INTRODUCTORY COMMENTS

This provides a list of abbreviations commonly used in project identification and preparation.
  

This provides a list of abbreviations and more detailed explanation of the key terms and techniques used in project identification and preparation.

Key terms used in the Manual and listed at the end of each Section are given in bold type.

The most important items are marked with the symbol A .
 

INDEX

Acidification 
Accountability
Activities 
Actors 
Aid 
Aid Packaging
Aim
Analytical and Presentational Skills 
Appraisal
Appraisal Report 
Assistance 
Assumptions 
Bankability
Bankable project
Bar Chart
Baseline Study
Baum Cycle
Beneficiaries 
Benefit-Cost Ratio 
Benefits
Bilateral 
Bilateral funder
Board 
Borrower 
Brain-storming 
Brief
Budget
Capacity-building 
Capital
Capital Budgeting
Capital Expenditure
Capital Grant
Capital Project 
Capital recovery factor
Cash Flow 
Checklist
Clean Production 
Co-Financing 
Collaborative Working
Commission
Commitment Fee
Competitive Tender
Concessional Funding
Constraints
Consultants
Contingencies
Contract
Costs
Cost Benefit Analysis 
Cost effectiveness analysis
Cost Recovery Index
Country Strategies 
Countries in Transition
Creative and Innovative Skills 
Credit
Credit Line 
Crisis Management
Critical-Path Analysis 
Debt for Environment Swap 
Debt Service
Decentralised
Deliverable
Demand Driven
Depreciation 
Desiccation
Disbursement
Disbursement Rate
Discounted Cash Flow (DCF) 
Discounting
Discount Rate
Dissemination
Dissemination Strategy
Disposal of Wastes
Donor 
Donor Appraisal Procedures
Donor Investment Strategies
Due Diligence
Economic Analysis 
Economic Appraisal
Economic Evaluation
Efficiency 
End of Pipe 
Environment 
Environment Banks
Environmental Action Programme for 
Central and Eastern Europe (EAP)
Environmental Action Programme
(EAP) Task Force
Environmental Assessment
Environmental Evaluation
Environmental Funds
Environmental Impact Assessment (EIA) 
Environmental Monitoring
Environmental Policy
Environmental Problem 
Environmental Protection
Equity
Equity Financing 
European Currency Unit (ECU)
European Union (EU) 
Eutrophication
Evaluation 
Ex Ante Evaluation
Ex Post Evaluation 
Externality
Feasibility Study 
Financial Analysis 
Finance
Financial Appraisal
Financial Instruments 
Financial Intermediaries
Financial Plan
Financing Mechanism
Framework
Funder 
Funding
Funds
GANNT Chart
Goal
Good Practice 
Grant 
Grants on Interest Payments 
Green 
Green Bank 
Greenhouse Effect
Guarantee
Hard Project 
Hot Spots
Housekeeping
Idea
Identification (Pre-Feasibility)
Immediate Objective 
Impact 
Implementation
In-kind Contribution
Incentives 
Incremental cash flow
Incremental costs
Indicative Programme Development
Indicators 
Information
Inputs 
Institutional Analysis 
Institutional Strengthening 
Intangibles
Intangible Benefits
Internal Rate of Return (IRR) 
International Financial Institutions (IFI) 
Investment Operation Cycle
Investor
Joint Venture 
Lender
Letter Contract 
Loan 
Loan Document 
Loan Guarantees 
Loans Provided through Financial Intermediaries 
Local Skills
Log Frame Analysis 
Long-list
Marginal Costs
Matchmaking
Matrix
Means of Verification 
Milestone
Mission
Mitigation Measures 
Monitoring 
Multi-Agency 
Multi-Criteria Analysis
Multi-Disciplinary 
Multilateral Funders 
National Environmental Action Plan (NEAP)
National Environmental Funds 
Negotiations and Presentation 
Negotiation Skills 
Net Benefit
Net Present Value (NPV) 
Non Governmental Organisation (NGO) 
Non-Recourse Loans
Noise
Nuisance
Objectives
On-Lending
Open Tender
Operations and Maintenance
Opportunity Costs
Options 
Organisation for Economic Co-operation and Development (OECD)
Outputs 
Overheads 
Ownership
Ozone damage
Package 
Participation
Pay Back 
Performance 
Performance Indicators 
Performance Measures
Period of Grace
PERT Chart 
Phare Countries
Phare Programme 
PIU
Planning Balance Sheet
PMU
Pollution
Polluter Pays Principle
Pre-Feasibility Study 
Presentation
Presentation Skills
Prioritisation
Problems of Project Development 
Procurement 
Procurement Rules
Programme 
Programming Cycles
Project 
Project Accounts
Project Appraisal 
Project-building 
Project-building Skills 
Project Concept Report 
Project Cycle 
Project Definition
Project Description 
Project Design 
Project Developer 
Project Development 
Project Director
Project Document
Project Evaluation
Project Framework
Project Identification
Project Identification Sheet
Project Implementation 
Project Management
Project Memorandum
Project Monitoring
Project Negotiation/Presentation
Project Preparation 
Project Preparation Committee (PPC)
Project Preparation Facility (PPF)
Project Proposal
Project Proposer 
Project Screening
Project Sponsor 
Project Sustainability
Purpose
Quasi Equity
Ranking
Rapid Assessment
Reporting
Resources 
Restricted Tender
Results
Revenue
Revenue Income 
Revenue Project 
Revolving Funds
Risks 
Risk Assessment 
Risk Management
Scoping 
Screening 
Sector Operations Policies 
Sensitivity Analysis 
Service Charges
Sewage
Sewerage
Short-list
Small Credits
Social Analysis 
Social Partners
Soft Loan 
Soft Project 
Sovereign Risk Guarantee
Stakeholders 
Stakeholder Analysis 
Steering Committee
Strategic Framework 
Strategy 
Sub-Contractor
Subordinated Debt
Subsidy 
Sustainable
Sustainable Development 
SWOT Analysis 
Tangible Benefits
Targets
Task 
Technical Assistance
Tender
Tendering Procedure
Terms of Reference 
Third Party Financing
Tied Aid 
Tied Assistance
Time Management
Timing
Time Value of Money
Trans-Border 
Trans-Boundary
Trust Fund Verification
Vision
Wastes (see Disposal of)
Wider Objective 
Win-Win Project
With-Without Project Analysis
Work Package
Work Plan

