PROJECT BRIEF
1. IDENTIFIERS:
PROJECT NUMBER:
PROJECT NAME:
RURAL ENVIRONMENTAL PROTECTION
PROJECT
DURATION:
3 years
IMPLEMENTING AGENCY:
World Bank
EXECUTING AGENCIES:
Ministry of Environmental Protection,
Natural Resources and Forestry, the National
Fund for Environmental Protection and
Water Management (NFEP), and Ministry of
Agriculture and Food Economy (MAFE)
REQUESTING COUNTRY OR COUNTRIES:
Poland
ELIGIBILITY:
As per IBRD eligibility.
GEF FOCAL AREA:
International Waters
GEF PROGRAMMING FRAMEWORK:
OP#9: "Integrated Land and Water Focal
Area"
2. SUMMARY : The global objective of the project is to improve the quality of the water of
the Baltic Sea by decreasing non-point sources of nutrient pollution from agriculture. The
Baltic Sea Strategic Action Plan estimates that 30-40% of the nitrogen and 10% of the
phosphorous entering the Sea come from agriculture, and the eutrophic conditions they cause
represent the Baltic Sea's top priority transboundary water problem. The project will help
Polish small farmers to adopt innovative waste management techniques and land use
practices to reduce pollution releases. GEF funds will be used to buy down the cost of adopting
these technical innovations in agricultural practices and waste management and help
overcome barriers to moving from demonstration level activities to operations projects for
agricultural non-point source pollution. Participating farmers will be expected to pay
approximately one-third of the cost.
3. COSTS AND FINANCING (MILLION US):
GEF:
-Project
US$3 million
Subtotal GEF:
US$3 million
C O-FINANCING:
-IBRD
US$2 million
-EU (Phare):
US$3.9 million
-NEFCO
US$1 million
-Government
US$1 million
-Beneficiaries
US$3.5 million
Subtotal Co-financing:
US$11.4 million
TOTAL PROJECT C OST:
US$14.4 million
4. ASSOCIATED FINANCING (MILLION US$) :
US$ 0.8 million
(other donor actitivities)
5. OPERATIONAL FOCAL POINT ENDORSEMENT:
Name:Wojciech Ponikiewski
Title: Senior Advisor to the Minister
Organization: Ministry of Foreign Affairs
Date: May 27, 1998
6. IA CONTACT:
Jocelyne Albert, GEF Regional Coordinator
Eastern Europe and Central Asia
Tel. 202-473-3458 / Fax 202-522-3256
Internet: jalbert@worldbank.org
N:\ENVGC\COUNCIL\MAY98\POLAND\PADGEF.DOC
June 11, 1998 9:24 AM
A: PROJECT DEVELOPMENT O BJECTIVE
1. Global and project development objectives and performance indicators (see Annex 1):
Global Environmental Goal. The long-term goal of the project is to improve the quality of the
water of the Baltic Sea by reducing non point source pollution from agriculture. Project activities are
directly linked to the implementation of the Baltic Sea Joint Comprehensive Environmental

