URBAN AND RBAN AND INDUSTRIAL NDUSTRIAL POLLUTION OLLUTION PROGRAMS ROGRAMS
A SYNTHESIS OF YNTHESIS OF FIVE COUNTRY CASE STUDIES
U.S. AGENCY FOR GENCY FOR INTERNATIONAL NTERNATIONAL DEVELOPMENT EVELOPMENT
USAID Program and Operations Assessment Report No. 30 USAID Program and Operations Assessment Report No. 30
Center for Development Information and Evaluation Center for Development Information and Evaluation
October 2002 October 2002
PN-ACP-545 PN-ACP-545
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U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
The views and interpretations expressed in this report are those of the author and
not necessarily those of the U.S. Agency for International Development.
i
Urban and Industrial Pollution Programs
A Synthesis of Five Country Case Studies
USAID Program and Operations
Assessment Report No. 30
By
Donald G. McClelland
Center for Development Information and Evaluation
U.S. Agency for International Development
Washington, D.C.
October 2002
Urban and Industrial Pollution Programs
ii
iii
Abbreviations and Acronyms ................ ................ v ................
Preface ..................................................... ..................................................... vii .....................................................
1. Summary and Lessons Learned ....... ....... 1 .......
2. Background ......................................... ......................................... 7 .........................................
Air Pollution ............................................. 7
Water Pollution ........................................ 8
Focus of Analysis ..................................... 8
3. Overview of the Five Case Studies..... 9 .....
Philippines ................................................ 9
Chile ........................................................... 9
Czech Republic ...................................... 10
India ......................................................... 10
Russia ....................................................... 11
4. Program Elements............................ ............................ 13 ............................
Economic Policy Reform...................... 13
Government Regulations and Standards 14
Institution Building ............................... 15
Education and Awareness .................... 16
Technological Change .......................... 17
Contents
5. Program Impact ............................... ............................... 19 ...............................
Economic Impact .................................. 19
Environmental Impact.......................... 21
Health Impact ........................................ 23
6. Program Performance ..................... ..................... 25 .....................
Effectiveness ........................................... 25
Sustainability .......................................... 27
Replication .............................................. 29
Annex A: Evaluation Methodology
Annex B: Case Studies and Evaluation
Teams
Bibliography
Urban and Industrial Pollution Programs
iv
v
BOD biochemical oxygen-demanding
Btu British thermal unit
CDIE Center for Development
Information and Evaluation
CIP Commodity Import Program
CTI Clean Technology Initiative
(India)
EAPS Environmental Action Program
Support project
EP3 Environmental Pollution
Prevention Project (Chile)
EPT Environmental Policy and
Technology project (Russia)
FIRE Financial Institutions Reform and
Expansion project (India)
GDP gross domestic product
ICICI Industrial Credit and Investment
Corporation of India
IEMP Industrial Environmental
Management Project
(Philippines)
NGO nongovernmental organization
NOX nitrous oxides
SOx sulfur oxides
TEST Trade in Environmental Services
and Technologies (India)
UNDP United Nations Development
Programme
U.S.-AEP United States-Asia Environmental
Partnership
U.S. EPA U.S. Environmental Protection
Agency
WHO World Health Organization
Abbreviations and
Acronyms
Urban and Industrial Pollution Programs
vi
vii
Republic, India, and Russia. CDIE teams spent
three weeks in each country during 1999-2000 in￾terviewing representatives of donor agencies, non￾governmental organizations (NGOs), government
officials, factory managers, and other beneficia￾ries of USAID-supported programs designed to
prevent and control urban and industrial pollu￾tion. The studies were conducted with the assis￾tance of economists, engineers, and environmen￾talists provided by Nexant, a Bechtel Technology
and Consulting Company. Annex A describes the
evaluation methodology. Annex B lists members
of the CDIE teams and provides ordering infor￾mation for the five country reports.
This synthesis of the five country case studies de￾scribes the economic, environmental, and health
impacts of programs in each country and identi￾fies factors affecting program performance (effec￾tiveness, sustainability, and replication). It is
designed to help managers learn from the experi￾ence of USAID-funded projects that have been
completed. These lessons will help guide the de￾velopment of future urban and industrial pollu￾tion programs.
USAID supports environmental programs in
five principal areas (often characterized as
strategic objectives):
‰ Reducing the threat of global climate change;
‰ Conserving biological diversity;
‰ Preventing urban and industrial pollution;
‰ Promoting energy conservation; and
‰ Improving natural resources management
(USAID 1997).
The Agency’s Center for Development Informa￾tion and Evaluation (CDIE) has completed four
environmental assessments in three of these ar￾eas: biological diversity (1995), energy conserva￾tion (1996), forestry (1996), and sustainable
agriculture (1996). This fifth program assessment
covers urban and industrial pollution. An experi￾ence review and country case study on global cli￾mate change (forthcoming) will complete the
CDIE series of environmental assessments.
Like its predecessors, this assessment is based on
country case studies. Fieldwork was carried out
in five countries: the Philippines, Chile, the Czech
Preface
Urban and Industrial Pollution Programs
viii
1
Summary and Lessons Learned
SAID has supported various programs to
reduce the adverse health effects of air and
water pollution in developing countries. This as￾sessment examines the impact and performance
of USAID’s urban and industrial pollution pre￾vention programs based on case studies of the
Philippines, Chile, the Czech Republic, India,
and Russia.
The five programs encompass a broad perspec￾tive. Some stress industrial pollution, while oth￾ers emphasize urban pollution. Some focus on
preventing pollution at its source, while others
focus on end-of-pipe treatments. Some use finan￾cial benefits (the carrot) as the main incentive for
industries to adopt pollution control and preven￾tion technologies, while others focus on their de￾sire to avoid penalties and financial costs (the
stick). Programs in some countries emphasize air
pollution, with programs in other countries mainly
targeting water pollution. Based on this broad ex￾perience, one can identify key lessons applicable
to most urban and industrial pollution programs.
Most USAID-funded projects in urban and indus￾trial pollution prevention supported interventions
in one or more of five areas: economic policy re￾form, government regulations and standards, in￾stitution building, education and awareness, and
technological change. The impact of these inter￾ventions was mixed. The Philippines, Chile, and
India studies all reported positive financial ben￾efits. This was not the case, however, in the Czech
Republic and Russia, where USAID-funded activi￾ties focused more on urban pollution than on in￾dustrial pollution.
Although the environmental impact was positive
in all five countries, the availability and reliability
of emissions and effluent data needed to reach this
conclusion varied among countries. Data were far
more thorough and credible in the Philippines and
the Czech Republic than they were in Chile, In￾dia, and Russia. Unfortunately, health surveillance
data, needed to measure changes in human mor￾bidity and mortality in response to changes in en￾vironmental quality, were not collected in any of
the five countries. It is reasonable to assume,
though, that the health impact of the USAID
projects was positive.
Each of the five programs was at least partially ef￾fective. This was certainly the case in Chile, the
Philippines, and the Czech Republic (at the na￾tional level). By contrast, most components of the
programs in Russia, India, and the Czech Repub￾lic (at the municipal level) were generally less ef￾fective. Program benefits were sustained after
USAID funding ended in Chile, the Czech Repub￾lic (at the national level), and Russia (under the
Moscow Water Quality project). This was gener￾ally not the case in the Philippines, the Czech Re￾public (at the municipal level), Russia (under the
Air Management project), or India (except for the
Financial Institutions Reform and Expansion
[FIRE] project). Finally, the benefits were not rep￾licated beyond the original target areas, partici￾pants, or industries in any of the countries. The
exception to this generalization is India’s FIRE-D
project, the debt component of the FIRE project.
Six key lessons emerged from this synthesis of the
five country case studies analyzed for this assess￾U
1
 Summary and
1 Lessons Learned
Urban and Industrial Pollution Programs
2
ment. The lessons address financial benefits, regu￾lation, sustainability, replication, credit/financing,
and data measurement.
1. Financial Benefits. Companies will not invest
in pollution prevention or control technologies
or environmental management systems unless
they perceive that it is in their business interest
to do so.
Companies are not altruistic. They are in business
to make a profit, either by increasing revenues or
reducing costs. In both the Philippines andChile,
pollution audits were used to identify opportuni￾ties for businesses to (1) increase revenues (by pro￾ducing less waste or by recovering waste and
selling it); (2) reduce costs (by reducing energy and
input use, such as water); and (3) use cleaner tech￾nologies. Companies were motivated to adopt au￾dit recommendations by the prospect of saving
money, increasing revenues, and expanding prof￾its—more so than by reducing pollution. However,
reducing pollution was a motivating factor if that
resulted in reduced pollution fees and fines. Pol￾lution audits demonstrated how a company could
benefit from increased profits and how a country
could benefit from lower pollution levels.
In the case of India, environmental performance a
was seen as a competitive factor in gaining access
to the international market. It was primarily for
this reason that companies adopted environmen￾tal management initiatives, such as ISO 14001 cer￾tification, greening the supply chain, and
benchmarking techniques. Environmental ben￾efits were seen as a by-product.
In Russia, cash-strapped industries were more a
likely to use limited financial resources to pay staff
rather than adopt environmental upgrades. This
was the case even for low-cost and no-cost im￾provements with short payback periods. Even
these involved a financial cost without a commen￾surate benefit.
Conclusion: Financial benefits (or other busi- sion:
ness-related benefits) are invariably needed to
encourage companies to adopt pollution preven￾tion and control measures. Pollution audits are
useful tools that can be used to identify such mea￾sures. If conducted by industry specialists, rather
than by generalists, such audits are likely to have
greater credibility with senior managers. It is
more cost effective to conduct audits for com￾panies in a few selected industries rather than in
many industries. Audit recommendations, in￾cluding what they can and cannot do, must be
carefully explained to company managers. In
some cases, financial benefits, though necessary,
are insufficient to induce companies to imple￾ment pollution prevention measures.
2. Regulation. Environmental regulations—and .
their strict enforcement—are important in mo￾tivating companies to acquire pollution control
technologies.
Chile had no environmental regulations when hile 
the USAID project was implemented. There was
little concern about pollution, and many compa￾nies viewed pollution prevention as a cost that
might not generate any return on investment. It
was therefore difficult to persuade firms to adopt
clean production measures. They became inter￾ested only when they faced the threat of fines,
government sanctions, penalties imposed by the
wastewater authority, or restricted access to ex￾port markets.
Command-and-control measures—environmen￾tal regulations and standards—are effective only
if they are strictly enforced and penalties are se￾vere. In the Philippines, the government did not s
routinely monitor compliance with environmen￾tal standards, so the probability of a business get￾ting caught was slim. Even then, orders to shut
down a factory were issued only for the most
egregious, obvious offenses, and penalties and
fines were relatively low. In India, companies in- ,
3
Summary and Lessons Learned
vested in pollution control technologies prima￾rily to avoid being shut down or paying fines for
noncompliance with environmental regulations.
As in the Philippines, however, enforcement in
India was generally lax, partly because political
will and public pressure were weak. Therefore,
companies often did not comply, deciding instead
to take remedial action only in response to liti￾gation and judicial rulings, which could take
years, or to pay fines, which was sometimes the
least-cost option. This seemed sensible, since the
cost of noncompliance was typically small rela￾tive to the cost of investing in end-of-pipe or pro￾cess-based controls.
In the Czech Republic, by contrast, public failure to
comply with the Clean Air Act meant swift and
harsh penalties, fees, and ultimately orders to
shut down a factory. Observing many polluting
industries being shut down, polluting municipali￾ties were prompted to take action. Asked why
they undertook environmental upgrades, an
overwhelming number of city managers pointed
to the Clean Air Act. (They also identified citi￾zen complaints and the high costs associated with
inefficient district heating operations.) In the ab￾sence of regulations that were enforced, the ef￾fectiveness of the USAID project would have
been seriously compromised.
Conclusion: The threat of environmental fines sion:
is a critically important tool. In fact, both cost
savings and regulation are important in motivat￾ing companies to take action. If pollution laws
and regulations are not already in place, they
should be developed before trying to persuade
industry to adopt pollution prevention measures.
