Public Disclosure Authorized

Report No. PID11090

Project Name ROMANIA-Afforestation of Degraded Agricultural Land Project

Region Europe and Central Asia Region

Sector Sub-national government administration (65%); Forestry (35%)

Project ID P075959

Borrower(s) GOVERNMENT OF ROMANIA

Implementing Agency
Public Disclosure Authorized

Address NATIONAL FOREST ADMINISTRATION

Address: Bucharest, Bd. Magheru nr.31, Romania
Contact Person: Mr. Ciprian Pahontu, Head of
Afforestation Service
Tel: 40-1-212-9741 x 255
Fax: 40-1-212-9769
Email: s.regpad@rosilva.ro

University of Brasov, Faculty of Silviculture and

Forest Engineering
Address: Sirul Beethoven, 1 Brasov 2200, Romania
Contact Person: Mr. Ioan Abrudan
Email: abrudan@unitbv.ro
Public Disclosure Authorized

Environment Category B

Date PID Prepared November 26, 2002

Auth Appr/Negs Date November 4, 2002

Bank Approval Date May 7, 2003

1. Country and Sector Background

Afforestation of degraded agricultural land. Romania contains 3 million
hectares (ha) of degraded agricultural land. These degraded lands have
been worked intensively for agriculture since the early 1970s, coinciding
with the extension of the drainage of the Danube River. Initially these
lands produced a range of crops including cereals, vegetables, fruits and
grapes. Through excessive working and lack of investment in irrigation
Public Disclosure Authorized

infrastructure and maintenance, the lands have become degraded and subject
to erosion and are now uneconomic for crop production, and are mainly used
either for pasture or are abandoned.
Afforestation of degraded agricultural land has been identified as a
priority by the government. However, despite political declarations that
100,000 ha should be afforested over a four-year period, the actual area
afforested has been negligible, mostly due to lack of funds. On average
only 399 ha of degraded agricultural land were afforested over the last
decade.
The prospect of harnessing carbon finance from the Prototype Carbon Fund
under the Afforestation of Degraded Agricultural Land Project, or other
sources, now gives an incentive for the government and the National Forest
Administration (NFA) to boost afforestation. Romania was the first
industrialized country to ratify the Kyoto Protocol and is now eager to
move to the implementation phase. The NFA plans to test the flexible
mechanisms of the Protocol by afforesting around 7,000 ha of State-owned
degraded agricultural lowlands in 7 Counties in Southern Romania.
This Project represents no shift of resources away from existing
activities, since the Project must ensure that no "leakage" is created.
Such leakage would ensue if the NFA carried out the Project at the expense
of the current annual volume of 399 ha of afforestation of degraded land
in the absence of the Project. The NFA has pledged that this annual
volume will be maintained and that the Project will still be carried out
in full.

2. Objectives
The Project has one main objective, namely (1) the reduction of greenhouse
gas concentrations through carbon sequestration in planted trees and in
soils. In the process of working towards this objective, the Project will
also achieve two subsidiary objectives: (2) stabilization of degraded
sandy agricultural lands through the planting of Robinia sp. and,
conditions permitting, Quercus sp. and a number of minor species; and (3)
ecological reconstruction of degraded lands in the lower Danube floodplain
through planting of native broadleaf species, mostly Populas alba, Populus
nigra and Salix sp.
The Project will also enable Romania to enter and benefit from the carbon
market. (4) Beyond the carbon sales proceeds from the Prototype Carbon
Fund, the Project should be able to keep earning revenues from other
carbon buyers. (5) More strategically, Romania will garner trading
experience and relations for the future, in the fields of forestry, but
also energy. Being able to harness the carbon market will catalyze public
and private investment flows to Romania.
Furthermore, the Project contributes to (6) the transformation of the
rural economy, from exploiting natural resources to acting as steward of
natural resources.

