Environmental Impact Assessment Review 21 (2001) 181 200 www.elsevier.

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EIA procedure

Factors leading to an erroneous impact assessment A postproject review of the Calaca power plant, unit two
Ryo Fujikuraa,1, Mikiyasu Nakayamab,*
a b

Faculty of Economics, Ritsumeikan University, 1-1-1 Nojihigashi, Kusatsu, Shiga 525-8577, Japan United Graduate School of Agricultural Science, Tokyo University of Agriculture and Technology, 3-5-8 Saiwai-cho, Fuchuu-city, Tokyo 183-8509, Japan Received 1 June 2000; received in revised form 1 November 2000; accepted 1 December 2000

Abstract This study investigates methodological shortcomings in the impact assessment practices employed by environmentally concerned groups and proposes improvements in project assessment methodology. The second thermal power plant project constructed in the Philippine city of Calaca was examined. This postproject review found the assessment made by environmentally concerned groups to be inaccurate. The following factors were identified as the probable causes of their erroneous estimates: the lack of a holistic approach in the particular sector or regional assessment; misunderstandings about the environmental regulation of the Philippines; the imposition of the environmental standards of the lending nation upon the borrower nation; excessively simplified assumptions about the second project's cause-and-effect relationships; preoccupation with problems of the first power plant project, particularly in confusing its soluble and insoluble aspects; and ideological bias in the minds of the practitioners, which not only led to erroneous estimates but also prevented them from examining the full range of alternative options. D 2001 Elsevier Science Inc. All rights reserved.
Keywords: Coal-fired thermal power plant; Japanese ODA; The Philippines; Air pollution; Sulphur oxides

* Corresponding author. Tel.: +81-42-367-5667; fax: +81-42-360-7167. E-mail addresses: fujikura@ec.ritsumei.ac.jp (R. Fujikura), mikiyasu@cc.tuat.ac.jp (M. Nakayama). 1 Tel: + 81-77-561-4584; fax: + 81-77-561-3947. 0195-9255/01/$ see front matter D 2001 Elsevier Science Inc. All rights reserved. PII: S 0 1 9 5 - 9 2 5 5 ( 0 0 ) 0 0 0 7 8 - 0

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1. Background Frequent electrical blackout or brownout used to be a matter of course or a part of daily lives for residents of Metropolitan Manila, Philippines as early as 1992. They suffered from a lack of electricity for 6 12 h everyday. This mostly stemmed from delays in the construction of a thermal power plant, the second unit of the Batangas coal-fired thermal power plant (hereinafter Calaca-2) at Calaca City, 115 km south of Manila. Calaca-2 was designed by the Philippine National Power Corporation (NPC) and was to be financed by a Japanese concessional yen loan provided by the Overseas Economic Cooperation Fund (OECF), Japan's national executing agency for concessional yen loans. Originally, Calaca-2 was to become operational by 1992 and to generate about 300 MW of electricity, which was almost identical to the 1992 electricity deficit of Metropolitan Manila (Warkentin, 1996; OECF, 1999). However, there was an extensive delay that was primary caused by environmental concerns over the thenplanned Calaca-2. These were expressed during 1991 and 1992 by Japanese NGOs, Japanese mass media, and a Japanese parliamentarian, as well as by Philippine local NGOs. The criticisms about Calaca-2 were based primarily on the environmental problems that had already been caused by the operation of the first unit of the same thermal power plant (hereinafter Calaca-1). As the result of these findings, those parties opposed to the Japan's financing of Calaca-2 felt that the negative environmental impact of the Calaca-2 would be significant. As a result of the strong Japanese opposition to this project, the OECF was forced to suspend the once-approved loan for Calaca-2 on the ground of concern for its effects on the local inhabitants and their natural environment. However, the OECF managed to lift the suspension 19 months later, saying that the measures pledged and taken by the NPC were found to deal satisfactorily with these environmental concerns. It should be noted, however, that no fundamental change was made to the design of the thermal power plant itself from the viewpoint of the emission of sulfur oxides. While the Japanese NGOs and the parliamentarian had insisted on installation of a flue gas desulfurizer (FGD) to reduce the emission of sulfur oxides into the atmosphere, the NPC had rejected the proposed installation of a FGD. Calaca-2 was therefore completed as originally planned without a FGD and was finally put into operation in November 1995, some 4 years later than originally planned, finally relieving Manila's electricity problems. In 1998, 3 years after completion of Calaca-2, the OECF sent an evaluation mission to the project. The mission found that Calaca-2 had made no significant negative impact on the local environment (OECF, 1999). The mission's findings imply that the protests made in early 1992 by Japanese NGOs did not have any solid grounds for their negative assessment of the environmental degradation to be caused by construction of Calaca-2. It therefore now seems safe to assume

