J.8 IEE DCN.2024-BOS-001.BiH.pdf

DCN: 2024-BOS-001

USAID Bosnia and Herzegovina / New Energy Policy Activity 2024 1 E&E Bureau IEE Template (Version 1 Jun 2023)

US Agency for International Development (USAID) Bosnia and Herzegovina

Initial Environmental Examination (IEE)

Program/Project/Activity Data Activity/Project Name: New Energy Policy Activity 2024 Assistance Objective: Economic Development Program Area: Economic Growth Country(ies) and/or Operating Unit: Bosnia and Herzegovina Originating Office: EDO Date: November 15, 2023

Original IEE/RCE Original IEE LOP Start Date: September 2024 IEE/RCE History DCN LOP End Date Original IEE/RCE September 2029 Purpose of Amendment: N/A Contract/Award Number (if known): N/A Sector Type(s) from the ECD Advanced Search Tab (https://ecd.usaid.gov) Major: Energy Minor: None Recommended Environmental Determination(s):

Categorical Exclusion Positive Determination Negative Determination

With Conditions Deferral

Additional Elements:

Local Procurement Government to Government

Donor Co-Funded Public International Organization (PIO) environmental and social policies and procedures applicable

Climate Change Vulnerability Analysis (included) Climate Change Vulnerability Rating: Moderate / Low

1. Background and Project Description

1.1 Purpose and Scope of IEE: The purpose of this IEE is to provide an evaluation of the proposed activities, and to recommend a Threshold Decision applicable to activities proposed under USAID New Energy Policy Activity 2024.

Type text here

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DCN: 2024-BOS-001

1.2 Project Description: BiH is a signatory to the Energy Community Treaty, which requires BiH to accept and adopt the relevant EU energy sector regulations. The EU, through the Energy Community Secretariat, regularly monitors and reports on the progress that BiH has achieved in liberalizing its energy sector.

Although the reform of BiH’s electricity sector has made progress so far, significant effort is still needed to complete the process. According to the latest, 2022 Energy Community Annual Implementation Report the status of reform in the electricity sector is at 61% and BiH has still not implemented some of the key requirements for market integration with the EU. In addition, since the publication of this report, the Energy Community has adopted a new package of legislation which represents the largest addition to the Energy Community’s acquis so far. The package contains new ambitious targets and mechanisms for achieving climate neutrality by 2050 and enabling full market integration with European and regional systems. However, it also represents the largest challenge so far for all contracting parties in terms of implementation.

Furthermore, the reform of the BiH natural gas sector and implementation of EU obligations is at a very low level. According to the 2022 Energy Community Implementation Report, BiH has implemented only 24% of its obligations. The absence of a proper legal framework in the BiH natural gas sector continues to hinder any reform and endangers the country’s security of supply.

BiH has not adopted a State-level natural gas law, that would set the main framework for the functioning of the market and natural gas transport. On Entity level, the FBiH has not adopted a natural gas law, while the RS has adopted a law that disregards the competences of the State-level government. As a result, BiH has an underdeveloped natural gas market, characterized by lack of regulatory oversight, low level of transparency, no competition, vertical integration, and an unfavorable business environment.

In addition, natural gas pipelines in BiH do not meet the required energy security standards as there is not enough capacity to satisfy the total natural gas demand in the event of a disruption of the largest natural gas pipeline. BiH has no natural gas storage facilities and is dependent on only one transmission pipeline and only one source of supply, which brings Russian natural gas to the country.

The legal and regulatory framework of BiH's energy sector is still not fully compliant with the EU acquis and best practices, whereby modest progress in the green transition, limited development and integration of the electricity and natural gas markets with the regional and EU markets, and poor energy security hinder the sustainable development of the sector and withhold country's economic growth.

The major challenge in this process is the complex BiH political environment that has played a major role in slowing down energy sector reform. Political challenges include the need to navigate the state-level and entity-level legal structures, as well as cantonal politics in FBiH. Various deadlocks that occur in the process slow down the pace of reform. The adoption of the State-level Electricity and Natural Gas Law has been held up, preventing full gas sector reform and further reforms in support of compliance and electricity market operation.

In addition, energy prices represent a politically sensitive issue, inviting the use of political power to influence independent regulatory bodies. Some progress has been made on key issues such as unbundling, however, several key reform steps such as the establishment of an organized wholesale electricity market and gas price transparency remain blocked. Hence, a host of policy interventions requiring specialized knowledge and technical assistance is needed to pull BiH nearer to its regional peers and bring its energy sector closer to the integrated European markets.

The Activity will work to create a legal and regulatory framework in line with best practices and Euro-Atlantic integration requirements, focused on clean energy investments, improved energy

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sector governance and green jobs. This effort will empower citizens and the private sector to participate in a robust and legitimate economy.