Market-based instruments can complement
command-and-control approaches. They use
economic incentives to influence a company’s
behavior by encouraging the company to act in
its own self-interest. Imposing pollution charges,
for example, on companies that discharge efflu￾ents into the environment effectively internalizes
the costs of their pollution.
3. Sustainability. A pilot effort is an excellent way
to demonstrate the benefits of pollution pre￾vention methods, but it should include a plan
to ensure that benefits are sustained after do￾nor funding ends.
The Philippines project assumed that waste mini- s 
mization techniques, once adopted, would gener￾ate substantial benefits, and that companies would
sustain those techniques over time. The same was
true in Chile, where it was a hile ssumed that compa￾nies would recognize the value of pollution audits
and continue implementing pollution prevention
recommendations. However, that was not always
the case, especially when companies did not real￾ize the financial benefits estimated in the audits.
When sustainability took root, it occurred most
often in large multinational companies, where cor￾porate image counts and managers reinforce the
goal of clean production and pollution prevention.
This suggests that constant support and vigilance
from top company management may be the key
to sustainability.
In Russia, program sustainability depended a
heavily on the availability of operating funds af￾ter donor assistance ended. And in the Czech
Republic, prog public ram sustainability was not only
contingent on a source of operating funds, but
also on well-functioning environmental institu￾tions. These take time to mature. Occasional vis￾its by short-term consultants may not be suitable
for long-term institutional strengthening. The
technical assistance provided to the 22 munici￾palities is unlikely to have any long-term effect,
partly because project staff and municipal staff
did not work together to develop needed skills.
By contrast, the State Environmental Fund is fi￾nancially sustainable, partly because of the sound
technical advice provided under the USAID
project. Finally, in India, considerable time was a
required to gain the acceptance of its business
and government leaders on the use of municipal
bonds to finance public sector infrastructure.
This was no doubt time well spent, though it is
Urban and Industrial Pollution Programs
4
still too early to assess the sustainability of this
ongoing program.
Conclusion: Designers and implementers of pi- sion:
lot programs need to develop a plan to ensure that
benefits will continue once the program ends. That
usually requires an institutional structure with ad￾equate funding and capacity. These needs should
be addressed at the project outset. Potential
sources of funding include environmental fees and
fines collected from industries, support from lo￾cal or federal agencies, and development assis￾tance organizations.
4. Replication. An industrial pollution preven￾tion program cannot hope to reach all firms di￾rectly but needs an intermediary to spread the
message. Careful targeting with an eye to shar￾ing and spreading successful results can also en￾courage replication.
In a dynamic private sector, companies compete
to win market share, and they will not voluntarily
share information with their competitors about
ways to minimize costs. This was the case in both
the Philippines andChile, where com hile panies were
reluctant to share their newly learned techniques
with competitors. In Russia, too, there was little a
or no replication beyond the targeted industries
and wastewater treatment plants. Rather, each
company closely guarded its production tech￾niques, not wanting to help competitors. When
there is no incentive for a firm to share new tech￾nology with others, replication is difficult. In the
Philippines, Chile, and Russia, USAID used a “re￾tail” approach, working with one factory at a time.
Impact will be greatest when an institutional struc￾ture (such as an industrial trade association) is used
to disseminate pollution prevention findings
throughout an industry (the “wholesale” approach).
In India, the TEST project used an untargeted re- a
tail approach to introduce pollution control tech￾nologies. Any company of any size from any
industrial sector located in any part of the coun￾try was eligible to apply for a loan. By contrast,
the CTI project is using a targeted wholesale ap￾proach. Export-oriented companies from three
industrial sectors have been strategically selected.
In addition, CTI, unlike TEST, works with indus￾try associations, which are often able to facilitate
the sharing of information among companies
within the same industry. CTI is also introducing
the concept of greening the supply chain, which
can be a powerful force in replicating environmen￾tal management systems from one company to
numerous supplier companies.
In the Czech Republic, there was no ev public idence of
replication from one municipality to another.
There are at least two ways replication might have
been improved at the municipal level. The first is
to develop manuals that explain how to prepare
loan applications and provide examples of success￾ful applications, with templates for different kinds
of projects. Distributing these manuals beyond the
target municipalities can support replication. The
second way is to target groups of municipalities
(such as municipal associations) so members can
spread the word. In either case, a replication strat￾egy must be explicitly planned.
Conclusion: Pilot and demonstration projects sion:
working one-on-one are unlikely to be
replicated—unless replication is planned from the
beginning and built into the implementation plan.
Even then, replication is unlikely to occur if it in￾volves revealing trade secrets. Replication may be
improved by working not just with individual busi￾nesses (the retail approach) but also with indus￾try trade associations (the wholesale approach) or
with a government agency. If the retail approach
is used, donors should target plants where the
owners are influential leaders in the industry.
Trade associations can be neutral in sharing in￾formation among their members. A government
regulatory agency is most likely to benefit com￾panies facing compliance problems. Finally, repli￾cation may be enhanced when a cadre of pollution
engineers is trained.
5
Summary and Lessons Learned
5. Credit/Financing. Lack of financing is typi￾cally not a serious constraint for large firms that
want to procure pollution control and preven￾tion technology. However, it often hinders in￾dividual small and medium-size firms. For
municipalities, domestic environmental funds
or bonds can be important sources of financ￾ing for environmental infrastructure.
In the Philippines andChile, most com hile panies
adopted low- or no-cost techniques that were
simple and had an immediate effect on pollution
reduction and cost savings. A few companies re￾quired financing, but only if they made large capi￾tal investments (for example, if they were building
a new factory or introducing a new production
technology). In these cases, in Chile, conventional
financing was used. However, in the Philippines,
pollution-related financing was a relatively recent
practice. As a result of USAID-funded studies,
however, both the Land Bank of the Philippines
and the Development Bank of the Philippines now
target small and medium-size firms with
concessional loans to finance investments in pol￾lution prevention. In Russia, even low- and no- a
cost solutions to urban and industrial pollution
were not readily adopted because they had a high
opportunity cost. And unlike in the Philippines
and Chile, credit was not readily available for capi￾tal investments due to tight money, high risk, and
financial market imperfections. Even if credit were
available, pollution technology was often
inappropriate.
The TEST project in India assumed that Indian a 
companies would need financing to purchase pol￾lution prevention technology from U.S. suppliers.
Although individual small and medium-size In￾dian companies often did require financing, large
companies did not (or they were able to secure
financing without donor assistance). Unfortu￾nately, TEST did not concentrate on small com￾panies; high transaction costs or strict lending
criteria may have been barriers. More important,
though, Indian companies were reluctant to buy
pollution technologies or process techniques from
the United States unless demonstrations had
shown they were suitable for local operating con￾ditions—and Indian financial institutions were
reluctant to lend funds for the purchase of un￾tested technologies. In addition, U.S. pollution
technologies were typically too expensive to find
widespread acceptance in the Indian market. All
of these factors limited the demand for credit.
India’s FIRE-D project introduced the concept of
private-sector financing of urban environmental
infrastructure. After successfully assisting several
municipalities, including Ahmedabad, USAID is
widely praised by Indian counterparts for carefully
nurturing this idea.
In the Czech Republic, USAID helped 22 m public unici￾palities prepare loan packages in a form that banks
and environmental funds could use in making
lending decisions. However, project personnel and
city leaders both concluded that the technical as￾sistance was of little interest or value. There were
three reasons: (1) larger municipalities already had
the expertise; (2) most municipalities believed the
fund’s approval process was arbitrary and politi￾cal, so improved packaging would not make a dif￾ference; and (3) smaller municipalities were not
given sufficient hands-on experience to learn how
to package loan applications. The situation was
somewhat analogous to that in India where project
designers made assumptions that proved invalid.
Conclusion: Financing is often available to indus￾tries that can demonstrate a positive return on in￾vestment and a history of repaying their loans.
Larger firms, in particular, typically do not require
concessional financing. Though municipalities
need financing for investments in environmental
infrastructure, they do not always need technical
assistance in how to package loan applications.
When such assistance is needed, it should be pro￾vided as part of a comprehensive response, not as
a stand-alone component. Environmental funds
will be handicapped if political factors affect their
approval procedures or if they are not perceived
Urban and Industrial Pollution Programs
6
as transparent and open. Regional funds (as in Po￾land) tend to manage these problems better than
national funds (as in the Czech Republic).
6. Measuring Results. “Before” and “after” data
are needed to monitor program performance
and assess program impact. Program
sustainability within a company and replication
beyond it depend on the availability of reliable
data and information.
In India, data were not available on environmen- a
tal quality in Indian cities or discharge rates from
industrial sectors; nor were epidemiological or
other health data available for populations lo￾cated near industrial zones or participating com￾panies. Lack of baseline data greatly reduced the
ability to conduct an accurate assessment of en￾vironmental and health impacts of USAID￾funded programs. The same was true in Russia.
At all three wastewater treatment plants and key
industrial enterprises, sufficient data had not
been systematically gathered to enable an unam￾biguous assessment of the effects of various plant
upgrades. Without good data it was impossible
to disentangle the effects of Russia’s economic
downturn from the effects of the USAID projects,
as both could have produced the same outcome—
reduced pollution.
Data collection is essential to establishing a baseline
against which to monitor progress and measure
results. But it is important to collect data for the
right indicators. Collecting data for inappropriate
indicators will yield irrelevant results. For example,
an important goal of the Philippines project was s
to improve human health by reducing water pol￾lution. But the pollutant that was measured, BOD,
does not directly affect human health.
Conclusion: USAID needs to c sion: onduct accurate
program appraisals. This depends on accurate data
that analytically link USAID interventions with
their effects on reducing pollution. Program ben￾efits are more likely to be sustained and replicated
when factory staff are involved in collecting and
analyzing data. Factory staff are more likely to col￾lect data for appropriate indicators, and manage￾ment is more likely to believe, and therefore use,
its own data and analysis.
7
1
ities in developing countries experiencing
rapid growth are increasingly unhealthy
places to live. This stems from inadequate control
of industrial effluents and emissions, insufficient
collection and disposal of sewage and solid waste,
and emissions from vehicles. The key links be￾tween urban environmental degradation and de￾teriorating public health include (1) air pollution,
which causes respiratory diseases, and (2) water
pollution, which causes waterborne diseases such
as diarrhea, dysentery, and cholera. (A third source
of poor public health is land pollution due to un￾controlled dumping of municipal and industrial
wastes.)
For decades, the international
scientific community has issued
warnings on the adverse health
effects of air and water pollution.
The main impacts on health are
premature death (mortality) and
sickness (morbidity). More than
70 percent of deaths from out￾door air pollution are in devel￾oping countries. In Mexico City,
for example, airborne particulate matter kills
about 6,400 residents a year. Air pollution caused
more than 175,000 premature deaths in China in
1995. The total health costs of urban air pollution
in developing countries were estimated at nearly
$100 billion in 1995, with chronic bronchitis ac￾counting for $40 billion. Water pollution is equally
serious. For example, Asia’s rivers contain 20 times
more lead, on average, than those in industrial
countries. Every year water pollution causes nearly
2 billion cases of diarrhea in the developing world,
and diarrheal diseases kill some 5 million people
annually (UNDP 1999, 28, citing UNDP 1998).
 Air Pollution
Tropospheric ozone, sulfur oxides (SOx), nitrous
oxides (NOx), atmospheric lead, and particulates
all contribute to air pollution.
Combustion of fossil fuels (coal,
oil, and natural gas) by industries
is a principal source of these pol￾lution-causing emissions.1
 Most
developing countries rely on fos￾sil fuels to meet much of the en￾ergy needs for industrialization
and economic growth. Although
particulates generated from
burning coal, especially coal with
high sulfur and ash content, gen￾erally have the most serious effects on human
health, coal is still used extensively as a key en￾ergy source in several countries, including China
and India.
