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Document of THE WORLD BANK
FOR OFFICIAL USE ONLY
Report No. 39667 - CO
PROJECT APPRAISAL DOCUMENT
OF A
PROPOSED PURCHASE OF EMISSION REDUCTIONS BY THE ITALIAN CARBON
FUND
IN THE AMOUNT OF US$3,628,810
FOR THE
REPUBLIC OF COLOMBIA CARTAGENA LANDFILL GAS RECOVERY PROJECT
May 3, 2007 Environmentally and Socially Sustainable Department
Colombia and Mexico Management Unit Latin America and Caribbean
Region
This document has a restricted distribution and may be used by
recipients only in the performance of their official duties. Its
contents may not otherwise be disclosed without World Bank
authorization.
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CURRENCY EQUIVALENT (Exchange Rate Effective December, 2006)
Currency Unit = US$ Colombian Pesos (COP) = US$0.0004
US$1.3 = €1
Fiscal Year 2007
ABBREVIATIONS AND ACRONYMS
CARDIQUE Corporación Autónoma Regional del Canal del Dique
(Regional Environmental Authority) CAS Country Assistance Strategy
CDM Clean Development Mechanism CERs Certified Emission Reductions
CF Carbon Finance CO2e Carbon Dioxide Equivalent DNA Designated
National Authority (Autoridad Nacional Designada) DOE Designated
Operational Entity (Entidad Operacional Designada EOD) EIA
Environmental Impact Assessment EMP Environmental Management Plan
ERs Emission Reductions ENVCF Carbon Finance Unit ERPA Emission
Reduction Purchase Agreement FOD First Order Decay GEF Global
Environment Facility GHG Greenhouse Gas GODC Government of the
District of Cartagena (Alcaldía Distrital de Cartagena) GOC
Government of Colombia GWP Global Warming Potential IPCC
Intergovernmental Panel on Climate Change IRR Internal Rate of
Return LCSEN World Bank Latin America and the Caribbean
Environmentally and Socially
Sustainable Development – Environment Family LDLC Loma de los
Cocos LFG Landfill Gas LoI Letter of Intent MAVDT Ministerio de
Medio Ambiente, Vivienda y Desarrollo Territorial (Ministry of
Environment, Housing, and Territorial Development) MP Monitoring
Plan MSW Municipal Solid Waste NGO Nongovernmental Organization
NMVOC Non-methane Volatile Organic Compounds NPV Net Present Value
OCMCC Oficina Colombiana para la Mitigación del Cambio Climático
(Colombian
Office for Climate Change Mitigation, the country’s Designated
National Authority)
PCF Prototype Carbon Fund PDD Project Design Document SWM Solid
Waste Management tCO2e Tons of Carbon Dioxide Equivalent UNFCCC
United Nations Framework Convention on Climate Change VERs Verified
Emission Reductions
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Vice President: Pamela Cox Country Manager/Director: Isabel M.
Guerrero
Sector Manager: John H. Stein Task Team Leader/Task Manager:
Horacio Terraza
This document has a restricted distribution and may be used by
recipients only in the performance of their official duties. Its
contents may not otherwise be disclosed without World Bank
authorization.
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COLOMBIA
Landfill Gas Recovery Umbrella Project
CONTENTS
A. STRATEGIC CONTEXT AND RATIONALE
....................................................... 1 1.
Background.............................................................................................................
1 Solid Waste Management in
Colombia.......................................................................
1 2. Project Eligibility
....................................................................................................
2 3. Rationale for Bank
Involvement.............................................................................
3
B. PROJECT
DESCRIPTION.......................................................................................
5 1. Overall
Description.................................................................................................
5 2. Project Development Objective
..............................................................................
6
C. IMPLEMENTATION
.............................................................................................
10 1. Institutional and Implementation Arrangements
.................................................. 10 2. Monitoring
and Evaluation of Outcomes and Results
.......................................... 11 3. Critical Risks and
Possible Controversial Aspects
............................................... 12 4. ERPA
Conditions and Covenants
.........................................................................
13
D. APPRAISAL SUMMARY
......................................................................................
13 1. Technical
Analysis................................................................................................
14 2. Financial
Analysis.................................................................................................
15 3. Social
Analysis......................................................................................................
17 4. Environmental
Analysis........................................................................................
18
...................................................................................................................................
20 Annex 1: Detailed Project Description
........................................................................
21 Annex 2: Implementation
Arrangements......................................................................
30
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Annex 3: Financial and Economic
Analysis.................................................................
32 Annex 4: Safeguard Policy
Issues................................................................................
38 Annex 5: Project Preparation and Supervision
............................................................. 45
Annex 6: Emission Reduction Purchase Agreement and Term Sheet
.......................... 46 Annex 7: Carbon Finance Risk
Assessment
.................................................................
47
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List of Tables Table 1: Key Performance Indicators for the
Cartagena Landfill Gas Recovery Project
.............................. 6 Table 2: Annual estimated ERs
(tons of CO2e/year) in
the...........................................................................
9 Table 3: Comparison of conditions in LoI and
ERPA.................................................................................
10 Table 4: Risk Ratings of the Cartagena Landfill Gas Recovery
Project .............................................. 12 Table 5:
Fixed
costs.....................................................................................................................................
15 Table 6: Variable Costs
...............................................................................................................................
15 Table 7: Percentage of the base ER
scenario...............................................................................................
16 Table 8: Purchasing period: 2008–2016 (LDLC)
........................................................................................
17 Table 9: Applicability of safeguard policies to the Cartagena
Landfill ....................................................... 19
Table 10: Estimated and actual methane
capture.........................................................................................
23 Table 11: Estimated ERs in the Loma de los Cocos landfill, base
scenario ................................................ 24 Table
12: History and projection of waste disposal at LDLC landfill
.......................................................... 26 Table
13: Baseline emissions at LDLC according estimations of potential
methane generation ................. 27 Table 14: Methane data
monitoring..............................................................................................................
28 Table 15: Financial assumptions
..................................................................................................................
33 Table 16: Financial analysis of project cash flow for LDLC,
2007–2016 (10 percent discount rate, US$10.4 per CER, and US$9.1
per VER, base
scenario)............................................................................................
35 Table 17: Financial analysis for purchasing period 2008–2016,
LDLC....................................................... 36
Table 18: Recommendations of the Environmental Audit for LDLC
.......................................................... 39 Table
19: Trace Components in LFG
...........................................................................................................
42 Table 20: Components of LFG Flaring Exhaust Gas
..................................................................................
43 Table 21: Emission Standards from LFG Flaring in Germany and
England............................................... 44
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COLOMBIA
Cartagena Landfill Gas Recovery Project
PROJECT APPRAISAL DOCUMENT
Latin America and Caribbean Region (LCR) Environmentally and
Socially Sustainable Development (ESSD)
World Bank CFU
Date: March 23, 2007 Country Director: Isabel M. Guerrero Sector
Manager/Director: John H. Stein Project ID: P103015 Lending
instrument: World Bank Italian Carbon Fund
Team Leader: Horacio Terraza Sectors: Solid Waste (100%)
Environmental screening category: B Safeguard screening category:
S2 Theme: Climate Change and Pollution Management and Environmental
Health
Project Financing Data
[ ] Loan [ ] Credit [ ] Grant [ ] Guarantee [X] Other: Emission
Reductions (ERs) Purchase For Loans/Credits/Others: The Project
does not involve Bank financing. Total Bank Carbon Financing
amounts to US$3,628,810 Proposed terms: €8 per ton CO2e for 220,325
CERs and €7/tCO2e for 146,883 VERs for the period 2007–2016
Financing Plan ($m.) Source Local Foreign Total
Borrower: Not a lending operation IBRD/IDA: Others: Italian
Carbon Fund Total:
US$3,628,810 US$3,628,810
US$3,628,810 US$3,628,810
Borrower: Not a lending operation Responsible for
Implementation: Caribe Verde S.A.E.S.P.
Estimated disbursements 2007–2016 (FY/$) US$3,628,810 FY 2007
2008 2009 2010 2011 2012 2013 2014 2015 2016
Annual 680,000 9,366 260,812 358,229 448,834 534,134 657,457
679,179 0 0 Cumu-lative 680,000 689,366 950,178 1,308,407 1,757,240
2,291,375 2,948,832 3,628,010 3,628,010 3,628,010
Project implementation period: FY2007 through FY2016 Expected
effectiveness date: June 30, 2007 Expected closing date: December
31, 2016
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Does the project depart from the Country Assistance Strategy
(CAS) in content or other significant respects? No
Does the project require any exceptions from Bank policies? Have
these been approved by Bank management? Is approval for any policy
exception sought from the Board?