3. Rationale for Bank's Involvement

World Bank value-added derives from the value of the Prototype Carbon Fund
itself. Generally, the PCF is benchmarking the emerging carbon market,
and has quickly come to be respected in the field. It aims to deliver
high-quality carbon emission reductions or carbon sequestration, i.e.
cost-effective Kyoto-compliant carbon emission reductions which are
verified and certified, and which produce coincidental social and
environmental benefits.
Specifically to this Project, the PCF is, at the current time, the only
external financing instrument which makes a convincing case for government
funding to expand/accelerate Romania's afforestation activities,
particularly on the targeted degraded agricultural land. A previous
attempt by a Dutch foundation failed for not having gathered enough land.
This Project is timely. Romania ratified the Kyoto Protocol on March 19,
2001. The next step is to take advantage of the opportunities this
ratification has presented, in particular joint implementation. The PCF
will give Romania the chance to test the Kyoto Protocol before it enters
into force. Such financial resources as the PCF's are limited, so they
should be used well. Supporting a country that has already ratified the
Protocol provides greater guarantees that the Project will be found to
comply with the Kyoto Protocol. Strategically, Romania has an interest in
moving early. Cost-effective opportunities will become fewer as more
sellers enter the market.
The rules and protocols established for the purpose of the Project,
together with the quality of the teams in charge of preparation and
implementation, should guarantee the success of the operation.

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Another significant dividend, which was noted above, is the potential
demonstration effect of the project. This Project is among the first land
use, land-use change and forestry (LULUCF) projects to be carried out with
Kyoto compliance in mind. The challenges it faces and the ways it meets
these challenges will build the knowledge base on such LULUCF projects.
This is particularly important as the final rules governing LULUCF
projects will be set at the 9th Conference of the Parties (CoP-9) to the
UNFCCC in the fall of 2003. This Project will supply practical experience
that will be useful to the preparation of CoP-9.

4. Description
The project will afforest 6,728 ha of State-owned degraded agricultural
lowlands in 7 Counties in Southern Romania, thereby helping the global and
local environments. The species planted initially will be black locust
(Robinia pseudoacacia), native poplars (Populus alba and Populus nigra),
oak (Quercus cerris) and willow (Salix sp.), depending on site conditions.
This Project is somewhat different than a typical Bank investment, in that
it consists of only one component, namely afforestation of degraded
agricultural lands. Afforestation consists of several activities, all of
which will be included in the Project; specifically, site and soil
preparation, seedling plantation, and maintenance.
The first three years of the Project will be supported by a public
information campaign targeting the local populations, to ensure their
understanding and support for the Project.
Monitoring (referred to as verification and certification) of the carbon,
social, and biodiversity aspects will occur according to a given timetable
throughout the 15 years of the Project (see Project Implementation Plan).
The costs of verification and certification are to be paid by the PCF and
reimbursed by the Project.
The table below distinguishes among costs by County (judet). The cost
structure is the same in all of the 606 parcels in the 7 Counties (Braila,
Dolj, Galati, Mehendinti, Olt, Tulcea and Vaslui -- sites in Braila County
are under the administration of Ialomita Forest Directorate, but there are
no projects located in Ialomita County itself).
There is no Bank or GEF financing, only NFA financing, with a PCF
contribution payable upon receipt of certificates that the carbon has been
sequestered. In other words, the PCF will reimburse the NFA for expenses
already incurred to start and implement the Project keeping pace with
carbon sequestration. Therefore, the column on PCF financing is
indicative, while actual payments will depend on the performance of the
Project.
As is the case with other PCF projects, the PCF pre-finances a portion of
Project preparation costs, including the baseline study, monitoring plan
and validation. These are the requirements of the Kyoto Protocol. All
these costs are then charged back to the Project against annual payments
for emission reductions.
The NFA has committed to financing this Project without prejudice to
current afforestation activities. Indeed, "additionality" is at the heart
of this Project. A shift of resources away from existing activities
towards this Project would create "leakage," which the NFA would need to
remedy. For the purpose of this Project, the NFA has committed to
maintaining current afforestation volumes (around 400 ha per year), as
well as do the additional afforestation under the Project.

5. Financing

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 Total ( US$m)
BORROWER $10.09
IBRD
IDA
PROTOTYPE CARBON FUND $3.67
Total Project Cost $13.76