A worldwide review of 126 cities where ambient
levels of particulates exceed World Health Orga￾nization (WHO) guidelines estimates that 130,000
premature deaths and 50-70 million incidents of
respiratory illness occur each year due to air pol￾lution (Brandon 1998, 39, citing Maddison 1997).
1
Burning fossil fuels causes air pollution. It is also the
principal cause of increased concentrations of carbon
dioxide in the atmosphere. Carbon dioxide is not a
form of air pollution and is not detrimental to human
health, but it is the principal cause of global climate
change.
A worldwide review of
126 cities estimates that
130,000 premature
deaths and 50-70 million
incidents of respiratory
illness occur each year
due to air pollution.
2 Background
C
Urban and Industrial Pollution Programs
8
In Manila, Bangkok, and Seoul, premature deaths
number 2,000-4,000 a year. Each of these cities
claims 30,000-90,000 cases of severe chronic bron￾chitis annually. In monetary terms, the costs of
air pollution total seven percent of urban gross
domestic product (GDP) in Manila and Bangkok,
and 4 percent in Seoul. Elsewhere in the world,
air pollution impacts are comparable: 40,000 pre￾mature deaths a year in India; 36,000 in the newly
independent states; 4,000-6,000 in Cairo; and
6,400 in Mexico City. The economic value of this
health damage represents 3-10 percent of urban
income (Brandon 1998, 39, citing Lvovsky and
Hughes 1998).
Studies have compared the cost
of pollution abatement with the
health benefits gained. They
have found the cost per life saved
is low—often $1,000 or less.
Studies have also found that the
rate of return on controlling par￾ticulate emissions is high, mak￾ing it an extremely cost-effective
public health approach in all cit￾ies with high levels of particu￾lates (Brandon 1998, 39).
Water Pollution
While air pollution affects all city residents more
or less equally, water pollution disproportionately
affects the poor who live in slums and squatter
settlements, which lack potable water, sanitation,
drainage, and are often located closer to waste
dumps and industrial sites. In fact, the principal
source of water pollution is disposal of untreated
municipal sewage and industrial waste into rivers
and streams. It has been reported that sewage is
the worst cause of water pollution in developing
countries, and leads to the most health problems.
A WHO study showed that improved water sup￾ply and sanitation reduces morbidity and mortal￾ity associated with diarrhea and other diseases by
25 and 65 percent, respectively (Brandon 1998, 40,
citing Esrey, et al. 1991). One way to reduce mor￾bidity and mortality rates caused by water pollu￾tion is to increase urban access to piped water and
improve urban sanitation; another way is to re￾duce and treat the discharge of pollutants and in￾dustrial wastes into rivers.
Focus of Analysis
This assessment focuses primarily on industrial
pollution in urban areas, and to a lesser extent it
covers municipal pollution (untreated sewage and
wastewater disposal). It does not
cover pollution caused by auto￾mobiles or by industries located
in rural areas, as neither has been
a primary area of emphasis for
USAID until recently.
Industrial pollution is a manifes￾tation of wasteful and inefficient
production processes. Waste and
inefficiency occur at two levels:
(1) individual industries and
firms (cement plants, for ex￾ample) and (2) power plants that
supply the energy used by indi￾vidual industries, firms, and households. In eco￾nomic terms, industrial pollution is a classic
example of negative externalities. For example, a
factory or a power plant does not incur a financial
cost if its smokestack spreads pollution over
nearby towns. Instead, the pollution costs are
borne by those who have to breathe polluted air;
the costs are external to the factory. Although so￾ciety would benefit if the factory reduced pollu￾tion, the factory would gain little or no financial
benefit by doing so. The factory would have to bear
the costs, while others gained the benefits. To ad￾dress this issue, USAID has supported various
activities, including programs to increase produc￾tion efficiency (and reduce pollution) at both in￾dividual firms and power plants.
A World Health
Organization study
showed that improved
water supply and
sanitation reduces
morbidity and mortality
associated with diarrhea
and other diseases by 25
and 65 percent,
respectively.
9
Overview of the Five Case Studies
s noted, this Center for Development Infor￾mation and Evaluation (CDIE) assessment
examined the impact and performance of USAID
urban and industrial pollution programs in five
countries: the Philippines, Chile, the Czech Re￾public, India, and Russia. An overview of each
country program reveals that the activities sup￾ported by USAID are not entirely comparable,
which complicates the synthesis of results.
Philippines
USAID implemented the Industrial Environmen￾tal Management Project (IEMP) in the Philippines
from 1992 to 1997. It was funded at $13.2 million.
Unlike many industrial pollu￾tion programs, which stress
treatment of waste, IEMP
stressed prevention. The pro￾ject’s principal goal was to im￾prove human health.
Pollution management apprais￾als were a central feature of
IEMP. These audits are a
straightforward way to assess
opportunities for reducing in￾dustrial pollution through low￾or no-cost techniques and capi￾tal investments in equipment. Implementing au￾dit recommendations typically contributes to
increased productivity while reducing waste and
emissions. Pollution audits were done for 143
small and medium-size industrial firms located
throughout the Philippines, excluding Metro
Manila. In addition, 2,600 people participated in
training seminars, and many others participated
in a series of public-private dialogs on new envi￾ronmental regulations—some of them based on
policy studies prepared with project support. The
Philippines project confirmed that industry-led
economic growth can be compatible with environ￾mental protection.
Chile
In 1993, USAID launched the Environmental Pol￾lution Prevention Project (EP3). Chile was the first
of nine countries worldwide where the project was
implemented. Valued at $1.3 million, the project
ended after only three years, in
1996, when Chile “graduated”
from receiving USAID assis￾tance. As in the Philippines, the
project in Chile did not focus
on “end-of-pipe” treatments—
reducing pollution at the
smokestack or drainpipe. In￾stead, it was designed to reduce
pollution at its source by intro￾ducing cleaner industrial pro￾duction processes and by
reducing and reclaiming indus￾trial waste. For this to work—
to prevent pollution at its source—industrial firms
had to be convinced that pollution prevention pays
and is financially beneficial. Therefore, the project
funded 26 pollution prevention diagnostic assess￾ments, similar to the pollution audits in the
Philippines.
A
13
Overview of the Five Case
Studies
The Industrial
Environmental
Management Project in the
Philippines confirmed that
industry-led economic
growth can be compatible
with environmental
protection.
Urban and Industrial Pollution Programs
10
These audits showed it was possible to save money
while reducing pollution, which was particularly
important in Chile. In many
countries, manufacturers are en￾couraged to reduce pollution by
a carrot-and-stick approach. The
carrot is cost savings; the stick is
the threat of fines or a plant shut￾down. In Chile, such punitive
measures did not exist, so the
project necessarily concentrated
on cost savings. In addition, it
trained nearly 2,500 people in in￾dustrial-pollution prevention
and created a cadre of private￾sector pollution engineering
consultants.
Czech Republic
USAID’s Environmental Action
Program Support (EAPS) project
was a $17-million effort to de￾crease or reverse environmental
degradation in seven central and
eastern European countries. The
project implemented in the Czech Republic be￾gan in 1995 and was funded at $1.4 million. It was
executed at the national and local levels. At the
national level, it supported a resident advisor to
help strengthen the institutional capacity of the
Czech State Environmental Fund. Created in 1991,
this fund was needed because many Czech mu￾nicipalities did not generate sufficient revenues to
pay for large capital projects to reduce airborne
pollution from district heating plants. The mu￾nicipal bond market, another potential source of
funds, was nonexistent, and commercial banks
were not making loans to municipalities to up￾grade their facilities.
At the local level, the project provided technical
assistance and training to help 22 small munici￾palities with highly polluting heating plants pre￾pare loan applications for submission to the State
Environmental Fund. Municipalities that received
loans were able to upgrade their
district heating systems, which
typically involved switching from
high-sulfur coal to cleaner burn￾ing fuels. The result was reduced
air pollution. Unlike the Philip￾pines and Chile case studies,
which addressed industrial pol￾lution, the Czech Republic case
study addressed urban pollution.
EAPS was later implemented in
Poland, lasting somewhat longer
than the EAPS project in the
Czech Republic. It was funded at
$2.75 million, twice the amount
spent in the Czech Republic. The
overall approach, though, was
similar—namely, to strengthen
domestic environmental funds
and help municipalities get loans
for environmental upgrades.
Whereas a single national-level
state fund was created in the
Czech Republic, 49 regional funds (as well as a na￾tional-level fund) were established in Poland. Re￾gional funds appear to have a clear advantage over
a single national fund because they are better able
to manage local problems that arise.
India
A decade ago, following India’s leap into industri￾alization, USAID designed the Trade in Environ￾mental Services and Technologies (TEST) project.
It had two objectives: (1) to enhance trade oppor￾tunities for U.S. companies that exported pollu￾tion prevention and control equipment and (2) to
improve environmental conditions in India. The
project authorized funding of $25 million from
1992 to 1997, with $20 million for loans to Indian
companies that needed financing to procure en￾The Environmental
Pollution Prevention
Project in Chile was
designed to reduce
pollution at its source by
introducing cleaner
industrial production
processes and by
reducing and reclaiming
industrial waste. For this
to work, industrial firms
had to be convinced that
pollution prevention
pays and is financially
beneficial.
11
Overview of the Five Case Studies
vironmental services or pollution prevention
technologies from U.S. companies. The other $5
million was for a U.S. contractor to identify U.S.
suppliers of environmental technology and to fa￾cilitate commercial transactions between U.S. and
Indian firms.
A second project in India, the Clean Technology
Initiative (CTI), was designed as a follow-on to
TEST. Total authorized funding was increased
from $25 million to $29.95 million, and the
completion date was extended by five years, until
2002. CTI, which is ongoing, helps leaders of In￾dian industry become more competitive in inter￾national markets by encouraging sound environ￾mental performance. It emphasizes pollution
prevention and market-based strategies (polluter￾pays paradigms), as distinct from command-and￾control approaches. In this respect, it is similar to
the Philippines project, which also introduced
market-based approaches to con￾trolling water pollution, and to
the Chile project, where govern￾ment-enforced environmental
regulations were nonexistent.
Unlike TEST, which worked with
individual companies (the “retail”
approach), CTI uses the “whole￾sale” approach (working with
trade associations of strategically
targeted industries).
A third project, Financial Insti￾tutions Reform and Expansion
(FIRE), focuses on urban pollu￾tion (as in the Czech Republic) as
distinct from industrial pollu￾tion. It has two components: FIRE-R (“R” stands
for regulatory) covers government regulation of
the stock market; FIRE-D (with “D” signifying
debt) covers the debt market. The original five￾year project (1994-1998) was extended by another
five years, until 2003, and like CTI, is ongoing. The
project addresses two issues. The first concerns
mechanisms to finance urban environmental in￾frastructure (such as sanitation, water supply, and
solid waste management). The second concerns
actual delivery of environmental infrastructure to
benefit the urban poor. At the end of FY 1998,
$19.5 million had been obligated to support both
objectives. In addition, the project is supported
by up to $125 million in loans from USAID’s En￾vironmental Credit Program.
Russia
In 1992, USAID launched the Environmental Policy
and Technology (EPT) project in Russia. (The
project was also implemented in other countries of
the former Soviet Union.) Funded at $128 million,
the project included several subprojects. Two of
these were the Water Quality subproject in Mos￾cow beginning in 1994 and the Russian Air Man￾agement subproject in Volgograd implemented
during 1993-99. Both were imple￾mented by the U.S. Environmen￾tal Protection Agency (U.S. EPA)
at a cost of $11 million.
The Moscow Water Quality
project sought to reduce health
risks by improving the quality of
drinking water. It did this by in￾troducing new approaches to
managing wastewater treatment
facilities at industrial enter￾prises in the cities of Tver,
Gagarin, and Dimitrov, which
are upstream from Moscow. The
project also developed a small
watershed program in the Istra
District near Moscow, where it sought to curb
agricultural runoff that was affecting water flow￾ing into the Moscow oblast. The Istra watershed
program supported the construction of dams and
manure-storage facilities, worked with local live￾stock operators, and demonstrated solid waste
management techniques. The Russian Air
The FIRE-D project in
India has worked with an
expanding group of
municipal governments
and urban agencies,
helping to privatize
services previously
performed by poorly
staffed and equipped
government agencies.