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Program which provides a framework for regional cooperation for protection of this important
international water body. The project also supports Poland's move towards compliance with its
national policies and with international legal agreements. These include the Helsinki Convention and
the environmental directives of the European Union (EU), which will apply to Poland as part of the
process of joining the Union.
Project Development Objective. The project's specific objective is to develop interventions which
motivate farmers to reduce the release of organic matter and nutrients entering water bodies in target
project areas. GEF funding will help remove institutional, financial and knowledge barriers which
currently serve as disincentives to farmer adoption of environmentally sustainable agricultural
practices.
Demand-Driven, Flexible Approach. The project is modeled on the approach taken by social
investment funds which are flexible funding mechanisms that respond to requests from communities
or local groups. Thus the project will respond to demands from eligible farmers for support, rather
than targeting specific farms or farmers. It will be flexible, so that project design can be adapted
during implementation according to feedback from beneficiaries and local communities. In this way,
it takes a highly participatory approach by involving farmers and farmers' representatives in the
decision-making processes.
The project is a "learning and innovation loan" (LIL), which emphasizes flexibility, testing and
learning with the aim of scaling up the project into a larger program in the future. The Government
plans to use the project implementation experience to develop a nationwide program to integrate
environmental concerns into agricultural and rural development practices and improve the quality of
Poland's water bodies.
Field Tested Technology. The technical issues involved are well understood and have been field tested
in Poland under three internationally funded pilot operations - sponsored by the USEPA, EU (Phare)
and Sweden - and by a major Polish NGO. This project will test barrier-removal mechanisms which
over time will allow for scaling demonstration activities up into a comprehensive program. It will
also test the beneficiaries' willingness to pay for services and investments to improve their
agricultural management practices. The financial and economic impact of the adoption of new
farming and other agricultural practices will be closely monitored and results will feed back into the
program design.
Key Performance Indicators.
Key project and global environmental indicators will be:
· Number of applications for support from farmers.
· Satisfactory construction and maintenance of on-farm environmental infrastructure.
· Establishment of an adequate system for monitoring quality of international waters, particularly
in the Vistula and the Odra Lagoons, and agreed baseline.
· Completed financial analysis of the impacts to farmers of improving their environmental
management practices.
Monitoring arrangements are:
· The NFEP will monitor project effectiveness through beneficiary assessment, economic and
financial evaluation, and monitoring of key indicators.
· The MEP and the Regional Water Boards (RWBs) will establish a baseline for ongoing long-term
monitoring of the environmental effects of the interventions.
· Special monitoring programs and environmental indicators are currently being developed for the
Vistula and Odra Lagoons which would be used for these special transboundary areas.
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2. GEF Program Objective addressed by the Project
The Joint Comprehensive Environmental Action Program for the Baltic Sea, a regional strategic
action plan developed under the leadership of the Helsinki Commission, provides a sound technical
basis for a project under GEF Operational Program Number 9, "Integrated Land and Water Multiple
Focal Area Operational Program." The objective of this Operational Program is to support "more
comprehensive approaches for restoring and protecting the international waters environment." This
is often accomplished through measures to support "better use of land and water resources
management practices on an area wide basis and in which land degradation is an important element."
Consistent with this approach, the project would support innovative activities which address the role
of agriculture, through direct activities with farmers in waste management and ecological protection
of watercourses, coastal zones and marine environment.
Projects in this program area address the "types of measures needed to ensure that the ecological
carrying of the water body is not exceeded," which is the focus of this project, as it supports measures
to incrementally reduce the input of nutrients from agriculture. The project provides an opportunity
for the GEF to be a "catalyst for action to bring about the successful integration of improved land
and water resource management practices on an area wide basis" by supporting implementation of a
model project. GEF support would buy down the cost of adopting innovations and help overcome
barriers in moving from demonstration level activities to operational projects for agricultural non-
point source pollution. The project has been designed specifically to provide a model activity which
can be replicated at other locations in Poland, the Baltic Sea region and Central and Eastern Europe.
It is anticipated that the experience gained from this project can be applied in the ongoing GEF
supported programs for the Danube River Basin and the Black Sea, in which non-point source
pollution from agriculture is a major transboundary issue. Therefore, the proposed project also
provides an opportunity to assess the usefulness of the Strategic Action Program (SAP) concept and
to derive lessons learned which can be applied in other locations.
Project activities will support complementary linkages with measures being undertaken by both
government and nongovernmental organizations for the "conservation of important biological
diversity" in wetlands and coastal lagoons. Activities would be linked with the management of the
transboundary Vistula Lagoon shared between Poland and Russia, and later the Odra Lagoon shared
between Germany and Poland. Implementation of the project will include as an integral element
"community involvement and stakeholder participation" through the direct involvement of rural
communities and farm families in the cooperative identification of measures to be undertaken at the
watershed level, the adoption and use of Good Agricultural Practices, and their role in the financing,
construction and operation of on-farm investments (see Annex 4 for transboundary analysis).
B: STRATEGIC CONTEXT
1. Country Assistance Strategy (CAS) goal supported by the project (see Annex 1):
CAS document number: 16484 - POL Date of latest CAS discussion: April 14, 1997
One of the CAS's four overarching objectives is to achieve environmental sustainability. Specifically,
the CAS describes the Bank's objectives of helping the Government to increase the focus on reducing
pollution from non-point sources and to move towards compliance with EU directives and
international agreements in a cost-effective manner. This project directly addresses each of those
objectives.
2. Main sector issues and government strategy:
At the international level, Poland as a Contracting Party to the Helsinki Convention has an
obligation to undertake measures to reduce pollution of the Baltic Sea from both point and non-point
sources. In this context, the recent "Recommendations for Updating and Strengthening" of the
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Baltic Sea Environmental Action Program prepared by the Helsinki Commission identifies actions to
reduce non-point source pollution from agriculture and rural settlements as a high priority for
regional and country specific actions in the context of the Program. More recently, as part of the
preparations for joining the European Union, much of the domestic policy agenda is being driven by
the need to move into compliance with the EU environmental directives. The EU has a directive
specifically aimed at reducing nitrate pollution from agriculture (the Nitrates directive). Furthermore,
the draft Framework Directive for Community Action in the field of Water Policy includes measures
for classifying the quality of water in certain water bodies.
At the national level, Poland is committed to managing and conserving its water resources and
coastal zone. In the nine years since the transition to a market economy it has made significant
progress through a sustained commitment to environment as an integral part of its national
priorities. Poland has domestic legislation to reduce pollution from agriculture and a draft law is under
review which would require farmers to invest in proper manure and slurry storage. In the National
Environmental Strategy issued in 1990, the Government set an objective of reducing pollution
entering the Baltic Sea from Polish rivers by 80 percent by the year 2020. In order to realize these
objectives the Government has actively sought international cooperation to develop the required
knowledge and experience for preparation and implementation of agricultural non-point source
pollution programs based on Western European and North American experience.
3. Sector issues to be addressed by the project and strategic choices:
This project will address the following sector issues:
· Assisting integration of environmental concerns into agricultural practices in order to reduce
nutrient pollution entering Polish surface and ground waters.
· Moving towards compliance with both the Helsinki Convention and the EU Nitrates directive in
a cost-effective manner.
· Strengthening water management at the level of the river basin, through a basin-based approach
to the strategy study and by working with the RWBs to monitor the environmental effects of the
project.
C: PROJECT DESCRIPTION SUMMARY
1. Project components (see Annex 2 for a detailed description and Annex 6 for a detailed
cost breakdown):
The project has two components. The first will provide technical assistance to farmers, to encourage
them to improve their environmental management practices, and financial support for on-farm
investments. The second involves public outreach, developing a strategy for replicating the project,
monitoring and project management.
Component 1. On-Farm Environmental Improvements (US$11.7 million or 81% of total cost)
Outreach, Technical Assistance and Training (US$1.5 million or 10% of total cost). NGOs, institutes
or private firms will work with farmers, farmers' families and rural communities to discuss options
for and demonstrate benefits of environmental management on farms. This will include cropping,
tilling, manure spreading, buffer strips, fertilizer application practices, constructed wetlands etc. The
outreach agents will also explain the terms of investment support offered under the project. An
element of this process would be review of the economic benefits to farmers and their communities
from adoption of these practices. The outreach workers will coordinate their technical advice with
local extension agents (ODRs). The MAFE will collaborate with the PIU to ensure consistency of
approach.
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Infrastructure Investments (US$10.2 million or 71% of total cost). The subcomponent will channel
financial support to eligible farmers to invest in facilities to store manure, urine, slurry and silage
correctly. The financial support will consist of credits or a mix of grants and credits. During the first
phase of implementation, the project will be limited to supporting slurry and manure storage
facilities. It will support these activities to eligible farmers with grants on a cost-sharing basis. In
these first stages the project will provide flat grants of US$4,000 to participating farms. The farmers
will provide their share in a mix of labor, materials and direct payments. Both the levels and terms of
support may be adapted during the course of implementation. Eligibility criteria for farmers will
include: having between 15 and 50 l.a.u., agreeing to use facilities for at least 5 years, being in
targeted areas.
Component 2. Outreach and Management (US$2.7 million or 19% of total cost)
Public Awareness & Outreach (US$0.5 million or 3% of total cost). The subcomponent will support
a public awareness and outreach program to widen understanding of the importance of agriculture and
environment issues in Poland. This program will work with local groups to promote environmentally
sound agricultural practices and to highlight the critical role of the farmer as an "environmental
manager." It will include information on the agronomic and economic benefits of improved practices
and the cost savings which can be obtained from the substitution of chemical fertilizers by the
properly times application of slurry. The program will disseminate good practices,
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results from demonstrations, new approaches and information about incentive programs. It will also
be used for dissemination of information to facilitate project replication and lessons learned from the
implementation process.
Monitoring (US$0.7 million or 5% of total cost). The NFEP will monitor project performance. This
component will involve a social assessment, including ongoing beneficiary assessment, to ensure that
the project is meeting the needs of its clients in rural Poland and to suggest modifications to project
design and implementation. RWBs, Voivodship Environmental Authorities and SANIPED will
monitor the long-term environmental benefits from reduced discharges of pollutants to surface and
groundwater, and agree with MEP and Ministry of Health on methods to standardize data collection.
Replication. (US$0.8 million or 6% of total cost) The project will include five activities aimed at
project replication: (i) a strategy for replicating the project which will include economic and financial
evaluation of project activities; (ii) assessment of the individual, local and national benefits of
integrating environmental concerns into agricultural and rural development practices; (iii)
development of lessons learned and good practices; (iv) an outreach and dissemination program; and
(v) learning from international experience including the EU and the United States (study tours,
lessons learned etc.). At the mid-term review, the Government and the Bank will decide whether to
prepare the next phase in the national program, and the basic principles on which that will be based.
Management (US$0.7 million or 5% of total cost). The NFEP will manage the project. In the
project areas, local implementation bodies will be selected to appraise subproject applications,
supervise implementation, and manage the process at the local level.
The project will potentially be active in four areas, all of which are sensitive to nitrate pollution.
They are also representative of different farm types, soil types, and will be in different parts of the
country to enable maximum demonstration effect.
As the project focuses on learning and testing approaches, it is designed to be flexible and to adapt to
experience during implementation. It will therefore rely on an Operational Handbook. The project
documents will include broad principles for the project. Implementation will be based on detailed
plans and criteria set out in the Operational Handbook. As implementation proceeds, these can be
changed in agreement with the implementation agency, the World Bank and cofinanciers without the
need to amend legal agreements.
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Component
Category
Cost Incl.
% of
Bank-
% of
GEF
Contingencies
Total
financing
Bank-
financing
(US$m)
(US$m)
financing
(US$ m)
1. On-farm environmental
Training &
11.7
81%
1.0
50%
improvements
Investment
Technical Assistance
(1.5)
10%
Investment Support
(10.2)
71%
2.5
2 Outreach and Management
Learning &
2.7
19%
1.0
50%
Adaptation
Public Awareness and
Outreach
(0.5)
3%
0
0
0.3
Monitoring
(0.7)
5%
Replication
(0.8)
6%
0.2
Project Management
(0.7)
5%
Total
14.4
100%
2.0
100%
3.0
2. Key policy and institutional reforms supported by the project:
Reducing pollution from agriculture and rural communities is key to the Government's agricultural
and environmental strategies. Thus, rather than seeking policy changes, this project will assist the
Government to develop an effective mechanism to implement existing policies.
3. Benefits and target population:
Reducing the level of nutrients entering the Baltic Sea will, over the long term, bring significant
international and national benefits by decreasing eutrophication. International experience shows that
improving environmental practices on farms is also likely to bring benefits to individual farmers over
the long run. They will have access to safer drinking water, cleaner local streams and lakes, and a
reduced need for fertilizer. Many improved practices can also increase soil productivity. This project
will explicitly calculate and disseminate these benefits in order to reduce the barriers to other farmers
of adopting these practices.
The benefits of this project will be considerable on many different levels:
· Improved quality of local streams, lakes and ultimately rivers, coastal lagoons and the Baltic Sea,
with benefits for quality of life, fisheries and tourism in certain areas.
· Reduction of nitrates reaching Poland's water bodies and ultimately the Baltic Sea, of
approximately 300 kg per farm per year for approximately 1500-2000 farms.
· Farms investing in manure storage can use the manure as fertilizer and thus can save $150-200
per year on chemical fertilizer. Over the long run, the farmer may also see productivity
improvements. In fact, excessive slurry spread on grazing land generates toxic levels of
potassium in grass. Improved storage of animal wastes will reduce odor and inconvenience and
improve hygienic conditions on participating farms.
· Quantification and demonstration to farmers of these benefits.
· Demonstration of an effective mechanism for channeling investment for environmental
protection in rural areas.
· Progress towards meeting Poland's water quality targets and its obligations under the Helsinki
Convention as well as towards compliance with the European Union directive on prevention of
pollution from nitrates.
· Improved health for families in the project areas over the long run, by reducing nitrates entering
groundwater.
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The target populations for this initial activity are families and rural communities in a maximum of
four potential areas: Elblag, Ostroleka, Lublin and Gorzow Wielkopolski. They have been chosen
because they are sensitive to nitrate pollution, representative of different farm types, have a variety
of soil types, and are well distributed within the country. The project will start by targeting two
voivodships--Elblag and Ostroleka. Elblag borders the Vistula Lagoon which is shared by Poland and
Russia and is a highly sensitive international water body. Farmers in this area have experience from a
Swedish-supported program and are prepared to proceed with a larger effort. Ostroleka is in the lower
Vistula River basin and has participated in the largest and longest running pilot demonstration
activity, supported by the US Government and EU (Phare). The local farmers are already sensitized
to the issues and interested in participating. During implementation, the project may expand into the
other pre-identified areas in agreement with the World Bank, the PIU and cofinanciers.
An independent technical review was prepared by a STAP roster expert (see Annex 5). The reviewer
endorsed the project in positive terms and noted that it was of "substantial importance." The
reviewer made a number of constructive suggestions for further strengthening of the proposal. These
proposals have been incorporated into the present text, as described below.
The reviewer suggested that the presentation should make more explicit the linkage between farmers
adopting improved practices for storing and application of slurry to crops, the economic benefit to
the farmers from these practices and the environmental benefit to the community resulting from
these actions. The reviewer noted that the project would assist in making the internalization of costs,
which in GEF terms are incremental, broadly recognized over the long term as economically
beneficial to farmers, communities and the global environment..
The reviewer also noted that to the extent that synthetic fertilizers play a role in Polish non-point
source pollution, there is a potential to demonstrate the economic benefits which could be obtained
from the substitution of stored manure slurry for synthetic fertilizers.
4. Institutional and implementation arrangements:
NFEP will implement the project on behalf of MEP. The project will be decentralized to the
participating project areas. Annex 2 contains details of the implementing arrangements, and the
Operational Handbook will spell these out further.
The institutional arrangements include:
· Project Steering Committee. At the national level, a Project Steering Committee (PSC) will
coordinate the project. This will be chaired by the NFEP, and include representatives of the
MOF, MAFE, MEP, relevant RWBs, and possibly the Chambers of Agriculture, NGOs and
representatives from the project areas.
· Project Implementation Unit (PIU). The NFEP will manage the project; promote project
activities; disburse funds and maintain the account; monitor project impacts and propose
improvements; and prepare quarterly and annual reports.
· Local Implementation Team (LIT). The project will select local bodies (possibly NGOs, institutes
or farmers' chambers) to implement the project at the local level, who will make up the LIT.
They will manage the project at the local level, including appraising and deciding upon the
individual subprojects that the project will support. They will also prepare project reports and
accounts; receive and appraise sub-project requests; visit the project sites prior to approval and
disbursements; and coordinate work with ODRs and other technical services.
Potential Administrative Changes. It is possible that during the life of the project a new structure for
regional and local government may be introduced in Poland; in this case the composition and
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responsibilities of the various project management units may require adjustment. At any time the
Operational Handbook may be revised to reflect these administrative changes.
D: PROJECT RATIONALE
1. Project alternatives considered and reasons for rejection:
· Full-Scale National Program. While the demonstration programs have generated significant
experience in technical and social aspects, the administrative mechanism for delivering support
for the investments is less developed. Therefore, a full-scale program would not be justified at
this stage. This project will be the first phase of a national program and will allow for
development and testing of management, financing and outreach systems which could be
expanded in geographical coverage over time. A phased approach will also allow for a more
precise calculation of the direct and broader social benefits of the interventions, which will be an
important element in generating support for a larger program of interventions.
· On-lending to farmers for environmental infrastructure. Passing a proportion of the funds to the
farmers as loans was considered, in order to test the farmers' willingness to borrow for
investments of this type. This option was rejected for the first stage of the program for three
reasons. First, because the projects bring very little private benefit to the farmer, but rather
benefits that are mostly regional, national and international. Thus a large grant component will
be necessary in any case. Second, because the administrative costs of managing large numbers of
small loans ($1,000-3,000) are likely to be very high and cause delays in the project. Third,
because the project can test willingness to pay (or borrow) by cost sharing with the farmers and
varying the proportion of grant funds versus farmer contribution. The possibility of passing loans
to farmers will be considered as the project develops.
· Targeting larger farms. The team decided against targeting larger farms, since they are more
financially viable and need less subsidies. This project aims to create a model that will allow
efforts to reach a majority of Polish farmers, and that can be applicable to small farms.
2. Major related projects financed by the Bank and/or other development agencies
(completed, ongoing and planned):
The Environment Management Project supported various activities to strengthen environmental
management capacity in several areas of Poland.
In addition, the design of the proposed project has benefited from experience gained through field-
based studies and demonstration programs addressing management of pollution from agriculture and
rural settlements conducted since the early 1990s in the Baltic Sea region.
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Sector issue
Project
Latest Supervision (Form 590)
Ratings
(Bank-financed projects only)
Implementatio
Development
n Progress (IP) Objective (DO)
Bank-financed
Strengthen
Environmental Environment
HS
HS
Management at central and local Management
levels
Project
Other development agencies
US Government, EU (Phare) and
other bilateral government financed
demonstration activities of on-farm
environmental improvements
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly
Unsatisfactory)
3. Lessons learned and reflected in the project design:
Key lessons learned from agricultural and environmental projects in Poland, as well as regional
initiatives to protect the Baltic Sea include:
· The need for a long-term commitment to address agriculture and environment issues through
phased programs of interventions and a broad-based partnership.
· The need to focus on working with farmers through field-level outreach activities to encourage
them to think of themselves as environmental managers at the farm level.
· The importance of calculating and disseminating the benefits of improved environmental
management in rural areas at local and national levels in order to sustain support for the
program.
· The high capacity of local and national Government officials for innovation and effective
management.
· The importance of adequate counterpart training and specialized support for procurement,
disbursement and supervision.
· The benefits from working within the existing policy environment rather than using the project
to push for major policy reforms.
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In addition, the Bank's experience with social funds in over forty countries worldwide has generated
important lessons for establishing the mechanism for implementing this project. These include:
· The need for an established framework for project management in the form of an Operational
Handbook which can be updated on the basis of implementation experience;
· The importance of agreeing in advance on clear, flexible approaches to administrative procedures
such as procurement and disbursement;
· The benefits in project quality associated with careful attention during the early phases of
innovative projects to the provision of specialized support for implementation activities.
STAP Reviewer's Comments. The STAP reviewer was very supportive of the project's objectives
and activities. He fully endorses the project concept and its importance in the Region. His chief
concern was that the link was not clear between the technical assistance to farmers on the one hand,
and the financial and economic impact of the adoption of new technologies on the other. We fully
agree that this link must be made--clearly, precisely, and with solid analysis-- and is critical to the
success of the project and its replicability. This section has been more precisely described in the text,
and is a key indicator to project success.
4. Indications of borrower commitment and ownership:
MEP and MAFE have been working throughout the 1990s on on-farm environmental pilot
initiatives in cooperation with EU (Phare), Sweden and the United States. Both MEP and MAFE
recognize the success of the farm-level demonstration programs and have expressed repeatedly the
need to broaden these successful pilots into larger programs. As an indication of this, when US
Government funding ended for the first pilot operation, MAFE independently applied for EU (Phare)
funding to enable it to continue the program.
In addition, the Government is committed to demonstrating its seriousness in moving towards
compliance with EU agricultural and environmental policies and directives and its pollution reduction
goals for the Baltic. The Government is aware that significant pre-accession resources will become
available for environmental and infrastructure activities and wishes to develop a mechanism to ensure
that these resources are used efficiently and equitably.
5. Value added of Bank and GEF support in this project:
The principal value added of GEF support for this project comes from providing additional funds to
address the top priority transboundary water problem in the Baltic Sea. GEF funds will specifically
help reduce the barriers to farmers adopting environmentally sensitive practices and will allow the
Government of Poland to consider scaling early pilot operations up to a larger scale. Without GEF
support to coordinate these activities, Poland would undertake a series of small activities in different
parts of the country to address these issues. It would lack a mechanism to coordinate the financing,
approaches and geographical targeting of activities. Without support from the GEF, the project
would lack sufficient resources to accelerate the program, to demonstrate measures on a wide range of
farm types and to undertake a public outreach program. The GEF is thus leveraging funds from the
donors, stimulating a program to coordinate activities, increase coverage and generate larger impact.
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Because of their international scope, the World Bank and GEF can provide funds and finance the
incremental costs for replicating such activities both within Poland and in other countries in the
region. This is particularly important as agricultural pollution is a major local and transboundary
problem in most countries in the ECA region, particularly those in the Baltic, Danube and Black Sea
drainage basins. Some level of financial support from the public sector and the international
community will continue to be necessary, particularly in lower income countries, because these
activities address externalities, affect transboundary pollution and involve an element of public good.
In addition, the World Bank has significant experience with a demand-driven mechanism that can
usefully be applied to the problem of agricultural pollution, which requires a blend of outreach,
technical assistance and investment for a large number of small polluters. This mechanism, applied in
social funds, has given the Bank significant experience linking technical assistance, outreach, and
beneficiary assessment with small grants for investments in social infrastructure.
E: SUMMARY PROJECT ANALYSIS (Detailed assessments are in the project file, see Annex 11)
1. Economic
The baseline cost without the GEF alternative for this activity includes ongoing government
programs, bilateral donor funded activities and the project without GEF funding. The total baseline
cost is U$12.2 million. With the GEF alternative, the cost is US$15.2 million. The baseline
comprises activities related to, but not included in this project which total $0.8m. Total project costs
described here are US$14.4 million, which includes US$3.5 million contribution from the
beneficiaries and US$1 million counterpart funding (see Annex 3 for Incremental Cost Analysis).
Given the emphasis on learning and innovation, the project has included resources to review
economic evaluation of the on-farm investments and the changes in farming practices in component
2 (outreach and management). Component 1 (investment in manure, urine and slurry storage) is
unlikely to generate positive rates of return, at least in the short term, because the benefits will only
be seen in the long term, will be diffuse and are extremely difficult to quantify.
2. Financial
This is a small loan focused on learning and innovation; it does not include ex ante financial analysis,
but again will review financial implications of the on-farm environmental improvements during
project implementation.
Experience in other countries indicates that improved manure storage, together with changing
fertilization, tilling and cropping practices can generate positive financial rates of return. The
project will specifically assess the conditions in Poland under which these positive FRRs can be
established. Preliminary estimates suggest that proper storage of manure will save the average farmer
participating in this project $150-200 per year in reduced need to purchase fertilizer.
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Fiscal impact: This will also be developed over the course of project appraisal and implementation.
3. Technical:
Most of the technology that this project will use is simple and well tested in Poland and other
countries in the Baltic Sea Region. The emphasis will be on the use of low cost on-farm
infrastructure. Technical assistance activities will include support for construction, supervision and
development of standardized design and specifications for commonly supported improvements.
Experience from the three internationally-supported demonstration projects and the work of the
Water Supply Foundation has been reviewed with regard to design and construction experience.
4. Institutional:
The NFEP will undertake the principal project management functions. In addition to its specialized
technical staff, including water resources and water quality specialists, the NFEP will hire one person
with specific expertise in outreach and technical assistance who can supervise the TA sub-
component. This specialist will have experience working with individual farmers. During the
project's preparation, a consultant will be hired to assess NFEP's accounts and MIS. During the
project, the NFEP will submit quarterly financial statements and management reports on its
operations, including liquidity and arrears. Its accounts will be audited annually by an independent
auditor acceptable to IBRD, EU (Phare) and NEFCO.
5. Social:
While there has been no systematic social assessment, the field-based evaluations of joint Polish-
United States supported demonstration projects for on-farm environmental improvements show
positive social results. Farm families, particularly the farmers' wives, were extremely supportive of
the activities, because of increased farm productivity and the reduction in odor and inconvenience
associated with improved manure storage. Communities in areas that depend on clean water for
potential tourism development are particularly supportive of sanitation activities, and are prepared
to contribute their own resources and labor to construct the facilities. The project will undertake a
social assessment to evaluate social impacts of the on-farm investments, which will include ongoing
consultations with beneficiaries.
6. Environmental assessment:
Environmental Category [Proposed] [ ] A
[X] B [ ] C
The project will support a series of complementary measures to improve environmental
management in rural areas, with a focus on reducing pollution of surface and groundwater, leading to a
beneficial impact on inland water, coastal water and the Baltic Sea. The primary environmental issues
will be addressed in the Operational Handbook and include: (a) adoption of guidelines for design of
manure pads and slurry tanks and for the use of their contents; and (b) guidelines for the development
of buffer strips. The activities supported under the project will be subject to review by the local
environmental authorities. The Environmental Data Sheet is provided in Annex 14.
7. Participatory approach [key stakeholders, how involved, and what they have influenced;
if participatory approach not used, describe why not applicable]:
a. Primary beneficiaries and other affected groups:
The project is based on demonstration programs conducted throughout the 1990s with highly
participatory approaches. They included field-based demonstrations, field days for farmers and
farmers' wives, participatory water quality monitoring with farmers and their families, outreach
programs and extensive "farmer to farmer" visits. The project has been prepared jointly with
officials involved in implementing these programs and in consultation with voivodship and gmina
12

