The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) Concept Environmental and Social Review Summary Concept Stage (ESRS Concept Stage) Public Disclosure Date Prepared/Updated: 12/20/2023 | Report No: ESRSC04022 Jan 02, 2024 Page 1 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) I. BASIC INFORMATION A. Basic Project Data Country Region Project ID Parent Project ID (if any) Brazil LATIN AMERICA AND P181511 CARIBBEAN Project Name Expanding Clean Hydrogen In Brazil - Ceará Hydrogen Hub Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date Energy & Extractives Investment Project 10/1/2024 12/17/2024 Financing Borrower(s) Implementing Agency(ies) Estimated Concept Review Total Project Cost Date CIPP - Complexo Industrial 12/19/2023 155,000,000 e Portuario do Pecem Public Disclosure Proposed Development Objective Facilitating investment in the green hydrogen value chain through shared infrastructure in the Port and Industrial Complex of Pecém. B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF Policy, para. 12? No C. Summary Description of Proposed Project Activities The project comprises two components to be implemented in the Industrial Complex of the Port of Pecem (Ceara): Component 1 - Shared infrastructure for the GH2 production chain is organized in four subcomponents: 1.1: Utility corridors and access infrastructures to the Export Processing Zone – ZPE covers the civil works needed (vegetation clearance, drainage, and pavement construction) to establish primary routes for electrical systems and other utilities, such as gas and water, connecting the area of production of GH and derivatives to the port, where the latter will be exported. 1.2: Expansion of the Port of Pecém Multiple Utilities Terminal (TMUT) and new attraction cradle  covers the implementation of a new berth at TMUT to serve the increase in activities in the port. 1.3: Expansion of Pier 2 for ammonia operation covers the expansion of Pier 2 to handle GH cargo movements in the forms of ammonia and methanol for export. Jan 02, 2024 Page 2 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) 1.4: Implementation of New Operating and Security and Control Systems in the CIPP embracing the optimization of the operation of the infrastructure, integration of operating systems, and safety (of both the infrastructure and people handling it). Component 2 - Infrastructure for applied research RD&I center (facilities, equipment), studies, trainings, and initiatives for workforce training and qualification comprises the structuring of the infrastructure for a research center focused on research, development, and innovation in the GH2 chain. The center will also collaborate with educational and research institutions in the region to provide training activities to qualify the workforce in areas such as ammonia storage, energy storage software, synthetic fuels, sustainable aviation fuel (SAF) – prioritizing the inclusion of members from vulnerable communities and promoting gender equality to ensure equal opportunities in the region. Additionally, it will conduct studies on industrial use of GH2 and its derivatives, such as the fertilizer chain, and establish safety certifications for all stages of the GH2 chain. D. Environmental and Social Overview D.1 Overview of Environmental and Social Project Settings The Port and Industrial Complex of Pecém (CIPP)is installed in an area of 19,000 hectares in the municipalities of Caucaia and São Gonçalo do Amarante. It is an industrial area completely inserted in Ceara’s coastal strip. The region is located in the Caatinga biome and crossed by the small and intermittent river courses of the Gereraú river sub- basin. Three protected areas are in the Project’s area and/or its vicinities: ESEC Pecém, APA Dunas do Litoral Oeste and APA Lagamar do Cauite. The coastal zone is marked by erosion/deposition processes (sediment removal/accumulation). The climate is marked by high temperatures throughout the year, a rainy summer and a dry Public Disclosure winter. The winds blow majorly from the east with low speed in the summer and stronger and more constant in the winter (average of 26 km/h). Caucaia and São Gonçalo do Amarante house a population of 408,324 inhabitants; they present urbanization rates equivalent to 89% and 65% as well as HDI equals to 0.682 and 0.665, respectively. Near the Project Area there are 11 Quilombola Communities – more than 8 km away from the Project Area – and two indigenous groups (the Tapeba and the Anacé), whose lands are located more than 20 km from the Project Area. The construction of the Port of Pecém at the turn of the century interfered with artisanal fishermen and its licensing by IBAMA required the implementation of a robust environmental compensation program for fishery replenishment (in progress). The Area of the Project includes six local (non-traditional) communities that are home to close to 8,000 families. Land ownership rights over all the CIPP’s area have been restricted by the State of Ceará since 1996. The Project will comprise Associated Facilities meeting the three criteria of ESS1: Green Hydrogen production plants and ammonia storage areas run by private companies (still to be selected) to be authorized to be built and operate within the CIPP area, contemporaneously with the project. D.2 Overview of Borrower’s