The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) Appraisal Environmental and Social Review Summary Appraisal Stage (ESRS Appraisal Stage) Public Disclosure Date Prepared/Updated: 10/03/2024 | Report No: ESRSA03711 Oct 03, 2024 Page 1 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) I. BASIC INFORMATION A. Basic Operation Data Operation ID Product Operation Acronym Approval Fiscal Year P181511 Investment Project Financing (IPF) Ceara Hydrogen 2025 Operation Name Expanding Clean Hydrogen in Brazil - Ceara Hydrogen Hub Country/Region Code Beneficiary country/countries Region Practice Area (Lead) (borrower, recipient) Brazil Brazil LATIN AMERICA AND Energy & Extractives CARIBBEAN Borrower(s) Implementing Agency(ies) Estimated Appraisal Date Estimated Board Date Complexo Industrial Complexo Industrial Portuário de 23-Sep-2024 10-Feb-2025 Portuario de Pecem Pecém (CIPP) Estimated Decision Total Project Cost Public Disclosure Review Date 09-Sep-2024 170,225,000.00 Proposed Development Objective Enable clean hydrogen production in the Complex of Pecém. B. Is the operation 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 Pecém (Ceará). Component 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. Component 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. Oct 03, 2024 Page 2 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) Component 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. D. Environmental and Social Overview D.1 Overview of Environmental and Social Project Settings The Port and Industrial Complex of Pecém (CIPP) was established by the Government of Ceará in the late Twentieth Century. One of the strategic projects of the Ceará Sustainable Development Plan – 1995-1998, the Pecém Industrial and Port Complex (CIPP) had its licensing requested before the State Environment Secretariat (SEMACE) in 1995. The Environmental Impact Study and the Environmental Impact Report (EIA/RIMA) were delivered in 1996 and, in the same year, SEMACE issued a favorable opinion on its installation and the State Environmental Council granted the installation license. IBAMA also issued the installation license in 1997. The CIPP was inaugurated in 2002. The original plan included the installation of two anchor industries – a steel mill and an oil refinery – and a set of multimodal transport logistics services and port back areas, occupying an initial area of 13,337 ha. Currently, according to data from the Association of Companies of the Pecém Industrial and Port Complex (AECIPP), CIPP is home to 21 industries (operating in the manufacturing of cement and cement artifacts, ceramics, fertilizers, steel, metallurgy, energy, thermoelectric and gases) and 8 logistics solutions companies, occupying an area of 19,115 hectares. CIPP is managed by Companhia de Desenvolvimento do Complexo Industrial e Portuário do Pecém S.A (CIPP), which is a joint-stock and mixed economy company ruled by State Law No. 12,536/1995 and State Law No. 16,372/2017. Through a shareholders' agreement between the Government of the State of Ceará (owner of 70% of the shares) and the Port of Rotterdam (owner of 30% of the shares), CIPP obtained the transfer of 3,613.30 hectares to its control. CIPP performs Public Disclosure functions in the administration, operation (including E&S management), exploration and development of the Pecém Port Terminal, the adjacent Industrial Area and the Ceará Export Processing Zone – ZPE CEARÁ (wholly-owned subsidiary). Among the activities performed, port operations, administration of port infrastructure, rental of owned properties and management of real estate property stand out. CIPP has 104 permanent employees and 258 outsourced employees, of which 29.6% are women. The Pecém Port Terminal is characterized as an offshore port, with an “L” shaped breakwater that has a total length of 2.7 km. This configuration provides greater natural depths, reducing dredging needs and environmental impacts. The berthing and unberthing facilities are divided into three piers: Pier 1 (Berths 1 and 2, located 1,789 meters from the coast), Pier 2 (Berths 3 and 4, at 2,143 meters from the coast) and a Multiple Utilities Terminal – TMUT (Berths 5, 6, 7, 8, 9 and 10, at 2,502 meters from the coast). The TMUT was built between 2008 and 2011 and later expanded (2013) and its construction involved 820,000 cubic meters of dredging. The port allows the docking of ships with drafts of up to 17.5 m. Launched by the State of Ceará in 2021, the Green Hydrogen Hub (GH2 Hub) will occupy a total area of approximately 1,258.8 hectares within CIPP, which will be distributed in three key zones: the Main Zone (888.3 hectares) will be the territorial space where Green Hydrogen producing industries will be located; the Secondary Zone (110.8 hectares) will operate as a transition “Buffer” between the Main Zone and the Port itself; and the Infrastructure Corridor with an area of 259.7 hectares, which will interconnect these two zones, and also the ship mooring pier. Green Hydrogen production plants and ammonia storage areas run by private companies that will be installed in the Main Zone meet the three criteria set in ESS 1 and will be treated as Associated Facilities. Oct 03, 2024 Page 3 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) CIPP is located in the municipalities of Caucaia and São Gonçalo do Amarante at the state of Ceará, Northeast Brazil. The state of Ceará has a population of 8,794,957 people and has a Human Development Index of 0.734, ranking in twelfth place among the 27 federation units. The nominal monthly household income per capita is equivalent to R$ 1,166.00, being the sixth lowest in the country and 44.3% of its economically active age population works in the formal sector of the economy. Around 1.4 million families and 3.4 million people among those registered in Cadúnico in the state live in poverty. The population of Caucaia reached 355,679 inhabitants in 2022 (demographic density of 290,77 inhabitants per km2) and São Gonçalo do Amarante reached 54,143 inhabitants (demographic density of 65.3 inhabitants per km2). Caucaia’s urbanization rate and Human Development Index equal to 89% 0.682, whereas São Gonçalo do Amarante shows an urbanization rate of 65% and HDI equal to 0.665. In 2022, child mortality rates equaled 11,48 and 7.24 deaths/1,000 born alive in Caucaia and São Gonçalo do Amarante, respectively. Only 15.1% of Caucaia population was occupied with an average income for those employed in the formal sector equal to two minimum wages. In São Gonçalo do Amarante these figures equaled 29.7% and 3.4 minimum wages. The CIPP had a major impact on the economy of the two municipalities, which entered a process of accelerated growth, reducing the number of unemployed workers. São Gonçalo do Amarante now ranks first in per capita GDP in the state of Ceará, whereas Caucaia ranks ninth. These economic outcomes hide large economic inequalities. Gini index equals to 0.48 in Caucaia and 0.51 in São Gonçalo do Amarante. Furthermore, around 41% of the population of Caucaia and 37% if São Gonçalo do Amarante’s live under poverty. CIPP is inserted in coastal strip of the state of Ceará. This environment is characterized by high temperatures Public Disclosure throughout the year, with small variations and comprising a rainy summer and a dry winter; winds that blow majorly from the Northeast with low speed in the summer and stronger and more constant in the winter (average of 26 km/h), leading to intense processess of erosion/deposition processes (sediment removal/accumulation). The characteristic vegetation of the area is the Caatinga biome. The territory is crossed by the small and intermittent river courses of the Gereraú river sub-basin. Nevertheless, water resources have limitations due to irregular rainfall, water deficiency and natural water loss due to the evaporation process (annual rate greater than 2,000 mm/year). The project area consists of an industrial complex in which other companies and industries also operate. Despite this, the environmental diagnosis of the ESIA (Hub) found that all the points monitored for atmospheric pollutants were within the limits of Brazilian legislation. The area showed high environmental noise production at all the points monitored, notably from anthropogenic sources. Nine points were monitored for water quality (4 underground and 5 surface). For surface water, the standards are permitted for recreational use, while for groundwater the standards are not permitted for human consumption without adequate treatment, with only less restrictive uses permitted (animal watering and recreation). According to Brazilian legislation, Environmental Conservation Units are divided into two groups according to their use: Full Protection Units, whose basic objective is the preservation of nature, where only indirect use of its natural resources is permitted, and Sustainable Use Units, whose objective is to make nature conservation compatible with the sustainable use of part of its natural resources. Three Conservation Units are located in the project’s area and/or its vicinities. Two Sustainable Use Unit – Dunas do Litoral Oeste and Lagamar Cauite. And one Full Protection Unit – the Pecém Ecological Station. The area directly affected by the Hub covers around 1,265.5 ha, of which 137.52 ha are anthropized areas, 1,110.42 ha are native vegetation, and 17.57 ha are occupied by water bodies. The project Oct 03, 2024 Page 4 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) construction will also interfere with approximately 70.24 ha of environmental protected areas (APP, in Portuguese), according to the criteria allowed by law. The floristic survey identified 02 endangered species. The fauna survey for the ESIA, on the other hand, did not identify any endangered species in the Hub area. However, endemic species were found: herpetofauna (04), avifauna (07) and mammal (01). Two migratory species were identified, classified as non-breeding seasonal visitors from the northern hemisphere (VN). In the port area, aquatic biota and fauna monitoring campaigns have already identified: 24 species of migratory birds, 01 species of mammal and 03 of chelonians. There have also been species classified in some category of threat for the groups of birds (05), chelonians (03), cetaceans (02) and ichthyofauna (05). To date, no exotic, invasive or threatened species have been identified for the phytoplankton community. On the other hand, exotic species have been recorded for the Zooplankton, Epifauna and Benthos groups. Three artisanal fishing communities are located nearby CIPP’s landholding and 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 program for compensation of fishing communities (in progress). There are no quilombolas and indigenous peoples’s communities within a distance of less than 8 km from CIPP landholding. Eleven Quilombola Communities are located more than 8 km away from the Project Area, whereas two indigenous groups (the Tapeba and the Anacé), whose lands are located more than 20 km from it. Public Disclosure D.2 Overview of Borrower’s Institutional Capacity for Managing Environmental and Social Risks and Impacts The Brazilian Legal and Institutional Framework. The legal and institutional frameworks related with the environmental licensing and E&S risk management of construction and operation of ports (ruled at the federal level) and green hydrogen facilities (ruled at the state level) are robust. The construction, installation, expansion, and operation of facilities using environmental resources, potentially polluting substances or capable of causing environmental degradation depends on prior licensing from a competent body that is part of the National Environmental System – SISNAMA (Law 6938/81 and Law 7804/89) conducted according to procedures established at the federal level by the National Environmental Council - CONAMA Res. nº 237/97. According to current legislation, the ordinary environmental licensing process consists of three stages: Preliminary License (LP), Installation License (LI) and Operation License (LO). Environmental licensing is a legal obligation prior to the installation of any project in which port infrastructure is planned. The competence to authorize and monitor this obligation is shared by state environmental agencies and IBAMA (National Environmental Agency). In 2022, IBAMA established a standard Terms of Reference (ToR) for the Environmental Impact Assessment and the Environmental Impact Report (EIA/RIMA), required for the issuance of the Preliminary License for port construction and operation (available at https://licenciamento.ibama.gov.br/Porto/TR__Modelo%20de%20Portos/TR%20portos/SEI_IBAMA%20- %2012158338%20-%20Termo%20de%20Refere%e2%95%a0%c3%a9ncia-EIA_RIMA.pdf). This standard ToR addresses the following aspects: •Description of the project: the infrastructure to be built, the geographic location, considering interference with indigenous lands, quilombola communities and environmental conservation units; watercourses, geological and paleontological sites, and speleology; labor to be employed; generation of liquid effluents, solid waste, and atmospheric emissions; and needs for dredging, demolishing, and earthmoving. Oct 03, 2024 Page 5 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) •Analysis of at least three locational alternatives to avoid the main associated negative E&S impacts and seeking not to affect environmentally sensitive/restrictive areas. •Description of the project area of influence, considering the physical, biotic (including terrestrial and aquatic biota, identifying intercepted ecological corridors, and carrying out a Landscape Ecology analysis) and socioeconomic (including identification of population clusters and public facilities intercepted or located in the area historical, cultural, and archaeological heritage, and the presence of traditional communities) environments. •Assessment of the E&S impacts generated in the implementation and operation phases according to their magnitude and significance, degree of reversibility, cumulative and synergistic properties, identifying measures to avoid, minimize or remedy all significant negative impacts, to enhance the positive impacts and to compensate the remaining negative impacts. •Environmental Prognosis, characterizing the future environmental quality of the area of influence and comparing scenarios with and without the project. •Description of the plans, programs, and measures to be adopted in all phases of the project, to avoid, mitigate or compensate for adverse impacts and enhance beneficial ones and to track/monitor their outcomes. •Reporting on the social communication activities carried out to meet the legal requirement of holding specific public hearings with key stakeholders in the local community. For Green Hydrogen projects, the State of Ceará follows the criteria and parameters established in the State Environmental Council Resolution 3/2022. This