No Yes No
Does the project include any critical risks rated “substantial”
or “high”? No Does the project meet the Regional criteria for
readiness for implementation? Yes
Project development objective: Ref. PAD page 5 The objective of
the Cartagena Landfill Gas Recovery Project is twofold. At global
level, the project will help mitigate climate change through the
reduction of greenhouse gas emissions caused by methane generated
at the newest landfill in Cartagena. At local level, the project
aims to improve public health through the installation of a
landfill gas (LFG) flaring system at the landfills. The flaring
system will improve air quality through the reduction of hazardous
trace gases contained in LFG and reduce the risk of uncontrolled
fires and explosion at the landfills. Indirect development
objectives include raising awareness of climate change and
demonstrating the feasibility of better solid waste final disposal
practices aligned with Clean Development Mechanism (CDM) and carbon
finance possibilities in Latin America. The main beneficiaries will
be both formal and informal workers at the landfills and the people
living in the surrounding communities.
Project description: Ref. PAD Annex 1
The purpose of the Cartagena Landfill Gas Recovery Project is to
capture and destroy methane generated in Loma de los Cocos landfill
that belongs to the District of Cartagena and sell the resulting
emission reductions (ERs) to the Italian Carbon Fund. The project
consists of the design, implementation, and monitoring of LFG
extraction, treatment, and flaring facility at this landfill. Such
facility will allow the capture and destruction of methane
generated through the anaerobic decomposition of organic matter
disposed in the landfill. A detailed project description is found
in annex 1.
Which safeguard policies are triggered, if any? Ref. PAD annex 4
O.P. 4.01 – Environmental Assessment
Significant, non-standard conditions, if any, for: Board
presentation: None, as no World Bank lending is involved
Effectiveness: Effectiveness will be achieved upon execution
(signature) of the Emission Reductions Purchase Agreement (ERPA),
as there are no conditions precedent. Covenants applicable to
project implementation: None
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1
A. STRATEGIC CONTEXT AND RATIONALE
1. Background
Solid Waste Management in Colombia
Waste management in Colombia faces many challenges. As in most
developing countries, waste is far from being disposed of
adequately, and landfills share serious problems. Colombia produces
approximately 28,800 tons of solid waste per day. It is estimated
that approximately 20 percent of the waste generated in the country
is disposed of in open dumps with no daily or final coverings and
that approximately 40 percent is disposed of with inadequate final
disposal practices. Inadequate disposal results in environmental
and health problems such as surface and groundwater contamination,
air pollution, and increased transmission of illness by vectors
such as flies and rodents.
The Ministry of Environment, Housing and Territorial Development
(Ministerio de Medio Ambiente, Vivienda y Desarrollo Territorial,
or MAVDT) is committed to the improvement of the final disposition
of urban solid waste. Landfills are beginning to replace open-air
dumps as a result of recent action by the Ministry. In 2002 the
MAVDT dictated Decree 1713, which mandated the closing of open-air
dumps beginning October 3, 2005. Decree 838 of 2005 promoted and
facilitated the localization, planning, and operation of solid
waste management final disposal systems. Based on these decrees,
the MAVDT has initiated the process of promoting the
regionalization of final disposition and complementary
activities.
The waste management situation in Cartagena is similar to that
in the rest of the country. Cartagena has two main landfills,
Henequén, which is closed, and Loma de los Cocos (LDLC), the
district’s current landfill, opened in January 2006 and located in
a rural area. Henequén, which is located in a predominantly urban
area, was the district’s landfill from 1993 to 2002. Most of the
waste disposed of in this old controlled landfill was of
residential and industrial origin. It is not clear whether
hazardous materials have been disposed in the area. Leachate has
not been properly monitored, and some kind of control and
monitoring is required. The operator of LDLC obtained an
environmental license, but many of the requirements of this license
are not being met. Landfill operation is weak, specifically related
to the lack of instruments to monitor the landfill’s stability,
lack of information about the management and effectiveness of the
leachate recirculation system, and lack of information about
control and monitoring of the aquifer.
The Government of the District of Cartagena (GODC), via a
mandate to the LDLC landfill operayor, Caribe Verde S.A.E.S.P.,
will address the issues in both landfills described above through
the implementation of a methane capture and flaring facility in
LDLC. Methane will be eliminated, and the equivalent tons of
avoided carbon dioxide (CO2) emissions will be sold to the Italian
Carbon Fund. Part of the earnings of this project will be used to
improve the environmental management conditions at the site of the
already closed Henequen landfill. The latter will contribute to the
fulfillment of the requirement set by the Designated National
Authority (DNA) that calls for contribution of the project to
sustainable development. The mandate issued by the GODC, which is
based on a business plan agreed upon by both parties, provides
incentives to the operator of LDLC to improve the management of the
landfill by
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2
making it a direct beneficiary of the earning of the project.
Moreover, a clear time-bound action plan, to ensure that LDLC is
operating in accordance with requirements set out in the
environmental license, will be prepared and presented as part of
the ERPA. This plan of action will be based on the recommendations
made by the environmental audit hired by the Bank for LDLC, and
will be monitored by a third party verifier hired for periodic
verification of ERs and verification of compliance with Bank
safeguards.
2. Project Eligibility
Climate Change and the Kyoto Protocol
The third session of the Conference of the Parties (COP-3) to
the United Nations Framework Convention on Climate Change (UNFCCC)
resulted in the Kyoto Protocol, by which industrialized countries
and economies in transition (Annex I countries) committed
themselves to greenhouse gas (GHG) emission reduction (ER) targets.
Under this international agreement, which entered into force in
February 2005, countries committed to reducing an average of 5
percent of their 1990 GHG emissions during the first commitment
period (2008–2012). In order to help Annex I countries achieve
compliance in a cost-effective manner, the Kyoto Protocol
established three market-based instruments—the Clean Development
Mechanism (CDM), Joint Implementation (JI), and International
Emissions Trading (IET)—that allow countries to buy and sell ERs in
a global market. Colombia signed the Kyoto Protocol and ratified it
on November 30, 2001.
The CDM allows Annex I countries to buy emission reductions
generated in developing countries. Article 12 of the Kyoto Protocol
established the CDM, whose main goal is to assist Annex I countries
in achieving their emission reduction targets while contributing to
sustainable development in developing countries.
Consistency with the UNFCCC and Kyoto Protocol
Capturing and flaring methane generated in landfills reduces GHG
emissions. Municipal solid waste (MSW) usually contains a high
degree of organic matter. Anaerobic decomposition of such matter
generates methane (CH4). While other gases, such as carbon dioxide
(CO2), are also present in the landfill gas (LFG), the largest
proportion (50 percent) is usually methane. Because methane is
combustible, emissions can be avoided by flaring this gas in a
controlled manner. Even though the result of this combustion will
be mainly CO2 (another greenhouse gas), emissions are reduced
because of the destruction of methane, which is 21 times more
powerful than carbon dioxide in trapping heat in the earth’s
atmosphere.
The Cartagena Landfill Gas Recovery Project is in compliance
with the United Nations Framework Convention on Climate Change
(UNFCCC) and the Kyoto Protocol. The project will reduce GHG
emissions, generating ERs that will be sold to industrialized
countries represented under the Italian Carbon Fund. The project
will also contribute to sustainable development in Colombia by
contributing to better quality of life and air quality in the area
of influence of the landfill, as well as improving solid waste
final disposal practices through flaring LFG generated at the
landfill.
Consistency with Relevant National Criteria
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3
National Climate Change Criteria
The Government of Colombia (GOC) has assigned a high priority to
climate change. Colombia has been a party to the UNFCCC since 1995
and has signed and ratified the Kyoto Protocol (Law 629, enacted
November 30, 2001). The country has been a leading participant in
discussions on the provisions and regulations of the CDM, in the
context of the international negotiations under the auspices of the
UNFCCC, and has developed a detailed negotiations agenda on items
leading to the definition of the rules for the CDM.
The government has undertaken several activities as part of its
commitment to maximize the benefits offered by the international
carbon market, including a national assessment for the optimal use
of the CDM, undertaken and completed in 2000 with Bank support. The
study assessed the Colombian market for GHG reductions and designed
a specific action plan to maximize the potential benefits of the
CDM in Colombia. The government also has taken steps leading to the
further development of institutional capacity through a) organizing
an inter-institutional committee under the auspices of the Office
of the Vice-President to ensure full coordination on climate change
issues and b) setting up a Climate Change Office (Oficina
Colombiana para la Mitigación del Cambio Climático, or OCMCC),
which has been in operation for the past 4 years. On the basis of
the studies sponsored as part of the National Strategy Studies
(NSS), other inputs, and the development of institutional capacity,
the government has defined the following main thrusts of a National
Climate Change Plan:
• Strengthen capacity to adapt to the anticipated impacts from
climate change; • Promote reduction of emissions and increase the
sequestration capacity for greenhouse
gases; • Minimize the adverse impacts on the nation’s exports of
fossil fuels; • Promote scientific capacity and the availability of
information on the impacts of
climate change on the nation’s economy and ecosystems; and •
Promote financial mechanisms for the adoption and funding of
response actions.
National Solid Waste Management Criteria As described in section
A.1, the government, through the MAVDT, has shown a clear
political, legal, and economic commitment to improving final
disposition of urban solid waste.
