Document of The World Bank FOROFFICIALUSEONLY Report No: 26848-CL PROJECT APPRAISAL DOCUMENT ONA PROPOSEDGRANT FROMTHE GLOBAL ENVIRONMENTAL FACILITY INTHEAMOUNT OFUS$6.98 million TO THE REPUBLICOFCHILE FOR THE SUSTAINABLETRANSPORT AND AIR QUALITY FOR SANTIAGO (GEF) OCTOBER 17,2003 Environmentally and Socially Sustainable Development Sector Management Unit Country Management UnitArgentina, Chile and Uruguay LatinAmerica and Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Itscontentsmay not be otherwise disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective ) Currency Unit = Chilean Peso Ch$700 = US$l.OO US$l.OO = Ch$700 FISCAL, YEAR 2004 -- 2008 ABBREVIATIONS AND ACRONYMS 3 c v MinistryofTransport's Emissions TestingLaboratory CAI 1I Clean Air Initiative CAS Country Assistance Strategy Ceq Carbon Equivalent CER Certified Emissions Reduction CGTS Coordinacibn General de Transporte de Santiago CNG CompressedNatural Gas co Carbon Monoxide IC02 I CarbonDioxide I CONAMA Comisibn Nacionalde Medio Ambiente CONAMA-RM CONAMA RegibnMetropolitana CONASET ComisibnNacional de Seguridad del Trhnsito cvs ConstantVolume Sampler System DDO Deferred Drawdown Option Loan ECA Europe and Central Asia IECLAC IEMP II Economic Commission for LatinAmerica an the Caribbean Environmental Management Plan II ESCO Energy Service Company FMS FinancialManagement Specialist GDP Gross Domestic Product GEF Global Environment Facility GHG Green House Gases GIS Geographical Information System IGTZ I German International Aid Arrencv I GWP GlobalWarming Potential IADB Inter American Development Bank IBRD International Bank for Reconslmction and Development IFC InternationalFinance Corporation IPCC IntergovernmentalPanel for Climate Change JEC JornadaEscolar Completa MIDEPLAN Ministerio de Planificacibn IMINVU I Ministerio de Vivienda. Urbanism0 v Bienes Nacionales I MIT Massachusetts Instituteof Technology MOPTT Ministerio de Obras Publicas, Transporte y Telecomunicaciones FOROFFICIAL USEONLY kGO I Non Governmental Organization tNOX 1 Nitrous Oxide II PCF Prototype Carbon Fund PDF-B Project Development Facility Block B PDO Project Development Objective PMlO Particulate Matter PTUS Plan de Transporte Urbano para Santiago SECTRA SecretariaEiecutivaDara la Comisi6n de TransDorte ISEREMITT I Servicio Regional delMinisterio de TransDorte v Telecomunicaciones I SERVIU Servicio Regional de Vialidad y Urbanism0 sox Sulfkr Oxides TRANSANTIAGO Plan de Transporte Urbano para Santiago UNDP UnitedNationsDevelopment Programme voc Volatile Organic Compounds WBI World Bank Institute Vice President: DavidDe Ferranti Country ManagerDirector: Axel Van Trotsenburg Sector Managermirector: JohnRedwood Task Team Leader/Task Manager: JuanLopez-Silva This document hasa restricted distributionandmay be usedby recipients only in the performanceof their official duties. I t s contents may not be otherwise disclosed [withoutWorld Bank authorization. CHILE SUSTAINABLETRANSPORTAND AIR QUALITY FOR SANTIAGO (GEF) CONTENTS A. ProjectDevelopment Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supportedbythe project 3 2. Main sector issues and Government strategy 7 3. Sector issuesto be addressedby the project and strategic choices 12 C. Project Description Summary 1. Project components 14 2. Key policy and institutionalreforms supported by the project 18 3. Benefits andtarget population 19 4. Institutional and implementation arrangements 19 D.Project Rationale 1. Project alternatives consideredandreasons for rejection 20 2. Major relatedprojects financed by the Bank and/or other development agencies 21 3. Lessons leamed and reflected inthe project design 23 4. Indications of borrower and recipient commitment and ownership 25 5. Value addedo f Bank and Global support inthis project 25 E. Summary Project Analysis 1. Economic 25 2. Financial 26 3. Technical 26 4. Institutional 26 5. Environmental 28 6. Social 29 7. SafeguardPolicies 31 F. Sustainability and Risks 1. Sustainability 31 2. Critical risks 35 3. Possible controversial aspects 37 G. Main Conditions 1. Effectiveness Condition 37 2. Other 38 H. Readinessfor Implementation 38 I.CompliancewithBankPolicies 38 .. Annexes Annex 1: Project Design Summary 39 Annex 2: DetailedProject Description 44 Annex 3: EstimatedProject Costs 52 Annex 4: Cost BenefitAnalysis Summary, or Cost-Effectiveness Analysis Summary 53 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 62 Annex 6: (A) ProcurementArrangements 63 (B)FinancialManagement andDisbursementArrangements 70 Annex 7: Project ProcessingSchedule 76 Annex 8: Documents inthe Project File 77 Annex 9: Statement o f Loans and Credits 79 Annex 10: Country at a Glance 81 Annex 11:ParticipationPlan 83 Annex 12: Measuring the Air Quality inSantiago, The Predictive Model 85 Annex 13: GlobalEnvironmentalImpact Calculation 88 Annex 14: TRANSANTIAGO-Preliminary elements for a new public transport system 90 development Annex 15: Methodology for estimating emissionsusingMODEM and ESTRAUS 92 .. Annex 16: REVIEWOF "PROJECT CONCEPT DEVELOPMENT: CHILE: SUSTAINABLE 94 TRANSPORT AND AIR QUALITY FOR SANTIAGO CHILE Sustainable Transport andAir Quality for Santiago (GEF) ProjectAppraisalDocument Latin America andCaribbeanRegion LCSEN Date: October 17, 2003 Team Leader: Juan Lopez-Silva Sector Director: John Redwood Sector(s): Roads andhighways(50%), Sub-national Country ManagerAIirector: Axel van Trotsenburg governmentadministration(50%) ProjectID: PO73985 Theme@): Climatechange (P), Participationand civic FocalArea: C Climate change - engagement (P) [ ]Loan [ ] Credit [XI Grant [ ]Guarantee [ ]Other: For LoanslCreditslOthers: Amount (US$m): 6,98 -inancing Plan iUS$m): Source Local Foreign Total BORROWERRECIPIENT 7.01 0.00 7.01 .' 3LOBAL ENVIRONMENT FACILITY 6.98 0.00 6.98 mal: 13.99 0.00 13.99 A. Project Development Objective 1. Project developmentobjective: (see Annex 1) 1.1. To help reduce greenhouse gases (GHG) from ground transport in Santiago through the promotion o f a long-term modal shift to more efficient and less polluting forms o f transport, and the adoption o f sustainable low-GHG transport measures. To that end, the project will support the implementation of the 2000-2010 Urban Transport Plan for Santiago (TRANSANTIAGO, formerly known as PTUS), a comprehensive multi-sector plan, which is consistent with the overall objectives of the GEF operational program on sustainable transport. The plan's specific objectives are to (i)maintain share of public transport (60% of total trips); (ii)promote rational managemento f transport demand, internalizing all costs from car travel; (iii)promote land-use policies that take into account environmental and transport dimensions helping reduce the average trip length; (iv) promote better coordination between agencies dealing with transport related policies and issues; and (v) reduce emissions o f air pollutants from public transport (70% o f PMlO and 45% o f NOx emissions from 1997 levels). A major outcome of TRANSANTIAGOwill be the restructuring of the city's transport system starting in 2005; the system of bus routes and the concession process will be modified, allowing substantial gains in efficiency and profitability for the bus operators. Section B.2 and Annex V provide additional information about the plan's genesis, programs, and preliminary measures. 1.2. To help improve Santiago's air quality, through reducing emissions of air pollutants like SOX, COY PM, and NOx (which together with VOCs contribute to the formation of smog or tropospheric ozone (03)). 2. Key performance indicators: (see Annex 1) Performance will bemeasuredusingtwo types o f indicators. Long-termperformance indicators, relatedto the implementation ofTRANSANTIAGO; andProjectperformance indicators, to measurethe achievement o fthe development objective. See Annex Ifor a better understanding of indicators and their relation to PDO, CAS, and Project Components. 2.1. TRANSANTIAGOPerformance Indicators (i) Shareofpublic transport maintained(as % of total trips); (ii) Land-use policiesinplace to favor reductionof average trip length(expressedinWtrip); (iii) Technological Regulatory Incentives for introducingcleantechnologies for transport removed, indicatedby at least 1test per commercially available bustechnology; and by the introduction o f at least 1regulatory measure or biddingcondition to ensure introductiono f clean bus technologies); (iv) Non-motorized transport share o f total trips increased (as % of total trips); (v) Air quality indicators improvedinspite ofeconomic anddemographicgrowth (reductions in concentration of controlledair pollutants); (vi) Reducedcarbon intensity per travelled km(inC e q h ) ; and (vii) Evidence o fbehavioural change towards more rational transport demand. 2.2. Project Performance Indicators (i) Component 1: a) Increaseduse o f bicycle as a transport mode (number of bike trips inproject area) ), inparticular within and betweenthe municipalities (commas) o f Santiago, Providencia, and - 2 - hiioa; andb) reduced number o fbicycle accidentsper 1,000 bicycle trips inthose comunas. (ii) Component 2: a) Upgrading of local emissions testing laboratory ( 3 0 (so that it can perform up-to-date emission testing for heavy-duty vehicles); andimplementation o ftests comparing economic, environmental, andtechnical performance of 3 commercially available technologies for buses (hybrid diesel-electric, diesel, andCNG); b) Review and developmentofbusinessschemes and management structures for the operators of the new public transport systemof Santiago, including design ofprogram to retrainbus drivers and operators; c) Program for monitoring environmental, social, and operational effects of new bus system inplace; andd) Assessmentof scrappingor relocation options for displaced buses resulting from the bus systemreform. (iii) Component 3: Institutional coordination of urban transport policies, incorporating environmental, and land-use dimensions. Environmentalassessmentof TRANSANTIAGO. (iv) Component 4 a) Assessment of several urban development options for the Anillo Central from a transport and globalllocal emissions perspective and incorporation of the results inthe decision-making processregarding land-usepolicies inthis area.; b) Assessment of options to integrate land-use and transport policies, and re-evaluate policies for housing and school location; c) Completion of detailed engineering andregulatory studies for traffic calming measures inthe city center; d) Assessment of institutional, legal, andtechnical options for Congestion Pricing in Santiago; e) Feasibility assessment of Travel Optimizationpilot, andReduction inthe number ofveh-km generatedby the people pertainingto the sample usedfor the travel optimizationpilot study; 9 design of legal, financial, and institutionaloptions for incorporationo f GHGemission reductions into the nascent programto trade emission reductions from mobile andpoint sources inChile. B. Strategic Context 1.Sector-related Country Assistance Strategy (CAS) goalsupported by the project: (see Annex 1) Document number: 23329-CH Date of latest CAS discussion: January 23,2002 la. Global Operational strategyProgram objective addressedby the project: The project i s consistent with the goals and strategic approach set out in the 2002 Country Assistance Strategy (CAS); also, in its pipeline, as part of the Non-Lending Services, the CAS already identified the development o f a SustainableTransport and Air Quality Management Project. Supporting a plan to enable a more efficient and cleaner transport allows for a sustainable, and equitable growth. Transport efficiency contributes to improved productivity while allowing for a reduction in air pollution and GHG emissions. The poorest segments of population benefit as accessibility is improved through an enhanced public transport system and better options for non motorized travel. From an environmental perspective, reducing the average trip length implies less use of fuel, and consequently less emissions of local and global pollutants. The most vulnerable population, the poor inparticular, are prone to be more exposed to air pollution. Not only the economic and community activity in poorer neighborhoods takes place near congested areas (where the vehicle fleet tends to be older and more polluting); also, some o f the poorest areas o f Santiago, such as Pudahuel, are exposed to a higher concentration o f local pollutants as a result o f photochemical and dispersion conditions o f the city, where thermal inversion further contributes to exacerbatethe effects on health. Consequencesof air pollution are quickly translated into decreased productivity and increased health treatment costs, affecting the family income. In general, air quality contributes to achieving a better quality of life, which together with a competitive economy, and an adequate transport system establish favorable conditions to attract direct investment flows. - 3 - In line with the CAS objectives, the project will (i) enhance sustained economic growth and social progress through improving accessibility, making the city more appealing and favoring a larger effective labor market (Le., the average number ofjobs accessible from any point of the city). This will increase the economic output o f a region which already yields 47 % of Chile's GDP, and will generate a trickle-down effect that will most likely have a very positive impact on the poor. It will (ii) heightenthe inclusionof the mostvulnerable groups; a more reliable and quick public transport system is expectedto address the low levels o f mobility of the poor, reducing their exclusion through improved access to services and opportunities at affordable prices and reasonable travel times, hence contributing to a more socially inclusive growth pattern. The project will (iii)improve environmental conditionsina city where pollution reaches very high levels and primarily affects the poor. Reduction inemissions o f air pollutants and GHG will result from a less intensive use of fuel, to be achieved through supporting measures to rationalize public transport supply, promote modal shift to public and non-motorized transport, relieve congestion through a better use o f road space, and through innovative measures such as travel demand rationalization. The project will also (iv) promote public private partnerships through a renovatedconcessionmechanism for private operators to provide public transport services. To end with, the project will (v) modernize the state and build its capacity :(a) it will reinforce CONAMA's capacity to deal with global environmental issues and participate in the reinforcement of the State technical capacity and its ability to enforce environmental regulations with minimal impact on the pace of economic growth; (b) strengthen coordination between public entities in charge of transport planning, urban planning and environmental management and (c) strengthen the recently created entity (CGTS) responsible for urban transport at the level of Santiago's metropolitanarea. Complementing this GEF project, and as a result of the continuous dialogue on transport and environment, the Government o f Chile has formally requested a USDlOOM IBRD adjustment loan to support TRANSANTIAGO(a potential Structural Adjustment Loan (SAL), according to the latest exchangeswith GoCH). The loan will mainly support a set o f reforms in the urban transport sector: (i)bus route restructuring :the proposed route restructuring will establish a trunk and feeder network, incorporating bus and metro services. The purpose o f this structure is to avoid competition on the road as a means o f improving the discipline and safety o f operations, and to generate operating cost savings and air quality benefits through the rationalizationof the public transport supply. (ii) reduction in car use (i.e. congestion pricing) combined with bus segregationfrom general traffic; (iii) fare integration, to integrate all bus and metro fares in a single system; (iv) finance reform aiming at making the system financially self sufficient; (v) institutional reform :operators will have to merge and corporatize. Infrastructure, ticketing and cash management fi-anchisees will have to be formed. The creation o f a specialpurpose agency will be infrastructure investment, traffic management, and bus franchising at the metropolitan level . The GEF encouraged to ensure co-ordination o f public sector activities in land use and transport planning, project will help remove barriers for the implementation of key elements of TRANSANTIAGO, such as Congestion Pricing or the rationaluse oftransport modes; which would also be supportedunder the loan; in particular it will advance the studies and designs for traffic calming measures, for upgrading CONAMA's emission reduction trading program, and for supporting the creation o f enterprises to operate within the new bus routes system under a reduced number of vehicles. Commitment from the Government of Chile i s strong, as TRANSANTIAGO is not only a critical plan for the development of Santiago and its metropolitanarea, but it is also highlysupportedby President Lagos andhis administration. Inparallel with the adjustment loan, the Bank is preparinga Technical Assistance Loan (TAL) to ensure that finance is immediately and specifically available to facilitate compliance with the policy triggers for disbursements under the SAL; and to finance the analysis and mitigation of the various potential adverse - 4 - .` impacts and risks associatedto the implementation o f TRANSANTIAGO, inparticular those related to the restructuring of the public transport system. More specifically, it i s suggestedthat a TAL should include components such as: (i)analysis o f the distributional effects of the first phase measures in TRANSANTIAGO, with particular reference to the balance between walking time, waiting time and in-vehicle time effects for the poorer comunas; (ii) development of retraining programs for existing bus drivers who would become redundant under the reformed system; (iii) assistance with the design o f new franchise contract documents; (iv) retraining in modem bus systems management for bus owners and managers; (v) assistance inthe analysis and design o f a metropolitan transport planning agency suitable for the specific Santiago circumstances; (vi) elaboration o f the draft Law to establish a congestion pricing mechanism in Santiago; (vii) set the stage for the establishment of a formal mechanism of coordination between land use planning (MINVU) and urban transport planning, especially focusing on housing location; (viii) monitoring of the environmental impacts of TRANSANTIAGO on air quality and possible researchprograms on the impacts of PM2.5 and ozone on public health; (ix) implementation of Strategic Environmental Assessment and Planning policies, initiated under the GEF project. The following table shows how the Bank and other agencies support TRANSANTIAGO'Simplementation. TRANSANTIAGO:support by IBRD and other internationalagencies .. Modernizing Public Transport Concept design Svstem IADB I I Concession schemes II IADB Busrouterestructuring and IBRD/ SAL, segregationofbus lanes Fare intemation IBRD/ SAL Advancement to financial IBRD/ SAL, self-sufficiency Technology testing for new IBRD/ GEF buses Assessmento f options for IBRD/GEF reusing displaced "not-so-old" buses fkom Santiago Development ofnew enterprise IBRD/ S A L schemes for operators, and institution development for new system(tariff collection, maintenance, cash management) Evaluation o f social impact o f IBRD/GEF new system, and design-of social plan for displaced operators Pilot training for transit IADB workers Development of retraining IBRD/ TAL program for redundant labor Economic analysis o f IBRD/ SAL distributional effects from - 5 - reform Promotion of cleanbus BRD / Carbon Funding technologies Jotential) Financing ofnew corporate FC (potential) operating enterprises RoadInvestments, and Traffic CongestionPricing: assessment IBRD/ GEF Control and Regulationof of social, legal, environmental Private Transport and economic effects of various forms of Congestion Pricing; technical options; and implementation mechanisms CongestionPricing: TA to IBRD/ TAL elaborate new regulatory framework itudyon traffic calming, BRD / GEF 'arking, pedestrianinterventions: adother revitalizationmeasures rt historic center ofSantiago 're-feasibility analysis and BRD / GEF 'otential Pilot Travel Iutimizationexperience Location o fEducational Assessment o fenvironmental IBRD/ GEF Institutions and economic costs of school location Dolicies ChangeinResidential Environmental and economic IBRD/ GEF Land-Use Trends evaluation of MINWpolicies to inform policy makers on options to coordinate with urban transport planning Assessment ofpoliciesto IBRD/ GEF promote urban development o f central ringof Santiagoto measure impacts on transport andenvironment andidenti@ alternatives or policy instruments Non-MotorizedTransport Promotionof bicycle use, IBRD/ GEF including construction o f bikewaysin3 Comunas, and implementation o f safety and promotionstrategies Communications and Citizen's Communication and IBRD/GEF Participation participationworkshops Participationactivitiesrelated IBRD/ SAL to any potential infrastructure works and the promotion o f bicycle use Institutional Strengthening Strategic Environmental IBRD/ GEF - 6 - Support for implementation of IBRD/ TAL StrategicEnvironmental Assessment recommendations issessmento foptions for formal IBRD/ TAL oordinating body onurban levelopmentand transport Upgrade and development of IBRD/ GEF CONAMA's Decontamination Bonds Program to incorporate andpromote carbon emission reductions Institutionalstrengthening for IBRD/ TAT- monitoring air pollution health and environmental impacts Development of single IBRD/ TAL metropolitanauthority for urbantransport planningand implementation 2. Main sector issuesand Government strategy: 2.1 Issues The TransportSystem and Travel Characteristics Santiago i s served by a road and public transport system, which is generally well managed and continuously being improved. Modern traffic engineering techniques - including a real-time computer controlled signal system - are applied to the street network. The 40-km metro, the first section o f which was inaugurated in 1975, i s an example o f efficient mass transit managementand serves 747,000 passenger trips per day. Most public transport passengers, about 4.5 million per day (2001), travel on the 7,635 buses which are mostly owned by individuals or very small companies. In addition, there are suburban railway lines, route taxis (colectivos) and regular taxis. Chile's sustainedrate of economic growth has a large impact on Santiago's air quality and on its aggregate environmental service capacity. With about 5.3 million inhabitants, Santiago ranks seventh among urban areas in Latin America and concentrates about 40% of Chilean population. While population growth has decelerated from 4.5% per annum during the 1950s to about 1.4%, residential settlements continue to expand over an area o f more than 600 square kilometers. This adds to its intense economic activity. Transport demand grows at a high pace, inflicting pressure on the urban transport system through increasedtraffic and congestion, and generating increasedGHGemissions and air pollution. - 7 - Between 1991 and 2001, the population increasedby 30%, car registrations by 103%, and the number o f trips (by all modes including walking) by 69%. O f great concern from the viewpoint of air pollution is the growing use of the private car which has increasedfrom 12.3% o f motorizedperson trips in 1977 to 38.09 % in2001. Vehicle ownership ratesrose from 320 cars per 1000householdsin 1977 to 360 cars per 1000 households in 1991 and 560 cars per 1000 households in 2001, with still higher figures in the up-scale districts such as Las Condes, Providencia and Vitacura. Modal participation in a Regular Labor Day 4,500,000 4,000,000 I 3,500,000 3,000,000 I 2,500,000 2,000,000 1,500,000 1,000,000 500,000 Auto Bus Metro Taxi Other Mode Source: SECTRA As a whole, Santiago's transport system is much less chaotic than in other cities of Latin America and highlycompetent transport planning entities combined with political commitment to tackle urbantransport issues have shaped a fairly well organized and reliable transport system. Nevertheless, the urban transport sector still suffers from acute problems which are still to be addressed and which can be summarized as follows : 2.1.1 Air pollution Much o f Santiago's pollution problem stems from its climate and topography. A thermal inversion acts as a cap over the city during fall and winter (April-August), inhibitingthe dispersion o f pollutants, which is further obstructed by the mountains surrounding the city. For more than ten years, the Government has declared pre-emergency or emergency days when ambient levels o f particulate reach unhealthy levels. Fortunately, the measures taken inthe last ten years have led to substantial improvements, reflected by a much lower occurrenceo f emergency days. Nevertheless, air pollution levels are still too highand transport i s the major contributor to local emissions; in October 2000, transport accounted for 91% o f CO emissions, 84% o f NOx, 48% o f PMlO, 34% o f Sox, and 38% of VOC emissions. - 8 - hissionsfrom Transport Sector in Chile ( Ton/ Yr), 2000 160,000 140,000 P0,OOO 100,000 80,000 60,000 40,000 20,000 Buses Trucks LightDutycat Light Duty non Light Duty Motorcycles Out of route cat diesel flPMDHCOONOxOCOVHSoxHNH3 Source: CONAMA The relatively highlevels of emissions and concentrations o f airborne pollutants affect health and quality o f life. Ozone and PM2.5 are the pollutants of most concern in Santiago, as their concentrations still exceed the air quality norms for the city. Besides their direct effect on health, PM10, NOxx and SOxx are major precursors for the formation o f PM2.5, which inflicts serious health impacts, including increasedmorbidity and mortality; and NOxx and VOCs are also precursors for ozone formation, which has in itself serious local social costs, while contributing to global warming. Inaddition to the global warming potential (GWP) of tropospheric ozone, transportation is a major source o f GHG, mostly in the form of C02. In Chile, transportation i s the major source o f energy-related GHG emissions, accounting for about 37% o f C02 emissions. C02 i s emitted as a direct result o f fossil fuel combustion; in Santiago, these emissions are mostly associated to the use of gasoline and diesel. Thus, measures aimed at improving efficiency of transport flows, at promotingmodal shifts to non-motorized, or to less energy intensive modes o f transport, and at adopting cleaner fuels and vehicles will not only help address local air pollution but will also reduce GHGemissions. A relatively recent study estimated that the annual costs of traffic-generated air pollution exceedUSD5OO million in Santiago. It discussed the relative decline o f PMlO and carbon monoxide emissions in recent years, but notedthat ozone levels hadgenerally beenincreasing. It also estimated that the transport system emittednearly 4.2 million tons o f C02 in 1994, of which 68% were produced by passenger cars, taxis and lighttrucks. - 9 - 2.1.2 Exponential increase of car use and ownership With about 5.3 million inhabitants, Santiago ranks seventh among urban areas in Latin America and concentratesabout 40% of Chilean population. Even though population growth has decelerated, residential settlements continue to expand and to generate increasingly long trips, more andmore difficult to be served satisfactorily by public transport. Inaddition to this, Chile's sustainedrate o f economic growth resulted in an increase o f car ownership in Santiago from 320 cars per 1000 household in 1977 to 560 cars per 1000 households in 2001. During the same period of time, the number of person trips (by all modes including walking) went up by 69% and the average length of these trips went up as well. This growth in mobility, associatedwith an ever-higher share of motorized trips made by car (12.3% of motorized person trips in .r 1977 to 38.09 % in2001) has been inflicting pressure on the urbantransport systemthrough ever-growing traffic and congestion. Considering the characteristic geographical conditions of the city, where the mountain chain around the city favors a thermal inversion in the colder months, this has a worrisome impact on Santiago's air quality. 2.1.3 Relative deficiencies in the organization of the current bus system Inspite of a public transport reform inthe 199Os, which includednew regulations of bus standards (age, size, and useful life), there are still many elementsthat can be correctedto achieve a still more efficient bus system. Presently, bus operators are still competing inthe streets (competition inthe market, instead o f for the market)on the very same routes, which generates operating inefficiencies and dangerous driving behavior when touting for passengers. As bus ownership is quite fragmented (most owners own no more than a single bus) and as there are very few sizable companies, transport supply i s poorly coordinated, chaotic and does not adapt to demand levels. Oversupply during off-peak hours contributes to unnecessary congestion and pollution, and increasedoperating costs. Also, bus routes are long and cross the city from one extreme to the other, and most of them run through the city center and the most heavily loaded axes, adding further to already highlevels o f congestion. Finally, there is no tariff integration betweenbus routes, which helps create inequities as the poorest classes get affected, facing higher travel costs and less accessibility. 2.1.4 Lack of inter-agency coordinationat the metropolitan level Coordination amongst the agencies dealing with transport and air pollution issues is still incipient. This stems from the diversity o f sectors and actors involved and from the absence of a coordinating transport body at the agglomeration level. However, environment and transport planning agencies have initiated a pro-active coordination around common goals and objectives, centeredon the improvement inthe quality of life. TRANSANTIAGOhas incorporated boththe local and global environmental dimension, and it is now clear that implementing the plan will bring about health benefits, and a less degraded city, while helping mitigate climate change. -10- # 2.2 Government Strategy 2.2.1 Institutional Responsibilitiesfor Urban Environmental Management At the national level, strategic transport investments are made by the Integrated Bank of Projects under the Ministry of Development and Planning (MIDEPLAN). The Ministry of Public Works and Transport (MOPTT) i s responsible for public transport roadsof national and regional importance, andthe Ministryo f Housing and UrbanDevelopment (MINVU),through its service division SERVIU, for most urban street construction and regional land-use development plans. SECTRA, subordinated to MIDEPLAN, and also coordinated with MOPTT and MINVU, is the agency responsible for transport planning throughout Chile, and hosts the primary role to support transport planning and investment. CONASET, the Traffic Safety Commission, is considered to be one o f the most effective traffic safety agency in Latin America. To address environmental issues, including traffic generated air pollution, the National Environmental Commission (CONAMA) was createdin 1994, reporting directly to the President o f the Republic. While MOPTT, MINW, and CONAMA have policy and spending authority for most urban projects, their regionally decentralized services (SERVIU, SEREMITT, CONASET and CONAMA-Metropolitan Region, respectively) are generally the executorsof those projects. At the local level, Greater Santiago is divided into 34 districts (commas). Each of them is a relatively autonomous government entity with a Mayor and its own departments such as Public Works and Finance. 9 Most districts fund the maintenance and construction of public spaces, including streets, bus stops, bikeways and sidewalks, with financial support from national authorities. While they have direct control over local land use, subject to SERVIUapproval, most investment decisions concerning the street system are taken by SEREMI. Also, an Executive Commission for the implementation o f TRANSANTIAGO called Coordinacion General de Transporte en Santiago - CGTS, has been appointed by the President of Chile. 