Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB1843 Project Name Espirito Santo Biodiversity and Watershed Conservation and Restoration Project Region LATIN AMERICA AND CARIBBEAN Sector General agriculture, fishing and forestry sector (100%) Project ID P094233 GEF Focal Area Biodiversity Borrower(s) ESPIRITO SANTO STATE Implementing Agency State Secretariat for Planning, Budget and Management Espirito Santo Brazil Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared June 11, 2007 Estimated Date of Appraisal Authorization December 03, 2007 Estimated Date of Board Approval March 27, 2008 1. Key development issues and rationale for Bank involvement Setting and Issues The Atlantic Fores t biome, one of the world’s most biologically diverse areas measured, has been reduced to less than 7% of its original forest cover throughout Brazil. In the state of Espírito Santo original forest cover of this biome reaches 9% and the project area has some of the largest clusters of Atlantic Forest remnants. Farming by smallholders has reduced and fragmented forest cover and poses a continuing threat to globally significant biodiversity, including the critically endangered Muriqui monkey, one of the top 25 most endangered primates in the world. For these reasons, the state government has made forest and watershed conservation and sustainable natural resources use, including biodiversity conservation, one of its central themes. Its Vision 2025 1 plan includes a 20-year vision for the sustainable development of the highland region, to ensure that socio-economic growth occurs “along with the preservation of natural resources, such as water and forests.” The federal government has adopted a policy of “zero deforestation” of the Atlantic Forest biome, and promotes sustainable use of forest resources and of already degraded areas, sustainable agricultural practices, and conservation of agro- biodiversity essential for food and livelihood security. The National Forestry Program works in collaboration with productive sectors and civil society to establish sustainable forestry practices adapted to the ecological, economic and social conditions of different forest ecosystems whilst conserving forest and their biodiversity. 1 Plano de Desenvolvimento Espírito Santo 2025. Espírito Santo: Marcoplan, 2006. Page 2 The project would focus on sustainable resource management and conservation and biodiversity preservation in two watersheds in south- central Espírito Santo, one of the poorest states in South and Southeast Brazil, covering a total of 401,000 ha. The selected watersheds are of critical importance to the state as they provide approximately 90% of the Greater Vitória Metropolitan Area’s (GVMA) water supply while also generating hydroelectricity. The GVMA is an area of great importance to the states economy as it houses close to half the state’s population of 3.1 million and generates 62% of state GDP. Upstream of the GVMA, land use patterns have resulted in severe erosion, substantially increasing silt loads and reducing the quality and timing of water supplies (CESAN 2 ). Rationale for Bank involvement The project presents an important opportunity to combine protection of globally significant biodiversity with activities that increase farmer welfare and protect the water supplies of a poor, rapidly growing state. It would complement and be partially blended with the ongoing Bank loan for the CESAN implemented Espírito Santo Water and Coastal Pollution Management Project (‘ Aguas Limpas Project’). It would also add to a line of related GEF and/or Bank funded projects in the Atlantic Forest and complement Rain Forest Pilot Program projects, through which the Bank has become a reference resource for cross-cutting issues of conservation, landscape management and sustainable development in forests of world-wide importance. The Bank also has substantial experience in the design, implementation, and support of market-based instruments for conservation, which form a key part of the proposed project. No other institution has the same breadth of experience in supporting payment for environmental services (PES) approaches. Rationale for GEF involvement The project is fully in line with the new GEF strategic long-term objectives for biodiversity conservation. It helps catalyze the sustainability of protected areas by helping develop new, sustainable financing sources for the PAs themselves and for agricultural activities in PA buffer zones and corridors (SP1); it aims to mainstream biodiversity conservation in production landscapes by strengthening the policy and regulatory framework (SP4), removing obstacles to the adoption of sustainable land use practices, and fostering new market-based instruments to provide incentives for the conservation of biodiversity goods and services (SP5). 