INTEGRATED SAFEGUARDS DATASHEET
APPRAISAL STAGE

I. Basic Information
Date prepared/updated: 10/03/2005
Report No.: AC1611
Public Disclosure Authorized
1. Basic Project Data

Country: Hungary
Project ID: P074971
Project Name: Nutrient Reduction GEF Project
Task Team Leader: Xavier Chauvot De Beauche
GEF Focal Area: International waters
Global Supplemental ID:
Estimated Appraisal Date: October 4, 2005
Estimated Board Date: December 8, 2005
Managing Unit: ECSIE
Lending Instrument: Specific Investment
Loan
Sector: Sewerage (50%);General water, sanitation and flood protection sector (50%)
Theme: Biodiversity (P);Pollution management and environmental health (P);Other
environment and natural resources management (S)
IBRD Amount (US$m.):
0.00
Public Disclosure Authorized
IDA Amount (US$m.):
0.00
GEF Amount (US$m.):
12.50
PCF Amount (US$m.):
0.00
Other financing amounts by source:
BORROWER/RECIPIENT
19.47
19.47
Environmental Category: B - Partial Assessment
Simplified Processing
Simple [X]
Repeater []
Is this project processed under OP 8.50 (Emergency Recovery)
Yes [ ]
No [X]
2. Project Objectives
Public Disclosure Authorized
The Project's higher-level objectives are to assist national and local authorities in
Hungary in the implementation of top priority investments in the wastewater sector and
to support the Government's commitments under the Danube Conventions and other
international agreements for the protection of the Danube River and the Black Sea.

The key development objectives of the Project are: (i) to reduce Budapest's discharge of
nutrients (nitrogen and phosphorus) into the Danube River, and consequently into the
Black Sea; (ii) to enhance the nutrient trapping capacity of Gemenc and Beda-Karapancsa
wetlands situated in the lower Hungarian part of the Danube River; and (iii) to serve as a
model for similar nutrient reduction initiatives in Hungary and other Danube basin
countries. These objectives will be achieved through: (i) the development of tertiary
treatment (nutrient removal) at the North Budapest Wastewater Treatment Plant
(NBWWTP); (ii) the rehabilitation of wetlands in the Gemenc and Beda-Karapancsa
Public Disclosure Authorized
areas of the Duna-Drava National Park (DDNP); and (iii) the establishment of a
comprehensive Monitoring and Evaluation (M&E) system for water quality and
environmental health allowing to measure the reduction of nutrients and contributing to
the development of an impact evaluation methodology. The Project will also finance

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dissemination activities to foster replication in Hungary or in other parts of the Danube
River basin.

3. Project Description
The Project's cost of US$32 million would be partially financed by a full-sized GEF
Grant in the amount of US$12.5 million. The Grant will be complemented by a
reallocation in the amount of EUR5.9 million (US$7.7 million equivalent) from the
Bank's Loan 4512-HU to the MOB for the HMWP, and additional counterpart funding of
about US$10.4 million from MOB, and US$1.4 million from the Ministry of
Environment and Water (MOEW).

The Project will assist the Government of Hungary (GoH) in developing advanced
wastewater treatment of domestic discharges and to restore high priority wetlands to
work as nutrient traps, while increasing their internationally recognized ecological values.
It will enable comparison of two different forms of intervention to reduce discharges of
nutrients from point and non-point sources, and evaluation of their impacts in terms of
global benefits in relation to their respective investment and operation costs. It is thus
expected to have an important demonstration role in Hungary and within the region to
help develop technically and financially sound solutions, allowing for best use of scarce
resources. Furthermore, the Project is expected to strengthen the institutions involved,
build capacity of local staff in efficient development and operation of wetlands for
nutrient trapping, and raise awareness of the ecological benefits of wetland rehabilitation
and their impacts on biodiversity. The Project has three components:

Component 1 - Development of nutrient removal at the NBWWTP (Budapest).
This component, hereafter referred to as MOB- or Budapest- component, will finance
works and equipment to upgrade the NBWWTP to the tertiary level of treatment for N
and P removal. The technology for such treatment is highly specific and likely to be
protected by patents. From a procurement standpoint, specifying the technical
solution/process would give an unfair advantage to a given supplier. Therefore, the
procurement will be based on a set of precisely defined performance requirements (to be
detailed in the technical specifications of the bidding documents), with evaluation based
on technical and financial efficiency in attaining the specified outcomes.