6. Implementation
The Project will be implemented by the National Forest Administration.
Based on the information below, and on the overall competence and
experience of forest sector professionals in Romania, the task team
believes that the NFA has the resources and technical expertise to prepare
and supervise, to a high standard, all of the operational aspects of the
Project.
The NFA will finance the Project mostly from its own revenues and for a
small part (around US $300,000) on resources from the extra-budgetary
Degraded Land Reclamation Fund. This Fund is constituted in accordance
with Law 18/1991. The fund is administrated by the MAFF and finances
studies and afforestation of degraded land. The Fund's revenues come from
special taxes on land-use change. The PCF will pay the NFA for each
verified ton of emission reduction (CO2e) delivered at the agreed-upon
price per tonne.
Technical Supervision. The NFA has an extensive geographic distribution
through its 36 Branch Offices, 380 Silvic Districts and at the level of
range foresters. Staff are technically well-educated and trained.
Typically, local range foresters are present on site for the greater part
of the time taken to complete the establishment.
Supervision under the Project will be conducted by the Afforestation
Service of the NFA, in its capacity as public forest manager, acting on
behalf of the MAFF.
Afforestation is subject to a number of national norms and standards, in
particular Norm 562/1991, which sets out the requirements and standards (%
survival, etc.) for field inspection of afforestation during the period
September 1 - October 15 of each year by their own staff. The number of
years that an afforestation is subject to this annual control/inspection
varies with species. Local range foresters have an incentive to ensure
that establishment is to the required standard, as failure to do so
results in them being liable for the extra cost to bring the plantation up
to standard.
See more on this topic in the monitoring sections and the Environmental
Management Plan of the Project Implementation Plan.
Seed Supply. The NFA has 20 tons of Robinia seeds in store and 582
hectares of registered seed stands for the supply of Robinia seeds. This
is more than adequate to provide seed for the Project and on-going
reforestation. The NFA exports Robinia seed to Germany where it is used
as a constituent in animal feed manufacture. There are 45 hectares
reserved for cuttings for Poplar together with registered seed stands for
White Poplar. This is more than adequate to provide seedlings for the
Project and on-going reforestation.
Nursery Capacity. Within the three counties where the majority of the
afforestation will take place, there are 13 forest nurseries with a total
of 618 hectares productive capacity. This is more than adequate to
provide seedlings for the project and on-going reforestation. Overall,
the NFA has an overcapacity in nurseries, reflecting large reforestation
programs in former years.

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Nursery Sowing Program. The planned seed sowing for 2002 and onwards
reflects the plant requirements for the Afforestation Project. The
majority of seedlings will be produced on a one-year cycle, and thus seed
sown this year will produce viable seedlings for planting in the following
Autumn and Spring.
Labor. Afforestation is labor intensive. Based on standard time and
production norms for silvicultural works, the soil preparation and initial
planting of a Robinia site would require a minimum of circa 35 work days.
While the NFA has some of its own labor, it will rely heavily on
contracted labor to undertake the planned planting. Some of this labor is
expected to be available locally, but there will be a requirement to
import labor from other regions. The NFA has the capacity to provide
mobile sleeping facilities for imported labor. Due to the relatively high
unemployment in rural areas, the NFA foresees no difficulty in attracting
labor. There is a strong tradition of mobile labor in forestry, both in
establishment and harvesting, and the NFA uses a system of informal
contacts to organize labor from other regions.
Machines - Site and Soil Preparation. Site preparation requirements are
confined mainly to the Poplar areas, where there is localized invasion of
Amorpha fruticosa. Soil preparation consisting of ploughing (complete or
partial), and harrowing (disc harrow) will be required on all sites. In
addition, where available, tractor-mounted augers for the preparation of
planting holes for Poplars will be used. The NFA, while it has some local
machine capacity, will have to rely on hired machines for some of the site
and soil preparation operations. The equipment used is standard
agricultural equipment, and is readily available. The NFA does not
foresee any difficulty in supplementing its own machine capacity through
contractors.

7. Sustainability
The next five to ten years represent a major challenge to NFA in terms of
its organizational development. Its reform and strategic development in
the new economic and forest ownership context will be supported through
the Forestry Development Project (FDP) -- World Bank loan RO-P067367 --
expected to become effective early in 2003. The FDP will initially
support this through provision of technical assistance, followed by
additional support to implement the recommended course of action (see PCN
and FDP for detailed actions). Despite all the changes ahead for NFA, it
has and will continue to have a strong asset base. This, together with
improvement in operational efficiencies and adequate compensation for the
undertaking of public purpose activities, should ensure its long term
financial viability. Carbon finance represents an additional source of
funds to help the NFA undertake activities that would otherwise not be
attractive.
Beyond insitutional sustainability, the physical assets, i.e. the forests,
should be sustainable as well. Roughly half of the forests to be
established in this Project are protection forests with no economic
production. They are designed to reconstruct local ecosystems, including
in one national park. The remaining half will be planted with black
locust initially and enriched with other species as soil conditions
improve. Here, too, a long term perspective has been taken.

