Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 64281-BR

PROJECT PAPER

ON A

PROPOSED ADDITIONAL LOAN

IN THE AMOUNT OF US$600 MILLION

TO THE

STATE OF RIO DE JANEIRO, BRAZIL

WITH THE GUARANTEE OF

THE FEDERATIVE REPUBLIC OF BRAZIL

FOR THE

UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT (FORMER RIO DE JANEIRO MASS TRANSIT 2 PROJECT)

December 22, 2011

Sustainable Development Department Brazil Country Management Unit Latin America and Caribbean Region

This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s Policy on Access to Information.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30 2011)

Currency Unit = Brazilian Real (R$) R$1.67 = US$1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AGETRANS Rio de Janeiro State Transport Regulatory Agency

(Agência Reguladora de Transportes do Estado do Rio de Janeiro) AMTU-RJ Metropolitan Urban Transport Authority of Rio de Janeiro

(Autoridade Metropolitana de Transporte Urbano-Rio de Janeiro) ASEP-RJ Original name of State Regulatory Agency BAU Business As Usual BNDES National Economic and Social Development Bank

(Banco Nacional de Desenvolvimento Econômico e Social) BRT Bus Rapid Transit BUC Integrated Transit Fare

(Bilhete Único Carioca) BUI Integrated Transit Fare

(Bilhete Único Integrado) CBA Cost-Benefit Analysis CBTC Communications-Based Train Control CBTU Brazilian Urban Train Company

(Companhia Brasileira de Trens Urbanos) CENTRAL State Company for Transport and Logistics Engineering

(Companhia Estadual de Engenharia de Transportes e Logística) CFAA Country Financial Accountability Assessment CMU Country Management Unit CMSP São Paulo Metro Company

(Companhia do Metrô de São Paulo) CNG Compressed Natural Gas CPS Country Partnership Strategy CPTM São Paulo Metropolitan Train Company

(Companhia Paulista de Trens Metropolitanos) EA Environmental Assessment EHS Environment, Health and Safety EHSMS Environment, Health and Safety Management System EMP Environmental Management Plan EMU Electric Multiple Unit ESMAP Energy Sector Management Assistance Program

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FLUMITRENS Former Rio de Janeiro State suburban railway company GAC Governance and Anti-Corruption GIS Geographic Information System IBGE Brazilian Institute of Geography and Statistics

(Instituto Brasileiro de Geografia e Estatística) ICB International Competitive Bidding ICMS Circulation Tax on Goods and Services

(Imposto de Circulação sobre Mercadorias e Serviços) IERR Internal Economic Rate of Return IFAC International Federation of Accountants IFR International Financial Reporting IMT Integrated Modal Tariff

(Tarifa Modal Integrada) IPSAS International Public Sector Accounting Standards ISA International Standards on Auditing ISR Implementation Status and Results MCASP Accounting Manual Applicable to the Public Sector

(Manual de Contabilidade Aplicada ao Setor Público) MetrôRio Rio de Janeiro Metro Private Concessionaire (also known as Metrô) MIS Management Information System MRJ Municipality of Rio de Janeiro

(Município do Rio de Janeiro) NBC NBCASP

Brazilian Accounting Standards (Normas Brasileiras de Contabilidade) National Accounting Standards Applicable to the Public Sector Normas Brasileiras de Contabilidade Aplicadas ao Setor Público

NCB National Competitive Bidding NLTA Non Lending Technical Assistance NPV Net Present Value O-D Origin-Destination PCB Polychlorinated Biphenols PDTU Urban Transport Master Plan

(Plano Diretor de Transporte Urbano) PER-RAP Preliminary Environmental Report

(Relatório Ambiental Preliminar) PMIG Project Management and Implementation Group PNLT National Plan for Logistics and Transport

(Plano Nacional de Logística e Transportes) RAP Resettlement Action Plan RJMR Rio de Janeiro Metropolitan Region SBD Standard Bidding Documents SCF Financial Management System

(Sistema de Controle Financeiro) SEAIN Federal Secretariat for Foreign Affairs

(Secretaria de Assuntos Internacionais) SETRANS Rio de Janeiro State Secretariat of Transportation

(Secretaria de Estado de Transportes do Rio de Janeiro)

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SIAFEM Financial Management System for States and Municipalities (Sistema de Administração Financeira para Estados e Municípios

SIG Integrated Management System (Sistema Integrado de Gestão)

SIGO Integrated Budget Management System (Sistema Integrado de Gestão Orçamentária)

SMA Secretariat for the Environment (Secretaria do Meio Ambiente)

SRJ State of Rio de Janeiro (Estado do Rio de Janeiro)

STM São Paulo Municipal Secretariat of Transportation (Secretaria de Transportes da Prefeitura do Município de São Paulo)

STN National Treasury Secretariat (Secretaria do Tesouro Nacional)

SuperVia Private concessionaire for the Rio de Janeiro suburban rail system since 1998 TOD Transit-Oriented Urban Development TSP Total Suspended Particles UTTP Urban Transport Transformation Project

Vice President: Pamela Cox Country Director: Makhtar Diop

Sector Director: Ede Ijjasz-Vasquez Sector Director: Aurelio Menendez

Task Team Leader: Arturo Ardila-Gomez

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BRAZIL

UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM

TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................................................ 1

II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING .......................... 1

III. PROPOSED CHANGES .......................................................................................................... 7

IV. APPRAISAL SUMMARY ...................................................................................................... 10

Annex 1. Revised Results Framework and Monitoring ............................................................. 20

Annex 2. Operational Risk Assessment Framework (ORAF) ................................................... 24

Annex 3. Detailed Description of Modified or New Project Activities ...................................... 29

Annex 4. Revised Estimate of Project Costs ................................................................................ 34

Annex 5. Revised Implementation Arrangements and Support ................................................ 35

Annex 6. Economic Analysis ......................................................................................................... 52

Annex 7. Sector Background, Urban Transport Planning and Context in the RJMR ........... 65

Annex 8. Methodology to Assess Reductions in Greenhouse Gas Emissions for an Urban Transport Project........................................................................................................................... 74

Annex 9. Team Members .............................................................................................................. 81

Annex 10. Maps .............................................................................................................................. 82

 

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BRAZIL UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM

PROJECT ADDITIONAL FINANCING DATA SHEET

Basic Information – Additional Financing (AF) Country Director: Makhtar Diop Sector Manager/Director: Aurelio Menendez/Ede Jorge Ijjasz-Vasquez Team Leader: Arturo Ardila-Gomez Project ID: P125630 Expected Effectiveness Date: March 30, 2012 Lending Instrument: Specific Investment Loan Additional Financing Type: Scale-Up and Restructuring

Sectors: General transportation sector (100%) Themes: Climate change (50%); Other urban development (30%); Infrastructure services for private sector development (20%) Environmental Category: B Expected Closing Date: June 30, 2017 Joint IFC: Joint Level:

Basic Information Original Project Project ID: P111996 Environmental Category: B Project Name: Rio de Janeiro Mass Transit Project II

Expected Closing Date: June 30, 2017

Lending Instrument: Specific Investment Loan

Joint IFC: Joint Level:

AF Project Financing Data [ X ] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: US$ Denominated, Commitment-linked IBRD Flexible Loan with a Variable Spread, with Level Repayments on May 15 and November 15 of each year, with 5.5 years’ Grace Period and 30 years Final Maturity, with all conversion options selected and the Front End Fee and Premia for Interest Rate Caps and Collars not capitalized.

AF Financing Plan (US$m) Source Total Amount (US$ m)

Total Project Cost: Cofinancing: Borrower: Total Bank Financing: IBRD IDA New Recommitted

600 0

600

AF Estimated Disbursements (Bank FY/US$m) FY 12 13 14 15 16 17 Annual 139.9 134.7 252.6 59.3 9.8 3.7Cumulative 139.9 274.6 527.2 586.5 596.3 600.0

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Project Development Objective and Description Original Project Development Objective: The proposed PDO is to: a) improve the level of service provided to suburban rail transport users in the Rio de Janeiro Metropolitan Region (RJMR) in a safe and cost-efficient manner; and b) improve the transport management and policy framework in the RJMR. Revised Project Development Objective: The proposed PDOs are: (a) to improve the level of service provided to suburban rail transport users in the RJMR in a safe and cost-efficient manner; (b) to place the suburban rail transport system on a lower carbon growth path; and (c) to improve the transport management and policy framework in the Borrower’s territory and in the RJMR. Project Components: The components of the original project remain as originally stated in the PAD and Loan Agreements for that project. The Additional Financing introduces new project activities as follows: Component 1: Infrastructure and Equipment 1. Acquisition of an additional sixty (60) trains (EMUs) with four (4) cars each and accessories, for a total of at least 360 (in the aggregate) cars to be operated on the lines of CENTRAL’s System, by the Concessionaire under the terms of the Concession Contract.

2. Design and implementation of a non-motorized transport and greening demonstration pilot program in selected stations of the CENTRAL System, through the acquisition of bicycles required therefor. Component 2: Institutional and Policy Development

1. Provision of technical assistance to SETRANS for the carrying out of additional studies on policy development, including, inter alia: (a) the design (but excluding implementation) of a sustainable transport policy for the Borrower, including measures to reduce the carbon growth path of transport and improve environmental and social sustainability; (b) the design and implementation of a strategy for the Borrower’s territory and the RJMR passenger and freight transport system, to adapt to the impacts of climate change, environmental and social risks and liabilities, and natural disasters; (c) the design and implementation of a center to monitor the impact of natural disasters on the metropolitan public transport system, including those stemming from climate change impacts; (d) the design (but excluding implementation) of a strategy to improve the efficiency and to reduce the carbon footprint of the Borrower’s freight system and its environmental and social risks and liabilities; (e) the carrying out of feasibility and detailed engineering studies (but excluding implementation) for potential BRT corridors in the RJMR area which are not competing with the rail-based transport; (f) the design (but excluding implementation) of a transport-related, accident-reduction policy to make the Borrower’s transport system safer; (g) the design (but excluding implementation) of an updated strategy for SETRANS to carry out consultations with stakeholders to improve its transport reform planning process; (h) the carrying out of an evaluation study to assess the social, economic and environmental impact of the Project, particularly on carbon emissions; and (i) the carrying out of studies to support the implementation of Part A.2 of the Project.

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2. Provision of technical assistance to CENTRAL for Project management and supervision, including the acquisition and reception of the trains (EMUs).

Safeguard Policies and Exceptions Safeguard Policies triggered: Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

[ X ]Yes [ ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ X ]Yes [ ] No [ X ]Yes [ ] No [ ]Yes [ X ] No [ X ]Yes [ ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No

Does the project require any waivers of Bank policies? Have these been endorsed or approved by Bank management?

[ ]Yes [ X] No [ ]Yes [ ] No

Conditions and Legal Covenants: Loan Financing Agreement

Reference Description of

Condition/Covenant Date Due

Schedule 2,Section I.A.1 The Borrower, through SETRANS, should maintain a Project Management Unit with staff, responsibilities, structure and functions satisfactory to the Bank.

During Project Implementation

Schedule 2,Section I.A.2 The Subsidiary Agreement is maintained throughout duration of project. The subsidiary agreement sets forth respective responsibilities of the Borrower and CENTRAL in the implementation of the project including procurement, safeguard, technical, and fiduciary responsibilities.

During Project Implementation

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Schedule 2,Section I.C The Borrower, through SETRANS, shall carry out, and shall cause CENTRAL and the Concessionaire to carry out, the Project in accordance with the provisions and recommendations of the Environmental Management Plan and the Resettlement Action Plan.

During Project Implementation

Schedule 2,Section II.A.1 The Borrower, through SETRANS, shall cause CENTRAL to monitor and evaluate the progress of the Project and prepare and furnish to the Bank Project Reports.

During Project Implementation

Schedule 2,Section II.B The Borrower, through SETRANS, shall cause CENTRAL to maintain a financial management system, prepare and furnish to the Bank financial reports, and have its financial statements audited all in accordance to the Bank General Conditions.

During Project Implementation

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I. INTRODUCTION

1. This Project Paper seeks the approval of the Executive Directors to provide an Additional Financing in an amount of US$600 million to the State of Rio de Janeiro, with a sovereign guarantee from the Federative Republic of Brazil, for the Upgrading and Greening the Rio de Janeiro Urban Rail System Project (P125630). The Additional Financing introduces new components and as such carries out a restructuring of the original project, Rio Mass Transit 2 Project (P111996, Loan 7719-BR). The Additional Financing also includes a change in the name of the project, an expansion in the project scope, as well as a change in the PDO and results indicators. The closing date of the original project, Rio Mass Transit 2 Project (P111996) is also being extended from June 30, 2014 to June 30, 2017.1

2. The proposed additional loan will help finance the costs associated with scaled-up and new activities to enhance the impact of a well-performing project. The two main complementarities the loan will help bring about are: (i) the strengthening of the policy component to facilitate the design of strategies for improving the transport policy and management framework, and for placing the passenger and freight transport systems on a lower carbon growth path, while becoming safer and more efficient in order to promote economic growth; and (ii) the purchase of additional rolling stock to further improve the level of service of the SuperVia rail network, to attract more users to a less carbon-intensive mode, to increase the likelihood of discouraging car use, to promote dense urban development around stations as an alternative to sprawl, and to encourage Transit Oriented Developments (TODs), such as low-income housing, along the corridor. Stemming from these complementarities, the Project Development Objective (PDO) needs to be amended not only to reflect the expected additional positive impacts on mobility but to recognize the “greening” nature of the project—contributing to a lower carbon growth path—as explained in this paper.

3. The project will improve transit quality, favor the poor in particular, promote non-motorized transport, and improve the policy framework for sustainable transport. The project will also improve the transit system’s resilience to natural disasters and it will have positive impacts on mitigation and adaptation to climate change. On the mitigation side, the project will contribute to reducing the carbon footprint of urban transport in the RJMR. On the adaptation side, the project will contribute to making the transport system more resilient, better prepared, and less vulnerable

II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING

4. This Additional Financing Loan with first-order restructuring of the original project is sought to: (i) scale up a well-performing project in order to strengthen its policy component and further enhance the level of service provided by the urban rail system to make it more attractive to bus and automobile users and to promote climate change mitigation and adaptation in the long

1 At negotiations, representatives of the Guarantor (the Federative Republic of Brazil) confirmed that all national procedures for the processing of the Additional Financing had been satisfied, but requested that the amendment to the Original Loan Agreement, referring to the Original/Parent Project, be carried out after an additional local procedure has been satisfied. Once this procedure is satisfied, the Bank will process this amendment through an Amendment Letter to the Original Loan Agreement. In coordination with LEGLA and LCSDE, it was agreed to prepare a single Project Paper with a Loan Agreement for the Additional Financing and an Amendment Letter to the Original Loan Agreement of the Original Project, which could be signed at different moments in time. Given that the aforementioned local procedure is already in motion, the two legal documents could be signed in parallel in early 2012.

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term; and (ii) restructure the project in order to ensure a more effective response to the emerging challenges facing the Rio de Janeiro Metropolitan Region (RJMR), that is, through the alignment of its transport, urban development, housing and climate change strategies for the RJMR, which are also leveraged by recent Bank loans to the State and Municipality of Rio de Janeiro. The proposed operation will be a necessary priority investment over the long term in the RJMR to enable urban growth and accessibility along critical development corridors where the State is planning affordable housing options for low-income groups (which constitute 90 percent of the total housing deficit in the RJMR).2

5. At appraisal for the original loan, the client indicated that because of the debt space authorized by the Federal Government, it could not pursue a more comprehensive project design in terms of the number of trains deemed necessary and the scope of the policy support component. Specifically, the project could not include a more ambitious policy component and could not afford the acquisition of at least 90 more trains for its suburban rail system—operated by a private concessionaire since 1998 (SuperVia)—and a climate change demonstration project around the transport corridor. Thus, because of the fiscal constraint, the original project was limited to the purchase of 30 trains and a small institutional component, albeit of significant policy importance, aimed at updating the Urban Transport Master Plan Plan (Plano Diretor de Transporte Urbano, PDTU) and supporting the introduction of the Bilhete Único to make transport more affordable for poor households. But the State also indicated that as soon as it could obtain an increase in the debt ceiling from the national government, it would request Additional Financing for a scaled-up version of the approved project.

6. A window of opportunity has now opened that allows the State to request the Additional Financing (AF) for the Rio de Janeiro Mass Transit II Project to scale up the project. First, the Federal Government increased the State of Rio de Janeiro’s debt ceiling. Second, the State and Municipality are reforming public transport in the Rio de Janeiro Metropolitan Region, with a clear target of benefiting the poor and reducing the carbon footprint of urban transport (see Annex 7). Third, the Municipality of Rio de Janeiro has initiated a comprehensive urban upgrade program along the rail corridor that will increase demand for the service provided by SuperVia. Finally, the State Government, with the help of the World Bank through the Rio de Janeiro Metropolitan Urban and Housing DPL (P122391), is strengthening the institutional framework for urban planning, housing policy, urban transport, environmental management, disaster risk management, and metropolitan service delivery in the State. The State Government is mapping and identifying vacant land suitable for large-scale low-income housing developments, taking into account the need for appropriate infrastructure, transportation, employment, and economic opportunities, with an emphasis on mass transit services. The Municipality and State are therefore pursuing Transit-Oriented Development (TOD) policies, which seek to promote denser urban development around mass transit stations.

7. The CENTRAL system, managed by the concessionaire SuperVia (and commonly referred to as the SuperVia System) is therefore one of the mass transit services at the core of these efforts. SuperVia has 225 km of tracks that currently transport 530,000 passengers per workday. Seventy-four percent of SuperVia’s users are poor and six of the nine municipalities served by the network have poverty rates above 50 percent. The network also serves the poorest

2 See World Bank, 2011. Program Document for the Rio de Janeiro Metropolitan Urban and Housing DPL (P122391), Report No. 58277. pp. 17 and 55–56.

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neighborhoods in the city of Rio de Janeiro. In two areas served by SuperVia, the Baixada Fluminense and Zona Oeste, 18 percent of the population is below the poverty line; in Santa Cruz, at the end of one line, 28 percent of the population is below the poverty line. As the network approaches downtown Rio, the network facilitates households’ access to job locations. The scaled-up project will therefore overwhelmingly benefit poorer segments of the population especially in terms of access to jobs. Forty-six percent of the poor residents of peripheral municipalities travel daily to the capital, the Municipality of Rio de Janeiro.3

8. Because of its extensive network and potential, the SuperVia system is an asset of the RJMR. Forty years ago, this rail network used to carry over one million trips per day. However, for different reasons—hyper-inflation in the 1970s and 1980s that eroded the fare box, a fiscal crisis that eliminated investment, and unregulated competition from buses—ridership plummeted and reached only 150,000 trips per day in 1998. In 1992 the World Bank began its assistance, through the Rio de Janeiro Metropolitan Transport Decentralization Project (P006547), to aid the process of decentralization of rail systems to states as mandated by the 1988 Constitution. CENTRAL was the state agency, within the Rio de Janeiro State Secretariat of Transportation (Secretaria de Estado de Transportes do Rio de Janeiro, SETRANS), that was granted ownership of the network. However, CENTRAL lacked the resources and the State made the decision to privatize the rail system.

9. In 1998 the Bank assisted the State in a multi-sector privatization program that included the awarding of the suburban rail and subway systems to a private concessionaire through the Rio de Janeiro State Reform and Privatization Project (P039197, Loan No 4211-BR).4 A consortium named SuperVia became the concessionaire of the suburban rail system, and the network is commonly known as SuperVia. The State and the concessionaire acquired specific investment responsibilities that translated into service improvements, which are clearly defined in the concession contract. The State is responsible for renewing the train fleet, while the concessionaire must improve the track and signaling systems, upgrade some stations, purchase a portion of the new trains, and operate and maintain the network at a tariff that is defined in the contract and updated annually upon approval by the regulatory agency (Agência Reguladora de Transportes do Estado do Rio de Janeiro, AGETRANS). The subsequent Bank project (Rio de Janeiro Mass Transit, P043421, Loan No. 4291-BR) financed part of the State’s commitments in the concession agreement for the acquisition of 20 new trains and the rehabilitation of others. In 2009, a new Bank operation was approved (Rio de Janeiro Mass Transit II Project, P111996, Loan No 7719-BR) and is financing 30 new trains. This AF is linked to the latter operation. Key results of the Bank’s assistance are as follows: (i) since 1998 ridership has increased consistently as a result of the improvements in service quality, reaching 530,000 trips per workday in 2010, and it is expected to surpass 1 million by 2016; and (ii) the operational subsidy paid by the State to support the operations of the rail system decreased from US$121 million per year in 1997 to

3 IBGE. 2010. Furthermore, according to the State of Rio de Janeiro, users shifting from traditional buses will save on average 49 minutes. Users changing from car will achieve less time savings (7 minutes), but the cost savings from the commute are significant and the comfort level/quality of service is high (page 5). 4 Since then, the State’s strategy has been always based on four pillars agreed with the Bank: a) Creation of a Metropolitan Authority which would prioritize transport investments in the RJMR and promote modal integration through a common tariff and subsidy policy; b) Periodic updating of the integrated urban transport, land use and air quality strategy; c) Development of financing mechanisms for the sector other than government budgets; and d) progressive promotion of the participation of the private sector in operations and investment in the sector.