Acidification - is a process which occurs as a result of the deposition of atmospheric (air-borne) pollution containing acid-forming substances and ozone. Acidification leads to damage to forests, heathlands, terrestrial and aquatic ecosystems, agriculture, public health, buildings and materials. The acid forming substances are: Sulphur dioxide (SO₂); Nitrogen oxides (NO_x); Ammonia (NH₃). The ozone-forming substances are: Volatile organic compounds (VOCs); Nitrogen oxides (No_x).

Accountability - a responsibility to explain, for example, actions undertaken, financial transactions made, and/or results produced. 'Public accountability' is where an agency has to account to the electorate or the wider public for a decision e.g. on policy or involving the expenditure of public funds 

Activities - are individual, detailed pieces of work which are linked together within a task. Activities usually must be completed within a specified time and require input of resources. They are also sometimes referred to as 'sub-tasks' (see also: Work Plan; Tasks)

Actors - all those having an active involvement in the identification, preparation and/or implementation of a project. As such 'actors' are a special type of stakeholder, although the terms are sometimes used interchangeably.

The main actors are usually:

• project developer (may be the same as the project sponsor); 
• project sponsor or proposer (for loans the sponsor, developer, or a third party may be the 'client' or 'borrower' which actually signs the loan agreement); 
• the funder (i.e. the agency providing the money for a project); 
• consultants.

Aid - help provided, usually quickly, in large units and without consideration of institutional strengthening or capacity-building aspects (e.g. emergency food aid) (see also: Technical Assistance).

Aid Packaging - funding of a project by several parties. For example, a project could be funded partly from the country's own national budget, partly from foreign grants and partly from a loan through a bank (see also: Package)

Aim - the overall, or wider objective of a project or action (see also: Goal; Wider Objective)

Analytical and Presentational Skills - the skills needed by a project developer in order to prepare the information and justification required to make a good case for their project - both to persuade the decision-makers and the potential funders. Effective presentation - both verbal and written - of the project idea is important.