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that the methodologies employed by the NGOs for assessing Calaca-2 failed to predict accurately its actual impact. This present study attempts to (a) establish the methodological shortcomings in the impact assessment practices employed by the Japanese NGOs and (b) propose methodological alternatives to those impact assessment practices employed so that a better methodology may be applied to future projects of the same nature. As for its analytical framework, this study is based on an analysis of the design, construction, and operation of Calaca-2 (Fujikura, 2000). Literature surveys, field visits, and interviews with relevant people were carried out during 1999 2000 period by the authors both in Japan and the Philippines. 2. Chronology of the Calaca project 2.1. A Japanese yen loan for Calaca-2 Table 1 shows the history of Calaca-1 and -2. During the 1940s, a coal mine was developed on Semirara Island located 200 km south of Luzon Island. In order fully to utilize this Philippine domestic coal resource, it was decided to build Calaca-1, a coal-fired thermal power plant unit, at Calaca City in the southern part of Luzon Island. It was constructed in 1981, with funds provided by the Export Import Bank of Japan and a private Japanese bank. Both the project planning and construction of Calaca-1 were implemented under the Marcos regime. Public participation in and environmental considerations about the project were absolutely lacking. The local people were not allowed to protest against this Marcos Government project, although the electricity generated was to be consumed exclusively in Metropolitan Manila. Local villages were to remain without electricity, while they were expected to assume the environmental burdens of the project. However, when Calaca-1 began its operations in 1984, the low quality of Semirara coal was found not to meet the specifications to which the thermal power plant had been designed. The inferior quality of the Semirara coal caused a double problem of frequent operational shutdowns and environmental problems, such as offensive odor, coal dust fall, and noise in the neighborhood. After newly elected President Aquino democratized the government in February 1986, the local people started to complain to the NPC about pollution caused by Calaca-1. Dissatisfied by governmental inactivity, in November 1989, the Calaca local assembly finally passed a motion that Calaca-1 should suspend its operation. For political reasons, the Philippine government had chosen to focus its attention on the other aspect of this problem its power shortage. In October 1986, the Government of the Philippines requested a concessional yen loan from the Government of Japan for the construction of Calaca-2, a second unit for the Calaca thermal plant. In the same month, the OECF dispatched an appraisal

184 R. Fujikura, M. Nakayama / Environmental Impact Assessment Review 21 (2001) 181200 Table 1 History of Calaca-1 and -2 1979 1981 1984 1986 September September September February October October November November December August September September December February March April April April April July August September January February March April July August September October January March March March May November A feasibility study of Calaca-1 and -2 are completed Construction begins on Calaca-1 Operation begins at Calaca-1 Blending of Semirara and Australian coals starts The EDSA Revolution brings President Aquino to power The Philippine requests a yen loan for Calaca-2 The OECF appraises Calaca-2 Japan pledges the yen loan for Calaca-2 JICA initiates a study for the upgrading of Calaca-1 The local people complains to the NPC about Calaca-1 pollution The NPC applies for an ECC for the construction of Calaca-1 A loan agreement for Calaca-2 is concluded Spontaneous combustion worsens Frequent blackout on the Luzon grid starts The DENR's environmental survey The DENR orders the suspension of operations at Calaca-1 The second DENR's environmental survey A Japanese Senator raises Calaca issues in Parliament Japanese lawyers demand antipollution measures The Senator again raises the issue in Parliament The OECF's environmental survey The NPC's public hearings The DENR, the LGU, the NEDA, and the NPC signs a MOA The OECF re-signs an approval for the contract of construction The Philippine requests a yen loan for an antipollution project A Japanese Newspaper (Mainichi) reports Japanese Newspapers (Asahi and Yomiuri) report Japanese NGO's survey critical of Calaca-1 The DENR issues an ECC for the construction of Calaca-2 A Japanese broadcast (NHK) reports The DENR states that a FDG is unnecessary The newly elected Calaca Mayor signs the MOA Japan presents Calaca-2 construction contract precondition The Philippine electricity shortage worsens All Barangay captains agree to Calaca-2's construction Philippine national emission standards are amended The OECF approves the construction contract A loan agreement for Calaca-1 antipollution measures is concluded The Philippine national emission standards are again amended Calaca-2 construction is completed, and operation is commenced The OECF's postevaluation of Calaca-2 is completed

1987 1989 1990 1991

1992

1993

1994 1995 1999

Source: OECF (1999) and Warkentin (1996).

mission. Provision for the yen loan to Calaca-2 was pledged to President Aquino during her visit to Tokyo in the following month. The electricity shortages in Metropolitan Manila became increasingly serious with blackouts starting in 1989. It became not only a serious problem for the daily life of citizens but also for the political life of the Aquino regime. Soon, one-third of the electrical demand of the

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Luzon grid (including Metropolitan Manila) could not be met. During the summer season, rotating brownouts lasted from 8 to 12 h. In 1993 alone, over 1000 articles on the issue appeared in the newspapers of Manila (Warkentin, 1996). In August 1987, the NPC submitted an environmental impact statement (EIS) on Calaca-2 to the Philippine Department of Environment and Natural Resources (DENR) in order to obtain the environmental compliance certificate (ECC) necessary to start construction. In September, a loan agreement was reached between the OECF and the NPC for the construction of Calaca-2. 2.2. Sulfur oxide emissions of Calaca-1 As a result of the increasingly intense demands of the local people for the suspension of Calaca-1 operations and their protests against the construction of Calaca-2, in September 1990, the DENR decided to monitor the emissions of Calaca-1. It found that the concentration of particulates and sulfur oxides in the flue gas of Calaca-1 were 1812 mg/Nm3 and 413 ppm, respectively, and that both exceeded Philippine emission standards (300 mg/Nm3 and 87.5 ppm for particulates and sulfur oxides, respectively). In December, the DENR ordered the NPC to suspend the operations of Calaca-1. The NPC requested that the DENR remonitor Calaca-1's flue gas. When the emissions were remonitored in February 1992, particulate concentrations met the national standard, because the electrostatic precipitator, which had been out of order during the previous monitoring, was back in operation. However, the concentration of sulfur oxides still exceeded the national emission standard. In those days, the DENR applied a sulfur oxide emission standard of 87.5 ppm to all emission sources regardless of their nature or magnitude. It should be noted that the Philippines then had an emission standard of sulfur oxides that was much more stringent than those applied not only elsewhere in the developing world but also in most developed countries as well. For example, the emission standards in Germany, the Netherlands, the United States, and Canada were 150, 150, 470, and 230 ppm, respectively. If the Philippines' stringent emission standard was to be complied with, installing a sophisticated FGD would be the only solution for a coal-fired thermal power station. A footnote in the DENR emission standards, however, exempted emission sources from complying with emission standards if compliance was impossible due to economic or technical reasons. In such a case, the source was required to show instead that the ambient air in the vicinity of the source complied with national environmental quality standards as to sulfur oxides. The DENR applied this stipulation to Calaca-1 and withdrew its order for suspension when Calaca-1 demonstrated that it complied with ambient air standards. It was officially confirmed that the emission of sulfur oxides from Calaca-1 complied with the DENR's regulations, despite exceeding the general emission standard. There have never been any reports that sulfur oxide concentrations in the ambient air of Calaca City exceeded the national environmental quality standards (0.30 ppm).