3. Rationale for Bank Involvement
The CDM is a valuable source of income and contributes to local
sustainable development. It therefore is an important tool for
achieving rapid and sustainable growth, one of the pillars of the
Country Assistance Strategy (CAS) for Colombia, released in 2003.
The other pillars of the CAS are sharing the fruits of growth and
building efficient, accountable, and transparent governance.
Assistance has centered on four programmatic development policy
loans to support the government’s reform agenda in the fiscal,
financial, environmental, and social sectors. Complementing this
assistance, the Bank has also provided investment lending and
grants in education, water, transportation infrastructure, rural
development, renewable energy, urban services, assistance for
forcibly displaced populations, and environment and natural
resource management.
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4
CDM projects for LFG capture and flaring contribute to
sustainable development. Domestically, they contribute by (i)
improving living standards through better air quality and reduced
risk of uncontrolled fires and explosion at the landfills (flaring
system reduce not only the flammability level but also the
hazardous trace gases contained in LFG) and (ii) contributing to
the adoption of a more sustainable SWM system through re-investing
ER revenues to improve the existing system. At the same time, the
project contributes to global sustainability by reducing GHG
emissions from LDLC landfill in Cartagena.
The Bank is currently discussing with the GOC the preparation of
a SWM investment project called Colombia sin Botaderos a Cielo
Abierto (Colombia without Open Dumps), to finance landfill
construction and closure of open dumps. The proposed Cartagena
Landfill Gas Recovery Project complements this project by providing
an example to other landfills throughout the country of an
additional source of income to finance the proper operation of
landfills.
The project is economically feasible solely through the
commercialization of greenhouse gas ERs, demonstrating alignment
with the Bank’s strategy of fighting climate change through
market-based mechanisms, among other initiatives. Specifically, the
project is in tune with the following main strategic objectives of
carbon finance:
1. High-quality ERs to show how project-based GHG emission
reduction transactions can promote and contribute to sustainable
development and lower the cost of compliance with the Kyoto
Protocol;
2. Knowledge dissemination to provide the Parties to the UNFCCC,
the private sector, and other interested parties an opportunity to
“learn by doing” in the development of policies, rules, and
business processes to achieve ERs under the CDM; and
3. Public-private partnerships to demonstrate how the Bank can
work with the public and private sectors to mobilize new resources
for its borrowing member countries while addressing global
environmental problems through market-based mechanisms.
Finally, the project is expected to continue to raise awareness
of the role of carbon finance in the solid waste sector and other
sectors that are CDM compatible in Colombia and the region.
The Bank’s Comparative Advantage
The World Bank is uniquely positioned to support this project
because of its extensive experience and expertise in LFG capture
and management through the implementation of several LFG-to-Energy
and LFG flaring projects in the region,1 both under the CDM
framework and sponsored by the Global Environment Facility
(GEF).
1 The Bank implemented the first LFG-to-Energy project in
Monterrey, Mexico, sponsored by the GEF, the LFG-to-Energy
GEF-sponsored project in Maldonado, Uruguay, and the Carbon Finance
project Nova Gerar in Brasil, as well as other Carbon Finance LFG
flaring projects in Olavarría, Argentina, and Montevideo, Uruguay.
Of these, methane is currently being recovered from Monterrey,
Olavarría, and Maldonado, while for Montevideo and Nova Gerar an
ERPA has been signed but no ERs have been generated yet.
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How the Project Fits into the Carbon Finance Strategy of the
Bank
The Bank’s engagement in Carbon Finance began in 1999 and since
has multiplied by almost 10 times. Bank-administered Carbon Funds
have grown quickly since the establishment of the US$180 million
Prototype Carbon Fund in 1999, from US$413.6 million on July 1,
2004, to approximately US$914.7 million on July 1, 2005. With the
Umbrella Carbon Facility, Bank-administered Carbon Funds reached
US$1,638.9 million by July 1, 2006.
Although the Bank’s initial role was to catalyze the market for
carbon emission reductions, carbon finance is now emerging as part
of the Bank’s mainstream lending program. In light of various
external developments, not the least of which is the entry into
force of the Kyoto Protocol on February 16, 2005, the following
objectives have emerged for the Bank’s carbon finance activity as
it matures:
1. To ensure that carbon finance contributes substantially to
sustainable development beyond its contribution to global
environmental efforts;
2. To assist in building, sustaining, and expanding the
international market for carbon emission reductions and its
institutional and administrative structure; and
3. To further strengthen the capacity of developing countries to
benefit from the emerging market for emission reduction
credits.
In addition to contributing to sustainable development, as
explained above, the project will help build the capacity of the
District of Cartagena and foster important technology transfer,
enabling the country to position itself as a player in the carbon
market.
B. PROJECT DESCRIPTION
1. Overall Description The purpose of the Cartagena Landfill Gas
Recovery Project is to capture and destroy methane generated in
LDLC landfill in Cartagena, which began operations in January 2006,
and sell the resulting ERs to the Italian Carbon Fund. The project
consists of the design, implementation, and monitoring of LFG
extraction, treatment, and flaring facilities at the identified
landfill. Such facility will allow the capture and destruction of
methane generated through the anaerobic decomposition of organic
matter disposed in the landfill.
The proposed project is expected to displace an estimated
553,721 metric tons of carbon dioxide equivalent (tCO2e) by 2016
and about 2.2 million tCO2e by 2028. The World Bank’s ENVCF intends
to buy approximately 367,208 tCO2e over a period of 9 years
(2008–2016). The investment cost is estimated at U$800,000, to be
invested throughout the duration of the contract with the Bank.
Additional costs include U$180,000 for World Bank and CDM due
diligence, U$20,000 annually for verification, plus supervision
costs of U$20,000 per year for the first four years of the project.
Financial resources equal to the minimum between the initial
construction costs, or 25 percent of expected revenues, will be
available on an up-front basis through the World Bank’s ENVCF, if
requested by the project sponsor. A detailed project description is
found in annex 1.
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2. Project Development Objective
The objective of the Cartagena Landfill Gas Recovery Project is
twofold: at global level, to help mitigate climate change through
the reduction of greenhouse gas emissions caused by methane from
LDLC landfill in Cartagena, and at local level, to improve public
health through the installation of an LFG flaring system at the
landfill. The flaring system will improve air quality through the
reduction of hazardous trace gases contained in LFG and reduce the
risk of uncontrolled fires and explosion at the landfill. Indirect
development objectives include raising awareness of climate change
and demonstrating the feasibility of better solid waste final
disposal practices aligned with CDM and carbon finance
possibilities in Latin America. The main beneficiaries will be the
formal workers at the landfill and the people living in the
surrounding communities.
Indicators for Achievement of Development Objective
Key performance indicators to measure the results of the
project’s intervention are listed in Table 1.
Table 1: Key Performance Indicators for the Cartagena Landfill
Gas Recovery Project
Indicator type Outcome indicator
Fulfillment of the Carbon Development Mechanism (CDM) project
cycle
The emission reductions attained during the period 2008–2012
have to comply with CDM rules. In order for Annex I countries to
use emission reductions (ERs) generated under the CDM framework
toward their Kyoto Protocol obligations, ERs need to be certified
under the rules set by the CDM Executive Board. The task team will
provide the necessary technical support to ensure that all steps in
the CDM project cycle are completed and that ERs become CERs
(Certified Emission Reductions): development of the project design
document (PDD), validation, registration and certification. This
will allow the eventual transfer of CERs to the Italian Carbon
Fund.
Timely delivery of ERs The project in Loma de los Cocos (LDLC)
will deliver to the Bank estimated tCO2e in the range of 176,260
and 312,127 by 2012, and in the range of 117,507 and 208,085 from
2013 to 2016.
Project Benefits and Main Beneficiaries
The main global benefit is the reduction of GHG.
Locally, the project will improve air quality, reduce the risk
of uncontrolled fires and explosion in the landfill, and contribute
to the improvement of the local labor market by creating jobs in
the construction, operation, and maintenance stages of the LFG
recovery and flaring plant. Improved air quality (see annex 4 for
detailed information) and reduced risk of
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uncontrolled fires and explosion mainly will benefit people who
work in the site and people working and living nearby. Other
municipalities in the landfill vicinity also will benefit from the
project because wind can blow hazardous trace substances far from
their source.
The project in LDLC also will help remediate a long-term
environmental problem at Henequen, the landfill used by the
District of Cartagena from 1994 to 2002. Part of the profits from
the sale of ERs will be used to improve the closure management
conditions at the Henequen landfill.2 Key environmental issues will
be addressed including the improvement of leachate and rainfall
management.
Monitoring of Global and Local Environmental Benefits
The main global benefit, ERs, will be monitored directly on site
through the following variables:
1. LFG flow from the landfill 2. Methane content in LFG
The risk of uncontrolled fires and explosions at the site will
be reduced significantly as a result of the capture system
operation. The number of incidents will be monitored. Better air
quality may result in fewer cases of respiratory diseases, although
it will not be possible at this point to link the project outcome
directly to such an improvement because of the lack of baseline
information and the high costs involved.