Appraisal - analysis of a proposed investment to determine its merit and acceptability in accordance with established decision criteria (it is a key stage of the Project Cycle - see Project Appraisal). This may also relate to the assessment of options and costs and benefits as part of the project identification process (see also: Appraisal Report)

Appraisal Report - a document that sets out the results of a project appraisal (see also: Appraisal)

Assistance - (see Technical Assistance; Aid)

Assumption - a condition or premise which is supposed or taken for granted during project preparation. Identifying assumptions is an integral part of Logical Framework Analysis where provisional hypotheses must be explicitly stated and tested (see also: Log Frame Analysis)

Bankability - is the ability (based on income or cost savings generated by the project) to repay the financing plus provide a return on the money (the interest on the loan or the expected return of an equity investment). The return should reflect the amount of risk taken by the investor (equity finance generally involves more risks and will therefore usually be more expensive than a loan).

(source: PCP Guidelines for Financing of Environmental Projects)

Bankable project - refers to a project which has been prepared in such a way (often supported by feasibility studies) that it successfully meets the criteria set in the appraisal and is, therefore, suitable for financing by a bank (see: Bankability).

Bar Chart - graphical representation of project data; useful in presenting the facts about a project or illustrating the use of time and resources (see also: GANTT Chart; PERT Chart; Work Plan) 

Baseline Study - a description of existing conditions to provide a starting point against which progress can be assessed or comparisons made

Baum Cycle - an alternative name for the project cycle (see also: Project Cycle)

Beneficiaries - those receiving some benefit/ advantage from an activity or project (see also: Actors; Stakeholders). The beneficiary is not necessarily the party that receives, or manages, the funds for a project.

Benefit-Cost Ratio (BCR) - is a measure of Discounted Cash Flow; it is one of the measures generated by Cost Benefit Analysis. It is the ratio between discounted total benefits and costs, allowing a distinction to be made between projects that have a high Net Present Value simply because they are large and projects having a genuinely high rate of return (see also: Time Value of Money; Discounted Cash Flow; Net Present Value; Internal Rate of Return) 

Benefits - the positive advantages or outcomes of a project which justify its implementation. Benefits may be measurable/ tangible or unquantifiable/ intangible (see also: Cost Benefit Analysis).

Bilateral - relationship or agreement between two countriesor organisations. It is often used to describe assistance provided directly from one specific donor country to a recipient country (see: Source Book 9.10).

Bilateral funder - used to describe countries which provide technical assistance and/or funds to other countries usually in the form of grants (see: Source Book 9.10).

Board - usually comprises the executive directors of an organisation; an IFI Board is the body that formally approves a loan.

Borrower - the organisation/country seeking project funding through a loan; often the project developer.

Brain-storming - structured, open discussion by a group of people leading to the generation of ideas to address or resolve a problem.

The purpose of brain-storming is to come-up with new ideas. It gives every member of the group of people involved a chance to contribute, and brings a wide range of intellectual and emotional responses to a problem. You need at least four people. Everyone is invited to bring-up any ideas as it occurs to them. The key principles are:

• concentrate on generating as many ideas as possible; 
• never reject an idea, however strange it may sound - crazy ideas may lead to realistic ones; 
• write down all ideas of a big sheet of paper, even repetitions; 
• each participants contribution is important; 
• no criticism is allowed during the activity; 
• ensure that you encourage people to give up their 'ownership' of an idea; 
• don't discuss practical implementation of ideas during the session; 
• sort out and select ideas after the brain-storming session; 
• make it fun! This helps avoid boring discussions and inspires everyone to take part. 

Brief - a document specifying tasks to be addressed or undertaken in a specific context

Budget - a presentation of the total costs of a project. Usually this is presented as a table with cost estimates broken down into direct costs (e.g. personnel, office costs, communications, computer costs, daily allowances for travel abroad, etc.) and reimbursable expenses (e.g. equipment, travel, contingencies). Notes should be used to explain any assumptions made. Most funders will require you to use their own format for presentation of the project budget.

Capacity-building - or capacity-development, focuses on improving the expertise and skills of personnel in relation to the responsibilities and tasks which they will carry-out. It is generally considered to be a specific part of institutional strengthening activities (see also: Institutional Strengthening).

Capital - financial or physical assets which are capable of generating income.

Capital Budgeting - the process of managing capital assets by means of a capital budget. This may cover an annual or longer period.