Urban and Industrial Pollution Programs
12
Management project was implemented in
Volgograd, a large industrial city ranked as the
sixth most polluted city in Russia in 1993, when
the project began. The project developed and
tested an air quality management system, pro￾vided training and technology, and supported
public awareness of the adverse effects of air and
water pollution.
13
Program Elements
consumption per unit of output and dispropor￾tionately high levels of waste and pollution.
Most of the industries affected by the Philippines
project were relatively water intensive (for ex￾ample, agricultural processing and textile produc￾tion). Thus, any reduction in water use would
theoretically yield significant cost savings for the
company—but only with realistic pricing policies.
Unfortunately, water from municipal systems in
the Philippines is inexpensive, and groundwater
is free. Thus, there is little economic incentive to
conserve water. Although the Philippines tradi￾tionally has relied primarily on command-and￾control approaches rather than on market-based
instruments to reduce pollution, under IEMP the
government established a polluter-pays system for
the Laguna Lake Development Authority. Com￾panies were assessed fees on their effluent dis￾charge into the lake, and those that reduced waste
generation were rewarded with lower fees and
penalties.
In India, the government subsidized the price of a
water, energy, and raw materials to promote rapid
industrialization. Because material inputs were
priced artificially low, industries used them inten￾sively and expanded capacity beyond what was
economically justified, thereby increasing pollu￾tion. In 1991, the government began to address
these problems through significant economic re￾forms and greater liberalization. It encouraged
competition through deregulation, while reduc￾ing subsidies and tariffs. As in the Philippines,
India introduced market-based instruments, in￾cluding the polluter-pays principle, to encourage
ost USAID-funded urban and industrial
pollution programs support interventions
in one or more of five areas: economic policy re￾form, government regulations and standards, in￾stitution building, education and awareness, and
technological change. This assessment was de￾signed to provide insights into the relative impor￾tance of these five factors in controlling and
reducing air and water pollution caused by urban
industries.
Economic Policy Reform
Governments often try to control pollution by re￾lying primarily on command-and-control ap￾proaches—creating regulations and enforcing
them. An alternative is to use market-based ap￾proaches that impose fees and provide incentives
to achieve the same objectives. For example, be￾cause energy generally represents a significant cost
of industrial production, companies try to reduce
costs by conserving energy. As demand for energy
declines, utilities burn less fuel and produce less
pollution. However, unless a country’s energy pric￾ing policy encourages use of cleaner fuels and
power sources or use of energy-efficient technolo￾gies, companies will continue to use the least ex￾pensive energy sources—including less efficient
and environmentally less desirable sources, such
as highly polluting diesel-powered generators.
Thus, an energy pricing policy will either encour￾age or discourage (often through subsidies or
taxes) the levels and types of energy that indus￾tries use. Similarly, input prices (such as for wa￾ter) are often set artificially low, especially in
centrally planned economies, leading to excessive
M
14 Program Elements
Urban and Industrial Pollution Programs
14
or a system of subsidies. Both approaches tend to
increase the demand for inputs and increase en￾vironmental damage associated with their over￾supply and inefficient use. Russia’s energy prices
are still below market levels. This helps explain
why Russia is one of the world’s least efficient en￾ergy consumers. In 1997, for example, Russia con￾sumed 61,000 British thermal units (Btus) of
energy for every $1,000 of GDP, the highest rate
in the world. This compares to 31,000 Btus in In￾dia and 11,600 Btus in the United States. Thus,
economic policy reform, especially price policy re￾form for inputs and energy, may well have helped
Russia reduce industrial pollution.
Government Regulations and
Standards
Environmental laws, standards, and regulations—
and a government’s capacity and willingness to
enforce them—are pivotal factors in explaining the
effect of pollution prevention projects. In many
countries, though, enforcement has a poor track
record, partly because the regulations are unreal￾istically stringent and partly because enforcement
agencies are corrupt.
Russia illustrates the point, as it has some of the a 
most stringent environmental standards in the
world. But it also has especially lax enforcement,
in part because the laws are complex and incon￾sistent across jurisdictions. Moreover, its pollu￾tion fees and fines are unrealistic, which reduces
compliance, drains resources, and undermines the
political will needed for law enforcement. Cam￾bridge International Forecasts states that of
250,000 reported violations of environmental stan￾dards, 40 percent go unpunished or unrectified.
India is another case in point. It was the first na- a 
tion to provide for environmental protection ex￾plicitly in its constitution. Since the early 1970s,
the Indian government has enacted 16 legislative
measures that provide guidelines for protecting
and improving the environment. However, the
industries to implement pollution control
measures.
Although almost all other countries subsidize pol￾lution control and prevention, that is not the case
in Chile,where subsidies, concessional loans, and
investment credits do not exist. Their absence re￾flects the deliberate economic policy of the Chil￾ean government, which relies almost completely
on private enterprise and free markets to drive the
economy. Thus, many companies in Chile were
already financially motivated to undertake pollu￾tion prevention measures to save money, reduce
waste, and decrease input costs without govern￾ment intervention. In short, a sound economic
foundation was already in place when the Chile
project began.
To combat inefficiency, waste, and pollution in the
Czech Republic, the public government allowed energy
prices to rise slowly toward international market
levels. Higher prices led to increased energy effi￾ciency which, in turn, contributed to improved air
quality. In addition, the government subsidized
natural gas prices, which led to a gradual shift from
burning coal to natural gas. As in the Philippines,
India, and Chile, the Czech government adopted
market-based instruments, including user fees and
pollution charges (as well as a system of fines and
closure orders), to help control pollution. And as
with Chile, project designers in the Czech Repub￾lic did not need to change economic policies, be￾cause appropriate policies were largely in place.
This was partly due to growing pressure to con￾form to European Union environmental stan￾dards.
The two projects implemented in Russia were not a 
designed to help reform economic policy. Unlike
the situation in Chile and the Czech Republic,
though, this was not because Russia’s policies did
not need reform. They did, as Russia historically
has undervalued production inputs such as oil,
coal, gas, and water, using a system that did not
recognize the role of markets (central planning)
15
Program Elements
government’s capacity and willingness to enforce
its laws have often been wanting. This is under￾standable: When there is a perceived trade-off be￾tween a sound economy and good environmental
practices, India’s politicians and industrial lead￾ers have opted for fewer environmental controls
and less environmental enforcement. Given these
political realities, judicial activism has become the
key driver in forcing Indian companies to adopt
pollution prevention and control measures.
One objective of the Philippines project was to s 
provide the government’s Department of Environ￾ment and Natural Resources with advice on issues
about regulations for industrial environmental
management. Policy studies were the key mecha￾nism for achieving this objective. The department
had already developed a five-year agenda for such
studies when IEMP began, which was a good in￾dication of the demand for expert advice. Despite
this effort, uneven enforcement of existing regu￾lations remains a serious problem.
An effective environmental regulatory framework
was already in place in the Czech Republicwhen
the EAPS project began. Legislation such as the
Clean Air Act had been passed and was being en￾forced. The government’s interest in maintaining
sound pollution abatement was partly due to its
desire to become a member of the European
Union. Therefore, as was the case with economic
policy reform in the Czech Republic, assistance
to strengthen the government’s environmental
regulations and standards was not needed.
This was also the case in Chile,where EP3 was,
by design, an industry-oriented program with little
emphasis on economic policy or governmental
regulations. It focused on the supply side: envi￾ronmental audits, clean technology, and trained
environmental engineers. It soon became appar￾ent, though, that the demand side was weak, as
cost-savings were not enough to motivate indus￾try to curb pollution. Regulations—and their en￾forcement—were needed to spur industry’s
interest in pollution prevention. Without the
threat of fines and penalties, industrial demand
for pollution control measures was limited.
Institution Building
Strong public and private institutions are often
seen as indispensable to ensuring clean air and
water in any country. This includes institutions at
both the national and local level.
The project in the Czech Republic helped public
strengthen public institutions at two levels: at the
national level through the Czech State Environ￾mental Fund and at the local level through mu￾nicipalities. Assistance to the State Environmental
Fund focused on improving transparency, ensur￾ing that grant approval was not influenced by po￾litical and personal factors, and emphasizing
proper technical and financial analysis of loan sub￾missions. At the local level, the project helped
municipalities prepare and submit loan packages
and then stayed in close touch with the Environ￾mental Fund to obtain financing.
In India, it made sense for USAID to concentrate a
on the private sector, as the World Bank was al￾ready strengthening key public sector environ￾mental agencies. USAID worked with the
Industrial Credit and Investment Corporation of
India (ICICI), now a well-established and compe￾tently managed financial intermediary. The
Agency also helped strengthen several national￾level industry associations, primarily the Confed￾eration of Indian Industry and the Federation of
Indian Chambers of Commerce and Industry. As
noted above, India’s state courts have recently be￾come active in pollution control cases—even
though court lawyers generally have little formal
training or professional experience with environ￾mental law. Therefore, CTI has exposed several
court justices and state lawyers to modern judi￾cial environmental issues in other countries. The
FIRE-D project has worked with an expanding
group of municipal governments and urban
Urban and Industrial Pollution Programs
16
ment agency), mainly at the local level. This large
regulatory bureaucracy has primary responsibil￾ity for setting environmental standards and enforc￾ing them. Its frequent leadership changes during
project implementation and staff turnover made
institution building difficult, at best.
Education and Awareness
Many urban and industrial pollution programs
have educated representatives of
industry, government, NGOs,
the general population, and lo￾cal consultants about the health
costs of air and water pollution
and the financial benefits of pol￾lution prevention. These educa￾tion and awareness programs
often have included outreach and
institutional capacity building.
The Chile project concen hile trated
on technical assistance and train￾ing to build knowledge and
awareness of pollution preven￾tion (at the time, not a well￾known concept in Chile) and to
encourage industry to adopt ap￾propriate technology. The
project trained local environ￾mental consultants about the
value of pollution prevention; they, in turn, helped
convince industries that such investments would
help them save money. Of the 2,500 people trained
in industrial pollution prevention concepts, 1,061
were from industry, 752 from universities, 309
from government, 252 from NGOs, and 123 from
local environmental consulting firms. Despite the
increased supply of pollution control engineers,
however, demand for the services of these special￾ists is still lacking. Without the threat of fines and
penalties (Chile had no pollution regulations at
the time), companies appear to have little interest
in reducing pollution, though this may change as
public pressure increases.
agencies, helping to privatize services previously
performed by poorly staffed and equipped gov￾ernment agencies.
In Chile as we hile ll, USAID concentrated almost en￾tirely on the private sector. Although various Chil￾ean environmental agencies were emerging in the
mid-1990s, EP3 did not provide direct assistance
to them. Several dozen organizations, represent￾ing the government, nongovernmental organi￾zations (NGOs), and the private
sector, now address environ￾mental issues. However, be￾cause they are relatively new,
almost no linkage exists between
these institutional structures and
the USAID project. For example,
the Commission on the Environ￾ment, the Chilean environmental
protection agency, did not be￾come fully effective until after the
USAID project ended in 1996.
In Russia, less than one percent a
of the federal budget is allocated
to support environmental objec￾tives. As a result, the country’s
environmental institutions are
poorly staffed and inadequately
equipped. USAID provided train￾ing to help strengthen these in￾stitutions, primarily through the Center for
Environmental Training and the Volgograd Envi￾ronmental Services Administration. It also sup￾plied basic environmental equipment—flow
meters, automatic samplers, dissolved oxygen
meters, Sludge Judges, and colorimeters.
The Philippines is characterized by duplication s 
of effort and conflict among organizations respon￾sible for the environment and industry. The pic￾ture is further complicated because these agencies
work at both the national and local level. The
USAID project focused on the Department of
Environment and Natural Resources (a govern￾The FIRE project worked
with a variety of target
audiences in several
Indian cities to introduce
the concept of private
financing of public
infrastructure. As a
result, municipal bonds,
the first in South Asia,
were issued successfully
in Ahmedabad for the
construction of water
and wastewater works.