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2.3. Antipollution measures It was not sulfur oxides but other pollutants, such as coal dust and offensive odors from the coal yard and noise from the boiler of Calaca-1, which polluted the local environment. The Japan International Cooperation Agency (JICA) responded to growing complaint against the pollution. It started ``The Study for Calaca Coal-Fired Thermal Plant (I) Upgrading Project'' in 1986 and recommended necessary measures to improve the operation and maintenance of Calaca-1. In April 1991, the NPC held public hearings for the local people and prepared an environmental improvement plan. In July 1991, the DENR, the NPC, the National Economic and Development Authority (NEDA), and the Local Government Unit (LGU) concluded a memorandum of agreement (MOA), which stipulated that the NPC must comply with environmental quality standards and support social development in local communities. Despite this, however, the OECF was concerned that the local people would oppose Calaca2's construction if the operation and maintenance of Calaca-1 remained unacceptable to them. Therefore, it suspended approval for the Calaca-2 construction contract and requested that the NPC prepare a more detailed environmental improvement plan for Calaca-1. In September 1991, the Government of the Philippines requested another new yen loan from the Government of Japan for the environmental improvement project. The major components of the proposed scheme were measures to control coal dust blowing and spontaneous combustion, including improvements in coal-handling equipment, the establishment of windbreaks, and the rehabilitation of sprinkling equipment. It also included noise and water pollution abatement facilities and monitoring equipment. As a measure for sulfur oxide emission control, the NPC required a higher stack (150 m) for Calaca-2. The sulfur content of the coal was to be regulated to less than 1% by blending the Semirara coal (whose sulfur content was less than 1.2%) with low sulfur Australian coal. Since Calaca-1 already complied with the regulations regarding sulfur oxide emissions and Calaca-2 had a similar design to Calaca-1, Calaca-2 was also forecast to comply with these regulations. It was decided that no further environmental measures, such as the installation of a FGD, were required. The DENR issued an ECC for the construction of Calaca-2 to the NPC in April 1992 under condition that the NPC would implement measures to comply with environmental quality standards, improve the local environment, support social development in the local communities, and compensate transferred people. 3. Japanese NGO's perspectives on the need for a FGD Just as Calaca's pollution problems were being resolved in the Philippines, Calaca-1's pollution problem came to be perceived within Japan as a

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contentious issue by early 1991. Although Calaca-1's compliance with Philippine regulations had already been certified by the DENR, Japanese NGOs and mass media began to report that Japanese-funded Calaca-1 violated the Philippine regulations. At committees of Japan's Upper House held in March and April 1991, a senator demanded that the Government of Japan install FGDs in both Calaca-1 and -2 (GOJ, 1991a,b). After their site visit in April 1991, Japanese lawyers stated in their Japanese report, ``sulfur oxide emissions at the stack have always exceeded the environmental quality standard (as written in the original report)'' and expressed concern that ``further pollution, such as sulfur oxides,'' would be created by Calaca-2 if FGDs were not installed at both units. As a result of these events, in January and February of 1992, Japan's three major newspapers, the Mainichi, the Asahi, and the Yomiuri, all reported that the pollution problems of Calaca-1 were caused by Japanese foreign assistance. Both the Mainichi and the Yomiuri newspapers reported that Calaca-1 was causing unsatisfactory levels of sulfur oxide air pollution. The Yomiuri stated that the Philippine pollution control regulations were being ignored. Later in July 1992, the Japanese National Broadcast Agency (NHK) also reported on Calaca-1's sulfur oxide pollution. From March to April 1992, a mission sent by Japanese NGOs visited Calaca and carried out a field survey. It should be noted that although the NGO representatives brought measuring equipment to monitor air and water quality, they failed to detect any significant pollution of any kind in the field. Nevertheless, from their field observations and interviews with local people, they concluded that the crop production, particularly of coconuts and bananas, in those villages 4 12 km northeast of Calaca-1 had been adversely affected since the commencement of Calaca-1's operations. The mission suspected that sulfur oxide emissions from Calaca-1 were the cause of this damage. They expressed their concerns that such damage would worsen if Calaca-2 were put into operation without a FGD (Kojima and Suwa, 1996). 4. Argument over the need for a FGD Following these arguments in Japan about its responsibility for the Calaca situation, the OECF dispatched an environmental expert survey mission to Calaca in April 1991. They reported five existing environmental problems: (a) frequent spontaneous combustion (some coal started combustion even during transport by boats from Semirara Island to Calaca), (b) coal dust dispersal from coal-handling equipment and the plant's coal stockyard, (c) well-water contamination due to seawater penetration from the plant's ash pond, (d) significant noise pollution caused by the safety valve several times a year, and (e) coal dust pollution of the neighboring sea surface. However, the concentrations of all pollutants in emission gases,