resolution rates the degrading polluting potential of green hydrogen plants as high and determines that for micro/small enterprises a Simplified Environmental Report must be prepared and for medium/larger enterprises the EIA/RIMA must be prepared. Regardless of the size, the licensing of these projects Public Disclosure also depends on the presentation and approval to the licensing body - the State Environmental Superintendence (SEMACE) – of a Risk Analysis Study. The resolution defines that the licensing process for hydrogen plants must be three-phase (prior license, installation license and operating license). Thus, for the licensing of the CIPP’s GH2 Hub, SEMACE issued ToR DICOP/GECON/SEMACE N° 114/2022. The E&S impact assessment commissioned to an independent consultancy addresses all aspects mentioned at the ToR, was broadly consulted with key stakeholders and local communities, and includes a Risk Analysis Study that sets the safe limits of a buffer zone considering the worst-case scenario for accidents during the operation of the hub. CIPP has established a robust structure for the management of environmental and social risks as required in the licensing process for its activities. The organizational structure of CIPP. comprises an E&S Risk Management Unit, an Occupational Health and Safety Management Unit and a recently created Environmental, Social and Governance Strategy Management Unit. •The E&S Management Unit is responsible for: the environmental licensing of port and industry activities within CIPP; monitoring the effluents of CIPP’s Wastewater Treatment Station and the potability of water available to the industry and port complex, implementation of the Solid Waste Management Plan; carrying out environmental management following GIIP for port operations; overseeing the implementation of prevention, mitigation and compensation measures relating to impacts caused by port operations and related works; and assessing the environmental impacts of companies installed in the CIPP As part of the port’s ESMP implementation and monitoring, the E&S Risk Management Unit is supported by an independent consultancy – with expertise on environmental and social impact analysis, risk assessment, and implementation of E&S risk management programs – competitively hired since 2016 for a long-term contract (MRS Ambiental). Oct 03, 2024 Page 6 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) •The Occupational Health and Safety Management Unit is responsible for: identifying and evaluating risks and hazards in the work environment and adopting the necessary control measures; acting to prevent injuries and illnesses caused by the nature of port activities, ensuring safe and healthy working conditions; providing adequate PPE for each activity carried out within CIPP and monitoring its use; and ensuring compliance with labor laws and OHS standards. •The ESG Strategic Management Unit is responsible for defining and implementing strategies that integrate environmental, social and governance considerations into the company's operations; monitoring natural resource use, carbon emissions and waste management; establishing and maintaining dialogues with key stakeholders (including local communities) and responding to their concerns and expectations; supporting social and community initiatives; and implementing policies that promote diversity and inclusion in the workplace. •CIPP also operates a Sectoral Committee for Access to Information (CSAI) with the purposes of a) ensuring immediate access to information of public interest through the website and the digital Platform Ceará Transparent, and b) answering information requests from citizens and users of the Pecém Complex in compliance with the Access to Information Law (Federal Complementary Law 131/2009 and State Law 15,175/2012). •CIPP runs an Ombudsman Office that operates in a network with other ombudsman offices of the State Government, under the coordination of the Comptroller and Ombudsman General of the State (CGE) to handle complaints from internal and external stakeholders. In 2023, CIPP. Ombudsman's Office registered 105 grievances, including 54 complaints. It recorded a resolution rate of 100% to citizen demands within the 20-day period established by Decree No. 33.485/2020, an average response time of 7.5 days, and a user satisfaction rate of 87%. CIPP. Ombudsman's Office publishes annual performance reports since 2016. E&S risk management is continuously monitored by state and federal regulatory agencies in accordance with the ESMP Public Disclosure approved when activities are licensed. The programs and plans included in the ESMP are publicly available through CIPP. CIPP has no previous experience working with the World Bank. Nevertheless, a set of conditions assessed during the preparation stage strongly indicates sufficient E&S risk management capacity: i) the E&S risk studies and tools that have been prepared to obtain the licenses of CIPP’s current operations as per the Brazilian environmental agencies, ii) the compliance with the requirements set forth by these licensing bodies, iii) and the material measures whose adoption have been required and taken for E&S risk management. Such aspects have been thoroughly assessed by the task team and are considered capable to allow the achievement of outcomes that are materially consistent with the objectives of the Environmental and Social Standards of the World Bank ESF that are relevant for this operation. Furthermore, the Project’s ESCP will include material measures to ensure that: a) CIPP. will keep the necessary human and financial resources to meet the increased demands related to E&S risk management caused by the expansion of Pier 2 and TMUT and the installation of the Green Hydrogen Hub – including the one health and safety specialist, one environmental specialist, and one social/stakeholder engagement specialist.; and b) Develop with and disseminate among the operators of the Green Hydrogen Associated Facilities a Guidance Note on environmental, social, and labor risk management standards – in line with the requirements of the relevant country’s legislation, the ESF and the WBG General EHS Guidelines and specific Guidelines for the Industry – to promote adherence to GIIP in the Sector. II. SUMMARY OF ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS A. Environmental and Social Risk Classification (ESRC) High A.1 Environmental Risk Rating High Oct 03, 2024 Page 7 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) 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. Although the off-shore (TMUT and Pier 2) and on-shore (utilities corridor) interventions will be located within CIPP area (brownfield Project), 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 environmental agency (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 (terrestrial and marine) 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) required by national and state legislation. Environmental and Social Management Plans and monitoring programs have been established and some are already under implementation. Substantial A.2 Social Risk Rating Following the requirements of the national law, CIPP has commissioned the assessment of environmental and social Public Disclosure impacts of the construction and operation of the Port of Pecém and the GH2 Hub to independent consultancies, which have identified potential positive and adverse social impacts of both endeavors. Additional assessments have been required by the Brazilian licensing authorities for the works of expansion of Pier 2 and the TMUT. 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. The operation of the Port of Pecém has already had adverse impacts on local artisanal fishing communities because the port overlapped with preferential fishing areas and/or made fishing routes longer, which are compensated through the implementation of the Compensation of Fishing Communities Subprogram (as part of the Port’s Environmental Education Program). These impacts may be increased by the works of expansion of Pier 2 and the TMUT and this compensation plan will be properly enhanced. No further land acquisition is expected for the activities supported by the Project and the Associated Facilities. On the hand, GH2 producing plants will occur within the area of CIPP. On the other, the Hydrus Project – one of the technological alternatives being considered to provide water for the operation of the GH2 Hub and is still in early stage of project design – will involve a) the construction of a new reuse water production station (envisaged to be located in a state owned area) and b) the use an already existing underground pipeline (section 5 of the Eixão das Águas, built in early 2010’s) is not expected to require land acquisition. Hence, no additional land acquisition is needed for the Bank-supported Project and Associated Facilities. Community health and safety is a major consideration during the operational phase of the Green Hydrogen Hub because the handling and use of dangerous chemical products (and, particularly, the production, Oct 03, 2024 Page 8 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) storage, and transportation of ammonia) increases the risk of accidents, anxiety, and feelings of unsafety among dwellers of nearby communities. A Risk Analysis Study was carried out by a specialized international consultancy firm and established a safe buffer zone considering the worst-case scenario. Preventative measures considering GIIP on the operation of these facilities and an Emergency Preparedness and Response Plan have been conceived. Labor- related risks are relevant due the exposure of workers to risks related to the handle of dangerous chemical products and the work at heights and the work with heavy machinery and electricity. The E&S assessments have found that no distinct social and cultural groups possessing the four cumulative characteristics set out under ESS 7 are present at the Project Area. On the positive side, these social risk and impacts assessments highlight local development, generation of jobs and increased sources of income in the region and the ensuing potential benefits for local businesses during the installation phase are highlighted – in consequence of an emphasis on absorbing local labor during the construction stage and as a potential outcome of the mitigating/compensatory programs required for licensing the operation of these enterprises. B. Environment and Social Standards (ESS) that Apply to the Activities Being Considered B.1 Relevance of Environmental and Social Standards ESS1 - Assessment and Management of Environmental and Social Risks and Impacts Relevant Complying with the requirements of the Brazilian environmental law, CIPP has commissioned to independent consultancy firms the preparation of 3 main instruments for E&S risk management of the Project-supported activities: the Complementary ESIA for the TMUT Expansion (C-ESIA, 2013), the 5th Version of the Integrated ESMP for the CIPP Public Disclosure area (5th PBA, 2022), and the ESIA/ESMP for the GH2 Hub (2023). The 2013 C-ESIA highlighted that during the implementation and operation phases of the new infrastructures, there would be potential adverse impacts related with workers occupational health and safety, changes in water quality, the removal of the benthic community, the interference in fishing areas, the transmission of diseases due to demographic attraction, the reduction of longshore drift, dispersion of chelonian fauna, birds and marine mammals due to the transit of vessels, and changes and pressure on marine communities. Addressing these risks, the 5th PBA reinforced the E&S risk management programs already set in the 1st PBA, which include: the management of solid waste and liquid effluents; the monitoring of atmospheric emissions, aquatic biota (including ballast water and underwater noise subprograms), sediment quality, water quality and sediment dynamics; the social communication and the environmental education (including subprograms for compensation for fishing activities and environmental education for workers), among others. This 5th PBA incorporates guidance provided/requirements made by previous technical opinions biannually issued by IBAMA (the federal environmental agency) with regards to compliance with the conditions of CIPP’s operational licensing. The implementation of the PBA is monitored by and audited by independent consultancy firms and annual reports are submitted to IBAMA. The last IBAMA’s technical opinion (based on the CIPP 2022 Annual Report and on- site inspection visit) pointed for the need to improve social and environmental risk management in the areas of solid waste and liquid effluents, monitoring of aquatic biota, social communication, and environmental education (including compensation for fishing activities) programs. This technical opinion indicated a decline in the environmental management performance of the TPP during the period of the Covid 19. CIPP responded with a technical report (June 2024) in evidencing compliance with the environmental license conditions, clarifications to the criteria pointed out in the technical opinion, and improvement actions being carried out. The diligent enforcement, and the institutional relationship between the borrower and IBAMA, provide enough comfort to the Team that the Oct 03, 2024 Page 9 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) systematics in place enable an adequate E&S risk management of the project, which includes adaptative management and continuous enhancement of CIPP ESMS. For the Pier 2 expansion, IBAMA required the preparation of technical documentation detailing the project, the environmental impacts that will be generated, as well as the mitigating measures and associated environmental programs, and an updated Risk Analysis Study, Risk Management Program and an Environmental Emergency Action Plan specific to the construction phase. To prevent the significant negative impacts generated by the works, an assessment was made of the mitigating measures and environmental programs required for implementation. Considering the PBA currently underway, CIPP analyzed the relevance of adapting, or including monitoring and/or mitigation of the impacts related to the Pier II expansion. The main impacts identified for the works, namely: changes in noise levels, changes in the quality of water, air and marine sediments, induction of erosive processes, disturbance and changes in the composition of aquatic communities, etc., according to the assessment carried out, are already adequately addressed to a large extent by the plans and programs of the PBA currently underway. Specific adjustments will be made to specifically monitor the impacts of the works, i.e. incorporation of a Noise Monitoring Program, addition of a weekly sampling point for water monitoring (water quality program), addition of sampling effort for the fixed-point fauna monitoring subprogram, and incorporation of