In addition, due to the aggression of Russia in Europe, the energy security is of crucial importance to BiH, its economy and the citizens. USAID technical assistance will support the BiH counterparts in creating the necessary preconditions for the regional and EU integration of the electricity and natural gas markets and improving resilience to cybersecurity threats. This will increase the security of supply for the energy consumers and create a transparent environment for the trade of these commodities. The Activity will also support the diversification of the natural gas supply from the current sole supplier Russia, by supporting natural gas pipeline development that brings natural gas from different sources, as well as Liquefied Natural Gas (LNG) and hydrogen technologies.

The technical assistance under this Activity will be focused on key energy sector stakeholders ranging from government entities, independent energy sector regulatory agencies, private sector, academia, non-governmental organization, and citizens.

The activity consists of the following three components.

Exemplary Activities for Component 1: Sustainability and Clean Energy:

1.1. Energy and Climate Policy:

- Assist in implementation of the National Energy and Climate Plan (NECP),

- Assist in development and implementation of energy sector policy documents such as strategies, action plans and programs to ensure a just transition,

- Assist in fostering collaboration between government, industry, and environmental organizations to drive innovation and facilitate the adoption of renewable energy and energy-efficient solutions, and

- Assist in development of an Emissions Trading Scheme to mitigate the Carbon Border Adjustment (CBA) Mechanism or any other prescribed procedures for electricity producers as required by the EU rules.

1.2. Business and Private Sector Initiatives:

- Assist in development of new models for active participation of citizens in the electricity market,

- Assist in establishing clear and supportive policy frameworks that encourage the development and adoption of renewable energy sources and energy efficiency measures,

- Support business and private sector initiatives to implement sustainable business models in clean energy and e-mobility,

- Assist business and private sector to attract investments and financial incentives for renewable energy projects and energy-efficient technologies,

- Assist the country in implementation of systemic mechanisms for implementing energy efficiency measures,

- Remove legal and regulatory barriers for investments in clean energy projects, and

- Expand the customized permitting guide for investors to include new features that make the investment process easier.

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Exemplary Activities for Component 2: Energy Security:

2.1. Natural gas:

- Support diversification of natural gas supply from sources other than Russia,

- Provide assistance on establishing natural gas distribution companies along the route of the new transmission pipelines,

- Assist in unbundling of transmission and distribution system operators, and

- Provide assistance in setting up a regulatory framework for natural gas.

2.2. Electricity:

- Support the establishment of an organized electricity market (Power Exchange) and enable market coupling with neighboring countries and region,

- Assist in unbundling of transmission and distribution system operators,

- Assist in implementation of the prescribed market features in the electricity sector,

- Assist the integration of renewable energy projects into the electricity system and transmission and distribution networks, and

- Assist in analyzing system operation and system development to maintain the stability of the system and creating preconditions for energy infrastructure investments.

Exemplary Activities for Component 3: Cross-cutting Assistance:

3.1. Legal and Regulatory Framework:

- Develop new/update existing primary legislation at State, Entity and Brcko District levels to transpose the latest Energy Community requirements,

- Develop new/update existing secondary legislation at all levels to ensure full implementation of Energy Community requirements and alignment with primary legislation,

- Training of energy sector stakeholders on the best international practices, and

- Hands-on work with the energy sector stakeholders in implementing legislation.

3.2. Cybersecurity and Digitalization:

- Develop new/update existing primary legislation at State, Entity and Brcko District levels to transpose the latest Energy Community requirements related to cybersecurity,

- Assist energy stakeholders to conduct risk assessments, develop risk mitigation strategies, and provide recommendations,

- Develop guidelines for collaboration and information sharing between energy sector companies,

- Assist in establishment of energy sector cybersecurity response teams,

- Provide training on the best international practice in cybersecurity and raise awareness, and

- Support digitalization in the energy sector through development of tools, registers, and applications.

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3.3. Public Outreach and Capacity Building:

- Work on public outreach initiatives to raise awareness about the importance of sustainable energy, its benefits, and its impact on the environment and society,

- Work on effective public outreach strategies tailored for different target groups,

- Assist in providing clear and accessible information, organize training programs, and facilitate information-sharing platforms,

- Facilitate collaborations between the energy sector, decision makers, non-governmental organizations, academia, media, and general public,

- Develop educational materials, and

- Educate and increase knowledge of main stakeholders in the electricity and natural gas sector on market processes.