Additional direct benefits are the improvement of the
environmental management of the LDLC final disposal site. LDLC
management will be monitored by a third party verifier hired for
periodic verification of ERs and verification of compliance with
Bank safeguards based on a clear time-bound plan of action also
referenced in the ERPA. Additional indirect benefits are associated
with the upgrading conditions of the closed Henequen controlled
landfill. These benefits will be assessed by the Bank, based on the
fulfillment of activities identified as contributing to sustainable
development, as required by the DNA. These activities will be
identified by the GODC, with the no objection of the Bank, and will
be implemented by the LDLC landfill operator.
3. Carbon Finance Component
ERs will be the project’s sole source of income because the
project does not aim to pursue electricity generation. Generation
of electricity from LFG is not competitive compared to the
prevailing mix of electricity generated in the country. The Carbon
Finance revenue is therefore essential for the profitability of the
project.
Expected Amount of Emission Reductions to be Generated over
Time
2 Activities to be addressed for improving the environmental
management conditions of this site can be summarized in the
following categories: (i) Fencing the landfill property; (ii)
Improving leachate management; (iii) improvement rainfall
management; and (iv) Improving monitoring (e.g., providing
necessary instruments to asses the stability of the landfill mass,
leachate, and pollution of underground water).
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ERs are generated in LFG projects by flaring the methane
produced in the landfill. Estimating ERs involves calculating the
amount of methane that is likely to be generated (baseline) and the
extraction and flaring efficiencies of the installation to
determine the amount of methane that will be captured and
flared.
Estimations of ERs for LDLC were estimated by the task team and
are congruent with the results obtained by an international
engineering company with extensive experience and solid
international reputation in the LFG field. Three methane recovery
scenarios were run: with high, medium, and low potential. Because
similar projects in the region that currently generate ERs have
shown that ERs have usually been overestimated, the most
conservative of the three methane recovery scenarios was defined as
the base scenario for this PAD.
Methane capture potential goes hand by hand with the design and
management quality of the landfills. Differences between real and
estimated gas extraction could indicate either that the models used
are deficient or that the model as designed is not appropriate for
the specific reality it is trying to model—that is, poorly designed
and managed landfills where waste is still deposited in open
dumps.
ERs—avoided methane emissions expressed in CO2 equivalent
terms3—are estimated by discounting from the baseline estimation
the extraction and flaring inefficiencies, i.e., methane emissions
that are neither captured nor destroyed. Table 2 shows the number
of ERs the LDLC project is expected to generate annually,4 achieved
under the high and low recovery scenarios.
Under the low methane recovery scenario, the LDLC project will
result in a reduction of approximately 220,325 tCO2e from 2008
until 2012 (the end of the Kyoto Protocol’s first commitment
period) and up to 2,199,177 tCO2e by the year 2028.
3 The Global Warming Potential value for methane for the first
commitment period is 21 tCO2e/tCH4. 4 The estimated number of ERs
to be generated by the LDLC for the period 2013–2016 differs from
the number of ERs expected to be delivered to the Bank (Table 1).
ERs expected to be delivered to the Bank correspond to those that
the Bank is considering to purchase in the ERPA. As explained in
the following section, the number of ERs that the Bank may purchase
from those generated since 2013 is restricted by a rule that limits
the number of verified emission reductions, or VERs (in this case
those generated and verified between 2013 and 2016) to the number
of certified emission reductions, or CERs (those generated and
certified between 2008 and 2012) generated by the project.
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Table 2: Annual estimated ERs (tons of CO2e/year) in the Loma de
los Cocos landfill
Year tons of CO2e/year
High Low 2008* 19,802 13,978 2009 54,053 38,155 2010 67,323
47,522 2011 79,665 56,234 2012 91,284 64,436 2013 102,352 72,248
2014 113,012 79,773 2015 123,382 87,094 2016 133,565 94,281 2017
143,644 101,395 2018 153,69 108,487 2019 163,766 115,600 2020
173,926 122,771 2021 184,216 130,035 2022 194,678 137,420 2023
205,348 144,951 2024 216,259 152,654 2025 227,444 160,548 2026
230,978 163,044 2027 226,76 163,771 2028 200,465 144,780
Total under Kyoto’s first commitment
period 312,127 220,325
Total estimated reductions 3,105,612 2,199,177
% of Kyoto ERs generated by the
project 10.1 10.0
Only includes ERs generated from July 2008
Proportion of ERs to be Purchased by the Bank Carbon Fund and
Purchase Price
A LoI with the GODC was signed on July 5, 2006. Several
conditions set in this LoI are being reconsidered in the ERPA.
These changes are summarized in Table 3: Comparison of conditions
in LoI and ERPA.
The Bank will purchase 367,208 ERs from LDLC generated during
the period 2008–2016. Sixty percent will correspond to CERs
generated before 2012, to be purchased at a price of €8 (US$10.4),
and the remaining 40 percent will correspond to verified ERs (VERs)
generated after 2012 and before the end of the contract in 2016, to
be purchased at a price of €7 (US$9.1). The 60/40 proportion of
CERs to VERs is a restriction set by the Italian Carbon Fund. CERs
to be purchased correspond to 100 percent of the ERs estimated in
the base
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scenario for the period 2008–2012, while VERs to be purchased
correspond to 47 percent of the ERs estimated in the base scenario
for the period 2013–2016.
Table 3: Comparison of conditions in LoI and ERPA
Conditions LoI ERPA
Project Sponsor GODC Caribe Verde S.A.E.S.P.
Landfills LDLC and Henequen LDLC
ERs and duration To buy the first 400,000 ERs
(tCO2e) generated in each landfill between 2007 and 2012
To buy CERs and VERs until 2016 in a proportion of 60% CERs
and
40% VERs, translates into 220,325 CERs and 146,883 VERs for a
total
of 367,208 ERs
Price Minimum €6 (US$7.8) per ER €8 per CER and €7 per VER
Up-front payment Maximum €600,000 for each project (U$780,000),
equivalent to 25% of
expected revenues
Minimum between the construction cost and 25% of expected
revenues,
approximately US$500,000 based on current estimates
Flow of Funds
A special account in Colombian pesos will be established to
receive the up-front resources, if requested by the project
sponsor, and ER payments.
The Carbon Finance Group intends to provide, if requested by the
sponsor, an advance payment for the project to kick-start project
design and construction. If this payment is made available, it will
be disbursed only against reasonable and verifiable milestones
(e.g., plant design, equipment purchase, civil works, and equipment
installation). The advance payment would be the minimum between the
construction cost (approximately US$500,000) and 25 percent of the
expected revenues of the LFG flaring project.
If provided, the advance payment to finance initial investment
costs will be paid by discounting the ER payment to be made to the
project sponsor in the same amount. The Bank will be reimbursed for
both external and Bank administrative preparation costs by
discounting the project sponsor’s ER payments by an equivalent
amount. Only after the advance payment and preparation costs are
fully paid will ER payments be proportional to the ERs delivered,
based on the ER price defined in the ERPA minus supervision and
verification costs.
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C. IMPLEMENTATION
1. Institutional and Implementation Arrangements
The project will be implemented by the project sponsor, Caribe
Verde S.A.E.S.P., the landfill operator of LDLC. The District of
Cartagena, who is the owner of the site where the landfill is
located and of the waste disposed off in LDLC, has granted a
mandate to the landfill operator by which it authorizes it to
negotiate and sign the ERPA.
The task team has made clear that it favors an international
bidding process for the design and construction, leaving the
operation of the plant under the responsibility of the current
landfill operator. Experience from previous LFG projects
implemented by the Bank indicates that an international firm will
provide the technology. Most of the experience in LFG project
design is concentrated in Europe, the United States, and
Canada.
Procurement Issues
Because the Cartagena Landfill Gas Recovery Project is not a
standard Bank operation (i.e., loan or grant), the procurement
process will not follow Bank guidelines. Instead, it will follow
municipal procurement procedures or a private process in case to be
carried out by the operator. In this case, the Bank shall be
satisfied that the project will fulfill the project sponsor’s
expectations under the ERPA.
The World Bank-administered Carbon Funds only buy emission
reductions. If provided, any up-front payment through the ERPA is
regarded as an advance payment for the purchase of a commodity
(ERs), and there is no procurement involved in this operation.
Nevertheless, advance payments expose the Bank-administered
Carbon Fund to higher risk related to the project completion risk
and project under-performance. Therefore, if an advance payment is
requested by the project sponsor, ENVCF will require an acceptable
letter of credit or other form of bank guarantee to cover the
financial risk of lack of reimbursement as a result of project
non-completion or under performance.
Institutional Capacity Constraints to be Addressed
Because this kind of project represents a relatively new concept
in Latin America, the project needs to address the following
capacity constraints:
1. Design of the bidding document. Because of a lack of specific
qualifications and experience for the commercial and technical
aspects of the bidding documents, if required, the Bank will
provide technical assistance to the LDLC landfill operator for the
design and elaboration of the bidding document;
2. Selection process and award of contract. Guidance may be
needed because the availability of specific technical skills
necessary to complete this stage is unknown. The Bank will assess
whether an engineering firm has to be hired to carry out this
activity; and
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3. CDM project cycle. Guidance for the different stages may be
needed to complete the process in a timely manner.
