Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Table 3.6 Kahramanmaras SKI Budget Results**

**Kahramanmaras Water and Sewerage Entity**
**Budget Results (TRY/EUR ave.rate)** 0,2691 0,2211 0,1652 0,1652 0,1652 0,1652
**(EURm)** **2016** **2017** **2018** **2019F** **2020F** **2021F**
Water and Other Tariffs 27,1 26,7 21,9 24,5 28,2 30,5 Other Revenues 7,4 9,6 5,1 5,7 6,6 7,1 Transfers Grants Received 10,3 9,7 8,1 9,1 10,5 11,3
**Total revenues** **44,8** **46,0** **35,1** **39,4** **45,3** **48,9**

Personnel Expenditure -7,6 -7,1 -5,2 -5,8 -6,7 -7,2 Other operating expenditure -18,7 -20,1 -17,4 -19,5 -22,5 -24,3

**Operating balance** **18,5** **18,7** **12,5** **14,0** **16,1** **17,4**

Interest paid -1,7 -1,1 -1,2 -2,0 -3,0 -5,0

**Current balance** **16,8** **17,6** **11,3** **12,0** **13,1** **12,4**
Capital Expenditure -20,8 -23,7 -26,1 -30,8 -31,5 -35,2
**Surplus/(Deficit) Before Debt** **-4,1** **-6,1** **-14,9** **-18,9** **-18,4** **-22,9**
New Borrowing 0,0 12,0 29,5 22,0 34,0 27,0 Debt repayment -2,8 -9,4 -11,4 -14,0 -16,4 -17,0

**Overall results for the year** **14,0** **20,2** **29,3** **20,0** **30,7** **22,4**
Debt (EUR equivalent) 24,5 23,2 24,6 35,1 52,7 62,7 Source: Budget results and consultant cal **c** ulations

**Table 3.7 Kayiseri SKI Budget Results**

**Kayseri Water and Sewerage E**
**Budget Results**
**(EURm)**
Water and Other Tariffs Other Revenues Transfers Grants Received
**Total revenues**

**ntity**

Personnel Expenditure Other operating expenditure

**Operating balance**

Interest paid

**Current balance**
Capital Expenditure
**Surplus/(Deficit) Before Debt**
New Borrowing Debt repayment
**Before Debt**
**Overall results for the year**
Debt (EUR equivalent) Source: Budget results and consult **a** 0,2691 0,2211 0,1652
**2016** **2017** **2018** **2019F** **2020F** **2021F**
47,3 44,1 38,2 42,8 49,2 53,2 1,5 1,2 1,4 1,6 1,8 2,0 14,2 14,3 11,8 13,2 15,1 16,4
**63,0** **59,6** **51,4** **57,6** **66,2** **71,5**

-11,6 -9,6 -8,0 -9,0 -10,3 -11,2

-32,9 -29,5 -24,0 -26,9 -31,0 -33,4

**18,4** **20,4** **19,3** **21,6** **24,9** **26,9**

-1,5 -2,6 -2,1 -2,4 -3 -3,2

**16,9** **17,9** **17,3** **19,2** **21,9** **23,7**
-24,4 -25,7 -23,6 -27,8 -28,4 -31,8
**-7,5** **-7,8** **-6,3** **-8,6** **-6,5** **-8,1**
31,4 31,1 45,3 35 42,5 28
-6,0 -7,4 -9,8 -10 -12 -14

**17,9** **15,9** **29,2** **16,4** **24,0** **5,9**
51,6 51,1 45,2 70 100 114 nt calculations Page 74 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Table 3.8 Osmaniye SKI Budget Results**

**Municipality of Osmaniye**

**Budget Realizations**

**(EUR million)**

TRY/EUR Taxes Transfers received Fees, fines and other operating revenue

**Operating revenue**

**ACTUAL** **ACTUAL** **ACTUAL** **PROJECT** **PROJECT** **PROJECT**

**2016** **2017** **2018** **2019** **2020** **2021**

0,2691 0,2211 0,1652 0,1652 0,1652 0,1652 4,1 3,4 4,1 4,5 5,1 5,7 29,6 29,1 34,0 36,7 41,1 46,0 7,8 7,1 6,8 7,8 8,7 9,4

**41,5** **39,5** **44,9** **49,0** **54,9** **61,1**

Operating expenditure -37,5 -32,6 -35,8 -38,7 -43,4 -48,6

**Operating balance**

**Operating Margin**

Financial revenue Interest paid

**Current balance**

Capital revenue Capital expenditure

**4,0** **7,0** **9,0** **10,3** **11,5** **12,6**

_**10%**_ _**18%**_ _**20%**_ _**21%**_ _**21%**_ _**21%**_ 0,6 0,6 0,4 0,4 0,4 0,4

-6,6 -4,0 -8,3 -6,6 -5,3 -5,7

**-** **1,9** **3,5** **1,1** **4,1** **6,7** **7,3**

0,8 5,3 0,1 0,2 1,8 2,7

-7,2 -24,5 -17,7 -8,8 -14,4 -24,3

Capital balance -6,4 -19,2 -17,6 -8,6 -12,6 -21,7

**Surplus (deficit) before debt variation** **-8,4** **-15,7** **-16,5** **-4,5** **-5,9** **-14,4**

28. Further detailed financial management assessments and creditworthiness analysis have been carried out for sub-borrowers Adana, Kahramanmaras and Kayseri water utilities along with municipalities of Kahramanmaras Metropolitan and Osmaniye. These have covered qualitative financial management areas as well as fiscal performance, expenditure coverage and indebtedness for the last five years and a projection period of five years.

29. The capacity of Adana SKI to clear its debts using the operating surplus is 1.1 years in 2014 and increased to 2.2 years in 2018 with an average of 2 years over the period from 2014 to 2018. The number of years for the 2019 – 2021 budget period is expected to be less than a year. The capacity of Kahramanmaras SKI to clear its debts using the operating surplus is 3.5 years in 2014 and decreased to 0.9 years in 2018 with an average of
1.2 years. The number of years for the 2019 – 2021 budget period is expected to be 1.5 years. The capacity
of Kayseri SKI to clear its debts using the operating surplus is 1.4 years in 2014 and increased to 2.3 years in 2018 with an average of 2.1 years over the period from 2014 to 2018. The number of years for the 2019 – 2021 budget period is expected to be 1.96 on the average.

30. Financial projections for the water utilities and municipalities have indicated that these entities will incur additional debt in the project implementation period with debt outstanding to current revenue peaking at 32 percent for Adana SKI, 45 percent for Kahramanmaras SKI, and 21 percent for Kayseri SKI. For the municipalities debt service burden will increase and self-funding ability from current balance will be stretched with debt service to current revenue reaching 43 percent for Kahramanmaras MM and 42 percent for Osmaniye. Sub-borrowers are forecast to maintain ability to meet financial commitments nonetheless remain exposed to adverse economic conditions.

Page 75 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Table 3.9: Summary Economic Analysis Results**

NPV of Total Costs NPV of Total Benefits E-IRR (%) (EUR) Adana Kozan Drinking Water and Transmission Line Adana Yedigöze Drinking Water Transmission and WWTP Kahramanmaras Ceyhan Basin (Andırın&Goksun) WWTP Kahramanmaras Northern Districts Integrated Solid Waste Management Kayseri WWTP Expansion Osmaniye Water and Sewerage Network

**Conclusion**

Economic NPV 1,913,523 22,009,027 23,922,550 11.0

-24,497,839

170,146 3,832,084 10,918,408 65,019,026 44,492,053 7,134,821 26,118,978 20,369,926 7,956,038 19,994,214 7,304,967 29,951,062 30,955,334 72,975,064 6.4 10.4 11.5 25.6 23.8 31. The influx of Syrian guests to several Municipalities of Turkey over the past years has led to an increase in infrastructural requirements caused by increasing water demands, wastewater generation and solid waste generation. This has burdened Municipalities’ ability to provide effective level of service both to their local residents, as well as to the guest population.

32. The entire project comprising various sub-projects by different implementing authorities will not produce commercially profitable results in each instance. Nonetheless, it will create viable results underpinned by net economic benefits to be accrued in total. With the implementation of the proposed projects, the capacity of the water entities (SKI) and their municipalities will be strengthened in terms of infrastructure and technical capacities, enabling them to better respond to the significant increase in demands for municipal services.
Through the technical assistance components, SKIs are also expected to prepare Performance Improvement Action Plans, which will, among other things focus on improving their performance efficiency and financial viability through appropriate actions targeting results such as improved revenue collection, cost reduction, non-revenue water reduction, etc.

Page 76 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**ANNEX 4: Procurement**

1. **Applicable regulations.** The World Bank Procurement Regulations for IPF Borrowers – July 2016 revised in November

2017 and August 2018 (“Procurement Regulations”) will apply to the proposed Project. A General Procurement Notice will be published on the World Bank’s external website and United Nations Development Business online immediately after the project negotiations.

2. **Anti-Corruption Guidelines** . The World Bank's “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006 and revised in January 2011 and as of July 1, 2016 (Anti-Corruption Guidelines)” will apply to the proposed Project.