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governments, extension agents, contractors, participating farmers and other members of rural
communities. The team has also consulted extensively with the Water Supply Foundation, a major
Polish NGO, which has an extensive record in cooperative development of rural infrastructure
including the construction of manure pads. It has also collaborated with the Foundation for
Development of Polish Agriculture and the National Association of Farmers.
During implementation, the project will be highly participatory with a social assessment providing a
mechanism for incorporating the views and experiences of local communities and farmers on an
ongoing basis. Project performance and impact monitoring will also use consultative processes where
appropriate, including focus group meetings and surveys of cooperating parties.
b. Other key stakeholders:
The United States Environmental Protection Agency and Department of Agriculture, which were
involved in designing and supervising the first pilot phases of this operation, have been key members
of the project preparation team, including participating in preparation and appraisal missions. The
cofinancing bodies, EU (Phare) and NEFCO, have also been involved in the project design processes,
with NEFCO participating in project missions.
The team has prepared the project in close collaboration with representatives of the MAFE. The
field review and design phases included the direct participation of representatives of the Foundation
of Assistance Programs for Agriculture (FAPA).
The team has consulted with the representatives of the Helsinki Commission and the Baltic 21
Secretariat, both of which are involved in supporting measures at the regional level to improve
environmental management in agriculture to reduce the degradation of rivers, wetlands, coastal zones
and the marine environment in the Baltic Sea region.
Finally, the team benefited from ideas generated through discussions with representatives of the
Coalition Clean Baltic (CCB) and the World Wide Fund for Nature (WWF).
F: SUSTAINABILITY AND RISKS
1. Sustainability:
The site-specific feasibility studies for farmer investments will pay particular attention to operation
and maintenance plans and to cost recovery. The proposed farm-level infrastructure investments will
13