2. Monitoring and Evaluation of Outcomes and Results
Because the main indicator for this project is the timely
delivery of ERs, performance will be evaluated according to
achievement of the expected ERs (CERs and VERs), as described in
the monitoring plan included in the ERPA. The ERPA also will
determine how often the Italian Carbon Fund should be informed of
the ERs achieved.
To satisfy the requirements of the CDM Executive Board, the Bank
will hire the services of a Designated Operational Entity (DOE) to
validate i) project design, ii) baseline estimate, iii) ERs to be
achieved, iv) contribution to sustainable development, v)
stakeholder consultation, and vi) monitoring plan laid out in the
Project Design Document (PDD). Another DOE to be hired for periodic
verification and certification of ERs will issue a verification
report consisting of at least the following:
• A statement of the amount of ERs the project has generated in
the relevant period, typically 1 year;
• Verification of compliance with Bank safeguards (if safeguard
policies are violated, carbon payments will stop immediately);
and
• Other matters as may be required by the UNFCCC or Kyoto
Protocol.
Project performance also will be measured by comparing the
contracted ERs delivered under the project against the target set
during project design, with a margin of error of 20 percent.
3. Critical Risks and Possible Controversial Aspects
Table 4 lists the project risks, mitigation measures, and risk
ratings. Overall project risk is low.
Table 4: Risk Ratings of the Cartagena Landfill Gas Recovery
Project
Risk Risk mitigation measure Risk rating with mitigation
Baseline risk Baseline methodologies used in this type of
project have been approved by the CDM Executive Board. Low
Additionality The project would be implemented only under the
CDM framework because there is no regulation in Colombia requiring
the flaring of landfill gas.
Low
Procurement risk The project is not a standard Bank operation
and procurement fiduciary responsibilities are not applicable.
None
Environmental management
Based on the results of the environmental audit of LDLC, the
Bank will set conditions in the ERPA to ensure that the district
improves environmental management practices in the landfill.
Similar conditions will be included in the ERPA for other
Low
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landfills if necessary. In the case of LDLC, the GODC has also,
via a mandate based on a business plan agreed upon by both parties,
provided incentives for the landfill operator to improve the
management of the landfill by making it a direct beneficiary of the
earning of the project.
Technical risks
Companies bidding for the design, construction, and operation of
capture and flare facilities will be required to have extensive
experience in these activities. Experience from similar Bank
projects such as in Monterrey (Mexico), Maldonado (Uruguay), and
Olavarría (Argentina) will also be taken into consideration.
Medium
ER non-delivery risk
Undertaking pre-feasibility studies and adopting a conservative
ERs scenario generation for the assessment of the project Potential
methane generation estimates were obtained from an adapted version
of the LandGem model, originally developed by the U.S.
Environmental Protection Agency (EPA). In addition, the project is
being assessed on a conservative scenario of ER estimates. With the
up-front payment from ENVCF, the sponsors are unlikely to breach
the contract.
Medium
Financial risk
Because the project does not include lending, financial risk is
limited to the Bank’s preparation costs and advanced payment, if
the latter is requested by the project sponsor. In case the sponsor
decides to ask for an advance payment, it will provide a letter of
credit to cover the risk associated with it. Moreover, Carbon
Finance will make its payments only on delivery of ERs, limiting
the risk of non-recovery of preparation costs.
Because the project’s financial sustainability depends on the
ERs agreed on in the ERPA, the baseline and ER estimates were based
on conservative assumptions.
Low
Overall risk rating Low
4. ERPA Conditions and Covenants
The ERPA stipulates that written approval by the Colombian
Designated National Authority is the condition for Article V of the
General Conditions on Certified Emission Reduction Purchase
Agreement to take effect.
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D. APPRAISAL SUMMARY
The section below analyzes the project’s technicalities,
financial components, potential social and environmental impacts,
and applicable Bank safeguard policies.
1. Technical Analysis
The proposed project in Cartagena will capture and destroy
methane that is estimated to be generated at the LDLC landfill in
the range of 176,260 and 312,127 by 2012, and in the range of
266,717 and 472,311 from 2013 to 2016.
LFG can leak from a landfill by two natural pathways: migrating
into the adjacent sub-surface and venting through the landfill
cover system. In both cases, without capture and control, the LFG
(and methane) ultimately will reach the atmosphere. The volume and
rate of methane emissions from a landfill is a function of the
total quantity of organic material buried in the landfill and its
moisture content, compaction techniques, temperature, waste type,
and particle size. While methane emissions decrease after a
landfill is closed (as the organic fraction is depleted), landfills
typically continue to emit methane for 20 years or more after
closure.
Internationally recognized technology for capturing and flaring
LFG consists of connecting the landfill’s gas wells to pipes, which
are ultimately connected to blowers. This configuration can create
negative pressure inside the landfill that forces the gas to leave
the site through the pipes.
Sites equipped with wells to allow for passive venting (passive
collection of LFG for release into the atmosphere), as is the case
with LDLC, allow quicker implementation because the structure is
designed to allow LFG collection. The collection is passive rather
than active. In this scenario, part of the project design will be
to determine where to drill additional wells in the landfills to
achieve maximum extraction performance. After the gas is extracted,
it is sent to a treatment unit where humidity is removed to avoid
corrosion and other problems in the upstream equipment (flow
meters, gas analyzer, and flares). After the gas is analyzed, it is
sent to the flares, which usually operate at temperatures above
1,000oC to eliminate all traces of methane, non-methane volatile
organic compounds (NMVOC), and hazardous air pollutants.
This technical structure, which is applied elsewhere in the
world, will be used in the Cartagena Landfill Gas Recovery Project.
Careful design and operation will be necessary, but not necessarily
sufficient, if the project is to achieve the expected outcomes.
Because field experience from similar projects around the world has
shown that ERs generally have been overestimated, there is a risk
that expected outcomes would not be achieved independent from the
technology used.
Baseline and Additionality
The baseline represents the GHG emissions that would occur if
the project were not implemented, that is, “the amount of methane
that would be emitted to the atmosphere during the crediting period
in the absence of the project activity.” According to the CDM
Modalities and Procedures, “A CDM project activity is additional if
anthropogenic emissions of GHG by sources are reduced below those
that would have occurred in the absence of the registered
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CDM project activity.” Thus the proposed project is additional,
as ERs from capturing and flaring methane in Cartagena would not
occur without the CDM, simply because there is no legal framework
in Colombia requiring LFG collection and flaring.
2. Financial Analysis
The financial evaluation of LDLC is based on financial
projections only for the duration of the contract with the Bank, as
there are no guaranteed revenues after the end of this
contract.
Project investment costs for the capture and flare plant are
estimated at US$800,000. Based on the experience of similar
projects in the region, initial construction costs are estimated at
approximately US$500,000; the remaining US$300,000 is assumed to be
equally distributed over the remaining period the Bank is expected
to purchase ERs from the project. Additional up-front CDM and World
Bank due diligence costs are estimated at U$180,000. Also based on
field experience, operation and maintenance costs are estimated
roughly as 5 percent of accumulated project investment costs.
Table 5: Fixed costs
Landfill
Investment in extraction and flaring unit (US$)
CDM and World Bank
due diligence
(US$)
Total (US$)
LDLC 800,000 180,000 985,000
Table 6: Variable Costs
Landfill Operation and maintenance
costs/year (US$)
Verification of emission
reductions (US$)
Supervision Costs (US$)** Total (US$)
LDLC 25,000 * 20,000 20,000 65,000
*Initial investment costs are estimated at approximately
US$500,000. Additional investments will be made during the lifetime
of the project as the landfill increases in size. Therefore,
operation and maintenance costs are expected to increase annually
starting at a level of 5 percent of the initial construction cost.
** Supervision costs are only considered for the first four years
of the project.
The analysis assumes that ENVCF will provide an advance payment
of approximately US$500,000 to cover the initial investment costs,
which together with the CDM and World Bank due diligence cost in
principle will be recovered in five equal installments. However, if
deduction of advance payment installments and/or CDM and World Bank
due diligence costs for any reporting year would make the annual
payment to the sponsor for that reporting year a negative number,
the Bank will carry forward any amounts not deducted in that
reporting year to the following reporting year.
The financial analysis considers the following assumptions:
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• Base scenario of ER estimation; • 2007 as the first year of
investment and generation and purchase of ERs starting in July
2008; • Purchase of CERs and VERs at a ratio of 60/40; • CER
price of €8 (US$10.4) and VER price of €7 (US$9.1), with a
sensibility scenario
for a higher price of €10 (US$13) per CER and €9 per VER
included; • 10 percent annual discount interest rate;5 and • No
income tax or value added tax taken into account, based on formal
consultation.