3. **Project Procurement Strategy for Development (PPSD).** The Procurement Regulations requires the Borrower to develop a PPSD for the Project. Since ILBANK and targeted municipalities are considered urgent need of assistance described under paragraph 12 of OP10.00, a simplified Project Procurement Strategy for Development (PPSD) a has been prepared by ILBANK. The draft PPSD describes how procurement activities will support project operations for the achievement of the PDOs and deliver value for money. The PPSD is linked to the overall project implementation strategy by ensuring proper sequencing of procurement activities. It provides information on institutional arrangements for procurement, roles and responsibilities, appropriate procurement methods, procurement duediligence, and other requirements needed for carrying out procurement. The PPSD also includes a detailed description of the procurement capacity needed by the executing agencies for carrying out procurement with specific focus on managing contract implementation, governance structure, and accountability framework. In addition, PPSD is supported with a market research and analysis assesses market-related risks and opportunities that will affect the preferred procurement approach to market strategy.

4. PPSD confirmed that the selection of “Design Review and Supervision Consultant(s)” are located as “ **strategic**

**security** ” procurement in the supply positioning matrix. It is envisaged that these consultants will support ILBANK
(PMU)/municipalities for the preparation of the bidding documents for the infrastructure investments, and therefore, consultants’ timely input is very critical for the initiation of the relevant procurements planned in the procurement plan. Considering the limited time for the implementation project and urgent need of the services, PPSD proposed to use “consultant’s qualification-based selection” method in the procurement of the six consultant’s contracts in line with the guidance on fit-for-purpose principle. Accordingly, use of higher thresholds proposed for the “consultant’s qualification-based selection” method. It was envisaged that the proposed approach will accelerate the selection of “Design Review and Supervision Consultant(s)” and will support to deliver the project development objectives. The selected consultant will also provide services to relevant municipalities/utilities for the quality assurance of the works and timely completion on the contracts within their original contract prices.

5. In the selection of six “Design Review and Supervision Contract(s)”, a streamlined procedure of single simultaneous international advertisement has been foreseen to collect the interests of the consultants. The firms with best qualifications and relevant experience determined, and based on their capacity and interest, eligible firms will be invited to submit their technical and financial proposals for the relevant contracts. In order to mitigate risks attributable to the perception of integrity matters, PPSD proposed ILBANK to engage independent Probity Assurance Providers to be present during the contract negotiation stages of the relevant contracts.

6. PPSD discussed that contracting of individuals in accordance with the Procurement Regulations will give flexibility in decision making to the project implementation teams in ILBANK and in the beneficiary municipalities in addition to Page 77 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996) maintaining uniformity in the followed selection procedures under the project. Therefore, PPSD proposed to hire the individual experts required for ILBANK PMU and municipal project implementation units in accordance with the individual consultant selection procedures as specified in the Procurement Regulations. These include but not limited to Procurement Specialist, Contract Management Consultant, Financial Management Specialist, Environmental Specialist, Social Specialist, Monitoring and Evaluation Expert and Communication Specialist.

7. The PPSD further analyzed the risks against the size of the proposed infrastructure contracts and thus all works procurements were positioned as “ **strategic critical** ” in the supply positioning matrix. And thus, the procurements of these contracts were packaged carefully considering the outcome of the market sounding i.e. availability of the capable contractors in the market who may respond to the ILBANK needs. As a conclusion, PPSD proposed to use National Procurement Procedures as specified in the Procurement Regulations by increasing the thresholds normally used in Turkey for similar contracts. The market sounding concluded that there are more than 50 national firms in each of the water, waste-water and solid waste sectors who may be qualified alone or in association with others for the proposed contracts. Also, it has been observed in the procurements of Bank financed MSP-I, MSP-II and SCP projects that the interest of the foreign bidders was very limited especially in city water and wastewater network construction works.

8. **Procurement Plan and Procurement Tracking.** The Procurement Regulations require the Borrower to use the Bank’s Systematic Tracking of Exchanges in Procurement (STEP) online procurement tracking tool to prepare, clear and update its procurement plans, and conduct all procurement transactions. ILBANK will create the procurement plan through STEP prior to initiating any procurement. The PPSD and the underlying Procurement Plan will be updated at least annually or as required to reflect actual project implementation needs. Only ILBANK will be given STEP access in the Project portal to safeguard confidentiality of the contract information recorded by different municipalities/utilities. All the procurement related complaints will be recorded in the STEP complaint module by ILBANK.

9. The contracts agreed by the Bank for financing and included in the approved procurement plan are listed in Table 4.1 below:

**Table 4.1: Contracts Agreed by the Bank**

**Estimated**

**Contract**
**Completion**
**Date (including**
**defects liability**

**period)**

**Estimated**

**Contract**

**Signing**

**Date**

4-Jan-21 20-Dec-23 1-Feb-21 17-Jan-24 Page 78 of 94

**Activity**
**Description**

Construction of Kozan İmamoğlu Yedigöze Water Transmission Line Construction of Yedigöze Water Treatment Plant

**Reference**

**No.**

**Estimated**

**Amount**
**(in EUR) (*)**

IBRD 21,850,000 Loan IBRD 13,150,000 Loan RFB – Single ADANA-W1 Works Stage RFB – Single ADANA-W2 Works Stage

**Market**
**Approach**

Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP)

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A data source described by its characteristics or producer rather than a proper name, containing a data noun and at least one identifying descriptor

A general reference to data, information, or statistics that contains a data noun but lacks enough specificity to identify the exact source


Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Estimated**

**Contract**
**Completion**
**Date (including**
**defects liability**

**period)**

**Estimated**

**Contract**

**Signing**

**Date**

**Activity**
**Description**

Construction of Kozan Water Network Project and Pınargözü Transmission Line Construction of Kahramanmaraş Northern Districts Integrated Solid Waste Project Construction of Elbistan Water Network Project Construction of Elbistan Water Transmission Line

**Reference**

**No.**

RFB – Single ADANA-W3 Works Stage

**Estimated**

**Amount**
**(in EUR) (*)**

28,070,000 EU Grant 14,000,000 EU Grant 8,000,000 EU Grant IBRD 25,000,000 Loan IBRD 17,000,000 Loan RFB – Single KMARAS-W1 Works Stage RFB – Single KMARAS-W2 Works Stage RFB – Single KMARAS-W3 Works Stage

**Market**
**Approach**

Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) 1-Mar-21 14-Feb-24 7-Feb-21 19-Sep-24 14-Jul-21 25-Dec-24 15-May-21 26-Sep-24 Kahramanmaraş (Centrum) Water Supply and Sewerage and Stormwater Project - West Part (Lot 1) RFB – Single KMARAS-W4 Works Open National Procurement KMARAS-W4 Works Procurement 7-Feb-21 23-Jan-24 Kahramanmaraş Stage Procedure (Centrum) Water (NPP) Supply and Sewerage and 18,800,000 EU Grant Stormwater Project - East Part (Lot 2) Stage Procedure (NPP) 18,800,000 EU Grant Construction of Ceyhan Basin Wastewater Treatment Plants (Goksun & Ekinozu) Construction of Ceyhan Basin Wastewater Treatment Plants (Caglayancerit & Andirin) Construction of Kayseri Wastewater Treatment Plant RFB – Single KMARAS-W5 Works Stage 7-Mar-21 25-Feb-23 7-Mar-21 25-Feb-23 12-Jul-21 26-Jun-24 Page 79 of 94 RFB – Single KMARAS-W6 Works Stage RFB – Single KAYSERİ-W1 Works Stage Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) Open National Procurement Procedure IBRD 5,500,000 Loan 2,900,000 EU Grant 12,500,000 EU Grant

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Estimated**

**Contract**
**Completion**
**Date (including**
**defects liability**

**period)**

**Estimated**

**Contract**

**Signing**

**Date**

**Activity**
**Description**

**Reference**

**No.**

**Market**
**Approach**

(Phase 1) (Lot 1) (NPP) Construction of Kayseri Wastewater Treatment Plant (Phase 2) (Lot 2)

**Estimated**

**Amount**
**(in EUR) (*)**

IBRD 12,500,000 Loan 4,710,000 EU Grant 3,900,000 EU Grant 4,560,000 EU Grant IBRD 27,650,000 Loan Construction of Akşehir Water Supply Project Construction of Ilgin Wastewater Treatment Plant Construction of Cumra Wastewater Treatment Plant RFB – Single KONYA-W1 Works Stage RFB – Single KONYA-W2 Works Stage RFB – Single KONYA-W3 Works Stage Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) 4-Apr-21 25-Mar-23 4-Apr-21 19-Mar-24 4-Apr-21 19-Mar-24 Construction of Osmaniye (Centrum) Water Supply and Sewerage and Stormwater Project - West Part (Lot 1) OSMANİYE RFB – Single Works W1 Stage Open National Procurement Procedure Works Procurement 6-Mar-21 23-Aug-23 Construction of W1 Stage Procedure Osmaniye (NPP) (Centrum) Water Supply and 29,910,000 EU Grant Sewerage and Stormwater Project - East Part (Lot 2) Stage (NPP) 29,910,000 EU Grant Minor Works for Incidental Infrastructure Investments (Mobile toilets, small water and sewerage network/s, septic tanks and etc.) (Multiple Contracts) 1,000,000 MW 1, 2.... Works RFQ National EU Grant TBD TBD Page 80 of 94