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use field-tested design approaches which allow for minimum investment and require limited
expenditures for successful operation and maintenance. Social assessment and follow-up visits built
into the technical assistance program will assess sustainability issues explicitly.
2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):
Risk
Risk
Risk Minimization Measure
Rating
Annex 1, cell "from Outputs to
Objective"
Targeted farmers are in the same N
Eligibility
criteria
state
that
watershed(s) to achieve maximum
participating farmers must be in project
nutrient reduction in selected water
areas, which will be selected on basis of
bodies.
being in sensitive watersheds, among
other things.
Project
management
structure M
Ensure project management structure is
cannot adapt to changes in regional
flexible and that all participating parties
administrative
structures
and/or
know that it may change in accordance
destroys local support.
with administrative changes. Details of
project management structure outlined
in Operational Handbook which can be
adapted during project implementation.
Review at mid-term. Ensure that
benefits to farmers are clear to all
participants and widely disseminated. If
one local area loses interest, increase
focus in other participating voivodships
or move to another part of the country.
Annex 1, cell "from Components to
Outputs"
Sustained Government commitment S
Ensure that MEP and the NFEP receive
to the project.
recognition for their role in the
initiative. Ensure that the benefits to
the farmers are explicit and reported
widely. Involve key stakeholders, such
as National Farmers' Union, Chambers
of Agriculture, extension agents, NGOs
to broaden support for initiatives of this
type.
Government, Bank and cofinanciers H
Substantial efforts in project preparation
can streamline procedures for project
and start-up phase for simplifying
implementation.
procedures. Key aspects in Operational
Handbook rather than loan agreement,
so that they can be adapted during
implementation.
Other Government programs do not N
Involve extension agents and other key
contradict project objectives.
services in outreach and training.
Replication strategy led by MEP, NFEP.
Ensuring
broad
government
participation.
Appropriate farmers are selected.
M
Eligibility criteria are flexible and can be
changed over course of implementation
if appropriate. Regular revisions during
14