Institutional Capacity for Managing Environmental and Social Risks and Impacts The Pecém Complex (CIPP S/A) is a joint venture formed by the Government of the State of Ceará and the Port of Rotterdam, in the Netherlands. It is a multinational company responsible for managing and developing an industrial and port complex on the west coast of Ceará, composed of an Industrial Area, the offshore terminal of the Port of Jan 02, 2024 Page 3 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) Pecém, and the subsidiary Export Processing Zone (ZPE Ceará). CIPP operates administratively linked to the State Secretariat for Economic Development (SDE). CIPP’s organizational structure includes: an environmental management unit and an occupational health and safety management unit, subordinate to the Vice-Presidency of Operations, as well as an ombudsman’s office and a land regularization management unit linked to the Presidency of CIPP. The preventive actions currently being implemented by CIPP aimed at reducing the E&S impacts of the Port’s ongoing operation and its associated activities are supported by various monitoring, plans and programs, including for: social communication; environmental education; community health and safety; emergency response; compensation for fishing activities; occupational health and safety; workers’ standards of conduct; management of solid waste and liquid effluents; and monitoring of atmospheric emissions, water quality, and aquatic biota. Independent consultancy firms have been commissioned for the preparation of all socio-environmental studies required for licensing CIPP’s current and future operations according to national law. The implementation and monitoring of the Environmental and Social Management Plans (ESMPs) is carried by CIPP’s qualified technical staff and independent consultants and overseen by the State Secretariat for Environment (SEMACE) and/or the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA). CIPP’s institutional capacity for managing socioenvironmental risks and impacts will be further assessed during project preparation. II. SCREENING OF POTENTIAL ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS Public Disclosure A. Environmental and Social Risk Classification (ESRC) High A.1 Environmental Risk Rating High The environmental risk of the Project is High. In the long-run, the provision of green energy contributes to the replacement of fossil fuel and reduction of carbon emissions and the off-shore (TMUT/Pier 2) and on-shore (utilities corridor) interventions – will be located within CIPP area (brownfield Project). Nevertheless, they entail important environmental impacts and risks, such as significant forest clearing, large-scale earthworks, seabed dredging, and storage of large quantities of chemicals (ammonia). During the construction stage, environmental impacts are likely to include increasing noise and vibration, dust and air emissions, waste and wastewater generation, disturbance and/or accidents to wild fauna, forest clearing, fragmentation and increase in the edge effect of terrestrial habitats, decrease in the number of individuals of native, endemic, protected and endangered species of flora and fauna (including marine biodiversity), and disturbances to protection areas as the GH2 hub area and vicinity intercepts three conservation units and will require the clearing of forest portions within environmental protection areas (water bodies’ buffer zones and Restinga dunes), subject to prior authorization by the SEMACE. During operation, these interventions and Associated Facilities (GH2 plants and ammonia storage areas to be installed concomitantly to Project implementation) can potentially generate a wide range of significant adverse risks and impacts on the environment and nearby communities – such as the potential catastrophic scenarios from ammonia tanks failure or leaks from ship loading operations. The risks and impacts of these interventions and those of some of the Associated Facilities already defined – have been identified and assessed through E&S impact assessment studies (ESIAs) Jan 02, 2024 Page 4 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) required by national and state laws. Environmental and Social Management Plans and monitoring programs have been established and some are already under implementation. A.2 Social Risk Rating High Following the requirements of the national law, CIPP has commissioned the assessment of environmental and social impacts of the operation and the expansion of the Port of Pecém (2013) and the Green Hydrogen Hub (2023) to independent consultancies, which have identified potential positive and adverse social impacts of both endeavors. On the negative side, during the construction phase, local communities may face issues ordinarily associated with the influx of workers and followers (such as increased demand on already scarce public services and basic infrastructure, rates of crime and violence, transmitted diseases), road safety and temporary disturbances (noise and dust). By the end of the construction phase, the E&S assessments highlight impacts related to the closure of jobs, demobilization of workers and dismissal of employees. At this stage, migrant workers will tend to return to their places of origin, move to other construction sites, or take