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A general reference to data, information, or statistics that contains a data noun but lacks enough specificity to identify the exact source


Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Estimated**

**Contract**
**Completion**
**Date (including**
**defects liability**

**period)**

**Estimated**

**Contract**

**Signing**

**Date**

14-Jul-21 12-Oct-21 14-Jul-21 12-Oct-21

**Activity**
**Description**

Kahramanmaraş Northern Districts Integrated Solid Waste Project Vehicle Supply Kahramanmaraş Northern Districts Integrated Solid Waste Project Container Supply Procurement of Video Conference System/s for ILBANK HQs and Regional Directorates (Multiple Contracts) Review of Existing Designs, Preparation of Bidding Documents and Construction Supervision Services Review of Existing Designs, Preparation of Bidding Documents and Construction Supervision Services Review of Existing Designs, Preparation of Bidding Documents and Construction Supervision Services Review of Existing Designs, Preparation of Bidding Documents and Construction Supervision Services

**Reference**

**No.**

RFB – Single KMARAS-G1 Goods Stage KMARAS-C2 1,800,000 3-Aug-20 15-Jan-24 KAY-C1 1,450,000 3-Aug-20 10-Dec-24 Page 81 of 94

**Estimated**

**Amount**
**(in EUR) (*)**

2,000,000 EU Grant 1,000,000 EU Grant RFB – Single KMARAS-G2 Goods Stage

**Market**
**Approach**

Open National Procurement Procedure (NPP) Open National Procurement Procedure (NPP) 1,325,000 ILBANK G1 Goods RFQ National IBRD Loan 15-Sep-20 9-Nov-21 ADANA-C1 2,000,000 13-Jul-20 23-Feb-24 KMARAS-C1 2,250,000 3-Aug-20 10-Dec-24 CS CQS International IBRD Loan

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Estimated**

**Contract**
**Completion**
**Date (including**
**defects liability**

**period)**

**Estimated**

**Contract**

**Signing**

**Date**

**Activity**
**Description**

Review of Existing Designs, Preparation of Bidding Documents and Construction Supervision Services Review of Existing Designs, Preparation of Bidding Documents and Construction Supervision Services Project Visual Design and Social Media Management

**Reference**

**No.**

**Market**
**Approach**

**Estimated**

**Amount**
**(in EUR) (*)**

KON-C1 1,000,000 5-Oct-20 18-Mar-24 OSMANİYE 1,750,000 21-Sep-20 6-Sep-23 C1 ILBANK C1 CS CQS National 120,000 EU Grant Public Awareness ILBANK C2 CS CQS National 300,000 EU Grant Campaign Individual consultants (in the fields of procurement, finance, technical and environment etc.) and Probity Assurance Providers for ILBANK, Municipalities and Utilities (Multiple Contracts) Project Printed Materials Production Producing the Project Visual Production & Materials ILBANK C3, National CS INDV C4.........

780,000 EU Grant 7-Dec-20 27-Mar-23 7-Dec-20 1-Apr-22

-

24-Jan-21 24-Apr-21 24-Jan-21 24-Apr-21 Page 82 of 94 ILBANK NCS 1 NCS RFQ National 40,000 EU Grant ILBANK NCS 2 NCS RFQ National 150,000 EU Grant

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A general reference to data, information, or statistics that contains a data noun but lacks enough specificity to identify the exact source


Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Estimated**

**Contract**
**Completion**
**Date (including**
**defects liability**

**period)**

**Estimated**

**Contract**

**Signing**

**Date**

**Activity**
**Description**

Logistical & Organizational Services for Capacity Building Activities for ILBANK and Final Beneficiaries (Workshops, seminars, symposiums, and trainings); and citizen satisfaction, baseline and endline surveys (Multiple Contracts) Logistical & Organizational Services for Capacity Building Activities for ILBANK (Multiple Contracts) Logistical & Organizational Services for Project Opening/Mid Term//Closing Events and etc.
(Multiple Contracts)

**Reference**

**No.**

**Market**
**Approach**

**Estimated**

**Amount**
**(in EUR) (*)**

ILBANK NCS 3 NCS RFQ National 370,000 EU Grant IBRD ILBANK NCS 4 NCS RFQ National 630,000 Loan ILBANK NCS 5 NCS RFQ National 125,000 EU Grant

-

-

-

(*) VAT included in Loan financing 10. **Advance Procurement.** Procurement Regulations Paragraphs 5.1 and 5.2 (Advance Contracting and Retroactive Financing) permits that the Borrower may wish to proceed with the procurement process before signing of the Legal Agreement. In such cases, if the eventual contracts are to be eligible for Bank financing the procurement procedures, including advertising, shall be consistent with Sections I, II and III of the Procurement Regulations which cover the _Bank’s Core Procurement Principles of economy, efficiency, transparency, fairness, fit-for purpose, value-for-money_ _and integrity._ With this understanding, ILBANK will initiate the selection of the PIU consultants and design review and supervision consultants’ selection upon publication of the General Procurement Notice in the UN Development Business online.

11. **Procurement Methods and Standard Procurement Documents.** While comprehensive selection methods and use of Bank’s Standard Procurement Documents will be applicable, due to emergency response nature of the project, arrangements will be used in the project procurements. Higher thresholds will be used for the national streamlined procurement procedures and simple selection procedures will apply for the selection consultants as specified in the Page 83 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996) approved procurement plan. Determined thresholds and selection methods will be reviewed by the Bank during the project supervisions and/or when the Bank decides and will be updated as appropriate.

12. **National Procurement Procedures.** When approaching the national market, as agreed in the Procurement Plan, Turkey's national procurement procedures will be used by ILBANK in accordance with the provisions in paragraphs 3.21-3.23; 3.30; 3.32; 5.3; 5.4; 5.5 and 5.7(a) of the Procurement Regulations. In such procurements, bidding documents agreed by the Bank in Turkish language including mandatory provisions specified in the procurement plan will be used.

13. **Procurement Risk Assessment.** The World Bank has conducted a procurement assessment for the project, with a focus on ILBANK in terms of: (i) procurement regulatory framework and management capability; (ii) integrity and oversight; (iii) procurement process and market readiness; and (iv) procurement complexity. The assessment concludes that: (a) applicable procurement policies and the regulatory system are designed broadly to meet Core Procurement Principles of value for money, economy, efficiency, effectiveness, integrity, transparency and fairness and accountability; (b) ILBANK has a clear system of accountability with clearly defined responsibilities and delegation of authority on who has control of procurement decisions; (c) there is a clear identified target market for all procurements; and (d) ILBANK/Municipalities effectively manages contracts to ensure delivery as per the contract conditions. The assessment is recorded in the Procurement Risk Assessment and Management System of the Bank.

14. ILBANK will undertake the overall responsibility of the project implementation and coordination through its Project Management Unit (PMU) located under the International Relations Department. PMU was originally established in 2005 for the Bank financed MSP-I project and has been continuously operational throughout MSP-II, SCP-I, SCP-II, and SCP-II additional financing projects. Hence, PMU is experienced in Bank financed projects and familiar with World Bank procurement procedures and contract management. All the procurements under the proposed project will be conducted by ILBANK/PMU centrally. The technical requirements in the selection documents will be agreed by the municipalities/utilities. The beneficiary municipalities/utilities will attend the bid evaluation committees and sign the respective contracts.

15. ILBANK PMU is linked to three separate units namely Contract Management Unit, Financial Management Unit and Technical Management Unit. The procurement management is under the responsibility of the Contract Management Unit. Considering fast track urgent response nature of the project, and heavy work load of existing PMU staff due to other Bank financed SCP-I, SCP-II and SCP-II additional financing projects, and also from projects of other IFIs, a dedicated procurement team will be established under the PMU with minimum 2 procurement experts who are familiar with the Bank procurement procedures. This dedicated procurement team (FRIT procurement team) will be supported by several specialized departments within ILBANK including Investment Coordination Department and Technical Management Team. The FRIT procurement team will be mainly responsible for the implementation and coordination of the procurement activities within the scope of the project. In case of need, Investment Coordination Department with vast experience in procurement under the public procurement procedures will bring additional capacity to the FRIT procurement team. When needed, PMU will be supported by Project Department responsible for review and approval of feasibility studies under the project. In addition, Infrastructure Implementation Department will provide support to the review of technical specifications; and several other administrative departments such as Accounting and Financial Affairs, IT, and Banking Services will be ready provide support when needed.

16. The beneficiary municipalities/utilities have certain technical and procurement capacity to operate their regular services with varying staff capacity depends on the size of the city. For example, while there are 78 technical and Page 84 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996) procurement staff exists in Osmaniye, similar staff number reaches to 554 in KOSKA (Konya Water and Wastewater Utility) including 433 technicians and 5 procurement experts. Some of the municipalities have experience to work with IFIs in their investment projects financing but in most of the cases experienced staff may not be available for the proposed project. Considering limited implementation duration of the project, the participating municipalities/utilities will establish dedicated project implementation units comprised of procurement and technical experts. These experts will be involved in the selection process of the design review and supervision consultants, works contractors, good suppliers and management of concluded contracts. The participating municipalities/utilities will hire experts experienced in the procurement and management of the contracts in the Bank financed projects, if such staff already not exist in their teams.