Decisions have to be taken about what to obtain and when, when to replace ageing assets or to sell off ones that are not performing as well as expected. It may involve choices between purchase and leasing. If purchase is the chosen option, the implications in terms of repayments must be understood

To do this effectively there needs to be a plan with objectives and criteria to steer the management process. It also requires a clear view of the appropriate timescale over which the costs and benefits are to be measured, and an understanding of the risk attaching to each decision

Capital Expenditure/Investment - the purchase of fixed assets, such as buildings, equipment, land, vehicles, or similar items which involve a significant investment of resources over a long period of time

Capital Grant - a grant to cover the costs of acquiring capital assets, e.g. land, buildings, equipment

Capital Project - a project that involves the construction or purchase of fixed assets e.g. buildings and equipment (see also: Hard Project)

Capital recovery factor - the remaining benefits of a project after payment of all the operational costs for repayment of the loan.

Cash Flow - all the payments and income (receipts) of money associated with implementing a project.

Checklist - a list of key factors that can serve as an aide memoire to project development.

Clean Production - manufacturing processes that minimise environmental impacts e.g. low use of energy and raw materials, low emissions and waste.

Co-financing - where two or more parties are involved in funding a project. Loans often involve co-financing with other banks or bilateral funders. Co-financing is also referred to as third party financing as the project developer (or borrower) is often also a contributor.

Collaborative Working - working jointly with another organisation to mutual advantage.

Commission - common term for a piece of work to be undertaken by consultants (see also: Brief; Consultants; Terms of Reference).

Commitment Fee - the fee paid to a lender for a formal line of credit, or the fee charged by a bank in respect of an unused balance of a line of credit. It is designed to offset the bank's cost of keeping the funds available. It reimburses the lender for the costs associated with meeting a payment request, and is usually a percentage of the loan approved.

Competitive Tender - where several organisations are invited to prepare proposals to provide a particular project or service on the basis of quality and price.

Concessional Funding - funds obtained at below market rates; another term for soft loans and other subsidies.

Constraints - limitations, restrictions; limiting factors that should be taken into account when identifying and preparing a project proposal e.g. lack of available materials, skills, funds.

Consultants - people providing professional advice for a fee.

Contingencies - an allowance in the project budget which will cover the cost of any (reasonable) unforeseen circumstances.

Contract - a legally binding agreement. For example a contract may commit a project developer (or sponsor) to carry-out the specified tasks and the funder to providing money once the tasks have been successfully completed.

Costs - the price of implementing a piece of work/project. Accrued cost/expenditure is generally interpreted to mean the work done to date or to the end of a previous financial year. Actual cost/expenditure is the invoiced total at the present time.

Cost Benefit Analysis - a technique that assesses projects through a comparison between their costs and benefits, including social costs and benefits for an entire region or country. Depending on the project objectives and its the expected outputs, three types of CBA are generally recognised:

1. financial; 
2. economic; and 
3. social. 

In order to be a really effective and acceptable tool cost-benefit analysis needs to take account of environmental variables. This requires that the environmental costs and benefits are quantified, wherever possible, and included in the analysis.

Cost-benefit analysis is the standard project appraisal method used in feasibility studies for internationally funded projects. It is based on discounted cash flow methodology. The key parameters generated by cost-benefit analysis are the Internal Rate of Return, the Net Present Value and the Benefit-Cost Ratio. The key input data comprises the quantified stream of costs and benefits in physical and economic terms.

Economic costs and benefits are usually measured by shadow prices or opportunity costs, which may be different from the market prices appropriate for financial costs and benefits. The technique generally uses economic prices e.g. world market prices, which exclude taxes and subsidies and therefore reflect the true scarcity of the resources involved. Sensitivity analysis is used to test the project for changes in the assumed values of key variables.

Sunk costs are those costs already incurred before the project appraisal stage and are excluded from cost-benefit analysis.

Externalities define project effects that do not imply a cost or benefit from the project but which may affect the achievement of the project's objectives. If such costs are significant and measurable they should be counted as economic costs.

No costs or benefits should be recorded more than once. 

(see also: Benefit-Cost Ratio; Internal Rate of Return; Net Present Value; Discounted Cash Flow)

Cost effectiveness analysis - analysis of two or more alternatives in order to identify the alternative with the highest input/output ratio; that is, to achieve the maximum output, or the result with the minimum input or costs. 

Cost Recovery Index - the proportion of project costs recovered from beneficiaries.