2. Baseline Environmental Information

2.1 Locations Affected and Environmental Context: The activities under this IEE will be implemented exclusively in the territory of Bosnia and Herzegovina. BiH has a complex legislative and regulatory framework. BiH has a state or national level government, which is administratively subdivided into two entity governments: the FBiH and RS. The FBIH is further subdivided into 10 cantons. The municipal level is the lowest form of government. In addition to the entities, which are divided into municipalities, there is the Brcko District. Currently the natural gas sector has no state level regulation and is regulated at the entity level the Federation of Bosnia and Herzegovina (FBiH), Republika Srpska (RS). Republika Srpska adopted a Natural Gas Law while FBiH has a Decree that regulates the gas sector in the FBiH. BiH fails to fully comply either with the EU’s Second or Third Internal Gas Market Directives. The approval of the new draft gas law in FBiH has been pending since 2014 even though BiH has been a member of the Energy Community since 2006. Therefore, unbundling, third party access and balancing rules do not yet apply in the country. In Republika Srpska tariffs for transmission and distribution are set by the Regulatory Commission while in the FBiH natural gas prices are approved by the Federation Energy Ministry for transmission and Cantonal Ministry for distribution and supply.

Bosnia and Herzegovina is a signatory of the Energy Community Treaty that requires the signatory parties to adopt the relevant regulations and thus harmonize their energy market frameworks with that of the EU. To facilitate this process the Energy Community (EnC) has adapted the EU energy acquis for the EnC Treaty signatories. However, Bosnia and Herzegovina continue to breach Energy Community law seriously and persistently by its failure to comply with the provisions of the natural gas acquis from the Second Energy Package. After its first decision in Case ECS-8/11 adopted on 1 October 2013 under Article 91 of the Treaty, the Ministerial Council has adopted three more decisions under Article 92 as from 2014, including imposing measures in 2015. After a brief suspension of the measures by the Ministerial Council on 14 October 2016, the measures were resumed on 1 April 2017, as the country did not honor its commitment to adopt a state law transposing the acquis in the natural gas sector. This activity will support energy reforms in BiH and enable progress toward fulfilling Energy Community Treaty obligations. In addition, this activity will assist the BiH energy sector to create an investor-friendly legislative and regulatory framework and to continue the integration of its energy sector into the regional and EU energy markets.

There are no institutions at the State level that are entirely dedicated to environmental protection. In other words, there is no State level Ministry for the Environment. Neither is there a Law on the environment at the State level. As per the Constitution, Entity level governments regulate environmental issues through their laws, regulations, and standards.

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However, Ministry for Foreign Trade and Economic Relations (MoFTER) has been delegated to manage certain energy and environmental issues at the State level in the absence of dedicated State level Ministries as per the Law on Ministries and other bodies of administration of BiH (Official Gazette of BiH, No. 5/03) enacted in March 2003. MoFTER is responsible to define and coordinate activities between the Entity authorities and institutions at the international level, in the field of environmental protection, agriculture, energy and natural resources and administer enforcement of relevant laws and other regulations.

2.2.Description of Applicable Environmental and Natural Resource Legal Requirements Policies, Laws, and Regulations BiH has a State level government, which is administratively subdivided into two entity governments:

the Federation of Bosnia and Herzegovina (FBiH) and Republic Srpska (RS). The FBIH is further subdivided into 10 cantons. Municipal level is the lowest form of government. In addition to the entities, which are divided into municipalities, there is also the Brcko District. Ministry for Foreign Trade and Economic Relations (MoFTER) has been delegated to manage certain environmental and energy issues at the State level in the absence of dedicated State level Ministries as per the Law on Ministries and other bodies of administration of BiH (Official Gazette of BiH, No. 5/03) enacted in March 2003. MoFTER is responsible to define and coordinate activities between the Entity authorities and institutions at the international level, in the field of environmental protection, energy and natural resources and administer enforcement of relevant laws and other regulations.

In order to improve and standardize environmental legislation, both entities drafted a set of 6 environmental laws that are largely in accordance with EU acquis:

The Framework Law on Environmental Protection;

The Law on Air Protection;

The Law on Water Protection;

The Law on Waste Management;

The Law on Nature Protection, and The Law on the Fund for Environmental Protection

These laws represent a framework for the legal protection of the environment, setting forth basic principles of the protection, defining basic notions and terms, as well as authorities responsible for policy implementation. They also lay down basic rules for drafting specific measures in the function of environmental protection policy implementation, as well as that of environment conservation and improvement. Since there is no central state environmental impact assessment (EIA) program the FBiH (Art. 36) and RS (Art. 35) are responsible to define the requirements for EIAs. If this project gets approved, they will be required to follow this process which also includes public participation in environmental decision making.