2. Proposed objective(s) Global Environment Objective The proposed project will assist the Government of Espírito Santo to reduce threats to globally important biodiversity (for example the critically endangered Muriqui monkey) from agricultural production systems and increase habitat for species in two key rain forest watersheds of the Atlantic Forest. 2 CESAN, the State’s water utility, in an ongoing analysis of rainy season water turbidity has observed a steady increase over the last 11 years. Page 3 Key indicators will include: · Number of endemic endangered species whose status has improved; · Area of critical habitat restored and/or protected from encroachment; · Implementation of sustainable market-based mechanisms to finance protected areas (PA) management and conservation of biodiversity in agricultural landscapes. Project Development Objective The project’s development objective is to support the widespread adoption of sustainable land use practices in two key Atlantic Forest watersheds in Espírito Santo, resulting in higher income for farmers and improved water supplies. Key indicators will include: · Increase in area under sustainable land use practices; · Establishment and implementation of payment mechanisms for watershed conservation. The primary target groups are the farmers in the watersheds, IEMA, CESAN and other government agencies to be strengthened, and Watershed Committees. The entire population and industries of Vitória’s metropolitan area dependent on reliable water supplies would also benefit, complementing the activities of the “ Aguas Limpas ” Project. 3. Preliminary description 1. Strengthening the policy and regulatory framework in the watershed : Strengthen participatory institutions responsible for planning and implementing NRM strategies in the watersheds. 2. Targeted biodiversity protection and Protected Area management: This component will undertake targeted intervention to restore and enhance the protection of critical areas for biodiversity conservation, and support the PAs in the watersheds, including the elaboration of management plans, and assisting land owners in the creation of private nature reserves. 3. Integrating biodiversity in production landscapes: Sustainable management of landscape mosaics requires a two-pronged approach: (a) measures to remove obstacles to the adoption of land use practices that would be beneficial both to farmers and the environment, such as lack of knowledge or non-availability of inputs; this sub- component will seek to remove these barriers; and (b) measures to induce the adoption of practices that generate positive externalities, particularly in biodiversity conservation and water services protection, but are unattractive to individual land users; this sub-component will seek to address these tradeoffs by fostering a range of markets for biodiversity goods and services, and in particular by developing payment for environmental services (PES) mechanisms in collaboration with water users (such as CESAN and small HEPs), mechanisms that will also contribute to PA support. Page 4 4. Project management: This component will coordinate, manage, and monitor all activities supported under the project. A Monitoring and Evaluation System will be implemented with capacity to undertake spatial analysis (including GIS capability). In order to analyze the true impact of the project this component will design and implement impact evaluation that includes specific data collection activities. 4. Safeguard policies that might apply The project would be rated “B”. It will not involve building of dams, reservoirs or roads, nor any resettlement. Indigenous populations will not be affected. An agreement would be sought that tree planting would be with appropriate native species. There may be cultural properties to be protected which will be determined during preparation. Pesticide use would not be stimulated or increased under any new farming model, rather it would be reduced. The following safeguard policies would likely be triggered and taken into account during preparation: Environmental Assessment; Natural Habitats; Forests; Indigenous peoples: to be checked; Cultural properties: to be checked. Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment ( OP / BP 4.01) [x] [ ] Natural Habitats ( OP / BP 4.04) [ ] [x] Pest Management ( OP 4.09 ) [ ] [x] Physical Cultural Resources (OP/BP 4.11) [ ] [ ] X Involuntary Resettlement ( OP / BP 4.12) [ ] [x] Indigenous Peoples ( OP/BP 4.10) [ ] [x] Forests ( OP / BP 4.36) [x] [ ] Safety of Dams ( OP / BP 4.37) [ ] [ ] Projects in Disputed Areas ( OP / BP 7.60) [ ] [x] Projects on International Waterways ( OP / BP 7.50) [ ] [x] Piloting the Use of Borrower Systems to Address Environmental and Social Issues in Bank-Supported Projects (OP/BP 4.00) [ ] [x] 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 8.0 GLOBAL ENVIRONMENT FACILITY 4.0 Total 12.0 6. Contact point Contact: Gunars H. Platais Title: Sr. Environmental Economist Tel: (202) 458-0538 Fax: (202) 522-0262 Email: gplatais@worldbank.org Location: Washington, DC, USA (IBRD)