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zero currently. Although fares did go up, they were in line with the generalized increase in public transport tariffs.

10. This history of reform, supported in part by the Bank, shows that demand along the corridor is responsive to increases in service quality: in particular, more reliable service and an improved fleet. The demand’s responsiveness to improvement in rail service also indicates that, because the network (physical infrastructure) exists, it is more cost efficient to improve service in the SuperVia system than to build bus rapid transit lines to serve the same demand. A cost-benefit analysis that was commissioned to understand the impacts of this AF proves this point (see Annex 3) by showing that the proposed investment in trains has a positive net present value. Equally important, the lack of space on the roads adjacent to the SuperVia corridors indicates that Bus Rapid Transit systems (BRTs) will require large expropriations, which dramatically increase their cost and social consequences. Therefore, the AF has the highest net present value of all alternatives. Within the RJMR, BRT would then be carried out in areas not served currently by the Metro or SuperVia For example, the Municipality of Rio is also implementing four BRT corridors: TransCarioca, TransOeste, TransOlímpica and Av. Brasil. The State Government implemented a BRT light corridor—Alameda–São Boaventura in Niterói—that opened for service in 2010 and brought significant time savings to users.

11. Coupled with the efforts to integrate public transport tariffs at the state and municipal levels (the Integrated Transit Fare or Bilhete Único Integrado, BUI), the investments by Rio de Janeiro State and Municipality in bus-based systems and rail-based mass transit will result in an integrated transit system in which different technologies complement each other to offer a reliable and affordable transit service. As mentioned, the State and Municipality of Rio de Janeiro are pursuing Transit-Oriented Development policies to improve the match between denser urban development and efficient mass transit. In addition, the State Government is interested in formulating a policy to reduce the road accident rate, which is estimated to be 50 percent higher than in developed countries.5 Therefore, the proposed AF takes place in a context of integrating urban and transport planning, as explained in detail in Annex 7, and translates into higher economic, social and environmental benefits.

12. The proposed AF will finance a scale-up in the project by introducing additional policy and infrastructure components. On the policy side, the scaled-up component will not only finance project management and supervision for the additional scope of the project but also a series of studies, policy strengthening measures and strategies to: (i) make the passenger6 and freight transport7 systems in the State and the RJMR more sustainable, with a lower carbon footprint; (ii) adapt and cope with the effects of climate change in the RJMR (i.e., increased

5 Rio de Janeiro has a fatal road accident rate of 15.6 per 100,000 inhabitants, while Canada has a rate of 9.8, Germany 8.5 and Japan 7.0. The intent of the Government of Rio de Janeiro is also important in light of the United Nations Decade of Road Safety. For more data on accidents in Rio de Janeiro see Souza et al. 2008. “Análise espacial dos acidentes de tránsito com vítimas fatais: comparação entre o local de residência e de ocorrência do acidente. R. bras. Est. Pop., São Paulo, v. 25, n. 2, p. 353-364, jul./dez. 2008. 6 The AF, including the policy component, is aligned with the lending and analytical work of the Bank in Brazil (see Figure 1 in the main body of the text). This footnote and footnotes 5 and 6 provide specific examples of this alignment. See also Gouvello, C. 2010. “Brazil Low-carbon Country Case Study,” in particular Chapter 5 “Transport Sector: Reference and Low-carbon Scenarios.” 7 See also: (a) World Bank 2011. “Mainstreaming Green Trucks in Brazil,” which is part of the “Brazil Green Freight Transport Report;” and (b) also the China GEF Guangdong Green Freight Demonstration Project (P119654).

5

rainfall) and other natural disasters;8 (iii) make the transport system safer; and (iv) improve consultations with stakeholders in light of the broad reforms taking place in the RJMR’s transport field. The project’s policy component will therefore create a framework for lowering the carbon footprint of transport in the State of Rio de Janeiro, without forgetting the importance of safety and of consultations with stakeholders.

13. In the first project component related to infrastructure and equipment, the scaling-up recognizes the RJMR’s rich transport and urban planning environment, which seeks to promote affordable transit and dense urban development around mass transit (see Annex 7). In addition, as explained, the second and new policy component explicitly expresses the State’s objective of making the transport system greener by lowering its carbon footprint. SuperVia is uniquely well positioned to significantly contribute toward the achievement of these objectives because: (i) greenhouse gas (GHG) emissions per passenger from electrified mass transit, such as SuperVia, are one-sixth the emissions of cars, one-seventh the emissions of Sport Utility Vehicles (SUVs), and between a third and a fourth of the emissions of buses in mixed traffic;9 10 (ii) demand along the SuperVia system has responded to improvements in the quality of service, diverting it from buses and cars. Therefore, SuperVia has the ability to induce a modal shift from more intensive carbon modes; (iii) the areas adjacent to the SuperVia system are at the core of the efforts by the State and Municipality to promote dense urban development that will generate demand for SuperVia and will not use cars for the most recurrent trip: commuting;11 and (iv) against a dynamic baseline, SuperVia has significant potential to reduce GHG emissions from a modal shift from buses, from cars, from more efficient land use, and from the regenerative braking system of the trains (see also the Appraisal section of this Project Paper).

14. The scaled-up infrastructure and equipment component will finance the acquisition of at least 60 additional four-car trains (Electric Multiple Units – EMUs), which is justified because of the need to improve service quality. Part of this fleet will replace trains too old to be retrofitted and upgraded, and part will increase SuperVia’s net fleet from 181 trains12 to 201 trains. The increase in fleet is needed to accommodate additional demand. Some old trains need to be replaced because they have reached the end of their useful life. These old trains lower the quality of service. The new trains will have significantly lower operational and maintenance costs and will consume much less energy than the old ones. Experience in the SuperVia shows that new

8 See World Bank 2011. “Green Cities: Cities and Climate Change in Brazil,” in particular the section Vulnerability of Brazilian Cities to Climate Change. The Municipality of Rio de Janeiro has studied some aspects of its vulnerability to climate change, but without an emphasis on the transport system. 9 Buses in mixed traffic operate on parallel routes to the SuperVia. As stated, building BRTs parallel to the SuperVia corridor requires significant land expropriations and are is not cost efficient compared with improving the existing corridor. 10 See Bertaud, A., B. Lefevre, and B. Yuen. 2011. “GHG Emissions, Urban Mobility, and Morphology: A Hypothesis.” In Hoornweg, D., M. Freire, M. Lee, P. Bhada-Tata, and B. Yuen (editors), “Cities and Climate Change,” p. 95. 11 See Bertaud, et al. op. cit. These authors make the case that investment in public transit is particularly important because it is key to maintaining commuting trips in less carbon-intensive modes such as mass transit. In the long run, moreover, cities with good public transport systems will also maintain or increase the share of non-commuting trips done in efficient transit modes. These authors also mention the importance of charging for car use, which is feasible only if there a minimum-quality public transport in place. 12 Currently there are 161 operating trains. Due to the original project, 30 trains will start operating and 10 trains will be retired. Therefore, the net operating fleet without the additional finance would be 181 trains.

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trains can consume one-third the energy of old ones. The old trains will be scrapped following the Environmental Management Plan.

15. This component will also finance a demonstration project to promote the use of non-motorized transport, in particular bicycles, around selected stations of the CENTRAL system to enhance the project’s greening impact. This part of the project will be linked to the non-motorized program run by SETRANS, in particular the “Rio-Estado da Bicicleta” Project, which seeks to promote bicycle use. SETRANS is preparing a Non-motorized Transport Development Plan.13 The demonstration project will take place in selected stations that already have bikeways to the stations.

16. The proposed AF and restructured project fit with the Bank’s involvement with Brazil and with the State of Rio de Janeiro. The project and the revised PDOs are fully consistent with the World Bank Group’s Country Partnership Strategy (CPS) 2008–2011 (Report No. 42677-BR) discussed by the Executive Directors in May 2008. They are also consistent with the Partnership Strategy that was discussed by the Executive Directors on November 1, 2011 (Report No. 63731-BR). Specifically, this CPS calls for a stronger policy integration of transport, urban development, housing, and disaster risk management. The new CPS also seeks to promote low-carbon growth and climate change mitigation action plans at the city level. The proposed project has elements in all of these areas. Figure 1 shows how the proposed project fits within the Bank’s analytical and lending work in Brazil and in Rio de Janeiro.14 Of particular relevance are the linkages between the proposed Additional Financing and the Project Restructuring for the Strengthening Public Sector Management and Integrated Territorial Development Technical Assistance Loan (P126735) for Rio de Janeiro. The latter project includes “urban transport activities (US$1 million) that will fund the capacity building, impact evaluations, and feasibility studies needed to build an integrated transportation capacity and a stronger planning and regulatory agency.”15 The two task teams are coordinating to ensure efficiency in the use of the resources.

17. The ongoing Rio Mass Transit II Project is performing in a satisfactory manner. The original loan of US$211.7 million was signed on September 24, 2009 and was declared effective on December 3, 2009. Soon after loan signing, the client signed the contract for the provision of at least 30 trains, following a successful competitive bidding process that resulted in a lower acquisition cost. Train manufacturing is under way and according to schedule, and the first train arrived in September 2011. Given the lower acquisition cost, CENTRAL was able to negotiate an amendment with the train supplier to produce four additional trains.16 Under the institutional component, the bid for the updating of the PDTU was completed and the study is under way. The Tariff Integration study has already led to the introduction of the Bilhete Único Integrado, a major achievement in the Rio de Janeiro Metropolitan Region because it makes public transit more attractive compared to cars and motorcycles. All these actions are already generating

13 See http://www.rj.gov.br/web/setrans/exibeconteudo?article-id=275563, accessed on August 31, 2011. 14 A more detailed analysis of how the project fits with the Bank strategy in Brazil can be found in the project files. 15 Concept Note for the Additional Financing and Project Restructuring for the Strengthening Public Sector Management and Integrated Territorial Development Technical Assistance Loan (P126735), p. 6. Version circulated for review on June 23, 2011. 16 At the time of this writing, CENTRAL and the train manufacturer had not yet signed the agreement for these additional four trains.

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important benefits for the population and specifically for the lower-income households that have seen a reduction in the proportion of their income allocated to transport.17

18. Consequently, both the Implementation Progress (IP) and Development Objective (DO) of the original project in the past 12 months have been rated Satisfactory and the PDO is on target to be achieved. Other requirements of project restructuring are also met: (i) the performance of the Borrower and implementing agency have also been rated Satisfactory; (ii) in light of the AF and the restructuring of the original project, the Borrower and the Bank have agreed on an action plan acceptable to the Bank to complete the project; (iii) neither the loan in particular, nor the country in general, is under suspension of disbursements; and (iv) the Borrower has no outstanding audit reports.

Figure 1. Fit of proposed project with World Bank Analytical and Lending Program in Brazil, Rio de Janeiro State and Rio de Janeiro Municipality

III. PROPOSED CHANGES

19. This Project Paper includes a restructuring of the original project and also a scale-up of the project through an Additional Financing. The scaled-up project demands a change in the name of the project and in the PDO. The new name of the project will be Upgrading and Greening the Rio de Janeiro Urban Rail System. The PDO will be changed to include a greening 17 For a comprehensive evaluation of the impacts and benefits of the Bilhete Único, see Neri, M. 2010. “Impactos Sociais do Bilhete Único Intermunicipal no Grande Rio.” http://www.fgv.br/cps/bu

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element (see (b) in the new formulation in the following paragraph), while preserving the inherent transport nature of the project.

20. The PDO of the original project is to: (a) improve the level of service provided to suburban rail transport users in the RJMR in a safe and cost-efficient manner; and (b) improve the transport management and policy framework in the RJMR. The PDO will be amended as follows: (a) to improve the level of service provided to suburban rail transport users in the RJMR in a safe and cost-efficient manner; (b) to place the suburban rail transport system on a lower carbon growth path; and (c) to improve the transport management and policy framework in the Borrower’s territory and in the RJMR.

21. The project outcome indicators need to be expanded to reflect the amended PDO. One additional indicator will be included, as shown in the following table:

Table 1. Revised Outcome Indicators PDO indicators

Current (original project) Proposed change under the AF and restructuring

Comments

Reduction of in-vehicle travel time plus waiting time

None Same indicator

Passengers per square meter None Same indicator Number of low-income passengers (up to 4 MS) in SuperVia

None Same indicator

Bicycle parking facilities installed at railway stations

None Same indicator

Number of SuperVia stations with bus–rail tariff integration

None Same indicator

Use of smartcard-based discounted fare during off-peak by SuperVia

None Same indicator

Reduction of in-vehicle travel time plus waiting time

None Same indicator

Reductions of transport-related greenhouse gas emissions in the SuperVia area of influence (ton CO2)

Indicator added to reflect amended PDO. Baseline will be established with results of PDTU, currently under way.

22. Annex 1 shows the revised Results Framework and Monitoring Indicators, which also incorporate the changes stemming from the extension of the closing date.

23. Project Components: The components of the original project remain as originally stated in the PAD and Loan Agreements for that project. The Additional Financing introduces new project activities as follows:

Component 1: Infrastructure and Equipment 1. Acquisition of an additional sixty (60) trains (EMUs) with four (4) cars each and accessories, for a total of at least 360 (in the aggregate) cars to be operated on the lines of CENTRAL’s System, by the Concessionaire under the terms of the Concession Contract.

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2. Design and implementation of a non-motorized transport and greening demonstration pilot program in selected stations of the CENTRAL System, through the acquisition of bicycles required therefor.

Component 2: Institutional and Policy Development 1. Provision of technical assistance to SETRANS for the carrying out of additional studies on policy development, including, inter alia: (a) the design (but excluding implementation) of a sustainable transport policy for the Borrower, including measures to reduce the carbon growth path of transport and improve environmental and social sustainability; (b) the design and implementation of a strategy for the Borrower’s territory and the RJMR passenger and freight transport system, to adapt to the impacts of climate change, environmental and social risks and liabilities, and natural disasters; (c) the design and implementation of a center to monitor the impact of natural disasters on the metropolitan public transport system, including those stemming from climate change impacts; (d) the design (but excluding implementation) of a strategy to improve the efficiency and to reduce the carbon footprint of the Borrower’s freight system and its environmental and social risks and liabilities; (e) the carrying out of feasibility and detailed engineering studies (but excluding implementation) for potential BRT corridors in the RJMR area which are not competing with the rail-based transport; (f) the design (but excluding implementation) of a transport-related, accident-reduction policy to make the Borrower’s transport system safer; (g) the design (but excluding implementation) of an updated strategy for SETRANS to carry out consultations with stakeholders to improve its transport reform planning process; (h) the carrying out of an evaluation study to assess the social, economic and environmental impact of the Project, particularly on carbon emissions; and (i) the carrying out of studies to support the implementation of Part A.2 of the Project. 2. Provision of technical assistance to CENTRAL for Project management and supervision, including the acquisition and reception of the trains (EMUs).

24. The project costs, including the AF, are shown in Annex 4.

25. The closing date of the project is extended by three years to June 30, 2017. The three additional years are necessary particularly to ensure the consolidation of the policy dialogue linked to the various critical issues pursued under the policy component of the project including climate change adaptation and safety in the transport sector. At the same time, the Borrower committed to do all efforts necessary for an earlier conclusion of the various Project activities,

26. Implementation arrangements will remain the same as those used for the original project. Because of their importance, they are summarized here: the Secretariat of Transportation of the State of Rio de Janeiro (SETRANS) will be the Government agency responsible for the project and it will represent the State of Rio de Janeiro. SETRANS has delegated the implementation of the project to CENTRAL, one of the operating agencies under its jurisdiction. CENTRAL was in charge of implementing the first Rio de Janeiro Mass Transit loan (Ln. 4291-BR), its Additional Financing, and the original project. CENTRAL will maintain the same Project Management Implementation Group (PMIG) used for the original project, which will be responsible for project implementation and monitoring. It will be headed by a Project

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Coordinator who will report directly to the Director-President of CENTRAL. The Director-President reports directly to the Secretary of Transport and will have the autonomy to make decisions and access to the Secretary if needed. PMIG will be staffed with regular personnel from CENTRAL and supported by project management and supervision consultants in charge of providing technical support in areas such as engineering, procurement, environment and financial management. CENTRAL has experienced technical, procurement, environmental, and legal staff that will support the implementation of the project. The Borrower and CENTRAL have signed a subsidiary agreement satisfactory to the Bank to carry out the project.

27. There are no conditions of effectiveness. New covenants are added beyond those that are already in place for the original project.

28. Retroactive financing will be provided for eligible expenditures up to 20 percent of the value of the loan to cover expenses paid after October 26, 2011.

IV. APPRAISAL SUMMARY

A. Economic and Financial Analyses

29. Economic evaluation: A comprehensive and independent economic evaluation was commissioned to assess the project’s costs and benefits. This evaluation is consistent with the evaluation made for the original project and it reflects standard practice in the field. In the base case, the project has a positive net present value of US$578.7 million, and a benefit/cost ratio of 2.71, both using a 10 percent discount rate, the same one used for the original project.18 If a discount rate of 12 percent is used, the NVP is US$386.3 million and the benefit/cost ratio is 2.25. The economic internal rate of return for the project is of 24.13 percent. A detailed sensitivity analysis was also carried out. Key findings are as follows: First, the NPV is positive even if unrealistically large discount rates are used. Second, if investment costs rise by 173 percent, then the costs will be greater than benefits and the NPV will be negative. On the benefit side, a reduction of more than 72 percent in the values of time used will translate into a negative NPV. When compared to the experience of the original project—trains procured at below estimated price, good economic growth in Rio de Janeiro and Brazil, which increase the opportunity-cost of travel time—these results suggest that the risk of the NPV being negative is low. Annex 6 shows the detailed economic evaluation. CENTRAL also undertook an economic evaluation that found the investment to have positive NPV and IRR above the discount rate. The evaluation is in the project files.

30. Financial projections prepared for SuperVia for the 2007–2026 period show that its working ratio will be equal to or less than one; operating costs will therefore be below operating revenues. Details are available in the project files.

31. Fiscal impact: The National Treasury Secretariat (STN) conducts an exhaustive and highly professional analysis of the State’s debt capacity. It is on the basis of this analysis that the State is allowed to borrow with a guarantee from the Federative Republic of Brazil, as illustrated

18 The Bank recommends as possible discount rates 5, 10 and 12 percent. See http://siteresources.worldbank.org/INTTRANSPORT/Resources/336291-1227561426235/5611053-1231943010251/trn-6EENote2.pdf, especially footnote 5.

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by the approval of the Carta Consulta.19 This approval also takes into account the overall lending program of the State. Given the lending program by the Bank to the State of Rio de Janeiro, an updated fiscal analysis based on that prepared for the Metropolitan Urban and Housing DPL (P122391) was carried out; it concluded that the State’s debt management strategy is sound and will be able to incorporate the proposed loan (the analysis is available in the project files).

B. Technical

32. The scaled-up policy component has elements that can be classified along the following lines of action: (i) design of policies to ensure that the passenger and freight transport systems in the State and the RJMR are more sustainable and have a lower carbon footprint; (ii) study and implementation of adaptation strategies to cope with the effects of natural disasters, including those stemming from climate change in the RJMR (i.e. increased rainfall); (iii) design of strategies for making the transport system safer; and (iv) improvement of consultations with stakeholders in light of the broad reforms taking place in the RJMR’s transport field. The project’s policy component will therefore create a framework for making the RJMR’s transport sector more sustainable and lowering its carbon footprint, without forgetting the importance of adaptation, safety and consultations with stakeholders.

33. From a greening perspective, this component will design actions on the mitigation side to reduce the carbon footprint when compared to a business-as-usual scenario. It also contains an adaptation side to climate change, which will assess the RJMR’s vulnerability to climate change effects and will design adaptation strategies for SuperVia in particular and for the urban transit system in general. Existing studies estimate that Rio de Janeiro is quite vulnerable to effects of climate change such as rising of sea levels, increased rain, and strong storms, among others.20 One expected result will be a monitoring center to guarantee rapid response during extreme weather- and climate-related events and to monitor the functioning of the transport system at the metropolitan level. The State of Rio de Janeiro has been implementing other centers for the analysis and prevention, for example, of geological risks21 and disasters and to monitor security. The Municipality of Rio the Janeiro has a center to monitor the functioning of the city, including transport. The preparation of the proposed center will take these existing centers into account and will coordinate with them.

34. The policy component also emphasizes strengthening SETRANS’ strategy and capacity to carry out consultations with project-related stakeholders. Given the broad reform agenda, which is currently taking place and emerging as a result of the abovementioned studies, these consultations are critical to gather opinions and find the path to make the reform agenda politically feasible. Finally, the policy component includes a study to design a road accident reduction strategy, which is relevant given the high accident rate in Rio de Janeiro and the United Nations’ recent launch of the Decade of Road Safety. The amount of loan resources allocated to the policy and institutional development component, nearly US$30 million, is

19 Governo do Estado de Rio de Janeiro. Secretaria de Estado de Transportes. “Adicional ao Programa Estadual de Transportes 2 – PET 2.” Carta Consulta COFIEX, Revisão Fevereiro 2011. 20 For a summary assessment of the impacts of Climate Change in Rio de Janeiro see: http://nelsontembra.wordpress.com/2011/04/08/vulnerabilidades-das-megacidades-brasileiras-as-mudancas-climaticas-regiao-metropolitana-do-riode-janeiro/ 21 The Department of Mineral Resources created the Center for Analysis and Prevention of Geological Disasters (Núcleo de Prevenção e Análise de Desastres Geológicos) and the Center for the Management of Geological Risks (Centro de Gestão de Riscos Geológicos).