17. Given the emergency nature of the project and limited implementation time; and taking into account the existing work load of ILBANK; and procurement and contract management capacity of beneficiary municipalities/utilities; the overall procurement risk for the project is assessed as “substantial”. The risk rating can be lowered to “Moderate” when the agreed actions in Table 4.2 below have been put in place. The assessment will be recorded in the Procurement Risk Assessment and Management System of the Bank.

**Table 4.2: Identified Risks and Agreed Action Plan**
**Action**
**Identified Risk** **Mitigation Measure** **Responsible Party** **Time Frame**
**No.**

Throughout the ILBANK project procurement process.

Page 85 of 94

1.

2.

ILBANK has been implementing three World Bank financed projects and the projects financed by other IFIs simultaneously. The teams in the PMU are overloaded. PMU may not be able to meet the procurement deadlines.

Project implementation duration is relatively short and beneficiary municipalities has no WB procurement experience. If the procurement schedules are not met the contracts may not be completed on time. To accelerate the project implementation all the procurements will be conducted centrally by ILBANK.
This arrangement requires parallel implementation of procurement activities including establishment A dedicated PMU team established to implement the project activities and at least 2 experienced procurement specialists will be employed in this unit.

ILBANK PMU will be supported by the ILBANK’s Investment Coordination Department, as needed.

ILBANK TORs will be prepared by ILBANK and the positions will be advertised in advance before the project effectiveness.

Contracts will be signed within first month after the project effectiveness.

A dataset, survey, database, index, census, registry, or information system with a specific proper name that can be cited, queried, or downloaded as a data source

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Action**
**Identified Risk** **Mitigation Measure** **Responsible Party** **Time Frame**
**No.**

of various bid evaluation committees.

Beneficiary municipalities/utilities will employ a staff knowledgeable in procurement and contract implementation.

This staff will be trained by PMU Procurement Specialists.

ILBANK to engage independent probity assurance providers in the contract negotiations.

Contracts will be signed within first month after the project effectiveness.

Selection of independent probity assurance providers will be completed before inviting the consultants to submit their technical and financial proposals.

3.

4.

5.

6.

7.

Beneficiary municipalities/ utilities staff are unfamiliar with the World Bank Procurement Regulations and contract provisions. It may cause misinterpretation of procurement provisions and contract implementations.

Stakeholder perception on the integrity of the contract negotiation process in CQS selection.

Differentiation of procurement implementations among the implementation entities. It may create unnecessary questions from the procurement stakeholders.

Incomplete environmental and social safeguard studies may delay commencement of the contract implementation.

Misinterpretation of the Procurement Regulations and terms and conditions of the contracts. It may cause noncompliance and also time and cost overruns in the contract implementation.

If applicable, all safeguard studies will be completed before signing of the contracts.

Work closely with World Bank Procurement Specialist.

ILBANK/ Municipalities/Utilities ILBANK Throughout the ILBANK/PMU Project.

Throughout the ILBANK Project.

Develop a Project Before the Project ILBANK Operations Manual. effectiveness.

18. **Procurement supervision frequency.** The World Bank will review the procurement arrangements performed by the implementing agencies, including contract packaging, applicable procedures, and the scheduling of the procurement processes, for their conformity with the Legal Agreement. Those procurements did not have ex-ante due diligence by the World Bank will be subject to ex-post due diligence on a sampling basis in accordance with the procedures set forth in Paragraph 4 of the Annex II to the Procurement Regulations. A post review of the procurement documents Page 86 of 94

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**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996) will normally be undertaken annually during the World Bank’s supervision mission, or the World Bank may request to review any particular contract at any time. In such cases, the PMUs shall provide the World Bank the relevant documentation for its review.

19. **Complaint review.** The procurement complaints other than covered under Annex III of the Procurement Regulations are to be handled by the ILBANK in accordance with the procedures agreed by the Bank and stipulated in the POM.
Immediately upon received, the complaints will be recorded in the STEP complaint module by PMU. ILBANK will not proceed with the next stage/phase of the procurement process, including with awarding a contract without satisfactory resolution of the complaint(s).

20. **Operational costs** will not be considered under procurement implementation which could be the incremental expenses, including office supplies, vehicles operation and maintenance cost, maintenance of equipment, communication costs, rental expenses, utilities expenses, consumables, transport and accommodation, per diem, cost for procurement advertisements, and salaries of locally contracted support staff.

Page 87 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**ANNEX 5: Communications and Visibility Plan**

1. A project Communications and Visibility Plan will be developed by the Project Management Unit (PMU) in

İlBank for inclusion in the Project Operations Manual (POM), and the EU Delegation to Turkey will be consulted on it in advance, ahead of project launch. The following annex presents preliminary guidelines, principles, and indicative objectives/activities for communications efforts under the project.

2. The final plan will be aligned with the European Union Communications and Visibility Manual for External Actions [60] as well as FRiT Facility Visibility Guidelines. [61] Communications and visibility activities under the project will be implemented in coordination with the EU Delegation in Turkey, [62] including visibility requirements. [63]

**5.1 Initial Project Communications Objectives**

3. The objectives of communications activities are to: help manage expectations and mitigate against local political and governance risks; facilitate outreach and engagement of refugees and host communities in project activities; and share results and disseminate project lessons learned with key audiences for broader impact. Activities will also seek to inform and communicate to project beneficiaries and project stakeholders, the EU’s financial contribution to support refugees and host communities in Turkey.

4. **Indicative objectives and messages for each target group.** The Communications and Visibility activities set out in this Plan will target the following groups of beneficiaries:

[60 http://ec.europa.eu/europeaid/work/visibility/documents/ communication_and_visibility_manual_en.pdf.](http://ec.europa.eu/europeaid/work/visibility/documents/%20communication_and_visibility_manual_en.pdf) 60 Communications and Visibility Manual for EU External Actions Projects funded under the EU Facility for Refugees in
[TurkeyVisibilityGuidelines_May2017_FRIT_EN_20170605_Final.docx http://avrupa.info.tr/eu-funding-in-turkey/visibility-guidelines.html.](http://avrupa.info.tr/eu-funding-in-turkey/visibility-guidelines.html) 60 The EU Delegation will be informed about the events at least 10 days prior to allow for participation. Designs of all visibility materials, publications, promotional items, and videos will be submitted to the EU Delegation for review and approval before production.
60 The EU-Turkey joint logo should be accompanied by the following text in English, Turkish, and Arabic (and any other language where needed).
“This project is funded by the European Union”. Illustrations will be provided in the POM. The materials, items for beneficiary usage, and office supplies to be used by the partners and procured under EU funds should display the EU flag accompanied by the following text in English, Turkish, and Arabic (and any other language where needed): “Funded by the European Union.” Illustrations will be provided in the POM. The following disclaimer will be used in relevant materials: “This leaflet/brochure/video... has been produced with the financial support of the European Union. Its content is the sole responsibility of the Ministry of Industry and Technology and Turkish Development Agencies and may not reflect the views of the European Union.” Page 88 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Table 5.1 Indicative Objectives for Communications and Visibility Plan**
**Target Group** **Indicative Objectives**
**Overall population** **including both**
**refugees and host**
**community members** and solid waste facilities.
**living in the 5** **provinces** decision-making mechanisms.

**Overall population** - To raise awareness of the residing population including both refugees and host
**including both** community members regularly on project progress and results, particularly on
**refugees and host** interventions related to construction and rehabilitation works for water, sanitation
**community members** and solid waste facilities.
**living in the 5** - To promote participation to the public meetings to integrate communities into
**provinces** decision-making mechanisms.

- To make improvements visible for communities by acknowledging the work done
and role of project partners in making it.

- To inform communities well in advance about any type of temporary
environmental impacts such as wastewater discharge, generation of dust and noise during construction and operation.
**İlBank PIU’s,** - To launch a series of information meetings in the 5 provinces to engage PIU’s,
**municipalities, SKI’s** municipalities, SKI’s and local stakeholders into dialogue on the project objectives
**and local** and future activities.
**stakeholders** - To inform and raise awareness of PIU’s municipalities, SKI’s and local stakeholders

**İlBank PIU’s,** - To launch a series of information meetings in the 5 provinces to engage PIU’s,
**municipalities, SKI’s** municipalities, SKI’s and local stakeholders into dialogue on the project objectives
**and local** and future activities.
**stakeholders** - To inform and raise awareness of PIU’s municipalities, SKI’s and local stakeholders

on the issues about sustainability, resource efficiency, climate change mainstreaming, gender and integrated approaches.

- To update PIU’s, municipalities, SKI’s and local stakeholders about the project
progress and results regularly.
**Media, national** - Increase awareness on the project’s progress and results; particularly promoting
**authorities, and** project’s impact on:
**communities/general** - Environment (decreased water loss, quality discharged water, closure of existing
**public** dumpsites, increased energy efficiency, reduced non-revenue water...) and

**Media, national** - Increase awareness on the project’s progress and results; particularly promoting
**authorities, and** project’s impact on:
**communities/general** - Environment (decreased water loss, quality discharged water, closure of existing
**public** dumpsites, increased energy efficiency, reduced non-revenue water...) and

- People’s everyday lives (improved access to safely managed water, improved
service delivery and related health) as a result of services provided to overall population (host population and refugees).