Component 2 - Wetland Restoration in the Duna-Drava National Park (DDNP
component).
This component will finance the rehabilitation of about 10,000 hectares of wetlands to
develop their nutrient trapping capacity within two identified areas, Gemenc and Beda-
Karapancsa, located within the DDNP, directly along the course of the Danube River. It
will also provide funds to design and install a M&E system for the evaluation of Project
impacts in terms of reduction of N and P. Parameters to be included in the M&E system
will be determined on the basis of the baseline survey to be carried out at the first stage of
the Project. This rehabilitation will be implemented in stages, with the establishment of
one pilot in each of the two areas for a period of one year. A comprehensive study will be
carried out at the beginning of the Project to assess the areas' environmental quality, to
determine the precise location of the two pilots, and to provide recommendations on the

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design and development of the M&E system. Building on the results and lessons learned
from the pilots, the rehabilitation will then be scaled up. Early in the process, an Experts
Panel will be convened by the MOEW to assess and assist the Southtransdanubian
Environmental and Water Authority (WA) and the DDNP authorities in the selection and
monitoring of the planned interventions. In parallel, the component will develop a
methodology of impact evaluation, using local research organizations and universities. It
will also include the development of a DDNP Special Area Management Plan, and
limited funding for incremental Project management costs for the DDNP. Works to be
carried out in the wetlands include clearing, dredging and construction or installation of
regulating water structures. This component will be implemented by the WA, acting as an
implementing agency on behalf of the DDNP.

Component 3 - Dissemination and Replication.
This component will finance consultant services to carry out a comprehensive end-of-
project impact evaluation and results analysis study of the two interventions (tertiary
treatment and wetlands restoration), including a cost-benefit analysis. It will also finance
dissemination, public awareness and replication activities, such as workshop and public
communication campaigns, that will be prepared on the basis of the impact evaluation
study. The Project will also provide limited funds to finance a Project launch workshop;
auditing services; and training to strengthen WA for project implementation and to build
capacity of DDNP staff for the efficient development and operation of wetlands for
nutrient trapping.

4. Project Location and salient physical characteristics relevant to the safeguard
analysis
As indicated above, the Project will be implemented in the NBWWTP of the city of
Budapest (component 1) and in 10,000 hectares of wetlands in the DDNP, which covers
50,000 hectares. Tertiary treatment facilities to be financed under the Project in the
NBWWTP will be entirely located within the current plant's area and would not represent
a modification to the plant's physical characteristics relevant to the safeguards analysis.
The interventions to be financed by the Project in the DDNP will be located in the
Gemenc and Beda-Karapancsa areas, which represent 27,800 hectares, of which about
19,500 hectares acts as a floodplain and is thus involved, at least during flood events, in
trapping part of the nutrients carried by the Danube.

Once these interventions are completed, it is expected that these areas would be subject
to longer submergence periods, increasing the surface of permanent wetlands to a
situation that more closely resembles their natural conditions.

5. Environmental and Social Safeguards Specialists
Mr Manuel G. Marino (ECSIE)
Mr Norval Stanley Peabody (ECSSD)

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6. Safeguard Policies Triggered
Yes No
Environmental Assessment (OP/BP 4.01)
X
Natural Habitats (OP/BP 4.04)
X
Forests (OP/BP 4.36)
X
Pest Management (OP 4.09)
X
Cultural Property (OPN 11.03)
X
Indigenous Peoples (OD 4.20)
X
Involuntary Resettlement (OP/BP 4.12)
X
Safety of Dams (OP/BP 4.37)
X
Projects on International Waterways (OP/BP 7.50)
X
Projects in Disputed Areas (OP/BP 7.60)
X
II. Key Safeguard Policy Issues and Their Management
A. Summary of Key Safeguard Issues
1. Describe any safeguard issues and impacts associated with the proposed project.
Identify and describe any potential large scale, significant and/or irreversible impacts:
Environmental Assessment (OP/BP 4.01).
The MOB completed the environmental assessment report for its component and got
Government's approval. The WA, on behalf of the DDNP, completed an EIA for the
DDNP component. As the process for its approval is rather lengthy in Hungary, the
Project provides for late implementation for the DDNP component once the
Government's approval for this EIA is obtained.