2.2.2 TRANSANTIAGO In late 2000, the Government announced its 2000-2010 Urban Transport Plan for Santiago (TRANSANTIAGO), the main goal o f which is to improve the quality o f life in the metropolis and the individual neighborhoods andto help in correcting social imbalances. This would be attained through better traffic flows, lesser time o f travel, improved air quality from reduced emissions of air pollutants, improved access to public transport, and improved mobility. TRANSANTIAGO includes the following programs: (1) Public Transport Modernization; (2) Road Investments and Traffic Control; (3) Location of Educational Institutions; (4) Promotiono f New Commercial and Service Centers; (5) Change inResidential Land-Use Trends; (6) Non-Motorized Transport; (7) Immediate Action Program; (8) Urban Goods Transport; (9) Monitoring and Control; (10) Financing; (11) Communications and Citizen's Participation; (12) InstitutionalAspects. .r TRANSANTIAGO was designed in consultation with the authorities in charge o f handling transport related issues, including land-use management and environmental matters (the plan i s consistent with the Decontamination Plan for Santiago recently launched by CONAMA, and aims at reducing air and noise pollution from mobile and fixed sources o f emissions). TRANSANTIAGO is considered to be a major reform plan, expectedto substantially change the city. Executive Commission for Transport in Santiago - CGTS. In order to ensure inter-institutional -11 - coordination at the highest level, so that cross-sectoralpolicies and programs inTRANSANTIAGO could be effectively implemented, the President of Chile appointed this special commission. CGTS is chaired by the Minister o f Works, Transport and Telecommunications, and includes the Minister o f Housing and Urban Development, the Sub secretaries of Public Works, Transport and Housing ,the managing director o f the Metro, the Intendente of the MetropolitanRegion, andthe Executive Director of CONAMA. Proposed Investments. Amongst the specific investments and actions proposed by TRANSANTIAGO are (a) the expansion of the metro system - about 6 km o f line extensions and a new line o f 32 km, have already been tendered (b) three new suburban railway services ;(c) a network of 15 segregatedbusways; (d) the reform of the public bus system (Annex V); (e) a taxi service reform and conversion to CNG propulsion; (f) USD750 millionprogram to improve the road network; (g) the application o f a Congestion Pricing policy; (h) the promotion of non-motorized transport; and (i)harmonization of land-use and transport policies inorder to reduceaveragetrip lengths. ImmediateAction Program. TRANSANTIAGO contains a program o f immediate actions many of which have already been implemented, comprising a package of low-cost public transport improvements operational since March 2001 and fine-tuned inearly 2002: 0 Exclusive public transport axes: From 7:30 to 9AM on eachweekday, seven radial avenues are now reserved for buses, taxis and emergency vehicles. 0 Parallel avenues operating one-way for private car traffic, to provide the neededadditionaltraffic capacity taken away from public transport axes. 0 Onthe ten-lane Alameda Bemardo O'Higgins near the city center, six lanes havebeenphysically segregatedandreservedfull-timefor buses; while only four lanes remainaccessiblefor taxis andprivate cars. The immediate action measures o f TRANSANTIAGO have set a very interesting precedent and demonstrate that air and noise pollution, and traffic congestion can be substantially mitigated with a very limited budget : a USD 1.5 million package o f public transport priorities has been successful, with travel time reductions inthe order of 14% to 35% accruing to buspassengerswithout causingundue delays to car users and bus occupancy rateshaving increasedby 16%, while PMlO concentration went down by 14%. 3. Sector issues to be addressed by the project and strategic choices: This project will support the implementation of the 2000-2010 Urban Transport Plan for Santiago (TRANSANTIAGO), which addresses the main issues affecting transport and mobility in the city. Transport is the main source o f air pollution, by far the most important environmental problemo f Santiago. Thus, in order to minimize airborne pollutant emissions and concentrations, the plan includes a set of measures to promote and favor the use of public transport, and non-motorized transport modes. It also seeks to coordinate land-use planning with transport planning and to enhance the use o f cleaner fuel and vehicles. All these measures will have an important effect inmitigatingclimate change, while allowing for a reduction in travel time. The project will strive to accelerate the introduction of these measures by concentrating on seven elements or project components, each one contributing to abate GHG emissions with different degrees o f intensity, and with different implementation time periods. The approach taken by the project is then to support a multi-sector approach to improve mobility and quality o f life, as opposed to focusing only on specific transport-only measures. A quantitative analysis will be carried out during the project, basedon the ASIF methodology and on the use o f local models ESTRAUS and MODEM. - 12- 3.1 SupportingPublic TransportReform A public transport reform took place in the early 1990s, whereby the fleet of buses was regulated, introducing quality standards for buses regarding age, size, and emission technology . However there are still many elements that can be corrected in order to achieve an efficient bus system. Today, there i s what i s called the "war for the penny"; as many operators share the same routes and busways, there is an incentive for not respecting bus stops. Also, bus routes are long and cross the city from one extreme to the other, making travel long and relatively expensive, as any change of route implies additional bus fares. The new system will consist of a trunk network, feeder routes, and transfer stations, which will allow more cost-effective transport for the users. Also, modal integration will be facilitated, as the metro, buses and suburban trains will be part of restructuredmass public transport system within integrated fares. Finally, it is expected that cleaner technologies will be introduced together with the use o f much cleaner fuels which will be available inthe Metropolitan area o f Santiago starting in2004. 3.2 Rational use of transport As indicated above, transport demand has increased as a result of economic and population growth. Relatively high levels of car ownership are also aggravating existing pressures on the road network ,and generating ever-growing emissions o f both GHG and local air pollutants. Transport use is not always rational from an environmental and economic point o f view; many trips, in particular car trips, are made without any planning and with disregard to travel time, contribution to traffic, or pollution. All external costs, and some internal costs, are absent from the transport decision. One o f TRANSANTIAGO'S goals is to inform the travel decision maker o f possibilities for reducing time, cost, and pollution; it i s also a strategic choice of the project i s to internalize those costs. A combination of better planning, diminisheduse o f expensive car travel, and modal shiR to more efficient and less polluting transport modes will have important impacts inslowing the growth o f motorizedtravel. 3.3 Inter-agency Coordination Coordination amongst the agencies dealing with transport and air pollution issues is still incipient. This stems from the diversity o f sectors and actors involved. Environment and transport planning agencieshave starteda proactive coordination of policies aimed at common goals and objectives, basically those centered around the improvement in the quality o f life. TRANSANTIAGO has incorporated the environmental dimension, and it i s now clear that implementing the plan will bring about health benefits and a less degraded city. SEE2.1.4 Although there is not a metropolitan authority in charge of developing and implementing air quality management plans, there are some councils and commissions focused on this type o f inter-agency coordination. CGTS i s clearly the body with the highest political leverage at the moment, as TRANSANTIAGO will inevitably produce improvements in air quality. Also, there is the Committee on City and Landof Santiago, which aims at articulatingpolicies on land-use, transport, and environment. The project will strive for a more interactive coordination betweenagencies, through the development and implementation of strategic environmental evaluation and planningtools. Also, through direct support to CGTS, it will ensure a better coordination o f land-use and transport plans, programs, and projects. - 13- C. Project Description Summary 1. Project components (see Annex 2 for adetaileddescription andAnnex 3 for a detailedcostbreakdown): (See Annex 2 for detailed description andAnnex 3 for a detail cost breakdown) The project will strive to accelerate the implementation of TRANSANTIAGO, by concentrating on 4 components, each one contributing to abate GHG emissions with different degrees of intensity, and with different implementation periods. Preparatory studies under GEF funding (PDF-B) have helped specify the activities under certaincomponents. # 1.1 Promotion of bicycle use The objective of this pilot program is to promote the use of bicycles as a mode of transport and aims at diverting travelers fiom motorizedmodes, especially private cars, thereby having a direct effect inreducing GHGemissions, as less fuel would be burntpertraveledkm. The project will include (a) 21.94 km of GEF-funded bikeways connecting the Comunas o f Santiago, Providencia, andh i i o a ;(b) 21.2 Kmofbikeways about to be built inthe same Comunaswith government funding and 11.6 Km recently built or currently under construction, (c) the implementation of a promotional strategy aiming at changing travel behavior to achieve a sustainable modal shift to bicycles; (d) a safety strategy to minimize bicycle accidents and to maximize personal security, and (e) a process to monitor and evaluate the results o f the pilot program. As the primary aim i s to reduce air pollution and GHG emissions, the component targets existing and potential car users - the number of which is rapidly increasing with generally favorable economic growth - and thus focuses on zones with relatively highcar ownership; this incontrast to similar bikeway programs elsewhere, such as Lima, which primarily address the transport needs o f the low-income population. On the other hand, the project will help catalyze future investments and raise bicycle use inother parts o fthe city. 1.2 Modernizing the bus system This component will support the development of the new bus system for Santiago, which will not only provide a more efficient use of buses (reducing bus fleet, higher bus occupancy, and higher average speed), but also will provide an opportunity to renewthe bus fleet both at the city level(through the introductiono f provenclean bus technologies), and at the national level. The component is structured in3 sub-components: -14- 1.2.1 Technical assistancefor evaluating the economicand environmentalimpact of clean technologiesfor buses This sub-component will provide technical assistance to comparetechnical and environmental performance and associated costs o f hybrid-electric buses with CNG and diesel ones. The project will allow the economic and environmental evaluation of the potentialintroductiono f the hybriddiesel-electric technology to Santiago's public bus fleet. As emissions reduction benefits and related costs will be determined, regulators will have the relevant information needed for the establishment of more stringent emission standards for Santiago. CGTS i s in the process of allocating the contracts for bus operation along the major Santiago corridors under a newly restructured public transport system; in this respect, the outcomes from this project will allow the regulators to determine emission standards requiring operators can be obliged to have bus fleets with a mixo f conventional andcleaner vehicles. 1.2.2 Implementationframework for bus reform Inorder to complement the buildingof segregatedbusways, technical assistanceunder this sub-component will support a review of management and business organization measures that are required to effectively operate the new corridor infrastructure, including a system o f business organization, the concessions for specific bus line operations, and the structuring o f integrated fares. It will also fund the formulation of a program to retrain existing bus drivers that would leave the public transport business, and to assist them in inserting them in other sectors of the economy. Moreover, this sub-component will support the establishment of a framework to monitor the environmental, social and operational effects o f the new system. 1.2.3 Renewal of the busfleet The project will finance a strategic study to define ways of synchronizing and coordinating the removal o f "not-so-old" buses from the streets o f Santiago, which will be displaced by the new articulated EURO I11 buses which will run in the trunk lanes. The study will identifl options for ensuring a national modernizationo f the bus fleet to rationalize public transport capacity. 1.3 Strategic Environmental Assessment The project will fund advisory work to ensure coordinationo f sector policies, programs, andprojects (ppp) dealing with transport, urbandevelopment and land-use, and environment. To that end, the project will help develop tools for an upstream integration o f environmental management within the scope of the development o f urban transport plans and policies, including land-use pattern changes, pricing, and tariff schemes; and will consider options for ensurean adequate institutionalcoordination. Also, considering that this component will assess the environmental impact of TRANSANTIAGO, andrelated regulations, plans, and programs, it will be a very important component to prepare and accompany the loan operation, which will address the plan inits entirety. - 15- 1.4 Technical Assistance and Analytical Support: land-use patterns and internalization of costs This component will consist of a series of studies and technical assistance oriented to (i) support the coordination of land-use policies and urban transport plans and measures; (ii)evaluate measures to improve traffic flows, including traffic calming measures and congestion pricing; (iii) assess the feasibility and potential impact o f a pilot program for rationalizing private car use; and (iv) assess opportunities and mechanisms for upgrading the recently approved decontamination bonds to account for GHG emission reductions. 1.4.1 Assessment of land-use incentivesandpolicies to reducemotorizedtravel 1) This sub-component aims at rationalizing the location of centers of activity, reducing trip lengths, improving traffic flows, andpromotingmodal shift. The sub-componentwill be structured in3 activities: 1.4.1.1 Developing the CentralRing of Santiago (Anillo Central) The project will fund studies to calculate the environmental impacts of urban development policies aiming at spurring the development of housing projects located on the Anillo Central, based on potential policy options. Thus, the study will help decision-makers to better evaluate the development of currently available central sites according to the expected impact on transport, air pollutionand global warming. 1.4.1.2 School Location The GEF grant will fund studies to assess the economic and environmental impact of locating new school facilities so that the average school related trip length can be reduced. This is key now that the hllschool day (Jornada Escolar Completa or JEC) is being established, requiring schools to expand to attend a double student load before 2010 nationwide. In addition to this, secondary education was recently made compulsory, which furtherincreasedhigher capacity requirements. 1.4.1.3 Housing Policy 1) The project will provide technical assistance to the authorities incharge of housingpolicies and regulations, so that the transport and environment dimensions can be better integrated into policy making. Recommendations would be aimed at the reduction of the average trip length, and at a modal shift to less polluting transport modes. 1.4.2 ReducingMotorized Trafjc 1.4.2.1 Traffic Calming at City Center This subcomponent consists o f studies to identify soundtraffic calming measures to reduce car traffic in at the historic center of Santiago, including a diagnostic phase, a design phase, stakeholder consultation, and integrating the need for GHG emission reductions into regulatory measures and the specific engineering designs for the civil works. - 16- 1.4.2.2 CongestionPricing This sub-component aims at reducing and rationalizingthe use o f private motor vehicles, by means of road or congestion pricing measures which would internalize external costs imposed on society by car drivers. Pricing would not only help reduce traffic volumes, but could also generate additional sources o f finance for transport improvements. The grant will funda study to investigate the likely social, environmental and economic effects of various forms of Congestion Pricing, the conditions under which it is likely to be acceptable, andthe best mechanism for its implementation. 1.4.3 Travel optimization The project will support a pilot study to evaluate the feasibility o f implementing a large scale program to make a rational use of mobility options ( aiming at a reduction o f cars traveled), including the identification of private entities interested in co-financing andor participating in the implementation of the overall program; and the implementation of a medium scale pilot phase. The project will draw from the successful experience o f 1997 carried out by SECTRA in Santiago for a small number of households. The objective i s to reduce the frequency and time of car travel, basedon the systematic record o f travel needs and practice. Using transport modes more efficiently according to pre-established travel plans will allow important reductions infuel use, travel time and emissions. 1.4.4 Decontamination Bonds The project will fund a study to evaluate options for promoting further local investment in sustainable transport by integrating GHG emission reductions into the new Decontamination Bonds Program to cap emissions in Chile. The initial setup will be focused in Santiago, considering that most of the transport related emissions in the country are generated in the city. This program, currently being established by CONAMA, will allow emission reductions resulting from sustainable transport measures, to compensate emissions from existing polluters exceeding the norms, andor from new polluters required to compensate for adding new emissions into the system. The systemhas been devised to enable NOx and P Mreductions. GEF incremental support would also help raise the awareness of the opportunities for emission off-set investments in sustainable transport, and ensure that the program can also take into consideration the additional green house gas benefits of these investments (provide extra "credit" or incentives for investments that include additional global benefits). To help the system become operative, the project will provide technical assistance to assess needs and options for including the transport related greenhouse gas benefits into the permit clearinghouse; further support for devising methodologies to measuring carbon reduction benefits inthe transport sector; address aspects o f integrating the transport sector into proposed financial mechanisms; and studies and awareness raising activities that promote the sustainable transport market potential. The expected result i s an impact assessment in terms o f potential C02 reductions in the transport sector, a strategy for building a solid and reliable scheme to identify and pre-validate potential local CER to be offered inthe international carbon market; the identification o f pilot sustainable transport projects; and technical assistancesupport for early transport demonstration pilots. - 17- :; Indicative Bank Component costs %of financing (US$M) Total (UStM) PromotionofBicicle Use 4.61 33.0 0.00 Modernizationof BusSystem 5.05 36.1 0.00 1.45 1 Strategic EnvironmentalAssessment 0.44 3.1 0.00 0.34 TechnicalAssistance andAnalytical Support: 3.41 24.4 0.00 2.15 land-usepattemsand internalizationof costs Project Management 0.27 1.9 0.00 0.25 Contingencies 0.20 1.4 0.00 0.20 Total Project Costs 13.98 100.0 0.00 6.98 100.0 Total Financing Required 13.98 100.0 0.00 6.98 100.0 2. Key policy and institutional reforms supported by the project: 2.1 Increasing car ownership inSantiago's peculiar climatic situation imposes ever growing challenges to contain traffic-generated emissions. The recent publication of the new ten-year transport plan (TRANSANTIAGO) indicates the Government's intent to face those challengesthrough a major public transport restructuring- and its objectives coincide with those o f GEF. However, the full implementation of that plan i s by no means certain, inpart because of budget limitations during this period of economic stagnation, inpart because o f opposition that can be expected from automobile clubs and similar organizations. The Government has thus welcomed a possible GEF operation for Santiago, knowing that such a support would give greater impetus to their transport/air quality management strategy, while creating conditions to reduce GHG emissions. 2.2 The possibility of implementing Congestion Pricing in Santiago has been seriously considered for more than a decade, and there is a continuing debate on the topic. Institutional and political hurdles have delayed its implementation, and GEF's participationcould play a pivotal role inhelping decision-makers to resolve pending issues such as the application and acceptability of Congestion Pricing. The Chilean Congress debated the concept in 1991 but, due to fierce opposition, the proposed Law had to be reformulated in 1994. Eventually, the House o f Deputies approved a Law in 1996, followed by the Senate in 1997. Unfortunately, the Law is written ina way that makes congestionpricing very delicate to apply, due to countless restrictions and provisions. Further changes are required in this legislation to enable the introduction of Congestion Pricing. The project will develop studies (legal, economic, technical) to help reduce the existingpolitical barriers. 2.3 The new Strategic Environmental Assessment and Planning tools may require formal changes in procedures with respect to the development o f transport and land-use planning, programs andprojects. The project will help spur a more coordinated approach to transport management, which involves the participation of local and national authorities, and which requires a coherent land-use approach. SEA allows for defining environmental costs associatedto specific programs andpolicies defined at the transport and housing ministries, aiming at better definingdevelopment alternativesat the upstream level. - 18- 3. Benefitsand target population: ., 3.1 Target Population The major benefits will accrue to the residents of Santiago and people living in the Metropolitan Region which are making daily trips to and in the city. All inhabitants are affected by air pollution. Environment-friendly actions will have an effect all over the metropolitan region. The project will help to put inplace policies, institutions, and infrastructure to sustain measures to reduce GHG emissions, which will haveglobal impact. 3.2 Benefits The major benefits will be the reduction in emissions of local and global pollutants, which translate into health improvements for the target population affecting attendance to school, better performance, and improved productivity. Also, improved transport conditions, and less congestion offer better quality o f life for the Metropolitan area o f Santiago, which will also favor the investment climate. Contribution to the reduction of GHGemissions will also have global impact. 4. Institutional and implementation arrangements: The project components and sub-components will be implementedby the relevant government authorities, under the overall coordinationand supervision of the Executive Commission for Transport in Santiago - CGTS, with the assistance o f UNDP as the project's procurement and disbursement agency. Thus, for each contract, the implementing agencies will participate inthe final elaboration o f Terms of Reference; in establishing the criteria for selecting firms or suppliers; indefiningthe short lists; and inthe final selection. Also, the implementing agencies will monitor and evaluate implementation o f works and studies. Each agency will request CGTS to authorize payments to contractors and suppliers according to physical implementation, while CGTS will interact with UNDP and the Bank. Below are the different implementation arrangements for each component. 4.1 Promotion of bicycle use The sub-component for buildingbikeways will be implemented by the Commas o f Santiago, hiioa, and Providencia, under the general coordination and supervision of CONASET (National Commission on Traffic Safety). CONASET will also be in charge o f implementing the other sub-components: (a) promotion o f bicycle use; (b) safety for cyclists; (c) supervision o f bikeway construction works; and (d) overall pilot project monitoring. The Commas will enter into an agreement with CGTS and CONASET, which will be a condition for starting procurement o f works. For all subcomponents, including the GEF-fbnded bikeway construction, UNDP will be responsible for the tendering ,contracting and payment aspects o f each contract. - 19- 4.2 Modernizingthe bus system The sub-component for the bus technology tests will be implemented by the 3CV ( Ministry of Works and Transportation Heavy and Light DutyVehicles Testing Facility). Private companies will provide the buses to be tested, as well as the routes where the tests will be run. 3CV will also coordinate the development of driving cycles for Santiago, and will oversee the field test development. The sub-components for the Implementation Framework for Bus Reform and the Fleet Renovation will bothbe directly implementedby CGTS. 4.3 Strategic Environmental Planning and Assessment This component will be primarily implemented by the Executive Commission for Transport in Santiago-CGTS, although an active participation o f SECTRA, the Ministries o f Transport, Housing, CONAMA, and its local dependencies is also required. 4.4 Technical Assistance and Analytical Support: land-use patterns and internalization of costs The implementation of this component will require a varied institutional participation, always under the overall coordination of CGTS. On the Assessment of land-use incentives and policies to reduce motorized travel, the sub-components on (a) Development of Anillo Central; and (b) Social Housing will be implemented by the Ministry of Housing (MINVU); while the sub-component on (c) School Location sub-component will be led by SECTRA, with close coordination with local municipalities and the Ministry o f Education. SECTRA will also be in charge of implementing the sub-component on (d) Congestion Pricing. The sub-component on (e) TrafJic Calming will be implemented by CGTS and will require a close coordination and participation of the Comuna o f Santiago. For the sub-component on (0 Travel Optimization, the Regional Secretariat on Telecommunications and Transport f?om the Ministry of Transport (SEREMITT) will be the implementingbody, although an active participation of public and private actors is requiredto be able to implement a large scale project. Finally, CONAMA will implement the sub-component on (g) Decontamination Bonds, with an active participation of market participants when implemented. D. Project Rationale 1. Projectalternativesconsideredandreasonsfor rejection: A project to purchasehybridelectric buses andtest them was initially considered. However, the Bank does not have the policy o f participating in actual bus purchases. On the other hand, being a project to be implemented by the private sector, it was decided that support for a technically sound test was a better use of the GEF resources, given that results could be extrapolated to other cities, without actual involvement in the purchase of new technologies. Once results are available on the different technologies, market oriented regulations will point to set an adequate mix of technologies to bepresent for the buses. From the different bus technologies commercially available that could be incorporated into the test, it was - 20 - decided that only Diesel, CNG and Hybridoptions were to be compared because: a) diesel constitutes the baseline (option that would be in place without GEF funding); b) CNG constitutes an option with strong + political approval and some field experience; c) hybrid-diesel constitutes a robust option in terms of potential reductions inemissionso f greenhousegases. Options discarded included LPG, electrical, and fuel cell powered buses due to perceived risks inthe first case, and especially high costs attached to the latter technologies. The project at its preparation stage considered two options for allocating the grant resources for the technological test. One option required upgrading o f local facilities for laboratory testing of heavy duty vehicles at the existing laboratory 3CV. In this case, counterpart funding would be required, and a permanent capacity to perform this kindof testing would be set available inthe country. The other option, on the other hand, was to contract the laboratory tests with third party providers. Based on the preparatory studies, and on the declared commitment by the Government of Chile to provide the required counterpart investment, it was decided to opt for the first option, as within the same range o f costs as ifcontracted with thirdparties, it allows for the development ofa sustainable localcapacity. 