Country Strategies - an assessment of the environmental situation, objectives and priorities for a country drawn up by an IFI and used to guide its investment.

Countries in Transition - a general term used to describe Central and Eastern European Countries.

Creative and Innovative Skills - important project identification skills - being able to develop new ideas and methodologies.

Credit - use or possession of goods and services without immediate payment.

Credit Line - where funding is transferred in instalments on the request of the recipient. This is a more flexible arrangement than a straightforward loan. Bank funds are often channelled through credit lines held at intermediary banks in order to make smaller concessional loans available. Loans from credit lines are often earmarked for certain types of investments.

Crisis Management - responding to unforeseen circumstances with no time to plan ahead.

Critical-Path Analysis - a method of analysing logically the phasing of tasks in the implementation of a project. The main idea is to check that all outputs which are required by the next phase of the project will be completed by the time that they are actually required. To give a simple example: in a training project the task to identify the needs of the target group must be completed before the training materials can be prepared, and these in turn must be completed before the first course can be given. 

Debt for Environment Swap- the debtor country trades a reduction in its debt burden against a commitment to provide resources for environmental protection.

Funding of a special environment fund as part of an agreed reduction in national debt repayments e.g. in Poland where western governments agreed to reduce the national debt by 60% on condition that 10% would be in exchange for equivalent domestic spending on the environment - to be agreed on a case by case basis.

Also called 'debt-for-nature-swap'

(Source: "The St Petersburg Guidelines on Environmental Funds in the Transition to a Market Economy", OECD, 1995).

Debt Service - a payment made by a borrower to a lender. May include one or all of: (1) payment of interest, (2) repayment of principal loan (3) loan commitment fee.

Decentralised - as much control as possible is delegated to the regional or local level e.g. much of operation of the EU PhareProgramme is decentralised to the individual CEEC.

Deliverable - a product, outcome or output from a project. e.g. production of a report (see also: Work Plan).

Demand Driven - a programme or project that responds to requests from its potential recipients, subject to consultation and certain criteria being met, is demand driven. Sometimes also called 'demand led' 

Depreciation - "the reduction in the value of an asset through wear and tear" (Dictionary of Economics); a budgetary allowance to enable the replacement of assets at the end of their working life.

Desiccation - or 'fresh water deficit' concerns changes in vegetation which may occur after a fall in ground water level, altered seepage flows and/ or the intake of extraneous water.

Disbursement - spending of money, release of payments.

Disbursement Rate - the rate at which disbursements/payments are made. A funder may provide the money for a project in instalments in accordance to a pre-arranged plan, or in line with progress.

Discounted Cash Flow - a method of comparing the profitability of alternative projects which takes the time value of money into account. 

Projects usually bring benefits later than costs, and appraisals therefore need to compare costs and benefits occurring at different times. Discounted cash flow involves applying a discount rate to all the costs and benefits that can be expressed in money terms. This gives more emphasis to costs incurred earlier and benefits received earlier. The best option is usually the one with the highest net present value.

Discounted Cash Flow is a mathematical technique applied to financial and economic cost-benefit analysis which enables the comparison of costs and benefits occurring at different time by calculating a present value for each

(see also: Time Value of Money; Discounting)

Discounting - the process of finding the present worth of a future amount of money. Generally this expression is obtained in the form of a discount factor from a set of compounding and discounting tables. The underlying concept is sometimes referred to as the time value of money

In order to compare costs and benefits over the life of a project it may be useful to discount these to their present values. However, there are a number of ways of assessing the discount rate - it can be the market interest rate, time preference rate or rate corrected for increases in the valuation of the environment, for example. There are strong arguments for using different discount rates when measuring some environmental costs and benefits. There is no consensus in practice as to which value of the discount rate should be used and it may be helpful to seek expert advice.

(Source: "Assessment of Benefits of Environmental Measures, Kuik et al, 1992)

(see also: Time Value of Money)

Discount Rate - the rate used to determine the present worth of a future value by discounting (see Discounting). Banks usually use the interest rate as a discount rate

In an economic cost-benefit analysis an appropriate discount rate must be selected - low discount rates usually favour the protection of natural resources. The discount rate reflects the shadow price (opportunity cost) or social cost or benefit of the proposed project, and it may differ from the market interest rate. Where a discount rate has been selected that differs from the market interest rate the discount rate must be used consistently throughout the analysis, e.g. for estimating the present value.