The EIAs and other studies carried out during preparation clearly indicate that no
significant negative impact on the environment is expected as a result of the Project's
implementation. For the Budapest component, potential impacts are exclusively limited
to those that could occur during the construction phase (noise, etc.) which will be
adequately controlled (the EMP includes measures to this end). For the DDNP
component, the EIA has identified potential environmental negative impacts associated to
dredging, changes in the local hydrology, disposal of dredge materials, and increased
flow of pollutants into the wetland. The EIA concludes that no significant negative
impacts are expected if the precautions (see next paragraph and PAD for details) foreseen
under the EMP are followed. Moreover, the rehabilitation of the wetlands is expected to
improve the ecological conditions of the ecosystem and increase biodiversity, as new
valuable habitats will be created. Positive ecological impacts are in particular expected
with the creation of additional habitats for a number of migratory bird species of global
importance. As indicated above, the Ministry of Environment will convene an Experts
Panel to assist the WA and DDNP authorities in the assessment and monitoring of the
proposed interventions.

Environmental Management Plans have been prepared for each of the aforementioned
components, and mitigation measures have been proposed. In particular, for the DDNP
component, possible options for the handling and disposal of the dredged material have
been considered and will be thoroughly examined as part of the detailed design. These
measures include testing materials to be dredged for potential contamination, physically

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isolate area during dredging and until sedimentation, reuse dredged material where
practicable if of acceptable quality, dispose of dredged material to an appropriate site
according to its quality and concentrate the dredging and construction work during
ecologically less sensitive periods of the year. Contractors will be responsible to
implement these precautions and measures and their implementation will be supervised
by the WA, the DDNP and the MOEW. These EMPs will be incorporated in the Project
Operational Manual and its implementation will be monitored as part of Bank follow-up
visits.

Natural Habitats (OP/BP 4.04)
On the basis of the conclusions of the EIAs, the Project is not expected to have any
significant conversion (loss) or degradation of natural habitats, particularly in the DDNP.
The DDNP is currently flooded periodically (several times a year) by the Danube River.
The Project will increase water retention and expand the areas of permanent wetlands.
Specific provisions have been included in the EMP to ensure that these works are carried
out taking into consideration the functioning of these habitats so as to avoid disturbing
migratory species or reduce biodiversity. Populations of selected endangered species will
be monitored during and beyond the Project life as part of the Park monitoring system to
be established. Consistent with the Safeguards meeting and comments received, the
Project Team took all necessary measures to comply with the OP/BP.

Cultural Property (OPN 11.03), Indigenous Peoples (OD 4.20), Involuntary
Resettlement (OP/BP 4.12)
The investments financed by the Project will not affect any known archeological or
historical site, nor will it affect indigenous people or require resettlement or purchase of
land.

Safety of Dams (OP/BP 4.37)
No dams higher than 15 meters are located within the Project area and no upstream dam
infrastructure failure could impact the planned investments.

Projects on International Waterways (OP/BP/GP 7.50).
The Project is expected to have a positive impact on the water quality of the Danube,
which is an international waterway. In addition, riparian countries which are signatory
members of the Danube convention have been informed of and have discussed the
Project within the scope of the Danube Commission, which has included it in the priority
list of the Joint Action Program. Therefore notification to the riparian countries as part of
OP7.50 has been waived for this Project via Memo from the ECA RVP dated March 18,
2005.

No other Safeguard Policy is triggered.

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2. Describe any potential indirect and/or long term impacts due to anticipated future
activities in the project area:
No significant negative impact on the environment is expected as a result of Project
implementation. Given the nature of the investments, the Project has been classified as
environmental category "B".

3. Describe any project alternatives (if relevant) considered to help avoid or minimize
adverse impacts.
As indicated above, the impacts of the Project are expected to be positive. For each
component, the EIAs studied different alternatives to maximize the positive impacts, in
terms of nutrient reduction, but also in terms of biodiversity and ecological balance.

4. Describe measures taken by the borrower to address safeguard policy issues. Provide
an assessment of borrower capacity to plan and implement the measures described.
Environmental Management Plans (EMP) were prepared for components 1 and 2
separately. The Mitigation Plan prepared under each EMP identifies and addresses all
relevant parameters, impacts and mitigation measures, both during the construction and
operation periods, and identifies the agency with designated responsibility for its
implementation and for its enforcement. In particular, for the DDNP component, it
includes specific measures in regard to the handling and disposal of dredged material.
The distribution of responsibilities for the implementation and monitoring of these EMPs
will be incorporated in the four-party agreement between the MOEW, the MOB, the WA
and the DDNP. Additionally, these EMPs will be incorporated in the Project Operational
Manual and its implementation will be monitored as part of Bank supervision missions.