Because ERs are the sole source of income for such a project,
profits are extremely vulnerable to variations in methane capture
potential. Therefore, overestimation of ERs could risk the
financial viability of the project. To assess this risk, the
analysis also considers a sensibility analysis for lower methane
capture potential: 70 percent and 50 percent of the base
scenario.
The results of the financial analysis for LDLC show that the
project is financially viable at the base price of U$10.4 for CERs
and U$9.1 for VERs. Despite project sensitivity to different
methane capture potential scenarios, the percentage of ERs of the
base scenario at which the project breaks even is less than 45
percent, indicating that the project is financially viable within a
wide range of methane capture. Initial investment costs would
always be covered by the advance payment under the scenarios
analyzed.
Table 7: Percentage of the base ER scenario at which the LDLC
project would break even
Price Percentage $10.4 45% $13 36%
5 Similar to the approximately 9.3 percent yield of a Colombian
treasury bond with annual payments for 9 years.
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Table 8 summarizes the main results of the financial analysis
for LDLC.
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Table 8: Purchasing period: 2008–2016 (LDLC)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 TotalERs 0
13,978 38,155 47,522 56,234 64,436 72,248 74,635 0 0 367,208
Cash Flow ($10.4 tCO2e, 100% inv. cost)
0 -106,066 142,809 237,654 325,687 428,416 549,167 568,339 0
0
Advanced payment $500,000IRR 181.95%NPV $1,290,253
Sensitivity analysis to capture potential ERs (CERs at U$10.4
and VERs at US$9.1) 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total NPV (10%) IRR
ER Estimated 13,978 38,155 47,522 56,234 64,436 72,248 79,773
87,094 94,281 553,721ERPA 100% 13,978 38,155 47,522 56,234 64,436
72,248 74,635 0 0 367,208 $1,290,253 181.95%ERPA 70% 9,784 26,709
33,265 39,364 45,105 72,248 30,570 0 0 257,045 $590,392 69.55%ERPA
50% 6,989 19,078 23,761 28,117 32,218 72,248 1,194 0 0 183,604
$118,345 20.96% ERPA values for 2014, 2015 and 2016 are restricted
by the rule of 60/40 of CERs/VERs
Capture PotentialBreak Even
Price (U$/tCO2e)
AP/TI ($10.4) AP/TI ($13)
ERPA 100% 5.1 100 100ERPA 70% 7 100 100ERPA 50% 9.6 95.47
100
Price NPV IRR$10.4 1,290,253 181.95%$13.0 1,907,607 390.36%
ER Price Sensitivity
AP/TI: advance payment as a percentage of total investment
Further detailed information is presented in Annex 3.
3. Social Analysis
Overall, social impacts from the Cartagena Landfill Gas Recovery
Project are expected to be positive. The construction, operation,
and maintenance of the LFG recovery and flaring plant will generate
employment. While a few positions will be filled by skilled labor,
e.g., engineers and technicians, most of the jobs created will be
filled by low-skilled laborers, many expected to come from the
neighboring communities. Some will work building the plant,
including drilling the gas wells and others will work as operators
collecting data, checking pipelines, and playing other roles under
the supervision of a chief operator or local manager.
There are no informal waste pickers at the LDLC landfill, so no
negative impacts are expected from project implementation.
Public participation was taken into consideration during project
preparation. On October 3, 2006, the GODC organized a presentation
to introduce the proposed project activity to local stakeholders in
Cartagena. The meeting gathered representatives and individuals
from a number of organizations and institutions, including private
companies, nongovernmental organizations (NGOs), public
institutions, and community representatives, among others. Overall,
most comments during the meeting concerned the social and
environmental impacts of the project on the local and neighboring
communities of the already closed Henequen landfill, and were taken
as lessons learned and as a way to improve management at the LDLC
landfill. LDLC does not have a neighboring community directly
affected by the project, nor has any people living in the premises
or surrounding areas. Some of the main comments received are listed
below.
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• Both the local community associations (recycling
organizations) and the ombudsman (veedor público) made formal
requests to engage in project activities in a comprehensive way.
According to the participants in the meeting, the development of
the GHG capture and flare project should not take place in
isolation, but should incorporate the objectives of other current
initiatives at the already closed landfill (Henequen). These
activities include the environmental management plan at LDLC and
the improvement of the environmental management conditions at the
site of the already closed Henequen landfill, which address a
number of environmental and social aspects relevant to the local
communities.
• Another request was made by the local community organizations
from the Henequen area (recycling) to analyze the feasibility of
using the gas generated at the sites not only for capturing and
flaring purposes but also for electricity generation and
particularly for providing gas to the local communities that
currently are not serviced. Since this meeting, however, the scope
of the project has changed, and Henequen no longer is being
considered for extraction of gas.
• Representatives of the neighboring communities expressed the
need to address the needs of families living close to both
landfills through the implementation of the project. These families
lack health and other basic services that should be addressed
appropriately by the GODC.
The GODC received all comments and expressed its willingness to
use some of the proceeds from the sale of ERs to address the
specific concerns of the local community.
4. Environmental Analysis The project will help finance the
installation and operation of methane recovery and flaring
equipment, technical assistance to improve gas collection capacity
as a result of proper waste management, and equipment and labor to
monitor and verify gas capture and flaring. Based on experience in
similar LFG flaring projects, the project should have no adverse
environmental impacts. On the contrary, LFG flaring will help
mitigate potentially negative environmental impacts resulting from
i) methane flammability and the risk of explosion, ii) trace
components that can be toxic and carcinogenic under long-term
exposure conditions, iii) lack of oxygen as a result of increased
methane presence in the vegetation root system, iv) odorous
emissions that may disturb nearby neighborhoods and attract insects
and related vectors of infection, and v) the larger global impact
of methane released onto the atmosphere, as this gas is 21 times
more powerful than carbon dioxide in contributing to global
warming. In addition, the project will have an additional positive
environmental impact derived from the improvement of the
environmental management conditions at the site of the already
closed Henequen landfill, using part of the project proceeds. The
only possible negative impact could arise from the air emission
pollutants associated with flaring combustion. These pollutants
include nitrogen oxides, sulfur oxides, acid gases, non-methane
volatile organic compounds, and particulate matter. However, this
risk can be mitigated by proper technical specifications for well
design and technologically proven flares, which would guarantee
insignificant concentrations of these pollutants in terms of
potential environmental effects.
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The installation and operation of an LFG gas capture and flaring
facility, however, are associated with minimal works that may cause
some nuisance and low environmental impact during the construction
phase, including noise (mainly during construction), odor (during
well drilling), particulate matter (from vehicles during
construction and maintenance), soil disturbance (minimal impacts
during the installation phase), and the visual impact of the
facility. These impacts will be mitigated through Environmental
Management Plans (EMPs), which will have to be produced by the
contractor and acceptable to CARDIQUE and the Bank. In addition to
the EMP, the Bank hired local consultants to undertake an
environmental audit of the site to better understand current
environmental conditions and the environmental compliance of the
controlled landfill and its implications. The audit checked for i)
a closure plan, ii) the landfill compliance with environmental and
sanitary permits, (iii) the existence of mitigation measures at the
landfill design stage, iii) the site location according to existing
land use plans, and iv) the monitoring plan in place. The
preliminary audit report concluded that the landfill management
requires improvement. In particular, the landfill design can be
improved to better fill the cells and achieve better leachate and
rainfall drainage so that the nearby aquifer (the Gravas de Rotinet
hydrological formation), which is not used yet, will not be
polluted as the landfill expands. 5. Safeguard Policies Table 9
shows that the project is expected to trigger only one project
safeguard policy, OP4.01 on Environmental Assessment. In addition
to the completed environmental audit, which was disclosed through
the Bank’s Infoshop on March 5th and the district’s Web site on
February 23rd, the project will need an EMP acceptable to the Bank.
The EMP will be produced during implementation by the contractor in
charge of installing the LFG’s capture and flaring system, and will
be disclosed through the GODC.
Table 9: Applicability of safeguard policies to the Cartagena
Landfill
Gas Recovery Project
Policy Applicability
Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) Yes
Natural Habitats (OP 4.04, BP 4.04, GP 4.04) No
Forestry (OP 4.36, GP 4.36) No
Pest Management (OP 4.09) No
Cultural Property (OPN 11.03) No
Indigenous People (OD 4.20) No
Involuntary Resettlement (OP/BP 4.12) No
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ANNEX 1: DETAILED PROJECT DESCRIPTION
CARTAGENA Landfill Gas Recovery Project
The proposed project will capture and destroy methane that is
currently generated in Loma de los Cocos landfill, which belongs to
the District of Cartagena in Colombia, thereby reducing greenhouse
gas (GHG) emissions and generating emission reductions (ERs) that
will be purchased by the Bank on behalf of the Italian Carbon Fund.