**Indicative project implementation activities**

_**(a)**_ _**Launch a series of information meetings in 5 provinces to engage PIU’s, municipalities, SKI’s and local**_ _**stakeholders into dialogue on the project objectives and roadmap.**_ 5. To increase the ownership among municipalities and build the bridges between project implementation units and management teams, it is important to organize a series of meetings in the beginning of project implementation. The meetings will set the ground for understanding the project objectives, agreeing collectively on a roadmap, addressing potential challenges on the way ahead. It will also become an effective platform to enable two-way communication where municipalities can raise operational bottlenecks during implementation. Close involvement of municipalities, sewerage utilities and other stakeholders to the entire process is key, particularly during strategic decision-making processes in which accurate background data and information is needed for effective project execution.

**(b)** _**Raise awareness of the residing population regularly on project progress and results.**_

6. The communities residing in selected provinces will benefit from the improved water, sanitation and solid Page 89 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996) waste facilities at the end of the project. This will require a set of actions aiming at informing the residents at critical points where they will be aware on: (i) what happens in their neighborhood; (ii) why it is needed; (iii) when the construction work will start and how long it will take to complete it; and (iv) by whom it is led.

7. Main project information and critical dates need to be shared in public information meetings and other online platforms (website and social media of municipalities, NGOs, governorate). In addition to that, construction parapets are functional and visible spaces to illustrate the planned work and inform community in the neighborhood about the expected results and start/end dates of operational work. Providing timely, relevant and life-enhancing information about the work carried out under the project would address some risks and underlying vulnerabilities. It would also avoid negative reactions rooting from ongoing construction and its temporary environmental impacts. Stressing the benefits (eg: “X amount of water will be saved with the rehabilitation of the pipelines.”) could be accompanied to the key project information content in the signboards surrounding the construction area.

8. One way to address misinformation risks could be achieved by involving community leaders of affected groups and maintain a continuous dialogue with them via public information meetings on their questions and concerns. Updated FAQ sheets in print and visual format would be useful to reach target communities via social media, SMS, hand-outs and videos. It is also crucial to acknowledge project’s contribution once the operation work is completed in constructed or rehabilitated facilities via signboards and temporary outdoor ads. (eg: “With this water treatment plant, x amount of water was treated and provided as safe drinking water to X number of households in the municipality).

_**(c)**_ _**Increase awareness on the project’s results; particularly promoting project’s impact on environment and**_ _**people’s everyday lives.**_ 9. Project opening and closing ceremonies, local information meetings, on-site ceremonies of completed works, workshops and trainings will be timely opportunities to inform public and local actors on the project results and progress. These events, as well as dissemination materials including posters, brochures, reports, training materials and all other project documents will be prepared in line with EU visibility guidelines. Any refurbishment, equipment and technology infrastructure will acknowledge EU’s financial support, providing an explanation on project’s contribution to water, wastewater and solid waste infrastructure in the provinces and EU’s financial support on construction sites such as new water reservoirs, pressure release chambers, rehabilitated pipelines, water reservoirs and pumping stations.

10. News releases, event announcements, human-interest stories, audio-visual materials will be published on websites of municipalities and/or separate project website with clear acknowledgment of EU contributions.
Press releases and success stories marking project achievements, updates and progress will be disseminated through local and national media outlets. Exclusive interviews and op-eds will be facilitated through the local and national TV/radio networks.

11. For audio-visual materials, it would be possible to build a narrative around a group of people who have experienced a positive change that comes with the improved conditions in water facilities. Project’s impact in the areas of sanitation, provision of drinking water, waste water and solid waste management will be told through human stories. The stories could be coupled with before/after conditions of a project site (e.g: rehabilitated dumpsite) or improved access of a Turkish/refugee household to drinkable water etc.

Page 90 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996) 12. It is key to have an online platform where all project information and audio-visual documents are shared and displayed for public and project stakeholders. This could be achieved either through launching a project website or creating project-dedicated webpages under each municipality website. Social media accounts of municipalities and their established connections (number of followers) will help reach target audience effectively and quickly.

**Table 5.2 Indicative budget for Communications and Visibility activities**
**Indicative** **Indicative Scope/Tools**
**Activity**

**Indicative** **Indicative Scope/Tools** **Indicative**
**Activity** **Budget**

**(Euro)**
**Launch a series** - 5 provinces – ILBANK PIU’s, municipalities, SKI’s and local stakeholders 185,000
**of information** - Local information meetings to facilitate information exchange ideas among local
**campaigns in** stakeholders and municipalities.
**the 5 provinces**

185,000

**Awareness-**
**raising events**
**for both host**
**community and**
**refugee**
**population on**
**project**
**progress and**
**results**

**Increase**
**awareness on**

- 5 provinces – ILBANK PIU’s, municipalities, SKI’s and local stakeholders

- Local information meetings to facilitate information exchange ideas among local
stakeholders and municipalities.

Indicative communication tools:

- Information brochures, leaflets and posters calling stakeholders to take urgent
action and featuring project objectives and interventions while raising awareness on the themes such as climate change, sustainability, water availability, current environmental constraints and project’s action points to address them. (social media, printed and online dissemination)

- Infographic posters that will illustrate where/why/how the interventions take
place.

- Dissemination of information materials in municipalities, SKI’s and local governing
bodies.

- Utilizing existing media channels of municipalities to provide information about the
project (Periodicals of ILBANK, Union of Municipalities of Turkey, Belediye TV)

- Project promotional materials targeting local stakeholders and municipalities to
increase their ownership

- 5 provinces – broad outreach to host community and refugee population

- Organize a series of public information meetings that bring together local
community members to engage them in dialogue.

Indicative communication tools:

- Printed materials to be disseminated in public information meetings on project’s
interventions

- Active use of social media channels of municipalities and their established
communication networks to promote participation of communities to the meetings.

- Clear infographics/FAQ sheets illustrating when, why and what will happen in the
neighborhood.

- Construction parapets providing information about ongoing work and clear
messages.

- SMS messages and activation of existing WhatsApp groups to inform people about
upcoming project activities.

- Signboards and outdoor ads on-site and in streets, buses, metro stations once the
rehabilitation and construction works are completed.

- 5 provinces – ILBANK PIU’s, municipalities, SKI’s and local stakeholders 250,000

Page 91 of 94 300,000

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**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**Indicative**
**Activity**

**Indicative** **Indicative Scope/Tools** **Indicative**
**Activity** **Budget**

**(Euro)**
**the project’s** - Organization of opening and closing ceremonies and on-site completion ceremony
**results** of a major work item.

**the project’s** - Organization of opening and closing ceremonies and on-site completion ceremony
**results** of a major work item.

Indicative communication tools:

- Press releases on project progress, announcements, and results. TV and radio
interviews of representatives from municipalities, community leaders through local and national media networks. Op-eds and interviews on sectoral periodicals.

- Infographic videos describing project contribution to energy and water efficiency.

- Human-interest stories (video) that narrate the change in people’s lives and
households living around an area rehabilitated by solid waste management.

- Photo stories that illustrate before/after conditions of the project sites with stories
from people living/working in the neighborhood.

- Visibility materials displayed in events, workshops and meetings (rollups, flags,
backdrops, banners)

- Effective use of webpages under Municipality websites/ standalone project
websites and social media channels of the municipalities.
**TOTAL** **EUR 735,000**

Page 92 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**ANNEX 6: Team List**

1. Sanyu Lutalo, Senior Water Supply and Sanitation Specialist, Team Leader

2. Canan Yildiz, Infrastructure Specialist, Co-Team Leader 3. Lisa Lui, Lead Counsel 4. Joanna Mclean Masic, Senior Urban Specialist, Co-Team Leader 5. Salih Bugra Erdurmus, Senior Procurement Specialist 6. Salih Kemal Kalyoncu, Senior Procurement Specialist 7. Ayse Seda Aroymak, Senior Financial Management Specialist 8. Arzu Uraz Yavas, Social Development Specialist 9. Esra Arikan, Senior Environmental Specialist 10. Gulana Hajiyeva, Senior Environmental Specialist 11. Christian Borja-Vega, Senior Economist 12. Ahmet Kindap, Urban Development Specialist 13. Toyoko Kodama, Water Supply and Sanitation Specialist 14. Felipe Vicente Lazaro, Senior Dam Specialist 15. Verena Schaidreiter, Junior Professional Officer 16. Ntombie Z. Siwale, Operations Analyst 17. Sylvie Ngo-Bodog, Senior Program Assistant 18. Ulker Karamullaoglu, Program Assistant 19. Turda Ozmen, Financial and Economic Consultant 20. Emre Tokcaer, Technical Consultant 21. Burcu Ergin, Social Safeguards Consultant 22. Merve Ayse Kocabas Yurtkuran, Environmental Consultant 23. Ibrahim Sirer, Procurement Consultant 24. Tomris Oksar, Procurement Consultant 25. Ayse Ozge Bayram, Communications Consultant 26. Turgrul Cem Icten, Environmental Consultant Page 93 of 94