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Risk
Risk
Risk Minimization Measure
Rating
implementation.
Project incentives are sufficient to H
Regular reviews during implementation.
motivate farmers to participate in
If problems occur, increase portion of
the project.
project dedicated to outreach and
training. Change levels of project
support.
Overall Risk Rating
M
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)
3. Possible Controversial Aspects:
It is not anticipated that the project will have any controversial aspects. The proposed interventions
have formally been given high priority by the Helsinki Commission, European Union, Polish
authorities and by international and national NGOs.
G: MAIN LOAN CONDITIONS
1. Effectiveness Conditions:
· Project and local steering committees appointed,
· Project staff in NFEP and in LIT appointed and ready to begin work,
· Operational Handbook drafted, satisfactory to the Bank, detailing eligibility criteria, levels of
investment support, precise responsibilities of implementing agencies, guidelines for TA,
arrangements for project supervision and monitoring activities, procurement arrangements,
disbursement arrangements, environmental procedures.
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Annex 1
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ANNEX 1
POLAND: RURAL ENVIRONMENTAL PROTECTION PROJECT
PROJECT DESIGN SUMMARY
Narrative
Key Performance
Monitoring and
Critical
Summary
Indicators
Evaluation
Assumptions
Sector-related CAS
(Goal to Bank
Goal:
Mission)
1. Improve
1. Gradual
1. Government's
EU membership is
environmental quality improvements in
State of the
likely to increase
through increased
ambient water quality
Environment Report average incomes.
focus on non-point
measures;
(annual);
source pollution;
2. Assist process of
2. Progress towards
2. EU reports
integration with
meeting environmental
(periodic).
European Union.
compliance targets.
Project
(Objective to Goal)
Development
Objective:
To develop
1. High demand from
1. Report from non-
Project-developed
interventions that
non-participating
user survey (within
interventions are
motivate farmers to
farmers to join a
Social assessment);
replicated on a wide
reduce organic and
similar program;
scale;
nutrient pollution
2. High satisfaction
2. Social assessment;
entering selected
rates among
Government
water bodies, to
participating farmers;
3. On-farm case
negotiations with EU
comply with Polish
3. Significant reduction
reports; watershed
continue on track.
and EU standards.
in nutrients discharged
case reports.
to selected water bodies
compared to baseline
levels.
Outputs:
(Outputs to
Objective)
1. Successful program
1. High percentage of
1. Quarterly reports
Targeted farmers and
developed to
participating farmers
of the NFEP; social
participating villages
motivate farmers to
adopt environmentally
assessment;
are in the same
adopt
responsible practices;
supervision mission
watershed(s) to
environmentally
financial and other
report(s); evaluation
achieve maximum
responsible practices;
benefits of on-farm
mission reports
nutrient reduction in
interventions
(mid-term & final);
selected water bodies;
documented;
economic evaluation
report (NFEP);

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Annex 1
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Narrative
Key Performance
Monitoring and
Critical
Summary
Indicators
Evaluation
Assumptions
2. Functional
2. Administrative
2. Quarterly reports
Upcoming
Operational
systems effective;
of the NFEP; social
administrative changes
Handbook developed
targeting criteria
assessment;
do not disrupt project
for reducing nutrient
effective in reaching
supervision mission
activities.
levels in targeted
relevant polluters in
report(s); evaluation
watersheds.
selected watersheds;
mission reports
baseline and M&E
(mid-term & final);
systems in place agreed
M&E reports
with MEP, NFEP, and
produced by RWBs;
meeting the standards
strategy study
for reporting to
report.
HELCOM and the EU.
Project
Inputs: (budget for
(Components to
Components/Sub-
each component)
Outputs)
components:
1. On-farm
1. US$11.7 million
Progress reports
Continuing
environmental
(quarterly);
government (MOF,
improvements:
MEP, NFEP, MAFE)
¥
TA;
Disbursement reports commitment to
· Investment support.
(quarterly).
project activities;
2. Outreach and
2. US$2.7 million
Government, World
Management:
Bank and cofinanciers
¥
Public
can streamline
awareness and
procedures for project
outreach;
implementation;
¥
Monitoring;
¥
Replication;
Other Government
¥
Project
programs do not
Management.
contradict project
objectives;
Appropriate farmers
are selected;
Project incentives are
sufficient to motivate
farmers to participate
in the project.

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Annex 2
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ANNEX 2
POLAND: RURAL ENVIRONMENTAL PROTECTION PROJECT
INCREMENTAL COST ANALYSIS
Overview
1 Project activities are directly linked to the implementation of the Baltic Sea Joint
Comprehensive Environmental Program which provides a framework for regional cooperation
for protection of this important international water body. The project also supports Poland's
move towards compliance with its national policies and with international legal agreements.
These include the Helsinki Convention and the environmental directives of the European
Union (EU), which will apply to Poland as part of the process of joining the Union.
Project Development Objective.
.
Global Environmental Goal. The long-term goal of the project is to improve the
quality of the water of the Baltic Sea by reducing non point source pollution from agriculture.
2.
Project Objectives. The project's specific objective is to develop interventions can
be which motivate farmers to reduce organic and nutrient pollution entering water bodies in
target project areas. GEF funding will help remove institutional, financial and knowledge
barriers which currently serve as disincentives to farmer adoption of environmentally
sustainable agricultural practices The project supports Poland's move toward compliance with
its national policies and legislation, as well as international legal agreements, including the
Helsinki Convention and the environmental requirements of the European Union (EU), which
Poland will have to implement as part of the process of joining the Union.1
3.
Project Components. Specific project components include:
(a)
Component 1 - On-Farm Environmental Improvement. This blends two
complementary activities: (i) technical assistance to farmers concerning Good
Agricultural Practices (GAP) that emphasize environmental management
concerns (cropping, tilling, crop cover, fertilizer use, wetland treatment and
buffer systems etc.); and (ii) support for farmers to invest in the construction
of manure and slurry storage facilities; and
(b)
Component 2 - Outreach and Management. This will include: (i) an initiative
to raise farmer and general public awareness of the issues concerning
environmental management and pollution control in agriculture; (ii)
monitoring; (iii) a strategy for replicating the project; and (iv) project
management.
The GEF alternative would be US$15.2 million, against a baseline without GEF support of
US$12.2 million.
Context and Broad Development Goals

1
The most directly relevant requirement is the Council Directive on the Protection of
Waters Against Pollution caused by Nitrates from Agriculture (91/676/EEC), known as the
Nitrates Directive. This aims to reduce or prevent the pollution of water caused by application
and storage of fertilizer and manure on farmland, and is intended to safeguard drinking water
supplies and to prevent ecological damage from eutrophication. The directive requires member
states to designate areas that are sensitive to pollution from nitrates and to establish plans for
reducing that pollution. It includes requirements for storage of livestock manure and for
application of fertilizers.

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Annex 2
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4.
Eutrophication. Eutrophication of international water bodies is a major
environmental problem in many parts of the world, including the Adriatic Sea, Baltic Sea and
Black Sea. The common symptoms of eutrophication, which is caused by over enrichment of
water by nutrients, are increased plant biomass in the form of algae, oxygen deficiency in water
bodies, the formation of hydrogen sulfide and remineralization of the biomass. These processes
disrupt the balance of freshwater, coastal and marine ecosystems and cause changes in their
structure and function. Excessive nutrient loads to the Baltic Sea affect the entire ecosystem;
the work of the Helsinki Commission has identified nitrogen as the substance of highest
transboundary concern. Impacts associated with eutrophication in Baltic coastal and marine
waters have been a shift in the composition of marine vegetation in many coastal areas,
repeated large scale algal blooms, disruption of reproductive cycles of some fish species,
declines in some fish stocks and increases in others. Summer algal blooms have periodically
necessitated the closing of many bathing beaches throughout the region with an adverse affect
on their recreational use and tourist value.
5.
Important Role of Agriculture. Nutrient pollution from agriculture is a major cause
of this problem. The Helsinki Commission estimates that non-point source pollution from
agriculture contributes 30-40 percent of the current nitrogen, and 10 percent of the current
phosphorus loading entering the Baltic Sea, as well as pesticide residues. This issue is
particularly relevant to Poland because the country has approximately 40 percent of the
agricultural land in the Baltic Sea drainage basin and the largest rural population in the region.
The main issues are improper storage and application of animal waste, rather than excessive
application of artificial fertilizers. Less than 10 percent of Poland's 2 million farms are
thought to have adequate facilities for storing manure or slurry. Reports prepared by the
Helsinki Commission and the Polish Ministry of Environment have identified the following
Polish coastal areas as being most subject to impacts from eutrophication: the Vistula Lagoon
which is shared with the Russian Federation, the Gulf of Gdansk adjacent to the mouth of the
Vistula River, and the Odra Lagoon which is shared with Germany.
6.
A Major Challenge. Because agricultural pollution is caused by a large number of
dispersed sources and because the agricultural sector is traditionally conservative, the problem
has been particularly difficult to tackle in most countries. Establishing mechanisms to provide
incentives to farmers to change their agricultural practices and to make on-farm investments
to control non-point source pollution have proven to be difficult. This is because the benefits
of these activities are long-term and because the farmers themselves only reap part of the
overall benefits of their actions. This has been a particular problem in the countries in
economic transition in the eastern and southern portions of the Baltic Sea drainage basin where
the restructuring of the agricultural sector has needed to address a diversity of issues beyond
environmental management. The proposed project will test mechanisms for providing
incentives to farmers and the level of support required to develop effective actions that could
be replicated elsewhere within Poland and in other countries.
7.
Bank Strategy. The World Bank has an established commitment to support
improved environmental management in the Baltic Sea Region. Since 1990 it has worked
closely with the Helsinki Commission and the cooperating countries in the development and
implementation of the Baltic Sea Joint Comprehensive Environmental Action Program. In
this context it has supported a series of environmental projects to address priorities established
under this strategic action program in Estonia, Latvia, Lithuania, Poland and the Russian
Federation. Consistent with this regional approach, the Country Assistance Strategy (CAS) for
Poland includes a strategy for helping Poland increase the focus on reducing pollution from
non-point sources, and move towards compliance with EU directives and international
conventions and protocols in a cost-effective manner. To address this issue, the Government
of Poland is going to adopt legislation that will require on-farm facilities to provide storage for