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particularly indicative of this component’s importance for the project. The studies financed by this component will define strategies and policies that the RJMR needs to implement in the future. At appraisal, the task team confirmed that there is broad political support for the reform agenda. In parallel, SuperVia is simultaneously pursuing its own environmental sustainability program by planting trees on its rights-of-way, periodically cleaning drains and trash dumped on its property by adjacent dwellers, and shifting toward energy-efficient lighting and energy sources at some stations.

35. The scaled-up infrastructure and equipment component follows the recommendations of the current PDTU to prioritize the carrying capacity of rail-based systems. The project is also in line with the broad reforms that are currently under implementation and that also follow the recommendations of the PDTU (see Annex 7 for a detailed explanation of these reforms). Specifically, state and municipal governments have implemented integrated transit fares (Bilhete Único Integrado) for inter-municipal and municipal trips, respectively, benefiting hundreds of thousands of people per day who now pay less and face broader economic opportunities.22 State and municipal governments are also implementing measures to rationalize bus supply and reduce the current oversupply,23 curb illegal transport, and improve transfers to high-capacity modes by improving access to stations by bus and non-motorized transport. The Municipality of Rio is also implementing four BRT corridors: TransCarioca, TransOeste, TransOlímpica and Av. Brasil.24

The State Government implemented a BRT light corridor—Alameda–São Boaventura in Niterói—that opened for service in 2010 and brought significant time savings to users. The RJMR is therefore creating a hierarchical and integrated transit system that assigns a structuring role to the modes with the greatest carrying capacity, such as SuperVia and Metro, followed by BRT corridors and by buses in mixed traffic. An integrated transit system improves the quality of service for users because it makes it easier to commute and facilitates transfers whenever they are necessary.

36. A similar analysis carried out for the SuperVia system corroborated the fact that purchasing additional trains to expand capacity and replace the old and highly inefficient trains was the best alternative. Building BRTs along the SuperVia corridors is not adequate because of the lack of road space. If undertaken, BRTs would imply significant land expropriations. Moreover, SuperVia has an attribute that is difficult to find in other transit systems: two rail tracks per direction in the central corridor of D. Pedro–Deodoro, which allows the operator to run express and local trains to better serve users’ needs. Furthermore, the capacity of SuperVia in this corridor would be close to 50,000 passengers per hour, which surpasses what Transmilenio in Bogotá—the BRT with the highest capacity in existence—can transport, albeit at a lower

22 For a comprehensive evaluation of the impacts and benefits of the Bilhete Único, see Neri, M. 2010. “Impactos Sociais do Bilhete Único Intermunicipal no Grande Rio.” www.fgv.br/cps/bu 23 In most Latin American cities, the way public transport service provision is organized leads to extreme competition between operators. Operators purchase additional buses to increase frequence and attract passengers. While this aspect is positive, the average number of passengers per bus goes down, fares go up to cover the costs of an additional fleet, and emissions increase. For the case of Rio, it is estimated that the oversupply is around 30%. See Ardila, A. 2008. “The Limitation of Competition in and For the Market in Public Transportation in Developing Countries: Lessons from Latin American Cities.” Transportation Research Record, Journal of the Transportation Research Board. No. 2048, pp. 8-15. 24 See Secretaria de Transporte do Rio de Janeiro (Municipality): “O Transporte Moderno que Rio Merece Começa Agora.” PowerPoint presentation. April 2011. See also SETRANS, Rio Prefeitura da Cidade, CGPU, “Maracanã–Engenhão: Proposta de Intervenção Urbanística para Requalificação dos Corredores Viários de Conexão com os Estádios.” PowerPoint presentation. June 2010.

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speed. Therefore, to achieve a higher carrying capacity and level of service, the expansion and improvement of SuperVia’s train fleet is the most cost-effective alternative. Having a high-capacity transit mode is important because demand is expected to increase in response to the improved service and because of state and municipal plans to promote transit-oriented development along the SuperVia network. Specialized consultants reviewed the proposed specifications for the acquisition of the trains and deemed them adequate for the intended purposes. Moreover, some of the old trains that will be replaced by the new ones are technically incompatible with the increased frequency proposed for the D. Pedro–Deodoro corridor. The idea of creating a surface metro in this corridor is only possible with a new fleet of trains.

37. The improved quality of service on the SuperVia will benefit above all the poor populations of the RJMR that currently depend on public transport. These populations will see important reductions in their travel time, in particular if they transfer from bus-based public transport (49 minutes). There are also time savings when transferring from cars (7 minutes) and more importantly cost savings while maintaining a high quality of service.25 The significant travel time reductions will allow these users to spend more time with their families or working instead of commuting. Furthermore, as the Brazilian economy grows, many users of the SuperVia will be able to purchase cars. However, the increased level of service achieved thanks to the project will offer an alternative to the car and many will continue to commute by the SuperVia instead of congesting streets. In addition, female riders will also benefit in particular, because current crowding conditions in the SuperVia have led to undesirable behaviors by other users. SuperVia has addressed up to now this situation by providing female- and children-only cars in each train. The additional capacity provided by the trains financed by the project, will reduce crowding conditions and hence the opportunity for abuse in non-female-only cars. The female-only cars will be kept in the short term, but hopefully the project will spur a change in behavior will occur that will allow females to use comfortably any car in a train.

38. This component also finances a demonstration project to enhance the greening impact of the project through the promotion of the use of bicycles. This component will be refined upon completion of a feasibility study that will determine if people already own bicycles but do not use them or if there is, as suspected, a real need for additional bikes. If the need is not confirmed, then the demonstration project will change to measures to promote bicycle use and to facilitate integrated use of bicycles and SuperVia. These measures are important because the State has a non-motorized transport program and 18 stations are expected to have bicycle parking facilities by 2014, as shown in the updated results framework (Annex 1). This element of the project therefore seeks to enhance the project’s greening impact.

39. Due to the amendment introduced to the PDO, namely to place the suburban rail transport system on a lower carbon growth path, it was necessary to appraise this component from a greening perspective as well. To this effect, the task team developed an analytical framework and a model to assess greenhouse gas impacts. The analytical framework is based on a literature review of the linkages among cities, urban transport and climate change mitigation and adaptation.26 The model is based on the model used to appraise emission reductions that are

25 Governo do Estado de Rio de Janeiro. Secretaria de Estado de Transportes. “Adicional ao Programa Estadual de Transportes 2 – PET 2.” Carta Consulta COFIEX, Revisão Fevereiro 2011, pg. 5. See also Annex 6 of this Project Paper. 26 For transport and climate change see: Wright, L, and L. Fulton. 2005. “Climate Change Mitigation and Transport in Developing Nations.” Transport Reviews, Vol. 25, No. 6, pp. 691–717; Schipper, Cordeiro, and Ng. 2007.

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generated by the mass transit projects financed by the World Bank-supported Mexico Urban Transport Transformation Project–UTTP (P107159). The model used also incorporates updates in knowledge since the UTTP was appraised. The model is presented in Annex 8.

40. For a transport project to reduce emissions, it must affect at least one of the following dimensions: number of vehicles, distance traveled, and emissions per vehicle-km traveled. The dimensions multiplied together determine the total emissions of a transport system (see Figure 2). The proposed project has a positive impact on all three. First, the project is expected to attract users from more polluting road-based modes (i.e., cars and inefficient bus operations) to efficient rail. Moreover, over the long run, the project will be able to better preserve the share of trips made by transit. That is, against a dynamic baseline, fewer people will opt to commute by car. Demand in the SuperVia system has been shown to be highly responsive to improvements in service quality. Between 1998 and 2010, 400,000 additional daily trips took place by train instead of cars or buses, thanks to much smaller quality improvements than those planned. Based on those improvements, it is estimated, for example, that for an average speed increase of 9.7 percent there is a demand increase of 5.5 percent in SuperVia.27 SuperVia therefore has the ability to induce modal shift from more intensive carbon modes. Had these additional trips taken place by bus only, 174,000 tons of GHG per year would have been emitted. Had they taken place by car, hypothetically the additional emissions would have been 456,000 tons per year.28 The positive response of users to improvements in quality of service in the SuperVia is important in light of the trend in Rio de Janeiro. Between 1997 and 2004 the share of motorized trips by public transport decreased from 85.5% to 74.5%. Insufficient investment in public transport partially explains this trend that can only be reversed through improvements to service quality of public transport, such as the proposed scaled-up project.

41. Second, the project is expected to enhance and facilitate more transit-oriented development along the SuperVia corridors, in line with government plans. The D. Pedro–Deodoro corridor is particularly critical because the State’s plans are to create a surface metro thanks to the additional fleet and the improved signaling. The high-frequency trains will dramatically increase the level of service; this will spur urban development around the stations. During preparation, the task team visited the alignments and verified the availability of land to carry out transit-oriented development (TOD). The task team also saw that some TOD is already “Measuring the Carbon Dioxide Impacts of Urban Transport Projects in Developing Countries.” (http://pdf.wri.org/measuring-co2-impacts-transport-projects-developing-countries.pdf); Bertaud, A., B. Lefevre, and B. Yuen. 2011. “GHG Emissions, Urban Mobility, and Morphology: A Hypothesis,” In Hoornweg, D., M. Freire, M. Lee, P. Bhada-Tata, and B. Yuen (editors), “Cities and Climate Change;” GTZ Sourcebook Module 5e. 2007. “Transport and Climate Change.” Schipper, Lee, C. Marie-Lilliu, and R. Gorham. 2000. “Flexing the Link between Transport and Greenhouse Gas Emissions: A Path for the World.” Washington, DC: World Bank; Kopp, Andreas. 2011 (Draft) “Transport and Climate Change: Turning Right.” For cities and climate change see Hoornweg, D., M. Freire, M. Lee, P. Bhada-Tata, and B. Yuen (editors) “Cities and Climate Change;” World Bank. 2011. World Bank. 2011. “Green Cities: Cities and Climate Change in Brazil,” OECD. 2010. “Cities and Climate Change.” For transport and emissions in general: World Bank. 2004. “Reducing Air Pollution from Urban Transport.” For arguments on how public transport can dissuade car use, see Weinberger, R. and K. Lucas. 2011. “Motivating Changes in Auto Mobility,” and Jones, P. 2011. “Conceptualising Car ‘dependence,’” In Lucas, K., E. Blumenberg, R. Weinberger (Eds.). 2011. “Auto Motives: Understanding Car Use Behaviours.” See also Sperling D. and D. Gordon, 2009. “Two Billion Cars: Driving Toward Sustainability,” Krupp, F. and M. Horn. 2008. “Earth: The Sequel: The Race to Reinvent Energy and Stop Global Warming;” and Brown, L. 2006. “Plan B 2.0: Rescuing a Planet under Stress and a Civilization in Trouble.” 27 Obtained from the demand analysis done as part of the economic evaluation shown in Annex 6. 28 These results come from the model developed to assess the project.

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taking place. TOD reduces GHG emissions because people live close to a transit station and choose to commute by train. Commuting is the trip that generates the most emissions because of its frequency. Third, the project uses trains that produce lower emissions per distance traveled than other modes (given Brazil’s energy matrix), and consume only one-third of the electricity used by the fleet that they will be partially replacing. Furthermore, the new trains have regenerative braking, which will feed electricity generated during braking back into the grid.29

Figure 2. Factors affecting greenhouse gas emissions from the transport sector

Source: Wright, L, and L. Fulton. 2005. “Climate Change Mitigation and Transport in Developing Nations.” Transport Reviews, Vol. 25, No. 6, p. 701.

42. In addition, the scaled-up project is in line with the recommendations of the World Bank’s “Brazil Low-Carbon Country Case Study.” This study found that the carbon footprint of urban transport would only be reduced through a significant improvement in the supply of mass transit service (quantity and quality).30 This study and the literature consulted also argue that demand-side management measures, such as congestion pricing, are essential to induce a more significant modal shift from cars to mass transit and thus further reduce the carbon footprint.31 But congestion pricing is politically feasible only if there is a high-quality and reliable transit service. Improving public transport, in particular mass transit, is a precondition to charging for car use. Therefore, improvements brought about by the scaled-up project would bring the RJMR one step closer to being able to adopt congestion pricing schemes in the near future.

43. The model developed to appraise the project is in line with the above analysis. The results of the model suggest that the project will lead to 61,400 tons of GHG emission reductions in the first year of operation; these will increase to 93,700 by year 10, for a total of 765,950 tons in a

29 See World Bank. 2010. “Brazil Low-Carbon Country Case Study”, p. 116. 30 See World Bank. 2010. “Brazil Low-Carbon Country Case Study”, which argues that Brazilian cities need to build 785 km of metro lines and 2,600 km of BRT lines with a cost of US$80 billion and US$26 billion, respectively (see pp. 120–122). 31 In the absence of congestion pricing, the space liberated by the modal shift induced by a transit improvement can be quickly occupied by more cars. The net reduction of GHG emissions could be zero. However, roads in Rio de Janeiro are quite congested. Congested streets take a toll on drivers, albeit one that is not collected, and motivates some drivers to switch to mass transit, particularly when it has been improved. Mass transit system improvements in Mexico City, Bogotá, and Lima have resulted in modal shifts of 10%, 7% and 3%, respectively, thanks in part to the congestion on the streets.

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10-year period32, which compares well with Transmilenio (Bogotá) and Metrobus (Mexico City), the only two transit projects that sell their emission reductions in the carbon market. Figure 3 illustrates how the estimated emission reductions would evolve. The model is conservative in its assumptions. Even then, the majority of the emission reductions generated by the project come from car users using the train and not their cars for their commute. The model indicates the importance of having congestion pricing schemes in the future. As previously stated, these require good mass transit service to be politically feasible.

Figure 3. Evolution of estimated emission reductions compared to do-nothing generated by the scaled-up project

Source: authors based on model shown in Annex 8.

44. In summary, the project will improve transit quality, favor the poor in particular, promote non-motorized transport, and improve the policy framework for sustainable transport. The project will also improve the transit system’s resilience to natural disasters and it will have positive impacts on mitigation and adaptation to climate change. On the mitigation side, the project will contribute to reducing the carbon footprint of urban transport in the RJMR. On the adaptation side, the project will contribute to making the transport system more resilient, better prepared, and less vulnerable (Figure 4).

C. Fiduciary

45. Procurement: CENTRAL’s capacity to carry out procurement actions for the project was re-evaluated as part of project preparation. CENTRAL is familiar with Bank procedures and carried out a very successful international competitive bid for the acquisition of the 30 trains in the original project. The competition yielded prices that were lower than anticipated. Procurement arrangements were updated due to the updated procurement guidelines used by the Bank and the scale-up in the project. Annex 5 shows the updated procurement arrangements. 32 The model is available in the project files. The results of the model are indicative. Further work is needed. The Carta Consulta submitted by the State of Rio de Janeiro to the Federal Government to justify this project states that the project will reduce emissions in the first year by only 37,731 tons equivalent of CO2. The discrepancy of the estimates can be attributed to a difference in assumptions on modal shift by car users. There is a debate in the literature on how different models yield quite different results when estimating emission reductions for a transport project (see Hook, W., C. Kost, U. Navarro, M. Replogle, and B. Baranda. 2010. Transportation Research Record: Journal of the Transportation Research Board, No. 2193).

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46. Financial Management: The Bank conducted a financial management assessment for the proposed project during project preparation, in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank-Financed Investment, dated March 5, 2009. The purpose of the assessment was to determine whether CENTRAL has acceptable financial management and disbursement arrangements in place to adequately control, manage, account for and report on project funds. Based on the assessment, the Financial Management Risk is rated as Moderate. The financial management arrangements, as set out for this project, satisfy the Bank’s minimum fiduciary requirements (see Annex 5.2).

Figure 4. Summary: Technical appraisal of the project

D. Social (including Safeguards)

47. The proposed project does not involve new construction activities, does not require land acquisition, and SuperVia’s rail right-of-way has been established. Although the project is not likely to have significant adverse social impacts, there are three small areas on one train line in which a limited relocation of people (approximately 80 families) illegally occupying the right-of-way will be necessary. For safety and operational reasons, this area within the concession-established right-of-way must be cleared. For this reason Involuntary Resettlement (OP/BP 4.12) is triggered. These squatters were detected during supervision of the original project and the task team has ensured that safe operational practices are followed by SuperVia in these sections: for example, trains slow down and honk. Triggering this policy affects the original project as well.

18

The Borrower and the SuperVia concessionaire have prepared a Resettlement Action Plan (RAP) in a participatory manner; it includes prior, free and informed consultations with the directly affected population and the incorporation of their suggestions into a final plan. The RAP was formally submitted to the Bank and publicly disseminated (on October 6, 2011) and consulted prior to project appraisal. The RAP defines resettlement principles and institutional responsibilities, eligibility criteria, alternative compensations, schedule of implementation, budget, grievance mechanism, and monitoring and evaluation actions. Budget for its implementation has been made available by SETRANS/CENTRAL and SuperVia.

E. Environment (including Safeguards):

48. The project will have positive environmental impacts on a regional scale by reducing vehicular traffic (i.e., more people will use the SuperVia train system). This will reduce air emissions, improve air quality and reduce traffic-related accidents. Because the project does not involve construction activities, and involves the purchase of 60 new cars and some technical studies, it therefore is not likely to have significant adverse environmental impacts. The project does indirectly involve the operation and maintenance of the SuperVia concession, which has potential negative impacts that can be readily mitigated. The project has been classified as Category B and the Safeguard Policies triggered are: (i) Environmental Assessment (OP/BP 4.01); (ii) Pest Management (OP 4.09)–the system’s concessionaire SuperVia sprays the right-of-way on a regular basis for vegetation and pest control; and (iii) Physical Cultural Resources (OP/BP 4.11)—although the project does not directly involve physical works within the SuperVia concession, there are four terminals recognized by relevant authorities as “urban heritage” due to their historical and architectural significance.33

49. A new Environmental Assessment (EA) and Environmental Management Plan (EMP) were prepared, building upon the plans and results of the previous Rio Mass Transport II Project (P111996). The EA was disclosed on July 1 2011. The EA includes: a legal and regulatory framework review; an updated baseline assessment; consolidation of prior environmental activities; an environmental impact assessment; and an updated EMP. The EMP addresses the potential negative impacts associated with the SuperVia concession; in relation to SuperVia it includes: environmental institutional capacity strengthening; social communication and environmental education; industrial and hazardous waste management plan; vector control plan; effluent management plan; noise monitoring program; Polychlorinated Biphenols (PCB) management plan; right-of-way vegetation plan; contaminated areas assessment program; environmental compliance action plan; and resettlement action plan. The EMP also establishes actions under the responsibility of SETRANS, including those related to pedestrian walkways over the trains’ right-of-way, control of wastewater discharges and solid waste disposal into the right-of-way from outside of the right-of-way, and environmental supervision by SETRANS. The EMP assigns responsibilities and indicates a schedule and budget. In relation to the purchase of the 60 new trains under the project, the bidding document requires that the supplier and its subcontractors operate in accordance with the provisions of the laws of that country (which would include environmental, worker health and safety laws).

50. The SuperVia concession has obtained its required environmental operation permits and established two compliance agreements in order to bring the concession into compliance with

33 OP4.11 was not triggered for the original project. However, the task team believes that triggering for the AF would be a good practice.

19

applicable Brazilian requirements. The SuperVia concessionaire has established an Integrated Management System (Sistema Integrado de Gestão, SIG), which includes specific components related to environmental, health and safety issues, in order to comply with all applicable Brazilian legislation and regulatory requirements and concession agreement requirements. The system also includes a Contingency/Emergency Plan. SuperVia, the system operator, has staff dedicated to environmental, health and safety issues.

51. Consultations with key stakeholders were held on the EA, EMP and RAP. The final versions of the EMP and the RAP were disclosed through the websites of SuperVia, CENTRAL and SETRANS and in the Bank’s InfoShop prior to appraisal. The EMP, RAP and SuperVia, as part of their Environment, Health and Safety Management System (EHSMS), have specific activities related to outreach and communications with the public throughout the project (i.e., beyond the ESMP consultations).

F. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X Forests (OP/BP 4.36) X Pest Management (OP 4.09) X Physical Cultural Resources (OP/BP 4.11) X Indigenous Peoples (OP/BP 4.10) X Involuntary Resettlement (OP/BP 4.12) X Safety of Dams (OP/BP 4.37) X Projects on International Waterways (OP/BP 7.50) X Projects in Disputed Areas (OP/BP 7.60) X

G. Policy Exceptions and Readiness

52. The project does not require any exceptions to Bank policies and is deemed to be ready for implementation.

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Annex 1. Revised Results Framework and Monitoring

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

Results Framework

Revisions to the Results Framework Comments/

Rationale for Change PDO

Current (PAD) Proposed “The proposed PDO is to: a) improve the level of service provided to suburban rail transport users in the RJMR in a safe and cost-efficient manner; and b) improve the transport management and policy framework in the RJMR.”