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in effluent, and in the ambient environment were found to be within Philippine standards (OECF, 1999). If the loan for Calaca-2 had been requested after the establishment of OECF's 1989 environmental guidelines, which only stipulated that the loan projects should meet local standards, the OECF would not have created a major issue by requesting a FGD as long as Calaca-1 and -2 had met local regulations. However, at the time of the loan request, neither the Japanese government nor the OECF had any substantive policies on the environmental impact of yen loan projects. As a result, in November 1991, OECF requested that the NPC install a FGD on Calaca-2. This was presumably because the OECF sought the ``easiest solution'' in settling this dispute among the Japanese community. However, the NPC strongly objected to this, arguing that (a) the then-planned Calaca-2 would comply with Philippine regulations without a FGD; (b) sulfur oxide emissions from Calaca-2 would in fact also be within the emission standards stipulated by the Japanese Air Pollution Control Law; (c) the installation of a FGD was required neither by an ECC nor by the OECF agreement; and (d) no other Asian countries had ever been requested to install a FGD. In addition, the NPC estimated that the cost of a FGD for Calaca-2 would be US$65 million or enough to construct another 50-MW power plant without a FGD (Warkentin, 1996). Initially, the DENR seemed inclined to let the NPC install a FGD for Calaca-2. However, it changed its position and supported the NPC's viewpoint after realizing that the FGD would not be financed by a Japanese aid grant, which were mainly provided for Basic Human Need Projects in LLDCs. In August 1992, the DENR officially stated that no FGD would be necessary for Calaca-2 (Warkentin, 1996). In December 1992, the DENR approved coal blending as a countermeasure for sulfur oxide air pollution abatement. In March 1993, the DENR amended its emission standards of sulfur oxides from 87.5 to 573.1 ppm and deleted the footnote stipulating the exemption. In May 1994, it restored the footnote and confirmed that under the footnote, coal-fired power plants were exempt from complying with emission standards and were required only to comply with environmental quality standards. It is unclear why the DENR made such amendments or whether the amendment were related to Calaca, because Calaca could satisfy the new emission standards without relying on the footnote. Interviews with a few Philippine officials do suggest, however, that the DENR failed to amend the standard to more ``realistic'' values for other old-fashioned thermal power plants than Calaca due to strong opposition from Philippine environmental NGOs, and that the new standard evolved as a compromise. Anyway, the Government of the Philippines was able finally to assure the relevant Japanese agencies that both Calaca-1 and -2 complied with new standards and that no FGD was necessary. Once the FGD issue was solved, the only remaining issue needed to meet the OECF's requirement was whether the local communities would agree to the new

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project. By January 1993, the newly elected Mayor of Calaca and the remaining two of 40 Barangay captains (village chief) agreed to the construction of Calaca2. In March 1993, the OECF approved the construction contract 19 months after the NPC's original request. At the same time, a loan agreement for Calaca environmental improvement project was concluded. Finally, the construction of Calaca-2 commenced, and Calaca-2 was completed and put into operation in November 1995. 5. Findings by a postproject survey In 1998 and 1999, the OECF conducted a postproject survey. Experts from both Japan and the Philippines visited the site, monitored the environmental quality, and reviewed the results of the monitoring by the NPC and the joint monitoring that the ECC required to be conducted by the NPC, the Calaca City, the NGOs, and the DENR. The environmental improvement project was almost completed by February 1999, and the environmental situation was found to have improved to a great extent. Problems of dust dispersal and spontaneous combustion had been substantially solved. Sulfur oxides, nitrogen oxides, and total suspended particulates in the ambient air from December 1996 to May 1998 demonstrated that sulfur oxides and nitrogen oxides were always within allowable environmental standards. The NPC explained that the total suspended particulate concentration sometimes exceeded the environmental quality standards when sugarcane fields were burned or wind blew dust from the street. Since particulate matter of less than 10 mm was not monitored, it was difficult to identify the contribution of the power plants to the total amount of suspended particulate observed in the ambient air. Water quality complied with all standards. Noise level sometimes exceeded the standards in the downtown area and at intersections, but it was not clear whether this was due to the power plant or to other factors, such as traffic of automobiles (OECF, 1999). Sulfur oxides in flue gas were not monitored because of the trouble of continuous monitoring equipment both at Calaca-1 and -2. The OECF estimated sulfur oxide concentrations in flue gas using known parameters, such as sulfur content, thermal efficiency, and the amount of residual sulfur. The maximum sulfur contents in fuel coal were 0.78% and 0.99% for Calaca-1 and -2, respectively, and were below the requirements of the ECC (1%). The sulfur oxide concentrations in flue gas were estimated as 370 606 ppm and 445 676 ppm for Calaca-1 and -2, respectively (OECF, 1999). Based on this estimation, the maximum concentration on the ground when both Calaca-1 were Calaca-2 are in operation was estimated at 0.12 ppm, which was below the Philippine environmental quality standard of 0.13 ppm that had been amended from 0.3 ppm in March 1993 (OECF, 1999).