2.3. Environmental Capacity Analysis

Federation BiH: Environmental management in the Federation BiH is uneconomical and unsustainable. The main reason for this serious lack of coordination, disorientation, and duplication between the different levels of administration responsible for environmental issues lies in the fact that institutionalized mechanisms and channels for exchange of information virtually do not exist. In addition to the relevant ministries involved in the environment and biodiversity, the Federation has quite an impressive number of specialist institutions that provide expert consulting, inspection, and monitoring, and/or services that protect citizens, property, and the environment/biodiversity from natural disasters. These institutes and agencies work under relevant ministries or report directly to the government. While the structure and number of institutions is rather impressive, the lack of inter-ministry coordination on all levels, as well as weak information exchange, are serious issues that impede and obstruct efficient environment/biodiversity management. Additionally, inadequate

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experience in environmental management of ministerial staff often results in serious gaps between the legal requirements and actual implementation. The environmental protection legal framework in FBiH consists of five laws that were developed and adopted in 2003 at the entity level:

• Law on Environmental Protection;

• Law on Nature Protection;

• Law on Waste Management;

• Law on Air Protection; and

• Law on Environmental Protection Fund.

Adoption of these laws was a crucial step towards harmonizing BiH legislation with the EU. Although, FBiH adopted several of the sub-laws that harmonized many aspects of environmental protection with the EU legislation, the process of harmonization is far from finished. The process of harmonization must continue in order for FBiH to meet all EU directives related to regulating the environment. The main impediments to harmonization are the lack of a vision and the lack of a strategy for improving the efficiency of the harmonization processes.

Furthermore, harmonization of legislation is required within the legal structure in the entity and cantonal governments. The environmental laws adopted in 2003 were at the entity level, and some cantons have never adopted cantonal laws. In addition, some cantonal laws were adopted prior to the year 2003; so many provisions in these laws are inconsistent with the 2003 entity environmental laws.

The Republika Srpska (RS): The institutional framework for environment in the RS is simpler than the one in FBiH. There are only two levels of administration in the RS: entity and local. Similarly, to FBiH, there are public enterprises tasked with specific consulting, monitoring or other services related to the environment.

At the entity level, the Ministry for Spatial Planning, Construction, and Ecology is responsible for all issues related to the environment. This Ministry is responsible for drafting and adopting laws, implementing laws relevant to environmental protection, recommending areas to be protected, and monitoring and supervising work of local/municipal administrations. Within this ministry, there is a specialized department that handles environmental issues. Some responsibilities at the entity level related to the environment are also delegated to the Ministry of Agriculture, Forestry and Water Works;

the Ministry of Education; and the Ministry of Trade and Tourism. The roles and responsibilities of each of these ministries have been defined by the Law on Ministries (2002). This same law provides for the role of the Public Institute for Protection of Cultural, Historical and Natural Heritage of Republika Srpska. This institution is tasked with all works related to protected areas, including updating the register of protected areas. They also provide expert and consulting services related to protection of the RS. In its work, the institute cooperates with other public institutions in the RS, such as faculties, museums, etc. In addition, and similarly to FBiH, there are public enterprises that manage natural parks. In the RS, there are two such institutions that are responsible for the national nature parks, Sutjeska and Kozara. Also, there is a public enterprise “Srpske Sume” that is responsible for overall management of all forests in the RS.

The most significant legislative reform related to the environment in the RS was the adoption of a set of entity laws on the environment. This set of five laws was drafted and adopted by both entities at the same time and are harmonized with EU legislation regulating the environment. Furthermore, and similarly to FBiH, there are other pieces of legislation that regulate certain aspects of the environment that were adopted in the RS. These include the following:

• Law on Forests (2003);

• Law on Hunting (2002);

• Law on National Parks (2005);

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• Law on Waters (2006);

• Law on Agricultural Lands (2006);

• Law on Fishing (2002);

• Law on Communal Police (2003);

• Law on Fees for Utilizing Natural Resources for Energy Generation (2003); and

• Law on Environmental Fund (2002).

The Republika Srpska is facing some of the same issues as FBiH, including the requirement for full harmonization of its legislation with EU regulations. As previously stated, in order to harmonize its legislation with the EU, the BiH government started revising existing laws in 2006. This project was financed by the EC with the ultimate goal of monitoring the level of harmonization with EU regulations.

2.4 Climate Change Vulnerability Analysis

The climate risk assessment was performed by the mission using the Climate Risk Screening done for the CDCS.

The climate risk screening for USAID/Bosnia and Herzegovina’s strategy identified low or moderate risk from climate to all IRs under two DOs. A ranking of moderate risk was assigned to IR 1.2 (Governance Effectiveness in Targeted Areas Strengthened) under DO 1 (Accountability of Government to Citizens Strengthened); and also to IR 2.2 (Private Sector Growth Increased) under DO 2 (Socio-Economic Conditions Improved).