“The PDOs are: a) to improve the level of service provided to suburban rail transport users in the RJMR in a safe and cost-efficient manner; (b) to place the suburban rail transport system on a lower carbon growth path; and (c) to improve the transport management and policy framework in the Borrower’s territory and in the RJMR.”

Due to the strengthening of the policy component in the AF toward a greening nature, and due to the additional improvement in quality provided by the additional trains, the PDO needs to be amended to include a GHG-related element.

PDO indicators

Current (PAD) Proposed change* Reduction of in-vehicle travel time plus waiting time

None Same indicator

Passengers per square meter None Same indicator Number of low-income passengers (up to 4 MS) in SuperVia

None Same indicator

Bicycle parking facilities installed at railway stations

None Same indicator

Number of SuperVia stations with bus–rail tariff integration

None Same indicator

Use of smartcard-based discounted fare by SuperVia during off-peak hours

None Same indicator

Reduction of in-vehicle travel time plus waiting time

None Same indicator

Reductions of transport-related greenhouse gas emissions in the SuperVia area of influence (tons CO2)

Indicator added to reflect amended PDO

Intermediate Results Indicators

Current (PAD) Proposed change* Number of trains per peak hour/direction and off-peak on 5 lines of SuperVia

None

Same indicator

Additional demand generated by the project

None

Same indicator

Working ratio of SuperVia

None

Same indicator

21

Revisions to the Results Framework Comments/ Rationale for Change

% completion of trains to be delivered to SuperVia

None Same indicator

* Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end-of-project target value.

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Arrangements for Results Monitoring Project Outcome Indicators Data Collection and Reporting

End of Fiscal Year Baseline 2008

2010 2012 2014 2016 Frequency and Reports

Data Collection Instruments

Responsibility for Data Collection

1. Travel Time plus Waiting Time (in minutes):

a. Japeri branch – line CENTRAL / Nova Iguaçu

59 59 55 54 52 Bi-annual Oper. Reports

CENTRAL

b. Santa Cruz branch – line CENTRAL / Bangu

62 62 56 55 54 Bi-annual Oper. Reports

CENTRAL

c. Saracuruna branch – line CENTRAL / Gramacho

54 54 48 47 46 Bi-annual Oper. Reports

CENTRAL

d. Belford Roxo branch – line CENTRAL / B. Roxo

73 73 64 63 62 Bi-annual Oper. Reports

CENTRAL

e. Deodoro branch – line CENTRAL / Deodoro

46 46 43 42 40 Bi-annual Oper. Reports

CENTRAL

2. Average passengers per square meter on SuperVia Lines at peak hour*

8 8 8 7 6 Bi-annual Oper. Reports

CENTRAL

3. % of Passengers/day from households earning <4 MS

n/a n/a 0.62 0.63 0.65 Every year

Oper. Reports

CENTRAL

4. Number of SuperVia stations with bicycle parking facilities

3 9 15 18 20 Every year

Oper. Reports

CENTRAL

5. SuperVia stations with bus-rail fare integration

a. Japeri branch 12 12 15 15 15 Bi-annual Audit Report

SETRANS

b. Santa Cruz branch 8 8 10 10 10 Bi-annual Audit Report

SETRANS

c. Saracuruna branch 1 2 4 5 5 Bi-annual Audit Report

SETRANS

d. Belford Roxo branch 2 3 4 5 5 Bi-annual Audit Report

SETRANS

e. Deodoro branch 7 8 8 10 10 Bi-annual Audit Report

SETRANS

6 Off-peak period in which SuperVia will offer smartcard-based discounted fare (hours of the day)**

n/a n/a 11 am - 3 pm

11 am - 3 pm

11 am - 3 pm

Bi-Annual

Audit Report

SETRANS

7. Reductions of transport-related green house gas emissions in the Supervia area of influence (Ton CO2)

n/a n/a To be defined

20000 34000 Every year

Report SETRANS

SuperVia Lines at peak hour*

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Project Outcome Indicators Data Collection and Reporting

End of Fiscal Year Baseline 2008

2010 2012 2014 2016 Frequency and Reports

Data Collection Instruments

Responsibility for Data Collection

Component 1a. Trains in peak-hour/off peak-hour

a. Japeri branch (min) – line CENTRAL / Nova Iguaçu

8 / 4 8 / 6 12/ 10 14 / 11

14 / 11

Bi-annual Operational Reports / Counting

CENTRAL

b. Santa Cruz branch (min) – line CENTRAL / Bangu

8 / 6 8 / 5 12 / 10

14 / 10

14 / 10

Bi-annual CENTRAL

c. Saracuruna branch (min) – line CENTRAL / Gramacho

6/ 2 6 / 3 10 / 8 10 / 8 10 / 8 Bi-annual CENTRAL

d. Belford Roxo branch (min) – line CENTRAL / B. Roxo

3 / 1.5

3 / 2 5 / 4 5 / 4 5 / 4 Bi-annual CENTRAL

e. Deodoro branch (min) – line CENTRAL / Deodoro

8 / 0 8 / 2 12 / 10

12 / 10

12 / 10

Bi-annual CENTRAL

Component 1b. Additional demand generated from project on SuperVia- passengers per day

n/a n/a 57759 70211 70211 Every year

Oper. Reports

CENTRAL

Component 1c. Working Ratio of SuperVia

0.75 0.7 0.7 0.7 0.7 Annual Audited Financ. Statements

CENTRAL

Component 1d. Cumulative % completion of trains to be delivered to SuperVia (Initial trains, Next 60 trains)

n/a 10% 100%, 0%

100%, 27%

100%, 100%

Annual Progress Rep.

CENTRAL

Component 1e. Cumulative % of completion of rehabilitation/modernization of metric gauge rolling stock.

50% 100%

Component 1f . Cumulative completion of SETRANS building rehabilitation

50% 100%

Component 2a. Update/completion of studies (Original Loan)

PDTU

100% IMT Studies

100% Update of PDTU

100% Strategic Inv. Plan

Annual Progress Rep.

CENTRAL

Component 2b. Studies (Additional Finance) (% of Completion)

0 0 50% 100% CENTRAL

** SuperVia will offer this discount but its implementation is subject to the approval by the Ministerio Público

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Annex 2. Operational Risk Assessment Framework (ORAF)

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

Stage: BOARD PRESENTATION

1. Project Stakeholder Risks Rating Moderate Description: Loss of political support for the project from State and Municipal Government. Bus-related stakeholders could oppose the project. State Government is fully committed to the project and leading its preparation. Governor was reelected and took office on January 1 2011. State Government and World Bank have a long-standing relationship in urban transport projects. Project is a top priority in the State’s investment program. As such, project also has support from the Federal Government. Municipality of Rio de Janeiro also supports the project. State has urban development policy and Municipality is planning complementary urban development investments. Riders and neighbors are supportive of the project. Bus-related interests are seeing the benefits of integration through the Bilhete Único Integrado and are seeing benefits of more efficient operations.

Risk Management: Sound supervision and dialogue with key stakeholders to resolve problems that may emerge. ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

Risk Management: Dialogue and consultation with key stakeholders such as bus interests. Strong communication strategy on project and its benefits based on solid technical analysis of alternatives. ‐ Resp: SETRANS and CENTRAL | Stage: ongoing | Due Date: | Status: ongoing

Risk Management: ‐ Resp: | Stage: | Due Date: | Status:

2. Implementing Agency Risks (including Fiduciary) 2.1. Capacity Rating: Moderate Description: Inability to handle managerial and procedural requirements for project implementation, including fiduciary and safeguard issues. However, CENTRAL staff has worked for many years with Bank procedures. FM and Procurement ratings are S for parent project as per last ISR. New safeguards are being triggered and some capacity development will need to take place to adequately manage them. Both CENTRAL and SuperVia have shown willingness to learn and hire people if needed. Furthermore, project is financing a consultancy on improving consultations, a key aspect to all safeguard handling. Procurement: Prolonged litigation in the award of the trains. It is not uncommon in Brazil for the second-ranked proponent to try to go to court to stop the signing of the contract. Because the

Risk Management: Bank will work closely with CENTRAL and SuperVia during preparation and implementation to build capacity in safeguards. ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

Risk Management: Loan will finance a study on how to improve consultations, an aspect that runs across all safeguards. ‐ Resp: CENTRAL | Stage: Implementation | Due Date: December 2013| Status: Terms

of reference are being prepared. Risk Management: Strong supervision of procurement processes and full compliance with Bank Guidelines to aid in defeating eventual legal injunctions.

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major activity of this project is one large contract for the procurement of trains, if the bidding fails and the bid requires re-issuing, there could be major delays in project implementation. Financial Management: The project’s main FM risk is related to the Financial Management Information System (Sistema de Controle Financeiro, SCF). Since the IFRs’ SCF customization has recently been concluded, a close Bank follow-up will be necessary in order to avoid report delivery delays. Similarly, it will affect the scope of internal control arrangements.

‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing Risk Management: This risk will be mitigated by (a) assuring that the FMS will support the development of a database to maintain adequate accounting and FM data, and (b) to ensure that reports can be generated for management review and monitoring purposes. ‐ Resp: Bank and Client| Stage: Preparation and supervision| Due Date: ongoing| Status:

ongoing

2.2. Governance Rating: Low Description: Changes in management and procedures in SETRANS, CENTRAL and SuperVia reduce these agencies’ managerial capacity, and project implementation does not advance as planned. CENTRAL and SETRANS have worked for over a decade with the Bank. The Bank is satisfied with these agencies’ management practices and procedures. These have proved resilient to results of elections and, in the case of SuperVia, to changes in ownership. SuperVia does not implement commitments acquired in the extension to concession contract to purchase new signaling system. SuperVia’s management has been strengthened by a recent purchase of the company by a large Brazilian group, which cares significantly about its reputation. SuperVia is now much more capitalized.

Risk Management: Strong supervision to detect changes, assess risk, and propose specific mitigation measures such as the hiring of qualified staff, adding resources, or firing people who do not perform. ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

Risk Management: Strong supervision to detect changes, assess risk, and propose specific mitigation measures. ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing ‐ ‐ Risk Management: Strong supervision of procurement processes. ‐ ‐ ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status:

ongoing ‐

3. Project Risks 3.1. Design Rating: Moderate Description: The project will be negatively affected if there are long delays in the supply of the 30 trains being financed under

Risk Management: The project team is now closely following the delivery of the first 30 trains, which are on schedule.

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Rio Mass 2 and if the additional 60 trains being financed by this proposed loan are not delivered on time.

‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

Risk Management: The team also has asked the Borrower to initiate the advanced procurement of the 60 new trains in order to have a bid award by the time of Board presentation. Bidding documents are expected mid-September. ‐ Resp: CENTRAL. | Stage: Preparation| Due Date: September 20, 2011| Status:

CENTRAL has submitted the bidding documents for Bank review to initiate the procurement process.

3.2. Social & Environmental Rating: Moderate Description: The project will be negatively affected if squatters get too close to the (secondary) tracks in operation, and accidents may happen. These squatters should be relocated to areas outside the right-of-way and according to Bank policy. Trash collection, although it does not affect train operation, is a focus of diseases if not controlled and the sewage dumped on the right-of-way tracks may cause problems to the track base if the drains are not cleared. Other elements of EMP not followed.

Risk Management: A Resettlement Action Plan has been prepared and was published on October 6, 2011, prior to appraisal. Consultations with affected parties have taken place. Bank is supervising. State Government and SuperVia are sharing the costs of implementing the RAP. ‐ Resp: SETRANS-CENTRAL| Stage: preparation| Due Date: Before appraisal | Status:

consultations have taken place. On schedule. Risk Management: Strong supervision of EMP, which has been updated for AF, after consultations. Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

3.3. Program & Donor Rating: Low Description: Project takes place within a public-private partnership in which SuperVia must purchase an updated signaling system. The signaling system is critical to the improvement in service quality to be brought about by the project. In May 2011 SuperVia signed a contract with a supplier for the provision of the signaling system.

Risk Management: Close supervision of the procurement of the 60 trains and of SuperVia’s acquisition of the signaling system. ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

Risk Management: ‐ Resp: | Stage: | Due Date: | Status:

Risk Management:

27

‐ Resp: | Stage: | Due Date: | Status: 3.4. Delivery Monitoring & Sustainability Rating: Moderate Description: Additional trains, 90 in total, coupled with the investments in signaling, burden the finances of SuperVia and operational subsidies are required again or fares have to increase. Concession contract does not allow operational subsidies, but it allows capital subsidies such as the 90 trains that will be supplied. Contract allows fare increases based on a cost-of-living index formula that must be approved by AGETRANS. Fare integration efforts, such as the integrated fare system (BUI), have lowered the cost to users. Transit-oriented development does not occur as expected. See above; this risk has been explained. If the newly acquired trains do not perform as specified or have frequent breakdowns due to design or component flaws, this will affect the project and the potential demand. Maintenance of the trains beyond the warranty, if not done properly, will add to frequent breakdowns and increase fleet immobilization rates.

‐ Risk Management: SuperVia is currently covering the long-run operating costs of its system and will continue to do so because the new trains have lower operating costs and demand has been shown to be responsive to improvements in quality. One of the target indicators in the M&E framework is SuperVia’s working ratio, which should not be higher than 1.0.

‐ The proposed Additional Financing and Project Restructuring for Strengthening Public Sector Management and Integrated Territorial Development Technical Assistance Loan (P126735), currently under preparation, includes financing to strengthen the transport regulatory agency, AGETRANS. Task teams are coordinating during preparation and will continue to coordinate during supervision to ensure that AGETRANS, which sets fares, is strengthened.

‐ Resp: Bank | Stage: Preparation and Supervision| Due Date: ongoing| Status: ongoing Risk Management: CENTRAL will include in the bidding documents for the 60 trains a longer warranty to ensure that maintenance by the manufacturer extends to 2017. ‐ Resp: CENTRAL| Stage: Preparation | Due Date: Submission of bidding documents |

Status: CENTRAL has committed to submitting the bidding documents to begin the procurement process.

Risk Management: SuperVia will learn to maintain the trains because it is in its commercial interest and it has contractual obligations in the concession. CENTRAL has to enforce contract. Bank will supervise CENTRAL’s enforcement of this critical aspect of the concession contract. ‐ Resp: Bank | Stage: Preparation and supervision| Due Date: ongoing| Status: ongoing

3.5. Other Rating: Moderate Description: Modal Integration: If there is no modal integration and the State allows bus routes parallel to the rail tracks on long distances, this will negatively affect the potential target demand and the shift of passengers from more polluting road modes.

Risk Management: The State has indicated that it will reorganize the inter-municipal bus lines through competitive bidding by 2013.

‐ Resp: State of Rio de Janeiro | Stage: Implementation | Due Date: December 2013 | Status: Bank is supervising and will continue to do so.

4. Project Team Proposed Rating Before Review

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4.1. Preparation Risk Rating: Moderate 5.2 Implementation Risk Rating: Moderate Comments: Key risk is on the procurement side. Starting procurement during preparation and completing it, if possible before Board, is a key mitigation measure, as well as closely supervising the procurement of the 60 trains. In addition, in over 16 years of close cooperation with the Bank, the Client has acquired solid implementation capacity for Bank-financed projects.

Comments: Key risk is on-time delivery of the trains and that they meet the expected quality standards. Supervision by CENTRAL and its consultants of the manufacturing and entry in operation of the trains, and Bank’s close supervision of the process, are the key mitigation measures. Project risks are mitigated in part by complementary activities to be carried out under two other Bank-financed projects, P122391 and P126735. Coordination with the task teams of these projects is essential.

5. Risk Team 5.1. Preparation Risk Rating 6.2 Implementation Risk Rating Comments: Moderate Comments: Moderate

6. Overall Risk Following Review 6.1. Preparation Risk Rating: 7.2 Implementation Risk Rating: Comments: Moderate

Comments: Moderate

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Annex 3. Detailed Description of Modified or New Project Activities

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

1. The components of the original project remain as originally stated in the PAD and Loan Agreements for that project. The Additional Financing introduces new project activities as follows:

Part A: Infrastructure and Equipment 1. Acquisition of an additional sixty (60) trains (EMUs) with four (4) cars each and accessories, for a total of at least 360 (in the aggregate) cars to be operated on the lines of CENTRAL’s System, by the Concessionaire under the terms of the Concession Contract. 2. Design and implementation of a non-motorized transport and greening demonstration pilot program in selected stations of the CENTRAL System, through the acquisition of bicycles required therefor.

Part B: Institutional and Policy Development 1. Provision of technical assistance to SETRANS for the carrying out of additional studies on policy development, including, inter alia: (a) the design (but excluding implementation) of a sustainable transport policy for the Borrower, including measures to reduce the carbon growth path of transport and improve environmental and social sustainability; (b) the design and implementation of a strategy for the Borrower’s territory and the RJMR passenger and freight transport system, to adapt to the impacts of climate change, environmental and social risks and liabilities, and natural disasters; (c) the design and implementation of a center to monitor the impact of natural disasters on the metropolitan public transport system, including those stemming from climate change impacts; (d) the design (but excluding implementation) of a strategy to improve the efficiency and to reduce the carbon footprint of the Borrower’s freight system and its environmental and social risks and liabilities; (e) the carrying out of feasibility and detailed engineering studies (but excluding implementation) for potential BRT corridors in the RJMR area which are not competing with the rail-based transport; (f) the design (but excluding implementation) of a transport-related, accident-reduction policy to make the Borrower’s transport system safer; (g) the design (but excluding implementation) of an updated strategy for SETRANS to carry out consultations with stakeholders to improve its transport reform planning process; (h) the carrying out of an evaluation study to assess the social, economic and environmental impact of the Project, particularly on carbon emissions; and (i) the carrying out of studies to support the implementation of Part A.2 of the Project. 2. Provision of technical assistance to CENTRAL for Project management and supervision, including the acquisition and reception of the trains (EMUs).

Summary Terms of Reference

(a) Design of a Sustainable Transport Policy for the State of Rio de Janeiro that also includes measures to reduce the carbon growth path of transport: establish a Sustainable Transport Policy for the State of Rio de Janeiro. Current mobility trends will exact unacceptably high social, environmental and economic costs worldwide. These costs can be avoided if society concentrates on achieving the following targets: ensure that conventional transportation

30

emissions do not cause problems to human health; limit greenhouse gas emissions from transportation at sustainable levels; significantly reduce traffic-linked death and serious injury; reduce traffic noise emissions; reduce traffic congestion; reduce unequal mobility opportunities within cities; integrate urban transport and land use planning; foster transit-oriented development and financing mechanisms (e.g., value capture); and preserve and develop existing mobility opportunities in cities. SETRANS has taken the lead in developing several initiatives, including the BRT system, alternative fuel experiments and the expansion of subway-railway system. Under the proposed study, SETRANS will develop a long-term transport strategy to be discussed with society.

(b) Design and implementation of a strategy to adapt the RJMR and the State’s transport and

transit systems to the impacts of climate change and natural disasters (e.g., increased rainfall): the study will identify hazards that might occur as a result of natural disasters, including those that can be exacerbated as result of climate change in the RJMR. The study will assess the transport system’s vulnerability to such hazards, including exposure, sensitivity, weakest links in the network, and potential impact on urban dwellers and the built environment. The study will recommend and prioritize interventions to make the transport system, and in particular the transit system, more resilient to the impacts of natural disasters and climate change.

(c) Design and implementation of a center to monitor the impact of natural disasters on the

transit system, including those stemming from climate change impacts: design, structure and implement an Integrated Environmental Information Center to provide information and advice for urban transport activities in the RJMR based on the interpretation of environmental data and parameters. The center will coordinate with the existing centers, which focus, among other aspects, on public security, civil defense and geological risks. The center will support the metropolitan environmental monitoring system, including the monitoring of weather conditions for transport planning and special operations, and will forecast adverse environmental and natural phenomena. Its core activities will include preparing and disclosing indexes and quantifying environmental adversities in Rio de Janeiro. The center will develop real-time simulations. Information management will also be provided through various distribution channels (SMS, MMS, e-mail, Web, etc.).

(d) Design of a strategy to improve the efficiency and reduce the carbon footprint of the State’s

freight system: the strategy will include the characterization of freight trips, freight-related emissions, and land uses, specialized technical services to conduct a competitive analysis, identification of bottlenecks and potential investments in logistical infrastructure in the State of Rio de Janeiro in the period from 2011 to 2030. The strategy will build upon the “Map of the Rio de Janeiro Logistics System and Competing/Complementary Logistics Systems, with Modeling and Definition of Demand” prepared by the State Secretariat of Transportation, and will propose initiatives for the optimization of freight transport in the State of Rio de Janeiro. The strategy will be developed in accordance with the National Plan for Logistics and Transport (Plano Nacional de Logística e Transportes, PNLT) of the Ministry of Transport, and will promote the formulation of public and private policies for the sector. The studies will include: (i) an origin destination survey at least for pass-through and internal freight in the RMRJ; (ii) a GIS mapping of freight transportation flows and

31

infrastructure; (iii) a competitive analysis and infrastructure bottlenecks assessment; (iv) specific plans for freight management in the RMRJ; (v) specific plans for the Oil and Gas Logistics Area—Rio das Ostras to Campos, Grande Sepetiba Logistics Area, surrounding the Port of Itaguaí and extending to the municipalities of the West Zone, Middle Paraíba Logistics Area—and covering the municipalities most impacted by economic activities and connected to southern Minas Gerais; and the 2011–2030 Investment Plan.