17
Program Elements
The Philippines project also supported a signifi- s 
cant training component designed to build envi￾ronmental awareness and technical knowledge.
The training targeted not only the private sector
(environmental consultants, managers, and tech￾nical staff from industry), but also national and
local government staff. The project offered semi￾nars and roundtables for private-public sector dia￾log on proposed reforms in environmental policy.
It also deliberately “Philippinized” the content of
the courses, which made the courses more appro￾priate and effective for the participants and helped
develop a corps of Filipino instructors. Finally,
publications produced under the project had far￾reaching impact, especially a se￾ries of success stories that were
widely circulated throughout the
Philippines.
The India projects relied heavily a 
on informal training programs to
introduce new approaches and
technologies. Much of this edu￾cational work was conducted
through India’s two leading busi￾ness associations, which rou￾tinely disseminated information
to their members. CTI benefited
from the Internet, which was in
its infancy when its predecessor,
the TEST project, was designed
in 1991. By 1997, USAID assis￾tance had helped create a world-class web portal
providing access to information on clean technol￾ogy. The FIRE project worked with a variety of
target audiences in several Indian cities to intro￾duce the concept of private financing of public in￾frastructure. As a result, municipal bonds, the first
in South Asia, were issued successfully in
Ahmedabad for the construction of water and
wastewater works. Environmental education and
awareness was also promoted through interna￾tional travel fellowships and exchange programs
available through the United States-Asia Environ￾mental Partnership (U.S.-AEP). Since 1992, well
over 200 U.S.-AEP/India exchanges have been
conducted.
In the Czech Republic, training courses were car- ,
ried out in northern Bohemia and northern
Moravia, where the USAID project was imple￾mented, and in Prague, where the Czech State En￾vironmental Fund was located. These courses were
not instrumental in helping officials of municipali￾ties apply for loans from the State Environmental
Fund. However, they did introduce various com￾puter models, one of which aided municipalities
in estimating their borrowing limits.
Education and awareness pro￾grams were supported under
both projects in Russia. The
Center for Environmental Train￾ing offered over 20 programs to
more than 400 participants. The
training was supported by
USAID, as well as a U.S.-based
NGO, the U.S. EPA, and Russian
public and private partners. Ap￾proximately one-third of the Istra
component budget of the Mos￾cow Water Quality project was
allocated to support environmen￾tal education activities. These in￾cluded a program for school
children, public events, and
newspaper and radio campaigns
designed to reach the public. The public partici￾pation program of the Air Management project
increased awareness of environmental issues,
helped develop printed and reference materials,
and elevated environmental quality to a “political
issue.”
Technological Change
USAID often supports the development or trans￾fer of environmental technologies and practices—
including retrofitting pollution control and
prevention technologies and investing in modern,
The public participation
program of the Air
Management project in
Russia increased
awareness of
environmental issues,
helped develop printed
and reference materials,
and elevated
environmental quality to
a “political issue.”
Urban and Industrial Pollution Programs
18
clean technologies for new plants. This sometimes
involves providing the financing required to pur￾chase new technology.
In Chile, the p hile ollution audits recommended new
practices and technologies ranging from low- and
no-cost housekeeping, maintenance, and process
changes to major capital investments. The attrac￾tiveness of any particular measure depended solely
on its potential to increase short-term operating
profits. Acceptance of recommended changes av￾eraged 40 percent, but this varied greatly among
the 26 participating firms. Key factors influenc￾ing acceptance were the suitability of the audit
recommendation, the size of the investment, the
benefit-cost ratio of the investment, and the skill
and business savvy of the firm’s owners and man￾agers. Surprisingly, some factory owners were re￾luctant to implement changes even when cost
savings and all other indicators were strongly posi￾tive. This anomaly also occurred in the
Philippines.
As its name suggests, the Industrial Environ￾mental Management Project (IEMP) in the Phil￾ippines emphasized the s management of
technological change—including the use of pol￾lution audits—and only indirectly specific tech￾nologies. As in Chile, the audits typically
recommended low- and no-cost process
changes rather than capital investments in
cleaner, more modern and efficient equipment.
Capital investment in pollution prevention
equipment was a relatively recent activity for
both businesses and financial institutions in the
Philippines. Companies were unaccustomed to
making bankable cost calculations, and bank￾ers were unaccustomed to reviewing loan re￾quests for these purposes. However, using
materials developed by the USAID project, both
the Land Bank of the Philippines and the De￾velopment Bank of the Philippines provided
concessional loans to small and medium-size
firms to finance pollution prevention and waste
minimization efforts.
Based on the results of a market survey under￾taken in India in 1991, USAID identified technol- a 
ogy gaps in the control of air and water pollution.
The USAID project was designed to fill those gaps,
while introducing U.S. environmental technolo￾gies to the Indian market. These technologies
would presumably be attractive to Indian indus￾try and replicated throughout the country. All that
was needed, at least initially, was to match U.S.
suppliers with Indian customers. However, it soon
became clear that the Indian market could not and
would not pay U.S. prices for finished products or
services with high U.S.-made content. In most
cases, India already had or could easily develop
the necessary manufacturing capability. Therefore,
successful U.S. counterparts adjusted by engag￾ing in joint ventures or licensing agreements with
Indian partners.
The USAID project in the Czech Republic pro- public
moted techniques that recovered waste heat and
converted combustion sources from coal to natu￾ral gas. It also improved techniques in preparing loan
applications and analyzing the technical and finan￾cial merits of projects. However, it did not directly
provide new technology or engineering assistance.
The USAID-funded Commodity Import Program
(CIP) in Russia indirectly supported the Moscow a 
Water Quality project by providing state-of-the￾art environmental technology valued at over $4
million. Most of the improvements at the waste￾water treatment plants near Moscow can be traced
directly to that equipment. This was not the case,
however, with the Air Management project, be￾cause much of the technology was inappropriate
for Russia’s operating environment. In addition,
delivery of the air quality sampling equipment and
source-testing equipment was seriously delayed
under the CIP.
19
Program Impact
rban and industrial pollution prevention
programs can have at least three effects:
economic, environmental, and health. The follow￾ing discussion examines the impact of each
country’s program in these areas.
Economic Impact
Successful pollution prevention programs reduce
or eliminate the amount or toxicity of pollutants
that enter the waste stream or the atmosphere,
thereby generating environmental benefits and im￾proving the health of employees
and others. Just as important,
though, they impart financial ben￾efits to companies and factories.
This was true in the Philippines,
where pollution audits identified
opportunities for 143 participat￾ing companies to reduce water
pollution, while increasing rev￾enues and reducing costs. The
firms collectively invested $27
million to implement many of
the waste minimization mea￾sures identified in the audits.
These investments resulted in
annual net benefits of $33 mil￾lion. Net benefits accrued to the
firms primarily because they
were able to increase revenues
through recovery of product or
sale of what was formely waste;
cost savings were not as impor￾tant a factor. Although more than
18 industries were represented by the 143 firms,
two industries accounted for most of the net ben￾efits. Cement manufacturing accounted for 33 per￾cent of the benefits, and starch manufacturing
accounted for 27 percent. Each pollution audit cost
$28,000, on average, yet financial benefits for all
companies (excluding the six in the cement and
starch industries) averaged $61,000 per com￾pany—high enough to justify the cost.
Pollution audits were completed in Chile for 26 hile 
firms, which, altogether, implemented approxi￾mately 40 percent of the recom￾mendations. This resulted in
annual savings estimated at $1.9
million, compared to total one￾time investments of $1.4 million.
With an average one-time invest￾ment of $53,000 per factory, an￾nual savings were $72,000 per
factory. Investment costs were re￾covered in just nine months, on
average; pollution was reduced by
32 percent; and annual water sav￾ings were 1.4 million cubic
meters. Although all 26 factories
benefited, the mining and food
processing industries accounted
for over 90 percent of the invest￾ment and savings.
The greatest financial returns ac￾crued to larger companies, which
were willing and able to under￾take larger investments. In addi￾tion, many of these companies
U
15 Program Impact
In the Philippines,
pollution audits
identified opportunities
for 143 participating
companies to reduce
water pollution, while
increasing revenues and
reducing costs. The firms
collectively invested $27
million to implement
many of the waste
minimization measures
identified in the audits.
These investments
resulted in annual net
benefits of $33 million.
Urban and Industrial Pollution Programs
20
several firms (such as Kirloskar American Air Fil￾ter) demonstrate that benefits were positive.
Throughout the 1990s, U.S.-India trade in envi￾ronmental technologies and services increased. In
1990, the Indian market for these technologies and
services was only $220 million. By 1994, estimated
demand had increased to $1.9 billion; by 2000, it
had increased still further to about $2.5 billion.
Continued growth in demand is
estimated at 15 percent annually.
The United States has been able
to take advantage of this ex￾panded Indian market: U.S. ex￾ports of environmental
equipment to India increased by
29 percent per year from 1992 to
1995. However, it is difficult to
assess the extent to which the
USAID project played a role. As
of early 1996, the United States
had the largest share of environ￾mental joint ventures (40 per￾cent). According to the U.S.
Foreign and Commercial Service,
U.S. companies were expected to
satisfy about 6 percent of the $2.5
billion demand projected for
2000, valued at $150 million.
These are impressive results.
USAID obligated $1.4 million to
support the project in the Czech
Republic. Of these funds, $650,000 was used to .
help 22 municipalities prepare loan applications
for submission to the Czech State Environmental
Fund; $750,000 was used to improve the operat￾ing efficiency of the State Environmental Fund.
The evaluation team found that the 22 project￾assisted municipalities reduced particulate mat￾ter by .05 tons per $1,000 invested. By contrast,
all municipalities receiving loans from the Envi￾ronmental Fund reduced particulate matter by .27
tons per $1,000 invested—five times the reduc￾tions realized in USAID-assisted municipalities.
had linkages to or were owned by foreign firms
that encouraged or required pollution prevention,
and some were export-producing firms that were
required by importing countries to meet higher
environmental standards. However, most firms
were interested in no- or low-cost investments
rather than higher cost investments, even when
the higher cost investments had higher estimated
rates of return. These firms tended to have small
budgets, short planning and ac￾counting horizons, reluctance to
depart from time-tested patterns
of production and risk aversion,
inadequate knowledge of new
production technologies, and in￾sufficient management resources
to supervise new procedures.
In India, USAID provided tech- a
nical assistance under the TEST
project to 92 companies, 25 of
which were identified as candi￾dates for potential trade agree￾ments with U.S. firms. Ulti￾mately, ICICI approved 14 loans
to 12 Indian companies that en￾tered into trade agreements.
(Two of the 12 companies re￾ceived two loans each.) The 14
business deals were valued at $35
million, of which the project fi￾nanced $9.4 million, or 26 per￾cent of the total value. According
to an external evaluation, all borrowers were re￾paying their loans on schedule as of September
1996. By May 2000, this was no longer the case.
Of the 14 loans, 2 had been repaid in full, 6 were
being repaid, 2 had been restructured, and 4 had
been canceled or were in litigation. Actual sales
of pollution control equipment and services (mea￾sured by volume or value) were not tracked for
most of the 12 Indian companies that received
loans. Therefore, the financial benefits of invest￾ing in industrial pollution control measures could
not be assessed. However, self-reported data for
Pollution audits were
completed in Chile for
26 firms. With an
average one-time
investment of $53,000
per factory, annual
savings were $72,000
per factory. Investment
costs were recovered in
just nine months, on
average; pollution was
reduced by 32 percent;
and annual water
savings were 1.4 million
cubic meters.
21
Program Impact
In short, the $650,000 investment was not cost￾effective, because the 22 USAID-assisted munici￾palities did not reduce particulate matter by nearly
as much as those that were unassisted by USAID.