The objective of the Cartagena Landfill Gas Recovery Project is
twofold: at global level, to help mitigate climate change through
the reduction of greenhouse gas emissions caused by methane from
the landfill and at local level to improve public health through
the installation of a landfill gas (LFG) flaring system at the
landfill. The flaring system will improve air quality through the
reduction of hazardous trace gases contained in LFG and reduce the
risk of uncontrolled fires and explosion at the landfill. The
project activity will improve solid waste final disposal practices
in LDLC through the installation of active recovery system, which
will enhance the management of the landfill. Between 3.1 and 2.2
million tons of carbon dioxide equivalent (tCO2e) emitted to the
atmosphere are expected to be avoided over a period of 21 years,
beginning in 2008.6 This reduction will be achieved by flaring
methane, which has a warming potential of 21 times that of CO2.
Locally, the project also will contribute to improving the local
labor market by creating jobs in the construction, operation, and
maintenance stages of the LFG recovery and flaring plant. The
project will encourage local supply of equipment and other
components for the construction and operation of the LFG plant,
increasing local knowledge. Similarly, it will help attract new
players with the capacity to implement a new technology. Finally,
the project will have an important replication potential, which
will trigger environmental awareness of climate change and
demonstrate the feasibility of better solid waste final disposal
practices aligned with Clean Development Mechanism (CDM) and carbon
finance possibilities, in addition to demonstrating the advantage
of the GHG emission market and Kyoto mechanisms to finance new
technologies in the Southern Cone. The project also will help
remediate a long-term environmental problem at Henequen, the
landfill used by the District of Cartagena from 1994 until 2002.
Part of the profits from the sale of ERs will be used to improve
closure management of the Henequen landfill. The latter will
contribute to the fulfillment of the requirement set by the
Designated National Authority (DNA) that calls for contribution of
the project to sustainable development. Key environmental issues
will be addressed including the improvement of leachate and
rainfall management.
6 These numbers correspond to the low and high recovery scenario
emission estimates.
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Capture and Flaring of Methane in LDLC, Cartagena Landfill
Background The project will be implemented at LDLC, the district’s
current landfill. The landfill site, Parque Ambiental los Cocos,
covers 65 hectares and is located approximately 15 kilometers from
the city of Cartagena, the capital of the Department of Bolívar.
Bolívar is the largest of the eight departments that form
Colombia’s Caribbean Region and the seventh largest in the country.
Cartagena faces the Caribbean Sea to the west and has a tropical
climate with average temperatures between 26ºC and 30ºC and 90
percent humidity. There are two seasons: April to November, during
which the district receives 80 percent of the annual rainfall, and
the dry season between December and March. According to the 2005
census, the total population of Bolívar was 2,090,323, while that
of the district of Cartagena was 1,030,149. Of the population of
Cartagena, 92.5 percent lives in urban areas, while the remaining
7.5 percent is primarily rural. LDLC receives all of the district’s
waste, including commercial and industrial waste, as well as waste
from some neighboring cities. Although overseen by the Government
of the District of Cartagena (GODC), the operation of the LDLC
landfill was contracted to a private company, Sociedad Caribe Verde
S.A. E.S.P., under a contract signed in April 2005. The DOCG gave
Sociedad Caribe Verde the responsibility for the design,
administration, operation, maintenance, and closing of the landfill
through a 20-year concession. Waste disposal in LDLC began in
January 2006, and the site is expected to receive about 7.6 million
tons over the 20-year concession period. Currently the landfill
receives approximately 700 tons of waste per day, and 171,887 tons
had accumulated during the first 8 months of operation. At present,
LDLC does not have active landfill gas collection or treatment
systems. LFG is passively released to the atmosphere. LDLC has a
basic LFG well system built of wood and loose rock and covered in
metal nets that run vertically through the landfill. The 35 LFG
chimneys are 9–16 feet high and approximately 35 meters apart.
Technology The technology to be used in the Cartagena Landfill Gas
Recovery Project includes LFG extraction, suction, and flaring
systems, as well as monitoring systems. The technology and
equipment involved have been employed for many years in a number of
landfills all over the world, including the LFG recovery plant in
Olavarría, Argentina (a carbon finance project of the Bank). The
technology basically will recover LFG, dehumidify it, and then burn
it in a closed flare. Parts, equipment, and plant construction,
operation, and maintenance will be procured through a bidding
process. Investment costs for the extraction and flaring plant in
LDLC are estimated at approximately US$800,000. Of this amount,
US$500,000 is estimated for initial construction, including an
enclosed flaring station, the wellheads and piping system required
initially, and engineering
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costs. The remaining investment cost will be distributed during
the lifetime of the project (conservatively assumed as the duration
of the contract with the Bank) and be used mainly to finance
additional wellheads and piping. Emission Reductions ERs are
generated in LFG projects by flaring the methane produced in a
landfill, which otherwise would flow naturally into the atmosphere.
Estimating ERs involves calculating the amount of methane likely to
be generated (baseline) and the amount that will be captured and
flared, discounted by the estimate of emissions from electricity
used to meet the project requirements. The level of capturing and
flaring is determined by the extraction and flaring efficiencies of
the installation. Field experience in similar projects has shown
that ERs generally have been overestimated. Table 10 summarizes
expected and actual methane capture from several projects
registered by the CDM Executive Board. The estimates are
conservative to minimize the risk of non-delivery of ERs. The most
conservative of the three ER recovery scenarios (high, medium, and
low) was taken as the base scenario for the purpose of the analysis
presented in this Project Appraisal Document (PAD). Table 10:
Estimated and actual methane capture
PDD Verification ∆ PDD Verification ∆ PDD Verification ∆2003 - -
- - - - 36,661 21,954 -40%2004 564,310 45,988 -92% - - - 45,267
30,656 -32%2005 614,392 269,863 -56% 387,303 106,185 -73% 47,764
40,988 -14%2006 - - - 880,800 96,076 -89% - - -
PDD Verification ∆ PDD Verification ∆ PDD Verification ∆2003 - -
- - - - - - -2004 - - - 748,624 469,752 -37% - - -2005 187,776
16,706 -91% 1,086,919 585,957 -46% - - -2006 198,175 31,279 -84%
1,364,960 646,687 -53% 9,424 1,436 -85%
Argentina Brazil
China Brazil Argentina
Salvador de Bahia Villa Dominico Tremembé
Nanjing Tianjingwa Bandeirantes Olavarría
Brazil
Source: Calculated based on information available at the UNFCCC
Web site The following assumptions were used to estimate ERs under
the base scenario:
• LFG recovery efficiency (RE) of 60 percent; • Methane
generation rate (k) of 0.2 for fast decay material, 0.04 for medium
decay
material, and 0.01 for slow decay material per year; • Methane
generation potential (Lo) of 73 m3 per ton of municipal solid waste
(MSW); • Methane content of 50 percent; • Global Warming Potential7
(GWP) for methane of 21;
7 The approved Global Warming Potential value for methane
(GWPCH4) is 21 tCO2e/tCH4 according to Miscellaneous Parameters in
ACM0001/Version 1 of the Approved Consolidated Monitoring
Methodology ACM0001 CDM, EB, September 3, 2004.
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• Waste disposal growth of 4 percent per year until site
closure, expected at the end of 2026; and
• Waste disposal growth at a rate of 4 percent per year. Table
11 presents the estimated ERs under the base scenario.
Table 11: Estimated ERs in the Loma de los Cocos landfill, base
scenario
Year LDLC (tCO2e/year) Low
2008 13,9782009 38,1552010 47,5222011 56,2342012 64,4362013
72,2482014 79,7732015 87,0942016 94,2812017 101,3952018 108,4872019
115,6002020 122,7712021 130,0352022 137,4202023 144,9512024
152,6542025 160,5482026 163,0442027 163,7712028 144,780
Total under 1st commitment period of Kyoto 220,325
Total estimated reductions (tCO2e)
2,199,177
% of Kyoto ERs to total generated by the project 10
Baseline The baseline was estimated by using an adapted version
of the LandGEM model, which was developed by the U.S. Environmental
Protection Agency (EPA). The model requires the site’s waste
disposal history and employs a first-order exponential decay
function, which assumes
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that LFG generation is at its peak following a time lag
representing the period prior to methane generation. The EPA model
assumes a 1-year time lag between placement of waste and LFG
generation. The model assumes that LFG generation decreases
exponentially after 1 year, as the organic fraction of waste is
decomposed. The following equation represents the maximum expected
LFG generation rate:
∑=
−=n
1i
ktiM
iekLoM2Q
where:
∑: Sum from opening year (i=1) through year of projection (n);
QM: Maximum expected LFG generation flow rate (m3/yr); k: Methane
decay rate constant (1/yr); Lo: Ultimate methane generation
potential (m3/ton); Mi: Mass of solid waste disposed in the ith
year (ton); and ti: Age of the waste disposed in the ith year
(years).
The methane generation rate (k) value reflects the fraction of
waste that decays in a given year and produces methane. Based on
their relative decay rates, different k values can be assigned to
different portions of the waste stream. The k value considers the
organic content, temperature and moisture conditions of the area
where the landfill is located. Because landfill moisture content
significantly affects decay rates, the values of the decay rates
for the fast, medium, and slow decay waste fractions will vary with
moisture as well. The procedure for developing k values for LDLC
was based on an average precipitation level of 900 mm per year, the
waste characterization in Barranquilla8, and used the following
methane generation rates:
(i) Fast-decaying waste: k = 0.2 per year; (ii) Medium-decaying
waste: k = 0.04 per year; and (iii)Slow-decaying waste: k = 0.01
per year.