BiH’s climate varies with its topography Mediterranean climate in the Adriatic coast and lowland Herzegovina, moderate continental climate in the plains and hills in the center of the country and an alpine climate in the mountains. Since 1990, the most frequent natural hazards in BiH have been floods, extreme temperatures, droughts, and storms. BiH’s climate has experienced significant

0.8°C, with seasonal variations. The highest increases in temperatures were recorded during the some data suggest decreases in rainfall during spring and summer and increased rainfall during winter, accompanied by decreased snowpack, which can significantly affect water availability during the spring and summer months. Limited knowledge exists on climate changes specific to BiH, but data for Europe’s Mediterranean region suggest that the seasonal increases in temperature will average 1°C by 2030, with the highest increases occurring in the summer but also pronounced in the fall. It is also anticipated that temperature increases will be more pronounced in the inland areas. A marked increase in high temperature extremes and meteorological droughts across Europe will likely also affect BiH.

Some of the issues associated with Climate change vulnerability in the energy sector are associated with the following trends:

may be difficult to increase awareness of and usage of online tools when citizens are focused on meeting basic needs in times of climate-related hazards leading to emergencies/disasters, it may be difficult to safeguard digital infrastructure in light of climate-related hazards leading to emergencies/disasters, possibility that funds for this IR would be realigned to meet climate-related disaster response needs

Some of the opportunities for the Mission and the activity to intervene and address the issues associated with the Climate Change are:

Integrate Climate change (CC) adaptation language into PPPs and GDAs

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Include climate change language in RFAs/RFPs on raising awareness, considering CC impacts in proposals and applications

Leverage trends with regards to CC issues This Activity will contribute directly to encouraging the sustainability of Bosnia and Herzegovina’s energy sector and improving its environmental aspects, as will enhance the energy sector’s contribution to sustainable aspect of environment.

3. Environmental Impacts and Recommended Mitigation Measures

This activity may contribute indirectly to environmental and biodiversity conservation since economic growth, if done in a sustainable manner, in general stimulates environmental management. The successful management and protection of natural resources is predicated on a stable government, sound policy frameworks and functioning fiscal system, transparency, accountability, and vibrant private sector.

This Activity, New Energy Policy Activity could have positive environmental effects if this support is directed at respecting all energy -related policies, as prescribes by EU Energy Directives (which will be done in this case). This could also help mitigate climate change impacts and address potential effects of climate change by reducing carbon emissions associated with heating and power generation, specifically replacing the burning of coal with natural gas, which has been identified as a transition fuel. Furthermore, economic development that excludes sustainable development planning can have adverse effects on the environment. A common misperception is that the activities that are not directly addressing the environment, such as feasibility studies, could not be harmful to the environment. Therefore, additional precaution is advised during the planning and administration phases of this project by following the appropriate environmental policies, directives, treaties, and regulations.

Component 1 –Sustainability and Clean Energy

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Sub-activities Potential Impacts Mitigation Measures Recommended Threshold Determinations

1.1 Energy and Climate Policy:

Technical assistance in implementation of the National Energy and Climate Plan (NECP), development and implementation of energy sector policy, including fostering collaboration between government, industry, and environmental organizations to drive innovation and facilitate the adoption of renewable energy and energy-efficient solutions, and in development of an Emissions Trading Scheme to mitigate the Carbon Border Adjustment (CBA) Mechanism or any other prescribed procedures for electricity producers as required by the EU rules

While the provision of technical assistance to implement energy sector policies has limited environmental and climate impacts, poorly designed and regulated energy policies may favor the use of fossil fuels over cleaner alternatives.

This can lead to higher levels of greenhouse gas emissions, contributing to climate change and its associated environmental impacts.

Identification and analysis of applicable EU Acquis and BiH requirements and other relevant environmental policies, regulations, requirements, international agreements, and best practices.

The implementer will prepare such analysis as part of the intervention and the analysis will be subject to approval by the COR and MEO in consultation with the BEO.

Negative Determination with Conditions

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1.2 Business and Private Sector

Initiatives: Technical assistance in development of new models for active participation of citizens in the electricity market, establishing policy frameworks that encourage the development and adoption of renewable energy sources and energy efficiency measures, assist business and private sector initiatives to implement sustainable business models in clean energy and e-mobility, to attract investments and financial incentives for renewable energy projects and energy-efficient technologies, in implementation of systemic mechanisms for implementing energy efficiency measures, to remove legal and regulatory barriers for investments in clean energy projects, and to expand the customized permitting guide

While the provision of technical assistance to develop the adoption of energy efficiency measures has limited environmental and climate impacts, poorly designed and regulated energy policies may favor the use of fossil fuels over cleaner alternatives.

This can lead to higher levels of greenhouse gas emissions, contributing to climate change and its associated environmental impacts.

Identification and analysis of applicable EU Acquis and BiH requirements and other relevant environmental policies, regulations, requirements, international agreements, and best practices.

The implementer will prepare such analysis as part of the intervention and the analysis will be subject to approval by the COR and MEO in consultation with the BEO.