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Input:
**The World Bank**
Municipal Services Improvement Project in Refugee Affected Areas (P169996)

**ANNEX 7: Project Map**

Page 94 of 94

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Input:
## **_sustainability_**

_Article_
# **Exploring Carbon Pricing in Developing Countries:** **A Macroeconomic Analysis in Ethiopia**

**Andualem Telaye Mengistu** **[1]** **, Pablo Benitez** **[2]** **, Seneshaw Tamru** **[3]** **, Haileselassie Medhin** **[1,4,]** *** and**
**Michael Toman** **[2]**

1 Policy Studies Institute, 2479 Addis Ababa, Ethiopia
2 World Bank, Washington, DC 20433, USA
3 LICOS—Center for Institutions and Economic Performance, University of Leuven, 3000 Leuven, Belgium
4 Environment for Development (EfD), University of Gothenburg, 40530 Gothenburg, Sweden

***** Correspondence: haileselassie.medhin@gu.se

Received: 2 July 2019; Accepted: 8 August 2019; Published: 14 August 2019

[���������](http://www.mdpi.com/2071-1050/11/16/4395?type=check_update&version=1)
**[�������](http://www.mdpi.com/2071-1050/11/16/4395?type=check_update&version=1)**

**Abstract:** This study uses a Computable General Equilibrium model to analyze policy scenarios for a
carbon tax on greenhouse gas emissions from petroleum fuels and kerosene in Ethiopia. The carbon
tax starts at $5 per ton of carbon dioxide in 2018 and rises to $30 per ton in 2030; these rates are
translated into taxes on the different energy types covered, depending on their carbon contents.
Different scenarios examine the impacts with revenue recycling through a uniform sales tax reduction,
reduction of labor income tax, reduction of business income tax, direct transfer back to households,
and use by the government to reduce debt. Because petroleum fuels and kerosene are a relatively
small part of the Ethiopian economy, the carbon tax has small impacts on overall economic activity and
greenhouse gas emissions. In proportional terms, however, the impact on greenhouse gas emissions
from these energy sources is notable, depending on the recycling scenario. The assumed carbon tax
trajectory also can raise significant revenue—up to $800 million per year by 2030. The impacts on the
poor through increased cost of living are not that large, since the share of the poor in total use of the
taxed energy types is small. In terms of induced income effects through employment changes, urban
households tend to experience more impacts than rural households, but the results also depend on
the household skill level and the revenue recycling scenario.

**Keywords:** carbon tax; Ethiopia; CGE model; distributional impacts

**JEL Classification:** Q54; Q66; O44

**1.** **Introduction**

Nationally Determined Contributions (NDCs) lay out the actions countries intend to take to limit
greenhouse gas emissions (GHGs) under the Paris Agreement at the 2015 Conference of Parties to the
UN Framework Convention on Climate Change. A very large body of analytical work indicates that
putting some kind of price on GHG emissions—“carbon pricing”—can be an effective tool for GHG
mitigation, although practical experience with carbon pricing is still evolving [1]. The NDCs of more
than 90 countries refer to carbon pricing in one form or the other [2]. Carbon pricing also can yield
collateral benefits including air pollution reduction and efficiency-increasing fiscal restructuring. So far,
however, carbon pricing has been applied almost exclusively in high- and middle-income countries.
This paper addresses that gap by examining the impacts of a carbon tax applied to petroleum
fuels and kerosene in Ethiopia. The core objective is to get a quantitative estimate of the environmental,
economic, and distributional impacts of carbon taxes in Ethiopia. Implementing carbon pricing
policy, of course, requires a through political economy analysis and development effective institutional

_Sustainability_ **2019**, _11_ [, 4395; doi:10.3390/su11164395](http://dx.doi.org/10.3390/su11164395) [www.mdpi.com/journal/sustainability](http://www.mdpi.com/journal/sustainability)

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_Sustainability_ **2019**, _11_, 4395 2 of 21

approaches that work for context in consideration. Our study should therefore be taken as a first but
crucial step for exploring the potential for carbon pricing in a developing-economy context.
Over the past decade, the government of Ethiopia has prioritized low-carbon growth and poverty
reduction. (Ethiopia also has taken several actions to better manage adverse impacts and risks of
climate change and variability [3,4]) For example, fossil fuel subsidies have been removed, with both
economic benefits and limited social impacts, since studies show that fossil fuel subsidies benefit
mainly the richer segments of the population [5]. Ethiopia has laid out ambitious GHG mitigation
[commitments in its NDC (The text of Ethiopia’s NDC can be accessed at https://www4.unfccc.int/sites/](https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Ethiopia%20First/INDC-Ethiopia-100615.pdf)
[ndcstaging/PublishedDocuments/Ethiopia%20First/INDC-Ethiopia-100615.pdf).](https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Ethiopia%20First/INDC-Ethiopia-100615.pdf) Those commitments
in turn are based on its Climate Resilient Green Economy (CRGE) Strategy [6]. Figure 1 summarizes the
approach to national GHG mitigation in the CRGE Strategy. The country aims to limit its net annual
greenhouse gas (GHG) emissions in 2030 to 145 Mt CO2e or lower, which would constitute a 255 Mt
CO2e (64 percent) reduction from projected BAU emissions in that year. Ethiopia’s NDC commitments
are _conditional_, in the sense that they depend on receipt of technological and financial support. Ethiopia
has estimated the need for US$7.5 billion in expenditures annually until 2030 on initiatives that will
contribute to GHG emissions reductions while also supporting economic advancement [6].

tCo2.e per capita

Power

Transport

**Emissions per year, Mt Co2e**

185

90

75 ~~5~~
40

90

Agriculture

Forestry

130

10
20
~~5~~

Industry

Others

-64%

145

Green
economy
2030

55

70

5
5 55 10

2030
2010 BAU

1.8 3.0 1.1

**Figure 1.** The CRGE Strategy’ targes for Low-Carbon Development. Source: [6].

To assess the various impacts of carbon pricing in Ethiopia, we use a Computable General
Equilibrium (CGE) model to analyze various policy scenarios using a carbon tax. We focus on
scenarios that apply the carbon tax to petroleum fuels and kerosene, for reasons we explain below.
More specifically, we analyze the implication of a price that starts at $5 per ton of CO2 in 2018 and rises
to $30 per ton in 2030. It is worth to note that direct emissions from electricity production in Ethiopia
are minimal because of reliance on hydroelectricity. There are also efforts underway to introduce
intermittent sources of renewable electricity, such as solar, whose costs have been declining significantly
over time.
The policy scenarios differ in terms of what is done with the revenue generated through the carbon
tax. Previous research shows that a carbon tax can raise considerable, and that the economic impacts of
a carbon tax depend significantly on what is done with that revenue. In particular, “recycling” revenue

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by cutting other taxes can soften negative effects of the carbon tax on overall economic activity and on
the distribution of income. Accordingly, we study the differences in impacts of the carbon tax with
revenue recycling through a uniform sales tax reduction, reduction of labor income tax, reduction of
business income tax, direct transfer back to households, and use by government to reduce debt.
One obvious question is the rationale for focusing on a carbon tax applied only to petroleum
fuels and kerosene. GHG emissions from livestock and from land use and forest change, including
unsustainable harvesting of fuelwood, represent 93 percent of Ethiopia’s national emissions (see Figure 2
below). Petroleum fuels and kerosene, on the other hand, account for less than 6.5 percent of
national emissions.

Carbon emission by source
(in millions of tons)

Carbon emission by source
(in %)

Fuels Kerosene Firewood Livestock Forestry

**Figure 2.** The sources of carbon emission in Ethiopia. Source: The livestock and fertilizer data are sourced
from FAO (www.fao.org/faostat/en/#data/GT). The forestry and firewood data are from the Environment,
Forests and Climate Change Commission (MEFCC) (Mefcc.gov.et/Ethiopia-forest-sector-ghg-emissions,
2017). The data on fuels and kerosene are from the International Energy Agency (IEA) [(https:](https://www.iea.org/statistics/statisticssearch/report/?country=Ethiopia&product=oil)
[//www.iea.org/statistics/statisticssearch/report/?country=Ethiopia&product=oil).](https://www.iea.org/statistics/statisticssearch/report/?country=Ethiopia&product=oil) Emission factors are
from FAO [(http://www.fao.org/faostat/en/#data,](http://www.fao.org/faostat/en/#data) 2017b), and Intergovernmental Panel on Climate
[Change (IPCC) (http://www.ipcc-nggip.iges.or.jp/public/2006gl/vol4.html).](http://www.ipcc-nggip.iges.or.jp/public/2006gl/vol4.html)