(e) Feasibility and detailed engineering studies for a possible BRT corridor in the RJMR area

(Niterói–São Gonçalo): conduct studies to improve and rationalize the transportation and traffic system in one of the main metropolitan corridors on the east side of Guanabara Bay. The corridor uses the RJ-104, RJ-106, Alameda São Boaventura and Feliciano Sodré Avenue highway infrastructure and directly connects the Municipalities of Niterói, São Gonçalo and Maricá to the Municipality of Rio de Janeiro through the Rio–Niterói Bridge. The studies will: assess the results of the interventions executed on Alameda São Boaventura and Feliciano Sodré Avenue; assess the transportation system in the corridor as a whole (considering existing studies and proposals); develop solutions that take into account structural, operational and technological aspects, including a BRT-type trunk and feeder system; and detail the prioritized solution at the basic engineering design level. The project must be structured to contain at least the following: Functional Plan; Economic and Financial Feasibility; Analysis of Financial, Institutional, Environmental and Social Risks; Basic Design (Projeto Básico); and Project Financial Plan.

(f) Design of a transport-related accident-reduction policy to make the transport system safer:

geo-referencing of traffic accidents is a key component for structuring a policy to reduce traffic accidents in the RJMR. A specific system supported by a digital database will monitor available accident data and enable the production of a set of spreadsheets and graphs that can be used to conduct temporal, qualitative and quantitative analyses of accidents as well as spatial analyses of the events. This work will eventually lead to a system that will incorporate into the SETRANS GIS system an accident database to aid in the design of transportation engineering solutions aimed at reducing the number of accidents on urban roads. During an initial phase, the proposed system will be capable of using information related to collective bus routes and stops. It will subsequently analyze trip generators, circulation and traffic. The strategy will also prepare the conceptual and basic engineering designs for cost-effective interventions that will significantly reduce the main traffic accident clusters identified in the RJMR.

(g) Improvement of consultations with stakeholders in light of the broad spectrum of transport

reforms taking place: SETRANS and AMTU recognize the importance of structuring an effective communication channel that links the main stakeholders to the technical team that is developing the Urban Transport Master Plan (Plano Diretor de Transporte Urbano, PDTU), particularly to ensure that proposals are formulated with the greatest possible participation. It is important to note that a long list of transport interventions is currently available for the RJMR; these interventions will change the city’s transportation profile. The proposed strategy will eventually suggests hiring a facilitating institution that is capable of organizing the channel of communications among the players involved in the process.

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(h) Baseline study and impact evaluation: study to determine the baseline for the indicators

added to the monitoring and evaluation framework with this Additional Financing. The study will assess the impact of the project, in particular the improvements brought about by the train fleet, on the low-income population of the Baixada Fluminense and Zona Oeste.

(i) Studies to support the detailed preparation and implementation of Component A2. Studies to

survey, define and monitor the implementation of the bicycle component.

33

Technical Characteristics of Rio de Janeiro’s 60 New Electrical Multiple Units (EMU) COMPOSITION OF EMU M + T + T + MEMU capacity (8 standing passengers/m2): 1,300 passengersSeated passengers: 20% of capacity (with a density of 6 standing

passengers/m²)Seats for preferential passengers: 5% of total seatsCar body shell structure and collision strut: austenitic stainless steelSides: austenitic brushed stainless steel plates Framework head: low-alloy and high-resistance carbon steel Front mask: polyester resin reinforced with fiberglass Car body shell length: 22,000 mm + 1% / - 2%Car width: between 2,970 mm and 2,980 mm Floor height starting from top of tracks: 1,305 mmFloor: manufactured with hardboard plywood plates

covered with stainless steel; floor finished with latest-generation plastic

Internal finishing: plates made with polyester resin reinforced with fiberglass

Side windows: high-resistance polycarbonate fixed panels Bogie: conventional, with four wheels, with welded plate

structure and frame cross member with pivot plateSuspension: primary: by helicoidal springs

secondary: pneumatic (air chambers) Wheel: type: A38 or A36

material: forged drawn steeldiameter: 965 mm or 914 mm (new wheel) diameter: 889 mm or 838 mm (life diameter) wheel axle gauge: 1,600 mm

Bearings: self-trimmer typeBrake application: disk brake in all carsParking brake: spring brake cylinder built into the main brake

equipmentPower: 3000V dc, overhead catenaryAcceleration/deceleration performance: acc: 0.85 m/s2, between 0 and 35 km/h.

dec: service braking: 0.77 m/s2 emergency braking: equal to or above 1.1 m/s², between extreme speed limits (100 km/h down to 0)

Coupler, traction, and collision mechanism: automatic mechanical coupler, with equipment for energy absorption (hydraulic gas type), compatible with load

Passenger car doors: Number of doors per each car side: 04Number of door sheets per gap: 02

34

Annex 4. Revised Estimate of Project Costs

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

Project Costs (US$ Million) Original Loan Changes with AF New Total Project Cost

Project Cost by Component and/or Activity

Foreign US$M

Local US$M

Total US$M

Foreign US$M

Local US$M

Total US$M

Foreign US$M

Local US$M

Total US$M

Infrastructure and Equipment – Part A

Acquisition of Trains and Accessories

178.9 8.4 187.3 496.2 0.0 496.2 675.1 8.4 683.5

Demonstration Project

0.5 0.0 0.5 0.5 0.0 0.5

Institutional and Policy Development – Part B

Project Management and Supervision

2.3 0.0 2.3 16.8 0.0 16.8 19.1 0.0 19.1

Updating of PDTU

2.0 0.0 2.0 0.0 0.0 0.0 2.0 0.0 2.0

Integrated Modal Tariff Study

0.4 0.0 0.4 0.0 0.0 0.0 0.4 0.0 0.4

Other Studies 0.1 0.0 0.1 12.4 0.0 12.4 12.5 0.0 12.5Total Baseline Cost

183.7 8.4 192.1 525.9 0.0 525.9 709.6 8.4 718.0

Physical Contingencies

16.9 0.4 17.3 42.1 0.0 42.1 59.0 0.4 59.4

Price Contingencies

10.6 0.5 11.1 32.0 0.0 32.0 42.6 0.5 43.1

Total Project Costs (1)

211.2 9.3 220.5 600.0 0.0 600.0 811.2 9.3 820.5

Front-end Fee 0.5 0.0 0.5 0.0 0.0 0.0 0.5 0.0 0.5Total Financing Required

211.7 9.3 221.0 600.0 0.0 600.0 811.7 9.3 821.0

35

Annex 5. Revised Implementation Arrangements and Support

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

5.1 Procurement Arrangements

A. General 1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement of Goods, Works and Non-Consulting Services Under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011; the “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers” dated January 2011; and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The State will ensure that the project is implemented in accordance with the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” dated October 15, 2006, with revision January 2011. 2. Procurement of Works: There are no bids under the category of works financed by the Bank loan. 3. Procurement of Goods: Goods procured under funding from the proposed loan for this project would include the procurement of at least 60 trains with 4 cars each (i.e., 240 cars) for use in the suburban rail system presently operated by SuperVia. The trains were procured using the Bank’s Standard Bidding Documents (SBD) for goods, with several adaptations agreed with the Bank. Warehousing, insurance and forwarding of trains will be done as in the previous loan through electronic auction under Bank supervision. Goods below US$5,000,000 can be procured through National Competitive Bidding (NCB) procedures using National SBD agreed with or satisfactory to the Bank. International Competitive Bidding (ICB) procedures will be adopted for all contracts above US$5,000,000. 4. The advanced procurement for the 60 trains was authorized by the Bank. Because the lead time for manufacturing the trains is at least 16 to 18 months after signing, the Borrower requested this advanced procurement at its own risk. The procurement process for the acquisition of 60 trains received clearance from the Bank on October 12, 2011. The warehousing, insurance and forwarding procedures for the 60 trains at the port of Rio will be procured using NCB procedures. 5. Selection of Consultants: The project includes the use of consultants for (a) project management, supervision of train assembly, and inspection for delivery of finalized units; and (b) specific consultancy needs for several studies listed in the procurement plan and described in

36

Annex 3. Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions in paragraph 2.7 of the Consultant Guidelines. B. Assessment of the Agency’s Capacity to Implement Procurement 6. Procurement activities were and will be carried out by CENTRAL’s project management team. CENTRAL is staffed by a general manager for procurement, contracts and administration of material, who oversees, among other departments, the manager of the procurement department. The procurement department is staffed by a highly competent group of procurement specialists supported by consultants with experience in Bank procurement. CENTRAL’s procurement staff has gained experience in Bank-financed contracts, such as those financed under Loan No 4291-BR (Rio de Janeiro Mass Transit Project), which included the acquisition of 20 new trains, the rehabilitation of 55 trains in lots of 18 trains, the rehabilitation and modernization of stations, track and electrification systems; and the acquisition of 30 trains under Loan No 7719-BR (Rio de Janeiro Mass Transit Project II). These bids allowed CENTRAL’s staff to gain the experience required for the proposed project. 7. From October 24 to 28, 2011, the project team’s procurement specialist conducted an assessment of CENTRAL’s capacity to implement procurement actions for the project. The assessment reviewed the organizational structure for implementing the project and the interaction between the project staff responsible for procurement and the relevant units for administration and finance. The agency is very familiar with Bank procedures and procurement guidelines because it had recently implemented other Bank-financed projects. The staff remains the same. The procurement capacity assessment is included in the project files. The overall project risk for procurement implementation capacity is Moderate. C. Procurement Plan 8. At negotiations, the Borrower confirmed the Procurement Plan agreed during appraisal and approved by the Bank October 27, 2011. This Procurement Plan is available in the project files. It will also be available in the project’s database and on the Bank’s external website. The Procurement Plan will be updated in agreement with the project team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision 9. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the implementing agency has recommended that supervision missions visit the field to carry out a post review of procurement actions every six months during the first year of project implementation, and annual visits thereafter.

37

E. Details of the Procurement Arrangements 1. Goods 10. List of contract packages to be procured following ICB–NCB and direct contracting:

1 2 3 4 5 6 7 8

Ref. No.

Contract (Description)

Estimated Base Total

Cost US$ million34

Procure-ment

Method P-Q

Domestic Preference

(yes/no)

Review by Bank (Prior/ Post)

Expected Bid Opening

Date

1

Supply of 60 trains with 4 cars (half motorized)

565 ICB No No Prior November 1, 2011

2

Warehousing, insurance and forwarding of trains

4.5 NCB No No Prior May 20, 2013

3 Acquisition of bicycles

0.5 NCB No No Prior May 2012

2. Consulting Services

11. List of consulting assignments:

Ref. No.

Description of Assignment Estimated

Base Total Cost US$ million

Selection Method

Review by Bank

(Prior/Post) 1 Impact Evaluation Study 1.0 QCBS Prior 2 Project management and supervision consultants 16.8 QCBS Prior 3 Study of the São Gonçalo–Niterói transit axis 1.1 QCBS Prior

4 Development of a Sustainable Transport Policy for the State

1.5 QCBS Prior

5 State Freight Logistics Plan 2.3 QCBS Prior

6 Design of the center to monitor the impact of disasters on the metropolitan transit system

1.2 QCBS Prior

7 Strategy adapt the urban transport and transit system to the impacts of climate change and natural disasters

0.5 QCBS Prior

8 Design of accident-reduction policy 0.6 QCBS Prior

9 Design of strategy to carry out consultations with stakeholders

0.9 QCBS Prior

10 Baseline study 0.1 LCS Prior

11 Studies to support the preparation and implementation of Component A2.

0.1 Single-source

selection Prior

12 Auditing 0.2 LCS Prior 12. Thresholds for procurement methods and prior review, as well as the allocation of loan proceeds and the Procurement Plan, are indicated below.

34 Estimated prices at appraisal including taxes,

38

13. Thresholds for procurement methods and prior review: Description Type of Procurement Prior Review Limit Contract Value

1. Goods ICB, NCB All No threshold

2. Consulting services firms

QCBS, QBS, FBS, SSS, FBS, LCS, LCS

All To be defined in the Procurement Plan

39

Procurement Plan

Category Amount of the Loan Allocated (expressed in USD)

Percentage of Expenditures to be financed

(1) Goods and Non-Consulting Services (including warehousing of the trains) for Parts A.1 and A.2 of the Project

570,293,640 100%

(2) Consultants’ services for Parts B of the Project

29,706,360 100%

TOTAL AMOUNT 600,000,000

Component Estimated

Costa/

US$ million

Type of Contract

Procurement Method

Documents Ready

Bid Prop. Invited

Contract Signature

Delivery Goods

(1st train)

Initiation of Works

Bank Review Ref. Nº Contract

Infrastructure and Equipment and Non-consulting Services–Part A

1 ADPET2-01 60 Trains 565.5 Goods ICB November 1

2011 November

1, 2011 February 28 2012

August 28 2013

Prior

2 ADPET2-02 Warehousing, Insurance, and Forwarding of Trains

4.5 Services NCB May 20, 2013June 20,

2013 July 20,

2013 Prior

3 ADPET2-03 Acquisition of Bicycles 0.5 Goods NCB May 2012 July 2012 August 2012

February 2013

Prior

Institutional and Policy Development–Part B

Estimated Cost a/

US$ million

Type of Contract

Procurement Method

Documents Ready

Bid Prop. Invited

Contract Signature

Delivery Goods

(1st train)

Initiation of Works

Bank Review

4 ADPET2-04 Impact Evaluation Study

1.0 Services Non-

consulting services

May 2012 July 2012 August 2012

n/a n/a Prior

40

5 ADPET2 – 05 Project Management and Supervision Consultants

16.8 Services QCBS January 2012February

2012 April 2012

n/a n/a Prior

6 ADPET2 – 06 Study of the São Gonçalo–Niterói transit axis

1.1 Services QCBS March 2012 April 2012 July 2012 n/a n/a Prior

7 ADPET2 – 07 Development of a Sustainable Transport Policy for the State

1.5 Services QCBS November

2012 December

2012 March 2013

n/a n/a Prior

8 ADPET2 – 08 State Freight Logistics Plan

2.3 Services QCBS November

2012 December

2012 March 2013

n/a n/a Prior

9 ADPET2 – 09

Design of the center to monitor the impact of disasters on the metropolitan transit system

1.2 Services QCBS November

2012 December

2012 March 2013

n/a n/a Prior

10 ADPET2 – 10

Strategy to adapt the urban transport and transit system to the impacts of climate change and natural disasters

0.5 Services QCBS November

2012 December

2012 March 2013

n/a n/a

Prior

11 ADPET2 – 11 Design of accident-reduction policy

0.6 Services QCBS November

2012 December

2012 March 2013

n/a n/a Prior

12 ADPET2 – 12 Design of strategy to carry out consultations with stakeholders

0.9 Services QCBS November

2012 December

2012 March 2013

n/a n/a Prior

13 ADPET2 – 13 Baseline study 0.1 Services QCBS November

2012 December

2012 March 2013

n/a n/a Prior

14 ADPET2 – 14 Studies to support the implementation of Component A2.

0.1 Services SSS November

2012 December

2012 March 2013

n/a n/a Prior

15 ADPET2 – 15 Auditing 0.2 Services LCS March 2012 April 2012 May 2012 n/a n/a Prior

a/ Base Cost–with taxes (inf. at the time of loan negotiations)

41

5.2 Assessment of the Agency’s Capacity for Financial Management 14. A Financial Management Assessment (FMA) of the Brazil: Rio de Janeiro Urban Rail System Additional Financing Project, to be implemented by the Companhia Estadual de Engenharia de Transporte e Logística–CENTRAL, has been undertaken in accordance with the following: (i) OP/BP 10.02, the Financial Management Manual for World Bank-financed Operations (March 1, 2010); (ii) the World Bank’s Audit Policy; and (iii) LCR regional guidelines for quality assurance and risk management. The objective was to assess CENTRAL’s capability to effectively execute the financial management and monitoring of this World Bank-financed project. The evaluation was conducted from October 24 to 25, 2011 in the offices of CENTRAL. 15. The Additional Financing with restructuring operation is sought to: (i) scale up a well-performing project by means of further enhancing the level of service provided by the urban rail system to make it financially sustainable and climate-change-oriented in the long term; and (ii) restructure it in order to ensure a more effective response to the emerging challenges facing the Rio de Janeiro Metropolitan Region (RJMR), that is, through the alignment of its transport, urban development, housing and climate change strategies for the RJMR, which are also leveraged by recent Bank loans to the State and Municipality of Rio de Janeiro. 16. The project categories, including the AF, are shown in the following table:

Category Amount of the Loan Allocated (expressed in USD)

Percentage of Expenditures to be financed

(1) Goods and Non-Consulting Services (including warehousing of the trains) for Parts A.1 and A.2 of the Project

570,293,640 100%

(2) Consultants’ services for Parts B of the Project

29,706,360 100%

TOTAL AMOUNT 600,000,000

Institutional Arrangements, Implementing Agency and Staffing 17. The project components will be implemented by CENTRAL, which will be responsible for all administrative and financial management activities, including accounting and disbursements for the components. CENTRAL will be responsible for consolidating the interim financial reports and forwarding them to the Bank.

42

18. CENTRAL is the State company responsible for Rio’s commuter rail system, known as SuperVia, and operates under the State Secretariat of Transportation. There is already an active Project Management Unit (PMU), which managed the previous Bank-financed Rio de Janeiro Mass Transit Project, Loan No 4291-BR (Project ID: P043421, closed); and the Rio de Janeiro Mass Transit Project II Project, Loan No 7719-BR (Project ID: P111966), the original project. 19. CENTRAL’s PMU will be responsible for carrying out the project activities related to their respective components and also for coordinating the preparation of periodic project financial reports for the Bank. CENTRAL’s PMU is staffed with qualified professionals and staff turnover has been low. PMU staff has prior experience with Bank and State procedures. 20. On December 30, 2009, CENTRAL signed a service contract with Gerenciadora Consórcio EBEI–ENEFER to provide consulting (program management) services. EBEI–ENEFER will be responsible for deployment planning and other related services, including technical supervision, monitoring and control of works and services, in addition to planning for materials, equipment and services, as proposed below:

The proposed institutional arrangements are as follows:

43

Disbursement Arrangements and Flow of Funds 21. The Bank will make loan disbursements to the project, primarily using the advance method. A segregated Designated Account (DA) will be opened in the name of the State of Rio de Janeiro in Banco Bradesco S.A. in US dollars (managed by CENTRAL) will be used for the deposit of advances under the proposed loan. This DA will be different from the bank account that was used for the original loan. For accounting purposes CENTRAL will maintain separate cash books/records/ledgers.

22. Payments for eligible expenditures will be made directly from this account by the State on behalf of the implementing entity, CENTRAL. The PMU will also have the option of requesting direct payments by the Bank to service providers for large payments in either local or foreign currency. Counterpart funds will be disbursed from the State Treasury’s single account to contractors and service providers through an operational account. 23. The proposed ceiling for the DA will be Variable and based on the forecast for the next two quarters as provided for in the quarterly IFR. The Minimum Application Size for Direct Payment and Reimbursement Applications is US$2,000,000 equivalent. The project will also have a four-month grace period after the closing date (to submit withdrawal applications for goods and services incurred before the closing date). 24. Statements of Expenditures (SOEs) and Summary Sheets (SS) with Records will be used to report the use of loan advances and request replenishment of the DA. SOE's and SS with Records will also be used as supporting documentation for Reimbursements. Records will be used as supporting documentation for Direct Payments. Ideally, withdrawal applications should be submitted monthly to the Bank but not later than quarterly. Each withdrawal application requesting a replenishment of the DA should be accompanied by a reconciled bank statement. The withdrawal applications will be prepared on the basis of payments actually made through bank payment orders issued under instructions from

44

CENTRAL. The detailed requirements for submitting withdrawal applications, supporting documentation, and SOE/SS formats is detailed in the Disbursement Letter.