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6. Factors behind the Japanese NGO's erroneous estimates 6.1. Preoccupation with the previous case and mixing up soluble and insoluble issues Calaca-1 was not free from environmental problems. In fact, it caused considerable atmospheric pollution of the surrounding area in its initial period of operation. As mentioned below, these problems originated from overstocking of Semirara coal at the premises. The question that should have been asked was whether the environmental problems caused by Calaca-1 were likely to emerge again at Calaca-2. If this was the case, there would be solid ground for the ``assumption based on the previous case'' that was made by the Japanese NGOs. Otherwise, the estimates for Calaca-2 would be biased because of the NGO's preoccupation with the previous case of Calaca-1. Calaca-1 originally was supposed to exclusively use Semirara coal from Semirara Island in the Philippines as fuel. Its nature is close to peat, with a lower fixed carbon concentration and a higher ash concentration than usual coals (see Table 2). With the commencement of operations, it was, however, discovered that using Semirara coal alone caused several operational problems, such as stacking of the coal feeder and difficulty in combustion due to high ash content (OECF, 1999). It was thus decided to mix the Semirara coal with Australian coal. While consumption of Semirara coal thus decreased due to the mixing of domestic and imported coal, the Semirara Coal Company continued to deliver the same monthly quantity of Semirara coal in accordance with the original contract with the NPC. Calaca-1 thus suffered from the overstocking of Semirara coal, which induced the following environmental problems both within and around the plant's premises (Kojima, 1991): (a) Spontaneous combustion of coal was often observed in the open-air coal stockyard due to the highly volatile oil concentration of Semirara coal. The resulting smoke emission caused contamination of the surrounding area.
Table 2 Characteristics of Semirara and imported coals Unit Calorific value Fixed carbon Volatile matter Ash content Moisture Alrarine content Sulfur content
a

Semirara coal 2.695 4745 17.4 33.4 23.5 34.6 5.0 32.1 27.0 30.0 2.8 10.8 0.5 1.2

Imported coala 6457 49.0 30.3 13.2 7.1 1.2 0.4

kcal/kg % % % % % %

Source: OECF (1999). Typical quality of coal imported from Australia.

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(b) Because Semirara coal was very fragile, the stockyard coal tended to crack into small particles, which were dispersed throughout the neighborhood by the wind. The small particles emitted caused atmospheric pollution around the power plant. These atmospheric pollution observed in the initial period of Calaca-1 operation were in fact caused by overstocking of Semirara coal at the premises, not by emissions from the power plant itself. The overstocking had a number of solutions, including a decrease in the volume of stock on-hand, the abatement of spontaneous combustion by means of frequent compaction and the sprinkling of water, and a change in the design of the stockyard to avoid particle dispersion. The overstocking was in fact resolved in 1995 by the alteration of the contract between the NPC and the Semirara Coal Company, while additional corrective measures were taken to decrease the small-particle pollution. The atmospheric contamination observed in the initial operation of Calaca-1 stemmed neither from design nor from operation of the power plant itself but from the improper management of the coal stockyard. This problem was technically soluble, as it was later proved. It should therefore have been safe to assume that such preventive measures were also foreseeable solutions for these problems when Calaca-2 was constructed. However, the NGOs regarded the atmospheric contamination initially caused by Calaca-1 as insoluble and made it one of the major rationales for their opposition to the construction of Calaca-2. Such a preoccupation with Calaca-1, coupled with confusing of soluble and insoluble issues, lead to erroneous estimates by the NGOs on the negative environmental impacts of Calaca-2. 6.2. Overly simplified assumptions as to cause-and-effect relationships The NGOs predicted degradation of the vegetation, in particular, of the farmlands and the forests on the hilly areas around the project site as one of the possible environmentally adverse effects of Calaca-2. This was based on their field survey and interviews with residents carried out from March to April 1992 (Kojima and Suwa, 1996). The mission concluded that tree crop and forest degradation observed in the surrounding hilly areas was due to atmospheric pollution, particularly sulfur oxides, released by Calaca-1. Therefore, the NGOs naturally assumed that such deterioration in vegetation would be worsened by the construction of Calaca-2, even to the extent that massive landslides might occur in the rainy season due to increased degradation of the vegetation in the surrounding hilly areas. Considering the fact that neither massive degradation of vegetation nor landslides has taken place in the surrounding region, the impact assessment methodology employed by the NGOs does not seem to have been accurate enough to correctly foresee the impact of Calaca-2. Such inaccuracy seems to have stemmed from incorrect or inappropriate assumptions in cause-and-effect

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relationships that were made by the mission members during their field visit in March April 1992. They attributed the recent degradation of vegetation to Calaca-1. It ought to be scrutinized if the degradation of vegetation witnessed by the mission team should really have been attributed to air pollution from Calaca-1. The authors believe that the following factors, which should have been considered before any conclusions were reached, do not seem to have been taken into account by the mission team: (a) the drought caused by El Nino from late 1991 to early 1992 and (b) the effects of the Pinatubo volcanic eruption in June 1991. Drought can occur virtually anywhere in the world, though researchers have found the strongest connections between El Nino/La Nina and Southern Oscillation (ENSO) and the intense drought in certain countries, which include the Philippines (NDMC, 1998). Philippines has always suffered from drought in recent El Nino years, to be precise in the year following the emergence of El Nino (e.g. in 1998, during the1997 1998 El Nino period). The following years were known as El Nino years in the 1980s and 1990s: 1982, 1986, 1987, 1991, and 1997 (COAPS, 1998). In the year 1992, which was the year following 1991 1992 El Nino period, the Philippines suffered from drought with subsequent impact on agricultural production (CIA, 1993). It seems safe to assume that the drought during this El Nino period also affected the vegetation of the Philippines including the area around the Calaca power plant, and that such impact was visible in March April 1992 when the NGO mission visited the project site. Attributing the degradation in vegetation entirely to the air pollution caused by Calaca-1 as the mission chose to do thus does not seem credible in view of the weather anomalies in the Philippines during this El Nino drought period. The June 1991 eruption of the Pinatubo volcano in the Philippines was one of the most violent and destructive volcanic events of the twentieth century. It erupted so violently that more than five billion cubic meters of ash and pyroclastic debris were ejected from its fiery bowels. For months thereafter, the ejected volcanic materials remained suspended in the atmosphere, which even resulted in the falling of the world temperature by 0.3C. So much volcanic ash fell in Metropolitan Manila that airports were closed for several days afterwards (Tokyo Shimbun, 1991). The acidic volcanic ash that fell affected the agricultural production of the Philippines as a whole. Pinatubo Mountain and the Calaca power plant are on the same island of Luzon. It thus seems reasonable to assume that the impact of the fallen volcanic ash was also visible in the region around the Calaca power plant from March to April 1992. However, the assessment by the NGOs made no mention of possible degradation to vegetation by volcanic ash, and it attributed all the observed degradation to air pollution by Calaca-1. In the same context as the abovementioned impacts of El Nino-induced drought on vegetation, the assessment by the NGOs was based on too simplified an assumption of the cause-and-effect relationship in that all the observed degradation in vegetation was judged to stem from air pollution caused by Calaca-1. Such an assumption apparently led