(see also: Cost-Benefit Analysis; Benefit-Cost Ratio; Economic Analysis; Economic Appraisal; Financial Analysis and Financial Appraisal; Internal Rate of Return; Net Present Value)

Disposal of wastes - Waste materials are produced by a wide range of activities. E.g. in the Netherlands the production of waste flows has been described in terms of quality, quantity, number of sources and current methods of disposal and related emissions. These were then assessed on the aspects of public health, environmental pollution, danger/damage/nuisance and occupation of space. In this way a list of priority waste materials was compiled (see table below).
 
 

Dissemination - distribution. Dissemination of project information might mean telling a wider audience about a project and its results. This may be by means of seminars, newsletters, press releases and similar methods. This can enable organisations to learn from others' experience and good practice.

Dissemination Strategy - a planned approach to informing a wider audience about the results of a project.

Donor - often a bilateral or multilateral funder. It is the organisation making a contribution towards the cost of a project. This contribution is usually in cash, but could also be in-kind (see also: In-kind)

Donor Appraisal Procedures - the way in which a systematic assessment of a project proposal is carried out by a donor.

Donor Investment Strategies - the guidelines that an individual donor has developed to steer its funding decisions and priorities.

Due Diligence - completing the appropriate environmental investigations for a project (i.e. EIA, environmental audit, and any other environmental analysis) in sufficient scope and detail is usually referred to as ensuring environmental due diligence. 

Economic Analysis - the comparison, with money as the index, of those costs and benefits to the wider economy that can be reasonably quantified, including all social costs and benefits of a project.

Economic analysis takes into account the opportunity cost of labour and capital; it considers private and social costs and benefits including environmental and other intangible social effects; it does not take into account subsidies and taxes.

Economic costs try to measure the real, or resource, cost to the economy from undertaking a particular activity. Economic benefits are not the same as financial income.

Economic Appraisal - the comparison of quantifiable costs and benefits accruing to society as a whole/the nation as opposed to the immediate beneficiaries. Economic appraisal is usually only required where a project is sizeable and/or there is a high degree of risk attaching to it. When quantification would impose excessive cost, it is best to treat the items as intangibles

Economic Valuation - giving an economic value to environmental factors and considerations. This helps give weight to such considerations where they might otherwise not be taken into account. Full valuation requires significant information, time and resources.

An economic valuation of environmental costs and benefits is recommended to take place within an Environmental Impact Assessment Study to compare the relative costs and benefits of various mitigation options and unavoidable impacts

Methods commonly used are adaptations of conventional cost-effectiveness and cost-benefit analysis:

1. Cost Effectiveness - identifying the least-cost option that meets the standard specified. This requires the specification of all costs. 
2. Cost-Benefit Analysis - the assessment of trade-off between options based on their relative costs and benefits. This involves defining the options, including doing nothing, drawing up a balance sheet of the costs and benefits of different options, expressing these in quantitative terms and putting a monetary value on them using valuation techniques 
3. Internalising Unavoidable Environmental Impacts - where the environmental impact of the project is the key issue in determining whether or not it is feasible or desirable, i.e. where the environmental costs and benefits identified during the EIA are given equal weight with other economic factors. There is need to put a monetary value on the costs and benefits (as in 2 above). 

1. Methods based on market values - where there is a market price for environmental goods and services 
2. Experimental market techniques - where there is no direct market measurement of a cost, e.g. survey approaches to identify public preferences may be appropriate - willingness to pay or contingent valuation techniques (what are you willing to accept, forego or tolerate) 
3. Hedonic price methods - estimate an imputed price for environmental attributes by looking at real markets in which these attributes are effectively traded. 
4. Travel cost method 
5. Property value approach 
6. Product substitution / shadow prices.

(Source: "Economic Valuation & Appraisal of Environment Projects", OECD)

Efficiency - carrying out a task with the minimum necessary resources.

End of Pipe - not changing a production process but controlling the waste products.

Environment - (see Environmental Policy).

Environment Banks - a loose term for banks that take special account of environmental factors when assessing how to lend their money.