The same was true for other forms of pollution:
SO2
 was reduced by .06 tons per $1,000 invested
in USAID-assisted municipalities, compared to .33
tons per $1,000 invested in all projects; NO2
 was
reduced by .01 tons in the USAID-assisted mu￾nicipalities, compared to .04 tons for all projects.
Thus, the 22 USAID-assisted municipalities that
used loan funds to upgrade their energy utilities
did reduce pollution. But the reduction was much
less than what the Environmental Fund accom￾plished by adopting policy rec￾ommendations proposed under
the project that increased the
availability of funds for lending
nationwide. The evaluation sug￾gests several reasons for this.
First, the value of the average En￾vironmental Fund intervention
was larger than the average mu￾nicipal intervention, suggesting
that economies of scale may have
come into play. Second, but less
likely, the municipalities typically
estimated the amount of pollu￾tion reduction, and perhaps they
overestimated these amounts to
improve the odds of having their
loans approved.
In Russia, it was impossible to a
estimate the economic impact of the Moscow Wa￾ter Quality project. First, baseline data did not exist
for some of the sites; second, it was impossible to
disentangle the effect of the economy’s downturn
from that of improved water treatment. In short,
it was impossible to say how much of the improve￾ment in water quality was due to reduced indus￾trial activity and how much was due to the project.
With the Istra component, there was no measur￾able economic impact on project participants or
on Russian society in general.
The only clear case of positive economic impact
from the Air Management project was from instal￾lation and operation of diesel and waste oil (boiler
fuel) emulsifiers at the Red October Steel Mill. This
process of using emulsified waste fuel oil dramati￾cally reduced fuel consumption, emissions, and
wastewater discharge. Moreover, it is sustainable
and has been widely replicated. At this one steel
mill alone, an estimated $2,000 per day was saved
in fuel costs through use of this technology.
Environmental Impact
The following discussion examines the environ￾mental impact of USAID-supported urban and in￾dustrial pollution programs in the
five countries. Each of the five
countries achieved reductions in
pollution during the period of
analysis. Nevertheless, it is un￾clear how much of this improve￾ment is the result of USAID urban
and industrial pollution pro￾grams. The lack of “before” and
“after” data in some cases and the
decline in industrial production in
others make it difficult to attribute
environmental improvements to
USAID interventions.
Although the P hilippines
project targeted various indus￾tries, its focus was mainly on
those discharging organic
wastes into the water, especially
biochemical oxygen-demanding (BOD) mate￾rial. (BOD material consumes dissolved oxygen,
thereby lowering oxygen levels to the point
where, at the extreme, the water cannot sustain
life.) The project also helped reduce suspended
solids (which reduce water quality, silt coral
reefs, and harm agriculture) and heavy metals
and toxins (which directly harm human health).
In addition, it identified ways industries could
reduce input requirements, thus saving water
and energy.
The process of using
emulsified waste fuel oil
at Russia’s Red October
Steel Mill dramatically
reduced fuel
consumption, emissions,
and wastewater
discharge. In addition to
saving $2,000 a day in
fuel costs, this effort is
sustainable and has been
widely replicated.
Urban and Industrial Pollution Programs
22
Interventions at the municipal level under the
Czech Republic project also focused on switch- public
ing fuels—in this case, fuels used for district and
residential heating systems—from dirtier lignite
to cleaner natural gas. As a result, particulate
matter was reduced by 412 tons per year, sulfur
dioxide by 493 tons per year, and nitrogen dioxide
by 116 tons per year. The environmental impact
of these reductions was improved outdoor and in￾door air quality, though these effects were diffi￾cult to quantify because of the lack of baseline data
and ambient air quality
measurements.
The project also supported
nearly a dozen studies to improve
operations of the Czech State En￾vironmental Fund. Many of the
study recommendations were
adopted and implemented, al￾lowing the fund to increase its
annual environmental loan port￾folio by nearly $24 million. These
additional resources enabled the
fund to make additional loans,
which further reduced pollution.
The environmental impact of
these additional loans varied, de￾pending on the types of projects
financed; unfortunately, this information was not
available. However, the evaluation team estimated
total annual reductions in air pollution attribut￾able to USAID support of the Environmental Fund
as follows: particulate matter by 6,400 tons; SO2
by 7,900 tons; and NO2
 by 980 tons.
In India as well, factories installed pollution con- a 
trol devices and implemented process changes as
recommended by the USAID-funded projects.
The result was reduced emissions into the atmo￾sphere and effluents into the water. However, as
in other countries, it was impossible to quantify
these changes in environmental quality without
baseline data, continuous sampling of air and
water quality, and source attribution studies. As
stated in the final project report, not enough
As a result of these interventions, water use was
reduced by an estimated 36.9 million cubic meters
per year; BOD material was reduced by an esti￾mated 43.5 million kilograms annually. These and
similar reductions for other pollutants can prob￾ably be attributed to the USAID project. Of course,
positive environmental results would also occur
if a company’s production declined, because less
water would be used and less total pollution would
be produced. However, it was impossible to de￾termine how much of the decline in BOD was due
to lower industrial output and
how much was due to project in￾terventions. A single industry,
sugar milling, accounted for the
largest share of water-use reduc￾tion (77 percent) and BOD reduc￾tion (69 percent). Measured by
BOD, water pollution decreased
by 29 percent, on average, for all
companies combined. However,
over 85 percent of total BOD re￾duction occurred in only 17 of the
143 companies targeted by this
project.
In Chile, project m hile anagers esti￾mated that pollution would be re￾duced by 32 percent, on average,
at the 26 factories where audits were carried out.
Unfortunately, no baseline or post-project mea￾surements of air and water pollution existed to
confirm this estimate. The main source of pollu￾tion was fuel used in the production process. Sev￾eral of the targeted companies switched from coal
to natural gas, a decision driven mainly by the
lower price of gas, not because gas is a much
cleaner fuel. Regardless, this switch lowered lev￾els of particulate matter and sulfur dioxide emis￾sions. In 1998, emissions of sulfur dioxide met
Chilean federal standards, which are comparable
to U.S. EPA standards; they even met the more
stringent California state standards. This achieve￾ment was due almost solely to industrial conver￾sion to natural gas and increased use of natural
gas for local power generation.
The evaluation team in
the Czech Republic
estimated total annual
reductions in air
pollution attributable to
USAID support of the
Environmental Fund as
follows: particulate
matter by 6,400 tons;
SO2 by 7,900 tons; and
NO2 by 980 tons.
23
Program Impact
money was earmarked for monitoring program
impact. However, one company that benefited un￾der the USAID project, Kirloskar American Air
Filter, did collect environmental data for 1999. The
data show that after installation of pollution con￾trol equipment manufactured and sold by
Kirloskar, particulate matter was reduced by 6,312
tons per day, on average, at 123 companies in four
industries. Five cement factories can be credited
with 78 percent of these reductions. Equally im￾pressive reductions in water pollution were
achieved by using the technology supplied by
Kirloskar to treat industrial effluent.
The Smolensk Environmental Training Center in
Russia tracked wastewater quality before and af- a 
ter 696 wastewater treatment operators were
trained. It found that water quality had improved
at municipal sites that had received training and
equipment under the USAID project. The Center
made no attempt to disaggregate the effect of the
training from that of the equipment and new tech￾niques. Nor was it possible to measure the envi￾ronmental effects of the overall decline in
economic activity, which no doubt altered both
the composition and volume of wastewater
treated. The environmental effects of interven￾tions at Istra were modest or negligible, owing to
the relatively small size of the demonstration ac￾tivities, the decline in productive activity, and the
failure of some interventions to take firm hold.
Air pollution, as measured by particulate matter,
was reportedly reduced by 8 to 12 percent under
the Air Management project implemented in
Volgograd. This may help explain why Volgograd
was ranked as the 6th most polluted Russian city at
the outset of the project, but is now ranked as the
20th most polluted city. However, the depressed
economy, which caused reduced production at the
Red October Steel Mill and closure of the Silica
Brick facility, no doubt contributed more to reduced
air pollution than the USAID project. Moreover, at
least 50 percent of the air pollution in the city stems
from sources not addressed by the project.
Health Impact
Air and water quality standards are established
primarily to protect human health. For example,
particulate matter in the air comes from partially
burned fuel, soot, exhaust smoke, industrial metal
grinding, and condensation of gases. When a per￾son breathes particles from these sources, they are
trapped in the nose, throat, and respiratory tract.
Similarly, untreated municipal effluent or sewage
is a major cause of diarrheal disease. Industrial
wastewater also often contains a wide range of
pollutants known to cause cancers, organ failures,
and neurological disorders and is typically dis￾charged along with municipal wastewater. To what
extent did USAID-supported urban and industrial
pollution programs help countries combat these
health problems?
The principal goal of the Philippines project was s 
to improve human health. Unfortunately, the
project did not concentrate on those industries
that most directly harm health. Nevertheless, it
did have a positive health impact, although that
impact was indirect and difficult to measure. For
example, levels of BOD and total suspended sol￾ids, two pollutants that damage aquatic life, were
reduced, and as a result, water quality likely im￾proved. And since many Philippine communities
depend heavily on fish protein, nutrition likely im￾proved. The project also reduced air pollution.
Interventions at cement plants, for example, re￾duced emissions of suspended particulate matter
that endangers human health. However, data nec￾essary to establish these linkages and quantify their
positive health effects were not available.
The same was the case in Chile. Alt hile hough the
USAID project helped firms reduce pollution dis￾charges and meet discharge standards, thereby
improving human health, no baseline emissions
and effluent data were available to estimate or
quantify health impacts. In the Czech Republic
as well, interventions supported at the municipal
level had a positive health impact, mainly by re-
Urban and Industrial Pollution Programs
24
ducing particulate matter in the air, but owing to
lack of data, the effect was not measurable.
Analyzing changes in human morbidity and mor￾tality in response to changes in environmental qual￾ity requires both environmental data and health
surveillance data. No such information was col￾lected in India. One can only assume that distri- a
bution of potable water, trash pickup, and
development of environmental infrastructure such
as sewer systems in low-income areas improved hu￾man health. Anecdotal evidence exists to support
this assumption. For example, beneficiaries of the
USAID-supported “slum networking” project in
Ahmedabad reported fewer visits to doctors and
hospitals. However, “before” and “after” surveys
have not been conducted, so data to substantiate
and quantify these claims are not available.
Health impacts were not measured in Russia. It
is likely, however, that municipal water treatment
plants and industrial wastewater treatment facili￾ties contributed to improvements in Moscow’s
drinking water. Under the Air Management
project, levels of exposure to various pollutants
were supposed to have been measured and then
ranked according to their effects on human health.
Had this been done, efforts to reduce emissions
could then have been undertaken sequentially,
pollutant by pollutant. However, engineers inter￾viewed by the evaluation team indicated that data
were not gathered. Thus, if changes in health oc￾curred, they could not be attributed to the USAID
intervention as distinct from other factors, such
as the depressed economy.
25
Program Performance
rogram performance is normally assessed
based on (1) the program’s effectiveness in
meeting stated objectives, (2) the sustainability of
benefits after donor funding ends, and (3) the rep￾lication of activities beyond the program.
Effectiveness
The program goal in each of the five countries was
to reduce environmental degradation and improve
public health, while promoting sustainable eco￾nomic growth. Several key questions help assess
program effectiveness in achieving this goal. Were
benefits significant? Did the program work with
the right people? Was the approach the best way
to get the job done? The discussion that follows
considers program performance in the context of
these questions.
Successful pollution prevention in Chile was hile gen￾erally associated with good plant management.
Good managers saw pollution prevention as an
integral part of efficient production. They adopted
pollution reduction and waste minimization strat￾egies to save money and improve product quality.
Thus, enterprises that benefited most from the
USAID project tended to be dynamic and capable
of modifying their industrial processes to take ad￾vantage of changing markets. In fact, most of these
firms introduced new technologies, clean produc￾tion practices, and pollution prevention processes
beyond those recommended by the project. By
contrast, small, less dynamic firms did not fare as
well. These firms may have had different priori￾ties, less capital, or greater skepticism about the
financial merits of pollution prevention.