For the MOB component, the municipality has shown satisfactory capacity during
preparation and implementation of the ongoing Municipal Wastewater Project, financed
by loan 4512 HU, which has a more complex structure and larger requirements.

Despite being technically strong institutions and with experience in dealing with the
Hungarian regulations in the matter, the Implementing Team of the WA and the DDNP
do not have yet experience in dealing with the World Bank Safeguards Policies. To
address this lack of experience, the Project provides for a Project launch workshop,
coaching from MOB to WA and DDNP and assistance from specialized consultants.
Therefore, the Project will build capacity of both WA and DDNP in regard to World
Bank's Safeguard Policies requirements.

5. Identify the key stakeholders and describe the mechanisms for consultation and
disclosure on safeguard policies, with an emphasis on potentially affected people.
Key project stakeholders are the institutions involved in its implementation, the
ecological associations of the DDNP and the public at large. For Component 1, on June
1, 2005, the Bank received confirmation that a summary of the Budapest-Component EIA
was disclosed to the public in Hungarian and in English on the website of the
Municipality. For component 2, the WA, on behalf of the DDNP, completed the Park
Component's EIA and presented it in a public forum on March 2005. This Component's
EAI, as well as the EMP, were also made available to the public for consultation at the

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public service office of the South-Transdanubian Environment Protection and Water
Management Directorate from June 1 to June 8, 2005. The project's EIAs and EMPs were
submitted to the Infoshop on June 7, 2005.

B. Disclosure Requirements Date
Environmental Assessment/Audit/Management Plan/Other:
Date of receipt by the Bank
04/15/2005

Date of "in-country" disclosure
06/01/2005

Date of submission to InfoShop
06/07/2005

For category A projects, date of distributing the Executive

Summary of the EA to the Executive Directors
* If the project triggers the Pest Management, Cultural Property and/or the Safety
of Dams policies, the respective issues are to be addressed and disclosed as part of
the Environmental Assessment/Audit/or EMP.
If in-country disclosure of any of the above documents is not expected, please
explain why:
C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the
ISDS is finalized by the project decision meeting)

OP/BP/GP 4.01 - Environment Assessment

Does the project require a stand-alone EA (including EMP) report?
Yes
If yes, then did the Regional Environment Unit review and approve the EA
Yes
report?
Are the cost and the accountabilities for the EMP incorporated in the
Yes
credit/loan?
OP/BP 4.04 - Natural Habitats

Would the project result in any significant conversion or degradation of
No
critical natural habitats?
If the project would result in significant conversion or degradation of other
Yes
(non-critical) natural habitats, does the project include mitigation measures
acceptable to the Bank?
OP 7.50 - Projects on International Waterways

Have the other riparians been notified of the project?
No
If the project falls under one of the exceptions to the notification
Yes
requirement, has this been cleared with the Legal Department, and the memo
to the RVP prepared and sent?
What are the reasons for the exception? Please explain:
Yes
Has the RVP approved such an exception?
Yes
BP 17.50 - Public Disclosure

Have relevant safeguard policies documents been sent to the World Bank's
Yes
Infoshop?

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Have relevant documents been disclosed in-country in a public place in a
Yes
form and language that are understandable and accessible to project-affected
groups and local NGOs?
All Safeguard Policies

Have satisfactory calendar, budget and clear institutional responsibilities
Yes
been prepared for the implementation of measures related to safeguard
policies?
Have costs related to safeguard policy measures been included in the project
Yes
cost?
Does the Monitoring and Evaluation system of the project include the
Yes
monitoring of safeguard impacts and measures related to safeguard policies?
Have satisfactory implementation arrangements been agreed with the
Yes
borrower and the same been adequately reflected in the project legal
documents?
D. Approvals

Signed and submitted by:
Name
Date
Task Team Leader:
Mr Xavier Chauvot De Beauchene
06/04/2005
Environmental Specialist:
Mr Manuel G. Marino
06/07/2005
Social Development Specialist
Mr Norval Stanley Peabody
08/10/2005
Additional Environmental and/or
Mr Cristobal Felix Diaz Morejon
06/14/2005
Social Development Specialist(s):
Approved by:

Regional Safeguards Coordinator:
Mr Ronald N. Hoffer
08/25/2005
Comments: Marjory-Anne Bromhead (Acting Regional Safeguard Coordinator)
Sector Manager:
Mr Sumter Lee Travers
09/29/2005
Comments:

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