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Annex 2
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liquid manure with a capacity of at least six months, and has already supported several
internationally financed pilot activities.
Baseline Scenario
8.
Agricultural Sector. Poland has a rural population of about 15 million, representing
40 percent of the whole population, with farmland covering about 65 percent of the total land
area. The agricultural sector provides 25 percent of the country's employment, although only
6 percent of GDP. Unusual for an economy in transition, Poland has retained a large number
of small family farms, and still has 1.4 million farms with an average size of 12-15 hectares.
Some areas of the country, predominantly to the north and west, were farmed as state farms,
but 90 percent of this land has since been privatized or leased out. Livestock accounts for 42
percent of Poland's agricultural production, mostly cattle and pigs.
9.
Environmental Management. At the national level, Poland is committed to manage
and conserve its water resources and coastal zone, and in the nine years since transition to a
market economy has made significant progress through a sustained commitment to
environment as an integral element of its national priorities. The domestic policy framework
is strongly supportive of activities to reduce pollution from agriculture, for three reasons:
·
Domestic policy. The 1990 National Environmental Strategy states an objective of
reducing pollution entering the Baltic Sea from Polish rivers by 80 percent by the year
2020. As part of this policy, Poland has prepared a draft law aiming to reduce non-
point source pollution that will, among other things, require farmers to invest in
proper manure and slurry storage.
·
European Union requirements. Much of the domestic policy agenda is currently driven
by Poland's need to move into compliance with EU environmental regulations, one of
which specifically addresses pollution from agriculture (the "Nitrates Directive"). In
addition, the European Union has published a draft "Framework Directive for
Community Action in the Field of Water Policy" which includes requirements for
improving water quality.1
·
Helsinki Convention. The 1992 "Baltic Sea Joint Comprehensive Environmental
Action Program" and the 1998 "Recommendations for Strengthening and Updating"
of the Program, which have been adopted by the Contracting Parties to Helsinki
Convention, identify measures for the management of non-point source pollution
from agriculture and rural settlements as a top priority. For GEF purposes, these
constitute the top priority transboundary water problem in the Baltic. In addition, the
proposed "Amendments to Annex III of the Helsinki Convention Concerning
Regulations on Prevention of Pollution from Agriculture" are currently under review
and are anticipated to be approved in March 1999.
10.
Recent Activities. Poland has had an ongoing interest in addressing non-point source
pollution from agriculture. The Ministry of Agriculture and Food Economy (MAFE), the
Ministry of Environmental Protection, Natural Resources and Forestry (MEP), and the
National Fund for Environmental Protection and Water Management (NFEP) have actively
participated in a series of recently completed demonstration programs which tested a wide
range of technical, education and investment activities directly with farmers in various parts of
the country. These demonstration activities have been successfully implemented and were
designed to serve as the basis for developing full-scale investment projects. These included the

1
A recent study conducted in the upper Odra basin by Warsaw Technical University
concluded that, however much Poland spent on reducing pollution from point sources, it would
not be able to meet its current standards for water quality without addressing pollution from
non-point sources.

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Annex 2
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project "Promoting Environmentally Friendly Agriculture on Individual Farms in the Bug-
Narew Basin" supported by the European Union (Phare) (ECU1.3 million); "Demonstration
Farms and Advisory Service Project" supported by the Baltic Agricultural Run-Off Program
(BAAP) of Sweden (Phase I US$600,000); "Agriculture and Water Quality Project" supported
by the United States ($1,550,000). The World Wide Fund for Nature also coordinated
development of management plans for the Vistula Lagoon and Odra Lagoon supported by the
European Union (Life) and Sweden (US$500,000) which address non-point source pollution
measures for these sensitive areas. The Water Supply Foundation, a major Polish
nongovernmental organization, has also undertaken a small number of field-based activities in
this area with limited funding from domestic and international sources.
11.
Ongoing activities. Ongoing projects include the second phase of the BAAP project
which supports development of extension services for control of non-point source pollution
(US$400,000) and the second phase of the management planning process for the Vistula
Lagoon and Odra Lagoon supported by Denmark and Sweden (US$400,000). In addition, a
number of ongoing activities are being implemented with domestic and international resources
to strengthen the planning capacity of the Regional Water Management Boards which have a
strategic role in addressing non-point source pollution.
12.
Impact of the Odra River Flood. The severe economic and social impacts from the
catastrophic Odra River flood in the summer of 1997 have had broad ramifications for the
investment program of the Polish Government and many activities which were well prepared
have been either delayed or reduced in their scope. Support for investments for improved
environmental management have not been exempted from budget reallocations required for
the massive reconstruction effort in southwestern Poland. However, even under these
constraints, the Polish Government remains prepared to support development and
implementation of a first phase project to address non-point source pollution from agriculture
which would provide the basis for a larger country-wide project in the medium term. Given
these serious short-term constraints, Poland has adopted a strategy that focuses on provision
of personnel drawn from government agencies to support the preparation and implementation
of such a project, other types of services in-kind, and use of government land, while seeking
support for investment activities from the independent National Fund for Environmental
Protection and Water Management and from international sources.
13.
Importance of International Assistance. Without international assistance, Poland
is unlikely to address these issues comprehensively in the next few years. This will cause a
disruption in the progress achieved to date through the successful demonstration programs and
delay the valuable opportunity to proceed with a full-scale investment project that will
undertake an operational program of interventions. In addition, since Poland has the most
advanced level of field-based knowledge in conducting non-point source pollution activities
among the countries in economic transition, the added benefit of having a model project that
could be replicated elsewhere in Central and Eastern Europe will be lost. Identification and
dissemination of lessons learned will also be delayed, an important loss for parties planning to
develop similar projects in the greater region.
14.
Baseline Scenario. Donors previously involved in these activities are phasing out
their funding, and there is no major new donor activity other than that leveraged by this
project. It is assumed that the baseline will include the ongoing activities listed above plus the
Rural Environmental Project, but without GEF support. The total cost of Baseline Scenario
investments for the Government of Poland and the donors, is US$12.2 million. This cost
includes technical assistance to farmers on Good Agricultural Practices (US$1.9 million); on-
farm investments to support storage of manure and slurry (US$7.7 million); public awareness
and outreach (US$0.2 million); monitoring (US$1.1 million); replication (US$0.6 million); and

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Annex 2
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project management (US$0.7 million). Implementation of the Baseline Scenario will result in a
limited reduction of nutrients into a small number of local water bodies in Poland. Reduced
coverage on farms would limit the number of opportunities for demonstration on different
types of farms and in different environmental conditions. Furthermore, there would be no
program to estimate and communicate the benefits of improving environmental practices on
farms.
Global Environmental Objective
15.
Current Situation. The current situation, the Baseline Scenario, will result in non-
point source pollution from agriculture in Poland and the adjacent countries contributing
significant and excessive loads of nutrients to the Baltic Sea, leading to widespread
eutrophication and the ecological damage and economic losses associated with this process.
The long-term implication will be continued degradation of a globally significant element of
international waters and its associated biodiversity in the shared coastal and marine
environment of the Baltic Sea. The GEF Alternative would build on the Baseline Scenario by
providing support for an expanded range of on-farm interventions, an enhanced program for
public awareness and outreach, and catalytic support for a replication initiative. The GEF
Alternative would go beyond the Baseline Scenario by establishing a mechanism for
coordinating the approach, funding and the geographic location of activities designed to