Project Flow of Funds

Flow of funds Reporting documentation obligations and new disbursement requests Accounting Policies and Procedures, FM System, and Internal Controls 25. The State of Rio de Janeiro follows the Brazilian Accounting Standards (Normas Brasileiras de Contabilidade, NBC) under Law 4320/64 which establishes high-level accounting principles, and the Accounting Manual Applicable to the Public Sector (Manual de Contabilidade Aplicada ao Setor Público, MCASP) issued under Law 10.180 of February 6, 2001 and Decree 3.589 of September 6, 2001. The State will be required to follow the first set of National Accounting Standards Applicable to the Public Sector (Normas Brasileiras de Contabilidade Aplicadas ao Setor Público, NBCASP) and the revised MCASP issued under Portaria STN 467 of August 6, 2009 beginning in fiscal year 2011. The latest Country Financial Accountability Assessment (CFAA) for Brazil indicated that Law 4320/64 was in line with international accounting standards. 26. CENTRAL manages its financial accounts through the Integrated Budget Management System (Sistema Integrado de Gestão Orçamentária, SIGO), the Financial Management System for States and Municipalities (Sistema de Administração Financeira

Project Designated Account Banco Bradesco

(in US$)

SEFAZ single account (in Reais)

SOE/SS with Records

Operational account (in Reais)

World Bank

Providers of goods, works and services

Counterpart funds

45

para Estados e Municípios, SIAFEM), and CENTRAL’S financial management system (Sistema de Controle Financeiro, SCF): a) The annual budget is entered and controlled in SIGO. b) The commitment and disbursement cycle (empenho, liquidação e pagamento) is controlled in SIAFEM. SIAFEM is part of the State’s public financial management system for the recording of activities, work plans, budget, revenues, commitments, expenditures and payments. The system has the ability to provide financial information on project execution by activity. SIAFEM is the integrated administrative and financial system used by the State of Rio de Janeiro to execute its budget. SIAFEM was developed to comply with the national regulations on budget execution and other fiscal requirements of the National Treasury (see Lei de Responsabilidade Fiscal). c) The IFRs’ SCF customization has recently been concluded. In the FMA phase, the SCF tests indicate it supports the FM Bank’s requirement. SCF will capture the data from SIAFEM and SIGO. In addition to producing entity and State-wide budget monitoring reports, SCF will also produce project financial management reports (for project monitoring and/or disbursements). The SCF will record project transactions using the loan disbursement categories. 27. CENTRAL will use the same International Financial Reporting (IFR) forms used in Loan No 7719-BR. CENTRAL will also provide annual financial statements for auditing purposes that reflect the activities of the operation supported by the Bank loan, prepared in accordance with accounting standards acceptable to the Bank. CENTRAL will be responsible for sending to the Bank the consolidated IFR 1, IFR 2, IFR 3 and IFR 4, which are to be prepared on a quarterly basis following a cash basis of accounting:

IFR 1 Source and application of funds by cost category as per Project Agreement; IFR 2 Statement of investments by components and activities; IFR 3 Disbursements reconciliation with the Bank’s Client Connection site

(attached with latest Bank Statement); and IFR 4 Disbursement Forecast (prepared in dollars (US$)).

28. The IFRs will include all sources of loan funds. They should all be prepared in Brazilian Reais (R$) and US dollars (US$), and will present expenditures by quarter, accumulated for the year and over the life of the project. IFRs will be submitted to the Bank up to 45 days after the closing of each quarter. The IFRs for the fourth quarter, showing the cumulative figures for the year, may be used as the project annual financial statements that would be audited. 29. The project will be subject to existing CENTRAL Internal Audit (AUDIT) sector practices. AUDIT will examine expenses, the schedule of planning, implementation and disbursement, annual reports, financial statements required by law, and the explanatory notes prepared by the external auditors.

46

External Audit 30. The project’s accounts and financial statements will be audited by an independent audit firm, selected among a pre-approved short list of three to six candidates, under terms of reference previously reviewed and approved by the Bank. It is recommended that the hiring process start immediately after loan signing. The annual audit report will contain a single opinion on the project financial statements, which would include retroactive financing, the Designated Account(s), IFRs and SOEs/SS, and a management letter identifying any internal control weaknesses and areas for improvement. 31. The audit report should be submitted to the Bank within six months after the end of the fiscal year. All records and documentation relating to the project should be maintained in the project files for at least a year after the submission of the audit report to the Bank or two years after the closing date, whichever is later. The financial statements, as audited by an independent entity acceptable by the Bank, should be audited in accordance with International Standards on Auditing (ISA) issued by the International Federation of Accountants (IFAC). 32. CENTRAL will be responsible for hiring an external audit firm to audit its respective components. External auditing costs are to be financed by project funds, thus allowing for the use of the Bank’s procurement guidelines, quality- and cost-based, or national procurement procedures if financed by counterpart funds. Financial Management Supervision during Implementation 33. Financial management supervision will take place at least twice a year and will include: (i) review of the IFRs; (ii) review of the auditors’ reports and follow-up of issues raised by auditors in the management letter, as appropriate; (iii) follow-up on any financial reporting and disbursement issues; (iv) response to the project team’s possible questions; and (v) updating of the financial management rating in the Implementation Status and Results Report (ISR).

5.3 Safeguards

C. Environmental and Social (including safeguards)

34. The proposed project is part of the Rio de Janeiro State Government’s strategy and policies to reduce the carbon footprint of urban transport by improving urban rail-based mass transport in a safe, clean and affordable manner in the RJMR. The proposed project is associated specifically with the SuperVia concession, which consists of approximately 225 km of passenger rail on five main lines (Deodoro, Japeri/Paracambi, Santa Cruz, Belford Roxo, Saracuruna) in 11 municipalities in the RJMR (these 11 municipalities account for approximately 82 percent of the RJMR’s population). SuperVia is operated by a private-sector concessionaire. The concession was established in 1998. The trains are electric powered and the concessionaire presently has approximately 161 trains (cars) and normally operates with 3 to 4 passenger cars. The concession includes 89 stations and 2 main

47

maintenance facilities. The train system connects the Rio de Janeiro downtown area to the Baixada Fluminense and West Zone counties, which are basically all urban or semi-urban areas. 35. Most of the project’s area of influence has poor air quality, primarily due to mobile-source air emissions (it is estimated that approximately 77 percent of total pollutants emitted are from mobile sources). In the Baixada Fluminense and West Zone areas, air quality conditions are influenced by several physical-geographical factors. Duque de Caxias County has the worst air quality in the Metro Region, but other counties also have high concentrations of total suspended particles (TSP) and ozone. 36. The project does not involve construction activities, and involves the purchase of 60 new four-car trains and some technical studies, and thus it is not likely to have significant adverse environmental impacts. The project indirectly involves the operation and maintenance of the SuperVia concession. The project will create positive environmental impacts on a regional scale by reducing vehicle traffic (i.e., more people will use the SuperVia train system), thus reducing air emissions, improving air quality, and reducing traffic-related accidents. The project does not involve construction activities and it is not likely to have significant, direct or indirect large-scale and/or irreversible adverse environmental impacts. 37. The project is classified as Category B. The safeguard policies triggered are Environmental Assessment (OP/BP 4.01), Pest Management (OP 4.09), Physical Cultural Resources (OP 4.11), and Involuntary Resettlement (OP 4.12). 38. Environmental Assessment (OP/BP 4.01). The project is classified as Category B under OP/BP 4.01. A new Environmental Assessment (EA) was prepared to assure the Upgrading and Greening the Rio de Janeiro Urban Rail System Project’s compliance with applicable Brazilian environmental legislation and World Bank safeguard policies. The project’s potential impact related to the acquisition of new cars is limited, and thus the potential moderate impacts are associated with the operation and maintenance of the SuperVia system. Approximately 80 families illegally occupying a portion of one rail-line right-of-way will require resettlement due to safety and operational reasons (see OP/BP 4.12 for details). The EA includes: a legal and regulatory framework review, an updated baseline assessment, the consolidation of prior environmental activities, an environmental impact assessment, and an updated Environmental Management Plan (EMP). The EMP addresses the potential negative impacts associated with the SuperVia concession; in relation to SuperVia, it includes: environmental institutional capacity strengthening, social communication and environmental education, industrial and hazardous waste management plan, vector control plan, effluent management plan, noise monitoring program, PCB (Polychlorinated Biphenols) management plan, right-of-way vegetation plan, contaminated areas assessment program, environmental compliance action plan, and resettlement action plan. The EMP also establishes actions under the responsibility of SETRANS, including those related to pedestrian walkways over the trains’ right-of-way, control of wastewater discharges and solid waste disposal into the right-of-way from outside of the right-of-way,

48

and environmental supervision by SETRANS. The EMP assigns responsibilities and indicates a schedule and budget. 39. Pest Management (OP 4.09). The concessionaire SuperVia sprays the right-of-way on a regular basis for vegetation and pest control. Additional spraying is done when diseases such as dengue are identified. The Pest Management Safeguard is triggered. The EMP has a pest management plan and attempts to promote the use of ecologically based biological or environmental pest management practices, to the extent practicable, and to reduce reliance on synthetic chemical pesticides. The pest plan includes procedures for procurement and use of pesticides in accordance to Bank guidelines and applicable Brazilian legislation. 40. Physical Cultural Resources (OP/BP 4.11). The project does not directly involve any construction. However, the ongoing operation and maintenance of the SuperVia concession can involve some minor maintenance of buildings under the responsibility of the concessionaire. The main terminal (Central do Brasil) includes a building recognized by relevant authorities as “urban heritage” due to its historical and architectural significance (Municipal Decree 14.741, April 22, 1996). The Central do Brasil Terminal is also classified as “urban heritage” by state and federal authorities. The EA conducted a study of historically significant buildings and structures along the railroad corridors, and identified four other buildings classified as cultural heritage: the São Cristovão Terminal, the Engenho de Dentro Terminal, the Vila Militar Terminal, and some facilities at the Engenho Novo site. The project does not include interventions in the main terminal and other cultural heritage facilities. However, if the concessionaire needs to perform works on these buildings, appropriate authorizations and approvals are required under Brazilian legislation. 41. Involuntary Resettlement (OP/BP 4.12). The project will not implement new construction activities or require new land acquisition. The railway system’s right-of-way has been established. However, there are three areas in which the right-of-way of an auxiliary rail line has been illegally invaded and occupied by 80 families. For safety and operational reasons, this area, which is within the concession’s established right-of-way, needs to be cleared of all buildings and occupants. OP 4.12 was triggered because those families are occupying the area, live in precarious housing conditions, are exposed to the risks of accidents on the railway, and must be relocated. In February 2011, the State of Rio de Janeiro and its concessionaire (SuperVia) hired an expert consultant who has prepared the Resettlement Action Plan (RAP). The cadastre and the socioeconomic assessment of the families living on the right-of-way were carried out immediately. The sealing of their houses was properly completed in March 2011, which was defined as the cutoff date. The draft RAP was discussed with the affected people at three community meetings; comments and suggestions have been critically incorporated in the final version of this document. The draft RAP was also publicly disclosed on the SETRANS and SuperVia websites on June 30, 2011. The final version was submitted by the client to the Bank for no-objection on July15, 2011 and later disseminated in line with the Access to Information Policy prior to project appraisal. The RAP clearly defines resettlement principles and institutional responsibilities. It also identifies the categories of affected people, states the eligibility criteria, and establishes alternative compensations. The RAP also outlines the schedule of implementation, including prior and post-resettlement activities, and a comprehensive budget. The removal of affected

49

people will take place during the first year of project implementation and before the new trains enter into operation. Finally, in line with OP/BP 4.12, the RAP established the guidelines for grievance mechanisms and for monitoring and evaluation methodologies. 42. Measures to address safeguard policy issues. The SuperVia concessionaire succeeded in implementing the EMP prepared in 2008 for the Rio Mass Transport II Project. This resulted in various improvements such as improving waste management in the workshops and maintenance yards, promoting a solid and hazardous waste management program for the system and surrounding communities, and improving environmental management capacity. 43. For this project, an updated EMP has been prepared, complementing the former environmental assessment and RMP prepared for the original project. An RAP has been developed to address the relocation of people occupying a small area of the train right-of-way. The Borrower and the concessionaire engaged specialized consultants to prepare the EMP and the RAP, and are implementing improvements in their environmental management system. 44. In relation to the purchase of the 60 new trains under the project, the bidding document requires that the supplier and its subcontractors operate in accordance with the provisions of the laws of that country (which would include environmental, workers’ health and safety issues). As part of the design and construction, and in consultation with the purchaser, the equipment will use materials and design elements to minimize the potential environmental impacts. 45. The SuperVia concessionaire has obtained its required environmental operation permits. The concessionaire and applicable government agencies have established two compliance agreements (Termos de Ajustamento de Conduta: one in 2002 and one in 2008) that establish actions in order to bring the concession into compliance with applicable Brazilian requirements. These agreements have helped to bring the concession into compliance and have been basically fulfilled; only a few actions are pending completion and are included as part of the EMP. 46. The SuperVia concessionaire has established an Integrated Management System (Sistema Integrado de Gestão, SIG), which includes specific components related to environmental, health and safety issues, in order to comply with all applicable Brazilian legislation, regulatory requirements and concession agreement requirements. The system also includes a Contingency/Emergency Plan. 47. The project’s rail system is operated by a private-sector concessionaire (SuperVia) and is supervised by the Secretariat of Transportation (Secretaria do Transporte, SETRANS) and the State Regulatory Agency (Agência Reguladora de Transportes do Estado do Rio de Janeiro, AGETRANS), each with different mandates. SETRANS issues transport system concessions and follows up on the concession contracts’ performance. The regulatory agency monitors service standards. Compliance with environmental aspects is observed by both agencies. SETRANS and its subsidiary agency, CENTRAL, have lengthy experience with

50

projects financed by the World Bank, and are implementing specific measures to improve their environmental management capacity. 48. The State of Rio de Janeiro has improved its involuntary resettlement legislation and procedures. Decree 41148/2008 introduced guidelines and mechanisms with the potential to promote socially responsible resettlement processes that guarantee the participation of potentially affected people and extensive consultation processes with key stakeholders to address their concerns during implementation. These are in accordance with most of the provisions of the Bank’s resettlement policies. These resettlement practices were assessed in the preparation of the Urban and Housing Development Policy Loan (P122391). Moreover, as agreed in the Resettlement Action Plan, a specific multidisciplinary team (lawyer, engineer and social worker) will be hired and a new and specific grievance mechanism will be defined by the State of Rio de Janeiro to address the involuntary resettlement issues that are directly related to this project. 49. SuperVia, the system operator, has staff dedicated to environmental, health and safety (EHS) issues. The EHS section is responsible for implementing the company’s EHS management system (which is part of the company’s Management Information System [MIS]), including a comprehensive social program with the surrounding communities. It addresses environmental education and communication. The ongoing environmental management measures have already produced positive results by implementing sound waste management in the maintenance yards, joint activities with community volunteers, and other relevant actions. SuperVia is strengthening its EHS institutional capacity and is expanding its staff and budget committed to environmental management. 50. Stakeholder consultation and disclosure of safeguard policies. Associated with the project, an Environmental Assessment, an Environmental Management Plan (EMP), and a Resettlement Action Plan (RAP) were prepared. These documents cover all the safeguard policies triggered by the project and include measures to mitigate any potential negative effects of project implementation. The plans were disclosed to the public prior to project appraisal. 51. A variety of stakeholders were consulted during project preparation on evaluating project-related safeguard policy issues. They included: (a) the operators of the system: the concessionaire (SuperVia), the state implementing agency (CENTRAL), state government entities, railroad workers, and community mobilization teams; (b) the people, communities and businesses settled in the area of influence of the railroad (railroad system users, community residents and associations, businesses and organizations, and the squatter families who may be displaced); (c) municipal and metropolitan authorities and organizations; and (d) civil society entities concerned with the mass transportation system in the Rio de Janeiro Metropolitan Region. 52. Meetings and consultations were held with representatives of key stakeholders on the draft EA, EMP and RAP. Three meetings with affected people were held to address the principles and guidelines of the RAP. The inputs from all these meetings were considered and included in the final drafts of the EMP and the RAP.

51

53. In line with the Access to Information Policy, the final versions of the EMP and the RAP were disclosed through the SuperVia, Central and SETRANS websites and in the Bank’s InfoShop prior to appraisal. 54. As part of their EHSMS, the EMP, RAP and SuperVia have specific activities related to ongoing public interactions.

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Annex 6. Economic Analysis

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

A. Introduction Summary of Cost-Benefit Analysis

1. An incremental cost-benefit analysis of the proposed project was carried out using standard methodologies for transport policies and in accordance with OP 10.04. The project consists of a policy component that finances several studies to improve the policy framework for sustainable transport, including climate change considerations, and to make the transport system more resilient, better prepared, and less vulnerable to natural disasters and other risks, including those related to climate change. The project’s Infrastructure and Equipment component includes the purchase of 60 trains to improve the quality of service in the SuperVia system. It also includes a demonstration project that could include the purchase and distribution of bicycles and/or tools to make certain elements of the SuperVia system more energy efficient.

2. This cost-benefit analysis (CBA) focuses on the evaluation of the 60 trains because the costs and benefits of this part of the project can be estimated over a number of years. The studies and the demonstration project cannot be evaluated as such because their benefits, although they exist, are difficult if not impossible to quantify. This approach is standard practice. Furthermore, some expected benefits of the investment in 60 trains, such as contributing to denser urban development, particularly by benefits resulting from synergy with a housing improvement program, were also not taken into account because of the level of uncertainty associated with their estimation. Finally, using the results of the model presented in Annex 8 to estimate emission reductions for the project, an effort was made to take these benefits into account. However, when monetized, these benefits are a small fraction of the overall pool of benefits. This result is standard for transport projects.

B. Summary of Cost Benefit-Analysis

3. An incremental cost-benefit analysis of the proposed investments for an increase of 60 trains in the railway system fleet operated by SuperVia was undertaken to evaluate the project’s economic feasibility. The methodology applied consisted of comparing the with- and without-project situation and quantifying the benefits due to time savings for users of public transport modes including railway, bus system and informal services such as vans and deregulated buses. Other benefits related to operating cost savings for all modes, road maintenance cost savings, bus management system savings, accident reduction, air pollution savings, and investment and operating costs were quantified. The demand for each mode was determined by using a discrete choice model that estimated the passenger-hours and passenger-km saved by mode with the project for with- and without-project scenarios.

4. The main benefits considered were: a) Operating cost savings resulting from the lower costs of operating all modes through estimates of passenger-km with and without the project which are multiplied by the respective estimated operating costs; b) Travel time savings estimated by determining the effect of travel time reduction on the consumer surplus for each passenger trip pertaining to the potential travel demand of the project; c) Reduction

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in road maintenance costs due to the reduction of bus-km with the project (minor); d) Reduction in the bus system’s management costs due to avoided costs of expanding the existing public management structure; e) Reduction of air pollution costs due to the reduction of bus-km with the project (minor). To be conservative, the costs of avoided investments in the do-nothing situation were not considered; and f) Reduction of accident costs estimated by multiplying the average cost per accident per 1,000 passenger-km with and without the project and as a function of the bus-km saved (minor). Benefits from modal shift from car users were not considered to be conservative.

5. The main costs considered were: a) Investment costs for the acquisition of trains, and b) Operating costs including operation and maintenance personnel for the additional fleet.

6. The project will decrease the number of bus-km and bus passenger-hours traveled on the urban network through the acquisition of the new fleet. The bus-km saved per year are estimated by the discrete mode choice model. The main beneficial impacts of the project under evaluation are reduced congestion (mainly due to fewer buses on the street), reduction in traffic-related accidents, reduced vehicular air pollution due to fewer buses on the street, and economic savings from travel time reduction. Regarding air pollution, global emissions were valued at US$12.5 per ton of CO2 not emitted.

7. The benefits mentioned above are all quantifiable and were used in the economic analysis. However, a large number of non-quantifiable benefits or positive impacts of the project cannot be captured in a standard cost-benefit analysis but are worth noting. As explained in the main body of this Project Paper, the project is taking place in a rich planning environment. As a result, it has close links to urban development. The main benefits that cannot be quantified are:

a. Improvement of travel level of service: (i) train occupation rates are expected to decrease to a lower level of passengers per square meter in the with-project scenario; (ii) comfort-level improvements provided by the new trains are non-measurable benefits and will certainly lead to higher utility levels of travel consumption and associated benefits.

b. Accessibility and creation of new opportunities: (i) promote the

interconnection between residential to employment areas and social equipment facilities (hospitals, schools); (ii) strengthen existing sub-centers and corridors.

c. Land use and value: (i) increase land values due to lower generalized travel

costs by public transport and by automobile, even without changes in the zoning law; (ii) increase the dynamics of the real estate market, reflected by the occupation of empty lots and the renewal of older buildings in the area of influence of the train railways.

d. Employment generation: the creation of jobs with multiplier effects in several

sectors of the economy will be promoted.

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C. Traffic Demand Analysis

8. Demand analysis was undertaken by a specialized consulting team, based on data provided by a comprehensive Origin-Destination Survey carried out in 2002 in the Rio de Janeiro Metropolitan Region. The survey collected data from 400 traffic zones and interviewed close to 99,300 people from 34,000 households. A schematic overview of the traffic zoning and rail and subway system configuration is presented in Figure A.

9. Traffic demand levels for the project life cycle were estimated by consulting advisers through the simulation of a discrete mode choice model, which tested several scenarios with different combinations of headway and network speed.

10. The mode choice model was calibrated under the conditional logit formulation and assumptions and was applied to simulate mode choice and trip assignment. The choice utility equations were derived from a dataset including 2,031 choice observations including railway, bus and informal modes.

11. The without-project scenario consisted of simulating the current public transport network without the railway improvements in headway and capacity, which will result from the rolling stock and signaling system acquisition. Headway ranging from 7.5 to 20 minutes was applied during the peak hour and from 10 to 40 minutes during off-peak periods, as shown in Table 1.