a program for monitoring erosive processes. In compliance with the Brazilian legislation for environmental licensing, SEMACE issued a ToR for the GH2 Hub ESIA (SEMACE N° 114/2022). The study should contemplate at least 3 technological and project location alternatives, considering technical, economic, social, and environmental aspects, focusing on the restrictions on the use of areas, regarding the existence of urban centers, watercourses, indigenous lands, quilombola communities, archaeological sites, historical heritage, permanent preservation areas, and areas of relevant environmental interest. Possible conflicts with the implementation of the enterprise involving the community and other enterprises of various typologies should be mentioned. The ESIA includes a characterization of Public Disclosure the physical, the biotic and the socioeconomic environment. Hence, it describes climatic (pluviometry, origin, speed and direction of the winds, temperature, air quality, concentration of atmospheric pollutants, noise levels), geomorphological (topography, characteristics of soil and propensity for erosion and siltation, volume of soil and earthy material to be used in cuts and fills and final destination of solid waste, coastal and sedimentary dynamic), and water resources features (surface and underground hydrology, water quality and uses) of the project’s area of influence. It also presents the description of the original and current vegetation cover of the region, considering the history of occupation of the area and anthropic interferences or conservation/preservation, to define the degree of alteration existing over the local ecosystems. It carries out the characterization and analysis of terrestrial, aquatic, and transition ecosystems in the area potentially affected, directly or indirectly by the enterprise, primary data surveys of flora and fauna, a floristic survey of the vegetation remnants, and a forest inventory. The ESIA addresses aspects related with population dynamics, including processes of expropriation and/or displacement; prevailing economic activities; quality of life and health condition, considering the possibility of adapting the existing health network to meet the new demand; basic data on infrastructure and services (including sanitation and solid waste management) provided to the local and regional population; social organization and the presence of Indigenous Peoples and other disadvantaged and vulnerable social groups; archeological and prehistoric sites; patterns of land use and occupation. It pays special attention to impacts on water and soil quality, noise levels, flora and fauna, deforestation, risks to the protected areas located in the surrounding areas, scenic beauty and landscape, traditional communities and local workforce, the regional transport network and infrastructure services. It predicts the magnitude of these impacts – considering degrees of intensity, duration, importance, and synergy/cumulativeness of the impacts caused by the project and other activities in operation in the area. The ESIA also includes a Risk Analysis Study taking into account accidents that have occurred with similar enterprises and that resulted in damage to humans, the environment, and the facilities, identifying hazards and the most probable accidents (including with the Oct 03, 2024 Page 10 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) transport of ammonia by trucks or a specific ammonia-duct), estimating the physical effects and vulnerability analyses, including individual and social risks for internal and external personnel and the total risk for the enterprise and the frequency and occurrence of the identified accidental scenarios and proposing a Risk Management Plan that encompasses measures capable of reducing the probability of occurrence of the accidental scenarios and/or the magnitude of their consequences for the community and/or ecosystems. A safety buffer zone is established according to the potential magnitude and harm of the worst-case hazardous scenario. The ESIA defines mitigating measures for each stage of Project implementation, considering their preventive or corrective nature, feasibility and duration of application,and the entities responsible for implementation, including: • Monitoring plans for water quality (surface and groundwater), soil and air quality; effluents and noise and vibration level. • Plans for the recovery of degraded areas, rational deforestation, and landscape conservation; wildlife rescue and management; worker protection and safety; emergency response, solid waste management and the eventual deactivation of the enterprise (including the removal of structures and recovery of impacted areas). • Programs of environmental education, management, and audit; risk management; engagement with surrounding communities (including communication, health assistance, and technical training and local labor utilization), the rescue of Cultural Heritage Findings; and atmospheric emission control Program. The Project will rely on these E&S impact assessments and risk management tools to achieve outcomes that are materially consistent with the objectives of the ESF. A Rapid Biodiversity Assessment (RBA) was commissioned by the Bank, aiming at informing the E&S due diligence of the project. Eligible expenditures for retroactive financing will be subject to an E&S Audit to ensure consistency with the country legislation and the ESSs. The ESCP incorporates additional material measures that are needed to further enhance CIPP’s performance on E&S risk management – particularly related with the proper management of hazardous materials, biodiversity monitoring and the retention of independent specialists to audit the implementation of E&S risk management plans and Public Disclosure programs. ESS10 - Stakeholder Engagement and Information Disclosure Relevant CIPP. has developed and made available for public consultation a Stakeholder Engagement Plan (SEP) in accordance with the objectives and requirements of ESS 10. The SEP maps the stakeholders in the Project, defines their degree of interest and influence over the Project, considers concerns expressed by different stakeholders and how they have been incorporated by CIPP management, proposes relevant channels for disseminating information about the Project as well as forms of ongoing engagement according to the characteristics and interests of each stakeholder, and describes the CIPP Ombudsman Office, which will be used as the Project grievance mechanism. The SEP incorporates elements of two programs required by the Brazilian legislation for the licensing of activities supported by the project (the expansions of TMUT and Pier 2 and the creation of the Green Hydrogen Hub) to promote stakeholder engagement: the Social Communication Programs (PCS) and the Environmental Education Programs (PEA). In compliance with the guidelines for environmental licensing, the PCS aims a) to build a communication channel for information dissemination about the enterprises and b) to establish continuous, transparent, and effective communication with all stakeholders, informing and clarifying doubts about activities to be developed throughout the installation and operation of the enterprises. The PCS: a. Maps stakeholders (the entrepreneurs, the environmental licensing agency, the industry and service providers that operate in the CIPP, the surrounding communities, and public and social entities such as unions, associations, cooperatives, etc.). b. Pays special attention to the communication to be developed with the surrounding communities, considering the possible impacts generated due to the activities arising from the implementation of the Project. c. Addresses the production and availability – through printed or digital newsletters and events – of information for interaction and dialogue between CIPP SA and society, Oct 03, 2024 Page 11 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) aiming to mitigate any friction that may arise from potentially adverse socio-environmental impacts caused by the enterprise (including changes in the daily life of the population, in the existing access and circulation routes, and any other action related to the work that may cause inconvenience to the population). d. Promotes permanent communication with stakeholders through the establishment of contact channels and dialogue and the holding of lectures, meetings, and online meetings, to integrate them into the planning and monitoring of the activities of environmental and social risk management programs. e. Requires the establishment of a "System for Receiving Suggestions, Complaints, and Praise" accessible to the population and workers, which also guarantees broad access to information about the enterprise, associated socio-environmental impacts, and environmental programs, and whose channels include communication boxes available in places with a large circulation of people (service fronts and/or construction site, administrative area, etc.), a telephone number (WhatsApp) or toll-free, and the ombudsman channel. The PCS is monitored based on indicators defined in the Environmental and Social Management Plans and reported periodically to the environmental licensing agency. Based on IBAMA's Normative Instruction No. 2/2012, which establishes guidelines for environmental education programs, the Environmental Education Programs (PEA) developed for port activities and for the Green Hydrogen Hub consider the different relevant social groups, the communities located in the Direct Influence Area (AID) of the activities and the surroundings, and the local leaders and workers of all companies operating within the CIPP. These programs must develop edu-communication actions (i.e., communication activities with educational goals), considering local specificities and the possible impacts that may be caused due to the Project, and promote good environmental practices among these communities. They also seek to reinforce the dialogue channels of CIPP. with the surrounding communities and integrate them into the actions to prevent and mitigate environmental impacts resulting from the Project. The PEA developed and implemented in relation to the Port of Pecém includes three lines of action – a) governance and institutional Public Disclosure strengthening of the fishing community organizations; b) environmental edu-communication and valorization of the culture and arts of fishing; and c) sexual education, prevention of drug addiction, and child and youth violence – and two subprograms: the Subprogram for Compensation of Artisanal Fishing Activity (which involves the creation of a Governance Committee with the participation of fishing community representatives and is detailed under ESS 5) and the Subprogram of Environmental Education for Workers (which addresses guidelines on the relationship with the resident population and fishermen and is detailed under ESS 2). Meanwhile, the PEA of the GH2 Hub includes environmental education actions in schools, nurseries, and/or community associations of the surrounding communities, focusing on issues related to waste generation and disposal, preservation of water bodies, maintenance of stormwater galleries, and reduction of predatory actions on fauna and flora. CIPP SA must present a semiannual monitoring report on these programs’ implementation to the environmental licensing agency. The SEP also incorporates the elements of stakeholder engagement strategies that are institutionalized by CIPP. - namely: • The Association of Companies of CIPP (AECIPP) created in 2015, which brings together 89 companies, includes 10 thematic forums of action (including those of the environment, health and safety, labor relations, communication, and social responsibility) and has among its goals the promotion of Sustainable ESG events and support to local communities. Among the initiatives by the forum are those that work towards educational improvement in the areas near Pecém; collective actions that enable the reduction of gender inequalities; strategic actions that contribute to the process of eradicating child mortality and initiatives that ensure the environmental sustainability of the Pecém Region. • The Community Council of CIPP (CCC), which was established in 2018 and aims to (i) develop mobilizing actions in partnership with the community, public power, and other institutions, to contribute to regional development, job and income generation, (ii) establish a dialogue channel between the communities and public agencies to meet collective demands, and (iii) rescue and develop culture and valorize local knowledge. The CCC has the participation of 39 representatives of the communities (17 representatives), public power, and private initiative Oct 03, 2024 Page 12 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) and acts on the themes most demanded by the communities (education, professional training, health and sanitation, security, employment, environment, sustainability, and drug combat) inserted up to 8 km from the CIPP area. • The outcome of a survey conducted in 2023 by CIPP. Sustainability Committee that mapped stakeholders and their priorities and identified of measures to be adopted to meet their reasonable expectations and interests. The mapping identified seven priority stakeholders: internal public, shareholders, clients, service providers, ZPE Ceará, community, and truck drivers. Environmental compensation actions and the prevention of environmental accidents carried out by CIPP., investments made as part of the PEA, job opportunities offered by CIPP., dissemination of information about the operations of CIPP. (restructuring, expansion, and/or completion of works), and the promotion of participation and social control are the topics highlighted by the local communities. • The Ombudsman's Office of CIPP, which is regulated by State Decree No. 33.485/2020 and operates in a network with other ombudsman offices of the State Government, under the coordination of the Comptroller and Ombudsman General of the State – CGE. CIPP. Ombudsman's Office records suggestions, compliments, requests, complaints, and denunciations through various channels: in person at the headquarters of the Pecém Complex, through the internet on the Ceará Transparent Portal (https://www.complexodopecem.com.br/ouvidoria/), by email (ouvidoria@complexodopecem.com.br), by the toll- free telephone service at number "155", and via WhatsApp at the number: (85)3372.1605. The Ombudsman's Office publishes annual performance reports since 2016. In 2023, CIPP. Ombudsman's Office registered 105 grievances, including 54 complaints. It recorded a resolution rate of 100% to citizen demands within the 20-day period established by Decree No. 33.485/2020, an average response time of 7.5 days, and a user satisfaction rate of 87%. CIPP. The C-ESMP of the expansion works of TMUT and Pier 2 and the ESMP of the GH2 Hub were publicly disclosed and consulted with the