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to erroneous estimates as to the probable effect of the then-planned Calaca-2 on the neighboring vegetation and related environment. One possible factor that contributed to the Japanese NGOs reaching such a simplified assumption was a sentiment shared by many Japanese people regarding air pollution. Thousands of people suffered respiratory diseases in major Japanese industrial cities from the mid-1960s until the early 1970s. Sulfur oxide pollution was one of the great concerns among the Japanese. During that time, of course, many large emission sources were concentrated within small industrial districts. This was quite unlike Calaca, where the power plant is the only large emission source. For many Japanese, however, the smoking stacks of factories still imply sulfur oxide pollution wherever they are located. Under this preoccupation, the Japanese NGOs as well as Japan's mass media might immediately have assumed that there would be sulfur oxide pollution when they observed the smoking power plant. 6.3. Imposing the environmental standards of a lending nation upon its borrowers Another point to be examined is whether attempting to impose environmental standards of a lending nation upon its borrower nations should be the correct strategy to adopt in order to abate environmental degradation in the borrowing nations. The emission of sulfur oxides from Calaca-2 was made a major rationale of the antiproject campaign by Japanese NGOs and others in the 1991 1992 period. A senator in the Japanese parliament echoed this criticism and raised the issue at governmental committees in March and April (GOJ, 1991a,b). The mass media criticized Calaca-2 in early 1992 on the ground that the environmental quality standard within the Philippines was three times more tolerant than the same applied within Japan, and that the installation of a FGD was planned by Government of neither the Philippines nor Japan, despite the fact that having a FGD was a ``common practice'' of thermal power plants in Japan (Mainichi Shimbun, 1992). The premise behind these criticisms was that Calaca-2 was not acceptable from the viewpoint of standards in Japan, and that the same practices accepted in Japan (in this case, the installation of a FGD) should be applied to Calaca-2, because the imposing environmental standards and practices of Japan upon the Philippines would automatically abate the environmental degradations of developing nations. To the authors, these criticisms of the project seem to be based on an overly simplified apprehension of the nature of the issue. The senator requested that the Japanese Government make installation of a FGD a precondition to providing financial assistance to Calaca-2 on the grounds that the Semirara coal to be used for Calaca-2 had a relatively higher sulfur concentration than the alternative of Australian coal. In other words, the use of Semirara coal was the very rationale for the senator insisting on the installation of a FGD for Calaca-2. Indeed, it

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should have examined the possibility of having the NPC withdraw its plan to use Semirara coal exclusively for Calaca-2. If they had done so, the NGOs and their affiliated groups would have lost their major reason for opposing Calaca-2, because the far less costly solution of a partial switch to imported coal was sufficient to solve the pollution problem that threatened to destroy this necessary energy project. Without this fresh approach that seemed beyond the scope of the NGO's, what may very likely have happened thereafter was that (a) since the NPC was already committed to using Semirara coal for power generation, (b) more alternative thermal power stations using of Semirara coal could have been planned, and (c) such power stations could have been financed by ``environmentally less sensitive'' funding sources, such as commercial banks. It would have been nothing but ``displacement of pollution'' within a country (as pointed out in Nakayama, 2000), and the nation as a whole would have received the same amount of pollution from power stations. What is worse, such a restrictive approach by donor nations might have started to encourage countries, such as the Philippines, to establish a procedure in which they asked ``environmentally sensitive'' donors for financial assistance on environmentally benign projects, such as hospital and school construction, and then stuck to ``environmentally less sensitive'' sources of money for potentially controversial projects. The authors are worried about ``displacement of pollution'' for the following reasons (Nakayama, 2000). It is understood that a project financed by the World Bank is, in general, ``cleaner'' than other projects of the same sort in the developing world. For example, a World Bank document (World Bank, 1995) mentions that the Bank-financed coal-fired thermal power plants implemented over the last 10 years are significantly less carbon-intensive than the same sort of projects not financed by the World Bank. That is, the Bank-financed thermal power plants consume less carbon per unit of energy produced. This is mainly due to the environmental conditions attached to the Bank-financed projects. It often happens that some conditions of the Bankfinanced project may require meeting certain environmental standards, e.g. emission standards for a thermal power station. The Bank standards specified are generally tighter (i.e. less permissive) than those required within the borrowing country. As long as the borrower adheres to the conditions, Bankfinanced projects are destined to be ``cleaner'' than others. One of the major aims of applying tighter standards to a Bank-financed project is the ``upward harmonization'' of environmental standards within a country in that a Bankfinanced project is supposed to serve as a vehicle to assist in the raising of environmental standards in a developing nation. The question to be asked is whether the environmental conditions attached to Bank-financed projects are really instrumental in improving the environment of borrower nations. The idea seems to the authors too optimistic, at least under some circumstances. For coal-fired thermal power plants, for which a borrower may choose either ``clean'' or ``dirty'' coals as fuel, the government may