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Figure A: Study area zoning and high-capacity passenger systems

Rail

Subway

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Table 1: Without-project scenario

12. The with-project scenario consisted of simulating the proposed public transport network with the railway improvements in frequency and capacity, which will result from the rolling stock and signaling system acquisition. Headway ranging from 3 to 7.5 minutes was applied during the peak hour and headway ranging from 3.8 to 15 minutes was considered during off-peak periods, as shown in Table 2.

Table 2: Estimated improvements

Schedule

Line

Without-Project Situation Frequency Headway

trains/hour min.

Pea

k P

erio

d Deodoro 8 7.5

Santa Cruz 8 7.5

Japeri 8 7.5

Saracuruna 6 10

B. Roxo 3 20

Off

-Pea

k P

erio

d Deodoro 6 10

Santa Cruz 6 10

Japeri 4 15.0

Saracuruna 2 30

B. Roxo 1.5 40

Schedule

Line With-Project Scenario Waiting

Time Operation

Speed Total

Reduction Frequency Headway

trains/hour min. Decrease in minutes

Pea

kP

erio

d

Deodoro 20 3.0 2.25 3 5.25

Santa Cruz 14 4.3 1.61 8 9.61

Japeri 16 3.8 1.875 6 7.88

Saracuruna 10 6 2 7 9.00

B. Roxo 5 12 4 5 9.00

Off

-Pea

k P

erio

d Deodoro 16 3.8 1.875 3 4.88

Santa Cruz 10 6 2 8 10.00

Japeri 11 5.5 4.8 6 10.80

Saracuruna 8 7.5 11.25 7 18.25

B. Roxo 4 15 12.5 5 17.50

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13. The network’s workday performance in 2012 was estimated by the model and adjusted according to data provided by SuperVia describing existing public transport demand and service supply by rail, bus and informal transport.

14. SuperVia has a vast amount of documentation, including an internal database of operational passenger surveys, as well as strategic information from the PDTU. The model application on the disaggregated data obtained from Origin/Destination (O/D) surveys provided estimates of time value for each type of user and trip purpose.

15. Time value in 2012 was estimated at US$2.37/hour or distributed in different user categories, as follows:

time value of US$1.29 for users with monthly income below US$368.45 (1.2 minimum wage of 2010) and time value of US$3.13/hour for users with monthly income above that level;

time value of US$3.56/hour for formal workers and US$1.70/hour for informal workers;

time value of US$2.88/hour for users with high school education level and US$1.94/hour for users with low education level.

Table 3: Estimated time value for railway users

Minimum wage = US$368.45

16. The time value is also estimated individually for each user included in the O/D database, which represents the potential demand for the railway services. The user categories mentioned above account for 64 percent of the demand by users who are formally employed, 58 percent of users with monthly incomes above US$368.45, and 45 percent of users with higher than basic education, as shown in Table 4.

Table 4: Rail demand distribution (%)

Attribute %

% Income > US$368.45 58%

% Formal job 36%

% Basic education 55%

Time Value

YEAR 2008 US$/min US$/hour

General 0.039445 2.366661Low income (<1.2 minimum wage) 0.021499 1.28996High income (>1.2 minimum wage) 0.052229 3.133751Formal job 0.059393 3.563544Informal job 0.028287 1.697194High school level 0.048046 2.882716Basic education level 0.032353 1.941228

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17. According to the model, the application time elasticity result is significantly higher than those values estimated for price and income, as shown in Table 5 below.

Table 5: Arc-elasticities

18. In 2008, the daily traffic of the railway system was estimated to be 458,208 passengers in the do-nothing scenario, increasing to 483,409 in the with-project scenario, adding up to 25,201 passengers or 5.5 percent and increasing rail commercial speed by 10 percent. Estimates for bus and informal systems reduced demand by 8.2 percent from the without-project scenario to the with-project scenario.

Table 6: Daily performance indicators

Indicator Scenario Railway Informal Bus

Trips Without project 458,208 99,122 209,920

With project 483,409 90,497 193,344

Variation 25,201 (8,626) (16,576)

Pass-km

Without project 21,178,700 4,313,476 8,595,228

With project 22,288,225 3,920,233 7,878,946

Variation 1,109,525 (393,243) (716,282)

Pass-hours

Without project 921,126 170,584 348,776

With project 883,545 154,357 317,651

Variation (37,581) (16,227) (31,125)

Commercial Speed

Without project 23 25 25

With project 25 25 25

Variation 9.7% 0.4% 0.6%

Source: Rio Mass Transit II, 2009.

D. Investment Costs of the Rail Systems 19. Investment cost estimates resulted in a total of US$571. 2 million, including the following components:

a) Fleet Acquisition Costs: the additional fleet required was estimated at 60 trains for the rail system, amounting to US$571.2 million. SuperVia has provided an estimate of the additional fleet and respective schedules for 2012 to

Arc-elasticity time -0.5721 price -0.08343 income 0.080371

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2014. Evaluations of fleet quantities took into account fleet expansion and replacement needs.

Table 7: Investment components for trains

b) Salvage Value and Depreciation: depreciation assumptions were made for

the investment of the components on rolling stock amounting to US$103.4 million after a project’s useful life of 25 years. According to information received from similar studies (São Paulo Trains Project 2008) trains are considered to have a full depreciation period of 30 years.

Table 8: Basic assumptions regarding salvage value and depreciation

20. Operational Costs: SuperVia provided an estimate of additional costs for the fleet and system operation during project implementation from 2012 to 2013. The breakdown of operational costs basically involved personnel expenses for operating and maintaining the new trains, including wages and labor costs. Costs were expected to grow from a yearly value of US$468,900 in 2011 to US$937,800 in 2013 and afterwards.

Table 9: Operational costs for additional trains (US$1,000)

E. Economic Benefits of Public Transport

21. Direct economic benefits were derived from the application of unit values of operating costs, bus system management costs, and road maintenance costs considered for

Investment Items US$ million

2012

2013

2014

Total

60 Trains 53.1 212.4 305.7 571.2

Component

Total Value USS million

Yearly Depreciation

Project Life Cycle

Residual Value

US$ million Lot 2012 53.1 10,158,799 26

103.4

Lot 2013 212.4 10,158,799 25

Lot 2014 305.7 10,158,799 24

Year Personnel Expenses

2012 87.240

2013 436.200

2014–2037 937,829

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each scenario (with or without project) on system performance indicators derived from choice model simulation.

Table 10: Unit cost values applied to simulation data (US$)

Attribute

Without Project

Bus

Operating costs/km 0.028099 0.082945 0.094256

Road maintenance costs/km 0.004098

Accident cost/km 0.003296

Pollutant emissions/km 0.004918

Source: São Paulo Trains Project 2008

22. The direct economic benefits of travel time were derived from the attribute valuation provided by the adjusted choice model. The marginal utility of income was determined from the cost parameter of the choice model and was applied to calculate consumer surpluses as logsum functions for the with-project and do-nothing scenarios. Whereas railway travel time reduction was the major improvement to be quantified, benefits of travel time were calculated from the increase in the consumer surplus for each user in the with-project scenario.

23. Daily results were multiplied by a constant of 272 working days to obtain yearly results. Basic estimators used for accident and pollution valuation are presented in Table 11.

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Table 11: Indirect cost estimates

Indirect Cost Items Basic Estimators

Accident Frequency

(per event type) Accident/Km

Accident Cost

(US$)

Property damage only 8.48E-06 3271.973

Injury 2.58E-06 17513.4

Fatal 9.13E-08 144583.9

Average 8.48E-06 3271.973

Pollutant Emissions (per ton) Emission Gr/Km US$/Gr

CO 19.56384 0.000586

HC 3.078044 0.002595

Sox 0.273894 0.011415

MP 0.743426 0.015339

CO² 1004.277 9.42E-05

CO 19.56384 0.000586

Source: São Paulo Trains Project 2008

E. Economic Cost-Benefit Analysis 24. The general cost-benefit evaluation methodology adopted was that of comparing the situation with the proposed project implemented, with the situation that would occur without implementation of the project. This implies that operating savings, travel time savings, avoided road conservation, bus system management expenses, and accident and pollution costs for the proposed project are considered to be incremental: with-project costs minus without-project costs.

25. Project Development and Growth Rationale: Growth rates were adopted according to projections included in the Economic and Financial Balance Analysis for the 2003–2007 Tariff Review Process, prepared for SuperVia by the Getúlio Vargas Foundation. Growth rates were derived from this study for the 2012–2024 period and a linear rate was adopted for the 2025–2037 period. Growth rates during the 2012–2037 period are expected at a yearly average of 4.8 percent. In 2013 the daily traffic for the railway system was estimated to be 547,916 passengers in the do-nothing scenario, increasing to 578,051 in the with-project scenario, adding up to 30,134 passengers to the rail system.

26. Benefits from fleet acquisition are considered separable from total benefits provided from the implementation of the signaling system. Only a 60 percent proportion of the total benefits incurred in time and distance savings was considered attributable for the additional fleet. Transfer payments such as taxes and subsidies were withdrawn from the project profile

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and the adopted value for the exchange rate was R$1.661/US$1 referring to February 1, 2011.

27. The project flows are presented in Table 12, discounted to present values at a rate of 10 percent per year for the basic alternative studied. The simulated scenario shows a positive net present value of US$578.7 million and a benefit/cost ratio of 2.71. The economic internal rate of return of 24.13 percent was obtained for the basic alternative.

28. Travel-time savings are the most significant benefits obtained. Operating costs saved by the decrease of bus and informal services showed a sufficient amount to compensate additional railway operating costs generated by the new service frequency and longer travel distances.

29. Road maintenance and bus system avoided costs amount to 11.15 percent of the value of total benefits. On the other hand, safety and environmental benefits were estimated at 1.4 percent of total benefits.

F. Sensitivity Analysis 30. The sensitivity analysis is shown in Table 13. Effects on the results emerging from changes in the costs and benefits are compared against the base case.

31. Significant variations were observed for value of time benefits and investment costs. The switching cases for a discount rate of 10 percent of each of these attributes were determined and results showed a factor of 28 percent for value of time and 173 percent for investment costs.

32. Variations due to environmental benefits can be assumed irrelevant for the purposes of the present analysis.

G. Reference Documents

Fundação Getúlio Vargas. Análise do Equilíbrio Econômico–Financeiro para o Processo de Revisão Tarifária Qüinqüenal, 2003 a 2007, 2008.

World Bank. São Paulo Trains and Signaling Project. Report No: 40891-BR, 2008. World Bank. Rio de Janeiro Mass Transit II Project. Report No: 46755-BR, 2009 Governo do Estado do Rio de Janeiro, Secretaria de Estado de Transportes. Adicional ao

Programa Estadual de Transportes 2–PET 2. Carta Consulta COFIEX. Revisão Fevereiro de 2011.

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Table 12: Economic evaluation (base case)

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Table 13: Sensitivity analysis

ALTERNATIVE

EIRR NPV B/C

% (US$

millions) Ratio

R =10% r=10%

Base Case (10%) Base Case (12%)

24.13%

24.13%

578.7

386.3

2.71

2.25

BENEFITS

Value of Time

10% reduction 22.39% 498.5 2.47

10% increase 25.84% 659.0 2.94

15% increase 26.69% 699.1 3.06

15% reduction 21.50% 458.3 2.3572% VoT reduction (switching value) 10.02% 0.8 1.00

33% VoT reduction 18.21% 313.8 1.93

50% VoT reduction 14.88% 177.4 1.52

10% increase 24.32% 587.5 2.73

Operational 10% reduction 23.94% 570.0 2.68

50% reduction 23.19% 534.9 2.58

Indirect Benefits

(Accidents and Air Pollution) 100% increase 24.40% 591.3 2.74

Demand Growth Rate 2.5% decrease in yearly growth 19.27% 313.1 1.92

1.0% decrease in yearly growth 22.16% 460.0 2.36

COSTS

Rolling Stock and System Acquisition Costs

10% increase 22.34% 545.4 2.47

25% increase 20.12% 495.4 2.17173% increase (switching value) 10.02% 2.0 1.00

Additional Fleet Operating Costs

10% increase 24.12% 578.2 2.70

25% reduction 24.17% 580.1 2.72

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Annex 7. Sector Background, Urban Transport Planning and Context in the RJMR

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

RIO DE JANEIRO METROPOLITAN REGION TRANSPORT PLANNING CONTEXT 1. The Rio de Janeiro Metropolitan Region (RJMR) is Brazil’s second-largest metropolitan region with 11.3 million inhabitants who in an average week day make 20 million trips. In 2005, the RJMR developed its Urban Transport Master Plan (Plano Diretor de Transporte Urbano, PDTU), which that assessed the transport system and the mobility patterns of the region. In addition, this plan provided policy guidance for improving the conditions of the inhabitants and trips in the RJMR. 2. The state and local governments are currently promoting an agenda of transport-related projects, plans and interventions including:

A new PDTU. This new plan will be ready in 2012. The new PDTU will assess the changes in the transport system and provide sustainable transport policies for the Metropolitan Region. For the first time in years, the development of this plan is providing the Municipality and State of Rio de Janeiro the opportunity to work together in developing their investment programs and subsidy policies.

Expansion and improvements to the MetrôRio Network. MetrôRio has been improving its network in recent years. These interventions include: (i) the improvements in Line 1 with the construction of the Ipanema/General Osório (which opened in 2009) and Uruguai stations; (ii) the construction of Line 1A, which connects Line 1 and Line 2; and (iii) the construction of Line 4.

Bilhete Único Intermunicipal (BUI). Based on the fare integration of public transport in São Paulo, in early 2010 the RJMR implemented its BUI for inter-municipal transport services. This integration, which improved the affordability of public transport, is currently benefiting about two million people.

Bilhete Único Carioca (BUC). Following the implementation of the BUI, the Municipality of Rio de Janeiro implemented its BUC at the end of 2010. This measure integrated the fares of municipal transport services. Users can transfer between services for free within a two-hour period. This measure has furthered the affordability of public transportation and led to an optimization of the use of the network. About 250,000 trips per day currently benefit from this policy.

Bus Rapid Transit (BRT) Lines. Four BRT lines are planned to be implemented in the coming years: TransCarioca, TransOeste, TransOlímpica, and Av. Brazil. These lines are planned to be integrated with other transport modes such as the SuperVia and Metro.

The TransCarioca will have a length of 39 km (Barra–Aeroporto Internacional) of segregated lanes and will carry out 500,000 trips per weekday. The TransOriente will have 36 km of segregated lanes (Jd. Oceânico–Cinco Marias), 7 km of mixed traffic (Cinco Marias–Santa Cruz), 9 km of mixed traffic (Mato Alto to the junction with

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Estr. do Monteiro), 11 km of segregated lanes (Cesário de Melo to Cemitério de Campo Grande), and 8 km of preferential lanes (Cesário de Melo to Centro de Campo Grande). This line is expected to carry 220,000 trips per weekday. The TransOlímpica will have a length of 26 km, with 30 km of feeder and parallel bike lanes. This line is expected to carry 100,000 passengers per weekday. The TransBrasil is currently undergoing a planning phase.

Rationalization of Bus Services (BRS). There will be a reorganization and rationalization of conventional transport services. After it is implemented, there will be 20 corridors with priority for public transport. A corridor is already implemented in the Copacabana corridor.

URBAN TRANSPORT CHARACTERISTICS IN RJMR 3. Figure 1-1 depicts the modal share for all 20 million daily trips in the RJMR as estimated in 2004. About one-third of all trips are non-motorized, about one-half are in public transport (PT) modes, and the remainder (about one-sixth) are in private modes.

Figure 1-1: Modal shares of all trips in the RJMR

4. However, the share for private modal shares is increasing at the expense of non-motorized and public transport trips. Rio de Janeiro’s fleet size is currently growing at 7 percent per year (Denatran) while the population is growing at 1.1 percent per year (IBGE). This is leading to an increase in the motorization rate in the RJMR.

Bicycle3%

Informal PT8%

Other PT (ferries, school, charter)

3%

Suburban rail2%

Metro2%

Other MV1%

Taxi1%

Motorcycle1%

Automobile15% Walk

32%

Bus32%

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5. Suburban rail, currently operated by SuperVia, represents about two percent of all trips, less than four percent of all motorized trips, and less than five percent of all public transport trips. Table 1-1 provides a summary of SuperVia’s most recent operational characteristics. Table 1-2 is a summary of operational characteristics by line.

Table 1-1: Summary data of SuperVia operations

Operational Stations 98 Total Network Extension 225 km Number of Municipalities Served 12 Operational Fleet 161 Electric Multiple Units (597 cars) Average Trips per Day 756 Total Passengers per Day 504,550 (between January and July 2011)

Deodoro 239,824 Japeri 111,123 Santa Cruz 76,608 Saracuruna 51,326 Belford Roxo 25,669

6. Table 1-3 presents the growth in total passengers transported and passengers-km since 1999. The number of passengers transported has nearly doubled in 10 years. Figure 1-2 presents the evolution of SuperVia’s average daily demand by month for the last 10 years. Figure 1-3 depicts the distribution of SuperVia passengers by income quintiles. The low-income population is generally represented by categories C, D and E.

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Table 1-2: SuperVia operating characteristics by line

Deodoro Santa Cruz Japeri

Belford Roxo Saracuruna

Operational length (km) 22 32,7 47.7 32.9

1.6 m gauge – 34.0

1.0 m gauge – 55.6

Number of stations 19 16 16 15 16 – 1.6 m gauge 16 – 1.0 m gauge

Stations integrated with Metro 2 none none 1 1

Stations with bus integration all stations all stations all stations all stations all stations

Passengers transported (000 boarding passengers on average workday)

239,824

111,123

76,608

51,326

25,669

Peak-hour/off-peak headway (minutes)

Local – 10/16

15/16 8/16 15/30 10/30 Direct – 5/10

Peak hour seats offered

Local – 97,300

110,200 118,950 62,400 48,950 Direct – 296,200

Average commercial speed (km/h)

Local – 34.83

41.60 44.64 37.32 34.02 Direct – 47.27

Travel Time (min) Local – 38 Direct – 28 79 83 53 60

Additional information can be found at: www.supervia.com.br Some stations serve more than one line. Travel time may vary depending on service. Headway may vary during peak period. Deodoro Line is served by local trains (stops at all stations) and direct trains (stops at selected stations). Peak hour seats according to average scheduled train capacity.

Table 1-3: SuperVia total passengers transported and passenger-km

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Total Passengers (000)

67,217 80,505 79,777 87,268 94,892 94,781 97,685 105,701 118,801 128,304 126,265 136,191

Passenger-km (000) NA NA NA NA NA 2,489 2,563 2,776 3,120 3,369 3,315 3,576

Average Passengers/Day 236 285 292 321 347 347 356 389 437 490* 461 497

* as of December 2008, average/year 464

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Figure 1-2: Average daily demand on SuperVia

Figure 1-3: Income quintiles of SuperVia passengers

RIO DE JANEIRO STATE GOVERNMENT’S URBAN TRANSPORT SECTOR STRATEGY 7. The State of Rio de Janeiro’s (SRJ) urban transport strategy for the RJMR is anchored on four pillars: a) to establish with the municipalities, operators and users a regional transport coordination commission (RTCC); b) to develop and periodically update an integrated land use, urban transport and air quality strategy; c) to introduce financing mechanisms that will guarantee the long-term sustainability of the urban transport systems; and d) to promote progressive private-sector participation in the investment and operations management of those systems. The SRJ has shown progress toward the above objectives. First, an RTCC (named AMTU-RJ)

Classe Social

B25%

C65%

D8%

E1%

A1%

A

B

C

D

E

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functions as a forum for discussion of metropolitan policies for prices and subsidies as well for discussion of common issues such as multimodal tickets and major investment projects. Second, the SRJ has refined an integrated land use, urban transport and air quality strategy using sketch planning techniques (PDTU), which is now a major planning tool that is continuously updated. This strategy has been used for decision makers and stakeholders to discuss proposed projects. The SRJ has explored several financing mechanisms for the urban transport sector other than government budgets. Through its concessionaires, it has accelerated the rental of station spaces, promoted in-vehicle and outside-vehicle advertising, created partnerships for shopping centers close to Metro stations, and sells space in the right-of-way for cable services in an effort to increase non-operating revenues. Finally, aware of the scarcity of resources it faces, the SRJ is the most advanced Brazilian state with regard to private-sector participation in investments and operations, considering that all its operating agencies have been awarded to the private sector and/or privatized since 1998. 8. In 2007 and very early in the current administration, the State made it clear that mass transport was a priority. The State confirmed that it will take all steps necessary to strengthen the trunk systems (both rail- and road-based) and improve hub-and-spoke networks as a means to decongest the RJMR. The SRJ’s strategy is to integrate the existing systems, offer an acceptable level of service to the user, and reduce operating subsidies. But it is also a State goal to improve rail-based urban transport in low-income areas to facilitate access to employment centers, health, education and leisure facilities. Finally, the State has clearly decided that a major improvement of the rail-based network, particularly the SuperVia and MetrôRio networks, is a cost-efficient priority and plans to upgrade it to a surface metro-like operation. Furthermore, it has decided that improving rail-based mass transport would contribute to a cleaner environment and to the greening initiatives put forward by the State. 9. A number of key issues are being addressed in order to improve the supply of urban transport services and to guarantee their orderly development and sustainability in the long term for the RJMR. These are: (a) institutional issues, (b) cost recovery and financial management issues, (c) environmental issues, and (d) transport planning issues.