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Annex 2
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reduce non-point source pollution in Poland. This would overcome the risk of the current
course of action, under the Baseline Scenario, that Poland's effort to reduce nutrient flow into
the Baltic will have limited effect due to a lack of coherence in strategy.
16.
Demonstration of a Replicable Mechanisms. The global environmental objective
of the project is to demonstrate effective mechanisms for improving environmental practices
in agriculture through a project designed to reduce nutrients entering the Baltic Sea. The role of
the GEF and the other donors in this project would be to buy down the risks to farmers of
adopting these techniques. It would also be to calculate, demonstrate and disseminate the
benefits of improved environmental practices in agriculture. It would assist in making the
internalization of costs, which in GEF terms are incremental, broadly recognized over the long
term as economically beneficial to farmers, communities and the global environment. The
GEF Alternative would accelerate, coordinate and expand field tested technologies and
approaches and link them with a major outreach and communications program. The GEF
Alternative would build on the Baseline Scenario, increase the coverage of the mechanisms to
be tested in Poland and provide a model for potential use in other Central and Eastern
European countries. Links with the work of the European Union, GEF partners, Helsinki
Commission, international financial institutions and donors will assist in sharing and
replication of successful practices within the region. Because of the potential for replication in
other countries, and because of its transboundary implications, the GEF Alternative has
leveraged approximately US$5.0 million grant contribution from other donors and at least
$100,000 in kind contribution from the US Government.
17.
Scope. The GEF Alternative has been developed to accelerate the opportunity
provided by the project in Poland to become a model which, with adjustment for local
conditions, could be replicated in other countries. The addition of GEF resources would reduce
the threshold for the Polish Government to proceed with a project whose success in turn would
reduce the risk of other countries in undertaking similar initiatives. It would build on the
Baseline Scenario in four ways:
·
Allow additional investments in on-farm infrastructure in selected project areas, all of
which are sensitive to pollution from nitrates and have an impact on the Baltic Sea.
The increased coverage will provide greater environmental benefits and augment the
demonstration potential of the exercise.
·
Expand the outreach and public awareness program to effectively explain the benefits
of improved environmental practices at the farm level.
·
Allow the development of a strategy for replication of the project within Poland and
internationally; and
·
Help to coordinate the testing and operationalization of a number of mechanisms to
address the challenge of controlling non-point source pollution under the Baseline
Scenario.
18.
Participatory Approach. This project builds on the successful demonstration and
planning activities outlined above, which were based on a participatory approach. These
activities were developed and implemented through a range of partnerships between the Polish
Government, local authorities, domestic and international nongovernmental organizations, the
European Union, World Bank and a range of bilateral donors. The project will follow the
model of these pilots by taking a participatory approach, involving farmers and their families
in investment planning and monitoring, and undertaking extensive outreach campaigns.
Project implementation will include the participation of nongovernmental organizations. The
project preparation process has been undertaken collaboratively with the Helsinki Commission
and members of its Program Implementation Task Force, United States Environmental
Protection Agency and United States Department of Agriculture, the European Commission

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Annex 2
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and the Nordic Environmental Finance Corporation. Project design has benefited from
consultations with Coalition Clean Baltic and long-term cooperation with the World Wide
Fund for Nature (WWF) and the European Commission.
Costs
19.
Cost of the GEF Alternative. The total cost of the GEF alternative is estimated at
US$15.2 million, detailed as follows:
· Component 1 - On-Farm Environmental Improvement: (a) Technical assistance - US$1.9
million (same as baseline); (b) Investment support - US$10.2 million (GEF financing 2.5
million).
· Component 2 - Outreach and Management: (a) Public awareness and outreach - US$0.5
million (GEF financing US$0.3 million); (b) Monitoring - US$1.1 million (same as
baseline); (c) Replication - US$0.8 million (GEF financing US$0.2 million); (d) Project
management - US$0.7 million (same as baseline).
Benefits
20.
Domestic and International Benefits. Poland's successful experience in serving as
a lead party in work on agriculture and environment issues at a regional level, in the context of
the Helsinki Commission and the pilot initiatives sponsored by the Swedish and United States
governments and EU (Phare), represent a good start for regional cooperation and commitment
to reducing agricultural pollution in the Baltic Sea. Under the Baseline Scenario, over the long
term, a variety of domestic benefits would indeed accrue, such as cleaner surface and ground
water, and improved farm productivity. However, because of the dispersed nature of the
benefits and the long time horizon, the more substantial effort as proposed in the GEF
Alternative, would be necessary for the benefits of this first phase project to be realized more
broadly within Poland and the region. The most valuable domestic benefits that will come from
the project are associated with increased public awareness and adoption of improved on-farm
environmental management. Internationally, the most important benefits will come from
development of a replicable model for addressing this important transboundary issue and the
dissemination of lessons learned from project implementation.
Incremental Costs
21.
Baseline vs. GEF Alternative. The difference between the cost of the Baseline
Scenario (US$12.2 million) and the cost of the GEF alternative (US$15.2 million) is estimated
at US$3.0 million. This represents the incremental cost for achieving environmental benefits
through public awareness; outreach; adoption of on-farm environmental practices by farmers
and local communities; and developing, strengthening, monitoring and testing replicability of
on-farm environmental practices to improve the quality of the Baltic Sea. Discussions are
ongoing with interested donors regarding cofinancing possibilities. It is anticipated that the
European Union (Phare) will contribute US$3.9 million, the Nordic Environment Finance
Corporation (NEFCO) US$1.0 million, and IBRD a possible credit of US$2.0 million. The
Bank will report on the success of additional cofinancing mobilization at the time of final CEO
endorsement.

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Annex 2
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Incremental Cost Analysis
Component
Cost
US$m
Domestic Benefit
Transboundary Benefit
Category
1. On-Farm Environmental
Improvement
(a) Technical
baseline
1.9
Long run productivity on
assistance
participating farms.
Sustainable use of manure
storage facilities
With GEF
1.9
Increased understanding of farmers
of economic benefits from improved
practices creates an economic
incentive to take actions which more
rapidly reduce agricultural non-point
source pollution.
Incremental
0
(b) Investment
baseline
7.7
Improved local quality of
support
surface water in
participating watersheds.
Improved quality of
groundwater over long run
with GEF
10.2
Increased coverage of manure
storage in project areas.
Demonstration of effective
mechanisms to reduce pollution from
agriculture. Reduced pollution of the
Baltic Sea from agricultural sources.
incremental
2.5
2. Outreach and
Management
(a) Public
baseline
0.2
Limited increased farmer
awareness and
awareness of importance of
outreach
environmental management
with GEF
0.5
Wider understanding among Polish
farmers and public of issues involved
incremental
0.3
(b) Monitoring
baseline
1.1
Provision of information
concerning response to
project supported
interventions at the
national level which allows
for establishment of trends
and more effective national
and local level management
actions.

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Annex 2
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with GEF
1.1
Provision of information concerning
response to project supported
interventions at the regional level
which allows for establishment of
trends and more effective regional
level management actions by
Helsinki Commission, European
Union and other bodies.
incremental
0
(c) Replication
baseline
0.6
Potential for national
replication
with GEF
0.8
Accelerate development of a
strategy for replicating project both
within Poland, Baltic Sea region and
in other Central and Eastern
European countries.
incremental
0.2
(d) Project
baseline
0.7
Increased capacity for
Management
project management and
awareness of agricultural
pollution
with GEF
0.7
incremental
0
Total
baseline
12.2
with GEF
15.2
incremental
3.0