A carbon tax to fossil fuels is easy to design and implement, based on the amounts of GHG emitted
per unit of energy of the different fuels. Carbon taxes also are relatively easy to implement, since most
countries (including Ethiopia) already apply excise taxes to energy. Moreover, fuel taxes are less prone
to problems of tax evasion than other forms of taxes [7,8]. In contrast, pricing carbon emissions that
occur as a consequence of land-use change and agriculture is more difficult technically and politically,
so we do not consider such options in this paper.
In principle, it would be possible to track forest removal on different patches of land and levy a fee
on the landholder based on an estimate of the resulting emissions. In practice this would be difficult
to enforce, especially for land clearing in the informal sector on land without clear title. Similarly,
it would be possible to tax extracted timber to the extent that the resulting loss of carbon sequestration
was not offset by replanting. However, calculating the net emissions from timber harvesting is quite
complicated, especially if different land holdings have different rates of harvest and replanting. For this
reason, the focus in mitigating GHG emissions from land clearing and forestry has been on “payment
for environmental services” initiatives like REDD, and in reducing other tax distortions that give
advantages to land clearing for agriculture [9]. Finally, while it would be possible to tax food products
based on relative GHG emissions (including methane emissions from beef cattle, and emissions based
on fertilizing practices), this too would give rise to technical and political problems. Nevertheless,

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it is clear that for many countries in addition to Ethiopia, there is need for additional well-functioning
incentive policies to curb emissions from sources other than fossil fuels. This remains an important
topic for further research.
One other important caveat concerns the CGE model used in this study for evaluating different
carbon tax policy options. A key finding in our analysis is that the impacts of the assumed carbon tax
on GDP and its growth are negative, though quite small, across the policy scenarios. The model we use
is very much representative of current practice for this kind of analysis. Nevertheless, there are some
important limitations of the model for capturing fully the impacts of a carbon tax. Specifically, the model
does not explicitly differentiate between employment and output from informal and formal sectors of
the economy. The model also does not include the possibility of lasting structural unemployment for
part of the labor force.
Incorporating these factors can in some cases reduce or even eliminate the negative GDP effects of
a carbon tax. However, the methods for accomplishing this are still very much a work in progress.
We return to these points in the concluding section of the paper.
In Section 2 of the paper we provide additional information about the Ethiopian economy and its
sources of GHG emissions. Section 3 through Section 5 describe the CGE model, the policy scenarios,
and the results of the simulation analyses. Concluding remarks are in Section 6.

**2.** **The Structure of the Ethiopian Economy and Its Carbon Emissions**

The Ethiopian economy has been largely agricultural for several decades. The last two decades,
however, witnessed a structural shift away from the agriculture sector. (See Table A1 in the Appendix B)
While most of the shift in the first decade has been towards the service sector, the latter decade has
seen substantial growth in the industry sector’s share of the economy. This has been stimulated by an
ever-expanding construction subsector.
Before analyzing the impact of carbon taxation on the economy, the sources of carbon emission in
the country and their direct and indirect uses by economic activity and household are examined in the
next subsection. This will provide a reference framework for the carbon taxation simulation.

_Carbon Emission by Source_

Most carbon emissions in Ethiopia emanate from the agriculture sector, land-use change and
forestry, as shown in Figure 2. Most of the emissions from the agriculture sector come from livestock.
This includes enteric fermentation, manure left on pasture, and manure applied on soil. Emissions
from land-use change and forestry include emission due to forest clearance and land-use conversion
for smallholder agricultural expansion, promotion of large-scale agriculture, human settlement
and authorized and unauthorized logging. Emissions from unsustainable extraction of fuelwood
also are typically included within forestry; however, in the subsequent analysis, fuelwood will be
considered separately.
Figure 2 shows that livestock accounts for 74.86 million tons (54.53 percent of total emissions),
and forestry and firewood together emit 52.8 tons of carbon (38.46 percent of total carbon emissions),
respectively. In contrast, the use of petroleum (fuel and kerosene) accounts for only 6.28 percent
(i.e., 8.62 million tons of carbon) of overall emissions. Emissions from fertilizer use in the agriculture
sector are based on 650,000 tons of fertilizer used in 2012 [10].
Each of the carbon emission sources mentioned above results from either direct consumption
by households or use of intermediate inputs in the production of other goods and services. Using
statistics on total outputs and inputs of different sectors in the Ethiopian economy, we can compute the
direct and indirect carbon intensities and emissions shown in Table 1 that result from the different
sources of carbon emissions. (The mathematical formula used to arrive at the figures presented in
Table 1 is given in Appendix C.) Table 1 shows that firewood, coal, and livestock have respectively the
highest carbon intensity as measured by tons per million birr of final demand. Kerosene, petrol and
fertilizer are a second set of product groups with significant carbon intensity.

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**Table 1.** Carbon Intensity by Group of Products.

**Product Group** **Carbon Intensity (Tons of CO2) Per**
**Millions of Birr of Final Demand**
**Crops and vegetables** 21.7
**Livestock** 1231.6
**Forestry** 15.8
**Firewood** 1937.7
**Fishery** 9.7
**Coal** 1725.8
**Other mining** 6.5
**Food processing** 183.0
**Textile and leather** 44.0
**Wood and paper products** 2.6
**Fuels (petroleum other than Kerosene)** 196.7
**Kerosene** 262.0
**Chemicals** 7.4
**Fertilizer** 184.0
**Non-metal minerals** 23.8
**Metals and metal products** 20.5
**Machinery and Equipment** 2.2
**Vehicles** 2.3
**Other manufacturing** 4.3
**Electricity** 33.5
**Water** 36.5
**Construction and real estate** 12.4
**Trade** 2.7
**Transport** 47.5
**Hotel** 106.1
**Communication** 11.4
**Financial and business services** 0.6
**Public administration, education, health, and other services** 12.7

Source: Authors’ calculation based on the 2010/11 Ethiopian Social Accounting Matrix.

The incidence of carbon price on households depends on the carbon content of their consumption,
among other factors. Figure 3a describes the carbon emission due to indirect consumption of petroleum
fuels, not including kerosene. Petroleum fuels consumption and the resulting emissions are higher as
a proportion of a given consumption for richer and urban households. However, as can be seen in
Figure 3b the pattern becomes less clear if we consider the consumption of kerosene. Because urban
households tend to be more dependent on modern transport, they are more intensive consumers of
petroleum fuels. They utilize electricity in addition to kerosene for cooking and lighting purposes.
Rural households, on the other hand, lack adequate access to electricity. As a result, they rely more on
kerosene for lighting and cooking purposes. The overall fuel (petroleum and kerosene) intensity of
consumption of households tends to be similar across categories of households.

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**Figure 3.** Carbon intensity of household consumption in Ethiopia due to petroleum fuels. ( **a** ) Carbon
intensity of consumption: fuel not including kerosene; ( **b** ) Carbon intensity of consumption: fuel including
kerosene. Source: Authors’ calculation based on the 2010/11 Ethiopian Social Accounting Matrix.

**3.** **Methodology for Assessing the Impacts of Carbon Pricing in Ethiopia**

_3.1._ _Modeling Framework_

This study relies on a recursive dynamic Computable General Equilibrium (CGE) model. It is
an extension of the Computable CGE model developed by the International Food Policy Research
Institute (IFPRI). The model is formulated as a set of simultaneous linear and non-linear equations
that simulate the behavior of consumers and producers across the economy, as well as the functioning
of the economy in which these agents operate. (More details about the model are included in
Appendix A.) The model can be used to assess the impacts of carbon pricing by tracking, in detail,
various transmission mechanisms within and across sectors. The model describes market equilibrium
conditions, macroeconomic balances, and dynamic updating equations. Given the nature of our input
data, we run all the model scenarios over a period starting in 2018 and ending in 2030.

_3.2._ _Baseline Scenario_

Analyzing the impacts of a carbon tax requires a comparison of the performance of the economy
with the carbon tax vis-à-vis a Business-As-usual (BAU) case without the carbon tax. Ethiopia’s current
tax system has direct taxes (income tax, profit tax, rental tax, etc.) and indirect taxes in the form
of Value Added Tax (VAT) (which is 15%), Excise tax, Turn-over tax, and customs duty. There are
currently no carbon taxes. Moreover, electricity and kerosene are exempt from VAT and Turn-Over
taxes. Our baseline scenario is based on the growth plan embedded in GTP II [11]. We assume that the
investment programs, tax policy, and environmental policies in GTP II will take place. This includes all
environmental polices embedded in the CRGE Strategy [6]. The economic growth rate under the BAU
scenario that we utilize is recorded in the first two years of the GTP II period (i.e., a GDP growth rate
of 7.6 percent).

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_3.3._ _Policy Scenarios_

The policy scenarios included in the current study differ from the BAU not only due to the
imposition of a carbon tax but also due to a set of decisions regarding (i) what sources of carbon to tax,
(ii) the time path of carbon prices, and (iii) how to use money that is raised through the carbon tax.
Decisions taken on each of these elements will imply different policy impacts on the economy vis-à-vis
the baseline.