Negative Determination with

Component 2 – Energy Security

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Sub-activities Potential Impacts Mitigation Measures Recommended Threshold Determination

2.1 Natural gas: Technical

assistance to support diversification of natural gas supply from sources other than Russia, on establishing natural gas distribution companies along the route of the new transmission pipelines, in unbundling of transmission and distribution system operators, and in setting up a regulatory framework for natural gas.

While the provision of technical assistance to support diversification of natural gas supply has limited environmental and climate impacts, ineffective policies may fail to provide sufficient incentives for the development and adoption of renewable energy sources. When policies favor incumbent industries or fail to encourage innovation, there is less motivation for the development of new, environmentally friendly technologies. This hinders the transition to cleaner and more sustainable energy alternatives.

Identification and analysis of applicable EU Acquis and BiH requirements and other relevant environmental policies, regulations, requirements, international agreements, and best practices.

The implementer will prepare such analysis as part of the intervention and the analysis will be subject to approval by the COR and MEO in consultation with the

BEO

Negative Determination with

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2.2 Electricity: Technical

assistance in establishment of an organized electricity market (Power Exchange) and enabling market coupling with neighboring countries and region, in unbundling of transmission and distribution system operators, in implementation of the prescribed market features in the electricity sector, integration of renewable energy projects into the electricity system and transmission and distribution networks, and in analyzing system operation and system development to maintain the stability of the system and creating preconditions for energy infrastructure investments.

While the provision of technical assistance to analyze energy systems and creating preconditions for energy infrastructure investments has limited environmental and climate impacts, ineffective policies may fail to provide sufficient incentives for the development and adoption of renewable energy sources. When policies favor incumbent industries or fail to encourage innovation, there is less motivation for the development of new, environmentally friendly technologies. This hinders the transition to cleaner and more sustainable energy alternatives

Identification and analysis of applicable EU Acquis and BiH requirements and other relevant environmental policies, regulations, requirements, international agreements, and best practices.

The implementer will prepare such analysis as part of the intervention and the analysis will be subject to approval by the COR and MEO in consultation with the

BEO

Negative Determination with Conditions.

Component 3: Cross-cutting Assistance

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Sub-activities Potential Impacts Mitigation Measures Recommended Threshold Determination

3.1. Legal and Regulatory

Framework: Technical assistance to develop new/update existing primary legislation at State, Entity and Brcko District levels to transpose the latest Energy Community requirements, to develop new/update existing secondary legislation at all levels to ensure full implementation of Energy Community requirements and alignment with primary legislation, and to train energy sector stakeholders on the best international practices, including hands-on work in implementing legislation.

While the provision of technical assistance to develop energy legislation has limited environmental and climate impacts, ineffective policies may fail to provide sufficient incentives for the development and adoption of renewable energy sources. Poorly designed legislation may favor the use of fossil fuels over cleaner alternatives. This can lead to higher levels of greenhouse gas emissions, contributing to climate change and its associated environmental impacts.

Identification and analysis of applicable EU Acquis and BiH requirements and other relevant environmental policies, regulations, requirements, international agreements, and best practices.

The implementer will prepare such analysis as part of the intervention and the analysis will be subject to approval by the COR and MEO in consultation with the BEO.

Negative Determination with Conditions

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3.2. Cybersecurity and

Digitalization: Technical assistance to develop new/update existing primary legislation at State, Entity and Brcko District levels to transpose the latest Energy Community requirements related to cybersecurity, to conduct risk assessments, develop risk mitigation strategies, and provide recommendations, to develop guidelines for collaboration and information sharing between energy sector companies, to establish energy sector cybersecurity response teams, to provide training on the best international practice in cybersecurity and raise awareness, and to support digitalization in the energy sector through development of tools, registers, and applications.

Not anticipated None Categorical Exclusion under §216.2(c)(2)(i)

3.3. Public Outreach and

Capacity Building: Technical assistance to work on public outreach initiatives to raise awareness about the importance of sustainable energy, its benefits, and its impact on the environment and society, to work on effective public outreach strategies tailored for different target groups, to assist in providing clear and accessible information, organize training programs, and facilitate information-sharing platforms, to facilitate collaborations between the energy sector, decision makers, non-governmental organizations, academia, media, and general public, to develop educational materials, and to educate and increase knowledge of main stakeholders in the electricity and natural gas sector on market processes.

Not anticipated None. Categorical Exclusion under §216.2(c)(2)(i)

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4. Conclusions of the Environmental Review

4.1 Recommended Environmental Determinations:

Categorical Exclusions:

A categorical exclusion is recommended for the following sub-activities under §216.2(c)(2)(i) Education, technical assistance, or training programs except to the extent such programs include activities directly affecting the environment (such as construction of facilities, etc.).