An alternative approach would have been to tar￾get companies with the worst pollution. However,
these companies often had financial problems
owing to weak management. They were produc￾ing the wrong product mix with inefficient ma￾chinery. Although targeting these companies may
have been the best way to clean up the most pol￾lution, pollution prevention efforts generally stand
a better chance of success if they target more pro￾gressive, better managed firms. Thus, the Chile
project was effective, yet it might have been even
more effective if it had targeted a group of com￾panies in one or two industries, rather than 26
companies in eight industries.
In contrast, the Philippines project concentrated s 
on small and medium-size firms outside Metro
Manila. This was a good choice because the World
Bank was targeting companies in Manila. In addi￾tion, larger companies were typically already us￾ing modern, less-polluting technologies, often
because they were connected to multinational cor￾porations and the export market, which typically
required cleaner production processes and tech￾nologies. Smaller firms, in comparison, often
lacked the technology, resources, and knowledge
to address industrial pollution. They were often
among the dirty (heaviest polluting) industries
located outside the major cities. In fact, many of
the 143 companies that volunteered for pollution
audits were among the Philippines’ “dirty dozen”
or so heaviest polluters, and they had environmen￾tal compliance problems.
As in Chile, the Philippines project might have
been even more effective if (1) it had targeted
P
16 Program Performance
Urban and Industrial Pollution Programs
26
ported by the fact that there was no difference in
loan approval rates between project-assisted mu￾nicipalities (40.9 percent) and nonproject-assisted
municipalities (41.3 percent). The project was also
implemented in several other countries, includ￾ing neighboring Poland, where the results were
much different. The Krakow Environmental Fund,
which is a regional fund (not a national fund as in
the Czech Republic), reported a higher loan ap￾proval rate for municipalities receiving project as￾sistance (almost 90 percent) compared to
municipalities receiving no project assistance
(67 percent).
The effectiveness of USAID’s urban and industrial
pollution program in India is mixed. The effec- a 
tiveness of the TEST project, in particular, was
compromised because several critical project as￾sumptions proved invalid. For example, a pre￾project market survey identified important pol￾lution prevention technologies that India
needed—and for which the United States had clear
manufacturing superiority. However, it later be￾came clear that importing finished pollution con￾trol equipment from the United States was finan￾cially unattractive to Indian companies. As a
result, 12 of the 14 loans approved by ICICI were
for U.S.-India joint ventures or licensing agree￾ments with U.S. companies; under such agree￾ments, pollution control equipment was manu￾factured or assembled in India. Only two loans
were approved so that Indian companies could
import environmental services or products di￾rectly from U.S. companies.
Although Indian companies of any size from any
industrial sector located anywhere in India were
eligible to apply for a loan, ICICI’s lending criteria
may have favored larger companies. As in Chile,
such companies tended to be strong financially
and already had access to the domestic capital
market and external sources of funding. Moreover,
it was primarily the large industries that were ex￾port-oriented that invested in pollution control.
This suggests that many of the 14 business
companies in fewer industries (rather than 18), and
(2) the targeted companies’ management had
maintained audit recommendations and complied
with pollution regulations (less likely with the
major polluters). In addition, one of the project’s
main objectives was to improve human health.
Heavy metals, harmful bacteria, and industrial
chemicals are health problems; BOD is not. Nev￾ertheless, the project measured changes in BOD,
rather than changes in levels of these other pol￾lutants.
In the Czech Republic, USAID provided tec public hni￾cal assistance to improve financial operations of
the Czech State Environmental Fund. The fund
implemented most recommendations with posi￾tive results. For example, the time required to pro￾cess loans was significantly reduced, enabling the
fund to process more loans and thereby increase
the potential for more environmental benefits. In
addition, the fund decreased the grant portion of
total project costs from 80 percent to 60 percent,
allowing it to expand its financing capacity while
reducing its risk. Finally, the fund lowered inter￾est rate subsidies, began charging interest on mu￾nicipal loans, and extended loan terms from 5 to
10 years. Most municipalities assisted by the
project confirmed that they had better access to
fund officials. However, they also indicated that
the time lapse between submitting a loan applica￾tion and receiving a response had not decreased
noticeably. On balance, though, the project was
highly effective at the national level.
At the municipal level, the project was much less
effective. Many municipalities reported that tech￾nical assistance was not critical to their securing
financing from the Environmental Fund for two
reasons. First, under the Clean Air Act, some mu￾nicipalities were forced to reduce pollution regard￾less of project assistance. Second, project￾supported feasibility studies and training did not
significantly improve the ability of municipalities
to carry out technical, financial, and environmen￾tal project evaluations. This conclusion is sup-
27
Program Performance
transactions almost certainly would have pro￾ceeded even without the concessional financing
provided by the TEST project, though perhaps not
as quickly or on terms as favorable. By contrast,
smaller companies often did need financing but
could not meet ICICI’s lending criteria. Finally, the
project probably would have been more effective
if the state pollution control boards had improved
their capability to enforce environmental regula￾tions—as had been assumed during project de￾sign. Although the World Bank initiated activities
to improve enforcement, they met with only lim￾ited success. As a result, many enforcement ac￾tions have been left to India’s ill-prepared judicial
system.
In Russia, the quality of drinking water at all three a
municipal sites improved with adoption of pollu￾tion control techniques and use of project-sup￾plied equipment. The key was to improve local
expertise in wastewater treatment methods, es￾pecially new water monitoring and enforcement
techniques. In addition, use of automatic samplers
and flow meters at industrial sites had convinced
firms to reduce waste flows and cooperate to a
greater degree with water control authorities. By
contrast, the pilot farms in the Istra watershed
demonstrated only modest results, largely because
the farming and livestock sectors were unstable.
Although this effort developed a base of critical
environmental data about the watershed, this was
of little value without an ability to use the data.
The Air Management project was designed to
implement continuous sampling using high-tech￾nology sampling stations provided under the CIP.
As indicated above, the equipment did not arrive
until 1997. Therefore, from 1994 to 1997, the U.S.
EPA carried out field-intensive saturation studies
based on over 1,100 samples of air quality taken
throughout Volgograd. This program enabled lo￾cal expertise to build a robust database and pro￾vided a supply of reliable equipment for collecting
future samples. At the national level, it created in￾terest in establishing a maximum standard for par￾ticulate matter.
Receipt of source-testing equipment (used to iden￾tify alternative pollution control measures, includ￾ing low- and no-cost measures) was also seriously
delayed under the CIP. Therefore, source assess￾ments initially planned for over 40 industries were
ultimately carried out at just three: Red October
Steel Mill, Volgograd Aluminum Factory, and the
now-defunct Silica Brick Plant. Although the
emissions inventories were conducted successfully
at these few industries, actual emissions have
changed due to changes in plant operating rates
and plant closures, thereby compromising the util￾ity of the effort. On the other hand, emissions test￾ing helped educate Russian environmental
inspectors, industry environmental staff, and min￾istry officials, and it trained others in the use of
sophisticated continuous analyzers. The effective￾ness of the training far outweighed any accom￾plishments resulting from technological upgrades
and equipment installation. For example, a
$250,000 Instrumented Source Testing Trailer
supplied under the CIP was not in use; rather, it
was stored at an engine factory with two flat tires.
Most other components of the Air Management
project were also ineffective.
Sustainability
Sustainability is achieved when a program con￾tinues to operate and provide benefits after de￾velopment assistance ends.
In part due to USAID’s training efforts, Chile now hile 
has a cadre of trained industrial environmental en￾gineers working principally in the private sector
and universities. Many have become managers and
heads of environmental agencies that have impor￾tant roles in pollution measurement, control, and
prevention. Several have established their own en￾vironmental consulting firms. As a result, many
of the aims of the project have been institutional￾ized, and commitments have been made to ensure
that pollution prevention concepts are sustained.
Chile’s Commission on the Environment, for ex￾ample, has adopted environmental standards, and
the philosophy of pollution prevention has been
Urban and Industrial Pollution Programs
28
of more demanding recommendations was con￾sidered extremely unlikely.
The State Environmental Fund of the Czech Re￾public is public financially stable and likely to remain so
for at least two reasons. First, it reduced the grant
portion of its costs from 80 percent to 60 percent,
which enabled it to preserve its capital base longer.
Second, it began charging interest on noncommer￾cial loans, thereby increasing its
revenue stream and further
strengthening its long-term fi￾nancial sustainability. In con￾trast, USAID assistance provided
to the 22 municipalities in pre￾paring loan applications is un￾likely to have any long-term
effect. Project staff and munici￾pal staff worked together in only
a few cases developing and pack￾aging loan applications. As a re￾sult, municipal staff did not
develop the skills needed to pre￾pare applications in the future.
The TEST project in India will
prove sustainable if the 12 com￾panies that received loans under
the project stay in business and
repay their loans. That will de￾pend in part on expansion of the
Indian market for the environmental services and
technologies provided by these companies. Mar￾ket demand, in turn, hinges mainly on the extent
to which the government enforces its environmen￾tal standards and regulations. USAID’s CTI
project is ongoing, making it too early to assess
sustainability. In the case of FIRE-D, considerable
time was required to change the mind-set of India’s
business and government leaders so they would
accept the idea of using municipal bonds to fi￾nance public-sector projects. This acceptance has
now been achieved. Infrastructure projects have
been initiated in two municipalities, and construc￾tion is likely to proceed smoothly elsewhere. Yet
to come, though, is a new set of challenges. Water
incorporated into the country’s regulatory frame￾work. The future of pollution prevention and clean
production looks bright. USAID can claim much
credit for recognizing an important need in Chile
and for responding early and effectively.
The Philippines project was a pilot effort de- s 
signed to introduce the concept of pollution au￾dits. A pilot project can be expensive, but if the
new techniques are widely
adopted, sustained, and repli￾cated, then the initial investment
is justified. Unfortunately, this
was not the case. A 1994 indepen￾dent evaluation attributed this
situation to the fact that
sustainability had not been
stressed in the original project
design. Another factor may be
that many of the businesses that
volunteered for pollution audits
were among the Philippines’
“dirty dozen” or so heaviest pol￾luters with a history of environ￾mental compliance problems.
Site visits revealed a mixed pic￾ture. Some companies did not
adopt the audit recommendations
in the first place; others adopted
the recommendations initially
but later dropped them. A few
companies had suspended or closed plant opera￾tions, making a determination impossible. No evi￾dence existed that any business had conducted ad￾ditional audits after the end of the project.
Interviews, also, uncovered a range of reasons for
the lack of sustainability: a natural resistance to
change plant operations that already “seem to
work well”; the time required to monitor and col￾lect baseline data to “sell” the audit approach to
plant owners; the effort required to keep existing
audit recommendations in force; and lack of sup￾port by company owners. As most audit recom￾mendations were either no-cost or low-cost (as
distinct from capital intensive), the sustainability
Chile’s Commission on
the Environment has
adopted environmental
standards, and the
philosophy of pollution
prevention has been
incorporated into the
country’s regulatory
framework. USAID can
claim much credit for
recognizing an important
need in Chile and for
responding early and
effectively.
29
Program Performance
charges must be established that are financially
sound yet politically acceptable. Equally impor￾tant, investors in municipal bonds must be repaid
on time. Only then will it be possible to assess the
sustainability of this activity.
The U.S. EPA, which implemented the USAID
projects in Russia, was acutely aware of the need a
for program sustainability. It therefore emphasized
training, no-cost and low-cost methods to im￾prove water quality, and institutional strengthen￾ing. This strategy paid off for the Moscow Water
Quality project. Three years after project comple￾tion, all wastewater treatment activities were op￾erational (except for industrial enterprises that had
closed). The project contributed to financial
sustainability in two ways. First, it provided equip￾ment and training to the water testing laborato￾ries, which allowed them to become certified.