stakeholders. These documents are available to the public through CIPP. website. The draft of the SEP has been disclosed and is under consultation with the stakeholders through meetings with the Community Public Disclosure Council and AESCIPP’s forums as well as a virtual consultation open to all interested parties. The final version of the SEP – incorporating feedback from this consultation process – will be disclosed through the CIPP website within 30 days after the Project's effectiveness. ESS2 - Labor and Working Conditions Relevant This standard is relevant. The Project involves direct, contracted, and primary supplier workers who faces risks from working at heights and confined spaces as well as with heavy machinery, electrical equipment, combustible and flammable liquids and other hazardous materials. The hiring of workers adheres to legal standards established in the Brazilian Consolidation of Labor Laws (CLT - Decree-Law 5,452/1943) and Regulatory Standards (NRs) regarding Occupational Health and Safety, which use has been considered by the ongoing Overarching Assessment that allows the achievement of results that are materially consistent with the objectives of ESS 2 with regards to: terms and conditions of work, fair treatment, non-discrimination, equal opportunity, freedom of association, collective bargaining, workforce protection (especially with regard to child labor and forced labor), occupational health and safety, and accessible judicial means for raising work-related concerns. Key legal provisions include Law 6,514/1977 on Occupational Safety and Medicine; Ministry of Labor Ordinance 3,214/78 and NR 5 on the Internal Accident Prevention Commission (CIPA), and Federal Decree 7,602/2011 on the National Occupational Safety and Health Policy. These set of parameters for safety engineering, occupational health, EPP, ergonomics, risk prevention, safety signage, fire protection, and conditions; unhealthy and dangerous activities and operations (including work with explosives and conditions for unhealthy and hazardous work). In addition, CIPP’s licensing conditions include compliance with the provisions that are described in the Worker Protection and Workplace Safety Plan – PPTSAT (addressing risk identification, reduction, and worker well-being), in the Environmental Education Programs for Oct 03, 2024 Page 13 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) Workers (PEAT) and, in the case of the GH2 Hub, also in the program for hiring, training, and using the local workforce. These plans are designed to act as a prevention, monitoring, and control mechanism in relation to – inter alia ¬ the risks of accidents, occupational diseases, internal and external conflicts, alcoholism, smoking, consumption of illicit drugs, and violence. They comprise safety inspections, the establishment of parity Committees of Accident prevention (CIPA), the implementation of a Code of Conduct, the monitoring of EPP use, the carrying out of daily and weekly meetings regarding the prevention of accidents on construction sites and biannual reporting to the licensing body. The measures, actions and activities provided for in PPTSAT are in line with the Brazilian labor legislation. They are subject to the legal standards established in the Consolidation of Labor Laws (CLT) and Regulatory Standards regarding concerns with occupational safety and medicine and other regulatory norms (among which stand out Law no. 6,514/1977, Ministerial Ordinance 3,214/1978, and the Federal Decree 7,602/2011). The PEAT ensures individual safety, maintains a communication channel with workers and requires the carrying out of surveys to measure the degree of approval and engagement of workers in the proposed activities. The Green Hydrogen Hub ESMP's program for hiring, training, and using the local workforce promotes and prioritizes the opening of job opportunities for local laborers, and includes training for health, safety, and environmental policies, aiming to reduce adverse impacts arising from the temporary influx of workers in the construction area and the adverse economic impacts of the demobilization of employees at the end of the works. The Code of Conduct established in both the C-ESMP of the expansion of the TMUT and Pier 2 and the ESMP of the Green Hydrogen Hub prohibits discrimination of any nature (ethnic identity, religion, sex, sexual orientation, special condition, age group, political conviction, etc.), moral and sexual harassment, and intimidation in the relationships between workers and between them and the local population, emphasizing respect for diversity and cultural differences and preventing sexually transmitted diseases. Since 2019, CIPP. follows ILO Convention 152 and NR 29 for port safety, hygiene, and health, identifying Public Disclosure environmental risks and emergency procedures. The 2018 Emergency Control Plan (PCE) and the updated 2023 Risk Management Program guide emergency responses, risk control, and impact prevention, with mandatory theoretical and practical training and PPE for employees. The PCE and the PGR are based on a Preliminary Risk Analysis that has identified hazards and accident scenarios that can potentially harm workers, surrounding communities and environmentally sensitive areas arising from the facilities, activities and work processes adopted. They also consider the probability and the severity of the occurrence of these scenarios. The PGR includes health checks, specialized maintenance support, and an Emergency Control Plan. Compliance is monitored by the Operations Control Center, with service providers reporting biannually on training. In 2023, CIPP conducted 26 emergency drills and extensive training to prevent environmental, personal, and social harm and the OHS Management Unit offered 18,000 hours of training to workers. In the same year, there were 26 accidents with leave and 35 without leave from work considering the employees of all the accredited companies operating within CIPP. All incidents were investigated and analyzed, resulting in action plans to prevent new occurrences. The well-disseminated CIPP Ombudsman’s Office is open for workers to raise work-place concerns – even anonimously – and follows specific procedures to facilitate their resolution in promptly, transparent, understandable and objective manner that does not admit retribution, does not prevent access to arbitration instances and does not substitute judicial or administrative remedies established by law. This whole set of country regulations and project specific programs and plans that address working and labor conditions is consistent with the labor management procedures required under ESS 2. The Project ESCP will a) reinforce the material measures to combat SEA/SH as well as any form of discriminatory behavior in CIPP.’s Code of Conduct and b) require that: i) the existing referral services for survivors of SEA/SH incidents are broadly advertised within CIPP; ii) all SEA/SH incidents occurring between Project workers and in their relationships with local population as well as fatalities and lost time injuries are properly reported to the Bank, investigated and responded according to the guidance provided in the Environment and Social Incident Response Toolkit for World Bank Staff; and iii) all Oct 03, 2024 Page 14 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) workplace concerns raised by Project workers are promptly addressed in a transparent and without retribution manner through a broadly advertised grievance mechanism that will not impede access to judicial means available under the Brazilian law. ESS3 - Resource Efficiency and Pollution Prevention and Management Relevant Port Terminal - The activities associated with the expansion of Pier 2 and TMUT are likely to involve relatively well- known environmental aspects for this type of civil work, involving mobilization and use of machinery, transport of people and inputs, execution of marine foundations, demobilization of support areas: generation of noise and vibrations (environmental and underwater), emission of particulates and combustion gases, generation of solid waste and effluents, alteration of land use. In this way, potential environmental impacts and risks are likely to be intensification of changes in noise levels, alteration of air quality, induction of erosion processes, alteration of water and marine sediment quality, increased operational risk and consumption of natural resources. As already mentioned in ESS1, CIPP has a robust and comprehensive ESMP, which includes various plans and programs aimed at mitigating, controlling and monitoring the impacts and risks mentioned, with the TPP Environmental Management Plan being a key instrument for managing the terminal's environmental and social risks. The aim of this plan is to provide the project with methodologies and procedures to guarantee the execution and control of the planned actions, as well as to supervise the implementation and execution of the environmental plans and programs, in addition to complying with the other conditions of the terminal's Operating License, providing for the planning of the terminal's entire operational process. The plan defines a set of structured and auditable procedures and practices aimed at minimizing the environmental impacts resulting from activities, including the training and awareness of employees - both own and third parties - involved in the process. This plan also includes the adoption and implementation of management Public Disclosure standards, inspection routines and internal and external audits. The ESMP also includes management programs for: sediment quality monitoring, water quality monitoring, waste and liquid effluent management, sediment dynamics monitoring and atmospheric emissions monitoring. The following treatment systems and operational controls for effluent management are currently structured for the Port area: • Administrative buildings, utilities and services block - the generated effluent is sent to the TPP Wastewater Treatment Plant (WTP), with capacity of 40m³/day, and includes aerobic-anaerobic reactors and 2 cisterns for storing the treated effluent, which is reused in toilets and to moisten gardens (30% of the total water treated). The surplus is stored in tanks and directed into infiltration ditches. • Warehouses - the effluent is sent to a treatment system (septic tank, filter and drain). The septic tank is drained weekly (3 operations/week) by licensed service providers. • Pier - the effluent is sent to a storage tank and, later, collected by a suction truck operated by the company SISAM (3 operations/week) and sent for treatment to the public sanitation utility (CAGECE). • TMUT - the accredited companies provide their employees with chemical toilets located in the terminal area. Sanitary effluent is collected by the company Sisam Sistemas Ambientais. Due to the fact that this is an expansion of a project with an operating license in force (Pier 2), which carries out environmental programs with results submitted annually and with a historical monitoring series, IBAMA understood that there was no need to prepare a specific environmental study to obtain the installation license for the works. However, it did require the preparation and filing of technical documentation detailing the project, the environmental impacts that will be generated, as well as the mitigating measures and associated environmental programs - including a specific assessment of the need to alter the port's existing ESMP. In addition, considering that the expansion will involve the handling of dangerous cargo, it was also requested to submit an updated Risk Analysis Study, as well as a Risk Management Plan (RMP) and an Environmental Emergency Action Plan (EAP) specific to the construction phase. The RMP presents the characteristics of the facilities and activities planned for the expansion of TPP Pier 2, and Oct 03, 2024 Page 15 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) establishes management guidelines and procedures with a view to preventing and controlling accidents during the implementation stage. The EAP operationally describes the response actions that will be adopted with the mobilization of material and human resources in the event of any identified accidental scenarios, making it possible to contain the leak at the source, collect the product and, consequently, minimize the resulting environmental damage. These documents were drawn up by CIPP, with the support of an independent consultancy, and filed with the environmental agency for evaluation (April 2024). To date, IBAMA has not issued a statement. Although CIPP has not yet applied for a license for the TMUT expansion - which will occur later in the project's implementation when the executive designs are ready - it is expected that IBAMA will make similar requests to those made for Pier 2, with the need to submit documents adapted to the construction phase. Although the exact instrument (and scope) is not defined yet, since it will depend project characteristics, volume and location of seabed dredging, IBAMA will require the preparation of a specific assessment of the E&S risks and impacts of the TMUT expansion, along with the presentation of applicable control, mitigation measures, for the construction phase. Green Hydrogen Hub - The ESIA prepared by CIPP through an independent consultancy to obtain the preliminary license for the GH2 Hub identified environmental aspects that are typical of civil works of this nature, such as: the transportation of people and supplies, clearing of vegetation, earthworks; opening up access; landfill execution; use of borrow pits and dump areas; movement, operation and maintenance of vehicles and equipment, demobilization of support areas, generation of noise and vibrations, particulate matter, atmospheric emissions, alteration of surface runoff, generation of solid waste and effluents, surplus materials, and leakage of chemical substances. This leads to potential environmental impacts and risks such as changes in noise and vibration levels, alterations to the quality of air, water, soil and sediment, the formation of erosive processes and alterations to the landscape. For each significant negative impact identified, environmental control measures were proposed to prevent, minimize or mitigate their effects in the 3 Public Disclosure phases of the project through Environmental Plans/Programs, consolidated in a reference ESMP. It will serve as the basis for drawing up the C-ESMPs for each Hub operator, to be developed and approved by the agency when applying for the Installation License for each of the Hub's facilities. The ESMP is robust and comprehensive and includes plans/programs for managing, mitigating, controlling and monitoring the E&S impacts and risks arising from the Hub's implementation works, including the operation phase: environmental management program, water quality monitoring, soil quality monitoring, noise and vibration monitoring, recovery of degraded areas, environmental audit plan, RMP & EAP, effluent monitoring, solid waste management, air quality monitoring and emissions control, microclimate monitoring. In the future, several companies will set up in each of these 3 areas to carry out the production, storage and distribution of GH2. These companies will have lease agreements with CIPP for the development of their industrial activities, and it will be up to them to obtain the necessary authorizations to set up and run their operations (installation and operation licenses). Notably, water consumption is a significant aspect of GH2 production. The water used in the electrolysis process will come from three sources: reuse, desalinization, or another form of distribution which guarantees the sustainability of the solution presented. The reuse water will come from the sewage system of Fortaleza city and will reach the EPZ area via an existent pipeline. Distribution will be the responsibility of Utilitas (service provider), which will install a plant in the EPZ area to receive and finally treat this water. A seawater desalinization plant is expected to be installed for the Hub, with the capacity to supply approx. 