8. Lessons learned from past operations in the country/sector

World Bank experience with the Romania country portfolio indicates that:
(1) Key stakeholder awareness and support of all proposed policy and

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institutional reforms should be established early in project
implementation in order to preempt delays that could result from special
interest group lobbies;
(2) Responsibility for project management shoudl be allocated to the staff
of existing institutional structures;
(3) Performance indicators should be in place;
(4) Collaboration for conservation and environmental management across
international boundaries can be effectively fostered by parallel but
independent projects.
The Project has addressed these lessons by:
(1) having obtained written political endorsement from the NFA, the
Ministry of Water and Environmental Protection, and the Ministry of
Agriculture Food and Forests early on (October 2001);
(2) having launched a stakeholder consultation and social impact
assessment (9 communities surveyed during the first phase completed in
March 2002 -- report available; second phase during baseline study in
April 2002);
(3) recommending a public information campaign to accompany Project
launch, the details of which will be determined in April 2002, as well as
other measures to ensure the support of the NGO community;
(4) limiting afforestation to state-owned land where no ownership disputes
exist;
(5) having obtained written financial commitment from the Ministry of
Agriculture Food and Forests and requesting financial commitment from NFA
for the full duration of the Project before signature of a Emission
Reductions Purchase Agreement;
(6) providing carbon finance as a new and tangible financial incentive to
supplement scarce financial resources;
(7) entrusting preparation and implementation to NFA, the public agency in
charge of forest land management;
(8) providing for a Monitoring Plan, based on detailed and quantified
indicators and procedures, and placing it at the heart of the Project and
its carbon trade mechanisms;
(9) establishing or seeking collaboration with NGOs such as Wetlands
International (Netherlands and Ukraine), the WWF Danube-Carpathian
Programme (Austria), and the European Union's LIFE-NATURE project
(Romania).
As noted in the Institutional and Implementation Arrangements section
above, NFA has extensive experience in afforestation activities, and this
experience has been built into the project design. There is no foreseen
need for any special technical assistance related to this project, apart
from the baseline study and monitoring plan. This study was undertaken by
a team led by a world expert in carbon sequestration measurements, in
collaboration with other international and local scientists, and allows
independent verification of project design and implementation.
The Project also benefits from the experience garnered to date by the PCF,
in particular with respect to the need for monitoring the coincidental
environmental and social benefits of climate change mitigation projects.
The monitoring and evaluation scheme put in place will be among the most
systematic of all Bank projects, and it will be central to the payment
scheme. Indeed, no carbon payment can happen without regular periodic
verification and certification of the carbon benefits. Periodic
verification and certification of the coincidental benefits are an
integral part of the verification and certification system. With respect
to the processing of the legal documents, the templates for the Term Sheet

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and Emission Reductions Purchase Agreement were tested and refined for
previous PCF projects.

Generally speaking, all the PCF business processes used for this Project
were already used and refined for other projects. To date, the PCF has
received over 200 project proposals, of which it has approved 26 projects
at the stage of Project Concept Note, and has agreed to the terms of 10
future carbon emission reductions purchases beside this Project. Prices
have varied between US$ 3 and US$ 4 per ton of C02e depending on risks.

Further, this Project contributes to a broader knowledge base on design of

carbon sequestration projects. As it is the first pure PCF carbon
sequestration project, it will be regarded as a model. Indeed, the
developers of the software CO2Fix at the European Forest Institute in
Helsinki, which was used to model sequestration volumes, requested that
the data input files for this Project be made publicly available on their
website. The baseline study and monitoring plans can also serve as a
first benchmark in this field.

9. Environment Aspects (including any public consultation)

Issues : General. Substantial detail has been provided
above regarding the positive environmental benefits of the project. In
summary, the project's positive environmental benefits are expected to
outweigh any potential negative impacts. There are however some issues
which should be taken into consideration.
There is a standard and binding protocol to be followed for the
afforestation of degraded agricultural lands consisting of: (a)
Pre-feasibility Study; (b) Feasibility Study by NFA; and (c) Technical
Project by NFA. The pre-feasibility study requires extensive approvals,
including the representative of the County Environmental Agency (which
reports to the Ministry of Water and Environmental Protection), the
registered owner of the lands and the local administration. It will be
critical to ensure that the feasibility studies incorporate site-specific
screening to ensure that no plot to be afforested is part of a protected
or endangered habitat, or represents an area of local cultural
significance.
The scale of the project is significant in that 6,922 ha of lands will be
converted to forests over a relatively short period. Lands to be
afforested are distributed over 7 counties and 23 locations. The
individual plots to be afforested vary from less than 1 hectare to 63 ha.
It is not possible to determine from the site location references the
degree of contiguity among the plots.
All the land to be afforested in the Project is state-owned, with 1,800 ha
currently being administered by the NFA, and 5,122 ha by the State Domain
Agency (SDA). For the purpose of the project, the procedures to transfer
SDA-administered land to the NFA were initiated by the MAFF in November
2001, and it is expected that by mid-2003 all Project sites will be under
NFA administration. This should be viewed in the context of the status of
the national cadastre and the numbers of disputed ownership claims under
the current restitution process. Stakeholders include the workers in
charge of afforestation and subsequent tending operations. The project
will provide significant, if albeit relatively short-term, benefits for
local employment, and also employment from outside of the project area.
Afforestation according to Romanian norms and traditions is labor
intensive. For example, the soil preparation and initial planting of one