2. Major related projects financed by the Bankand/or other developmentagencies (completed, ongoingandplanned). LatestSupervision PSR) atings (Bank-finance Drojects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Agriculture, Fishingand Forestry Secano RuralPoverty S S Alleviation andNatural ResourcesManagement Project Transportation Road Sector Project (03) Environment EnvironmentalInstitutions S HS Development Project Environment SantiagoFoothills Project Environment Ozone Protection Policy and S S Institutional Strengthening Project Water, Sanitation andFlood Protection Valparaiso Water Supply and U U SewerageProject (02) Transportation Urban Streets and Transport Project (completed) Agriculture, Fishingand Forestry Biodiversity Conservation inthe S S Valdivian Forest Zone Project General Transportation, Urban Santiago's Air Quality and Environment, other environment Transport Project ( Planned) Urban Transport and instituional Bogotdurban servicesproject strengthening UrbanTransport, sub national GEF/IBRD/IADB Lima Bus government administration Transport ( Planned) Urban Transport, information GEF/IBRDMexico's Air technology, Health, other Industry IQuality Management and Sustainable Transport Project I -21 - Other development agencies UNDP GreenHouse gas reduction on the Energy Sector Inter American Development Bank- Mejillones Terminal 1Project IADB Inter American Development Bank - GIS-Applications with Highways IADB Inter American Development Bank- Modemization of Ground Public Transport o f Santiago IADB HydrologialModeling Study o f Inter AmericanDevelopment Bank - the Concepci6n and SanVicente IADB Bays German Cooperation Agency-GTZ Assistance withAir Pollution Control inSantiago Conservation ofNatural Forest GermanCooperation Agency-GTZ Regional Planning inthe GermanCooperation Agency-GTZ Coastal Zone of BioBio Region t P/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), H (Highly Unsatis The USD75 million World Bank loan supporting the Urban Streets and Transport Project (1989-1995), in addition to urban road rehabilitation and maintenance, contributed substantially to the construction o f a busway and other bus corridor improvements, and also financed studies aimed at reducing congestion and air pollution, and at improving traffic models and planning tools. The performance of SECTRA, which was responsible for carrying out the studies, was ratedas highly satisfactory. The Chile EnvironmentalInstitutionsDevelopment Project, which was carried out between February 1993 and December 1999 and was the first operation for environment in Chile, assisted the Government in implementing sectoral policies and plans aimed at: (a) establishing the institutional framework to manage environmental protection and conservation of natural resources, and (b) strengthening environmental management o f priority sectors (e.g., forestry, mining and industry). Under component A, the project helped establish environmental and emissions standards (norms) and prepare plans for the decontamination of highly polluted areas. Between 1996 and the end of 1999, the project helped finance work on 20 national norms, o f which 14 were approved. The principles used to establish norms are some of the most advaced worldwide (allowing for flexibility in standards based on the carrying capacity of the receiving bodies), and are beginning to incorporate greater use o f economic instruments (such as in encouraging offset agreementsfor air pollution). The Inter-American Development Bank (IADB) has approved a $1,250,000 grant from the Multilateral Investment Fund to support modernization of the surface mass transit system o f the metropolitan area of Santiago. The resources have been used in developing the concept design and concession schemes for the restructured public transport system to be implemented under TRANSANTIAGO. UNDP is currently participating as procurement agent for the GEF Air Quality and Sustainable Transport Project (PDF-Bphase), and will participate under the secondphase (full size IBRD/GEFproject). - 22 - The Clean Air Initiative (CAI) for Latin American Cities i s a special initiative spearheaded by the World Bank Institute (WBI) and the Latin American and Caribbean region of the World Bank, aimed at promoting dissemination of best practice and capacity building on air quality management in Latin # American Cities. With a current operating budget for CY2003 of about 0.5 million, the CAI brings together the efforts of leaders from the public and private sectors, NGOs, research and academic institutions, government agencies and international institutions, which cooperate to improve the capacity o f city leaders to address air quality management. The CAI i s proposed as the vehicle for disseminating the lessons learned under this innovative project outside Chile and its outreach i s now global as the CAI is being expanded to other regions (Asia, ECA, Africa). In Santiago, the CAI provided the opportunity for sharing the city's experience inits air pollution decontamination plans among partner cities (Buenos Aires, Rio, Mexico City, Lima-Callao), and set the grounds for advancing with the Air Quality and Sustainable Transport Project. The Ministry o f Finance of Chile officially requested the World Bank in October 2002 to examine in coordination with the Executive Commission for Transport in Santiago-CGTS the possibility of a World Bank loan to support the implementation of TRANSANTIAGO. This initiative led to the inclusion o f several design modificationswhich were to be includedunder the final phase of the GEF project. The World Bank's BogotL Urban Transport Project financed part o f the new developments intransport o f Bogota. This project helped finance the development o f Transmilenio, a rapid bus system using segregated bus lanes, a route network with an integrated fare structure andfeeder routes, a modernconcessionscheme, and articulated buses. Also, the project hnded part o f the 250 kmbikeways network. These developments dramatically changed the city traffic flows, increasing bus and bike use and helping decrease travel times. Also, the project has added to the recovery o f public space, safety, improved accessibility, and citizen culture development which have become a model to follow inthe region. A secondproject, Bogota's Urban Services Project, effective since May 2003, will help further expand Transmilenio and its feeder routes, promote the use o f bicycles, strengthenthe local capacity for managing air pollution and improve mobility, and improve low income neighborhoods. The World Bank i s collaborating with Mexico and Lima through similar GEF interventions through Air Quality and Transport projects. In Mexico, the GEF will be financing the development o f sustainable transport corridors, where segregated rapid bus systems can be complemented by bikeways and promotion of bicycle use. Also, the project will strive to incorporate the global dimension into the local planning processes. InLima, a GEF project will be linked to an IRBD/IADBloan to develop similar segregatedbus lanes for rapid transit systems according to the model followed in Bogota. The project will have a component to promote the use o f bicycles, and a component to help modernize the bus fleet. Finally, as in Mexico, GEF funds will be used to develop the framework for developing the bus rapid transit systems under the new concession schemes. 3. Lessons learned and reflected in the project design: The Bank has a long-standing involvement in the sector of air quality management in general, and its interrelationship with urban transport inparticular. The first loan inthis regard, approved in 1992, hadthe objective of reducing traffic-generated air pollution in Mexico City. Stemming largely from that participation, the Clean Air Initiative inLatin American Cities was set up in 1997, which has been highly successhl indisseminating experiences among major cities, including Santiago; similar clean air initiatives have now been started in East Europe, Asia and Africa. In addition, recent strategy papers on Pollution Management. and Urban Transport. discuss extensively the effects of urban traffic on air quality, and urban transport operations in BogotL, Buenos Aires, Lima and SZo Paulo include air quality management - 23 - components intheir design. Some ofthe lessons leamedinclude: 3.1 Air qualitymanagementand urbantransport development involvelong-term issues that require long-term responses Changes inpersonal travel behavior -a key element to reduce traffic-generated air pollution- are unlikely to occur unless there i s a long-term government commitment to sustainable transport. Similarly, improvements in air quality require the kind of long-term vision that has been spelled out in Mexico City with the publication of the Air Quality Management Plan for 2002-2010. The proposed project would support similar long-range plans that have already been formulated in Santiago for transport and air pollution. 3.2 Planning for the long term, however, requires flexibility Experience in Mexico City has shown that, despite the best planning efforts in the preparatory stage, the need for adjustments in air quality activities becomes evident only during the implementation of the plan. Similarly, the Implementation Completion Report for the Bogoth Urban Transport Project states that "flexibility should be encouraged in some subcomponents, procedures or new technology areas. This occurred in the case of the Transmilenio components where adaptations had to be made in various areas (platforms, bike paths, bridges, surfacing materials, etc, and with very satisfactory results". Therefore, while eachcomponent of the proposedproject has beendefined inconsiderable detail, there should be room for modifications during its implementation. 3.3 The Bank's involvement should support an overall Government strategy This applies to most World Bank operations. The more successfulurbantransport and air qualityprojects, such as the one in BogotA - and indeed the Chile Urban Streets and Transport project - confirm this maxim. The proposed GEF project would fully support the objectives o f Santiago's air quality strategy and TRANSANTIAGOby testing key elements o fthe existing government policies. 3.4 Community Participation is Vital For Success The PAD for the recently approved GEF grant to support the introduction of climate friendly measures in transport of Mexico City stresses that a "participatory approach, incorporating public opinion in the project, is required to establish legitimacy o f the project". Similarly, the Bogotd experience demonstrates the importance of community involvement which contributed to the public acceptance, even pride, for several "project outputs, notably TransMilenio and the bike paths". The proposed project - especially the components aiming at increase bicycle use - was prepared in close consultation with civil society, NGOs and district governments; this collaboration would continue duringproject implementation. - 24 - 3.5 M o r e construction of bikeways does not ensure the increased use of bicycles In 1996, about 46 kmof Bank-financed bikeways were successfully implemented inLima, connecting an industrial area with low-income residential zones. However, the number of cyclists did not increase significantly, as the project did not include a coherent strategy to overcome the cultural barriers inhibiting bicycle use. Even inBogota, where over 200 km of bikeways were built inthe last four years, the growth in cycling has been modest, and the Government intends to implement - under the recently approved Bank-financed project -a promotional strategy to raise bicycle use. Therefore, an important component of the proposed project would initiate the process of cultural change through a multi-pronged promotional strategy aimedat making bicycle use more attractive inthe minds o fthe population. 4. Indicationsof borrower andrecipientcommitmentandownership: This project is basically supporting an existing plan, TRANSANTIAGO that not only is a priority for the Government of Chile (as manifested in the creation o f the national Office for Coordinating the Implementation o f TRANSANTIAGO) but also has a clear support by the local Comunas and local governmental agencies. Basedon the implementation o f the PDF-B Grant : "Sustainable Transport and Air Quality", National and local authorities have requestedthe Bankto advance with the project proposal to be submitted to the GEF Council. There has been a recent invitation to the Bank to allocate resources for a potential loan to support the new public transport system implementation. A further update on the progress o fthis loan, would beprovided at the time o f CEO endorsement. 5. Value addedof BankandGlobalsupportinthis project: r. The World Bank has a long and proven world wide experience and technical skills related to the implementation o f transport, urbandevelopment, and environmental projects. Its presenceat the sector level invarious countries intransport, water, energy, health, and environment oriented projectsprovide aunique cross-referencedperspective which allows to replicate good experiences, while learning from experience. Further, the Bank offers advantages in terms of funding leverage. Not only a loan operation i s being prepared to support TRANSANTIAGO, but also it could be potentially complemented with other services available to support the participation from the private sector, such as the IFC products. Besides, TRANSANTIAGO offers opportunities for funding under the Prototype Carbon Fund (PCF). Not only Santiago has good quantitative tools in place to help measure potential impacts of transport projects in terms of GHG emissions reduced, but also, the Government commitment i s very high and long-term. Potential PCF projects could be developed for (a) a light train, where measurablepublic transport demand would be transferred from other more polluting modes (buses and private cars); and (b) a scheme for promoting ESCO-like maintenanceand servicing programs that could ensurereduced fuel use andtherefore reduced GHGemissions that could be sold at the carbon market. E. Summary ProjectAnalysis (Detailed assessmentsare inthe project file, see Annex 8) 1. Economic(see Annex 4): 0 Costbenefit NPV=US$ million; ERR= % (see Annex 4) r. 0 Costeffectiveness Incremental Cost 0 Other(speci@) - 25 - 2. Financial(see Annex 4 and Annex 5): NPV=US$ million; FRR= % (see Annex 4) Counterpart funding i s being provided to implement various components, namely, the building of bicycle pathways, travel optimization, and the field testing of bus technologies. Without this counterpart funding, the project will not be able to start. Therefore, besides ensuring the right allocation of resources, it will be necessary to coordinate its timeline with govemment allocation cycles, so that the project may start as planned without delays. Fiscal Impact: 3. Technical: The new Bus System needs to be inplace (routes, fiequencies, and conditions for operation defined if not tendered) to implement the field tests effectively, under real conditions. Also, the quality of diesel for the tests will have to be compatible with the new specifications of sulfur content projected for 2004 (50 p.p.m.); ifnot already available, it will be necessaryto ensure its provision duringprojectimplementation. The tests will build on the experiences o f similar operations in New York City and Mexico City. It is therefore important that the tests are robust fiom a technical stand point, as their result will be used widely at both local and international levels to promote or justify investments, policies and programs. To that end a study has been commissioned as part o f the on-going preparationprocessto devise the testing protocols. Modeling will be important. It will not only allow the simulation of results, but will strengthen the institutional capacity for planningand monitoring of policies, programs and projects related to sustainable urbantransport. 4. Institutional: 4.1 Executingagencies: The project components will be implemented by the relevant government authorities, under the overall coordination and supervision of the Executive Commission for Transport in Santiago - CGTS, with the assistance o f UNDP as the project's procurement and disbursement agency. CGTS i s the Executive Secretary for the Committee of Ministers created for the implementation of TRANSANTLAGO. The committee is presided by the Minister o f Public Works, Transport and Telecommunications; its Vice President is the Minister of Housing; and the other permanent members are the Executive Director of CONAMA; the ManagingDirector of METRO; the Under Secretary o f Transport; the Executive Director o f SECTRA; the Intendente o f the Metropolitan Region (Governor); and the Head o f Concessions o f the Ministry of Works. CGTS will instruct UNDP, which will act as procurement and disbursement agent. GCTS inturnwill follow the recommendationso fthe different implementing agencies for each component, as explained in Section C.4 o f this document. The Promotion o f Bicycle Use Component will be implemented andcoordinated by CONASET, with the exception of the construction of bikeways which will be responsibility of the local municipalities (Comunas), under the coordination of CONASET. The Field - 26 - Test on bus technologies will be implemented by 3CV. The sub-component on Traffic Calming measures for the Historic Center o f Santiago will be directly implemented by CGTS but will require a close intervention of the Comuna of Santiago. CGTS will also directly implement the subcomponents on the Implementation Framework for Bus Reform and Bus Fleet Renewal; and the Strategic Environmental Assessment. The School Location, and Congestion Pricing sub-componentswill be led by SECTRA. The Decontamination Bonds sub-componentwill be implemented by CONAMA. The other sub-components on Land-use incentives (Housing and Anillo Central) will be led by the Ministry on Housing. Finally, SEREMITTwill be inchargeofthe sub-componenton Travel Optimization. 4.2 Project management: The project will be managed by CGTS, which will host a Project Coordinating Unit to be created, mostly staffed by CGTS plus a Procurement Specialist, who will also monitor the project accounts managed by UNDP. It i s expected that the office will be sustainable and have budget during the time of project implementation. Manual o f Operations: The functions and responsibilities of the project managementwould be governed by the Manual o f Operations (MOP), which would include, among other aspects, a full description o f project activities, and project procedures, financial guidelines, criteria for selecting consultants, staffing, and assignment of staffresponsibilities, project supervision, flow of funds, special account, budgeting, auditing, reporting, as well as procurement and disbursement procedures. MOP will be a condition o f Grant Effectiveness. Also, the MOP will include the safeguard requirements for the construction bikeways, including guidelines for issuinga resettlement framework and devising a resettlement plan, incase there are any involuntary resettlementsrelatedto the bikeways to be constructed. 4.3 Procurement issues: UNDP will act as procurement and disbursement agent, following the Bank's rules and procedures. A procurement specialist to be appointed by and located in CGTS will be directly responsible for coordinating the production o f project's procurement documents the contract processing with UNDP and the implementing agencies. A Cost-Sharing Agreement will be signed between UNDP and the Ministry of Transport (from which CGTS depends), and will be framed within the Grant Agreement signedbetween the Government of Chile and the Bank. The Cost Sharing Agreement will include the Standard Annex agreed between the Bank and UNDP, which governs this type o f arrangements. UNDP already acted as procurement and disbursement agent for the implementation of the GEF's PDF-b resources. Considering that UNDP has a broad experience with project implementation and procurement, although not specifically Bank procurement, the capacity assessment performed by the Bank's Procurement Specialist indicated that the procurement risk is AVERAGE, andproposedthe following procedures for prior review: (a) all TORS for consultants; (b) the first 2 contracts with consultant firms and all contracts over USD350,OOO; (c) all international bidding; the first nationalbidding; and the first shopping process. 4.4 Financialmanagementissues: The project components will be technically executed by the respective implementing units, with oversight by the CGTS. The financial management of the project will remain in CGTS, while UNDP will be in charge of contracting and disbursement. Implementation of the project will be guided by the Project Operational Manual (MOP), the Financial Management manual and a detailed procurement plan. The - 27 - implementing units will provide regularly scheduledprogress reports to the CGTS. The CGTS, inturn, will report project progress on a semi annual basis to the Bank, according to agreed Financial Monitoring Reports (FMR) format. CGTS will be responsible for the financial management of the project (including accounting, timely submission of the Financial Management Reports -FMRs, annual audits and disbursements), assisted by UNDP. GEF Fundswill be transferred inadvanceto anUNDP project accountthat will act as a Special Account for the project and will be managedaccording to FinancialManagement manual. Thejustification on the use o f funds andrequestfor disbursementswill be made at least quarterly. The project will be audited annually by an independent auditor acceptableto the Bank. Audit reports will be submittedto the Bank underacceptableTerms ofReference(TOR) for a single audit opinion, nolater than six months after the end o f each fiscal year. Another accountantwill be appointed at CGTS for supporting the increaseon administrative operations due to this project 5. Environmental: Environmental Category: C (Not Required) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation anddisclosure) and the significant issues and their treatment emergingfrom this analysis. The project will involve the construction of 22 kmofbikeways which will connect with existing and soonto be.built municipal bikeways. No significant adverse environmental impacts of the project are expected, as project activity will be taking place in urban areas with considerable development and human activity. Environmental activities during construction will be limited and may include: (i) interruptions to vehicular and pedestrian traffic; (ii)noise; (iii) on safety o f roadusers; (iv) limitation of access to dwellings impacts or businesses. To mitigate these impacts, the project will follow environmental guidelines for construction prepared by CONAMA RM and SERVIU. No resettlement o f persons as a result of the project is envisaged. However, if involuntary resettlements are needed by the time of construction, the works would be conditionedto the issuanceof an appropriate resettlement framework and a specific resettlementplan. The bikeway designs will be subject to an independent safety audit, and the construction contract will involve an environmental assessment and management plan. As to the rest of the project, there will be environmental benefits. The field test will take place on operating routes. The rest will be studies with indirect benefits inthe future. 5.2 What are the main features of the EMP and are they adequate? The project is a category "c".Special attention will be given to the construction of 22 KMo f Bikeways, which are not expectedto raise any major environmental issues. The project will have an Environmental Management Planwhich will include: The environmental specifications, rules, and guidelines for contractors, including construction waste disposal, an assessment of compliance of all proposed works with existingnationallegislation; and measures addressingmotorcyclist andpedestrians. Onthe institutional component CGTS, through its Environmental Unit will be incharge of coordinating with CONAMA-RM the implementation o fthe environmental policies onthe development o f TRANSANTIAGO. Besides complying with the Bank's rules, CGTS will have to comply with those o f CONAMA, which has a very strong environmental managementcompliance program. - 28 - 5.3 For Category A and B projects, timeline and status o f EA: Date of receipt o f final draft: N/A * 5.4 How have stakeholdersbeenconsulted at the stage of (a) environmental screeningand (b) draft EA report on the environmental impacts andproposed environment managementplan? Describe mechanisms o f consultation that were usedand which groups were consulted? SeveralNGO's in Santiago havebeen consulted duringthe preparation phase, also communities will be involved inawareness raisingprograms. See section 6.2 below. 5.5 What mechanismshave beenestablishedto monitor and evaluatethe impact o fthe project on the environment? Do the indicators reflect the objectives and results of the EMP? Yes, for the bus field test, a comparison of emissions and environmental impact will be performedin order to determine the most cost-effective technology to be used in Santiago's public transport system. For the construction of the bikeways, the EMP will have monitorable indicators to ensure mitigation of environmental impact. As per the other components, there will be a modeling o f baseline and different project scenariosto measurethe long-term impact o f the project. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. * The project will implement a communication strategy to promote the use of bicycles, and public transport. Community participationwill play a key role intriggeringcultural change with regards to the increaseduse o f non-motorized and public transport, a rational use o f cars, and with regards to land-use measures such as densifling the Anillo Central. Also, the new school zones needto be informedofpublic preferencesto be effective inachieving transport objectives. Active participationand community involvement is a key issue for the success o f TRANSANTIAGO and o f the project. Not only do some of the components rely on participation, but also, inorder to really effect change inthe long term, the project requires cultural and behavioral changes, which can only be induced by meanso f effective communication strategies and participationplans. 6.2 Participatory Approach: How are key stakeholdersparticipatinginthe project? Duringthe development of TRANSANTIAGO, public participation has become a very relevant issue for the authorities in Chile. On the formulation process o f TRANSANTIAGO and the GEF project, duringits PDF-B preparatory phase, several NGOs and interested parties have been involved inthe decision making process, through meetings, written comments in a public website, and two participatory workshops. The following stakeholders have actively participated inthe preparation process: central government authorities (Ministries o f Housing, Public Works and Transport, SECTRA, Metropolitan Region Governor * (Intendente), CONAMA, CONASET and SERVIU); local authorities (representatives from the Commas o f Santiago, hiioa, and Providencia); universities; multilateral organizations (UNDP andECLAC), NGOs (Ciudad Viva, Movimiento Ciclistas Furiosos, Arriba'E la Chancha, etc); and bus operators and associations. - 29 - TRANSANTIAGO has a strong strategy for ensuring stakeholder participation at the community level. The following are its elements: e Work with community organizationsat the neighborhood level on the design ofthe new system (reach of trunk and feeder services, design and security of bus stop places, interior layout of new buses, type and conditions o fnight services, informationneeds, etc) and to monitor advance at different stages. e To incorporate key specific actors (i.e. university studentsand the like) into specific tasks at the different stages o fthe modernization process(Le. information to users at some critical moments of the process, continued monitoring ofperformance of the new system, etc). e To buildregular links and contacts betweenthe community, the public transport operators and the municipalities. e To make available a web page for information exchange and suggestionsgathering (m.sectra.cl) e To make available a special telephone line for consultations and suggestions. The current strategy i s to identify the parties' involvement and their attitude to participate in the process. For every party involved inthis processa planwill be designedand their recommendationswill be taken in to account. Also there i s a permanent website where the parties can have access to the development of the project. Duringthe GEF-PDF-B project preparation, this tool has been heavily used as a communication tool. For more details, refer to Annex 11-Participatory Plan 6.3 How does the project involve consultations or collaboration withNGOs or other civil society organizations? NGOs and other civil society organizations will continue to participate in the project through an implementation plan, which i s based on the requirements o f several interested parties who have been involved inthe development of the project since the formulation o f TRANSANTIAGO. This plan, aims at the integration of severalNGOs as well as groups directly involved inthe design and implementation o f the PDF-B grant. 6.4 What institutionalarrangementshave beenprovided to ensure the project achieves its social developmentoutcomes? The creation of CGTS demonstrates the need for a permanent metropolitan authority for Santiago, to ensure coordination amongst stakeholders, and especially between governmental agencies. Therefore, the implementation of TRANSANTIAGO will be handled by CGTS untilthe new official body is created. All sector agenciesare expectedto remain performing as such, but CGTS will coordinate the policiesto ensure consistencywith TRANSANTIAGO. A Working Group will be set upto ensure anadequate flow ofinformationand communication fiom andto the bus operators, in particular with relation to worker rights and conditions within the new public transport system. Another permanent working panel will be constituted, with the participation of mayors, heads of the transport and public works departments, head o f the District Secretary o f Planning, and other local officials. Similarly, a permanent Consultative Body will be createdto deal with NGOs, both to inform them and to affect the design phases of specific measures to implement TRANSANTIAGO. - 30 - 6.5 How will the project monitorperformance interms of social development outcomes? Indicators have been provided in section A o f this document, and in Annex I. Measurements will involve surveys, field data gathering exercisesregularly undertaken by SECTRA, plus the activities foreseenunder the project components, andthe use of existing modeling andair quality monitoring capacities. 7. Safeguard Policies: 7.2 Describe provisionsmadeby the project to ensurecompliance with applicable safeguardpolicies. The environmental analysis provided a Category "C" for the project, only requiring environmental guidelines for the development and construction o f 21.94 kmo fBikeways. F. Sustainabilityand Risks 1. Sustainability: Much of the project is intended to remove barriers that prevent the pursued measures to take place in the first place, and thereafter to become sustainable. Most components depend on behavioral changes which will triggered by the project. Financial sustainability will depend inmost cases on those changes, and only the component onbicycles directly involvesinfrastructure development. Bicycle use Increasedbicycle use is already part of Santiago's statedtransport objectives. Inview of the strong support by Government and civil society, this component is likely to sustain itself after completion o f the GEF project. It is also expected that the non-motorized transport component would have a positive demonstration effect which would (a) strengthen political support for TRANSANTIAGO'S bikeway program, (b) provide incentives for District Mayors to initiate similar programs and (c) in combination with the travel optimization concept mentioned above, contribute to an overall modal shift which could be replicated in other cities. Inaddition, it i s hoped that a positive outcome of this subproject will convince the Metro managementto provide bicycle parking facilities at more rail rapidtransit stations. Bikeways will be maintained by the Comunas, as they not only serve the purpose o f facilitating -31 - non-motorized transport but also of enhancing public space. Its use, though, will depend on cultural changes to be effected by the project. The Comunas have already formally committed to invest in the bikeways that make part of the GEF co-funded network. Modernizing the bus system Sustainability is one of the key elements with regards to the gradual change in bus technologies. As the routes are to be allocated for a relatively long periodof time, the initial technological upgrade i s guaranteed to last. In addition, the construction and use o f segregated bus lanes, operated with large articulated buses running on clean technologies is a gradual process expected to expand over time until the main routes network gets rationalized and modernized; this means a sustained and growing potential demand for clean technologies. Besides, CONAMA is considering the introductiono f a subsidies plan that would add a larger boost for the introduction o f clean technologies to the city. Moreover, as the technologies become more # commercially available, and production lines get maximized at the suppliers' end, investment and maintenance costs (batteries) for operators are expected to decrease over time. The concept o f linking emission performance to routes concessions has a highpotential for replicability in other Latin American cities such as Bogoth, Mexico, Sao Paul0 and Lima. Emissionreduction results will be key to promote the replicationscheme through the Bank's Clean Air Initiative, and directly through on-going Bankoperations. Inthis case, the studies aimat promotingthe modernization o the bus fleet. The laboratory at 3CV will be upgraded, and both co-funding and future maintenancewill come from the government. Once the project i s completed, there will be local capacity able to perform similar tests (including laboratory) for any other heavy-duty vehicles available inthe future. All other elements are not dependent on financial support, but on stakeholder conduct. Bus owners will be induced to renovate their fleet based on the development of standards, and on the removal o f risk barriers. Since not all routes and services are to be concessioned immediately, the project will provide for informing the biddingprocesses taking place from 2005 onwards. Since this is a test, the results will need to determine whether more stringent regulation on fleet emissions can be developed. The study on options for modernizing the bus fleet in Chile i s aimed at informing decision makers on options available, and on impacts and related costs. The expected follow-up i s the development o f policies and programs to incentivate the fleet renewal. The study to support the framework for the new bus system, will be followed by programs for drivers and bus owners reinsertion to productive activities; lines o f credit, andm h e r trainingare some ofthe options already envisioned. - 32- Land-use incentives Land-use pattern change i s a long term process that i s likewise expected to last. The team believes that localization o f additional housing and services can be oriented towards certain goals but i s also conscious .