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selectively provide the Bank-financed power plant with ``clean'' coals, so that the power station can maintain the emission standards required by the World Bank. At the same time, ``dirty'' coal could be fed into other power plants, which are not subject to these tighter environmental standards. This ``displacement of pollution'' arrangement is, from the viewpoint of the government, the most cost-effective way of sticking to the conditions specified by the World Bank. The authors assume that the same strategy could be used by a borrower for seeking assistance for ``environmentally controversial'' project to be financed by ``environmentally sensitive'' donor, such as the governments of developed nations. Moreover, it seems to the authors that those demanding the installation of a FGD underestimated the difficulties of operating and maintaining a FGD. They demanded a comparable FGD for Calaca to those used in Japanese power plants. However, the FGDs installed at Japanese coal-fired power plants require highly sophisticated technology for their operation and maintenance. In addition to that, they consume considerable resources and energy. A FGD installed at a Japanese 300-MW coal-fired power plant needs 43 tons of water, 8 tons of limestone, and 3 MW of electricity every hour (Yanagioka, 1993). It is quite doubtful whether the NPC could adequately have operated and maintained a FGD if it were imposed on Calaca. In order to comply with Philippine domestic standards, a FGD would have been totally unnecessary. For the NPC, a FGD would only have been troublesome equipment that consumed water and energy and generated industrial waste. Attempting to impose environmental standards of a lender nation upon its borrowers thus sounds a risky option with limited effectiveness for doing so may lead to (a) environmental ``multiple standards'' within a borrower country and (b) ``displacement of pollution'' within that country. It is also likely that donor communities would start to have less influence on the environmental issues of borrowers, which might also discourage developing countries from adopting more environmentally sound practices in their economic development activities. 6.4. Lack of a holistic approach need of a sector or regional assessment The Government of Philippines adopted a policy that coal's share as an energy source for Philippine power generation should increase from 7% in 1986 to 13.3% by 1992 (OECF, 1999). The rationale behind this policy was to promote the use of domestically produced coal rather than imported coal. Substituting imported coal with domestic production would improve the balance of payments of the nation and make the cost of power production (in local currency) less prone to fluctuations in foreign exchange rates. The Calaca-1 and -2 power plant units were the only consumers of Semirara coal. The Calaca-2 alone conserved about US$23 million of hard currency in 1996 by using Semirara coal rather than relying entirely on imported coal (OECF, 1999). The use of Semirara coal was instrumental in minimizing the power production costs (in foreign currency), despite the devaluation of the local currency in 1997 and thereafter.

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The use of Semirara coal also created employment for about 1000 people in the coal mine on Semirara Island. Considering the fact that employment opportunities are rather limited on this isolated island, the use of Semirara coal by the Calaca thermal power plants should be instrumental in alleviating poverty in one rural area of the Philippines. In addition, the Calaca-1 and -2 power plants also created employment for 788 people (either as permanent or temporary staff members) as of July 1988. It should be noted that 498 employees of these 788 are permanent residents of the Calaca region (see Table 3). The important questions to be asked are (a) whether the benefits created by the Calaca power plants as employment opportunities were enjoyed equitably among the local people and in particular by those who were obliged to relocate due to the construction project, (b) whether the benefits to the human environment, in the form of employment opportunities and better subsequent livelihoods, compensated sufficiently for the possible degradation of other aspects of the environment, such as air and water quality, and (c) whether the improved balance of payments of the nation was instrumental in the alleviation of poverty and the increase of the welfare of the Philippines as a whole. However, such a holistic viewpoint, which is now widely known conceptually as ``sector assessment'' or ``regional assessment'' rather than ``project assessment,'' was lacking in the assessment conducted by the Japanese NGOs. In other words, the environmental assessment on the Calaca power plants conducted by the NGOs did not examine the ``indirect'' impacts, both benefits and losses, of a particular project in a sectoral or regional context. The importance of ``sector'' EIA has also been stressed by development aid agencies, such as the World Bank (World Bank, 1995), so that the environmental issues of a particular sector could be analyzed in relation to sectoral development policies, institutions, and even regional or national development plans as a whole. Nevertheless, the notion of tradeoffs between benefits and losses to the environment of a region or a sector was not visible in the impact assessment methodologies employed by the NGOs, and the assessment failed to take into consideration the sectoral or regional impact of the project, particularly as to the benefits to be enjoyed by the sector or region as a whole.

Table 3 Employment opportunities created by the Calaca power plants Number of employeesa NPC (permanent) Temporary workers Contractors Total
a

Calaca residents (%) 161 107 230 498 (42%) (92%) (80%) (63%)

386 116 286 788

Source: OECF (1999). As of August 1998.