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Annex 3
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ANNEX 3
POLAND: RURAL ENVIRONMENTAL PROTECTION PROJECT
TRANSBOUNDARY ANALYSIS
1.
Strategic Action Program. The management of nutrient pollution from agricultural
non-point sources is a problem common to all the countries in the Baltic Sea Region, with
impacts on the shared coastal waters and marine environment. The need to address agricultural
inputs to international waters has been highlighted as a major priority in the "Baltic Sea Joint
Comprehensive Environmental Action Program (Program)," the strategic action program for
the region, which was prepared under the coordination of the Helsinki Commission by a
broadly representative high level task force. Since the Ministers of Environment adopted the
Program in 1992, many field-based demonstration activities have been undertaken in the
countries in economic transition in the eastern and southern portion of the Baltic Sea drainage
basin. These activities were designed to establish a basis for preparation and implementation of
operational projects that support long-term measures required to incrementally reduce non-
point source pollution of the coastal and marine environment. Implementation of operational
programs was not possible in the early 1990s due to political changes in these countries which
resulted in a complete reorganization of the agricultural sector as the shift from planned to
market economies took place.
2.
Updated Strategic Action Program. The "Recommendations for Updating and
Strengthening" of the Program were adopted by the Ministers of Environment in 1998. This
document noted that agriculture contributes an estimated 30-40 percent of the nitrogen and 10
percent of the phosphorous loading entering the Baltic Sea and that increased efforts should be
made to address control of non-point source pollution from agriculture and rural settlements. A
review, conducted as part of the "updating and strengthening" process, assessed the status of
the demonstration activities. The review concluded that measures to initiate operational
projects to control non-point source pollution from agriculture in the countries in economic
transition would be possible in the next phase of Program implementation due to increased
stability in the sector and resolution of many issues concerning land ownership. The
importance of rapidly proceeding with a cooperatively-based project in Poland was specifically
identified in the document. This is justified by the high level of transboundary impacts from its
extensive agricultural sector, the opportunity to introduce Good Agricultural Practices as part
of the restructuring process, and the considerable potential for success given the commitment
of the Polish Government and the positive results from the cooperatively funded
demonstration programs. The report also recognized that a project could be rapidly developed,
given the advanced state of preparation of the Polish Government and nongovernmental
institutions, and their positive experience with the use of participatory approaches.
3.
Assessment of Transboundary Impacts. The Helsinki Commission, working in
cooperation with the signatory countries, has prepared three Pollution Load Compilations, in
1987 (PLC-1), 1990 (PLC-2) and 1995 (PLC-3). A fourth PLC is currently being prepared.
These compilations have aimed to amass information on the inputs of important pollutants
entering the Baltic Sea from different sources on the basis of harmonized monitoring methods.
They have been complemented by a series of Periodic Assessments which review trends in the
Baltic Sea environment. The PLCs also included special studies including non-point source
pollution from agriculture at the regional level, selected country level studies, and local studies
prepared to support demonstration activities in Estonia, Latvia and Lithuania, Poland and
Russia. Efforts are currently underway to upgrade the quality and comparability of monitoring
data and to develop a series of indicators which can be used to assess trends. In addition,

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Annex 3
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regional meetings were held to review progress in addressing agriculture and environment issues
in the eastern and southern portion of the drainage basin in Vilnius (1993) and Warsaw (1996).
This issue was also the subject of the 1996 Royal Colloquium chaired by H.M. King Carl XVI
Gustaf of Sweden on "The Baltic Sea Region: Agriculture and Sustainability."
4.
Eutrophication. Eutrophication of international water bodies is a major
environmental problem in many parts of the world, including the Adriatic Sea, Baltic Sea and
Black Sea. The common symptoms of eutrophication, which is caused by over enrichment of
water by nutrients, are increased plant biomass in the form of algae, oxygen deficiency in water
bodies, the formation of hydrogen sulfide and remineralization of the biomass. These processes
disrupt the balance of freshwater, coastal and marine ecosystems and cause changes in their
structure and function. Excessive nutrient loads to the semi-enclosed Baltic Sea affect the
entire ecosystem; the work of the Helsinki Commission has identified nitrogen as the substance
of highest concern. For the purposes of GEF, eutrophication from nutrients and organic
matters is a top priority transboundary water problem. Impacts associated with eutrophication
in Baltic coastal and marine waters have been a shift in the composition of marine vegetation
in many coastal areas, repeated large scale algal blooms, disruption of reproductive cycles of
some fish species, declines in some fish stocks and increases in others. Summer algal blooms
have periodically necessitated the closing of many bathing beaches throughout the region with
an adverse affect on their recreational use and tourist value.
5.
Eutrophication Trends. The symptoms of eutrophication, such as increased plant
biomass and oxygen deficiency in the bottom water, have decreased in some coastal areas while
in others they have stayed the same. Improvements have occurred in some portions of the
western and northern part of the region due to a reduction of nutrient inputs resulting from
construction of wastewater treatment plants and measures to control pollution from
agriculture. However, in open sea areas no clear changes have been observed. With respect to
long-term variations, there were no major differences in the dominance of phytoplankton
species reported in the Periodic Assessments on the state of the Baltic Sea. In fact there are
indications that the frequency and spatial coverage of harmful algal blooms in the Baltic Sea
may have increased. This may be partially due to changes in seasonal availability and relative
proportions of nutrients. Information available on macrophytobenthos strongly suggests that
general changes have taken place during the recent decades along the coasts of virtually the
whole of the Baltic Sea area. The depth distribution of perennial macrophytes, attached to the
seabed, has decreased, and short-lived filamentous or thin-bodied epiphytic or drifting algae
have become increasingly prevalent in recent times. These changes are most commonly
explained by the high inputs of nutrients during the early 1990s.
6.
Massive Blue-Green Algal Blooms in 1997. The summer of 1997 brought about
exceptional blue-green algal blooms in different parts of the Baltic Sea. According to studies by
the Finnish Institute for Marine Research, the surface accumulations of blue-green algae during
this period were the most extensive ever recorded in the whole Baltic Sea area. Toxic blooms
were found in the entire Baltic Sea. Large amounts of blue-green algal biomass drifted ashore,
particularly along the northern coast of the Gulf of Finland and in the Archipelago Sea between
Finland and Sweden. The large scale blooms have been attributed to the high nutrient load in
the Baltic Sea, with exceptionally sunny weather serving as an effective catalyst for starting
the blooms. In Helsinki, the extensive blue-green algal blooms forced the city to close many of
its beaches for most of the swimming season. During the summer several cases of cyano-
bacterial toxicosis were reported both in humans and animals in Finland. This event caused
widespread demands from politicians and the public for intensified action to reduce nutrient
loading to the Baltic Sea from all types of sources to avoid such large scale transboundary
impacts.

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Annex 3
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6.
Transboundary Pollution in Sensitive Coastal Areas. The eastern and southern
portion of the Baltic Sea includes a number of semi-enclosed bays and large coastal lagoons
that are critical elements of the regional ecosystem and require special management efforts.
These areas include portions of the Gulf of Finland (Estonia, Finland, Russia); Haapsalu and
Matsalu Bays (Estonia); Gulf of Riga (Estonia, Latvia); Kursiu Lagoon (Lithuania, Russia);
Vistula Lagoon (Poland, Russia); Gulf of Gdansk (Poland); and the Oder/Odra Lagoon
(Germany, Poland). They provide extensive habitat for aquatic and terrestrial species, support
important fisheries and are of recreational and tourism value. In particular, the coastal lagoons
and their associated wetlands serve as nutrient traps which reduce the impacts on the greater
Baltic Sea by concentrating these substances. The Program has identified the need to take
priority actions to strengthen management of, and reduce the discharge of nutrients to these
sensitive areas. Because most of these areas are transboundary, special measures should be
taken through the Helsinki Commission to promote development of cooperative management
plans and to support actions for investments to control both point and non-point sources of
pollution. Special monitoring programs and indicators are currently being developed for use in
the Vistula Lagoon and Odra Lagoons. It is important to note that while the Gulf of Gdansk is
within Poland, the current pattern in the Baltic carries its waters to coastal areas of Russia
(Kaliningrad Oblast) and Lithuania, making its management a transboundary concern as well.

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Annex 5
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ANNEX 4
STAP REVIEW

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Annex 5
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ANNEX 5
Poland: Rural Environmental Protection Project
LIST OF ANNEXES
(included in printed version)
Annex 1:
Project Design Summary
Annex 2:
Incremental Cost Analysis
Annex 3:
Transboundary Analysis
Annex 4:
STAP Technical Review
(included in electronic version or to be provided by the IA upon request)
Annex 6:
Estimated Project Costs
Annex 7:
Cost-Benefit Analysis Summary, or
Cost-Effectiveness Analysis Summary
Annex 8:
Financial Summary for Revenue-Earning Project Entities, or
Financial Summary
Annex 9:
Procurement and Disbursement Arrangements
Table A.
Project Costs by Procurement Arrangements
Table A1.
Consultant Selection Arrangements
Table B.
Thresholds for Procurement Methods and Prior Review
Table C.
Allocation of Loan Proceeds
Annex 10:
Project Processing Budget and Schedule
Annex 11:
Documents in Project File
Annex 12:
Statement of Loans and Credits
Annex 13:
Country at a Glance
Annex 14:
Environmental Data Sheet
Map

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