Institutional Issues. The most critical institutional issues are: (a) the fine-tuning of relations between state and municipal governments and a clear definition of their respective roles in the financing, planning and operation of urban transport services in accordance with the 1988 Constitution; and (b) a clear definition of the funding mechanisms of the sector at the metropolitan level through an agreement between the State and municipalities in the region. The government’s strategy, which was developed under the previous Bank-supported project, was to create a regional urban transport coordination agency (Autoridade Metropolitana de Transporte Urbano-Rio de Janeiro, AMTU-RJ) to plan, coordinate and set priorities for new investments and modal integration. AMTU-RJ now meets frequently and is primarily a forum for discussion of metropolitan transport policies and projects. The SRJ has been strengthening AMTU-RJ, has merged the state administrations of metro and suburban rail, and has strengthened the enabling environment to build integration terminals identified in the PDTU. The PDTU’s update is under way and for the first time in years, the Municipality and the State of Rio de Janeiro are

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working together to develop their investment programs and subsidy policies.

Cost Recovery, Financial Management and Funding Issues. A number of measures are needed to improve the sector’s cost and financial performance: (a) setting tariffs that, when added to subsidies, cover at least the long-run variable costs (defined as out-of-pocket costs plus depreciation of equipment and cost of capital) of the service provided; (b) controlling fare evasion; (c) appropriate peak and off-peak pricing; (d) improving the financial management of the systems through wide-ranging cost-cutting measures and generating more non-operating revenues through advertising, station space rentals, and use of the right-of-way; and (e) revamping the funding mechanisms in order to guarantee adequate financing for the implementation of new mass transit systems and the sustainability of the existing systems. Since 1998, to help achieve these goals the SRJ has embarked on an aggressive campaign to promote private-sector participation in the urban transport sector, reduce fare evasion, cut costs and generate more non-operating revenues. But much more needs to be done and, under the proposed project, the institutional and policy development component includes studies to assist the State in this area. As its financial situation improves and its capacity to obtain authorization from the Federal Government for multilateral/bilateral loans is increased, the SRJ plans to increase investment in public transport. Major policy advances were the introduction of the Bilhete Único Integrado (BUI) by the State in 2010 and the introduction of the Bilhete Único Carioca (BUC) by the Municipality of Rio. Both are integrated flat fares that allow users to use more than one mode of transport during a two-hour period. They have substantially cut lower-income households’ expenses for transportation. In the case of the State, the BUC requires a subsidy that is being monitored and audited. In the case of the Municipality, there are no subsidies but several tax exemptions were given to the consortia that won the concession to operate the bus routes.

Environmental Issues. Air pollution, noise, traffic congestion and road accidents are major environmental issues to be addressed in the RJMR. The environmental impacts of urban congestion and noise pollution in the urban area could be reduced through: (a) the allocation of responsibilities across government levels for the enforcement of the law and the definition of tougher standards; (b) the use of cleaner and quieter systems; (c) where appropriate, the use of non-motorized transport; (d) improved traffic management and control; and (e) the strengthening of traffic safety education and the enforcement of traffic regulations. Extension of the MetrôRio network and the proposed improvements on MetrôRio and SuperVia will most likely reduce the number of bus-kms in the corridors where they are occurring and consequently will reduce vehicle emissions. Mandated fuel changes to compressed natural gas (CNG) in intermunicipal and municipal buses would also contribute; both the State and Municipality of Rio are planning them. Aggressive control of informal vans may also help because these vehicles are generally in poor maintenance condition. This may also reduce congestion and emissions. Finally, the use of more bicycles to access the stations and the renewal of the train fleet with trains that have regenerative braking will certainly add to the greening of the system. Figure 1 in the main body of the document shows other greening initiatives piloted

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by the Bank in Brazil.

Transport Planning Issues. The need to continue to strengthen the RJMR’s transportation planning, traffic database, traffic management, and economic and financial evaluation of new investments was emphasized during project preparation and was addressed by the SRJ. SETRANS/CENTRAL is equipped with a battery of sketch planning, demand and supply models that will test different land use, air quality, and urban transport scenarios. Furthermore, an integrated land use, urban transport, and air quality strategy (PDTU) exists and should continue to be fine-tuned with more attention to land use and environmental aspects. The PDTU is being updated under the parent loan and should be an important tool in the planning of future transport networks.

GREEN TRANSPORT PROGRAM FOR BRAZIL 10. The proposed project fits very well in the wide-ranging effort being made by the Brazil CMU to contribute to the greening of passenger and freight transport. This program includes the following projects and trust funds:

GEF Sustainable Transport and Air Quality Project for Brazil (P114010): US$8.5M grant

Spanish Trust Fund for LAC–Integrating the Transport and Climate Change Agendas: US$500K

NLTA Mainstreaming Green Trucks in Brazil (P123173) NLTA Green City Development for Brazil ESMAP Regional Block Grant (proposed for FY12) Korean Trust Fund for ICT (proposed for FY12)

11. The elements of this program include:

Integration of Transport and Land Use Planning: Technical assistance, training, modeling tools and surveys to promote a more balanced distribution of jobs and residences, reduce the use of private motor vehicles, reduce trip lengths, and increase accessibility to public and non-motorized transport. This support is being offered to the city and metropolitan region of São Paulo and the city of Belo Horizonte.

Enhancement of Public Transport: Technical assistance and training to improve public

transport systems, facilitate the effectiveness and interconnectivity of those systems with other modes of transport, and induce mode switching away from private vehicles. This support is being offered to the cities of São Paulo, Curitiba and Belo Horizonte.

Non-motorized Transport: Technical assistance, training and conduction of pilot

investments to better integrate walking and biking into municipal planning processes and public transport facilities and to create incentives for their use as a viable and safe alternative to traditional motorized transport systems. This support is being offered to the cities of São Paulo, Curitiba and Belo Horizonte.

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Private Transport Demand Management: Technical assistance and training to support

the development and evaluation of transport interventions and policies to rationalize the use of private vehicles, such as vehicle and area restrictions, pricing and other policies. This support is being offered to the cities of São Paulo, Curitiba and Belo Horizonte.

Urban Freight Management and Logistics: Technical assistance, training, and a

Freight Origin-Destination Survey to test policies to improve the efficiency of freight transport in urban areas and reduce conflicts and impacts on other modes of transport. This support is being offered to the city of São Paulo.

Vehicle Modernization and Fleet Renewal: Technical assistance, training and

conduction of a pilot test of a small fleet of trucks to test energy efficiency technologies (such as low-rolling resistance ties and aerodynamics packages) and operating practices (such as driver training), and advise government and industry on the building of a voluntary program to promote modernization and fleet renewal.

Intelligent Transport Systems (ITS): Technical assistance, training and studies to

develop a system architecture for systems such as multimodal control and operation centers, advanced traffic signal systems, remote monitoring and enforcement systems (cameras, sensors, probes, software), and systems for traffic incident management, emergency response, electronic payment and pricing, and real-time user information. Many Brazilian cities are planning major investments in ITS to enhance the capacity of existing infrastructure to handle the growth in vehicular traffic and in preparation for major events (such as the 2014 World Cup and 2016 Olympic Games),

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Annex 8. Methodology to Assess Reductions in Greenhouse Gas Emissions for an Urban Transport Project

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

I. Introduction

1. The aim of this document is to propose a simple methodology to calculate the potential reductions in greenhouse gas (GHG) emissions in cities that implement urban transport projects. The methodology proposed in this document uses basic information contained in the demand (or cost-benefit) studies that are typical for the implementation of these projects. It also employs default values for the amount of emissions from the vehicles currently being used and the potential vehicles (and technologies) that would begin to operate. Consequently, the estimates resulting from the use of this technology are not intended to meet the degree of accuracy and precision of an ex ante evaluation that will later be used to trade emission reductions in the carbon market.

II. Public Transport and Emission Reductions

2. Most of the emissions of the transport sector relate to the combustion of fossil fuels that produce emissions of carbon dioxide, water vapor and air pollutants such as CO, NOx, SOx and particulate materials (PM). The literature indicates that the sources of emissions related to transport are the result of four effects: activity, modal distribution, intensity of energy modes and their efficiency, and type of fuels or propulsion mechanisms employed.35

a. Activity refers to the number of trips and their length. Quantitatively, activity refers to the total kilometers traveled by the various vehicles. The number of trips is a function of people’s need to travel to the sites of their activities (home, work, school, shops, etc.). The length of the trips also depends on the spatial distribution/location of these activities. A sustainable transport strategy (aimed at reducing GHG emissions) seeks to reduce the length of the trips, for example, with policies that affect the use of land and provide disincentives for urban sprawl.

b. Modal distribution refers to the share of trips that take place in the various modes of transport (private, non-motorized, public). A sustainable transport strategy seeks first to prioritize the non-motorized modes, and second, the use of public transport.

c. Energy intensity and efficiency refer to two elements: (i) the energy consumed per unit of travel (or its opposite, measured, for example, in kilometers per gallon of gas), and (ii) a system’s efficiency in terms of energy consumption (measured, for example, in the number of kilometers traveled per day36 by the public transport fleet or in the number of

35 These elements are defined in the literature with the acronym ASIF (making reference to: Activity, modal Share, energy Intensity, and Fuel use) 36 The kilometers traveled per day mentioned both in the Activity effect and in the Intensity effect of the energy modes and efficiency are the same. It should be noted, however, that their increase has two causes: (i) in terms of the Activity, the kilometers increase as people, using different vehicles, increase their travel requirements (more trips per day; for example, more shopping trips) and/or increase the length of their trips (by moving to housing in the suburbs that is further away from work); and (ii) with regard to the Intensity effect in the energy modes and efficiency, the kilometers increase as the modes of transport, especially public transport, become less efficient. For example, the number of kilometers traveled by the public transport fleet per day could be reduced by designing

75

passenger-kilometers). A sustainable transport strategy should consider the use of vehicles with better performance in terms of kilometers traveled per gallon, and/or the implementation of transport systems that employ high-capacity vehicles, making it possible to reduce the number of passenger-kilometers with efficient route designs.

d. The types of fuel or propulsion mechanism refer to the fuel or propulsion method used by the vehicle fleet. A sustainable transport strategy seeks to improve propulsion mechanisms, for example, by promoting a switch from the use of diesel to hybrid technologies.

III. Methodology to Estimate Greenhouse Gas (GHG) Emissions

3. For the case of typical urban transport projects, it is proposed the inclusion of emission reductions due to: (i) modal shift; (ii) change in energy intensity (efficient route designs and fewer kilometers traveled) and use of more efficient technologies (less consumption of fuel per kilometer); and (iii) the implementation of low-emission technologies, such as hybrid buses. On the other hand, we propose that changes in the activity component not be included, since it is difficult to forecast the effects of an urban transport project on land uses, the distribution of trips in the city, and the number of trips. 4. Moreover, we propose the use of a 10-year time horizon to calculate emissions once the project has been completed. This horizon is proposed due to the high level of uncertainty regarding the performance and programming of the new system as well as the projection of a dynamic baseline, which is designed to predict the future emissions under the “without-project” scenario.

a. Required Information

5. The data required for each project can be derived from the demand studies, the default emission factors of traditional buses, and the emission factors of low-emission vehicles. The following information is required in order to use the proposed methodology:

a. Number of kilometers traveled per year by the current public transport fleet in the demand basin to be affected by the project (variable K11). This information is generally provided directly in the demand study. If it is not available, it may be inferred by taking the number of buses available in the corridor multiplied by the average distance per trip (that is, the length of the route), and then multiplying this figure by the number of trips made by a bus per day. Another possible methodology to obtain this indicator, if it is not available in the study, is based on dividing the number of daily trips that would be made in conventional public transport (in the without-project scenario) by the number of people transported per day by a conventional bus. This quantity, which corresponds to the number of buses that would be taken out of circulation, is multiplied by the number of kilometers traveled by a bus per day. It is important to be cautious because studies usually only present an estimate for a typical workday. Therefore, the number of kilometers traveled per year should not be the value indicated in the study multiplied by 365 (the number of days in a year), but by a smaller figure. If sufficient information is not

better routes, reducing oversupply of fleet, and using high-capacity vehicles. These measures taken together have the potential of transporting the same number of people but with fewer kilometers traveled.

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available, this figure could be 312, if we consider that there are 52 weeks in the year, with 5 workdays each, and the demand on Saturdays and Sundays is half as much as on a working day.

b. Projection of the number of kilometers traveled per year by the current fleet if the project is not executed (variable K1i). Some demand studies (or cost-benefit studies) include as an alternative a “no-project” scenario. If that is the case, we suggest that the values projected in the studies be used. If this scenario has been calculated in the studies but the evolution of kilometers traveled has not been included, we suggest that the change in kilometers traveled be projected in accordance with their historical increments; that figure could also be obtained based on the evolution of the fleet size. If more information is available, we propose that a statistical analysis be conducted, making use of linear regression models. In this analysis, the dependent variable should be the number of kilometers traveled per year by the current fleet, and the independent variables should be population growth, economic growth and the expansion of the motor vehicle fleet. With the results of this analysis it is then possible to project the change in the number of kilometers traveled by the current fleet.

c. Number of kilometers traveled per year by the new fleet under the project (variable K2i). As in the previous point, this figure may be obtained directly from the demand studies. Some demand studies may comprise different scenarios, such as “optimistic” and “pessimistic.” We suggest that these values be taken from the more realistic scenarios or those that are more consistent with the reality of the projects and conditions in the cities.

d. Modal shift, number of trips in the new system that would otherwise have used private modes and kilometers logged in those modes in the no-project scenario (variable K3i). If this information is not available from the studies and a modal shift from private cars to public transportation is deemed possible, we suggest that values from international experiences be used. In the case of the Metrobus system in Mexico City, this change corresponds to 10 percent (Metrobus website). In the case of Lima’s Metropolitano, the change is 3 percent (Total Market Solutions 2010). In the case of Bogota’s Transmilenio, the change is 9 percent (FTA Report 2006). The above figures lead us to suggest that if there is no information available and a modal shift is deemed possible, a value of 7 percent could be used (the average of international experiences). The effect of the modal shift from taxis to public transport is not considered since it is very likely that taxis will continue operating during the same number of hours in which these trips would be made.

The number of trips per day that would shift their mode must be converted into the number of kilometers per year that these trips would travel in the private modes. To obtain this number of kilometers, take the number of trips per day and divide it into the average occupancy of private vehicles (for private cars it is usually around 1.4). This represents the number of private-mode trips that would be replaced. The result of this operation is divided into the number of daily trips that are made in private modes (two or more trips) to determine how many “vehicle equivalents” would stop running. Finally, this number is multiplied by the kilometers traveled by a private-mode vehicle per year.

e. CO2 equivalent emission factors in terms of mass per unit of distance (kg/km) of the current fleet, the new system’s fleet, and the private project (variable En). These factors are dependent on city-specific conditions, driving cycles, and the characteristics of the fleets, including:

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speed in the different segments of the trip temperature fleet age and number of kilometers traveled per year driving practices of the operators number of cold starts topographic characteristics of the routes vehicle subtypes (large buses vs. microbuses)

The lack of accuracy in determining these factors introduces a great uncertainty in the estimate. We estimate that these uncertainties could represent up to 68 percent37 of the estimated value. In other words, the estimated quantity, which we could call X, would be in the range38 of X ± 0.68X. Given the need to have an estimate available without conducting tests in the various cities with the fleets currently used and those that will be employed in the subprojects, we suggest the use of the standard values reported in Annex 1. Said Annex also shows the factors if the project includes bus and trains; in this case, the emissions are dependent on the consumption of electricity per kilometer traveled by the fleet.

f. Destination and use of the fleet that the project is decommissioning from the system (variable K4i). It is necessary to know what the destination of the decommissioned fleet will be. If it is scrapped, this factor is equal to zero. If the fleet continues to operate anywhere in the world, it will emit GHG. Therefore, it is necessary to estimate the number of kilometers per year that it would travel and subtract it from the project’s estimated reduction.

b. Procedure

6. After the abovementioned data are obtained, the proposed steps to estimate the potential emission reductions are as follows:

a. Emission estimate at the dynamic baseline. For year 1 (when the project has already been implemented and is fully operational), emissions are obtained by multiplying the number of kilometers that the old fleet traveled per year by the emission factors. For the following years, it is calculated based on the kilometers projected to be traveled by the old fleet in the no-project scenario, times the emission factors.

1 1

Where: K1i: Number of kilometers that would be traveled by the old fleet in year i. E1: Emission factor (or factors) of the old fleet.

37 Presentation by the World Bank’s GHG emission expert John Rogers. 38 This refers only to the range of the emission factor per vehicle. The calculation of the uncertainty regarding the total GHG saved and estimated with this methodology is not only dependent on this factor, but also on the uncertainties and magnitudes of the other figures used (kilometers traveled by the fleets, percentage of modal shift, etc.).

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b. Estimated emissions of the new system in operation. This figure is obtained by multiplying the number of kilometers traveled per year by the new fleet, times the respective emission factors (whether trains or buses).

2 2

Where: K2i: Number of kilometers that would be traveled by the new fleet in year i. E2: Emission factor (or factors) of the new fleet.

c. Estimate of emissions of passengers who have switched to public transport. This is estimated by multiplying the number of trips by passengers who switched mode (private to public transport), times the emission factors of the private vehicles that have been “left at home.”

3 3

Where: K3i: Number of kilometers that would be traveled by the private modes in the no-project scenario in year i. E3: Emission factor (or factors) of the private modes.

d. Estimated emissions of the old fleet that continues operating. The emissions of the old fleet, if it was not scrapped, are calculated by multiplying the estimated number of kilometers per year of operation, times its respective emission factor.

4 1

Where: K4i: Number of kilometers that would be traveled by the private modes in the no-project scenario in year i. E1: Emission factor (or factors) of the old fleet.

e. Estimated emission reduction. The emission reduction can be calculated using the

following equation: Reduction of GHG emissions = A + C – B - D

7. As previously mentioned, the emissions resulting from changes in land use were not included in this methodology due to the uncertainty of these impacts in the context of different typologies of subprojects in Mexican cities. IV. References

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Dargay, et al. Vehicle Ownership and Income Growth, Worldwide: 1960–2002. 2007. Available at: http://www.econ.nyu.edu/dept/courses/gately/DGS_Vehicle%20Ownership_2007.pdf Federal Transit Administration. Applicability of Bogota’s Transmilenio in the United States. 2006. Available at: http://www.nbrti.org/docs/pdf/Bogota%20Report_Final%20Report_May%202006.pdf Global Environment Facility. Manual for Calculating Greenhouse Gas Benefits of Global Environment Facility Transport Projects. Available at: http://www.unep.org/stap/Publications/AdvisoryProductsofSTAP/ManualforCalculatingGHGBenefits/tabid/52256/Default.aspx Inter American Development Bank. CTF – Investment Plan. Integrated Transport System Projects GHG Emission Reduction Potential, 2011

V. Annex 1. Emission factors tables

Vehicle type

Average emissions CO2

kg CO2/km

All fuels

Car 0.3041

Motorcycle 0.0459

Taxi 0.2906

Conventional Bus 1.3379

Small Bus 0.4205

Vehicle Type

Average emissions CO2

kg CO2/km

All fuels

Feeder (Mixed traffic)

Euro IV or V Bus 1.1372

CNG Bus 0.6690

Hybrid Bus 0.5352

Trunk (Exclusive lane) Euro IV or V Articulated Bus 1.3379

Hybrid Articulated Bus 0.9366

CNG Articulated Bus 0.9366

Vehicle Type

Average emissions CO2

kg CO2/kWh

Train (Rio de Janeiro Grid) 224

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Train technology Average energy

consumed by vehicles (kWh/km)

Without regenerative braking 26.80

With regenerative braking 9.50

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Annex 9. Team Members

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT Name Title Unit Arturo Ardila-Gomez Senior Transport Specialist, TTL LCSTR Jorge Rebelo Lead Transport Specialist (R) - Consultant LCSTR Catarina Portelo Senior Counsel LEGLA João Vicente Financial Management Specialist Brazil – CMU Alberto Costa Senior Social Specialist LCSSO Robert Montgomery Lead Environmental Specialist LCSEN Augusto Mendonςa Senior Environmental Specialist LCSED Bernardo Alvim Consultant LCSTR Ke Fang Peer Reviewer - Senior Urban Transport Specialist EASIN Alessandra Campanaro Peer Reviewer - Infrastructure Finance Specialist LCSUW Christophe de Gouvello Peer Reviewer - Senior Energy Specialist LCSEG Rein Westra Peer Reviewer - Senior Urban Transport Specialist EASIN Maria Catalina Ochoa Young Professional LCSTR Harvey Scorcia Junior Professional Associate LCSTR Paloma Lopez-Diez Program Assistant LCSTR

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Annex 10. Maps

BRAZIL: UPGRADING AND GREENING THE RIO DE JANEIRO URBAN RAIL SYSTEM PROJECT

Rail-Based Network in Rio de Janeiro Metropolitan Region

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RJMR’s Existing Suburban Rail Network (Operated by SuperVia) and Integration Stations