up informal works, generating a possible retraction in the market for goods and services at the municipal level. Community health and safety can become an issue for nearby communities during the operational phase because the handling and use of dangerous chemical products (and, particularly, the production, storage and transportation of ammonia) increases the risk of accidents, anxiety and feelings of unsafety. On the positive side, the generation of jobs and increased sources of income in the region – in consequence of an emphasis on absorbing local labor and the ensuing potential benefits for local businesses during the installation phase are highlighted. These assessments find that no distinct social and cultural groups possessing the four cumulative characteristics set out under ESS 7 is present at the Project Area and no additional land acquisition is needed for the Bank-supported Project and Associated Facilities. Both aspects will be further assessed during Project preparation as part of the Bank’s due diligence. Public Disclosure B. RELEVANCE OF STANDARDS AND POLICIES AT CONCEPT STAGE B.1 Relevance of Environmental and Social Standards ESS1 Assessment and Management of Environmental and Social Risks and Relevant Impacts Per legal requirements, to issue environmental licenses, IBAMA and SEMACE require comprehensive/full ESIAs of the proposed investments and ESMPs. Independent and reputable ES consultancies have prepared ESIAs/ESMPs for the operation of CIPP (dated 2009 and updated in 2013) for the GH2 Hub (2023) and for CIPP’s Associated Facilities. CIPP’s current operations are licensed by IBAMA and SEMACE has issued a preliminary license for the GH2 Hub. Required ES management/monitoring programs are being implemented, monitored by a reputable third party and annually reported to IBAMA, which may request additional studies for licensing the expansion works of the TMUT/Pier 2 (to be confirmed after the submission of the ToR for these works). The task team will review the existing and future studies to determine if additional ES instruments would be required for compliance with ESF. This will be documented in the A-ESRS and any additional requirements set out in the ESCP. ESS2 Labor and Working Conditions Relevant Jan 02, 2024 Page 5 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) The Brazilian labor law includes provisions that enable the achievement of development outcomes that are materially consistent with the objectives of ESS 2 in matters related with working terms and conditions, protection of the workforce and OHS. CIPP has specific OHS policies & procedures, based on ILO 152 Convention, NR 29 – Safety and Health at Port Work, the WBG EHSG and GIIP; issued a workplace code of conduct that addresses, inter alia: workers’ conduct in relationships with other workers and local residents; the prevention of the spread of sexually transmitted diseases; and operates a standalone GRMfor workers raising concerns about workplace conditions that ensures confidentiality. During preparation, the Team will assess if CIPP’s existing labor management and OHS procedures are materially consistent with the ESS2, including the requirement for developing a Project-dedicated LMP and any potential upgrades to the existing workers’ GRM. ESS3 Resource Efficiency and Pollution Prevention and Management Relevant The environmental impacts of Project’s interventions will be those commonly associated with civil works, i.e., solid waste and wastewater generation, noise, dust and vibration, air emissions, soil carry-over, handling of chemicals and potential spills. Specifically, the expansions of the TMUT and Pier 2 (Subcomponents 1.2 and 1.3) will most likely involve dredging works. Dredged material is planned to be used in the works itself, as foundation-landfill. No dumping site (on or offshore) is likely to be necessary. Even though the use of large quantities of water is an important aspect of hydrogen production, sustainable sources will be used for the Project, i.e., reused water or water from desalinization. All described risks and impacts are well-known and routinary for CIPP, for which there are management, mitigation and monitoring measures in place, due to ongoing environmental programs, part of environmental licenses requirements, and as part of CIPP’s own E&S management system. Public Disclosure ESS4 Community Health and Safety Relevant CIPP’s ESMP includes programs and plans for anticipating, avoiding, minimizing and mitigating adverse impacts on provisioning and regulating ecosystem services, on the health and safety of nearby communities from both routine and nonroutine circumstances and on community exposure to project-related traffic and road safety risks, diseases and hazardous materials. The Contingency Plan for Effluent Spills and Leaks and Fire Fighting, the Risk Management Program and the Emergency Preparedness and Response Plan were prepared. Their implementation is annually audited by independent consultancies. During preparation, the implementation of these plans and the rules for the use of contracted workers to provide personnel and property security will be further assessed. Per the environmental licensing of the Associated Facilities, Risk Analysis Studies (RAS) are required, the team will also consider the pertinence of an integrated RAS for the hub, to be developed under CIPP’s responsibility. ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Not Currently Relevant According to the GH2 Hub’s ESIA, there is no land acquisition needs for Project implementation. All facilities – including the the Innovation and Applied Research Center – will be built within the area owned by CIPP. Land ownership and usage rights over this area – in Caucaia and São Gonçalo do Amarante – have been claimed by the State of Ceará through an expropriation process dating from 1990s-2012 through State Decrees 24,032/1996, 25,400/1999, 28,883/2007 and 30,998/2012 as required under national law. Displaced people were compensated following a Resettlement Program that required community participation, offered compensation choices equivalent to replacement costs, restoration of livelihoods, and security of tenure. Jan 02, 2024 Page 6 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) During preparation, the task team will review and confirm whether additional land acquisitions are needed to expand the buffer zone of the area of green ammonia storage – but at this stage, this is not anticipated - and adopt additional measures in line with ESS 5. ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Relevant Resources Although it is a brownfield-Project, there are 3 conservation units adjacent/overlapping the Project’s area. The GH2 Hub’s ESIA found 2 threatened flora species, while Port's ongoing monitoring has found marine endangered, endemic and exotic species. The Caatinga Biome prevails. Nearly 88% (1,265ha) is of natural vegetation and forest clearing (±70ha of buffer zones of water bodies, Restinga dunes) will be necessary for the GH2 Hub, which preliminary license has been issued by SEMACE. Mitigation measures are required for issuance of construction & operation licenses. Although the TMUT/Pier2 expansions might cause impacts on the marine ecosystem (dredging works potentially required), CIPP is already implementing well-known control & mitigation measures as part of the Port ESMP, including monitoring programs of marine biodiversity (aquatic biota, mammals, chelonians & seabirds), water quality, ballast water and underwater noise. Monitoring results/analyses are annually reported to IBAMA. ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Not Currently Relevant Local Communities Two Indigenous Lands are located in the municipalities of Caucaia and São Gonçalo do Amarante: the Tabeba Indigenous Land (declared by FUNAI in 2017) and the Taba dos Anacé Indigenous Reserve (created by the State of Ceará in 2012). These lands are located more than 20 kilometers away from the Project’s Area. Public Disclosure The Tapeba began to claim rights over traditionally occupied lands in the 1980s. The Anacé began to self-identify as an Indigenous People amidst the process of creation of CIPP in the late 1990s. In 2003, they demanded for land rights to the National Indigenous Peoples Foundation (FUNAI). Land demarcation started in 2010 and is not completed yet. In 2010, they reached an agreement with the State of Ceará to exclude CIPP’s area from the demarcation process. During Project preparation, the presence of Indigenous Peoples (possessing the four cumulative characteristics set in ESS7) in the Project area will be further assessed and appropriate measures taken. ESS8 Cultural Heritage Relevant In 2009, and in compliance with the national legislation, independent experts carried out an Archaeological Diagnosis of the Pecém Industrial Complex Area. This diagnosis verified the existence of 20 archaeological sites (14 prehistoric and 6 historical) and 22 archaeological traces, as well as environments with archaeological potential in the direct area of CIPP. Based on it, two mitigating and/or compensatory measures were adopted by CIPP: a) the execution of archaeological Prospecting and Rescue Programs (IPHAN Ordinance No. 230/2002) when carrying out foundation construction activities, opening roads and other earthmoving works; and b) the development of a diversified and participatory Cultural Heritage Education program with local communities. During project preparation, the implementation of these measures will be further assessed to ensure the achievement of development outcomes that are materially consistent with the objectives of ESS 8. ESS9 Financial Intermediaries Not Currently Relevant Jan 02, 2024 Page 7 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) ESS10 Stakeholder Engagement and Information Disclosure Relevant As part of the licensing process, public hearings and consultations of E&S instruments are carried out. CIPP’s ESMP includes requirements for providing project information on the risks, impacts and potential opportunities of its projects, promoting continuous engagement with the population of nearby communities and other stakeholders, and responding to concerns and grievances they may raise in a timely, transparent and culturally appropriate manner, which results are monitored and reported to the environmental agency. CIPP has established a Community Council and an Association of Companies to engage with nearby communities and other stakeholders. CIPP also operates a Grievance Mechanism, which can be accessed in person, via the internet, email, the free phone call center 155 and WhatsApp. The team will