15,000 m³/day. For electrolysis, the water must be deionized, requiring stages of ultrafiltration, reverse osmosis, polishing, among other processes that will leave it with the necessary quality for use in the GH2 industry. The electricity generated will be supplied through the National System (SIN), primarily through the PECÉM II substation, in accordance with the commercial terms agreed by the entrepreneurs who will be setting up in the complex. It is also planned to install another complementary substation, PECÉM III, in the EPZ area, to distribute complementary energy to the GH2 plants. According to CIPP’s planning studies/calculations, which were provided to the Bank during Oct 03, 2024 Page 16 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) preparation, the water balance for the Hub operation is as follows – considering 5 signed pre-contracts with GH2 producers: (1) Utilitas capacity (1 module) = 50,457,600 m3/y (1.6 m3/s) (2) Desaliniz. plant capacity = 5,475,000 m3/y (3) Total availabity (1) + (2) = 55,932,600 m3/y (4) GH2 prod. demand = 22,398,130 m3/y (5) Water balance (3) – (4) = 33,534,470 m3/y (still available) The estimated consumption of energy is 2.3GW/y. As reported by CIPP, the anticipated water supplying alternatives have enough capacity to supply the demand of the companies with pre- contracts/MoUs with CIPP. Both the PECÉM III substation and the water supply units will be treated as Associated Facilities and will be under the environmental and social management of CIPP. Appropriate measures for this are provided for in the ESCP. ESS4 - Community Health and Safety Relevant This standard is relevant. The Project's activities may cause adverse impacts on community health and safety located nearby CIPP and related to the exposure of communities to diseases, adverse impacts on ecosystem services, management and safety of hazardous materials, road safety and emergency situations, temporary project induced labor influx, and the performance of property security teams. The Project does not depend on new or existing dams. In compliance with Brazilian legislation on the environmental licensing process, the ESIAs and ESMPs developed by CIPP include plans and programs aimed at anticipating and avoiding adverse impacts on community health and safety. Traffic and road safety – An increase in vehicle movement on highways and access roads is expected that may impact the traffic dynamics of the region. The Logistics and Equipment Transport Program included in the ESMP of the GH2 Hub defines the best routes for the transportation of materials and equipment and determines the necessary authorizations. A Construction Signage Program aims to alert workers and the resident population, bystanders and users of access roads and nearby highways about the risks of traffic accidents. It also aims at Public Disclosure regulating the traffic of vehicles and people in and around the working sites. It includes the implementation of communication and educational campaigns on "safe traffic," "types of signage," and respect of traffic laws. Finally, it prodes for the recording of road accidents. Furthermore, CIPP has hired a commute service for workers that contributes to reduce the number of trips by individual vehicles. Community disturbances – The socioenvironmental instruments prepared by the Borrower to comply with the Brazilian environmental licensing of the Project requires the monitoring of noise and vibration levels resulting from the installation and operation of the GH2 Hub and aiming to ensure acoustic environmental quality and the comfort of the community. Quarterly measurements are undertaking in several places and take as reference the parameters for admissible noise limits set in the Regulatory Standard 10,151/2019 and CONAMA Resolutions 001/1990 and 002/1990. These standards are consistent with the International Best Practices of the Sector. Although aspects related to the demand for a high flow of trucks that would constitute an additional source of noise for the expansion works of the TMUT and Pier 2 are considered in the C-ESMP, it does not consider mitigating measures and does not include plans for noise monitoring or traffic safety. Ecosystem services - Direct impacts of the activities supported by the Project on ecosystem services are addressed by measures proposed in: a) the Monitoring Programs on water quality, air quality, and emission control monitoring, b) the Management Plans of liquid effluents and solid waste and c) rational deforestation and landscape conservation plans that are required by the country’s legislation and have been incorporated into the ESMP of the GH2 Hub and in the C-ESMP of the expansion works of the TMUT/Pier 2. Emmergence Preparedness and Response – A first Risk Analysis Study was developed – per the Terms of Reference issued by IBAMA – as one of the legal requirements for the environmental license for the expansion of Pier 2. The study estimated the risks imposed on the environment and the external community by the Project. The application of the Preliminary Hazard Analysis (PHA) technique enabled the identification of 91 accidental hypotheses, with 24 accidental hypotheses of loss of containment of flammable Oct 03, 2024 Page 17 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) chemical substances (diesel oil and acetylene) being selected for the quantitative analysis stage. The consolidated accidental hypotheses were studied quantitatively, estimating the range of possible consequences through mathematical modeling using Phast Risk/Safeti software. It was found that the physical effects resulting from accidental situations do not reach areas with occupation and the presence of a fixed population. The results obtained were used to draw up the Vulnerability Mapping and to propose measures of emergency preparedness and response, which have been included in the risk management programs (RMP) and emergency action plans (EAP). A second Risk Analysis Study was carried out as part of the licensing process of the GH2 Hub. It was based on a consequence analysis that estimated the areas vulnerable to certain damage due to flammability or inhalation toxicity from products and processes in operation at the complex's future facilities. A total of 60 accidental hypotheses were simulated to represent the 21 pre-existing and future projects that will operate in the Complex. The analysis focused on simulating the consequences of the worst-case accident scenarios and supporting CIPP in making engineering decisions to better manage these effects. This study presents preliminary recommendations on the location of companies in the complex, the preparation of a comprehensive emergency plan, and engineering measures aimed at reducing the consequences and frequency of accidental scenarios. Most of the industries are planned to be located to the south of the complex, an area with a lower population density. The tankage area is closer to the Pecém community. While the utilities corridor is located in a very central region of the complex, there are no alternatives for new positions due to the nature of the project layout. The impacts coming from the pipelines have the potential in a worst case scenario of accidents to reach some neighboring communities (Pecém, Matões, Bolso), but considering the nature of the structure, the frequency of occurrence of this scenario is low. An Emmergence Preparedness and Response Plan has also been proposed and emphasizes awareness raising campaigns and periodical drills with the neighboring communities. The Emmergence Preparedness and Response Plans prepared for both the TMUT and the Public Disclosure GH2 Hub emphasize life and safety procedures as part of the operational requirements of these facilities. Finally, as defined by SEMACE, a detailed quantitative risk analysis will be carried out for each GH2 producing facilities, considering all the processes and comparing them with the appropriate criteria. This will be done when each hub producer/operator applies for their respective installation license. Temporary Project Induced Labor Influx – The ESIA concluded that the Project is expected to cause temporary induced labor influx, which can lead to the occurrence or increase of violence, sexual harassment, abuse and exploitation, social conflicts, and increased demand over basic public services networks beyond their capacity to serve. The ESIA provides for material measures to manage these risks in line with GIIP and included in the Integrated Environmental Education Program prepared for the expansion works of the TMUT/Pier 2, the Health Program of the Populations Surrounding the Enterprise (PSPCE) and the Worker Protection and Workplace Safety Plan (PPTSAT) prepared for the GH2 Hub. The main measures aiming to minimize labor influx by favoring the sourcing of the local workforce, the hiring and the provision of job skills qualification training for local workers, reducing the magnitude of labor influx and, consequently, the pressures on accommodations, rents, and public services and the potential rise of road accidents, SEA/SH incidents, spread of communicable diseases (including SDTs), substance abuse and violence. These programs also provide for the carryin out of substance abuse prevention and management programs and community education campaigns about the transmission of diseases (targeting specially women and youth); information campaigns regarding the Workers’ Code of Conduct for both workers and local communities and cultural sensitization training for workers regarding engagement with local communities; investments in and capacity building of local public service providers and the carrying out of vaccination campaigns against common and locally prevalent diseases. They also provide for the monitoring and control of endemics that may affect the communities and workforce and CIPP will also cause contractors, subcontractors and project workers to comply with its Code of Conduct that sets behavioral standards aimed at preventing SEA/SH risks and impacts. Finally, CIPP’s Grievance Mechanism will be broadly advertised and Oct 03, 2024 Page 18 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) open to raise and properly facilitate the resolution of local community complaints with regards to workers’ behaviors and CIPP will ensure proper enforcement of sanctions envisaged by the country legislation. Retainment of Security Personnel – CIPP has a Security Unit responsible for ensuring compliance with the requirements established in Resolution 053-COMPORTOS of 2021, the International Code for the Protection of Ships and Port Facilities (ISPS CODE), and the 2021 Port Security Plan, which regulates the entry, stay, movement, and exit of people, vehicles, cargo units, and goods. This unit is composed of security guards from a private security company, accredited by the Brazilian Federal Police and ruled by Ordinance No. 18,045/2023, which establishes criteria to regulate the activities of private armed and unarmed patrimonial security companies. ESCP – The Project ESCP includes material measures aiming to: a) raise awareness and provide clear information among nearby communities of environmental, social, health and safety risks of CIPP operations related to the Project and the key elements of Emergency Preparedness and Responses Plans; b) carry out induction and training programs on proper standards of behavior for the workforce about refraining from unacceptable conduct toward community members, specifically women; c) broad dissemination of the Grievance Mechanism among nearby communities, ensuring proper handling of SEA/SH and GBV related grievances; and d) appropriate screening and training of private security personnel. ESS5 - Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant This standard is relevant. In compliance with the Brazilian legislation for environmental licensing, the Ceará State Secretariat of Environment issued Terms of Reference for the environmental and social impact assessment of the Green Hydrogen Hub (DICOP/GECON/SEMACE, TdR N° 114/2022 – Fortaleza, 2022) and required an Environmental and Social Impact Assessment (ESIA) that should consider potential impacts related with restrictions on land uses, land acquisition, expropriation and/or displacement. Commissioned to an independent consultancy firm, the ESIA Public Disclosure concluded that no expropriations or resettlement are foreseen for the installation and operation of the Green Hydrogen Hub within the area of CIPP. The ESIA includes a historical register of the process of land acquisition for the installation of CIPP, showing that the State of Ceará issued Decree 24,032/1996 – declaring an area of 335 km² within the municipalities of Caucaia and São Gonçalo do Amarante as of public utility (DUP) - and Decree 24,294/1996 - creating a Special Expropriation Commission (CEDE) subordinated to the State Attorney General's Office and the Presidency of the Ceará Port Company (CEARAPORTOS). The DUP war renewed in 2007 (Decree 28,883/2007). As part of this process, the Institute of Agrarian Development of Ceará (IDACE) carried out the land regularization of an area equivalent to 21,200 hectares – located in the localities of Bolso, Madeiro, Paul, Camará, Cambeba, Fazendo Olho D’Água, Mixira, Caraúbas, Suzano, Matões, and Tapuio – and, afterwards, 386 families were expropriated, of which 218 small landowners, squatters, and landless rural workers with no land rights benefited from IDACE’s resettlement plan, which aimed to ensure access to agricultural lands and the maintenance of traditional livelihoods/social networks. They were resettled in seven nearby communities. Some of them belonged to the Anacé people and were later resettled in the Taba dos Anacé Indigenous