` that this process obviously takes time. The expected benefits to be reaped from this component will need time to materialize and the relevant time-scale is to be measuredinyears, if not indecades. The other side of that coin is that once the urban pattem i s consolidated, and once development has materialized along certain corridors or areas that are propitious to sustainable transport behaviors, this cannot change overnight and these transport behaviors can reasonably be expected to be long-lasting, and to yield important benefits. The question is then to make sure that the same guidelines regarding land-use will be followed after the GEF grant closes. This will dependto a great extent on the success and attractivenesso f the real estate developmentsprojects to be designedunder the GEF grant andthis is why a lot of emphasis will be put on public outreach and on the quality of the design of these projects. The involvement of students from the Catholic University and from MIT should generate appealing and innovative proposals from an urban landscaping perspective, which will obviously increase the likelihood of success o f these environment-friendly real estate development project(s), even more so since the mandate of these universities is to design projects that fits into an overallprogramof urban sustainability. Here, the project will undertake studies that are expectedto affect land-usepolicies. Financial sustainability i s not a direct issue at this stage. Once the real estate options get developed, the market is expected to sustainthe component. Reducing Motorized Traffic Congestion Pricing. In this case, sustainability will depend on the design o f the pricing schemes, once they become feasible from a legal and political perspective. The project is contributing to remove those barriers; financial sustainability is directly linked to the particular design o f Congestion Pricing scheme being developed. As London's recent experience shows, financial sustainability i s not an issue. Traf$c calming. Here, maintenance will be carried out by the Comuna of Santiago involved, as this type of measures i s linkedto the municipality's own public space development. - 33 - Travel Optimization This sub-component requires a behavioral change that i s theoretically triggered by self-interest, since participants are not forced into changing their behavior by decrees or laws, or not even induced to do so through incentives which may not be sustainable over time. Participants are expected to change their way of traveling through being provided with a more accurate and comprehensive information about available transport alternatives, that may greatly differ from their current perception which may be incomplete. If,as expected, participants reap sizable benefits, in time and/or money savings, from these changes, the sustainability o fthe concept can be taken for granted. The consultantsincharge o f the program will needto identify for each participating entity or household attractive alternative modes o f travel, a d o r alternative destinations easier to reach by clean modes and that deliver the same services as the current ones. Then, when informed about this wider array o f choices regarding travel modes and destinations, the members of the participating households should adapt their travel behavior to this new information and adopt new transport-related strategies, that, for being more attractive, will be sustainable. As with the other components, once results are attained and published, replicability will be pursued in other Latin American cities mainly through the Clean Air Initiative. Financial sustainability is directly linked to the cultural change inducedinthe participants, and on the ability of the project to foster replicability. Decontamination Bonds As with the Congestion Pricing, financial viability and sustainability strongly depends on the design. How well demand and supply can be matchedwill inject sustainableliquidityto the market. la. Replicability: The project will include workshops to enable debate in some of the components and to facilitate participation from stakeholders. Also, the project will have a launching workshop, and a workshop at the end to disseminateresults. The impact of TRANSANTIAGO is expected to be felt beyond Santiago's boundaries, so that similar projects can be developedinother cities of the region. As inthe case of Colombiawhere the implementation o f Transmilenio has created a wave of new projects aimed at restructuring public transport, it is expected that this type o f projects will spur subsequent operations dealing with transport and environment, while helpingmitigate climate change. Components and sub-components such as the promotion o f the use o f bicycles; promotion o f cleaner bus technologies and fleet renewal; traffic calming at historic and congested areas; strategic environmental planning; and land-usepolicies linkedto transport objectives all have elements that make them replicable in other cities where cars are rising as a function o f economic growth and urban sprawl, while public transport tends to be chaotic and insufficient. Methodologies for developing this type of project components, as well as for measuring impacts and monitoring implementation can be easily replicated or adaptedto a different socio economical and infrastructure setting. This has already been recognized, inthe transport restructuring plans in Santiago and Bogota, which have sharedelements with each other. Lima is certainly learning from the Bogota experience with bike routes, while Santiago is considering lessons learned from both cities. As long as there are measurements and records o f costs, benefits, and implementation steps, all these experiencesbecome replicable. - 34 - 2. Critical Risks (reflecting the failure o f critical assumptionsfound inthe fourth column o f Annex 1): Promotion of Bicycle Use The Government and several citizen's groups have been calling for a cultural change in travel behavior, with the shift from car use to non-motorized transport being one of the objectives. TRANSANTIAGO calls for the construction o f 1,000 km o f bikeways, and individual Comunas such as Providencia and Rufioa are carrying out their own municipal bikeway programs. However, financing of the ambitious TRANSANTIAGO bikeway program is not assured, and SECTRA officials indicated that a relatively small GEF-supported bicycle promotion subproject would give the overall program a much-needed impetus. Moreover, this subproject would place special emphasis on promotional campaigns, in collaboration with NGOs and the private sector - a dimension that has not yet been much developed in TRANSANTIAGO. While the proposed subproject can count on the full support of the Government and NGOs, it i s by no means certain that the number of cyclists would increase rapidly enough for this concept to be perceived successful. There is certainly great risk attached to the subcomponent on promotion, as the best possible campaign i s no guarantee of increased demand for bike travel. Besides, there are few experiences in the developing world about promotion o f a modal shift to bicycles. Therefore, the strategy will consist of a close monitoring, so that any required changes in the political approach can be modified soon enough to ensure the best use of GEF resources. A similar pilot project in Lima, implemented in 1997 under the Bank-supported Peru Transport RehabilitationProject, resultedina moderate increaseinbicycle usage, but the bikeways built under that project are still not frequented enough to convince many motorists that bikeways are a wise use of scarce road space. Learning from that experience, the proposed Santiago subproject would put special emphasis on the promotion and monitoring aspects, and concentrate its bikeway investments in high-density corridors which could generate relatively high (and thus visible) rr bicycle volumes. Also, the quality of the bikeways will be higher incomparison to the Lima's experience; the example of Bogota, where substantial increase in the use of bicycles is evident, shows that a good quality infrastructure brings safety and status, helping attract new users. Also a well designed urban space near the bikeways will set the conditions to facilitate modalchange. Congestion Pricing The fact that congestion pricing is explicitly included inthe list of priorities that have to be pushedforward inthe framework ofTRANSANTIAGO - 2000-2006 shows awill, bothat the technical andpoliticallevel, to promote the concept. In addition, the endorsement o f international institutions such as the GEF and the WB should give a boost to the issue and help the Executive Commission for Transport in Santiago - CGTS to convince the various stakeholders of the soundness of Congestion Pricing inthe case of Santiago and have a positive impact on the media and therefore on the public opinion. It is therefore not unreasonable to consider that the context has changed since the last time the legislation referring to Congestion Pricingwas discussedinParliament. - 35 - Restructuringof BusSystem The main component of TRANSANTIAGO will be the restructuring o f the bus system, but this may encounter opposition along its implementation. A strike by the bus owner associations has already taken place, and although it was successfully managed by the Government, and helped showing the strong Government commitment to TRANSANTIAGO, it also evidenced the risks involved in this kind of endeavor. Also, since the city of Santiago is divided into 38 municipal governments, which belong to different political parties, there is substantialpolitical risk attachedto the plan implementation. To mitigate these risks, the Government i s negotiating with the opposition which controls a significant share o f the municipalities in the metropolitan region, and is incorporating the bus owner views into the design o f the new bus system. Similarly, surveys and participation from all other stakeholders, in particular the bus users, will ensure popular acceptance and backingfor the new developments. Risk Rating I Risk Mitigation Measure From Outputsto Objective 1. Interest inbikingas transport mode M The comunas of Providencia, Nuiioa and Santiagohave issuedletters confirming Not sufficient budget for buildingand Commitment. Also there has been a broad maintainingbikeways inparticipating participatoryprocessduringthe design and comunas (Santiago, Ruiioa, and formulation of the bike ways . Providencia) A study was conductedto develop a three years Low stakeholder collaboration strategy for promoting the use o fbicycle. Its implementation will help not only raise awareness but also will induce modal change, as soon as bikeways become available.. 2. Lack o fnecessarytesting equipment M Key stakeholdershave committedthemselvesto available the bustest. There is a strong commitment from the Government, which has approved budget for upgradingthe laboratory equipment at 3CV. Letters o f commitment will be requested; also, Availability o fbuses to be testednot contracts will be signed for the use o fthe buses guaranteed before disbursementstake place Willingness o fbus operators to participate infieldtests mayfade 3. Behavioralchanges may not be S Private sector should get involved on the sustainable over the long term with implementation ofthis sub-component. Previous respectto travel optimization work has beendone inChile and there is interest by the former actors to participate at this stage Public acceptanceuncertain S Inthepastthere hasbeenopposition to the - 36 - 4. Political opposition to Congestion concept of congestion pricing. Howeverwith the Pricing new roadsbeingbuiltunder concessionandtoll schemes, the public may get more receptive. The project will focus into studies and activities to promote the removal o f these perception barriers. From Componentsto Outputs 5. Counterpart fhding not effective M There i s a strong commitment from the comunas of Santiago, Nuiioa andProvidencia, which will bereinstatedvia letters o fcommitment and meetingwithmayors. Also the concessionaireof CostaneraNorte roadupgradingis involvedon the expansion o fthe bikeways; a letter of commitment will be requested. 6. Coordination of executing agenciesmaj M TRANSANTIAGO i s an array o fpolicies and become difficult for project measures aimedat improvingtransport, implementation environmental conditions, andultimately quality of life. The plan has beenenvisagedas a multi-sector plan, where the aggregate impact of different measures under the same objectives may produce the desired outcomes. It i s anticipated that some of these measures will take longer to implement, and some may not materialize. Overall Risk Rating M tisk Rating - H (High Risk), S (SubstantialRis ,M (Modest Risk), N(Negligib1eor Low Risk) 3. PossibleControversial Aspects: No Potential controversial issues have beenidentified for the project G. Main Conditions 1. EffectivenessCondition To be effective ,the following conditions will have to be met: 0 Operational Manualpreparedandacceptableto the Bank; 0 ProcurementInformation Systeminstalled and acceptable to the Bank; 0 Appointment o f ProcurementSpecialist at CGTS; and 0 Signature of Cost-SharingAgreement betweenUNDP, Ministry of Foreign Relations, and MinistryofWorks, Transport, andTelecommunications. -37 - 2. Other [classify accordingto covenant types used in the LegalAgreements.] H. Readiness for Implementation [XI 1.a) The engineering design documentsfor the first year's activities are complete andready for the start o fproject implementation. 4 1. b) Not applicable. IXI 2. The procurement documents for the first year's activities are complete andready for the start of project implementation. 17 3. The Project ImplementationPlanhasbeenappraisedandfoundto berealistic andofsatisfactory quality. [XI 4. The following items are lacking and are discussedunderloan conditions (Section G): I. Compliance with Bank Policies IxI1. Thisproject complies withallapplicable Bankpolicies. 2. The following exceptions to Bank policies are recommendedfor approval. The project complies with all other applicable Bank policies. Juan Lopez-Silva JohnRedwood Axel van Trotsenburg Team Leader Sector Director Country ManagerlDirector - 38 - Annex 1: Project Design Summary CHILE: Sustainable Transport and Air Qualityfor Santiago (GEF) Key Performance Data CollectionStrategy Hierarchyof Objectives Indicators Sector-related CAS Goal: Sector Indicators: Sector1country reports: from Goal to Bank Mission) Promote Sustainable ncreasedwell being o fpeople CAS ,ESW, survey, sector 'olitical acceptance Development nSantiago report and updates Improve quality o f life mproved air quality dacroeconomic Stability neasured by reduced :oncentration o f target ,011utants GEF Operational Program: lutcome IImpact ndicators: Promoting environmentally GHG emissions inventory ,ong term commitment to sustainable transport 0 Improvedsustainability o f )romoting reductions inGHG Specific objective: reduce the transport sector Transport Plan and Reports :missions relatedto transport GHGemissions from urban and surface transport sources inrecipientcountries by 0 Reductions inGHG facilitating recipient emission associatedto countries' commitment to modal shift adopt sustainable low-GHG transport measures, and 0 Reduced carbonintensity disengagement from o f trips unsustainable measures common inmanyparts of the world. Global Objective: lutcome IImpact Project reports: from Objective to Goal) ndicators: Reduce the GHG emissions 0 UrbanTransport Planfor Government agencies reports: ,ong term government from ground transport in Santiago implemented: :ommitment to implement the Santiago through a promotion 0 Modal share o fpublic Government agencies reports neasures inPTUS 2000-2010 o f a long-term modal shift to transport maintained more efficient and less 0 Land-usepolicies inplace Bank supervision reports 'rivate sector interest in polluting forms oftransport. to favor reduction inavg tdopting cleaner technologies The project will support the trip length Mid-termevaluation implementation o fthe 0 Barriers for introducing 'ublic acceptance o f higher 2000-2010UrbanTransport clean technologies for Completion Reports :osts attached to car use Plan for Santiago -PTUS. transport removed ( technological ,financial , Public opinion surveys zooperation between regulatory). itakeholders for integrated 0 Bicycle Trips increased in ransport and land-use - 39 - project area jolicies e Growth incars-km reduced Public awareness about air e Air quality indicators jollution and traffic effects improved inspite o f economic and economica Acceptance o fbus system growth reformby stakeholders e Reducedcarbon intensity per travelled km e Evidence o fbehavorial change towards a rational transport demand Iutput from each htput Indicators: 'roject reports: [fromOutputs to Objective) iomponent: .Use o f Bicycle is promoted Number o fbicycle 'roject reports [nterest inbiking as transport rips inproject area mode Improvedpublic licycle counts and intensions ierception about bicycle use is part o f a four year Sufficient budget for building Enterprises nonitoring program andmaintainingbikeways in ommitment to facilitate participating comunas licycle use by meanso f igency reports (Santiago, h i i o a , and nstalling parking places, Providencia) howers, andlor lockers CR At least 15 kmof Stakeholder collaboration dditional bikeways built in 'ublic opinion surveys Irovidencia, h 7 o a and lantiago. ictual kmo f bikeways built Adoption o f parking md connecting Commas lrograms for bikes at Metro itations .lHybridDiesel-Electric Drivingcycles for Leportsfrom test Necessary testing equipment IusTechnology tested and lantiago developed available ompared to CNG andDiesel Estimationo f hipervision reports uses ssociated costs to compared Availability o fbuses to be :chnologies tested Estimation o f GHG missionreduction from Willingness o f operators to cenario penetration o f participate infield tests xhnologies Cost-effectiveness omparison amongst xhnologies tested Trainedpersonnel at - 40 - relevant institutions such as 3CV, to test bustechnologies bothinlaboratory and field Eonditions .2 Designo fbusiness model D Evaluation ofbusiness Study reports articipation o f stakeholders 3 ensure profitability of models estructure public bus system; D Consultation with 4gency reports ndprogramfor retrainingof transport operators IUS operators inplace D Social Plan, including rrainingprograms for bus operators designed D Design o f monitoring mechanisms ..3 Program for modernizing D Assessment of options Study report iovemment commitment .ationalbus fleet inplace for fleet renewal inSantiago indother Chilean cities Agency report wticipation o f bus operators 0 Monitoring systemfor tracking down displaced buses designed '.Methodology for strategic Strategic Supervisionreports nter-agency collaboration llanningandevaluation of Environmental Assessment o f lrbantransport and land-use TRANSANTIAGO Assessment reports ilans inplace. D Identification of formal coordinating mechanisms for land-use, environment, and urban transport policy development andmonitoring ..1Evaluationof land-use D Report on options for Geo-referenced maps jovernment commitment to ,olicies coordinated with land-use incentives, and oordinate land-useand ransport demand and transport and environmental Agency reports ransport dimensions o f 'UPPlY impact ilanning Travel O D Surveys Design o f framework for locatingHousing Public surveys programs, takinginto account transport dimension e Assessment of school zoning and planning. 0 Development o f methodological framework to integrate transport and environmental dimension 1.2.1 Tentative strategy and In-depthanalysis o f Public acceptance surveys 'olitical willingness imetable proposed to induce legal implications :ongestion pricing Identificationo f Agency reports Jegal feasibility measuresto implement in Santiago Study reports -41 - Identification o f :chnology needs Evaluation o f iternatioaal experiences lost-benefit assessment 4.2.2 Traffic calming Evaluation o fpublic ?ublic acceptance surveys ?oliticalwillingness measuresdesignedfor xeptance Santiago's city center 0 Identification o f 4gency Reports Legal feasibility measures 0 Design and costing Study reports 20-fmancing secured 0 Publicprivate Management unit established 4.3 Pilot inplace for a Feasibility AssessmentPilot project results Behavioral changes are sustainable adoption o f sound fPilot wstainable over the long term travel demandpractices 0 Numbero fparticipants in Supervision reports (Travel Optimization) pilot keep new patterns of Public acceptance travel demand after 2 [CR years Public surveys 4.4 Program for Assessment o f Supervisionreports Participation o f stakeholders Decontamination Bonds ieasures and mechanisms to upgraded to incorporate GHG pgrade Decontamination ionds program Development o f istitutional setup llearinghouse mechanism esigned Project ComponentsI )puts: (budgetfor each Projectreports: (from Componentsto Sub-components: omponent) Outputs) 1. Promotion o fbicycleuse. .606 Million reports on civil work Counterpart funding effective supervisionpromotional strategy, safety and monitoring 2. Modernizing bus system ,054 Million Test Reports Effectiveparticipation o f private partners Supervision reports Regulation inplace 3. Strategic environmental .439 Million Supervision report Political acceptance assessment Audit reports, financial report, quarterly and annual Coordinationo f transport and progress reports, and Bank land-use measures midterm review 4.1 Assessment o f land-use ,072 Million Supervision report Coordinationo f transport and `ncentives andpolicies to 4udit reports, financial `,and-use measures :educe motorized trave .eport, quarterly and annual irogress reports, andBank nidterm review 4.2 ReducedMotorized 080 Million 3upervision report Political acceptance rraffic 4udit reports, financial .eport, quarterly and annual Public support irogress reports, and Bank nidterm review 4.3Travel optimization 0.388Million Supervisionreport Willingness to participate in Audit reports, financial pilotprogram report, quarterly and annual progressreports, andBank midterm review 4.4 DecontaminationBonds 0.871 million Supervision report Regulation inplace Audit reports, financial report, quarterly andannual Willingness to participate in progressreports, andBank program midterm review I5. ProjectManagement 0.268 million Supervision report Politicalcommitment Audit reports, financial report, quarterly and annual InformationAvailable progress reports, and Bank midtermreview -43- Annex 2: Detailed Project Description CHILE: Sustainable Transport and Air Qualityfor Santiago (GEF) By Component: Project Component 1 US$2.58 million - The GEF-funded bikeways would run along the following axes: Santa Isabel, 1.737 KM, Condor, 0.853 Km, SanIsidro 0.037 Km, SantaVictoria 0.846 Km,Fray Camilo Henriquez0.126 Km, Marin 0.212 Km, BCilnes RepCiblica 3.279 Km, in Santiago. Antonio Varas 2.109 Km, 11 de Septiembre 0.073 Km, Santa Beatriz 0.370 Km, PCrez Valemela 0.047 Km, General Calderon 0.161 Km, Santa Isabel 0.190 Km, Marin, 0.158 Km, in Providencia. Matta Oriente 0.545 Km, Republica de Israel 1.218 Km, Grecia 2.196 Km, Campos de Deporte -Antonio Varas 1.820Km, anda additional section of 5.698 Kminl%iioa. The total lengtho fthe Bikeway Network i s 21.945 Km. The investments in the GEF funded bikeways are expected to average USD91,lOO per kilometer. In addition, the local governments will contribute counterpart funds in the order of USD 2 million, for the construction o f an additional 21 KM of bikeways. The Comunas have issued letters of intent, confirming their plan to buildthe complementary bikeways and committing themselves to the maintenance, cleaning andlightingo fallbikeways to bebuiltunder the Project. The configurationo fthe proposedbikeway network is shown below: * The physical works will be complemented by an action program aimed at maximizing traffic safety and - 44 - personal security for the increasing number of cyclists in the three Comunas. An independent safety and security audit o f the final designs has been carried out (with PDF-B funding). During construction, specialists will closely monitor the implementation and ensure that appropriate standards are used to ensure the cyclists' safety. Safety oriented measures will also be implemented and traffic safety campaigns and education will be carried out as part of the promotional strategy (see below). .. Moreover, this Project component includes the implementation of a three-year program of promotional actions, with the overall objective o f increasing bicycle use in the three Comunas. This plan will include such actions as (a) collaboration with citizen's groups to develop grass-roots support for non-motorized transport, (b) publicity campaigns to develop an attractive image of the bicycle as transport mode, (c) traffic safety campaigns directed at drivers and cyclists, (d) special events such as bicycle outings (cicletadas) and car-free Sundays in selected streets, (e) approachesto major employers to promote bicycle use among their staff, including the installation o f showers and bicycle parking, (0 provision o f bicycle parking in public spaces and car parks, (g) establishment o f a website to provide information useful for cyclists, and (h) interventions to increase cycling as a feeder mode to the metro. In addition, a pilot program will be carried out in collaboration with a university and a high school to establish conditions enhancing the use of non-motorized transport (cycling and walking) by their students. Project Component2 US$1.45 million - 2.1 Technical assistancefor evaluating the economicand environmental impact of clean technologiesfor buses The tests will be developedusinga state o f the art emissions laboratory for heavy duty vehicles located at the 3 C V facilities. The 3CV laboratory would be upgraded, so that all relevant equipment gets in place. The chasis dynamometer will be retrofitted and the laboratory will be h i s h e d with gas analyzers, a .. Constant Volume Sampler System (CVS); a Particulate sampler; an AC/DC clamp on power Hitester Hioki model; and a Measurement System for exhaust gases. GEF funds will be complemented by local resources; the grant amount was determined by the preparatory PDF-B study, and the amount was determined based on the costs of contracting thirdparties to carry out the laboratory tests. Representative drivingcycles for Santiago will be developed, takinginto account the new layout for the bus system, to be effective starting 2004. Complementary to the laboratory tests, the operating conditions of the buses will be closely monitored throughout a year, to determine costs, and technical performance. The first stage will evaluate the buses initial conditions, establish a baseline scenario, driving cycles and set out the methodological approach. A heady duty dynamometer needed for the 3CV lab will be purchased. Second phase will start the performance tests, and will include basic training for operating the new lab equipment and a first set o f laboratory testing at the 3CV. Also, it will calibrate the testing protocol according to the new lab facilities. Thirdphase will include the second set of laboratory tests at the 3CV facilities and will take place after 6 months o fmonitoredoperation ofthe buses, usingdrivingcycles developedunder the project. Fourthphase will consist o f a second set of laboratory tests to be conducted after twelve months o f bus operation. Cost and performance monitoring will measure oil and fuel consumption, tires and parts degradation, and maintenancerequirements, including labor. The technical protocols for the testing were produced under the study financed with GEFresources(PDF-B) as part o fthe preparation process. The test will include at least 6 buses: Two (2) HybridBuses, one 10-12 meters long with Euro I1engine, and one articulated Euro I11hybrid. Two (2) CNG Buses (EURO I1and EURO 111); and two diesel buses: one Diesel Euro I1,and one Diesel Euro I11articulated bus. The GEF will f h d the tests, while private bus - 45 - owners and developers will provide the 6 Buses and will allow their operation on real representativebus routes. Tests are estimated to cost about USDl million, which include co-funding for the 3CV upgrade. Counterpart funds will be in the order o f USD 2.910 million (including USD800,OOO from ENA for upgrading the 3CV facilities). The testing for the bus technologies will take place using over 10 buses provided and operatedby the private sector on existing routes. Parties expressing interest incontributing to this so far include Chile Association o f Bus Operators, Transelectric, Quilical, Mercedes, and Volvo. This test will be harmonized with the one taking place ina similar GEF project for Mexico. Experts from both cities will share their experiences. Also, the testing protocols will be compared to develop harmonized procedures. Since the project in Mexico will start sooner, the Chilean test will use all resulting lessons learned for their approach. Both Bank project teams have already initiated the coordination of bus testing activities. 