assess whether or not these tools enable the project to achieve development outcomes that are materially consistent with the objectives of ESS 10 and this will be detailed in the A-ESRS. B.2 Legal Operational Policies that Apply OP 7.50 Projects on International Waterways No OP 7.60 Projects in Disputed Areas No Public Disclosure B.3 Other Salient Features Use of Borrower Framework In Part Following the Interim Technical Note: Documentation and Review Requirements for High and Substantial Risk Projects Prior to Appraisal (October 2, 2023) and considering the bulky and robust ES documents required under national law that CIPP has prepared for its operations, the team is proposing to use CIPP’s ESIAs and ESMPs. During preparation, as part of its due diligence, the task team will: a) Review the national ES documents do not contain any statements that contradict or are materially inconsistent with the ESSs, as well as any statements that are factually inaccurate; and, b) Identify any supplemental assessments and measures that may be required to enable the achievement of development outcomes that are materially consistent with the objectives of the ESSs, probably including a overarching Risk Assessment Study of the production, transportation and storage of large quantities of green ammonia within CIPP facilities (i.e., Quantitative Risk Asssessment – QRA). Use of Common Approach No There will be no financing partners. C. Overview of Required Environmental and Social Risk Management Activities Jan 02, 2024 Page 8 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) C.1 What Borrower environmental and social analyses, instruments, plans and/or frameworks are planned or required by Appraisal? Pursuant to the E&S approach described above, the Bank’s due diligence will carry out a comprehensive review of the following key documents prepared by CIPP (directly or with support from retained E&S consultancies): - ESIA – Port of Pecém Complex – CIPP (2009) - Supplementary ESIA – TMUT Expansion – CIPP (2013) - CIPP’s ESMP (2022), which includes the following: o Environmental Management Plan o Solid Waste and Liquid Effluent Management Program o Atmospheric Emissions Monitoring Program o Aquatic Biota Monitoring Program, specifically the following: Mammal, Turtle and Seabird Monitoring - Fixed Point and Beaches; Plankton monitoring; Benthos monitoring; Marine Ichthyofauna Monitoring; Ballast Water Subprogram; Underwater noise monitoring sub-program o Sediment Quality Monitoring Program o Water Quality Monitoring Program o Sediment Dynamics Monitoring Program o Social Communication Program o Environmental Education Program (PEA), containing sub-programs: o Fishing Activity Compensation Subprogram o Environmental Education for Workers Subprogram o Risk Management Program Public Disclosure o Emergency Action Plan o Individual Emergency Plan - Operation License for the Port of Pecém (CIPP), issue by IBAMA, and its correlated requirements - ESMP Annual Reports submitted to IBAMA – Port of Pecém Complex – CIPP (2022 and earlier) - Terms of Reference issued by IBAMA for supplementary studies concerning the Installation Licenses for the TMUT and Pier 2 expansion works - ESIA – Green Hydrogen Hub – CIPP (2023) - Preliminary License for the GH2 Hub (CIPP), issue by SEMACE, and its correlated requirements - Terms of Reference to be issued by SEMACE for the Installation Licenses for the GH2 production plants and ammonia storage area - During preparation, the team will consider the necessity of requiring the development of supplemental E&S studies and/or programs, as per the results of the described E&S due diligence. Preliminarily, the following are being considered: o Integrated Risk Analysis Study (RAS) for the GH2 hub, considering reasonably anticipated operation scenarios and catastrophic scenarios of ammonia tanks and pipelines failure (also known as Quantitative Risk Assessment – QRA) o Biodiversity Assessment, including a classification of habitats (Modified, Natural or Critical) and a review the existing Biodiversity programs and plans to ensure consistency with ESS6 para 19 to 27 requirements o GH2 hub’s E&S management and monitoring plan, intended to be CIPP’s management tool to support the overall compliance with E&S requirements of the hub’s entrepreneurs - Additional documents might be used/revised to complement the general comprehension of the Project’s area and its correlated E&S risks and impacts Jan 02, 2024 Page 9 of 10 The World Bank Expanding Clean Hydrogen in Brazil - Ceará Hydrogen Hub (P181511) - The Project’s ESCP will reflect the results of the E&S due diligence and any requirements related to the development of additional E&S studies/programs, vis a vis the achievement of objectives materially consistent with the ones set out in the ESF. III. CONTACT POINTS World Bank Task Team Leader: David Vilar Ferrenbach Title: Senior Energy Specialist, Program Leader Email: dvilar@worldbank.org IV. FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects V. APPROVAL Public Disclosure Task Team Leader(s): David Vilar Ferrenbach, Pierre Audinet ADM Environmental Specialist: Guilherme Todt Cardoso De Faro ADM Social Specialist: Alberto Coelho Gomes Costa Safeguards Advisor ESSA Maria Luisa Duran Fargas (SAESSA) Cleared on 02-Jan-2024 at 15:38:21 EST Jan 02, 2024 Page 10 of 10