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hectare of Robinia would require a minimum of 38 man days depending on
site conditions. Following on from establishment, the labor requirement
will be relatively low (one man day per 5 hectares is assumed) but locally
significant.
Apart from the Poplar area, none of the project sites form part of any
specially protected habitat. However the planned feasibility study should
confirm this.
Native Poplar. In the Danube island of Insula Mica a Brailei (declared a
Ramsar site), the Poplar plantations form part of a larger project to
protect bird populations in the lower Danube River corridor (as part of an
ongoing LIFE-NATURA project funded by the European Union). Native poplars
(Populus alba and Populus nigra) are the main species of the natural
vegetation of that particular floodplain island (together with some Salix,
which normally regenerates naturally after the flood season).
Accompanying species like Salix sp., Alnus sp. or Quercus sp. will be
introduced in time (either naturally or artificially, to be spelled out
during baseline study) to achieve a natural forest composition. In
addition, about 200 ha of invasive and exotic Amorpha fruticosa will be
mechanically destroyed as part of site preparation activities.
The site and soil preparation activities used are intensive and can best
be described as total cultivation. Subsequent maintenance operations are
either manual screefing or mechanical control of vegetation for the first
number of years.
These stands will not be subject to harvesting and will be managed on a
purely ecological basis with minimum intervention. No road construction
(new or upgraded) is planned; use will be made of existing roads and
tracks for access. The area visited during the field visit was relatively
remote from existing settlements.
The plantations are unlikely to impact on the local landscape; rather,
they will reinforce the gradual extension of a more natural landscape
identified with the area. Native Poplars are susceptible to attack from
Sapaerda populnea which can be controlled by treatment with insecticide.
There is a small amount of sporadic grazing on parts of the project area,
mainly sheep and pigs. The grazing would appear to be opportunistic in
nature and not organized. It is illegal.
Robinia. Robinia is the most suitable forest tree species for the
afforestation of degraded sandy soils. As a species, it is valued not
only for its timber qualities -- being suitable for firewood, vine poles,
flooring etc. -- but also for its nitrogen fixing and soil ameliorating
qualities and its honey production potential. The wood has a relatively
high extractives content (11 dry weight), and is as such a potential
source of natural products. It is a native of North America, but has been
naturalized in central and eastern Europe over a period of roughly 200
years. Robinia is not susceptible to pests under Romanian conditions.
In the Dabuleni area, there was a network of windbreaks at 500 metre
intervals consisting mainly of Robinia, to assist in the control of soil
erosion but they have not been maintained.
Soil degradation and erosion is on-going in the project area and there is
the added impact of eroded sand being deposited on fertile soils used for
crop production.
There are already some existing plantations close to the project area and
as mentioned above Robinia has been used extensively for windbreaks. Thus
as a species it already forms part of the existing landscape. Forests
cover 58,000 ha out of a total of 439,000 ha of sandy soils in the country.
In the absence of the project, there is likely to be an extensification of

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the soil degradation and an extension to existing fertile soils.
The biodiversity impact/benefits of the Project will be further clarified
during the baseline study, with the help of Wetlands International and
Winrock International.

10. Contact Point:

Task Manager
Benoit Bosquet
The World Bank
1818 H Street, NW
Washington D.C. 20433
Telephone: 1-202-458-0923
Fax: 1-202-614-1190

11. For information on other project related documents contact:

The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-5454
Fax: (202) 522-1500
Web: http:// www.worldbank.org/infoshop

Note: This is information on an evolving project. Certain components may

not be necessarily included in the final project.

This PID was processed by the InfoShop during the week ending
February 14, 2003.