2.2. Implementation Frameworkfor Bus Reform The business structure of bus services in Santiago has resulted in a costly and environmentally unsustainable surfacepublic transport system. Key issues include: (a) lack o f an organizational model that # would facilitate efficient public transport operation, (b) dispersed operations that hinder the effective control of bus services and contribute to traffic congestion, (c) lack o fprofessional managementamong bus operators, and (d) an unattractive image which induces potential bus passengers to use private vehicles instead. The experience of Bogoth's innovative bus corridor system has demonstratedthat the creation of the right business environment is vital for achieving sustainable public transport services by improving their commercial viability. On the basis of the Bogotb model, the Santiago Transport Strategy for 2003-2005 includes the implementation of about 30 kmof segregatedbus ways. As learnedinBogoti, the physical busway construction must be complemented by a well-conceived program of institutional measures to create the business environment required for reforming the bus transport system. A social mitigation plan will also be designed to help those transit workers impacted by the reform to find a Job either inthe new public transport system or outside the transport sector. These studies are estimated to cost USD 707.092, o fwhich USD216,315 would be financed by GEF. - 4 6 - 2.3 Renewal of the busfleet in the regions The implementation of the bus routes, and more specifically of the trunk routes on segregatedbusways is expected to allow the road-basedpublic transport system to runmore efficiently with a reduced number o f buses. Due to higher speeds, the introductionof articulated buses, and more stringent environmental norms approximately 4,000 buses are expected to be removed from the streets of Santiago. These buses, which mightnot be eligible to runinSantiagounder Santiago's own standards regarding age andemission levels, r. are still much newer and cleaner than most o f the buses which are circulating in the cities of the other regions. These buses are hence expectedto be sent to other cities where a renewal of concessionswill also take place. The study financed under this component will evaluate options to avoid proliferation o f those buses in these cities. One likely option would be to require local bus operators to replace their old buses with those from Santiago, through incentives that could be basically linked to the concession awarding process. The study would identify cities where concessions are about to be renewed, would design a legal and institutional framework to facilitate the renewal of the existing bus fleets and would define the necessary incentives to make this happen. It would also design a strategy to make sure that the oldest and dirtiest displaced vehicles are not sold on a secondary market but are properly scrapped according to adequate environmental norms. This way, the objectives of local and global emission reduction would be achieved. These studies are estimated to cost USD553,935, o fwhich USD253.935 would be financed by GEF. Project Component 3 US$ 0.34 million - 3. Strategic Environmental Assessment Current tools for policy making rely on the use of transport models inter-phasedwith an emission model assessing emission changes due to changes indirect transport measures (e.g. newly segregatedbusways, changedtraffic patterns, introductionof cleaner vehicles or fuels). However, effects from structural r. changes such as pricing or tariffs, or inland-use patterns, cannot be easily measured, This component would strive for a better inter-agency coordinationabout cross sectoral issues arising from transport and urbandevelopment planning; complementarily, it will help develop a systemto introduce environmental evaluation of all aspects with transport planning, linkingtransport to air quality, climate change and environmental impact assessment. This approachwill be used over a long-termperiod o ftime, as validation requires important changes suchas technology renewal and land-usepattern changeto have effect. GEF will fund studies and workshops to develop and implement a strategic environmental planning and evaluation methodology. The GEF will fund these studies with an amount of USD339,105. Project Component 4 US$2.15 million - 4. Technical Assistance and Analytical Support: land-use patterns and internalization of costs 4.1 Assessment of land-use incentives andpolicies to reduce motorized travel 4.1.1 Developingthe Central Ring of Santiago (Anillo Central) The population of the city center in Santiago has unfortunately been decreasing for decades and urban - 47 - sprawl is o f great concern. A preparatory PDF-fundedstudy showed that developing housing at Santiago's central ring (Anillo Central) would have a positive environmental impact, as emissions of both GHG and local air pollutants would decrease as a result o f a reduced average trip length. The Central Ring of Santiago not only has lots available for real estate developmentsprojects, but also enjoys a good access to public transport means. Simulation using ESTRAUS, MUSA, and MODEM models has shown that complementary public transport development inthe area, such as circular routes over the ringwould bring considerable reductions in emissions. The studies will help orient land-use policies so that the average trip length gets reduced, and where modal shift to public and non motorized transport is promoted. Potential articulationwith the locationof social housing programs and subsidieswill also be studied. The GEF will fundthese studies with an amount ofUSD188,lOO. 4.1.2 School Location This sub-component will help assess the feasibility o f rationalizing school location considering the transport dimension. Different school location scenarios will be examined and modeled in order to provide .. decision-makers with information on the environmental impacts of eachenvisagedstrategy, interms ofboth local and global pollution, the ultimate goal being the rationalization of school-related trips and the reduction o f their average length. It will also examine the effects o f the JEC ( fully day at school policy) which will severely add to travel demand inthe morningpeak hour. The GEF will fundthese studies with an amount o f USD195,446. 4.1.3 Housing Policy It was decided in agreement with the "Mesa de Trabajo Ciudady Territorio" that the GEF support would focus its intervention through an analysis of the consistency and compatibility o f the various sector policies that affect land-use and transport, namely the policies designedby the Ministries o f Housing, Economy and Transport regarding land-use, social housing, transport infrastructure investment plans, air pollution, etc. The GEF would allow decisions makers to take knowledgeable decisions regarding housing location policies, that will take into account criteria linked to the impact o f those policies on travel patterns, air pollution and GHG emissions. Within the same logic as the other two sub-components, the project will promote a rational location of housing, so that urban spread i s minimized and access to public transport is ensured. The GEF will fund these studies with an amount o f USD206,910. 4.2 ReducingMotorized Traffic 4.2.1 Traffic Calming at City Center This sub-componenthas as its objective to reduce motor vehicle use within Santiago's city center. This will be done trough the implementation o f measures such as traffic calming, pedestrian facilities implementation, and parking restrictions in the area of the Triangulo Central de Santiago ( Zone between Alameda Libertador Bernard0 O'Higgins, the Mapocho River and Autopista Norte-Sur). Also it is expectedto enhance current programs o f pedestrian corridors recently built or actually under execution and to reduce the incentives to car use, trough measures pointed to restrict though traffic and limiting the amount o fparkingspaces downtown. A key element o f this sub-componentis to get the plan agreedby city center businesses and other stakeholders, and haveregulatory measures and the detailed engineering designs ready for implementationso that works could start as soon as possible. This sub-component is estimatedto cost USD 572,297, of which USD 522,297 would be financedby GEF. 4.2.2 Congestion Pricing Various studies or a multi-pronged study will be necessary before defining a technically sound politically * viable scheme. The implementation (electronic systems, minor civil works, tolls, operating costs) i s not considered under GEF's financing as this would be premature at this stage. The main items which should be dealt withare the following: 0 Analysis o f institutionalwill political barriers : Learning from the history o f Congestion Pricing in Santiago, the reasons wouldbe examined why the political context has made it impossible to implement a systemwhich hadbeen envisagedfor years, with the objective o f finding a practical and more effective future approach to overcome these barriers. 0 Inventory andanalysis of international experiences (Norway, Singapore, London, etc.). 0 Choice o fthe pricing mechanism : severaloptions will be examined, such as area-wide pricing, pricing limitedto downtown ;and corridor-based congestion-pricing. Options include flat, distance-related, and time-differentiated tariffs. 0 Choice of the technology :review and investigatethe technical options for congestionpricing in Santiago and their potential public and politicalacceptability. 0 Legal base for dedicating revenues: The Government's fiscal policy does not permitthe earmarking of taxes. It must be determinedunder which legaland institutional arrangementsthe revenues * from congestion charges can be regarded as user fees. 0 Sustainabletransport fund: Inthis vain, consideration wouldbe givento the creation o f a fund which would utilize the revenues from congestionpricing for improvements to public transport and non-motorized transport. 0 Surveys (possibly statedpreference surveys) and modeling :these surveys will help the technical team andthe decision makers to examine potential user responseby means of behavioral research, including statedpreference analysis and traffic simulation modeling. 0 Environmentalimpact and GHGemission reduction assessment : The aforementioned comprehensiveanalysis o f changes intravel behavior would provide the elementsnecessaryto carry out the environmental assessment of Congestion Pricing, focusing on GHGemissions. 0 Informationcampaign to facilitate political acceptability o f Congestion Pricing : Incollaboration with Government and civil society groups (includingthe Automobile Association), public relations specialistswould define an information strategy. The GEF will find these studies with an amount o f USD378,089, out of which 92% will be used to fund specific studies and 10%will be dedicated to workshops, field trips, and publications. - 49 - 4.3 Travel Optimization Duringthe preliminary phase, neighborhood(s) andcompanieswillbe identifiedwhere thisprogramis most likely to succeed. Then, GEF funds will be used in a first instance to finance the census of the trips for a few thousands households and the drafting of alternative travel patterns for the households involved in the pilot. Also, to assess the potential role of companies in supporting travel optimization projects; GEF resources will also be used to develop a large scale program for voluntary travel optimization, while monitoring travel needs and actual traveling practice during a fixed period of time. This will involve developing questionnaires, surveys, monitoring indicators, and actual monitoring during and after the project i s implemented, and calculating environmental impact and cost effectiveness. Then, complementary actions would be taken which would require GEF financing such as street sign improvements, publication o f a Community Directory with an inventory o f the shops and services available in the targeted neighborhoods, the realization of a specific web-site to facilitate car pooling, etc. part of the grant would also be required for the follow-up of the program, notably to assess its impact in terms of the reduction in car trips. The GEF will fundthese studies with an amount o f USD188,lOO. 4.4 Decontamination Bonds CONAMA is preparing a project of law to establish a legal and comprehensive ground for the so-called Decontamination Bonds. These are economic instruments designed to place a cap on emissions to the Metropolitan Area o f Santiago. The concept is as follows: any new polluter has to compensate by more than 100% its net pollution contribution to Santiago's emissions, through purchasing contamination permits (called Decontamination Bonds) or through investing inreducing emissions inother sectors. Thus, a coal-power plant located in Santiago will have to scrap old buses, or convert taxis to CNG, or simply purchase emission permits in order to expand its capacity. Until now, via environmental licensing, CONAMA has managed to control growth inthe generating power inindustryand utilities, and has acted as a clearinghouse, helping find environmental options to invest in. Also, the system had only addressed point sources of pollution. To advance the Decontamination Bonds, CONAMA has submittedthe draft of a law to Congress. The new law will extend the coverage to mobile sources, and will create a basis for creating a more liquidemissionspermits market. The project will help upgradethe system, to enable carbon emission reductions to be traded. The project will provide resourcesto facilitate sustainable transport projects to be funded by the emerging market o f emission permits. The system's supply curve will derive from the incremental marginal cost of those transport projects. The demand curve will be dictated by the excess in emissions resulting from a command and control measure; placing a reduced cap for the city's overall emissions will generate demand for emission permits. The underlying concept i s that for a polluter it can be less expensive to purchase an emission permit,than incurring incosts to reduce its emissions in-house. Today the market does not exist as such. Demand and supply do not meet; CONAMA's intention is to generate a clearinghousemechanismto help bringtogether demand and supply of emission permits. A fund may help do that without the need o f coordinating the involved parties, and will help inject liquidity and reliance into the system. The GEF study will help determine the best ways to ensure the C02 emissions are incorporated into the system. It will also ensure that emission reductions resultingfrom the system can be - 50 - acceptedand traded internationally. The GEF will fundthese studies with an amount ofUSD471,562 - 51 - Annex 3: Estimated Project Costs CHILE: Sustainable Transport and Air Quality for Santiago (GEF) Local Foreign ProjectCost By Component US $million US $million 1.Promotion ofBicycleuse 4.56 0.05 4.6 1 2. Modernization ofBus System 4.33 0.73 5.06 3. Strategic Environmental Assessment 0.44 0.00 0.44 4. Technical AssistanceandAnalytical Support: land-use 3.34 0.07 3.41 patterns and internalization of costs 5. Project Management 0.27 0.00 0.27 Total BaselineCost 12.94 0.85 13.79 Physical Contingencies 0.20 0.00 0.20 Price Contingencies 0.00 0.00 0.00 Total ProjectCostsI 13.14 0.85 13.99 Total FinancingRewired 13.14 0.85 13.99 Local Foreign Total Project Cost By Category US $million US $million US $million Goods and services 3.17 0.73 3.90 CivilWorks 3.70 0.00 3.70 Consulting 6.07 0.12 6.19 Contingencies 0.20 0.00 0.20 Total Project CostsI 13.14 0.85 13.99 Total Financing Required 13.14 0.85 13.99 IIdentifiable taxes anddutiesare 0 (US$m) andthe total project cost, net o ftaxes, is 13.99 (US$m). Therefore, the project cost sharingratio is 0%o f total projectcost net o ftaxes. - 52 - Annex 4 IncrementalCost Analysis CHILE: SustainableTransport and Air Quality for Santiago (GEF) Overview This project will help reduce GHG emissions from ground transport in Santiago, through a promotion of a long-term modal shift to more efficient and less polluting transport modes. To this end, the project will co-finance measures aimed at removing barriers for changing cultural behavior and transport demand patterns; improving the public transport system; promoting cleaner fuels and technologies; and incorporating the environmental dimension inurban transport, and land-useplanning. Context and Broad Development Objective With over 5 millionpeople, Santiago de Chile concentratesmuchof Chile's economic and political activity over 50,000 ha. Transport in Chile contributes to almost 40% of all GHG emissions, and Santiago hosts most of the emission sources. About 40% of the country population lives in the city, and 50% of Chile's GDP is generated in Santiago, which has experimented a relatively acceleratedeconomic growth (over 6%) during the last decade. As a result, the urban sprawl is expanding quickly and the use of private car is intensifying.From 1991 to 2001, households owning at least a car augmented from 36% to 56% causing trips inprivate cars to increase from 18.5% to 38.1%. Conversely, for the same period, trips by bus have fallen from 59.6% to 42.1% o f all motorized travel modes. The intensity in the use o f cars pairs with an relatively inefficient public transport systemto produce traffic congestion, and a carbon intensive transport. This tendencybringsabout dire consequences interms of GHGemissionsand air pollution. Barriers for an efficient and less carbon-intensive transport Achieving an efficient transport system ina city i s major and difficult task and may not suffice to attain the goal of reducing emissions and sustaining them in the long term. It also requires the participation of * stakeholders, who play a key role in the selection of transport modes, and moreover in the intensity of transport use. Also, transport users decide where to live, and how and where to conduct their businesses, not necessarily thinkingabout the best transport mode combination. Therefore, one of the main barriers for achieving a less carbon-intensive transport i s (i) the resistance to change cultural patterns or behavior. The use o f bicycles as a transport option; rationalizing the demand for car or motorized transport use through travel optimization practices; making a better use of mass public transportation; and attending schools or services located near the household location or work place are some o f the areas addressedby the project that require cultural change. Other barriers include (ii) the inefficient public transport svstem. As long as the mass public transportation i s not efficient enough to reduce travel time under reasonablecosts and comfort, the car will continue to be the preferred transport mode. The (iii)lack of adequate infrastructure for non-motorized transport is also a barrier that needs to be overcome. Bicycle use can only be incremented if safe, well located, properly designedbikeways are available, and complemented by parking places, showers, and lockers. Besides cost, there is also (iv) a technological risk attached to the newer and cleaner transport technologies. Finally, the (v) regulatory framework as a barrier to the adoption of newer schemes as Congestion Pricing, and use or zoning ofpublic space. - 53 - Strategy for overcoming barriers and Global Benefits Late in 2001, a PDF-B project was approved by GEF to help prepare an Air Quality and Sustainable Transport Project for Santiago. Based on the 2000-2010 Urban Transport Plan for Santiago (TRANSANTIAGO), considering the Decontamination Plan for Santiago prepared by CONAMA, and in light of GEF Operational Policy on Sustainable Transport, a series of measures were studiedduring2002 to help develop this GEF proposal. The following measures or sub-components have been identified due to their potential for both addressing air pollution and reducing GHG emissions: (1) Promoting the use of bicycles; (2) Modernizing the bus system; (3) Assessment of land-use incentives to reduce motorized transport; (4) Reducing motorized traffic through Congestion Pricing and traffic calming; (5) Strategic Environmental Assessment and Planning; (6) Travel optimization; and (7) Decontamination Bonds. Most measures promoted under the project will be effective in the long-term. Reductions in GHG emissions will be felt as a result of TRANSANTIAGO implementation, as the addition of net effects from all measures. Preparatory studies under PDF-B, using a conservative approach, have already shown potential C02-equivalent reductions as a result of TRANSANTIAGO implementation. Below is the estimated potential impact from all control measures supported by the project, based on the level of information available. However, not all of these potential reductions could be compared against each other, as different assumptions, and implementation timeframes have been used for studying each type of measure. The Strategic Environmental Assessment sub-component will enable a comparison between and amongst rr componentsto show local and global impacts at different points intime. 1. Promotion of bicycleuse The introduction o f even a moderate shift from motorized modes of transport to bicycles could provide substantial benefits in terms of GHG emissions. For the GEF-supported Marikina (a district o f Metro Manila) bikeway project, it was estimated that an increase of bicycle usage from 1.6% in2000 to 2.8% in 2015 would yield aggregate benefits o f USD4 million for an initial investment of USD2.1 million. A decrease o f 3% in the vehicle-km traveled by private cars and taxis as a consequence of modal shift to bicycle trips in metropolitan Santiago would help reduce C02 emissions by 1.15% at about 126,000 tons per year. 2. Modernizing the bus system (a)Technical assistancefor evaluating the economic and environmental impact of clean technologiesfor buses. It is expectedthat the hybridbuses inthe public transport fleet will allow reductions inemissions o f airborne pollutants over 60% o f EURO I1standards currently used in Chile, and up to about 15-30% in GHG emissions (the latter achieved as the hybrid bus requires less fuel to run). Based on ASIF methodology and takinginto account the total fleet o f the new bus system, ifwe assume a scenario o f 561 rr per year . hybridbuses (about 25% of the 2005 trunk fleet), it would mean a reduction of about 23,516 tons C02 @) Technical assistance to develop an implementation framework for bus reform. Reforming the bus systeminSantiago generatesimportant gains inefficiency for the operators and for the transport system o f the city as a whole. These gains will not only provide operators a better return on investment, and users shorter travel times, but emissions will get reduced as a consequence of fewer buses needed, o f increased use of bus capacity, o f higher average speed, and o f modal shift. Based on the information obtained from the PDF-B preparatory studies, the projected bus system will offer annual reductions in the order of - 54- 586,000 tons o f C02. (c) Renewal of the busfleet in the regions. The new bus routes system is designed to operate with fewer buses than the current fleet. About 4,000 buses will have to be replaced in order to comply with the technology standards for the city. As these buses will probably go to other cities or countries, older buses are expected to be substituted. Ifthe project succeeds in avoiding that the older buses remain in operation after all 4,000 are replaced, there could be annual reductions o f C02 emissions inthe order of 80,000 tons Assumingtypical traveledkmpera"of 100,000 km, anda 100%scrappingofEPA 94 buses.. 3. Strategicenvironmentalassessment andplanning Current tools for policy making rely on the use o f transport models inter-phased with an emission model assessing emission changes due to changes in direct transport measures (e.g. newly segregated busways, changed traffic patterns, introduction of cleaner vehicles or fuels). However, effects from structural changes such as pricing or tariffs, or in land-use patterns, cannot be easily measured. This component would strive for a better inter-agency coordination about cross sectoral issues arising from transport and urban development planning; complementarily, it will help develop a system to introduce environmental evaluation of all aspects with transport planning, linking transport to air quality, climate change and environmental impact assessment. 4. TechnicalAssistance andAnalytical Support: land-usepatterns and internalizationof costs 4.1 Assessment of land-use incentivesand policiesto reduce motorized travel (a) Developing the Central Ring of Santiago. Density patterns are obviously closely linked to transportation and therefore energy use and greenhouses gases emissions. Different studies (Naess, 1993, INRETS, 1995, Newman and Kenworthy, 1998) have shown a strong correlation between the energy use par capita in passenger travel and urban density. Preliminary simulations show that a set o f real estate development projects (6,000,000 m2 of housing projects, i.e. almost 50,000 homes, and sq m2 915.000 of non-housing projects) strategically located along the Anillo Central, and implemented in lieu of other real estate development projects of the same amplitude but located further away from the center, would generate substantial benefits in terms o f travel patterns and subsequent emissions : transport-related C02 emission in Greater Santiago would decrease by 6.7 % while PMlO and PM2.5 emissions would drop by an estimated 8%, ifand only ifthese real estate developments projects were to be accompanied by consistent transport policies to avoid further congestion, i.e. mainly a substantial increase and improvement o f public transport supply. (b) School Location and Housing Policy. Both sub-componentsare aimedat promoting a reduction inthe average traveled vehicle-km, which i s expected to allow for lower emissions o f GHG and local air pollutants. This will be achieved through a combination of lower transport demand (shorter trips), and modal shift to public and non-motorized transport. 4.2 ReducingMotorized Travel (a) City Center Revitalization. This sub-component aims to reduce car use in the city center while at the - 55 - same time maintaining its commercial and cultural attractiveness, allowing for reductions inC02 emissions derived from modal shift. In 2001 the amount of travel trips to the city center was 4.1% o f the total trips; assuming that 30% of these trips will go to the Central Triangle, and that with measurersas traffic calming we reduce the amount of trips by 50% a reduction of 20,931 tons of C02 per year would be possible, equivalent to 0.19% of total emissions. Also, less traffic in the city center will bring about local environmental benefits derived from lower exposureto air pollutants ina relatively closed area. (b) CongestionPricing. GHGemission reductions are directly linkedto the reduction inthe use ofprivate vehicle trips. Congestion Pricing has significant potential to reduce congestion by lowering vehicle-km traveled, since effective road user charges reduce traffic demand. Since environmental impacts such as GHGemissions increasewithrisingmotor vehicle use, CongestionPricingwould have apositive impacton global warming. Different options have already been tested through traffic models under the PDF preparatory studies, and the results show the importance of designing correctly the proposed road-pricing mechanisms to maximize benefits and avoid possible negative side-effects. A preparatory study shows that a scheme where car drivers would have to pay 1000 pesos (USD 1.4) to enter a small area inthe center o f Santiago there would be none or very little environmental benefits, since there would be a trade-off between car users who would decide to switch to public transport and car drivers, whose destination i s not located on the tolled zone but whose current itinerary goes through it, who would then opt for a longer itinerary. On the other hand, a more extendedtoll zone inthe city, whereby car drivers would be required to pay the same amount when entering a wider area defined by Americo Vespuccio ringroad, or when driving within this area, would actually deter many more car users from using their vehicle. This shift to public transport, and the impact on current congestion levels, would reduce transport-generatedC02 emissions in Greater Santiago by 9.6%. Inaddition to this, and since fewer private vehicles would use the roads, public transport commercial speed would rise and generate substantial time savings to their users. To end with, proceedsfrom the toll couldbe usedto finance public transport improvements, to optimize the traffic signal systemor to untie local bottlenecks on the road network. 4.3 Travel optimization This innovative approach, which promotes a more rational use of motor vehicles, has (in two Australian schemes) resulted in the reduction o f car trips by 23%, and of vehicle-km traveled by 21%. In Santiago there has already been a demonstration experience, which allowed reductions in average travel km by 23.3%. Such a scheme i s expected to yield substantial reductions o f GHG emissions at very low cost. A reductiono f 10% incar-km could meana reduction of C02 of over 340,000 tons, a total 3.1% reduction. 4.4 Decontamination Bonds CONAMA i s currently developing a National Program o f Decontamination Bonds, to control the increase of emissions of air pollutants due to the booming economic activity. New polluters on the system will have to compensateby buying emission permits, which can be traded on the local market. Chile is one o f the leaders in Latin America in the use o f market based instruments for environmental management (they already have an incipient market for NOx emission permits from fixed emission sources). Chile has a well developed financial market, including a vibrant stock exchange and a good level o f secondarymarkets. Incorporatingcarbon emissions offset by sustainabletransport projects inthe programwill allow to place a limit to the ever growing C02 emissions; the potential impact interms ofpotential C02 emissionsreduced will result from the project financed studies. The project is aiming at allowing sustainable transport investments to take place in exchange for measures to avoid GHG emissions generated elsewhere. To illustrate, there has been a recent deal whereby a power plant located in the city of Santiago has been - 56 - allowed to expand its generating capacity. To compensate for the additional NOx emissions into the city's airshed, the power plant will finance conversion of taxis running on gasoline to CNG. At the end, a net reduction in emissions was obtained, while a much larger reduction in exposure was ensured (as taxis inflict a more direct effect onpeople and hardware). Baseline Scenario and Costs The baseline scenario assumes the implementation of measures consistentwith Santiago's Urban Transport Plan - TRANSANTIAGO, mainly those aimed at restructuring the public transportation system. TRANSANTIAGO is a program focused on reducing air pollution and improving transport, without consideration o f GHG emission reduction. In the absence of GEF, TRANSANTIAGO would have only focused on achieving a renewedplan for routes, concessionschemes, and integrated fare for the bus system without much consideration of technologies such as the hybrid diesel-electric buses. Also, studies to develop Congestion Pricing or land-use incentives to reduce travel distances would not take place. In the same line, studies on incentives for school and housing location as a way to reduce the average traveled km would not take place with the neededcelerity. Finally, the programon decontamination bonds would remain focused on local air pollution objectives. Total expenditures under the baseline scenario are estimated to be at least USD6.272 million. As per the baseline scenario in terms of GHG emissions, the annual level of emissions derived from the current trips taking place inthe city inyear 2000 is about 7 million MT C02-Equivalent. This results from over 20,000 millionvehicle-km resultingfrom a total o f trips. Alternative Scenario and Costs The proposed alternative will seek to demonstrate the benefits of measures aimed at promoting a change to less carbon intensive transport modes; a reduction o f average traveled distance (avg vehicle-km for specific trips), anda more efficient use o ftransport (more passengers per vehicle kilometer). Inorder to make these measures possible it is necessary to ensure an institutional coordination of sector policies and sustainable rr mainstreaming o f the environmental dimension into land-use and transport planning. Following is an incremental cost analysis for each component and sub-component: 1. Promotion of bicycle use The baseline o f this component includes the already budgeted plans for recreational bikeways in the Comunas o f Santiago, Providencia, and fiuiioa. Without GEF, the bikeways would be built considering the particular recreational goals of each Comuna, and without any need of standardization. The GEF project will ensure that the bikeways built effectively address transport needs, considering specific trip purposes such as work and education and linkingthem to other transport modes such as the Metro. Also, the GEF alternative will ensure that a promotional strategy is implemented to promote and sustain the cultural change neededto induce modal shift from motorized transport. Finally, the costs will also cover the safety and monitoring studies. - 57 - 2. Modernizing thebus system 2 1 Evaluationof Bus technologies. The baselineincludes most o fthe equipment neededto upgradethe . . chassis dynamometer emissions testing laboratory for heavy-duty vehicles. Incremental costs are linkedto part o f the laboratory equipment, co-financing the development o f Santiago's driving cycle, and the field tests and coordination. 2.1 Implementation Framework for Bus SvstemReform. Here the baseline includes the existing studies on the newbus system. The alternative project includes additional studies on the business structure, so that the new systemgets supportedand can start soonerattracting cleaner technologies under the new operation concessions. 2.2 Renewal o fbus fleet. This sub-componenti s all incremental. Without the GEF, the old buses displaced from Santiago would simply end inother cities contributing to increaseGHGemissions. The incremental costs are attachedto the initial study. 3. StrategicEnvironmentalAssessment The associated baseline for these studies is the existing modeling capacity which would be used to r. determine impacts in air pollution and traffic congestion related to the implementation o f such measures. The alternative project will ensure that the global dimension is counted in, and measured. 4. TechnicalAssistance andAnalytical Support: land-usepatterns and internalizationof cost 4.1 Assessment ofland-use incentivesand policiesto reduce motorized travel The baseline for this sub-component i s the local contributionto studies, and use of existing modeling tools. The alternative will ensure that these studies take place, oriented to measurethe potentialreductionof GHG emissions. 4.2. Reducing MotorizedTraffic As with the Strategic EnvironmentalAssessmentcomponent, the associatedbaseline for these studies is the existing modelingcapacity which would be used to determine impacts inair pollution andtraffic congestion related to the implementation o f such measures. The alternative project will ensure that the global dimension i s counted in, and measured. 