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6.5. Misunderstandings about regulations in the Philippines The Philippine pollution control system was different from the Japanese one. In Japan, emission standards applied to every independent factory's stack that was subject to the control of a national law. Japanese environmental quality standards were established as administrative targets in order to protect human health and to conserve the living environment, and were not established as regulating criteria. In the Philippines, on the other hand, environmental quality standards were not only targets for the general welfare but also criteria for the regulation of sources exempted from emission standards. Sulfur oxide concentrations in the flue gas of Calaca-1 exceeded the emission standards, but the quality of the ambient air in the vicinity met the environmental quality standard. Thus, Calaca-1 did not violate the Philippine regulation. The Japanese NGOs and mass media failed to understand this unique aspect of the Philippine system. They believed that Calaca-1 violated the national regulation, because exceeding emission standards in Japan implied that the source had to be controlled. Moreover, in those days, the Japanese NGOs and mass media believed that Japanese national regulatory standards were far more stringent than those of developing nations. They therefore often accused the Japanese Government of ``environmental double standards'' with regard to their overseas' development aid projects. However, standards in many developing countries, at least in Asia, were almost equivalent to or even more stringent than Japanese national standards. The Calaca thermal plants were in fact not ``dirty'' even by Japanese standards. 6.6. Impact of political biases It has been demonstrated that the environmental impact assessment on Calaca2 done by the Japanese NGOs was erroneous due to the following methodological issues: (1) preoccupation with a previous case, (2) overly simplified assumptions as to environmental cause-and-effect relationships, (3) the attempted imposition of environmental standards of the lender nation upon the borrower nation, (4) the absence of a holistic approach, and (5) misunderstandings about the regulatory system of the foreign country being assisted. It should now be examined if and how such pitfalls could have been avoided in the assessment conducted by the NGOs. From a technical point of view, the following should be pointed out: (a) Existing manuals and guidelines for environmental impact assessment were fairly detailed as to theory and modality of the assessment. (b) These guidance documents were very detailed as to practices to be employed, such as environmental elements to be taken into account for particular sort of development projects and the assessment methods to be used to determine the extent to which such elements would be affected by the

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project. (c) However, very limited guidance was given as to how to judge if an impact assessment on a particular element of the environment was holistic enough to properly address various spheres of impact induced by the development activities. (d) Although methodological pitfalls in carrying out assessments were known to some practitioners, in general, these had not been properly synthesized as important lessons requiring explanation in guidance documents. The assessment done in this case by the NGOs could have been technically more accurate in order to properly foresee all aspects of the impact of Calaca-2. However, the authors are not comfortable in attributing this entirely to technical incompetence. It seems that the assessment was predestined to be erroneous due to the following political consideration. The assessment by the NGOs was not done as an assessment of a particular development project per se but as an instrument designed to oppose the overseas' development aid by the Japanese government in general or proposed for the Philippines in particular. The assessment was in fact a single part of the antiaid campaign ``package,'' in which other development aid projects funded or to be funded by Japan were also being criticized in terms of their environmental and/or social impact. No subjective judgement should be made about launching such a campaign. It should however be examined if being a part of such a campaign resulted in some unscientific bias to the assessment of the Calaca-2 project in the context of its methodologies used and conclusions reached. The authors feel that political considerations guided the methodology of the assessment in the direction of an unnecessary negative conclusion about this particular project due to the general nature of the campaign of which the assessment of Calaca-2 was one of its major components. Such a bias seemed to result in a very negative shortsighted conclusion to discard this project. It should be needless to say that the major aim of an environmental impact assessment should be to propose alternative approaches in the event that some adverse impact is foreseen. Although the alternatives to be considered should of course include the option of abandoning the project, this should be considered as a last resort to be taken only after both the advantages and the disadvantages of various other options have been examined. It seems safe to suggest that the political environment of this assessment to some extent, if not to an excessive extent, prevented the NGOs involved in the assessment from openly considering alternatives other than the option of discarding or freezing the project. This may also explain why the anti-Calaca-2 argument raised by the mass media, which was essentially based on the results of the NGO assessment, was presented almost exclusively as a choice between ``a FGD and no loan from Japan.'' Since the Japanese NGOs were aware that the NPC and the Government of the Philippines opposed to the installation of a FGD, insistence on the installation of a FGD in fact seemed guaranteed to prevent the Japanese Government from providing the proposed financing and to kill the project for the Philippines.

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7. Conclusions The abovementioned factors, which led to erroneous estimates of the environmental impact of this project, were by no means particular to the Calaca-2 project. For example, the assessment of the environmental impact of the High Aswan Dam in Egypt also employed overly simplified assumptions as to causeand-effect relationships, which resulted in wrong assumptions being made about the proliferation of schistosomiasis (Nakayama, 1997). Also, the lack of a holistic approach as to sector or regional assessment is common in the environmental impact studies of development aid organizations (Nakayama, 2000). In a sense, the assessment of the Calaca thermal power plant by these NGOs ended up suffering from the same pitfalls. Carrying out postproject reviews on environmental impact assessments about various kinds of development projects is critical for refinement of appropriate methodologies, and the avoidance of such pitfalls so that more accurate and rational impact assessments can be done on future development projects. Greater effort and resources ought to be devoted to conducting postproject reviews on various types of development projects for the purpose of delineating lessons learned and subsequently improving assessment methodologies. Another lesson from the case was that preexisting political bias in the minds of practitioners tended to prevent them from examining the full range of alternative options in the event that some adverse impact was predicted. Such political bias also had a tendency to lead to technically erroneous methodologies in assessing project impact. Care should therefore be taken in examining the outcome of an assessment in order to determine whether or not the assessment as a whole has been distorted by some political bias, both as to the methodologies employed and the conclusions reached.

Acknowledgments This research was supported by Grant-in-Aid for Scientific Research (C) No. 11680575 from the Japanese Ministry of Education, Science, Sports and Culture.

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