Reserve (as addressed under ESS 7). Following the Brazilian legislation, which requires the payment of prior and fair compensation based on independent and qualified valuations, the remaining families received cash compensation. CIPP has the right to use 3,656.50 ha of this expropriated area granted by the State of Ceará for a period of 40 years, extendable for equal periods (State Law 18,589/2023) and has officially reported that there are 6 expropriation processes still under pending legal proceedings. Provisional possession over these areas – which owners have not been identified – have been granted to the State of Ceará by the Courts, following due legal procedures and deposit of the compensation value in a escrow account. Furthermore, 21 properties – which land owners and/or occupants have already been fully compensated – are still to be officially registered in the public notary registries on behalf of CIPP. During implementation the task Oct 03, 2024 Page 19 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) team will follow the closure of these processes as part of its due diligence. In short, Project activities will take place within the state-owned areas conceded for at least 40 years to CIPP. This area was acquired through expropriation procedures according to the national law that occurred in the first decade of the 21st century and were not undertaken or initiated in anticipation of, or in preparation for, the Project. The ESCP states that eventual (although currently unexpected) needs of land acquisition to ensure health and safety of neighboring communities will be implemented based on Resettlement Plans (RAP) prepared and implemented in a manner consistent with the requirements of ESS 5. This requirement will also apply to all land acquisitions needed for the construction of all Associated Facilities – such as the Hydrus Project. Managed by an Specific Purpose Enterprise formed in 2021, the Hydrus Project is one of the technological alternatives to provide water for the operation of the GH2 Hub. It includes the construction of a new reuse water production station (still in early stage of project design) envisaged to be located in a state owned area. Sanitary effluents from the Fortalez Metropolitan Region will be treated at this station until reuse water quality is achieved. Afterwards, the water will be transported to CIPP through an already existing underground pipeline (section 5 of the Eixão das Águas) that was built in early 2010 and is neither an Associated Facility, nor was built in anticipation or preparation for the Project. Any changes in this project design that may require land acquisition will follow the requirement of the preparation of a RAP in a manner consistent with the requirements of ESS 5. As previously mentioned, the construction of the Port of Pecém has already had adverse impacts on three local artisanal fishing communities (Pecém, Cumbuco and Praia de Taíba) because the port overlapped with preferential fishing areas and/or made fishing routes longer. Complying with the National Environmental Policy (Law 6,938/1981) and to compensate these adverse impacts (that are not related with the Project), the Operation License issued by IBAMA and the 5th version of the Integrated Environmental Management Plan (PBA) for the whole area of CIPP required the preparation and implementation of a Fishing Communities Public Disclosure Compensation Subprogram (PCAP, the Portuguese acronym for Programa de Compensação da Atividade de Pesca). This PCAP – under implementation – follows standards and guidelines set by IBAMA Technical Notes 07/2020 and 03/2024, including: a) an initial stage of community mobilization comprising consultation with the different social groups that make up each affected fishing community and their representative organizations, carried out in a culturally adequate manner (favoring popular communication strategies, the use of objective language and succinct texts in all communication pieces and events). b) Workshops to select demands and define the compensatory measures to be included in the PCAP in a participatory manner and with broad participation of fishing communities. c) The formation of a monitoring committee for the implementation of the PCAP, which is also composed by members of the fishing community. d) The consideration of four criteria for PCAP approval: i) collective decision by hearing members of the fishing community rather than only hearing community leaders; ii) inclusion of measures that are additional to the ordinary obligations of public authorities with the communities; c) favoring other forms of compensation to cash compensation; and d) compliance with legislation. The ongoing PCAP considers that these early works interfered with artisanal fishing due to its direct overlap with preferential fishing areas or routes rather than in the marine ichthyofauna but contributes to fishing by attracting species that were only found in areas distant from the continent. Thus, it does not include actions aimed at increasing fishing stocks but focuses in promoting actions of a mitigating and compensatory nature, including: • Measures to ensure the “innocent passage” of fishing vessels through the port area and to reduce the risk of accidents between fishing vessels and ships operating in the port area; • Measures for compensating for the increased distance of fishing routes, restriction of use of fishing grounds close to the port’s breakwater and access bridge, and the impacts caused by the increased circulation of large ships. These measures aim to improve navigability safety of fishing vessels and the individual protection of fishermen, increase the earnings of fishermen and shellfish gatherers (skills qualification, insertion in the job market and the creation of income alternatives), the biannual provision of fishing equipment and artifacts (enabling the renovation of rafts Oct 03, 2024 Page 20 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) selected by the fishermen), operational safety and personal protection equipment, continued capacity building on navigation safety, first aid, personal protection, and health, and health services. PCAP planning and implementation are overseen by the Environmental Education Program Governance Committee (CGPEA), created to comply with IBAMA Normative Instruction 02/2012. It enrolls representative fishing communities organizations, CSOs, the Brazilian Navy and the state/municipal governments, and is accountable for establishing a dialogue channel through which fishermen and shellfish gatherers present demands and resolve concerns and grievances. It meets quarterly. PCAP implementation and CGPEA deliberations are annually reported to IBAMA and the PCAP must be reviewed every three years (following the same participatory methodology). Considering all these aspects, the elements of the PCAP are considered in line with the objectives and principles of ESS 5 (though it has been prepared to address impacts thar were not in anticipation or prepartion for the Project). Considering that: a) The Complementary Environmental Assessment undertaken for the licensing of the expansion of TMUT supported by the Project has pointed out that the execution of the works for expansion of Pier 2/TMUT may increase these adverse impacts on the livelihood of the same three artisanal fishing communities by further limiting the areas they use for fishing and/or imposing new fishing routes with a longer distance. b) This potential adverse impact restricting access to fish stocks and traditional livelihoods of fishing communities falls within the scope of ESS 5 [paragraph 4(f)]. The Project ESCP includes the provision that if this risk is confirmed, the existing PCAP must be properly reviewed and expanded to address the potential additional adverse impacts in a manner consistent with the objectives and requirements of ESS 5. It also states that the implementation of the PCAP, its periodical reviews and the operation of CGPEA as a channel through which representatives of fishing communities can raise their concerns and discuss compensatory measures must be continued. ESS6 - Biodiversity Conservation and Sustainable Management of Living Natural Relevant Public Disclosure Resources Port Terminal - The main biodiversity risks and impacts resulting from the Pier 2 and TMUT expansion works are alteration of the habitat of the benthic soft-bottom community, impacts on marine fauna (mainly, ichthyofauna), alteration of water quality and the risk of introduction of exotic species. With the expansion of Pier 2 and the installation of the support structures, there should be a loss of habitat for soft-bottom benthic organisms such as polychaetes. However, by replacing this habitat with fixed, elevated structures, such as the support columns that will make up the pier, there will be an increase in the surfaces available for colonization by encrusting biota, such as sponges, ascidians, tunicates, corals, algae, molluscs, crustaceans and various other groups of organisms. The works are also expected to generate noise and vibrations with the installation of the pillars, as well as increased concentrations of particulate matter in the sea. These activities will cause disturbances that will be perceived mainly by the ichthyofauna, which will move in the opposite direction to the disturbances. The tendency is for the ichthyofauna to gradually return as the disturbances caused by the works cease. The new submerged structures of the pier will act as an artificial reef, even if they are regularly disturbed by the arrival and departure of ships. A similar effect can already be observed in the marine biological communities that have colonized the TPP breakwater. Another risk inherent to port activity is the introduction of exotic species associated with ballast water and the hulls of ships that operate in port. With the increase in the flow of vessels following the expansion of Pier 2, there is an increased risk of introducing exotic species. CIPP has a robust and comprehensive ESMP, which includes a set of plans and programs aimed at mitigating, controlling and monitoring the biodiversity-related impacts and risks, namely: 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; Oct 03, 2024 Page 21 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) Underwater noise monitoring sub-program. In order to particularly assess the risks and impacts on biodiversity due to the TMUT and Pier 2 expansions works, during the preparation stage, a Rapid Biodiversity Assessment (RBA) was commissioned by the Bank, aiming at (i) informing the WB’s E&S due diligence of the project; (ii) assessing the sufficiency of ongoing biodiversity management and monitoring plans against the ESS6 requirements; (iii) identifying the main potential impacts and suggesting potential/additional in-depth studies, programs or measures to be carried out to adequately mitigate and control the risks and impacts of the projects. The identification of Habitats (Modified, Natural or Critical) - according to the taxonomy of Environmental and Social Standard 6 (ESS6), was also part of the study scope. The criteria defined by the ESS6 and supplemented by the Draft Guidance for Critical Habitat Assessment (World Bank, 2023) were used to assess the existence of critical habitats in the study area. The use of distribution areas was adopted due to the lack of population data for these species on both a local and global scale. Overall, 47 threatened species were listed according to their recorded occurrence in the project's area of influence (direct and indirect). The fish group, especially elasmobranchs, had the highest number of species. Of these, only 15 species have been recorded in the area of influence of the Pecém Port Terminal (TPP). In relation to migratory species, some species of birds that are classified as endangered make intercontinental migrations, moving during the boreal or Antarctic winter, temporarily passing through the state of Ceará. Among the species recorded through the existing monitoring programs, the Trinta-réis-róseo (Sterna dougalli) is the most frequently observed species (55.3% frequency of occurrence) between 2014 and 2023, all the others have less than 5% of occurrence. Among the endangered species recorded during the surveys, Sotalia guianensis (gray dolphin) stands out, with a frequency of occurrence of 64.7% in the project’s area of influence. Four of the five species of sea turtles recorded on Brazilian coasts also occur, namely C. caretta, C mydas, E. imbricata and L. olivacea. The northern coast of Ceará is recognized for being one of the feeding areas for these turtles (ICMBio/MMA, 2018). Nevertheless, all the endangered and Public Disclosure endemic species identified had an occurrence percentage of less than 1% in relation to their total area of distribution. Also, according to the consultation carried out on the website of the IUCN Red List of Ecosystems | Database (iucnrle.org), in the state of Ceará there is no area considered to be a unique and/or highly threatened ecosystem. As per the preliminary results of the RBA, the study area, defined as the areas of direct and indirect influence of the Pecém Port Terminal, where Pier 2 and TMUT are located, were considered modified habitat. This area includes the physical structures that make up the TPP, a 300m buffer around them, as well as the port's evolution basin. These areas are considered to be modified spaces due to their intense use as a result of port activity. The area adjacent to the areas designated as modified habitat was considered natural habitat. In these areas there is less pressure from port activities, and there are no restrictions on fishing activities. Although no critical habitats were identified in the study area, the presence of species with varying degrees of vulnerability highlights the need to improve biodiversity surveys in the area. This will be done by strengthening the monitoring of aquatic biota, water quality, cetaceans, chelonians and seabirds carried out under the current licenses of the TPP, as determined in the project's ESCP. Furthermore, it is necessary to carry out a robust and continuous analysis of the impacts actually observed with the operation of the TPP and the expansion of the Pier 2 and TMUT, as also pointed out by IBAMA in its technical opinion. This analysis will make it possible, if necessary, to define appropriate environmental measures to prevent, minimize and compensate for the project's impacts. Green Hydrogen Hub - The key biodiversity-related impacts and risks as identified and assessed through the ESIA for the Hub are: loss and increase in the edge effect of terrestrial habitats, decrease in the number of individuals of native, endemic, protected and endangered species of flora, alteration of local ecological dynamics and sensitive areas, fragmentation of habitats, and degradation of environmental protected areas (APP, in Portuguese). As part of the Hub's