4.3 Travel optimization Inthis case, without GEF the implementationof a programwould probably not take place inthe short or medium term. A small pilot has already been implemented and some results evidence the potential for reducing the emissions greenhouse gases; however, the GEF co-funding can spur a larger program, where private sector will pair with the Government to achieve results. Incremental costs account for half of the foreseeninvestment. 4.4 Decontamination Bonds - 58 - The associatedbaseline is the slow development of an emission permitstrading system, where air pollutants such as NOx only get targeted. GEF participation will ensure that the system is well defined from the beginning, inparticular with reference to the monitoring and verification methodologies and protocols, so that future verified carbon emission reductions canbe traded internationally, attracting foreign investment. The total cost o f the GEF project alternative i s estimatedat USD13.985 million. IncrementalCosts Implementation o f the barrier removal strategy noted previously would require funding of incremental costs, which would be the difference between the cost of implementingthe baseline scenario versus that of the GEF Project alternative. GEF funds are sought to support incremental costs. The total cost of the GEF Project alternative i s USD13.985 million, as compared with the baseline case o f USD 7.005 million. Thus, the incremental cost of the GEF Project alternative would be USD6.98 million. The table below show the contributiono f GEF to the development of the alternative project. Component Domesticbenefits IGlobalBenefits PotentialAnnual CO2-Equiv Reductions(MT)" Promotionof Baseline Bicycleuse intra comuna Alternative additional22 Km and associated Increment 2.583 f 1GHG emissions 126,000 I Modernizing Baseline 1.600 DrivingCycleof de BusSystem Santiagodeveloped Alternative 5.064 Estimationof Reductionof GHG emissionfrom transportscenario penetrationof technologies Increment 1.454 690,000** Strategic Baseline Environmental landuse development Assessment Alternative Frameworkfor (SEA) and locatinghouses - 59 - irograms taking '0 account .ransport iimension and neasurement o f 202 emission -eductions from .his type of lntervention Increment .339 N.A. Baseline 0.482 Report on options for anduse development Altemative 1.072 Framework for locating houses xograms taking :o account :ransport iimension and measuremento f 202 emission reductions from h i s type o f intervention Increment .590 280,000*** Baseline .180 inalysis o f the legal mplication. dentification o f neasuresto recover nvestment costs from oad and public space levelopment Altemative 1.080 Data and option: for reducing carbon emission; from reduced C a r - k m Increment 0.900 480,000 Baseline 0.050 konomic savings romreducedtravel ndless air pollution Altemative .388 Reduced fuel ust andGHG emissions * Data to assess experience and replicate elsewhl Increment .188 340,000 Baseline .300 levelopment o f local ndglobal emission eduction program. - 60 - to incorporate carbon emissions trading Clearinghouse mechanism designed Increment .471 N.A. Alternative .143 Effective implementation o f global climate change aspects Increment .136 i Baseline 7.005 Alternative 13.985 I Increment 6.980 (*) Emissionreductionsroughly estimated usingdifferent time implementationassumptions, available at the time of projectpreparation.Cross-feedingeffects have not beendeducted, andawhole long-term effect is assumed. The Strategic EnvironmentalAssessmentcomponent will evaluate overall effects andeffects attachedto differentscenarios of interventionat different times inthe future. (**) Assuming23,516 MT tons from hybridbusespenetration; 586,000 MT from overall bus systemrestructuringwithout technologicalchange; andabout 80,000 MT frombus renewal(4,000 units) * (***) Only from centralring of Santiago, assumingfullrealestate development andtransport accessby 2015. - 61 - Annex 5: Financial Summary CHILE: SustainableTransport and Air Qualityfor Santiago (GEF) Years Ending 2004-2007 IMPLEMENTATIONPERIOD I IYear1 I Year2 I Year3 I Year4 I Year5 IYear6 IYear 7 Total Financing Required ProjectCosts Investment Costs 5.6 4.5 3.5 0.4 0.0 0.0 0.0 Recurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Costs 5.6 4.5 3.5 0.4 0.0 0.0 0.0 Total Financing 5.6 4.5 3.5 0.4 0.0 0.0 0.0 Financing IBRDllDA 2.9 1.9 2.0 0.2 0.0 0.0 0.0 Government 0.8 1.2 0.4 0.4 0.4 0.0 0.0 Central 1.4 0.2 0.2 0.2 0.0 0.0 0.0 Provincial 1.4 0.2 0.2 0.2 0.0 0.0 0.0 * Co-financiersprivate 2.0 0.3 0.0 0.0 0.0 0.0 0.0 Sector User FeeslBeneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 5.7 3.4 2.4 0.6 0.4 0.0 0.0 - 62 - Annex 6(A): Procurement Arrangements CHILE: SustainableTransport and Air Qualityfor Santiago (GEF) Procurement ProcurementandDisbursementArrangements All procurement will be done inaccordancewith the IBRD's guidelines on procurement of goods, works and services, and using standard bidding documents and requests for proposals acceptable to IBRD .. (Guidelines: Procurement under IBRD Loans and IDA Credits, dated on January 1995, Revised January and August 1996, September 1997, and January 1999), and Guidelines: Selection and employment of Consultants by World Bank Borrowers dated January 1997, revised March 1997, September 1997, July 1998, November 1999, and May 2002. UNDP will perform as procurement agent following the Bank procedures, and using the electronic advertising required by national Law. UNDP services will not be financed out o f the GEF grant. 1. Procurementof Works (prior reviewthresholdUSD500,OOO and first NCB) The project will finance the construction of about 22 kmofbikeways in3 Comunas in Santiago. There will be up to 3 contracts for a total amount o f USD2 million, of which GEF will fund USD1.7 million (85%). Contracts will be awardedusingNational Competitive Bidding(NCB). 2. Procurementof Goods and Non-consultantServices (prior review for LIB and first Shopping) The project will finance (i) emission testing laboratory equipment; (ii)geographical information system (GIS) services for school location analysis; (iii)logistic support for workshops and training; (iv) publications; (v) surveys; and (vi) trips for evaluating foreign experiences. It i s estimated that a total of USD1,094,979 will be contracted, out o fwhich the GEF grant will fundUSD1,040,232. The emission testing laboratory equipment will cost about USD730,OOO and will be purchasedusing the Limited International Bidding procurement method, subject to prior review The other goods will be purchased under internationalor nationalshopping. - 63 - .. 3. Procurementof Consultants(thresholdsfor prior review USD200,OOO for firms, USD50,OOO for individuals) The project will finance consulting services for a total o f about USD4,200,000, out of which GEF will fund about USD3,990,000. Most contracts will be procured using the Quality and Cost Based Selection method for a total of USD3,186,880. Two contracts will use the Quality Based Selection method: (i) Safety Strategy for Bicycle Use (component 1); and (ii) Development o f Field Tests and Driving Cycle for comparing bus technologies (component 2). In both cases, the information produced will be key for developing the components, there are not many experts in those fields, and the quality will be the required criteria for selecting the consultants. Consultants' qualifications will be used for another 2 studies under USDlO0,OOO each, where not only there is need of recognized expertise ad the main driver, but also to enable a shorter contracting period. The need for immediate contracting is the reasonto use the Single Source selection method for contracting the study to develop a baseline against which to measure the component on Promotion of Bicycle Use (under USD30,OOO). Least Cost Selection (less than USD100,OOO each) will be used for contracting the project auditing, and the supervision of civil works, as there are consultant services which tend to follow standard procedures. Finally, individuals (under an aggregate of USD400,OOO) will be used for the (i) Project Implementation Unit, (ii) for coordinating the bus technology tests at 3CV; and (iii) international experts to provide advice on the development of the Decontamination Bonds, and the Promotion of Bicycle Use. The total number of consulting contractsunder the project addto USD4,200,229, out of which the GEF grant will fund USD3,990,218. .. 4. OperatingCosts The project will also finance incremental operating costs (about USD55,336 of which the GEF will fund USD46,113) including travel expenses, office supplies, advertisement, publications, and mailing related to the execution o fthe project at the Project Implementation Unit. ProcurementPlan Component I Contracts /Duration/W/G/C I/F LS/T I I I Procurement I 1.6 Supervisionofworks 99,000 24 C F T LCS 1.7 Base lines 29,700 7 C F LS sss 2. Modernizingthe bussystem 1,492,300 2.1 Evaluation of Bus Technologies 997,300 2.1.1 Equipment 730,000 7 G F LIB ~~ 2.1.2 Field Tests & DrivingCycle 217,800 13 C F L S QBS 2.1.3 Coordination 49,500 15 C I T cv -64 - 2.2 Implementation Frameworkfor 495,000 BusReform 2.2.1 Diagnostic, evaluation 93,060 8 C I LS CQ anduredesirm 2.2.2 DesignAdjustment 134,640 7 C F L S QCBS 2.2.3 Fleet Renewaland 267,300 13 C F L S QCBS environmental effects 4.1.1 DevelopingCentral Ring 198,000 13 C F L S QCBS 4.1.2.1 SchoolLocation 59,400 10 C F L S QCBS 4.1.2.2 School Location - GIS 163,548 12 G F Shopping 4.1.3 Housing Policy 217,800 12 C F L S QCBS 4.2 Improving Trafflc Flows 964,989 4.2.1 Traffic Calming .. 562,574 4.2.1.2 Study 444,085 14 C F L S QCBS 4.2.1.2 Workshops 49,565 4 G F Shopping 4.2.1.3 Trips 18,69 1 1 G F Shopping 4.2.1.4 Surveys 50,232 4 G F Shopping 4.2.2 Congestion Pricing 402,415 4.2.2.1 Study 360,360 14 C F L S QCBS 4.2.2.2 Workshops 18,691 2 G F Shopping 4.2.2.3 Trips 18,691 1 G F Shopping 4.2.2.4 Publications 4,673 3 G F Shopping 4.3 Travel Optimization 198,000 - 65 - (*) IncludingGEF plus counterpartfunding * (**) W=Works; G=Goods andnon-consultantservices; C=Consultants (***) I=Individual; F=Firm (****) LS=Lump Sum; T=Time Based(for Consultants) Procurementmethods(TableA) Table A: Project Costs by ProcurementArrangements (US$ million equivalent) 2. Goods 0.00 0.00 1.10 2.81 3.91 (0.00) (0.00) (1.04) (0.00) (1.04) 3. Services 0.00 0.00 4.20 1.92 6.12 (0.00) (0.00) (3.99) (0.00) (3.99) 4. Operating Cost 0.00 0.00 0.06 0.00 0.06 (0.00) (0.00) (0.05) (0.00) (0.05) Contingencies 0.00 0.00 0.20 0.00 0.20 (0.00) (0.00) (0.20) (0.00) (0.20) Total 0.00 2.00 5.56 6.43 13.99 (0.00) (1.70) (5.28) (0.00) (6.98) - 66 - Table A1: ConsultantSelection Arrangements (optional) (US$ millionequivalent) (3.03) (0.36) (0.00) (0.16) (0.14) (0.03) (0.00) (3.72) 8. Individuals 0.00 0.00 0.00 0.00 0.00 0.29 0.21 0.50 (0.00) (0.00) (0.00) (0.00) (0.00) (0.27) (0.00) (0.27) Total 3.19 0.38 0.00 0.17 0.15 0.32 1.94 6.15 (3.03) (0.36) (0.00) (0.16) (0.14) (0.30) (0.00) (3.99) 1\Including contingencies Note:QCBS = Quality- and Cost-Based Selection QBS = Quality-basedSelection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Single Source Selection,Selection of individualconsultants (per Section V of ConsultantsGuidelines),Commercial Practices,etc. N.B.F. = Not Bank-financed Figures in parenthesesare the amounts to be financed by the Bank Grant. - 67 - Prior review thresholds (Table B) + Table B: Thresholdsfor ProcurementMethodsand Prior Review' Contract Value Contracts Subject to Threshold Procurement Prior Review Expenditure Category (US$thousands) Method (US$ millions) 1. Works >500.000 NCB K L <500 NCB First 2. Goods <150.000 Shopping First >150.000 LIB All 3. ServicesFirms >200 QCBS- QBS All <200 QCBS/QBS/LCS/SFC/CQ/ TOR IndividuaIs ss >50.000 Other All <50.000 Other None The UNDPwill be the procurement agent for this project. Its experience mitigates the Risk, considering the relatively large number of implementing agencies, and the short experience o f CGTS. A procurement assessment was camed out considering both UNDP and CGTS, which will be in charge o f managing the project. UNDP meets the Bank's minimum procurement management requirements and the Project ExecutionUnit(PEU) has satisfactory organization althoughit needs the hiringo f aprocurement specialist. A Bank Procurement Specialist (PS) has instructed the procurement process for CGTS and the procurement plan has been designedwith the participation o f UNDP, CGTS and the PS. CGTS and UNPD have both receivedguidance on how to keep record o f the procurement process, to become able to conduct ex post evaluations. An Action Planwas agreedwith CGTS. The Overall Procurement Risk i s considered AVERAGE because the lack of specific experience in Bank procurement i s balanced by the UNDP experience in project implementation and because measures to mitigate risk would be implemented. Special procurement conditions would be added to the Grant Agreement and the following additional measures will be conditions of grant effectiveness: (i)hiring of a procurement specialist for the PIU, (ii) the approval by the Bank of the Project Operational Manual, (iii) + the implementation ofa Procurement Information System satisfactory to the Bank,and (iv) the signingof a Cost Sharing Agreement acceptable to the Bank. An Action Plan aimed at alleviating risk and at facilitating project implementation was agreed on and includedinthe Aide Memoire of the Project Pre-Appraisal Missionheld from August 4 to 8,2003. - 68 - Frequency of procurement supervision missions proposed: The Procurement supervision mission will be every year. Special Provisions on Procurement to be includedinthe Grant Agreement Basing on the legal framework used in Chile for procurement of goods, works, services, and consultants; and on UNDP's role and special provisions, the following Special Conditions will be includedinthe Grant Agreement: a) Selection of consultants shall be on the basis of short-lists and not subject to open competition. r. b) The evaluation processand the related documents shall be kept confidentialuntil the contract becomesbinding. c) A two-envelope systemofprocurementwillnotbeusedfor the procurement ofgoods or services other than consultants'. I\Thresholds generallydiffer by countryandproject. Consult "Assessment of Agency's Capacity to Implement Procurement" andcontact the RegionalProcurementAdviser for guidance. - 69 - Annex 6(B): FinancialManagementand DisbursementArrangements CHILE: SustainableTransportand Air Quality for Santiago (GEF) FinancialManapement 1. Summaryofthe FinancialManagementAssessment The fmancial management assessment was conducted in accordance with OP/BP 10.02, the Guidelines to Staff for the Assessment of Financial Management Arrangements inWorld Bank-Financed Projects (dated June 30, 2001) and the FinancialMonitoring Reports: Guidelines to Staff datedNovember 30, 2001. The objectives o f the assessment were to determine if the CGTS has the capacity to properly manage and account for all project proceeds and to produce timely, accurate and reliable financial monitoring reports for use by management and submissionto the World Bank Strengths andWeaknesses The clear strengths o f the project i s Chile's record on fiscal transparency; the overall attitude about control and compliance and the Intemal Control arrangements of the project. Chile's high rate on law and order, the quality of its bureaucracy, and the low levels of corruption indicate a good attitude about control in public finances and that apply also to the project execution (as the project will be executed and controlled by public institutions). The review of internalcontrols for the project will be managedby the IntemalAudit o f the Ministry o f Transport. Also the country's high performance in public finance i s reflected in the country compliance recordinBank financedprojects inChile. The main identified potential weakness is associated not with GEF funds but with counterpart committed execution. The complexity of multiple technical counterparts, which also will execute the technical components, may result indifficult monitoring o f counterpart fundexecution. RiskAssessment The performance o f the Chilean govemment in implementation o f Bank projects, the country's rating on perception of the public sector performance (Transparency International Corruption perception Index - CPI) andthe effective managementof the public sector budget evidenced by Chile meeting its fiscal targets, all indicate that there is a strong degree integrity in management, that government officials are well experienced, andthat pressureto misuse funds is not an issue. This situation combined withthe relative and straight forward nature of financial transactions in CGTS for the project execution lead to the conclusion that the inherent riski s low. The project will be executed under CTGS and the overall financial administration will be under the responsibility o f its Administrative Area. Also the internal control rules and regulations o f the Ministry o f Transport apply to the operation. These controls require adequate segregation of duties, competent stated and documented procedures, in addition to regular reporting to central authorities, and an internal audit carried out by the Internal Auditor o f the Ministry o f Transport. Additionally a consulting firm will be hired to evaluate intemalcontrol and procedures inCGTS and provide suggestionsfor improvement (Terms of Reference for this consultant service were provided during project appraisal). UNDP, which will act as procurement and disbursement agency, has also agreedto act with the Bank to supervise the disbursement procedures to ensure a proper use o f funds. However, the project financial system i s not yet fully in place and, therefore the control risk cannot be considered low in this aspect until the complete system is in place. Hence the control risk is considered - 70 - medium. However, upon the completion of the recommended actions noted in the action plan, the control and project risk could be upgradedfrom mediumto low risk. Inherent Risk Level Comments Country Specific Low Secondary sources indicate good performance of Chile's public sector in budget management; also it has an excellent record in execution of Bank projects. EntitySpecific Low Subject to rigorous control of Chile's financial managementarrangements. Project Specific Medium FMoperations are not of a complex nature, they will be carried out by CGTS in collaboration with UNDP. Management has some experience in project execution and is very conscious in financial management matters. However there are many actors in technical implementation (component implementation agencies) Control Risk FinancialManagement System Medium ot yet in place. Reporting format, accounting and Chart of accounts will be included in Manual. UNDP administrative signed andreviewedby the Bank. Internal Control Framework supervision (Internal audit control). A specific consultant fmwill be hiredto assess and provide technical assistance Institutional Arrangements The project components will be implemented by the relevant government authorities, under the overall coordination and supervision of the Executive Commission for Transport in Santiago - CGTS, with the assistance o f UNDP as the project's procurement and disbursement agency. CGTS is an institution created for the implementation of TRANSANTIAGO. CGTS i s a dependency o f the Ministry o f Works, Transport and Telecommunications, and is the driving institution for Santiago's Directorate on Transport, chaired by the Ministry of Transport, and also formed by the Minister o f Housing and urban development, the Sub secretaries of Public Works, Transport and Housing, the Intendente o f the Metropolitan Region (governor equivalent), and the ExecutiveDirector of CONAMA. The project's technical components will be executed by the respective implementing units, with oversight by the CGTS. The financial managementof the project will reside inCGTS. Implementationof the project will be guided by the Project Operational Manual (MOP), which will include the Financial Management manual and a detailed procurement plan. The implementingunits will provide regularly scheduledprogress reports to the CGTS. The CGTS, inturn, will report project progress on a semi annual basis to the Bank, according to agreeduponperformance indicators. - 71 - UNDP will sign an administration agreementwith the Ministryo f Public Works, Telecommunications, and .c Transport to act as disbursement and procurement agent of the project. UNDPwill act under CGTS orders and receive the project funds, perform procurement process, make payments, and report back transactions to CGTS. GCTS will follow the technical recommendations of the different implementing agencies for eachcomponent. ProjectManagement CGTS has skilled staff to managethe financial management functions fulfilling the organizational structure designed for the project. An additional accountant will be hiredunder this new operation, to monitor the project account managed by UNDP. Financialmanagement o fthe project is the responsibility of the Administrative andFinance Coordination of CGTS. This area carry out the financial management functions o f budgeting, accounting and treasury. GEF funds will by channeled through UNDP. Counterpart contributions will be both in kind and funds. Counterpart funds will be those needed to comply with the pari passu of GEF project (to pay taxes and comply with the Standard Disbursement Percentage for counterpart funding) and will also be channeled through UNDP. Inkindcontributions will be made by the corresponding technical executing agencies and will berecorded by CGTS as they certify the physicalprogresso fthose relatedactivities. AccountingandInformationsystems CGTS Administrative Coordination will maintain the accounts for the project in its accounting system. This system may adopt the Public Expenditure Reform Project (SIGPFE) project module, adjusting it with the specific chart of accounts reflecting the categories and components of the project. Also CGTS will maintain an adequate asset register for the project. The accrual basis o f accounting will be used for internal reporting and for the production o f FMRs. Chile's public sector accounting rules are comprehensive and consistent with public international standards. They are set by the CGR and the implementing entities are responsible for developing and maintainingtheir own accounts within these rules (Chile: Report on the Observance of Standardand Codes - FiscalTransparencyModule, IMF,August 2003). 2. AuditArrangements Internalaudit MinistryofTransport's InternalAuditUnitwill reviewthis project and has agreedto include this operation in its annual operational plan. The review of the Internal Audit Department found that it is operated by professional auditors who manage an annual audit plan, which is agreedupon with the central office o f the Internal Audit of the Executive. The annual operational plan (POA) does include reviews of the systems under which the project is operating andi s reported. The internalaudit comprises the review o f the internal control framework andprocedure regulatory compliance o f CGTS. Externalaudit CGTS will be responsible for preparing financial statements for the project. The project will be audited - 72 - annually according with Terms of Reference acceptable to the Bank, and by auditors considered acceptable to the Bank (Guidelines: Annual Financial Reporting and Auditing for WB-fiianced activities, F M Board, June 2003.). The auditor contract should cover the duration of project implementation, reducing costs and helpingto provide timely audited reports to the Bank. The project will prepare the Terms of Reference and submit them to the Bank for clearance. The annual audit will be due no later than six (6) months after the end of the project's fiscal year (the fiscal year coincides with the calendar year). 3. DisbursementArrangements The Bank will advance Trust Fundproceeds through UNDP, and UNDP will be responsible upon CGTS requests, for payments to contractors and consultants. The local counterpart contribution funds will be allocated to CGTS and will also be transferred to UNDP to disbursed jointly with GEF funds, allowing compliance with disbursement percentages in each category (To avoid tax Bank financing and for the r. applicationof SDP in consultant services), Contributions inkindwill be managedout of this system by each sub component agency andonly will berecorded as their physicalprogress is certified. Allocation of grant proceeds (Table C) Table C: Allocation of Grant Proceeds Expenditure Category Amount in US$million FinancingPercentage IGoods andWorks II 2.01 II 85% I Consultancy Services 3.99 95% ODerating Cost 0.05 80% InternationalGoods 0.73 100% Contingencies 0.20 100% Total ProjectCosts with Bank 6.98 ITotal Financing 6.98 The disbursements will be made through UNDP based on the regular UNDP procedures (Manual de Gesti6n de Proyectos, UNDP)., which consist in a mechanism based on a forecast o f project expenditures agreed between the project and the Bank, covering the next six moths period, which is presented on a quarterly basis. Under this mechanism each quarter the project forecast the funds needed for the next six r. months and based on the funds available on UNDP, request the difference. An administrative operative manual acceptable to the Bank will be preparedandwill be agreedupon before grant effectiveness. - 73 - I FlowofFunds I I Worl: Bank k-...'. ---__---.. \\ \I ' c I - Beneficiaries Flow of funds .. Reporting and Monitoring CGTS will prepare the following Financial Monitoring Reports: (i) summary of uses and sources of a funds and a statement of uses by project activity; (ii) procurement monitoring reports, and (iii) Output monitoringreports, all inaccordance with models to be agreeduponby effectiveness. The FMRs will be a condition of effectivenessof the Grant. Additionally, CGTS will prepare annual financial statements in line with the Bank requirements. CGTS will beresponsible for the financial managemento fthe project (including accounting, timely submission of the Financial Management Reports -FMRs, annual audits and disbursements). The FMRwill be submitted semiannually to the Bank, jointly with project progress reports. The physical progress indicators will be consulted with the TTL to ensurethe usefulnessof the FMR inthe overall project supervision. Manualof Operations The functions and responsibilities of the project management would be governed by the Manual o f Operations (MOP), will include, among other aspects, a full description o f project activities, procedures, financial guidelines, criteria for selecting consultants, staffing, assignment o f staff responsibilities, project supervision, flow of funds, special account, budgeting, auditing, reporting, as well as procurement and disbursementprocedures. The MOP will be a condition of effectiveness for the Grant. Impact of ProcurementArrangements A procurement assessmenthas beenconducted and it indicates that Overall Procurement Riskis considered satisfactory. The assigned Procurement Specialist has recommended the strengthening o f PIU capabilities through the hiringof a consultant with expertise inBankprocurement methods. - 74 - Action Plan As a result of the assessment, the assessment concluded that the following action need to be completed in order to strengthen the project's financial management arrangements. Action ResponsibleEntity CompletionDate 1.Administrative Operative Manual I CGTS Before Effectiveness approvedby the Bank. 2. Chart o f accounts approved by the CGTS Before Effectiveness Bank to be included in Operative Manual 3. FMR format approved by the Bank CGTS Before Effectiveness to be included in Operative * Manual 4. FM Manual approved by the Bank CGTS Before Effectiveness to be included in Operative Manual 5. Terms o f Reference for a Single CGTS Before Effectiveness opinion Audit to be included in Operative Manual SupervisionPlan Timing Mechanism Obiective Visit General Integrating supervision missions at Review FMsystem. Supervision: least one time each semester. Supervise Special Account Twice a year for Reconciliation. Use o f funds. fmt year, once a Follow up on External Auditors year for the recommendations1raised issues. following years. Review staffin. ~ FMRReview With each Over the FMR submitted to the Review FMRinformation consistency. report Bank. Raise issues disclosed inFMR. Once a Year Over the Audit Report submitted Review Audit Report. to the Bank Raise issues disclosed inAudit Reuort Use of statementsof expenditures(SOEs): Use oftraditional disburesement procedures of the N e w Financial Monitoring Reports were agreed during appraisal - 75 - Annex 7: Project Processing Schedule CHILE: Sustainable Transport and Air Quality for Santiago (GEF) Time taken to prepare the project (months) 20 First Bank mission (identification) 0310112002 11/01/2001 1 Appraisalmission departure I 08/04/2003 I 08/04/2003 I Negotiations 09/10/2003 09/10/2003 Planned Date of Effectiveness 01/15/2004 Preparedby: Juan Lopez-Silva Jose RamitnGitmez Pierre Graftieaux Gerhard Menckhoff Antonio Blasco ,LCOAA Andres Mac Gaul, LCSPR Preparationassistance: Ana B. Iraeta Bankstaff who worked on the Droiect included: Name Speciality Juan Lopez Silva Task Team Leader Pierre Graftieaux Urban Transport Specialist GerhardMenckhoff Urban Transport Consultant Jose RamitnGitmez EnvironmentalConsultant Antonio Leonard0 Blasco FinancialManagement Specialist Andres McGaul Procurement Specialist Marta Molares-Halberg Legal Counsel - 76 - Annex 8: Documents in the Project File* CHILE: Sustainable Transport and Air Quality for Santiago (GEF) A. Project ImplementationPlan The PIP can be found inthe Project File B. Bank Staff Assessments The Project Concept document ( PCD ) and other comments inproject file. Sustainable Transport, Priorities for Policy Reform, World Bank Group, Washington D C 1996. C. Other r. Cities on the Move, a World BankUrbanTransport Strategy Review, 2002 Estadisticas Episodios Criticos Calidad del Aire en Chile, Servicio de Salud Metropolitan0 del Ambiente, January 2003. Estraus, urbanTransport Development software, SECTRA 200I HybridElectric Drive Heavy Duty Vehicle Testing Project, Final Emission Report, Northeast Advanced Vehicle Consortium. M.J. Bradley & Associates ,Inc. West Virginia University. February 2000 Methodologicalanalysis for Urban Transport Plans, SECTRA 2002 MODEM, software to model the emission impact for urbantransportation, SECTRA 2001 Mussa, Urban Development and Transportation Software, SECTRA 2001 NYCT Operating Experience with HybridTransit Buses ,World Bus & Clean Fuel Summit, Los Angeles, June 2000 Origin Destiny Survey for the Great Santiago, SECTRA 2001. Plan de prevenci6n y descontaminacibn atmosfkrica de la Regibn Metropolitana, Drecreto No. 20, Sectrari general de la presidencia de Chile. Santiago, Abril2000. Strategic Environmental Assessmento f Transport Corridors: Lesson learned comparing the methods o f five member states, EnvironmentalResourceManagement, January 2001 Preparacibntkrminos de referecnia para la Evaluaci6nAmbiental Estratkgica (EM) del Plande Transporte Urbano de Santiago, 2000 - 2010 ( TRANSANTIAGO). Centro de Estudios para El Desarrollo y Medio Ambiente, Diciembredel 2002. Plan de Cambio Tecnol6gico para el Sistema de Transporte Nblico de Santiago Chile, Universidad de Chile, Facultad de Ciencias Fisicas y MatemAticas, Pontificia Universidad Cat6lica de Chile. Deuman Ingenieros. Enero del2003. - 77 - Preparacibn del Estudio para la Evaluacibn Ambiental y Econbmica para Buses de Tecnologia Limpia. DeumanIngenieros, Santiago de Chile, Marzo del2003. .r Tarificacibn por Congestibn y Medio Ambiente en Santiago: Viabilidad TCcnica y Politica. Juan de Dios Orttizar Salas, Santiago, Chile. Octubre del 2002. Tarificacibn por Congestibn Londres- Estudio de Caso. Juan de Dios OrOizar Salas, Santiago , Chile. Mayo del 2003. "Transportation and C02 emissions :Flexing the Link", Paris 1999. This methodhas already been used in a GEF-World Bank bikeway project inManila. Urban Air Quality Management -Coordinating Transport, Environment and Energy Policies inDeveloping Countries, Masami Kojima and Magda Lovei, World Bank Technical Paper 508,2001. Urban Transport Plan for Santiago, TRANSANTIAGO 2000 - 2010, SECTRA, Ministry of Works and Transport, MIDEPLANand consultants. *Including electronic files - 78 - Annex 9: Statementof Loansand Credits CHILE: SustainableTransport and Air Qualityfor Santiago (GEF) 24-Sep-2003 Differencebetweenexpected and actual OriginalAmount in US$ Millions disbursements' Project ID FY Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'd PO77282 2003 CL-Science for the KnowledgeEconomy 25.26 0.00 0.00 25.26 0.93 0.00 PO69259 2002 CL Pub ExpenditureManagement 23.23 0.00 0.00 19.83 5.10 0.00 PO68271 2002 CL-Lifelong Learningand Training 75.75 0.00 0.00 72.74 15.62 0.00 PO55481 1999 CL-HIGHER EDUCATION 145.45 0.00 0.00 56.18 42.47 0.00 PO55480 1999 CL MUNIC DEVr II 10.10 0.00 0.00 3.22 3.22 0.75 Total: 279.79 0.00 0.00 177.24 67.34 0.75 - 79 - CHILE STATEMENT OF IFC's HeldandDisbursedPortfolio June 30 - 2003 InMillionsUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1991/93 Aconcagua 0.00 0.45 0.00 0.00 0.00 0.45 0.00 0.00 1999 CBTI 0.00 0.00 0.83 0.00 0.00 0.00 0.83 0.00 1989191199 Escondida 0.00 0.00 16.66 0.00 0.00 0.00 12.91 0.00 1996 FEPASA 11.60 5.60 0.00 4.68 11.60 5.60 0.00 4.68 2003 LanChile 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1994196197 Moneda Mgt 0.00 0.13 0.00 0.00 0.00 0.13 0.00 0.00 1994 Pionero Fondo 0.00 9.33 0.00 0.00 0.00 9.33 0.00 0.00 1996 ProaFund 0.00 6.64 0.00 0.00 0.00 6.64 0.00 0.00 2000 San Antonio 35.00 3.70 0.00 65.00 24.15 3.70 0.00 44.85 0 TFSA 0.00 4.44 0.00 0.00 0.00 4.44 0.00 0.00 2003 TRANSELEC 60.00 0.00 0.00 0.00 60.00 0.00 0.00 0.00 Total Portfolio: 136.60 30.29 17.49 69.68 95.75 30.29 13.74 49.53 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic 2002 San Vicente 0.02 0.00 0.00 0.02 2003 Thames Chile 0.04 0.00 0.00 0.04 Total PendingCommitment: 0.06 0.00 0.00 0.05 - 80 - Annex 10: Country at a Glance CHILE: SustainableTransportand Air Quality for Santiago (GEF) C Development diamond. 