3.3.1. What Sources of Carbon to Tax

As shown in Figure 2, most of the carbon emission in the country comes from the agriculture
sector. This implies that any tax that will put a significant dent on emission would have to address
the agriculture sector. However, there are two reasons why this would be undesirable and difficult to
implement. The sources of emissions from agriculture and forest land use are diverse and diffuse. This
makes these sources difficult to tax without extensive, costly, and untested measurement, reporting,
and verification (MRV). Note that imposing a carbon tax merely on agricultural and forest outputs
is not possible because the carbon intensity of outputs may substantially differ across suppliers and
regions of the country. In addition, most of the agricultural activity in the country is undertaken by
smallholder farmers engaged in subsistence agriculture. Burdening them with a carbon tax, even if it
could be figured out how to do so, would have adverse distributional consequences.
In contrast, taxing fossil fuels has the inverse pros and cons of taxing agricultural emissions.
It can easily be administered by imposing a tax on fuel importers. In other words, it does not involve
significant levels of MRV measures. Moreover, it is an effective approach for taxing the informal sector.
In addition, it can easily be linked with other existing taxes in the overall fiscal system. Therefore,
although fossil fuels make only a small contribution to total GHG emissions in Ethiopia (a bit more
than 6 percent, as noted in Section 3), this study focuses on putting a price on the carbon emitted
from fossil fuels. An important follow-up task beyond the scope of this study is to give much deeper
consideration to what policies, beyond carbon pricing, can effectively mitigate GHG emissions from
agriculture and forestry.
How kerosene is factored in carbon tax analysis has important implications due to two seemingly
countervailing reasons. On the one hand, kerosene is an alternative cooking energy to fuelwood; taxing
it may backfire by increasing consumption of fuelwood which could result in more GHG emissions as
well as worse indoor air pollution. On the other hand, exempting kerosene from a carbon tax could
lead to tax evasion through reclassification of other fuels as kerosene. We have carried out our policy
comparisons both with and without kerosene. However, in this report, we include only results from
the analysis with kerosene taxed. The results with kerosene exempted are available on request.

3.3.2. The Time Path of Carbon Prices

Another important factor is deciding what level of tax to impose and how the tax rate evolves
over time. The range of carbon prices being used is from $1 per ton to over $125 per ton, there are many
examples in the range of $5 to $30 per ton [1]. Accordingly, we have analyzed three possible cases.
The first entails imposing a low tax of about $5 per ton throughout the time period of the analysis
(2018–30). The second entails imposing a higher tax rate of $30 per ton initially and maintaining that
rate throughout 2018–30. In the third case, the tax rate starts at $5 per ton and then steadily grows
over the study period until it reaches $30 per ton in 2030. Although we have run our model based on
all three tax design cases, in this report, we include only the results from the third case “starting low
and steady growth” for various reasons: (i) it is a realistic assumption of how carbon pricing might be
implemented in practice; (ii) a carbon price of $5 per ton has little relevance by 2030 when countries’
NDCs targets need to be met; and (iii) a carbon price of $30 per ton now can be considered excessive if
compared with other developing economies.

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While the carbon price is to function as a tax on carbon emissions, in practice it needs to be imposed
on the fossil fuels themselves; therefore, it is necessary to convert the carbon tax rate to fuel-specific
taxes based on their respective carbon contents. Imposing a $5 price on carbon is equivalent to a 2.23
percent tax on petroleum fuels, based on the fuel prices utilized in the study. ($5 per ton of CO2* 3.5
ton of CO2 per ton of fuel = $17.5 per ton of fuel. Since 1176 L is equal to 1 ton of oil, this is equivalent
to $0.015 per liter of fuel. Using the current price of $0.67 L of fuel, then $5 price is equivalent to 2.23%
tax.) Similarly, a $30 price on carbon is equivalent to a 13.4 percent tax on petroleum fuels given the
assumed prices.
As of 2015, 2.68 million tons of various oils were used in the country, according to the International
Energy Agency. Using the average conversion factor of 3.5 tons of CO2 per ton of oil, the CO2 emissions
in 2015 from use of fossil fuels was 9.54 million tons. Consequently, in 2015, a $5 price on carbon would
have raised $47.7 million, while a $30 price on carbon would have raised $286 million.

**4.** **How to Use the Increased Carbon Revenue**

The structure of the model we employ is such that the equilibrium in the economy is consistent
with the government budget constraint. The revenue from carbon tax increases government revenue.
The government has to use the money to reduce borrowing, reduce debt, increase spending, or reduce
other taxes. Consequently, how to utilize the increased government revenue becomes a relevant policy
issue. After discussions with many policy-making units and other relevant stakeholders, we decided
to evaluate five options for how to use the money that is raised through the carbon tax:

1. **STAX** —A scenario where we adopt uniform reduction of sales taxes for intermediate and
final commodities.
2. **TRANS** —A scenario where the increased government revenue is used as a lump-sum transfer
payment to all households. Lump-sum transfer payments follow the same pattern of existing
allocation of government transfers to each type of household. The proportion of transfers to
household types is maintained. (As indicated in Appendix A, the Social Accounting Matrix
has 15 types of households. The initial share refers to the government transfer to each type
of household relative to overall government transfer to households. The basic premise in this
scenario is that the current transfer scheme reflects the weight the government puts on the welfare
of each type of household.)
3. **SAVINGS** —A scenario where the money from carbon tax is directed to the overall saving pool
where it can then be invested in the most profitable sectors.
4. **DTAX** —A scenario where the money from carbon tax is transferred to taxpaying households
in the formal sector. This is done in the form of uniform reduction of direct taxes (personal
income tax).
5. **CORPOR** —A scenario where the money is used to encourage investment by firms. This is
achieved by uniform reduction of business income tax.

We compare the results from imposing the specified carbon tax with these different uses of
revenues to the BAU scenario.

**5.** **Modeling Results**

_5.1._ _Impact on Emissions_

Figures 4 and 5 present summary results of changes in emissions across the different scenarios.
The figures show that, as expected, emission reductions increase over time as the price on carbon
increases. Depending on the recycling scenario, the reduction ranges from 1.1 million tons to 1.5 million
tons relative to BAU in 2030, when the carbon tax reaches its maximum value. The differences across
scenarios are due to the differences in growth of the economy due to the different revenue recycling
mechanisms considered, which in turn influence the demands for fossil fuels.

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**Figure 4.** Reduction in fossil fuel emission (millions of tons of CO2) from tax on fuel and kerosene
compared to the base case.

Percentage change reduction in fossil fuel from tax on fuel and kerosene compared to the base case

**Figure** **5.** Percentage (%) change reduction in fossil fuel emission from tax on fuel and kerosene
compared to base case.

Comparing across the scenarios, the least emission reduction is achieved in the sales tax (STAX)
reduction scenario. This is because its effect on the general economy results in the least growth impact.
Direct tax reduction (DTAX), on the other hand, leads to more significant reductions in emissions.
Similar comparisons follow when we compare the resulting reductions in emissions from all
emission sources. These will be larger than the reductions in emissions in fossil fuels, because the
changes in fuel prices will have effects on the quantities of other emissions-producing activities in the
economy. By 2030, as compared to the base case, the STAX reduction scenario will lead to a reduction
of total emission by 1.7 million tons while the DTAX reduction scenario will lead to a reduction of total
emission by about 3.8 million tons (see Figures 6 and 7).

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Reduction in total emission (from all sources) from tax on fossil fuel compared to base case (millions

of tons of CO2

**Figure 6.** Total emission reduction in millions of tons from base case.

Total emission reduction as % from base case

**Figure 7.** Total emission reduction as % from base case.

_5.2._ _Impacts on the Economy_

The assumed time path of carbon prices has a fairly modest effect on the growth of GDP (Figures 8
and 9). In BAU, GDP is much higher in 2030 than in 2015 given the assumed growth rates for the
economy. The same is true in the policy scenarios; the different tax and recycling combinations only
slow growth by a little over the study period. GDP in 2030 is about 1 percent lower compared to BAU
in almost all scenarios. Average GDP growth is from 0.38 to 0.52 percentage points lower with the
carbon pricing than under BAU, depending on the chosen scenario. This is a small decrease in the
growth rate of 7.6 percent per year in BAU.

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Average change (%) from Base Case
(2018-2030) (5-30 USD/ton)

DTAX STAX SAVINGS CORPOR TRANS

0.0%

-0.1%

-0.2%

-0.3%

-0.4%

-0.5%

-0.4%

-0.4%

-0.5%

-0.5%

-0.6% -0.5% -0.5% -0.5%

**Figure 8.** Changes from base case average GDP growth rate (2018–2030).

Changes from Base Case GDP in 2030 (30
USD/ton)

DTAX STAX SAVINGS CORPOR TRANS
0.00%

-0.20%

-0.40%

-0.60%

-0.80%

-1.00%

-0.74%

-0.83%

-1.06%

-1.06%

-1.06% -1.06% -1.07%

-1.20%

**Figure 9.** Changes from base case GDP in 2030.

A cut in either sales or corporate tax leads to smaller negative effects on GDP compared to the other
policy scenarios. The reason is that lower sales tax reduces cost of goods and services and stimulates
demand across income groups. Lower business tax reduces the cost of capital which encourages
investment and therefore employment and production. Both tax reductions end up reducing existing
distortions in the economy. That, in turn, will lessen the amount of emission reduction from the
carbon tax.
The scenario in which personal income tax is reduced leads to a larger decrease in the growth of
economic activity. The reason is that professional and educated labor—the types of workers paying
the personal income tax—is assumed to be fully employed. Reducing income tax therefore increases
neither labor supply nor economic activity.

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