ESIA, locational alternatives for implementing the project were studied, taking into account technical, economic and environmental aspects, in an integrated manner. Among the criteria analyzed were: total area and environmental zoning; interference with APP's and environmental conservation Oct 03, 2024 Page 22 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) units; among other aspects. A total of 1,083.59 hectares of vegetation will need to be cleared to implement the Hub, of which 977.2 hectares are in Coastal Cerrado (Seasonal Savannah), 70.53 hectares in Carnaubal and 35.84 hectares of Herbaceous-Shrub Restinga. Of this total, 70.24 hectares will be APPs located in the area directly affected by the project. The CIPP is defined as a Public Utility Area by State Decree No. 34,944/2022 and its updates, as well as being classified by the municipality of São Gonçalo do Amarante as a Special Industrial Zone of the CIPP by Law No. 1,221/2013 and by the municipality of Caucaia, as a “CIPP Special Industrial Zone” according to Law No. 1369/2001. According to national environmental legislation, cases of public utility are one of the exceptional cases in which intervention in these areas is permitted, provided that the relevant legal requirements are complied with, and the applicable environmental and financial compensation is carried out. SEMACE has already issued the preliminary environmental license for the Hub (LP No. 73/2023 - DICOP). In this document, the agency establishes as conditions that each company that will set up in the Hub will be required to: i) apply for specific environmental licensing, ii) submit the complementary Fauna Work Plan on the fauna diagnosis, before applying for the installation license; iii) apply to SEMACE, before installation, for the Environmental Authorization for Wild Fauna Management to carry out the Survey, Monitoring, Rescue and Destination of the fauna affected by the project, and; iv) agree to an Environmental Compensation Commitment Term, as necessary, because of the need to clear vegetation. The environmental control measures proposed to prevent, minimize and/or mitigate the significant risks and impacts are consolidated in a reference ESMP, part of the Hub’s ESIA, and include the following: landscape conservation plan, degraded area recovery plan, fauna monitoring program, fauna rescue and management plan, rational deforestation plan, and a program for monitoring run-over fauna, including external accesses that border the area and are in common use by the community. ESS7 - Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Not Currently Relevant Public Disclosure Local Communities This standard is not currently relevant. In compliance with the Brazilian legislation for environmental licensing, the Ceará State Secretariat of Environment issued Terms of Reference for the environmental and social impact assessment of the Green Hydrogen Hub (DICOP/GECON/SEMACE, Termo de Referência N° 114/2022 – Fortaleza, 2022) requiring an ESIA. This impact assessment should consider impacts on indigenous peoples, quilombola and traditional communities located nearby the area of the Project. According to this legislation, a prior technical opinion by the National Indigenous Peoples Foundation is required for all enterprises that may have impact on Indigenous Peoples and their lands. In such a case, a process of free, prior and informed consultation with Indigenous Peoples must be held, and the Basic Environmental Plan of the enterprise must include measures to prevent, mitigate or compensate adverse impacts on Indigenous Peoples and their lands. The ESIA of the Green Hydrogen Hub mapped all localities in the municipalities of Caucaia and São Gonçalo do Amarante where people that self-identify as members of the Tapeba and the Anacé People: • The Tapeba People live in the Tapeba Indigenous Land – an area of 5,240 hectares located in the municipality of Caucaia at 13.65 km from CIPP. This land was identified by FUNAI in 1986, but its limits were only defined through FUNAI Ordinance No. 734/2017. This land hosts a population of 6,651 people, partially overlaps with the Estuário do Rio Ceará Environmental Protection Area and has not been regularized yet, facing pressures from miners and large landowners. • The Anacé people traditionally inhabit a territory located in São Gonçalo do Amarante and Caucaia. Their ethnic emergence is closely linked to the installation, in the same area, of the CIPP. The Anacé have appeared “in literature since the 16th century. Over the centuries, like many other indigenous peoples in Northeast Brazil, and as a survival strategy, the Anacé chose to hide their identity. They stopped speaking their native language and adopted some elements of popular Catholicism that resembled their Oct 03, 2024 Page 23 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) religious customs (Santana et al.: 2010, A Luta Anacé frente aos “imPACtos” industriais. In: Anais da I Conferência Nacional de Políticas Públicas contra a Pobreza e a Desigualdade. Natal: CCHLA/UFRN). The historical evidence shows that, between 1995 and 1999, the context of the expropriations of the areas where the CIPP was established (in the communities of Matões, Paú, Madeiros, Bolso, Chaves, Gregório, Tapuio, Suzano, Torém, Cambeba) led to the resurgence of the Anacé ethnicity. The Anacé were supported by social movements and between 2003 and 2009 they made 13 representations, complaints, and requests to the Federal Public Ministry (MPF). In 2007 and 2008, they held the 1st and the 2nd assemblies of the Anacé Indigenous People and decided to fight for the demarcation of their lands and against the possible expropriation of the Anacé community's lands, resulting in a MPF’s administrative process and the drafting of MPF Technical Opinion No. 01/08, which supported the understanding of the Anacé People as an indigenous group, highlighted the high-magnitude socio-environmental damages associated with the installation of the CIPP, and proposed and alternative for its location not far from the Port of Pecém, but outside the boundaries of the lands traditionally occupied by the Anacé. This proposition was not accepted in the licensing process of the CIPP enterprises. In 2010, an agreement between the State Government, FUNAI, the MPF, and the Anacé People was reached, through which the Anacé gave up their claims over the area of CIPP in exchange for the establishment of an indigenous land and other compensatory measures, including the construction of houses and infrastructure (paved streets, basic sanitation, electricity, and road access). In 2012, Funai established a Technical Group to carry out studies of an ethnohistorical, anthropological, cartographic, land, and environmental nature, within the scope of the procedure for the constitution of this indigenous land for the relocation of the Anacé from Bolso and Matões. The goal of this Technical Group was to assess the adequacy of the area made available to house the Anacé families and their physical and cultural reproduction. Funai’s technical opinion was legally required for the release of the Installation License of the enterprise, which was issued, with the condition of acquiring an area Public Disclosure destined for the Indigenous Reserve, observing the vulnerability of the population to the socio-environmental impacts of the implementation and operation of the enterprise. In 2013, a Term of Commitment for the Creation of the Taba dos Anacé Reserve was agreed upon by the Anacé people, the Ceará State Government, Petrobras, the National Indigenous Peoples Foundation (Funai), and the Public Prosecutor's Office and signed with the provisions of acquisition of the area and installation of basic infrastructure. Hence, the Taba dos Anacé was established as a compensatory measure to the adverse impacts of physical displacement caused by land expropriation for the installation of a refinery within the polygonal of the Pecém Port and Industrial Complex in the beginning of the 21st Century. It is located at 11.06 km from CIPP, occupies an area of 543 hectares and hosts 163 families dislocated from the communities of Bolso and Matões. Taba dos Anacé was delivered to the Anacé in 2018 by the Government of the State of Ceará. Currently there is no evidence of legacy issues in this regard. In addition to the Taba dos Anacé Indigenous Reserve, the ESIA of the Green Hydrogen Hub identifies 20 different localities where people who self- identify as part of the Anacé are present in the vicinities of CIPP. They include the communities of Matões, Japuara and Santa Rosa (in Caucaia) and Pau-Branco, Salgado, Mangabeira, Tabuleiro Grande, Boqueirão, Currupião, Baixa das Carnaúbas, Maceió do Rafael, Área Verde, Torem, Gereraú, Lagoa Amarela, Chave, Tocos, Oiticica, Bolsos, Siupé and Tapuio (in São Gonçalo do Amarante). All these localities are outside of the area of the Project and outside of the buffer zone defined by the Risk Assessment Study made for the Green Hydrogen Hub. The land claims of the Anacé People that are being studied by FUNAI for the demarcation of the Anacé of Serra da Japuara Indigenous Land are also outside of these areas. This process is still ongoing. Consulted by CIPP during the environmental licensing process of the Green Hydrogen Hub, FUNAI officially answered (FUNAI/DPT Official Letter 784/2023) that a) multidisciplinary studies are underway on the area claimed by the Anacé , in the municipality of Caucaia and b) these studies were authorized through FUNAI Ordinance 1,354/2018, highlighting that the claimed territorial limits will only be known after the issuance of the Detailed Identification and Delimitation Report (RCID), which must be submitted for Oct 03, 2024 Page 24 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) approval by the Presidency of FUNAI. The interests of the Anacé People living in these nearby areas are represented by some Indigenous Peoples organizations: the Organization of the Old Trunks of Japiman; the Indigenous Council of the Anacé People of São Gonçalo do Amarante and Caucaia (CIPASA), the Indigenous Association of the Anacé People of Caucaia, the Anacé Association of Santa Rosa and the Anacé Indigenous Youth Commission. Leaderships and representative organizations of the Anacé People have been consulted during the elaboration of the ESIA in the process of environmental licensing of the Green Hydrogen Hub. ESS8 - Cultural Heritage Relevant This standard is relevant. The Brazilian legislation on environmental licensing requires that cultural heritage (including tangible and intangible heritage) and archaeological sites are considered in environmental impact assessments (CONAMA Resolution 001/1986. The legal framework on cultural (tangible and intangible) heritage establishes robust administrative procedures to be observed by the National Institute of Historical and Artistic Heritage (IPHAN) in the environmental licensing processes of which participate (IPHAN Normative Instruction No. 1/2015) and the protection of national historical and artistic heritage (Decree-Law 25/1937), which can be used for the achievement of material outcomes that are consistent with the objectives and requirements of ESS 8. In compliance with the Brazilian legislation for environmental licensing, the Ceará State Secretariat of Environment issued the Term of Reference for the environmental and social impact assessment of the Green Hydrogen Hub (DICOP/GECON/SEMACE, Termo de Referência N° 114/2022 – Fortaleza, 2022) required an Environmental and Social Impact Assessment that should consider potential impacts on sites of historical, cultural, landscape and archaeological value located within and nearby the Project site, in accordance with the Normative Instruction No. 01/2015 of the National Institute of Historical and Artistic Heritage (IPHAN). This ToR required that the ESIA should consider three alternatives for project Public Disclosure location, including considerations related to impacts on archaeological sites and historical heritage (among which the cultural spaces associated with intangible cultural heritage). It also required that the Project’s Environmental and Social Management Plan consider the inclusion of a Rescue Program for Archaeological, Cultural and Historical Heritage Finds. Through IPHAN-CE Technical Opinion No. 72/2022, the project was classified as Level IV "Medium and high interference with conditions in force on the ground and which precise layout and location will only be subject to definition after the Preliminary License phase or equivalent" and IPHAN was in favor of consent for Preliminary License, recommending the execution of the regular procedures established in IPHAN Ordinance 001/2015. With regards to intangible cultural heritage, the country system complies with the principles, guidelines and rules set by the National Intangible Heritage Program (established by Decree 3,551/2000) and the Convention for the Safeguard of UNESCO Intangible Heritage (2003), which includes measures aimed at ensuring the viability of intangible cultural heritage, such as identification, documentation, investigation, preservation, protection, promotion, appreciation, transmission – essentially through formal education and non-formal – and the revitalization of this heritage in its various aspects. These measures encompass – inter alia- the involvement, the borad support and the consent of social segments that value the intangible heritage, the safeguarding of the intangible heritage by supporting the material conditions that enable its existence and the shared management of intangible cultural heritage, articulating civil society and government institutions and promote accountability among these actors. Based on CNSA/IPHAN definitions, the ESIA of the Green Hydrogen Hub (2023) identifies 14 sites within the area of the utility corridors, Pier 2 and TMUT. The required Program was elaborated with the goal of preserving archaeological sites that may be damaged or destroyed during the implementation of the project, so that possible damages are avoided or mitigated by the production of scientific knowledge and the objectives of a) carrying out the rescue of archaeological sites that may be found in the Area Directly Affected by the Project, b) monitoring the implementation activities in order to Oct 03, 2024 Page 25 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) avoid or mitigate impacts to archaeological sites present in the area and c) promoting the dissemination of knowledge about archaeological heritage. The Program shall be implemented throughout Project implementation. The Archaeological Monitoring Subprogram provides for daily on-site archaeological monitoring of activities that involve earthmoving with the objective of identifying the presence or absence of an archaeological site in the area to be impacted by the Project, recording occurrences and the remains identified through photographic documentation, mapping, and