3.2. Cybersecurity and Digitalization:

3.3. Public Outreach and Capacity Building:

4.2 Negative Determination Terms and Conditions:

Under §216.3(a)(2)(iii), a negative determination with conditions is recommended for activities:

1.1 Energy and Climate Policy

1.2 Business and Private Sector Initiatives

2.1 Natural gas, and

3.1. Legal and Regulatory Framework.

Specific terms and conditions are presented below in Section 4.3.

4.3 USAID Monitoring and Reporting

For activities 1.1, 1.2, 2.1, 2.2 and 3.1, identification and analysis of applicable EU Acquis requirements and other relevant environmental considerations. Revised legislation and regulation will be in accordance with EU requirements and must meet all applicable EU environmental standards. The implementer will prepare such analysis as part of the intervention and the analysis will be subject to approval by the COR and MEO in consultation with the BEO.

4.3.1 The AOR/COR, with the support of the MEO, is responsible for monitoring compliance of activities by means of desktop reviews and site visits.

4.3.2 The AOR/COR is responsible for confirming that the IP includes environmental compliance requirements and monitoring results as part of their routine project reporting to USAID.

4.3.3 The AOR/COR is responsible for monitoring, to the extent practicable, that the IP complies with applicable host country environmental requirements.

4.3.4 If at any time the project is found to be out of compliance with the IEE, the AOR/COR or MEO shall immediately notify the BEO.

4.3.5 A summary report of Mission’s compliance relative to this IEE shall be sent to the BEO on an annual basis, normally in connection with preparation of the Mission’s annual environmental compliance report required under ADS 203.3.8.5 and 204.3.3.

4.3.6 The BEO or his/her designated representative may conduct site visits or request additional information for compliance monitoring purposes to ensure compliance with this IEE, as necessary.

4.4 Implementing Partner (IP) Environmental Compliance Monitoring and Reporting

4.4.1 The IP is required to comply with applicable host country environmental requirements.

4.4.2 If an individual activity is found to pose significant adverse environmental effects that have not been identified and addressed in the approved environmental review documents, new environmental review documents shall be developed to include environmental safeguards for such effects.

4.4.3 IPs shall report on environmental compliance requirements and monitoring results as part of their routine project reporting to USAID.

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4.4.4 After the IP has finalized its activities at a specific site, the IP shall sign a Record of Compliance certifying that the organization met all applicable conditions and submit it to the COR/AOR. The COR/AOR shall keep the original for the project files and provide a copy to the MEO and BEO. The ROC shall be assigned a DCN and posted to the ECD. The Record of Compliance certifies that all the mitigation measures that the IP confirmed would occur during project implementation did indeed occur. The ROC is completed at the end of work at each individual site. If there are multiple sites, multiple ROCs are required.

5. Mandatory Inclusion of Requirements in Solicitations, Awards, Budgets and Workplans

5.1 Appropriate environmental compliance language, including limitations defined in Section 6, shall be incorporated into solicitations and awards for this activity and projects budgets shall provide for adequate funding and human resources to comply with requirements of this IEE.

5.2 Solicitations shall include Statements of Work with tasks for meeting environmental compliance requirements and appropriate evaluation criteria.

5.3 Environmental mitigation and monitoring requirements, when available, shall also be included in solicitations and awards.

5.4 The IP shall incorporate conditions set forth in this IEE into their annual work plans.

5.5 The IP shall ensure annual work plans do not prescribe activities that are defined as limitations, as defined in Section 6.

5.6 The USAID Mission will include an indicator for environmental compliance as part of the project’s performance monitoring plan. (For example, if an IEE has a threshold determination of negative determination, then a possible indicator is if the IP complied with the ERC/EMMP.)

6. Limitations of the IEE: This IEE does not cover activities (and therefore should changes in scope implicate any of the issues/activities listed below, a BEO-approved amendment shall be required), that:

6.1 Normally have a significant effect on the environment under §216.2(d)(1), including:

Programs of river basin development;

Irrigation or water management projects, including dams and impoundments;

Agricultural land leveling;

Drainage projects;

Large scale agricultural mechanization;

New lands development;

Resettlement projects;

Penetration road building or road improvement projects;

Powerplants;

Industrial plants;

Potable water and sewerage projects other than those that are small scale.