The Methane Generation Potential (Lo) for LDLC was estimated in
73 m3 of methane/ton of waste.
8 The waste characterization for Cartagena was not available at
the time the estimates were obtained. However, the waste
characterization of Cartagena is similar to that of Barranquilla.
Both are coastal cities with similar characteristics.
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LDLC Waste Filling History According to the information provided
by the GODC and the operator of LDLC, the landfill is filling at a
rate of about 680 tons per day, or approximately 250,000 tons per
year (Table 12). Filling rates are measured daily using an on-site
scale. At this current filling rate and total volume, the LDLC
landfill is anticipated to reach capacity in 2026. The majority of
the MSW filled at the landfill comes from the district of
Cartagena, with a small fraction coming from the nearby
villages.
Table 12: History and projection of waste disposal at LDLC
landfill
Year Waste disposed (tons)*
Cumulated waste disposed
(tons) 2006 250,000 250,000 2007 260,000 510,000 2008 270,400
780,400 2009 281,220 1,061,620 2010 292,470 1,354,090 2011 304,170
1,658,260 2012 316,340 1,974,600 2013 328,990 2,303,590 2014
342,150 2,645,740 2015 355,840 3,001,580 2016 370,070 3,371,650
2017 384,870 3,756,520 2018 400,260 4,156,780 2019 416,270
4,573,050 2020 432,920 5,005,970 2021 450,240 5,456,210 2022
468,250 5,924,460 2023 486,980 6,411,440 2024 506,460 6,917,900
2025 526,720 7,444,620 2026 220,180 7,664,800 2027 0 7,664,800
*Projected tonnage according to historic levels of operation and
forecast waste production and disposal at landfill
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Table 13 presents the baseline emissions for LDLC. Table 13:
Baseline emissions at LDLC according estimations of potential
methane generation
Year Baseline emission (tCO2e/year) Cumulated baseline emissions
(tCO2e) 2008 46,592 46,592 2009 63,592 110,184 2010 79,203 189,387
2011 93,723 283,110 2012 107,393 390,503 2013 120,413 510,916 2014
132,955 643,871 2015 145,157 789,028 2016 157,135 946,163 2017
168,992 1,115,155 2018 180,812 1,295,967 2019 192,667 1,488,634
2020 204,618 1,693,252 2021 216,725 1,909,977 2022 229,033
2,139,010 2023 241,585 2,380,595 2024 254,423 2,635,018 2025
267,580 2,902,598 2026 271,740 3,174,338 2027 251,955 3,426,293
2028 222,739 3,649,032
Monitoring Plan
The Monitoring Plan for the LDLC landfill gas capture and flare
project describes the requirements for the collection, processing,
and auditing of data from the project for the purpose of
calculating and verifying the ERs produced. According to the
CDM-approved consolidated monitoring methodology ACM0001 (Version
04) applied for this project activity, the monitoring methodology
is based on direct measurement of the amount of landfill gas
captured and destroyed at the flare platform. The monitoring plan
will provide for direct measurement of the quantity and quality of
LFG flared and the non-combusted methane in the flare, as well as
for continuous monitoring of the on-site electricity consumption
for project requirements. Table 14 summarizes the procedure for
monitoring ERs.
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Table 14: Methane data monitoring
Indicator Key data Monitoring procedure
LFG captured (Nm3) Flow meter installed in the capture
system
Methane fraction in LFG
Gas analyzer to determine LFG composition prior to flaring
LFG temperature and pressure (to calculate methane density)
Thermometers and barometers installed in the capture system
Flare efficiency
LFG flared in the flaring facility through analysis of methane
concentration in exhaust gases
Flare hours of operation Number of hours the flaring facility
was in operation through a timer
Avoided methane emissions
Quantity of electricity used to meet the requirements of the
project activity
Continuously monitored through an energy counter
Both the LFG volumetric flow and the fraction of methane in the
LFG will be monitored continuously on site to calculate the amount
of methane captured. LFG temperature and pressure will be measured
and recorded daily to calculate the methane density and therefore
mass flow. Finally, methane content in the exhaust gases will be
monitored to verify the flare efficiency and correct the amount of
methane actually destroyed by the project activity. The combustion
efficiency in terms of the percentage of combusted methane will be
calculated from the difference between the amount of captured
methane in LFG (before flare) and the non-combusted methane (from
the sampling ports in the flare). This value will be verified
monthly through spectrometry analysis during the first 6 months of
operation and quarterly thereafter if results are stable to
determine the methane content in the exhaust gas. Thus, actual
reduction of emissions will be obtained from i) discounting the
amount of methane in the exhaust gas from the product of the LFG
captured (flow meter) and the methane content (gas analyzer), ii)
multiplying the resulting amount of methane by the methane density
(t/m3) at the corresponding temperature and pressure to obtain the
methane emission reductions of the project activities in tCH4, iii)
multiplying the tons of CH4 by the methane Global Warming Potential
(21) to obtain the result in tCO2e, and iv) discounting the
emissions from the on-site use of electricity to meet project
requirements.
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According to the applied methodology, leakage -defined as the
net change of anthropogenic emissions by sources of GHG that occurs
outside the project boundary that is measurable and attributable to
the CDM project activity- will not be considered.
The monitoring plan also includes periodic monitoring of updates
in Colombia’s legislation and regulatory requirements through the
official Web sites of the Ministry of Environment, Housing, and
Territorial Development (Ministerio del Medio Ambiente, Vivienda y
Ordenamiento Territorial) at www.minambiente.gov.co and the
Regional Environmental Authority (Corporación Autónoma Regional del
Canal del Dique, or CARDIQUE) at www.cardique.gov.co.
Expected Outcome
It is expected that between 568,000 and 804,000 tCO2e of
emissions to the atmosphere will be avoided through the project in
LDLC from 2008 through 2016.9 Moreover, if the project runs for the
21 years for which it will be registered, it is expected that
emissions of between 2.2 and 3.1 million tCO2e will be avoided.10
As the adverse impacts of climate change daily become more obvious
and intense, this reduction will be a major environmental
benefit.
Locally, the project will result in a clear improvement in
living standards. By reducing the release of landfill gas to the
atmosphere, the project will alleviate emissions of gases that are
carcinogenic, pollute the air, and may increase respiratory
diseases.
The project will contribute to technology transfer and may
result in the availability of local technology in the future.
Technology for this sort of project is not widely available in the
developing world and is likely to be provided by international
firms.
The project will generate employment for skilled and low-skilled
labor, enhancing its contribution to economic development in the
region. Construction of the facility will require trained as well
as low-skilled labor. Local engineers and technicians will be
needed to work on equipment procurement, quality assessment, and
other tasks that are usually better performed by local people. For
the operation of the plant, both technicians/engineers and
low-skilled operators will be needed.
9 These numbers correspond to the high and low recovery emission
estimates. 10 These numbers correspond to the low and high recovery
emission estimates.
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ANNEX 2: IMPLEMENTATION ARRANGEMENTS
CARTAGENA Landfill Gas Recovery Project
The parties involved in the activities of the projects that will
be part of this umbrella and their roles in the implementation of
these projects are listed below.
• The GODC is responsible for providing governance and multiple
public services, including the management of municipal solid waste
(MSW). Operation and management of the landfill was given on
concession to a private entity. As the owner of the site where the
landfill is located and of the waste disposed off in LDLC, the GODC
has granted a mandate to the landfill operator by which it
authorizes it to negotiate and sign the ERPA
• Italian Carbon Fund. This trust fund is maintained and
operated by the World Bank in its capacity as trustee on behalf of
the public and private participants;
• Builder of the landfill gas (LFG) recovery system. To be
designated through a bidding process; and
• Caribe Verde S.A. E.S.P. is the operator of LDLC landfill. Via
a mandate issued by the GODC, it is the entity responsible of
negotiating and signing the ERPA; and
• Operator of the LFG recovery system. The task team has made
clear that it recommends leaving the operation of the plant under
the responsibility of the current landfill operator.
Payment and Flow of Funds
A special account in Colombian pesos will be established to
receive the up-front resources, if requested by the project
sponsor, and ER payments. For the up-front payments, transfers will
be made only after the Bank’s non-objection against project
execution achievements such as the award of a bidding contract,
delivery of an engineering study, and advances for project
construction.
At the time of the signing of an ERPA, an anticipated schedule
of payments will be prepared based on the delivery of emission
reductions (ERs). The project sponsors will make requests to the
Bank for payment as agreed in the ERPA. The payment schedule will
consider any advance payment that might have been provided and
Clean Development Mechanism (CDM) and World Bank due diligence
costs disbursed by the Bank. Apart from perhaps financing up-front
costs, the