331 Life expectancy 5,040 66.4 1,727 1,668 T 1.3 1.5 1.2 2.0 2.2 1.6 GNI Per Most recent estimate (latest year available, 1996-02) capita 17 Urban population (% of totalpopulation) 86 76 75 Lifeexpectancy at birth ( 76 71 73 i Infantmortality (per I, 9 27 19 Child malnutrition (% 1 9 Access to improved water source Access to an impro 93 86 90 4 11 7 - hool-agepopulation) 103 130 105 Chile 104 131 106 -Upper-middle-incomegroup 101 128 105 1982 1992 2001 20 24.3 41.9 66.5 64.2 Economicratios' 11.3 23.8 20.7 19.4 30.7 34.7 Trade 9.4 .. 25.2 22 7 21.5 19.8 Currentaccount balancelGDP -9.5 -2.3 -1.9 .. Domestic InterestpaymentslGDP 2.7 2.7 2.5 savings Investment TotaldebffGDP 71.1 45 57.8 63.0 Total debt service/export .. 20.8 29.5 33.1 56.8 .. 167.2 Indebtedness -92 1992-02 2001 200 __/m Chrle 6.8 5.0 2.8 2. GDP per capita 1.5 0. -Upper-middle-incomegroup STRUCTUREof the ECONOMY 1982 1992 2001 2002 1 Growth ofinvestmentand GDP (%) I%of GDP) I Agriculture 5.5 9.9 8.8 20 Industry 34.7 38.1 34.3 0 Manufacturing 18.5 20.5 15.8 Services 59.8 52.0 56.9 '20 Private consumption 75.3 65.2 65.3 General governmentconsumption 15.3 9.7 12.0 importsof goods and services 21.3 29.3 32.7 1992-02 2o01 Growth of exports and imports(%) (average annual growth) Agriculture 7.4 1.8 6.5 20 Industry 5.7 5.1 2.1 .. 10 Manufacturing 6.4 3.1 -0.3 " Services 5.7 3.6 2.9 0 Privateconsumption 5.4 5.8 3.0 -10 Generalgovernmentconsumption 1.5 3.6 2.7 .. -20 Gross domestic investment 14.6 5.0 -13.6 %-Exports +imports -81 - Chile PRICES and GOVERNMENTFINANCE 1982 1992 2001 2002 Domesticprices Inflation (%) (% change) l5 T Consumer prices 9.9 15.4 3.6 3.0 ImplicitGDP deflator 8.5 11.8 1.5 2.6 10 Governmentfinance 5 (% of GDP, includescurrent grants) - 0 Currentrevenue .. 22.9 22.8 22.8 Currentbudgetbalance 5.0 3.2 2.4 Overall surDlus/deficit .... 2.3 -0.3 -1.1 I GDPdeflator -CPI 1 TRADE :::, 1982 1992 2001 2002 (US$ millions) Exportand importlevels (US$ mill.) Total exports (fob) 3,706 10,007 18,050 19,133 i Copper 1,685 3,886 6,746 7,151 Fruits 375 1,005 1,116 1,182 Manufactures 1,207 4,031 9,070 9,614 Total imports (ciD 4,094 10,183 16,334 17,151 Food 590 10000 Fueland energy 632 1,138 2,589 2,718 5 w o Capitalgoods 697 2,540 3,418 I 3,589 I O Export priceindex (1995=100) 75 65 68 96 97 98 fi9 00 01 Importpriceindex (1995=10Uf 86 117 127 Exports .Imports Terms of trade (1995=100J 87 55 53 O2 BALANCEof PAYMENTS 1982 1992 2001 2002 (US$ millionsf 1 Current account balance to GDP (%) Exportsof goods and services 12,364 22,315 23,019 Imports of goods and services 11,820 21,221 20,619 Resource balance ...... 544 1,094 2,400 Net income -1,881 -2,757 -2,808 Net current transfers .... 378 422 -529 Currentaccount balance -2,304 -957 -1,243 Financingitems (net) 3,455 2,363 Changes in net reserves .... -2,498 -1,120 -1,165 Memo: Reservesincludinggold (US$millions) .. 9,009 16,331 17,495 Conversion rate (DEC.locallUS$) 50.9 362.6 634.9 688.9 EXTERNAL DEBTand RESOURCE FLOWS 1982 1992 2001 2002 (US%millions) I Compositionof 2002 debt (US$ mill.) Total debt outstanding and disbursed 17,315 19,134 38,398 40,432 IBRD 200 1,928 728 555 IDA 20 13 7 6 Total debt service 3,676 2,693 6,648 7,702 388 IBRD 28 312 182 252 IDA 1 1 1 1 Composition of net resource flows Officialgrants 7 56 23 0 Officialcreditors -69 54 -121 -313 Privatecreditors 1,497 532 1,461 1,385 Foreign direct investment 401 935 4,476 0 Portfolio equity 0 338 -219 0 F: 36,400 World Bank program I Commitments 0 313 0 0 E Bilateral Disbursements 32 200 39 28 A - IBRD ~ F Private Principal repayments B - IDA D - Other multilateral 14 168 119 202 C IMF - G Short-tern -- Netflows 19 32 -81 -175 interestpayments 15 144 64 50 Nettransfers 3 -112 -144 -225 77 - 82 - r Additional Annex 11:ParticipationPlan CHILE: Sustainable Transport and Air Qualityfor Santiago (GEF) The GEF project aims at supporting the implementation of TRANSANTIAGO during its 10 years of implementation form 2000 to 2010. Among its major characteristics, participation of stakeholders, public and civil society, has become a fundamental issue since its formulation. TRANSANTIAGO i s a radical and comprehensive initiative aiming at the organization o f the Transport Sector in Santiago, in order to complement the service provided by the Metro and looking forward to provide a transportation sector to poor and low income communities onthe Metropolitan Region. With this inmind, a participatory plan must be designedto produce deep changes inurban transport andurbandevelopment. TRANSANTIAGO has identified the main institutional and social actors involved in the preparation and implementation o f the plan as follows: 0 Institutional: Government & Municipalities 0 Public transport system: Operators and drivers 0 Communities (at the neighborhood level) 0 Municipalities 0 NGO's; and 0 Buses and equipment suppliers. Along with this identification, CGTS is developing a conflict managementanalysis, basedon the following assumptions: The public transport is a very important issue for the citizens and for all relevant public opinion-maker actors and sectors. 0 Public transport operators tend to be the worst evaluated sector by the citizens. 0 Operators are the mainsource o fresistance to change and conflict. Therefore, conflicts between Government and operators tendto solidify analliance between the Government and the communities, NGOs andmunicipalities. 0 This alliance is strengthenedifa realprocessofparticipationo fthe community and o fthe municipalities i s developed for the different stages ofpolicy design and implementation. At the development stage ofthe participatory plan there are severalactions to be implementedbasedonthe category o f the sector which will participate on the development of the plan, as it is explained below for every actor previously identifiedthe planwill address its issuesas follows: 0 At the community level, theplan will include thefollowing: Work with community organizations at the barrio level to polish up the design o f the new system (reach of troncal and feeder services, design & security o f bus stop places, interior layout o f new buses, type & conditions of night services, information needs, etc) and to check advances at different stages, incorporate some specific sectors (Le. university students and the like) into some specific tasks at different stages o f the modernization process (Le. Information to users at some critical moments of the process, continued monitoring o f performance of the new system, etc); build regular links and contacts between the community, the PT operators and the municipalities; design a web page for information exchange and suggestions gathering, which is currently in place for the development o f the GEF project; and make available a dedicatedtelephone line for consultations and suggestions. - 83 - 0 At the Municipalities level, theplan will include: .. Permanent "Work Table" with majors, heads of the transit and public works departments, head o f the District Secretary o f Planning, and other local officials. The agenda of subjects should include (i) District urbanplanning & public transport; (ii) Specific coveragerequirements o f the local public transport system; (iii)Segregatedlanes for public transport; (iv) Modal exchange stations, and transfer stations (metro-bus & bus-bus); (v) Technology of buses; and (vi) Environmentalqualities required for specific public places in the district (schools, hospitals). Also, at the municipality level there must bejoint contacts with community organizations for the coverage of the agendao f subjects at the barrio level. e At the NGOs level, theplan will include thefollowing: Creation o f a permanent consulting council that will include NGO representatives, to discuss policy design and implementationof the public transport system, community participation, and work with municipalities. Formation o f a consultative body with NGOswith expertise and interest inenvironmental aspects linked to different policy and plan components o f the renewed public transport system. Involve NGO's in the technical work (through tendering), so that they can participate as consultants and provide their experience on community participationprocesses. 0 At the Public Transport Operators level, theplan will include thefollowing: Promotion of a strong participatory process and provision o f technical assistance to support the creation of enterprises within the new concession schemes for public transportation, for the existing transport companies. Also, through their participation in the design o f the tender process itself @re-qualification of future companies participating in the 2003 tender process). Promotion o f associative processes between current public transport operators with the new operators (both national and foreign), and promotion o f continuous dialog betweenoperators, municipalitiesand local communities. 0 At the Public TransportDrivers level, theplan will include thefollowing: A wide informative process amongst drivers' organizations about policies and plans, and its consequences for workers in the sector. Promotion o f an active participatory process, involving the various drivers' organizations, Installation of a "Work Table" for permanent and periodic discussion around an agreed agenda about workers rights and labor conditions in the future public transport system, about "Professionalization", re-training o f current drivers, permanent training in future concession contracts, and strengthening sector labor organizations. e At the Great Santiago community level, theplan will include thefollowing Strong and sustained communications strategy, closely synchronized with the participation strategy, addressed at users as well as non-users o f public transport in order not only to inform them but also to prepare them for the oncoming changes, develop among "santiaguinos" a sense o f identification with Santiago and with the drivingidea "Santiago, world quality city" as well as with the importance o f public transport system and users transformation for such objective, and develop a powerful sense of identification for the santiaguinos with their modemized public transport system: "Un transporte para la gente". - 84 - Additional Annex 12:Measuringthe Air Quality in Santiago,The PredictiveModel CHILE: Sustainable Transport and Air Qualityfor Santiago (GEF) In Chile, critical episodes of Air Pollution occur during the Fall and Winter seasons, when the weather conditions are not favorable for pollution dispersion. This situation triggers highlevels ofparticulate matter (PM10). Inorder to determine the type of local atmospheric conditions., it is necessaryto understand the role that plays the air quality norms for atmospheric contaminates. A local regulations establishes a level of concentration ,from which, sensiblegroups experience symptoms due to the concentrations of contaminant. In the case of Particular Matter, the Chilean regulation establishes 150 ug/m3 as the average The measurement unit ug (microgram) corresponds to one /lo00 of milligram The used concentrationunit, ug/m3, express the quantity o f mass of contaminants per volume unit in the air. .This level can not be more than 7 times per year. In case this threshold is not met, the Environmental authority must set a plan to decontaminatewith the purpose of reestablishthe committedlevel. Inthe MetropolitanRegion, the norm for Particulate Matter, is overcome bymore than 60 times a year. Basedon this fact, a planto decontaminatethe city was establishedin 1998. though, the levels ofpollution can reach extremely highlevels, for which operational plans to confront the critics episodesare established. Since 1989, inthe region exists a plan to mitigate these effects. Modifiedin 1997, the plan sets three levels Matter reaches 195 ug/m3 .Level two (2) is pre-emergency, or Index 300, when the concentration o f to restrict emissions. The level one (l), alert, or index 200, produced when the concentration of Particulate Particulate Matter reaches240 ug/m3. Level 3, Emergency or Index 500, when this reaches 330 ug/m3. It i s important to note that the last emergency episodes was registered inJuly 1999. Every level has actions associatedto stop emissions. The following table resumesthe above information: I Concentration Category I I ug/m3 I Index I III Goodhorm) 0 I 0- 150 0-100 I Regular 0 151 - 194 101-199 I Alert III 1 II 195-239 III 200-299 I Pre-emergency 2 240 - 329 300 -499 Emergency 3 330 + 500 + At the Alert stage, the circulation restrictions for two digits from vehicles without the green seal are applied, in the months from March toDecember. In Pre-emergencies, the restriction i s extended to four additional digits for vehicles without the green seal, and for two with green seal. Also, Industries which emissions exceeds 32 mdm3 and can not work with double chamber chimneys. These measures are also completed with the implementation o f a emergency gridcirculation systems. At the emergency periods, restrictions reaches up to 6 digits for vehicles without the green seal and four digitswith green seal. A1the steady emission sources with emission exceeding sing 28 mg/m3 have to stop, the double chamber chimneys can't work, and alternative circulation grid for transportation i s inplace. All the above is complemented with a message to population, that includes recommendations to reduce acute exposure to contaminants, especially to the most vulnerable groups, elderly people, children and people - 85 - with chronic respiratorydiseases. The plans respond to extreme situations and have as an objective mitigate the pollution impact and to reduce the acute exposure to contaminants. The decontamination o f the Metropolitan Region will be achieve introducing structural measures into the system. The last ones have allowed to significantly reduce .r the levels o f Particular Matter, to the point that, on the last 12 years, the annual average concentration o f PM2,5, the most aggressivepollutant for people, was reduced by 50%, in a context where the economical activity have doubled. As the above achievements are not sufficient, in order to reach the goals, and based on the need of more stringent controls, it i s necessary to adopt more strict actions, to protect local population from days of high pollution. The predictivemodel Between 1989 and 1996, the prediction model worked based on the fact of events conformation. This means, once the event happened and was verified, measures to contain the episode were placed. At that time, filters were used to monitor local air pollution. These filters were exposed for 24 hours. Lately, the filters were driven to labs were after a day of dryness, they were measured. At that moment concentration levels were measured after two days. Based on this information, local authorities established exceptional measures the day after. In the mean time, since the occurrence o f the event and the implementation of measures, three days were passed. The accuracy o f the system, understood as the coincidence between the actions o ftakingmeasures of the episodewere extremely low, not overcoming 1%. Later after 1997, automatic stations to measure Particular Patter were introduced. The last generation monitors provided information of continuous mode, to hourly value. By this way, the Environmental authority updates inhourly matters, the mobile average every 24 hours. Based on this, the critic episode is verified at the moment when it happens. When the measures to contain the episodes are placed, the delay between the exposition and the restriction to emission had one day. The percentage of achievement improved, basically due to the fact that the meteorological considerations associatedto pollution events, are due to last 3 to 4 days, by which the occurrence o f episodes o f two consecutive days was at that time, a frequent situation. Meanwhile actions were delay inrespectto population exposure. All the above headed local authorities towards the implementation of an predictive event system, which could be capable to anticipate the occurrence of the event and to establish restrictive measures during the same day when the high concentrations were produced. In 1997, the first system was established and implemented. This systems was adjusted the year after. The forecast operatesbasedon statistical equations, that correlates meteorological variables and air quality. Based on current daily information, given by the monitoring stations, and a weather forecast, the equations produce the expected concentration value for the next day. Based on this assumption, the authority establishesthe restrictionmeasures. The applied model has acceptable levels o f success, o f about 80%, with variations from one year to another. Although, the levels o f success on critical events o f about 50%. In fact, during 2002, 7 pre-emergency measures were identified and 17 alerts, this means 24 episodes, of a total o f 170 days, between the 1of April and the 17 of September. During2001, only 20 critical episodeswere demonstrated. - 86 - Current Situation - 87 - Additional Annex 13:Global EnvironmentalImpact Calculation CHILE: SustainableTransport and Air Quality for Santiago (GEF) ASIF Methodology The basic approach to calculate the global environmental impact o fthe project, measuredas reduction of .r GHGemissions, is basedonthe so-calledASIF methodology . ASIF is a useful analytical framework for analyzing changes inemissions and for confronting possibilities for the future. It stands for Activity, Structure, Intensity and FuelChoice. Basically, the methodology principle is the following : Z A Si Ii Fij * * * Considerthat G= i ~ j Where G i s the carbon emissions from the particulartransport sector, A is the total travel or freight activity (inpassengers-kmor ton-km), Si is a vector of the modal shares, Iiis the modal energy intensity of each mode, Fij representsthe sum o f each of the fuels j inmode I, using standardcoefficients to convert fuel (or electricity) used into carbon emissions. This equation can be used to study changes in energy use or emissions over time. Throughout the development o f the project, ASIF will be used to assess the level o f GHG emissions to be attained ina medium-to-longterm frame. The project i s aimed at spurring the adoption of measures that not only will contribute to abate air pollution, but also to mitigate climate change. However, the measures contemplated involve behavioral and structural changes in the transport system, that will show results slowly and over a relatively long-period of time. The methodology will help build sound scenarios o f success, basedon data that will be available throughout project implementation. Estimated Project Impact At the preparatory stage, and based on the above referred methodology, some estimates on the project global environmental impact can be made. Basically, the approach will calculate emissions reductions resulting from induced changes or measures that affect modal composition, as well as types o f technology, as per the following equations: Erk= (Dijb Fijkb) - (Dijp Fijkp) * * Where Erk= EmissionReductions o fpollutant k Dijb = Distance traveled (veh-km) per year for mode Iand technology j for Fijb = Factor ofEmissions for pollutant kfor mode Iandtechnologyj p = Project scenario b =Baseline scenario D already incorporates information on Activity (trips, length, technology, speed), andEfficiency (km/lt of fuel), while F includes information on the type of fuel and on the emission effects of the respective technology. For purposes of estimating the project impact inthe reductiono f C02 emissions, a preliminary estimation .r will be made according to the following methodology. During project preparation not only additional information will be incorporated into the analysis, but also it will be performed for all the other target -88 - pollutants (NOx, SOX, CO, NH4, and PM). Inaddition, scenarios combining measureswill also be defined withGoCh; this will enable to estimate more realistic emission reduction scenarios. TRAVEL OPTIMIUTION.Emissionreductions are obtained, similar to the previous components, from a net decrease inthe use ofprivate cars. Inthis case, it is through education and associatedbehavioral change that the trips get bundled and reduced. The experience o f a travel blending program for Sidney and Adelaide inAustralia have shown net reductions of about 20% inthe number of car-km. For Santiago, and at this preliminary stage we have assumed a more conservative 10% net reduction inthe number o f private car-km. This would mean a reduction inemissions of about 340,347 tons C02 per year, equivalent to 2.9 milliontons C02 in20 years (discounted at 10%) or an accumulated 6.8 milliontons C02 at no discount. BICYCLE USE. Inthis case, the emission reductions are obtained from a shift to a non-motorized mode of transport. Previous studies show potential reductions inthe trips by private cars o f 3-lo%, trips which are absorbedby trips by bicycle .To estimatethe reductions inemissions for Santiago, we have assumeda 3% increase inthe use of bicycles accompanied by a 3% decrease in the number of cars-km, and 3% in the number of taxi-km. This couldbe consideredthe long term effect, and would amount to about 126.000 tons C02 per year, equivalent to 1.072 million tons C02 in 20 years (discounted at 10%) or an accumulated 2.52 million tons C02 at no discount. A medium term scenario, better related to the project will take into account the number of trips, modal composition, associated technology, and associated veh-km from Las Condes, from Providencia, and from Rufioa to the center of Santiago, as well as the trips within these comunas and amongst them. This estimation will be performedduringproject preparation. HYBRIDBUSES. The new rules for biddingthe routes in Santiagowill be stringent enough so that cleaner technologies get promoted. Thus, a bus operator company can have a fleet o f vehicles combining old emitting buses with new clean ones (hybridor CNG), as long as the minimumemission criteria are met. In addition, the potential for emissions resulting from the particular fleet composition will be one o f the key criteria to choose operators. It is expected that the participation o f hybridbuses will start slowly, peaking up as long as new mandatory fleet replacements are needed. We have calculated the potential of emission reductions o f C02 resulting from the introduction o f hybrid, comparing the hybridbuses to the baseline technology which consists inconventional diesel buses (EPA 94 or EURO 11).Emission factors have been obtained from previous studies in Manhattan and Mexico, aimed at comparing emissions from hybrids (diesel electric), CNG buses and diesel-powered buses. Results for 561 show potential C02 yearly emission reductions of 23,516 tons. This i s equivalent to 200,597 tons C02 in 20 years (discounted at 10%) or an accumulated .709 million tons at no discount. N o effects from modal shifts or growth are incorporated into the analysis at this stage. Basedon the data from MODEM, other factors like growth, and specific bus route information will be incorporated into the analysis to enhance the environmental impact assessment. 23.Schipper, L,andCeline Marie-Liliu,"Transportation and C02 Emissions:Flexingthe link-A Pathfor the World Bank", WorldBandESSD Series, September 1999. 24.The GdanskBicycle InfrastructureProjectalso funded by GEF estimatesthat the participationof bicycle use in the city's modalcompositioncanbe increasedfrom 1.5%to 510%. The Metro Manila UrbanTransport IntegrationProjectestimates anincreaseinthe use of bicycle of 2-3.5%. - 89 - Additional Annex 14:TRANSANTIAGO Preliminaryelementsfor a new publictransport - system development CHILE:SustainableTransport and Air Qualityfor Santiago (GEF) 1. Changestopublic transportplan Current extended bus routes that runfrom one end of the city to the other will be replaced by a network of trunk routesand feederlines, which will complementthe metro networkto beextended. These systems would run on a graded and integrated fare structure, operatedby means o f a magnetic ticket or smart card (preferably contact-less) and automatic fare collection devices. The interchange between one mode of transport to another requires the creation o f a series of transfer stationsto facilitate passenger boarding particularly inintersections with heavy traffic o f different modes of public transport. (To accommodate the high concentration and constant flow o f people, these transfer stations could be coupled with shopping centers, converting them into clear opportunities for private investment). The new route network would keep public transport off the downtown triangle o f Plaza Italia to Teatinos street and Alameda to Mapocho streets. In other words, no public transit vehicles would cross the downtown area. Only one circulator buspreferably using electric technology would runwithin this triangle. Several streets would be converted to pedestrian walkways. Thus, the quality o f life o f people who carry out their activities withinthe capital city's civic and commercial center would improve substantially. Public transportation along the Alameda-Providencia-Apoquindo corridor would be run by one concessionaireusing electric traction vehicles operating on a fixed-schedule basis in coordination with the Metro and on a demand-responsiveshort-distance systemduring peak hours. 2. Change in technology in a significantproportion of thepublic transportfleet Both interms o f construction (high quality standards) and propulsion (CNG, hybrids, or electrical), as well as the introduction of alternative vehicle technologies such as trams, light rail, and articulated or O-Bahn buses along several corridors. This would not only modernize the fleet but also substantially reduce the public transport system's contribution to the pollution problem inSantiago. 3. A change in the tenderingmethodology For public transport services, replacing the current system of "throughout carriage concessions" (crossing the city from one end to another) to "service area concessions" (i.e. Santiagowould be dividedinto 8 or 10 "service areas" according to existing studies on transport demand. Transport service operators would bid for a full package o f public transport routes within a specific area along trunk roads, along Metro and trunk line corridor feeder routes, and along shuttle routes to cover passenger demand in specific zones). Licenses would be awarded on the basis of the provision of all necessary services, both high and low revenue generating services (to avoid market "descreme" practices and service deterioration, similar to the concessionsystemfor telephone services). 4. Enterprise structurefor bus operators - 90 - Thorough entrepreneurship of public transport operators, mainly through tax mechanisms (from presumptive incometo real income) and service contract obligations. Changes in recruitment practices and training programs. Bus companies will have to pay drivers a fixed salary. Complete modernizationo f service infrastructure such as terminals, maintenanceshops, etc. Exclusive operation o f service areas will allow formation o f enterprises subject to varied sources of capital raising (i.e. stock issuance, limitedand open societies, consortia). 