Certification, in turn, allowed the laboratories to
perform services for a fee, thereby providing them
with a source of income. Second, the project iden￾tified various adjustments at municipal water
treatment plants that resulted in reduced costs,
enabling them to accomplish more within a fixed
budget. In contrast, most activities supported
under the Istra component of the project were not
sustained. One of the two livestock operations
closed during the project, and the other sold most
of its animals. However, many of the education
materials developed under this component were
still being used.
The system for monitoring air quality by sampling
particulate matter under the Volgograd Air Moni￾toring project was sustainable. It was easy to op￾erate and repair, required minimal maintenance,
and had low operating costs. In addition, there was
a substantial reserve of spare parts, as 40 samplers
were delivered and only four or five were currently
in use. By contrast, the system introduced for con￾tinuous air sampling was not sustainable. The
equipment was not operating due to lack of spare
parts, calibration gases, and operator resources.
In addition, the laboratories equipped under the
CIP were not sustainable. This is because indus￾trial demand for the services to be performed by
these laboratories did not materialize, mainly be￾cause they were too expensive. Conducting source
assessments, however, had become a marginally
sustainable commercial service.
Most other components of the Air Monitoring
project also were not sustainable. For example, use
of continuous analyzers (housed in the
nonfunctioning, CIP-supplied mobile trailer) for
emissions testing was not sustainable, because op￾erating costs exceeded revenues and prospective
clients were typically unable to pay for the services.
Further, the methods and procedures recom￾mended by the project have yet to be accepted by
the Russian government. Visible emissions test￾ing, an alternative to continuous analyzers, was
also unsustainable, because it was not integrated
into a legally enforceable procedure for compli￾ance testing. The human health and risk assess￾ment component was not effective and is unlikely
to be sustained; nor is the compliance and enforce￾ment component. By contrast, the education and
awareness activities at the Center for Environmen￾tal Training will be sustained, but only if there is
funding.
Replication
Replication refers to the difficult process of ex￾tending benefits beyond the original target areas,
participants, or industries.
With over 10,000 “brown sector” companies in
the Philippines, it was clear that replication of s
pollution audits beyond the 143 participating
firms would be needed. Unfortunately, plant
interviews consistently described replication as
either nonexistent or negligible. Some plant man￾agers regarded the audit as proprietary as it may
reveal trade secrets. Others indicated there was no
real forum for discussing replication. Still others
viewed replication as counterproductive, because
it involved sharing audit recommendations with
competitors. In addition, local government staff
knew of no replication of audit recommendations
Urban and Industrial Pollution Programs
30
This suggests that several regional funds have a
clear advantage over a single national fund. Re￾gional funds appear to be more flexible, are closer
to the environmental problems, and can provide
technical support more easily.
A key objective of the TEST project in India was
to increase exports of environmental services and
technologies from the United States to India. Ac￾cordingly, one measure of replication is the extent
to which the Indian market for such services and
technologies has grown. In 1991, U.S. suppliers
were exporting about $6 million of environmen￾tal equipment to India annually, or about 4 per￾cent of the total market estimated at $135 million.
In 2000, they were exporting $150 million of pol￾lution control equipment and services, 6 percent
of the much larger $2.5 billion Indian market.
Thus, the volume of U.S. exports to the Indian
market was 25 times larger in 2000 than it was in
1991. Unfortunately, it is difficult to determine
how much, if any, of this increase in U.S. exports
can be attributed to USAID programs. It appears
that replication is already occurring with the on￾going FIRE-D project. Following the example of
Ahmedabad, the first municipality in India certi￾fied as creditworthy for the purpose of issuing un￾secured commercial bonds, 13 other munici￾palities have sought fiscal review to obtain a credit
rating.
In Russia, there has been little full-scale replica- a
tion of wastewater treatment facilities beyond the
three sites supported under the Moscow Water
Quality project. Replication has also been limited
on the industrial side. Perhaps firms used what
little money they had for production improve￾ments rather than environmental improvements.
Whatever the reasons, replication did not occur.
By contrast, monitoring and inspection programs
have been replicated elsewhere. For example,
monitoring equipment has been moved from one
industry to another. Moreover, laboratories not
targeted under the project are now certified and
equipped, and some are providing services to
in their regions. No replication was occurring
through word of mouth, local seminars, or other
formal or informal means. These findings were
consistent with the views of professional and trade
groups.
Of 17,000 small and medium-size enterprises in
the Santiago area of Chile, just 26 were chosen hile
for environmental audits. Clearly, replication of
successful results would be essential. But, as in the
Philippines, firms were reluctant to divulge secrets
about their industrial processes. Owners and plant
managers did not want to share information about
operational changes that resulted in cost savings.
They wanted to protect proprietary information,
including information contained in the audits, to
protect their competitive positions. This made
replication difficult. Targeting firms or trade or￾ganizations within a particular industrial sector
or a specific geographic area might have led to
greater outreach and more expansive coverage. In
addition, selecting companies whose owners were
leaders within their trade association might have
been an effective way to enhance replication. Fi￾nally, information was perhaps more likely to be
disseminated when influential people were in￾volved with the audit.
Although there are thousands of municipalities in
the Czech Republic, there is public only one State Envi￾ronmental Fund. Therefore, while the issue of rep￾lication applies to the former (municipalities), it
does not apply to the latter. That said, there was
no evidence of replication from one municipality
to another, perhaps because replication was not
an explicit project objective. In Poland, on the
other hand, there are 49 regional environmental
funds and more than 2,000 local environmental
funds (rather than a single state environmental
fund at the national level). The Krakow Fund, one
such regional fund assisted under the USAID
project, was able to transfer what it learned to
other regional funds. The same is true for the
Katowice Fund, another regional fund assisted by
USAID. In short, replication worked in Poland.
31
Program Performance
industry for a fee. In addition, replication of envi￾ronmental education efforts under the Istra com￾ponent has been a great success. The number of
schools in the Istra region has increased from 7 to
28. Moreover, all schools in the Moscow region
now teach environmental education using mate￾rials developed under this component of the
project. Textbooks, now in their second edition,
are being sold to schools throughout Russia. Prac￾tical activities, such as environmental cleanups,
are undertaken monthly.
Most activities supported under the Air Manage￾ment project were not replicated. For example,
there is no evidence that the particulate matter
sampling program was replicated; unless equip￾ment and operating budgets are subsidized or cov￾ered by others, replication is unlikely. Similarly,
the laboratories equipped under the project have
not been replicated due to the high cost of opera￾tion and insufficient contract work. The practice
of constructing improved emissions inventories
has not occurred, so there is no replication. Emis￾sions testing using continuous analyzers has not
been successfully replicated. However, two pollu￾tion control measures introduced under this
project have been replicated at other facilities in
Volgograd and beyond: (1) fine-tuning boiler fir￾ing procedures and (2) use of the fuel oil emulsifi￾cation process.

A–1
he assessment involved fieldwork in five
countries: the Philippines, Chile, the Czech
Republic, India, and Russia. Criteria used to se￾lect countries were as follows:
‰ The countries should include USAID-funded
projects that had relatively homogeneous ob￾jectives, thereby permitting comparability
among countries.
‰ The countries should include projects for which
USAID funding was not unusually small.
‰ The countries should pose no security prob￾lems for the assessment teams.
Evaluation teams (of three to five people each)
spent two to three days in Washington, D.C. at
USAID participating in a team planning meeting
and approximately three weeks in-country gath￾ering data. Each team consisted of a team leader
from CDIE, an economist or other expert knowl￾edgeable about environmental economics and
environmental regulatory policy, and an environ￾mental engineer or other technical expert knowl￾edgeable about industrial and urban pollution
prevention technology (see Annex B for a list of
country teams).
Before conducting fieldwork, the teams reviewed
project documentation available in Washington
and interviewed people based in Washington who
were knowledgeable about urban and industrial
pollution programs implemented by USAID in the
countries of focus. In conducting fieldwork, the
teams relied primarily on three data sources: docu￾ments not available in the United States, key in￾formant interviews, and site visits.
Evaluation teams interviewed a broad range of key
informants. These included managers of urban
industries where pollution control technology had
been (or was being) used; private-sector suppli￾ers of pollution control devices; representatives
of environmental groups, government, and NGOs;
USAID staff; other donors; and USAID contrac￾tors that had implemented the projects. These in￾formants also included a rich mix of trade and
professional groups knowledgeable about urban
and industrial issues. The teams carried out site
visits in each country. Both the best cases and
those that might have been less successful were
selected. The option of selecting only “success
story sites” to assess best case impacts and best
case opportunities for sustainability and replica￾tion was rejected.
Teams used two interview protocols (or topical
guides), rather than formal questionnaires or other
survey instruments to gather data. The first was
designed for site visits, usually factories, munici￾palities, or other beneficiaries; the second, for pro￾gram managers and implementers. The topical
guides served not only to structure the interviews
in each country, but also to ensure some degree
of comparability among countries.
T
Annex A1 Evaluation Methodology

B–1
Chile
Reducing Urban and Industrial Pollution in Chile.
Impact Evaluation. December 2000. PN-ACG-619.
Available on-line at: www.dec.org/pdf_docs/
PNACG619.pdf
Joseph M. Lieberson
Team Leader
Center for Development Information and Evaluation
USAID
Mark G. Hodges
Environmental Engineer
Nexant
Gene M. Owens
Economist
Nexant
Czech Republic
Reducing Urban and Industrial Pollution in the
Czech Republic. Impact Evaluation. August 2001.
PN-ACG-628. Available on-line at: www.dec.org/
pdf_docs/PNACG628.pdf
Steven Gale
Team Leader
Center for Development Information and Evaluation
USAID
Matthew W. Addison
Environmental Economist
Nexant
Keith Forbes
Environmental Research Analyst
Academy for Educational Development
Michael Gould
Environmental Engineer
Europe and Eurasia Bureau
USAID
India
Reducing Urban and Industrial Pollution in India.
Impact Evaluation. August 2001. PN-ACG-629.
Available on-line at: www.dec.org/pdf_docs/
PNACG629.pdf
Donald G. McClelland
Team Leader
Center for Development Information and Evaluation
USAID
Mark G. Hodges
Environmental Engineer
Nexant
Vijayan Kannan
Environmental Economist
Nexant
Will Knowland
Environmental Specialist
Nexant
1
 Case Studies and
Annex B Evaluation Teams
Urban and Industrial Pollution Programs
B–2
Philippines
Reducing Urban and Industrial Pollution in the
Philippines. Impact Evaluation. September 2000.
PN-ACG-611. Available on-line at: www.dec.org/
pdf_docs/PNACG611.pdf
Donald G. McClelland
Team Leader
Center for Development Information and Evaluation
USAID
Matthew W. Addison
Environmental Economist
Nexant
Steven Gale
Environmental Specialist
Center for Development Information and Evaluation
USAID
Joseph M. Lieberson
Economist
Center for Development Information and Evaluation
USAID
Will Knowland
Environmental Specialist
Nexant
Russia
Reducing Urban and Industrial Pollution in Russia.
Impact Evaluation. February 2002. PN-ACP-069.
Available on-line at: www.dec.org/pdf_docs/
PNACP069.pdf
Steven Gale
Team Leader
Center for Development Information and Evaluation
USAID
Matthew W. Addison
Environmental Economist
Nexant
Mark G. Hodges
Environmental Engineer
Nexant
Nick Wedeman
Environmental Research Analyst
Academy for Educational Development
Bib–1
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World Bank.
Diamond, N. K., Regina Ostergaard-Klem,
Stanislaw Sitnicki, and Daniel Hall. 1998. “Im￾pacts, Best Practices and Recommendations
from Nine Environmental Programs.” USAID/
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Environment and Natural Resources Information
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Esrey, S. A., J. B. Potash, L. Roberts, and C. Shiff.
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McClelland, Donald G., Matthew W. Addison,
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Knowland. 2000. “Reducing Urban and In￾dustrial Pollution in the Philippines.” Wash￾ington, DC: USAID/CDIE.
McClelland, Donald G., Mark G. Hodges, Vijayan
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Urban and Industrial Pollution in India.” Wash￾ington, DC: USAID/CDIE.
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