6.2 Support project preparation, project feasibility studies, engineering design for activities listed in §216.2(d)(1);

6.3 Affect endangered and threatened species or their critical habitats per §216.5, FAA 118, FAA 119;

6.4 Provide support to extractive industries (e.g., mining and quarrying);

6.5 Promote timber harvesting per FAA 117 and 118;

6.6 Lead to new construction, reconstruction, rehabilitation, or renovation work;

6.7 Support agro-processing or industrial enterprises;

6.8 Provide support for regulatory permitting;

6.9 Lead to privatization of industrial facilities or infrastructure with heavily polluted property;

6.10 Research, testing, or use of genetically engineered organisms except in accordance with ADS

211; or

6.11 Assist the procurement (including payment in kind, donations, guarantees of credit) or use

(including handling, transport, fuel for transport, storage, mixing, loading, application, clean-up of spray equipment, and disposal) of pesticides or activities involving procurement, transport, use, USAID Bosnia and Herzegovina / New Energy Policy Activity 2024 18

DCN: 2024-BOS-001

storage, or disposal of toxic materials per §216.2(e) and §216.3(b). Pesticides (cover all insecticides, fungicides, rodenticides, etc. covered under the Federal Insecticide, Fungicide, and Rodenticide Act); and

7. Revisions

7.1 Under §216.3(a)(9), if new information becomes available that indicates that activities covered by the IEE might be considered major and their effect significant, or if additional activities are proposed that might be considered major and their adverse effect significant, this environmental threshold decision will be reviewed and, if necessary, revised by the Mission with concurrence by the BEO.

It is the responsibility of the USAID COR/AOR to keep the MEO and BEO informed of any new information or changes in the activity that might require revision of this IEE.

USAID Bosnia and Herzegovina / New Energy Policy Activity 2024 19 E&E Bureau IEE Template (Version 1 Jun 2023)

8. Environmental Threshold Decision Clearances:

Approval:

Courtney Chubb, Mission Director Date

Savannah ThomasArrigo, Acting Deputy Mission Director Date

Anela Semic, Date Mission Environmental Officer

Ankica Gavrilovic, Activity Manager/AOR/COR Date

Concurrence:

Poojan Tripathi, Bureau Environmental Officer (BEO) Date USAID Europe and Eurasia Bureau

Distribution:

Activity File

AOR/COR

MEO

BEO

ECD

Ankica Gavrilovic Digitally signed by Ankica Gavrilovic Date: 2024.01.05 09:16:55 +01'00'

Anela Semic Digitally signed by Anela Semic Date: 2024.01.05 09:22:28 +01'00'

Savannah ThomasArrigo

Digitally signed by Savannah ThomasArrigo Date: 2024.01.05 09:56:26 +01'00'

Courtney Chubb

Digitally signed by Courtney Chubb Date: 2024.01.05 12:30:09 +01'00'

POOJAN BHASKER

TRIPATHI

Digitally signed by POOJAN

BHASKER TRIPATHI

Date: 2024.01.16 12:10:44 -05'00'

USAID Bosnia and Herzegovina / New Energy Policy Activity 2024 20 E&E Bureau IEE Template (Version 1 Jun 2023)

Annex A: Climate Risk Screening and Management Tool

1: Components or Sub-activities 2: Time-frame and Geography 3: Climate Risks* 4: Climate Risk

Rating* 5: How Climate Risks are Addressed in the Activity*

6: Accepted Climate Risks*

Component 1:

1.1 Energy and Climate

Policy

National

10-15 years

Government ability to implement reforms stalled, delayed, or overtaken by the need to respond to extreme weather events and disasters

Political instability, social unrest, depreciation of democratic values and attention distracted from transformational reforms due to extreme weather events and market impacts from weather/climate impacts

Moderate Prioritize support for reforms that build climate resilience and engage with groups already working in that space (EU entities, UNDP, etc.)

1.2 Business and Private

Sector Initiatives:

National

10-15 years

Political instability, social unrest, depreciation of democratic values and attention distracted from transformational reforms due to extreme weather events and market impacts from weather/climate impacts

Low Prioritize support for reforms that build climate resilience and engage with groups already working in that space (EU entities, UNDP, etc.)

Component 2:

2.1 Natural gas:

National

10-15 years

Decreased confidence in government’s ability to ensure energy security and reliability due to climate impacts on energy provision and reliability

Moderate Prioritize support for reforms that build climate resilience and engage with groups already working in that space (EU entities, UNDP, etc.)

Component 2:

2.2 Electricity

National

10-15 years

N/A Low N/A

USAID Bosnia and Herzegovina / New Energy Policy Activity 2024 21 E&E Bureau IEE Template (Version 1 Jun 2023)

1: Components or Sub-activities 2: Time-frame and Geography 3: Climate Risks* 4: Climate Risk

Rating* 5: How Climate Risks are Addressed in the Activity*

6: Accepted Climate Risks*

Component 3:

3.1. Legal and Regulatory

Framework

National

10-15 years

Decreased confidence in government’s ability to ensure energy security and reliability due to climate impacts on energy provision and reliability

Prioritize support for reforms that build climate resilience and engage with groups already working in that space (EU entities, UNDP, etc.)

Component 3:

3.2. Cybersecurity and

Digitalization

National

10-15 years

None Low N/A

Component 3:

3.3. Public Outreach and

Capacity Building:

National

10-15 years

None Low N/A

* means a required element, according to the Mandatory Reference