descriptive assessments of the area. The archaeologist – responsible for field coordinator – will be responsible for the on-site monitoring and for informing IPHAN about the chances find of archaeological heritage and for awaiting its deliberation and pronouncement on the actions to be carried out. Any traces found during this stage will undergo registration and preservation. The Subprogram for the Rescue of Prehistoric, Archaeological Historical and Cultural Heritage will be carried out in a sample basis. After subsurface excavations, collections will be carried out to minimize impacts to archaeological remains located on the surface. After the site(s) have been rescued, all material will be taken to the laboratory for curation and analysis. Previously, in 2009, as part of the process of licensing the establishment of CIPP (the Port of Pecém and its industrial complex) a full assessment of the cultural heritage found in the area was conducted by a team of experts composed by Archaeologists, Historians, Geographers and Geologists commissioned by CENTEC. The assessment revealed the presence of archaeological remains, characterized as archaeological sites or occurrences, in different areas. In quantitative terms, 20 archaeological sites were identified (14 of which prehistoric sites and 6 historic sites) and 22 archaeological occurrences. The assessment proposed material measures to minimize adverse impacts in the cultural heritage found in the area, including: a) the execution of archaeological prospecting and rescue programs, according to the guidelines of IPHAN Ordinance 230/2002; b) the development of a diversified and participatory heritage education program with a view to the recognition of archaeological heritage by communities in the CIPP’s area of influence; and c) the memorial documentation of Public Disclosure archaeological heritage through reports and scientific publications. The assessment was submitted to and approved by IPHAN. CIPP’s Environmental Management Plan includes an Archaeological Prospecting and Rescue Program that encompasses three projects. The first aimed to provide for Intensive Prospecting with Sampling of Subsurface, in compartments with the greatest archaeological potential and was to be implemented, anticipating the execution of construction works. The second aimed the Archaeological Monitoring of construction works involving earthmoving, to be carried out during the entire installation period. The third project referred to Cultural Heritage Education and should be implemented mainly from the beginning of the works, given that the area is practically not inhabited. Finally, the Complementary Environmental Study for the Expansion of the Multi-Use Terminal (TMUT) at the Port of Pecém (dated 2013) also considered the registered and unregistered archaeological, historical and cultural heritage of the municipalities of Caucaia and São Gonçalo do Amarante The bibliographic research and consultation of IPHAN’s National Registry of Archaeological Sites (CNSA/IPHAN) identified 44 sites in these municipalities, but concluded that the probability of archaeological sites occurring in an underwater environment tends to be zero. The Project ESCP will include material measures aimed at the maintenance of the Archaeological Prospecting and Rescue Program and chance finds procedures required by the Brazilian licensing authorities for the installation of the industry and port complex and the Green Hydrogen Hub of Pecém aiming the protection of both tangible and intangible cultural heritage. ESS9 - Financial Intermediaries Not Currently Relevant Not relevant. Oct 03, 2024 Page 26 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) B.2 Legal Operational Policies that Apply OP 7.50 Operations on International Waterways No OP 7.60 Operations in Disputed Areas No 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), during project preparation, the task team has reviewed the bulky and robust environmental and social impact assessments and Environmental and Social Management Plans that CIPP has prepared to obtain the licensing for the installation and operation of both the industry and port complex and the Green Hydrogen Hub. The analysis of the ESIA of the Green Hydrogen Hub conducted by the task team has identified that it also includes an overarching Risk Assessment Study (RAS) of the production, transportation and storage of large quantities of green ammonia within CIPP facilities. This RAS was commissioned to a highly-acknowledged international specialized consultancy firm and defines a safety buffer zone considering the worst-case scenario for accidents related with ammonia-producing plants. The task team has also assessed the procedures adopted by CIPP to comply with the conditions set by the licensing governing authorities to concede installation and operations licenses and the track-record of the implementation of the environmental and social plans and programs required under the ESMP of the industry and port complex since its inauguration. This assessment considered monthly reports submitted by the independent consultancy firm in charge Public Disclosure of the implementation of the ESMP, the annual reports submitted by CIPP to IBAMA (the federal licensing authority) as required by the operation license, and the technical opinions issued by IBAMA on the performance of environmental and social risk management by CIPP. Also noteworthy is that the ESMPs for the Hub’s infrastructure (GH2 plants, corridor, tanking area) will build from the “preliminary” ESMP that has already been developed by CIPP and approved by the environmental agency (SEMACE). This “preliminary ESMP” was part of the Hub’s ESIA – which based the issuance of the Hub’s Preliminary License. The ESMP for the port terminal operation is already existent, and has been operational since 2022 (5th version). It might be complemented (as required by IBAMA) if risks and impacts of the Pier 2/TMUT expansion are different from the ones already addressed in their current plans and programs. The assessment of the these ESMPs was part of the Bank’s due diligence, and no significant gaps were identified. New ESMPs will have to be drawn up for the implementation of the power substation and water treatment plant (Utilitas). For these cases, the E&S team will assess their consistency with the ESF and propose any improvement needs as soon as possible during the licensing of these projects, considering the level of control that CIPP exercises over these associated facilities. Nevertheless, during implementation, the team will also revise future ESMPs / revised versions of ESMPs to ensure consistency with the ESF requirements. Following the defined E&S strategy, eventual gaps identified during implementation and monitoring stage will be properly addressed as part of the Bank’s performance assessment, and for that, supplementary studies, plans, reports, etc. might be requested, as deemed relevant. As part of its due diligence, the task team has reviewed historical records on the process of land acquisition needed for the installation of the industry and port complex (at the turn of the Century) and on the relocation of the Anacé Oct 03, 2024 Page 27 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) Indigenous Peoples from nearby communities to the Taba dos Anacé Indigenous Reserve (2013-2018) and has also commissioned a Rapid Biodiversity Assessment to an independent high-qualified consultant. The main findings of this due diligence are: a) The ESIAs of both the industry and port complex and the Green Hydrogen Hub identify and access all relevant environmental, social and labor risks and impacts of both enterprises, addressing the key elements of the relevant ESSs. b) The programs and plans incorporated in the ESMPs of both projects (industry and port complex and the Green Hydrogen Hub) include material measures to manage those risks in a manner that would allow the achievement of outcomes materially consistent with the objectives of the relevant ESSs. c) In compliance with the requirements of the regulatory agencies for licensing installation and operation, CIPP. implements – in a permanent basis – key stakeholders engagement activities and operates a readily accessible grievance mechanism that shows all the necessary functionalities to facilitate the resolution of complaints promptly, effectively, in a transparent and responsive manner, at no cost and without retribution. d) As observed by IBAMA’s 2023 Technical Opinion, some of the on-the-ground/day-to-day implementation processes and procedures of these plans and programs – particularly on the monitoring of aquatic fauna, waste management, and community communication – must be enhanced and a small number of material measures aimed Public Disclosure at resolving these procedural shortcomings and further strengthening stakeholder engagement have been agreed and incorporated in both the Project’s Environmental and Social Commitment Plan and Stakeholder Engagement Plan. e) Even though the recently conducted Brazil Overview Assessment identified some gaps between the ESF and the country legislation, the Bank's due diligence during Project preparation has identified that CIPP's environmental and social management system (ESMS), together with the environmental licensing requirements for CIPP's activities, required by SEMACE and IBAMA, and CIPP's own voluntary practices (e.g., seeking ISO 14.001 and 45.001 certification) guarantee consistent alignment with the expected results from the application of the ESF. Hence, up to this stage the E&S team did not identify any significant gaps with relation to the ESF requirements. The team not only considered a thorough review of the available E&S documents previously developed by the client (i.e., ESIAs, monitoring reports, etc.), but also the whole E&S risk management system involving the project (on both the borrower’s side and also the licensing agencies), including, the borrower’s installed E&S technical capacity, structure, resources, applicable E&S legislation, environmental licensing requirements, and diligent enforcement carried out by the licensing agency. Minor gaps have been addressed through the insertion of material measures in the Project’s ESCP and eventual gaps that might be identified during implementation and monitoring stage will be properly addressed as part of the Bank’s performance assessment, and also considering the process of change/adaptative management. Use of Common Approach No The Climate Investment Funds (CIF) through the Renewable Energy Integration (REI) provides US$ 35m of concessional and grant funding to support the project and capacity building in the CIPP. The funding will be blended Oct 03, 2024 Page 28 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) with IBRD resources to lower the cost of capital to enable green hydrogen development which will accelerate the integration of renewable energy into hard-to-abate sectors and unlock further private sector investment in renewable generation. C. Overview of Required Environmental and Social Risk Management Activities C.1 What Borrower environmental and social analyses, instruments, plans and/or frameworks are planned or required by implementation? Prior to Effectiveness, the Borrower will complete consultations on the Project’s Stakeholder Engagement Plan, which post-consultation version shall be disclosed by the Borrower and the World Bank within 30 days after Effectiveness. During implementation, the Borrower will: a) develop a Guidance Note on environmental, social, and OHS/labor risk management standards to be adopted by CIPP. and all operators of Green Hydrogen Associated Facilities; b) awareness raising campaigns among the workforce against discrimination and SEA/SH; c) implement the stakeholder consultation and engagement activities envisaged in the SEP and, particularly, make the best efforts (within the limits of its responsibilities and based on the involvement of partnerships with municipal governments) to promote the development of surrounding communities and meet expectations/opportunities related to income generation and job qualification; d) strengthen the capacity of the teams in charge of environmental and social risk management and the effectiveness of the implementation of the programs and plans required under the ESMPs approved by the regulatory environmental agencies in the licensing processes of the industrial and port complex and the Green Hydrogen Hub; e) biannually report to the Bank on the management of environmental and social risks; f) promptly inform the task team Public Disclosure of any accidents or incidents related with project supported activities that had, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers; and g) promptly inform the task team of any significant changes identified through its regular monitoring procedures in relation to the environmental and social risks of activities supported by the project and appropriately update environmental and social risk management instruments in response to these changes. As part of its due diligence, the World Bank task team will: a) carry out six-monthly implementation support missions; b) review the semi-annual reports submitted by CIPP on environmental, social, health and safety aspects; c) assess the progress on the implementation of the material measures agreed on the Project’s Environmental and Social Commitment Plan; d) provide orientation and support the development of the Guidance Note on environmental, social, and OHS/labor risk management standards to be adopted by CIPP. and all operators of Green Hydrogen Associated Facilities and on the content of the awareness raising campaigns against discrimination and SEA/SH; e) check compliance of the Borrower with the requirements of the licenses for installation and operation of the industry and port complex and the Green Hydrogen Hub, including through the review of the Technical Opinion’s regularly issued by the licensing authorities; and f) follow the closure of the notarial register of the 21 plots of land still ongoing and provide guidance on the updating of the PCAP to ensure it is in line with the requirements of ESS 5. Furthermore, the Bank will maintain a robust and continuous analysis of the impacts actually observed with the operation of the TPP and the expansion of the Pier 2 and TMUT, as also pointed out by IBAMA in its technical opinion. This analysis will make it possible, if necessary, to define appropriate environmental measures to prevent, minimize and compensate for the project's impacts. Oct 03, 2024 Page 29 of 30 The World Bank Expanding Clean Hydrogen In Brazil - Ceara Hydrogen Hub (P181511) III. CONTACT POINT World Bank Task Team Leader: David Vilar Ferrenbach Title: Senior Energy Specialist, Program Leader Email: dvilar@worldbank.org TTL Contact: Pierre Audinet Job Title: Lead Energy Specialist Email: paudinet@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 Oct 03, 2024 Page 30 of 30