5. Main changesto small vehiclepublic transport Competitive tendering to award collective fixed taxi routes integrated preferably to mass public transport trunk-line corridors, thus greatly reducing the competitionofthese taxis with mass transport vehicles. Regulate taxicabs, reducing the number o f vehicles in operation and introducing a quota system in accordance with the city's potential demand and in compliance with strict service quality and security norms. Infrastructure and Information Systems. All o f these changes would also produce a series o f additional improvements in other aspects such as roads construction and passenger information systems using state-of-the-art informationand communication technologies, etc. 6. Main changesto other modes of transport of goods andpeople The intermodal nature of the Plan raises the need to establish distinct and comprehensivepolicies for other types o f urban motor vehicles. The Plan includes specific proposals regarding other modes o f people transportation: private cars, shuttle trains, rural and inter-city buses that use urbanthoroughfares, company buses to transport employees, school buses. A series o f proposals have also been incorporated regarding urbanand inter-city cargo transportation. Specific measures to reduce emissions o f air-borne pollutants from these vehicles have also been considered, such as halting the importationinto the capital o f new light diesel vehicles, introducing stricter controls and mandatory technical standards for cargo trucks, etc. -91 - AdditionalAnnex 15:Methodologyfor estimating emissionsusing MODEM and ESTRAUS CHILE: Sustainable Transport and Air Qualityfor Santiago (GEF) MODEM These modelling tools have been developed by the Chilean Government to strengthen the local transport planning capacity through technical instruments which, when used in combination, provides decision makers with valuable and reliable information on the impacts of transport planning decisions on a wide array o f issues such as air quality and landuse patterns. Inorder to estimatethe levelofemissionsofatmosphericpollutants, MODEMis fedbyESTRAUS, which forecasts public and private transport flows, which are then "translated" into levels o f emissions through emission factors that are continuously updated MODEM is basedon a methodology to estimate emissions which was developed by CONAMA ,on the basis of emission inventories for Santiago and other citiessuch as Gran Valparaiso ,Temuco, Rancaguaand Concepcion. MODEM is capable o f providing specific results on pollutants associated with several automotive emissions, on an hourly, daily or annually basis, either locally or city wide. The information produced by the system can be seen in GIs Format. The definition o f the Urban Transport Plan For Santiago was supported by these models. MODEM was developed from October 1999 untilMarch 2000 by Universidad de Chile, Laboratoriode Transit0 DICTUC and Catholic UniversityinSantiago. MODEM includes an economic valuation module, which allows to evaluate, from an economical point of view , different environmental regulations, aiming at reducing the emission generated by the transport sector. The most important elements ofthe methodology to calculate emissions are the emission factors. The model uses an array of different 1factors according to the type of source, the emission control devices and the technologies being used. These factors are usually expressed for transport in grams per kilometre and also depend on average speed. Following this, the system uses 111curves of emission in function of speed, to determine emissions of seven compounds for each vehicular category. Regarding this project ,the final analysis i s under way in order to provide the most reliable information. Final results are expected to be available by March 2003 and will be incorporated during the appraisal period. ESTRAUS ESTRAUS is a set of programs, whose first version was developed in Chile at the end o f the 80's. The system allows to see several scenarios on urban development, constituting itself in a powerfid tool to support strategic processes on decision making activities. Based on the origin - destination surveys, and minimizing cost and travel time, ESTRAUS models the generation o f trips, attraction, distribution, modal partition and allocation. The last three stages are modeled with an algorithm of simultaneous balance that, unlike a sequential model, obtains a solution that considersthe dynamic interaction of the three stages and gives values which reflects the situation o fbalance among them. - 92 - ESTRAUS allows to make an integral analysis of the urban transport system, modeling to every available way and all types of users. At the same time, it provides a great flexibility inthe levels with desegregation of spaces, particularly for the project evaluation of limited influence (i.e. public railway networks public, etc.), which requires a fine zoning process. ESTRAUS has been used inthe modeling o f UTS in Santiago with 264 and 535 zones, and also inValparaiso and Viiia delMar, with 200 zones. Model ESTRAUSconsists of four sub models: e Socioeconomic: Itpredicts variables related to the systemo f activities. e Generation and attraction: Fromthe previous sub model, for several scenarioso f urban development, it predicts the generationand attraction o f trips for eachone o fthe zones inwhich they subdividethe are o f study. e Of simultaneous balance: Itjointly solves the distribution, modalpartition and allocation oftrips to severalnetworks o fpublic and private transport, considering interactions between modesthat use a common infrastructure. e Of economic evaluation: Itmakesanalysisbenefit-cost by meanso f calculation o fthe social net benefit, considering the willingnessto pay, the benefitofthe operators, the investmentsand the operation costs, the calculation o f the benefits through the savings ofphysicaltime and resources, and costs like the value of the investments. - 93 - Additional Annex 16: Review Of "Project Concept Development:Chile: Sustainable TransportAnd Air Quality For Santiago CHILE:SustainableTransportand Air Qualityfor Santiago (GEF) REVIEWOF "PROJECT CONCEPTDEVELOPMENT:CHILE: SUSTAINABLETRANSPORTAND AIR QUALITYFOR SANTIAGO" Project ID PO73985 Global Environment Facility The World Bank Mark A.BY Delucchi Does Research 5029 Vista del Or0 Way Fair Oaks, CA 95628 (916) 989-5566 madelucchi@ucdavis.edu and ResearchScientist Institute of Transportation Studies UniversityofCalifornia Davis, CA 95616 December 16,2002 The format ofmyreview In the following, Irefer to page numbers in the 45-page "project concept document" (PCD) (dated December 8,2002) Ireceivedvia e-mail. Generaleditorialcomment Becausethe PCD is not yet finished, Ihavenot botheredto make any specific editorial comments. Some obvious general editorial comments: the final document ought to have a table o f contents, anacronym list, anduniformfont andformatting style. Generalcomments Allowing that the project description i sjust a draR, it is pretty good at this stage. There i s reasonably good background information. Most ofthe proposed components are adequately described ,appropriate, and reasonably likely to be at leastpartially effective. Some general ways to improve the proposal: An outline or introduction or overview at the beginningwould be helpful, * There i s some confusing repetitionof information inseveral sections, particularly inpp. 6-9 vs. 10-19. - 94 - Ifyouhaven't already, youmightwant to takealookat therecentreport called: Transportationin DevelopingCountries:GreenhouseGas Scenariosfor Chile,by Raul ORyan (University of Chile) et al., Pew Center of GlobalClimate Change, Arlington, Virginia, August (2002). www.pewclimte.org. Response/All the abovepoints have been taken in to accountfor thefinal version of the PCD. O'Ryan is one of the local consultants hired under the PDF-b component to evaluate technological options. This report presentsa lot ofgoodbackground informationontransportation andrelatedproblems in Santiago (similar to what you present, but more extensive), and then develops a high-GHGand a low-GHG emissions scenario for transportation inSantiago. Some o fthe measures considered are similar to the ones you propose, but some are different. You mightwant to consider additional GHG- and pollution-reduction measures. Your proposed rr components to do not include reducing the fuel use per mile of passengervehicles, or switching from gasoline or diesel to low-carbon, low-emissions fuel. One often overlooked but very effective way to reduce fuel use per mile is to facilitate the use o f mini-cars, such as are popular inJapan. For safety reasons, mini-cars should be segregated from conventional, heavy, high-speedvehicles. This requires careful land-use planning and transportation-infrastructure design, but these already are general components o f your proposal. Response/ Theproject contemplates the analysis of emerging technologies with better fuel consumption rates (Hybrids). Also it is decided that, with PTUS implementation in 2005, all the buses circulating in Santiago will be Buses complying with the Environmental Standard Euro 111and the Diesel, in the metropolitan region to be equal or less than 50ppm of sulfur content. Similarly, you might want to look at the freight sector. According to the O'Ryan et al. (2002) report cited above, 35-40% oftotal C02 emissions from transportation inChile come from the freight sector, with nearly a quarter o f the total coming from freight trucks alone. Evenifone considers Santiago alone, freight transport accounts for on the order of 10%o f C02 emissions from transport. Your proposaldoes not address the freight sector at all, and so misses altogether the chanceto reduce the significant emissions from the sector. Shiftingfreight from trucks to rail can reduce GHG emission per ton-mile by about 75%. Convertingdiesel trucks to natural gas can immediately reduce PMand NOx emissions, albeit not GHG emissions. ResponsdAs theproject states the GEF involvement aims at supporting the implementation of the PTUS with its main objective of reorganizing the Public Transport in Santiago. Thefreight sector its not being considered at this stage. Finally, you ought to at least discuss vehicle taxes, fuel taxes, and parking charges and controls as additional measures designedto induce people to use alternatives to single-passenger automobiles. Parking controls or parking chargeshave been shown to be particularly effective at reducing single-passenger commutingby automobile. - 95 - ResponsdAll these measures will be discussed in more detail during the nextphase of theproject and with the implementation of the components allocated under the Traffic Calming Measures. Itwould be niceifyou couldmake preliminaryestimatesofthe GHG-emission impactsofall ofthe components, and then present them ina single table, along with the component costs. This would give GEF an idea o fthe cost-effectiveness o f its investments. Response/ The impact of the measures included in theproject are not always comparable in terms of reduced GHG emissions, as they differ very much in scope, and implementation timeframe. Also, most measures depend on the degree of stakeholder participation, as they are indirect, aimed at removing barriers, not at directly removing GHG emissions. Giventhat the bus demonstrationprogramis the most costly component ofproposedproject and also arguably the most pertinent to the GEF, there should be a more extensive technical discussion of the technology, operation, costs, and expectedemissionsbenefits o f the program. There is by now sufficient actual experiencewith or good simulation of these technologies to support a more in-depth discussion of what the project intends to do and what benefits it expects. Inthis regards, the discussion of CNG and hybridbuses wouldbenefit from the recentand comprehensivebook onbus systems by the IEA: Bus Systemsfor the Future, International Energy Agency, Organization for Economic Cooperation and Development, Paris, France (2002). The book discusses hybrid-electric buses, fuel-cell buses, CNG vs. diesel, and other fuels and technologies, and has case studies for cities Indonesia, Bangladesh, Brazil, India, and Mexico. Response1 Theproject team has already taken conceptsfrom this book andfrom the experience executed in New York with Hybrid Buses. Also, the hybrid technology to be tested is Brazilian. The case of Mexico has been developed inparallel. A more detailed technical discussion will be added to the PAD. The discussions o froad-pricing and land-use-planning measures should be a little more informedby the very large literature on these subjects. Major transportation journals periodically have special issues devoted to these topics; see for example the recent issue of TransportPolicy devoted to roadpricing (Volume 9, pp. 175 --,2002). The analysis of the interaction between landuse and transportation i s particularly complex, and not usefulreducedto correlations between density and vehicle ownership or use. Response/ This has been revised by the Project Team and more information has been added to thefinal PCD.During appraisal, additional information will be added as needed. The strategic environmental assessment, travel harmonization, anddecontamination bondcomponentsare too rudimentary at this point. They should be elaborated more. Response/ Thesecomponents were developed in more detail on thefinal PCD, and will be complemented during appraisal. Finally, some of the discussionso f necessary institutional changes and interactions among agencies and between the public andprivate sector ought to be more clearly elaborated. Response/ Thesepoints are more discussedduring the Final PCD. Also during the appraisal phase, - 96 - e these will be more discussion in more detail Specificcommentspage by page p. 2., KeyPerformance Indicators. Ialways havetrouble withthis section ofGEF proposals (!). Iassume that what GEF wants are indices that measurethe extent to which project objectives are attained. Ifso, then the first problemwith your list i s that you have expressedmost o f the "indicators" as desired outcomes (e.g., "non motorizedtransport share of total trips increased") rather than as measures related to program objectives (e.g., measures of modal share, which are relatedto the objective of curbing the use of private automobile). Second, it i s not clear how items 2.1 iii,2.1 v, and 2.2 iiiare to be expressedas measurable indices. Response/ Thisnotes have been corrected on thefinal document of the PCD. Both indicators ofproject (long-term) and of process (short term)success have been added. p. 2-3, part B1. The backgroundfor this sectionneeds to bebetter developed. For example, tell us more about the CAS -what it is, and why it is pertinent here. .- Response/ This notes have been corrected on thefinal document of the PCD p. 3. section 2. Give more background onthe transport system andtravel characteristics. The O'Ryan et al. (2002) report referenced above has good information for this. Response/ This notes have been complemented on thefinal PCD p. 3, bottom. The secondto the last sentence is unclear (syntax muddled; what is a "most preventive action?). Response/ This notes have been corrected on thefinal PCD p. 4, top. I s PMlO a "major precursor for the formation ofPM2.5?" Regarding footnote 3 (ozone), recent work has indicatedthat the black carbon component o f PM2.5 contributes significantly too global warming; see for example: M.Z.Jacobson, "Strong Radiative HeatingDueto the MixingStateof Black Carbonin Atmospheric Aerosols," Nature 409: 695-697(2001). Response/ This notes have been corrected editedproperly. Wehave also noted the contribution of e tropospheric ozone to global warming p. 4, secondparagraph: See also: J. D. Ortuzar andG. Rodriguez, "Valuing reductionsinenvironmentalpollution ina residentiallocationcontext," Trunsporfufion ResearchPurf D 7 407-427 (2002). Response/More information has been included on thefinal PCD. Ortwar has been contracted as consultantfor thepreparatory studies (PDF-B) - 97 - p. 4, bottomhalf. Again, the O'Ryan et al. (2002) report has an expandeddiscussion ofthe institutional situation. Response/More information has been included on thefinal PCD. p. 5, "Objectives o fthe Plan," bullet 5. There isno conceivableway that the PTUS will reduceemissions of "global pollutants" by 70% compared with the current situation. Indeed, O'Ryan et al. (2002) show that even ina "low" GHG emissions scenario, emissionsof GHGsare still likely to increase, albeit at a lower r. rate than inthe "high" GHGemissions scenario. Response/ It was an error in the text that has been corrected. It refers to local contaminants from motorized transport. p. 6, section 3, first paragraph. It is not true that all measures designedto mitigate urban air pollution will also mitigate climate change. For example, retrofitting dirty diesel buses to burn CNG will reduce emissions o f P M andNOx, but not emissions o f GHGs. Response/We agree. Theproject aims atfinding less intensive and more fuel efficient technologies to reduce emissions of GHG p. 7, fn 7. Actually, Idon't think assumingan increaseof 2 percentagepoints for the bicycle modalshare i s "conservative". Inthe U. S. anyway, that would be a huge increase for a major city. Response/ Agreed, we change the qualijkation as it was. Recent studies have shown that, shares on modes of transportation can change up to 3% as seen in Bogotd, city where 270 KM of bikeways will be in place shortly. The estimative presented on the project are based on conservatives assumption of the changes that might takeplace in Santiago with the construction of the I 9 Kilometersfunded by GEFand 20 more Kilometers funded by the private sector. Another aspect here is the involvement on the civil r. society and NGO's on the design process, sofar these groups have showed a great attitude towards the implementation of these components, and will result on the success and the increase of the expected results. p. 7, Modernizing the bus system. This is one ofthe most feasible and significant measuresinthe whole project, and so should be elaboratedmore fully. The TEA book cited above couldprovide ideason how to elaboratethis section. [Note: Isee that there is more elaboration inPart C. Perhaps you should combine the two section-this one with the bits from Part C -- to avoid confusing disjointedness.) Response/Thedocument has been improved to avoid duplication. Additional information on the Testing protocol will be added to the PAD. p. 7,part (b), busreform, andp. 44, Annex VI. The busreforms should be explainedinmore details. (Or else this section should be combined with the similar section from Part C.) Since results from MODEMand ESTRAUS are going to beusedinthe GEFproject to evaluate the impacts o f the bus reforms, there should be a better write up of these models. Inparticular, we needmore informationon the ESTRAUS model. Response/Although thefinal report on the detailsfor the new system is still beingproduced, we have added an annex with the key elements of the reform. During appraisal this information will be updated. pp. 7-8, part (c). This section shouldbe combinedwiththe "bus renewal" section from Part C. Inany - 98 - event, Idon't follow the reasoninghere. Are you suggesting that the buses displacedby the EPA 94 buses can either be scrapped, or else deployed incompletely new routes that would serve completely new trips which inthe alternative (scrapping ofthe buses) would not exist? The latter i s completely improbable. If the oldbuses are used inother places, they might shift the modal split a bit, and might even generatesome new net travel, but it i s impossible that all the trips on the old buses would benet "new" trips inthe final transportation equilibrium. Response/The reasoning is to avoid that all displaced busesfrom Santiago simply co-exist with much older equipment in other cities. Theprogram provides an opportunity to not only renew thepublic transportfleet in Santiago, but also in other cities. p. 8 (a) school location. What mechanismwill change the location ofthe schools?Legislation? Incentives? This section here is too spartanto beofuse. Isuggest dropping it and referring the readerto the discussion o f school location inPart C. Response/ The document has been modijied to reflect the contribution of theproject, which will be the assessment of opportunities to coordinateschool zoning policies with sustainable transport. p. 8 (b) central ring.What simulation models were usedto determine the effects ofthis (component? MEPLAN?Inany event, more details of the proposed simulation and evaluation methods are needed, because this is simultaneously one ofthe most potentially important long-term actions, and also the most difficult to model. Response/ The model used is MUSSA (http://www.mussa.cl/) ,which is a recent developed land management model tool developed by Chilean authorities. More details have been added to the document. p. 8 (c) housing policy. Ibelieve that the there are a lot moreenergy and emissions-relevantdifferences between infilland peripheral development thanjust the average length of trips. Withintransportation alone, one has to consider mode choice, destination choice, numbero f trips, and more. But there are non-transportation effects, too, relatedto heating and cooling, infrastructure, and telecommunications. I recallreading at some point that not all of these differences favor infillover peripheral development, which, ifcorrect, meansthat acomprehensivemodelofmulti-sector energyuse, transportation, landuse, and more, i s neededto properly tease out all o fthe effects. Furthermore, housing location i s not the only pertinent planning variable; one can and should simultaneously plan for the locationof industry, commerce, services, and infrastructure. Put another way, one shouldn't compare peripheral with infillhousing development; rather, one should compare two optimally designed complete alternatives, one featuring intelligent multi-modal peripheral development, the other featuring central-city infill.Although this greatly complicates the comparison, it i s realistic, and at least ought to be considered. Response/Comments taken and will be incorporated into TOR during appraisal p. 8 (d) city center. Howwill measures suchas traffic calming reduce trips by a full 50% (which really is quite a lot)? And what happensto any trips no longer made by car inthe city center?Do some o f themjust go elsewhere? [I see that there i s a bit more elaboration inPart C. The two sections should be combined.] Response/Text has been corrected; the reduction of 50% had been included as hypothetical scenario to show relevance of GHGemission reductions associated with the measure. More specijk information will - 99 - be added on this sub-component during appraisal. p. 8-9 roadpricing. There is no doubt that one can manipulateprices insuch a way as to discouragepeople to use cars, and probably even reduce GHGemissions. This does not mean, however, that such a scheme is economically "rational" inthe sense of maximizing social welfare. Indeed, a truly "rational" pricing scheme requires long-run marginal social-cost everywhere inthe society -notjust on cars, not evenjust on all transport modes, buteverywhere (although with limited substitution between transportation and non-transportation sectors, it might be sufficientjust to price all transportation modes correctly). You must price buses, trains, public infrastructure -everything-correctly, accounting for pollution, infrastructure (or congestion) costs, accident costs, service costs, and so on. As part of doing this, you must estimate full lifecycle emissions for public transportation operation, including the metro. For details on my arguments about pricing, see: M.A. Delucchi"Should We Try to Getthe PricesRight?," Access, Number 16, University of California Transportation Center, Berkeley, pp. 14-21, Spring (2000). For lifecycle GHG analysis applied to transportation options inChile, see the O'Ryan et al. (2002) report mentioned above. You ought to consider a broader set of economic/pricingmeasures. Inparticular, measuresthat affect the cost and availability ofparking can have a dramatic impact mode choice. (See any number of articles by Error!Bookmarknot defined. ofUCLA.) This section should be combined with the similar section inPart C. Response/ Weagree with this statement, and considerations will be added to TOR development during appraisal. p. 9, strategic assessment. This is a worthy but probably overly ambitious goal. Such a unified suite of models is difficult to achieve. Isuggest either devoting a lot more serious attention to this, or dropping it altogether. Response/ For the development of the PTUS the introduction of the environmental variable is a priority at the government level. Not only the introduction of climatefriendly measures arepursued, it also looks for a more comprehensive approach on how to integrate development and environment, seen as the perspective of the transportation sector. Other changes have been introduced on thefinal PCD. p. 9, travel harmonization. What exactly is this? What are the Australian examples? Ifthis really is a cost-effective way to reduce GHGemissions, it should be elaboratedupon. Response/ Experience not only in Australia but is Santiago itself has shown that rationalization of trips always results in a reduction of trips length and more efficient trips. This can be achieved by education certain groups of thepopulation and introducing these measures as a sustainable plan. The concept has even beenpatented as "Travel Blending ". p. 9, decontamination bonds. Isthis apropositionto study apossible C02 emissions trading scheme (incorporated into an existing emissions trading scheme for urbanair pollutants)? Ifso, you needto say more than "we will study" this. A lot has beenwritten about this already, and you should acknowledge this -100- and give us a better idea of how you might implement the scheme and what you mightexpect fiom it, with particular attention to the institutional, economic, and industrialcharacteristics o f Santiago. An example o f recent literature is: International Energy Agency, International Emission Trading,from Concept to Reality, Organizationfor Economic Cooperation andDevelopment, Paris, France (2001). Response/ Comments taken and text improved. Additional information will be added during appraisal. p. 10, promotionof bicycle use. Onwhat basis do you expect that significant numbers o fpeople who own cars will choose to ride bicycles instead?Iunderstandwhy you target areas of highcar ownership - becauseo fthe theoreticalpotential to eliminate a lot of car pollution -but against this theoretical potential one must recognize that the propensity to ridebicycles is a decreasing fbction o f wealth, vehicle ownership, and the qualityo fthe roadnetwork for cars. Maybe it i s more socially beneficial to provide infrastructure insupport o f cycling where it is more of a necessarymode rather than a luxurymode. Moreover, as far as Iknow, the only safety "strategy" that really makes cyclists feel secure (and hence has any chance o f attracting people away from cars) i s complete grade separation of cars and bicycles. After this, what seemsto matter next isthe provisionofconvenient, safebicycle parkingor storage, and facilities for changing clothes. Isuspect that next to these, educational campaigns and the like accomplish very little. (Of course, they cost relatively little, too...) Response/On regards to this component a comprehensiveplan is under developmentfunded by the GEF under the PDF-b Studies.Afinal outcome of this study will be ready at mid March 2003, which will be added to the PAD during appraisal and certainly to develop TORS.Along with building a bikeway network, with high specifications (defined as an investment of I00.000per kilometer built), aplan to address issues as safety and security are alsopart of the Project. Specific measures are been identified and on thefinal PCD and the appraisal stage all these information will be availablefor analysis and development. The experiences in Bogota and Manila have shown that an increased use of bicycles in the order of 1.53% of trips ispossible under comprehensive schemes (Le.promotion, good infrastructure, safe@). p.11-13, busprogram. See my comments above. Also, you ought to consider usinga Euro V bus, because these can have emissionsbenefits similar to those o f CNG(see the IEAbus report mentioned above). The discussiono f emissionstesting i s good, but there is nothing said about what costs are going to be estimated and how. Do you intendto project lifecycle capital plus operating costs, under some future conditions? If so, tell us more about the expectedmethods and data o fthe analysis. Response/ Currently, legislation in Chile requires Euro IIbuses; with the implementation of PTUS it has been decided that all the new buses have to comply with Euro IIIstandards. Buses with other enhancepollution control systems are not available in the countiy, nor it is thefuel. On the economical analysis, the testprotocolfor the Bus Test currently under development contemplates the analysis of the economical variable, which is consistent with the requirements of the abovepoint. The text has been improved to reflect this. p. 12, busreform. This section should be mergedwith the similar section earlier inthe report (p 7, part (b), so that all o f the informationi s inone place. As it stands now, the earlier section has insufficient background, andthis section i s missingsome useful bits from the earlier section. - 101- Response/Text improved to reflect comments. p. 12-13, renewal of bus fleet. Again, this sectionshouldbe combined withthe similar earlier section (pp. 7-8, part (c)). See my commentson that section. Response/Sections have been combined. pp. 13-14, central ring. See my commentsonthe similar section earlier inthe report (p. 8 (d) city center). Also, the order o f sectionshere should follow the order used earlier ("central ring" after "school location"), .r unless the sections are merged (which is the best idea). Response/This has changed signiJicantly since thefirst draft. Comments have been taken into account in thefinal version of the PCD. p. 14-15, school location. The discussionof school location seems excessiveand out ofproportionto the GHG-reduction benefits that it is likely to provide. Itwould benice to have some indication o f the likely magnitude of the benefits. Response/This has changed significantly since thefirst draft. All comments have been included on the final version of thePCD. p. 15, housing policy. See mycommentsonthe similar section earlier inthe report (p. 8 (c), housing policy). Response/Comments addressedabove. p. 15, fns. 13 and 15. Eliminate the duplicate. Response/Ok, Will do this of thefinal version of the PCD p. 16, city center. See my commentsonthe similar section earlier inthe report (p. 8 (d), city center.) The two sections should be combined. Response/nis has changed significantly since thefirst draft.All comments considered on thefinal version of the PCD. pp. 16-17 roadpricing. See my comments onthe similar section earlier inthe report (p. 8-9 roadpricing). Refer also to the recent issue of TransportPolicy (volume 9, pp. 175 --,(2002)) on roadpricing. The sections ought to be combined. Response/ Weagree with this statement, and the changes are reflected on thefinal PCD p.17, strategic assessment. See my comments onthe similar section earlier inthe report (p. 9 strategic assessment). The sections ought to be combined. Response/Sections combined. pp. 17-18, travel harmonization. See my comments onthe similar section earlier inthe report (p.9 travel harmonization). The sections ought to be combined. - 102- Response/Sections combined. p. 18, decontamination bonds. See mycommentson the similar sectionearlier inthe report (p.9 decontamination bonds). The sectionsought to be combined. Response/Sections combined. p. 19,2.1. What is the nature ofthe reformthat is to be sought here? Response/PTUS implementation, in particular the restructure of thepublic transport system. p. 19,2.2. What legislative changes specifically are needed? Response/ Roadpricingprinciples. p. 21, D.Project Rationale. Seemy"general comments" at the beginning ofthis review. A specific question here: why were fuel-cell buses rejected?The GEF i s interestedinthem, and the O'Ryan et al. (2002) report on sustainabletransportation inChile includes them inits analysis. Response/From theperspective of project implementation and economical analysis on the implementation of the PTUS,fuel cell buses are not being considered due to its high capital cost and the willing of the government. Also, GEF has stopped considering this option. pp. 21-22, relatedprojects. Ijust skimmedthis section. Response/ This has been completed on thejnal version of the PCD p. 24, bikeway construction. Iagree withthis (see mycomments above. p. 10promotionofbicycleuse), but wonder why it is imagined that "cultural change" is likelyto be effective, or evenpossible. Idon't know o f any evidencethat this sort of enlightenment campaign can do anything to overcome the effects o fwealth and concems about safety and convenience. Response/ See commentsabove. p. 26-28. These sections seemincomplete. Iskimmed them. Response/ This has been completed on thejnal version of the PCD. p. 29, travelharmonization. Iagree that once a person becomesmore informed, he or she will make decisions on the basis o ftheir new enlightenment rather thantheir previous ignorance. But eachnew generation will have to be educatedinorder for the behavior to be sustainedacross generations. Response/ Thefinal version of the PCD contains a more detailed scope of this component. p. 29, bicycle use. What do you meanwhen you say that "this component is likely to sustainitselfafter completionof the GEF project". Response/ Once theproject is implemented, a communication andpromotion campaign will have taken - 103- place, and the modal shift will be expected.Normally,potential bikers thatface favorable conditions will maintain theirpreferences. p. 29, hybridbuses. There are two other key andrelatedfactors: economic and operational viability ofthe new systems. They won't beexpandedor evensustainedfor long ifthey prove too costly or difficult to operate. Response/ Weare aware of the situation, this is the main reasonfor to have a Lab Testand a Field test, in order to evaluate the operational and capital cost of the technologies under evaluation. p. 30, rationalizationoftrips. Iwould addthat the sustainability ofland-usepatterns depends greatly onthe permanenceandeffectiveness o fthe policies and economic forces that govern landuse. And here Ithink is a weakness inthis proposal: Ibelieve that strong central planning i s neededto ensure sustainable land development, and Ididnot see any indicationthat this sort of planningwill bepursuedinSantiago. Response/ Thefinal version of the PCD contains a more detailed scope of this component. p. 30-31.Ithink that the potential problems withthe bicycle component are serious. Puttingbicycleroutes inhigh-densitycorridors, inorder to maximizevisibility, isnot likely to work ifthe bicycles must mix in any way with road traffic. Response/l%e designs will avoid thatpotential mix and willfavor complete segregation over pavement. Final designs will be appended to the PAD. p. 31, roadpricing. There may be a bit ofwishfbl thinkinghere, but perhapsthat is OK! Response/ Weagree pp. 32-36, Annex I. secondcolumn should be called "performance indicators or generalevaluation The guidelines," and init should have indicators or guidelines or measures but not desired outcomes. Response/Theseare the guidelinesfor PCD development at the WorldBank The right-hand columns are not labeled clearly. It looks like what you have inthe rightmost columns are simply goals. Isuggest callingthemthat. Response/ This has been taken care at the final version of the PCD pp. 39-41, Annex IV. The emission factors, Fij, should not be end-use carbon emission factors, but rather fbll fbel-cycle COZequivalent emissions. Inother words, one must consider all the linkedsources inthe transportation fbel and vehicle lifecycle (not just end use), and all GHGs, notjust C02. The analysis must be done for all modes, includingthe metro, intercity trains, andthe like. An application ofthis full fbelcycle analysis to transportation scenarios inChile i s given inthe O'Ryan et al. (2002) mentionedabove. Response/Allfactors considered are IPCC-consistent and take into accountfull fuel-cycle emissions.I n any case, all calculations will be checkedduring appraisal. pp. 42-43, Annex V. This is useful information. , - 104- p. 44, Annex VI. See my comment above, p. 7, part (b), busreform. Response/see above - 105-