Environmental Action Programme for Central and Eastern Europe (EAP) - adopted at the ministerial conference in Lucerne, April 1993. It sets down the methodology for creating strategic environmental priorities at national level. It is not prescriptive, but helps the country to draft effective and realistic environmental protection plans. The Environmental Action Programme sets the framework for environmental projects and programmes across the CEEC. It provides the context within which individual countries can develop their National Environmental Action Plans 

Environmental Action Programme (EAP) Task Force - The Task Force for the Implementation of EAP brings together environment officials and independent experts from CEE, NIS and OECD countries in order to facilitate and support environmental improvements in the CEE and NIS area. The Task Force Secretariat has been mandated to initiate and support an Environmental Funds Network. Amongst other things the Task Force is interested in:

• improving project evaluation and selection procedures 
• the more effective and efficient use of funds, in particular through co-operation of funders 
• strengthening fund performance.

Environmental Evaluation - (see Economic Valuation).

Environmental Fund - a fund developed within the country and dedicated to the implementation of projects intended to improve environmental quality; funds are generally supported through pollution funds, taxation, and charges for environmental licences.

Environmental Impact Assessment (EIA) The purpose of environmental impact assessment (also referred to as environmental assessment) is to ensure that the environmental effects of a proposed project are fully considered before it is implemented. 

EIA can be applied to individual planning proposals or projects, to large environmental projects e.g. afforestation, or to policies, plans and programmes. In the latter case it is known as strategic environmental assessment or environmental appraisal.

The purpose is to ensure that sufficient information is available and that a proper evaluation is carried out in relation to the scale of the proposed project and the risks that it may pose to the environment.

Environmental impact assessment will:

• assist in deciding whether a project should or should not go ahead 
• where it does go ahead, assist in drafting conditions and legal agreements

• considering environmental issues in preparing project proposals 
• examining alternatives 
• highlighting the environmental effects of proposed projects 
• proposing appropriate mitigation measures

1. Screening - determining whether an EIA is needed for a particular project - whether there is a legal obligation or the environmental impact is clearly significant 
2. Scoping - deciding on the appropriate range and depth of factors to be included in the EIA. Scoping focuses the assessment on the most important issues, whilst making sure that indirect and secondary effects are not overlooked. It also defines the geographical boundaries of the project. A systematic approach will help to identify possible impacts and ensure comprehensive coverage - useful approaches include checklists, matrices and flow diagrams. The scope will be influenced by published policy documents and consultations with interested/knowledgeable parties. 
3. Considering alternatives - these can be considered as part of the EIA, for example, through looking at alternative locations/sites/layouts for a project, altering project implementation or phasing on the same site, or not carrying out the proposal. 
4. Describing the proposal and its context - some projects have impacts well beyond their immediate site - the collection of baseline data and carrying out of further survey work where required; also a consideration of relevant standards and legal/policy context 
5. Forecasting effects - explanation of the terms and techniques used, justification for the choice of techniques; the level of confidence attached to different elements of the forecasts and any risks attaching 
6. Determining the significance of different impacts - the nature and scale of changes - quantified and as specific as possible, with an explanation how the significance was assessed. Consideration of possible mitigation/amelioration/enhancement measures. 
7. Production of the environmental statement - with the following characteristics:

• should contain a non technical summary in order to facilitate consultation (by the public) 
• relatively short, jargon-free, and with technical details in annexes

• Construction, operation (and where appropriate, decommissioning/restoration) stages 
• Direct and indirect effects 
• Temporary, permanent and cumulative effects 
• Short or long term effects 
• Interrelationships between impacts on landscape and human beings, flora and fauna, soil, water, air, climate, material assets and the cultural heritage.

Environmental evaluation - the public authority carries out a review of the likely impact of a project proposal submitted by a developer

(Source: "Environmental assessment", The Royal Town Planning Institute Practice Advice Note No. 13, September 1995)

Environmental Monitoring - measuring changes in the quality of the environment in order to guide changes of policy or activity, and in order to detect improvements as a result of actions taken.

Environmental Policy - aims at correcting market and regulatory failures to improve environmental quality. Ideally, environmental policy should be designed to maximise the net benefits to society by achieving the optimal level of environmental quality. In practical terms, the determination of this optimal level is difficult because of both limitations in our understanding of both the physical and biological relationships in the environment and the difficulties in evaluating environmental costs and benefits in environmental terms. A more practical approach is to set environmental quality standards.

Once the environmental objectives and their associated standards have been agreed, the choice of the mix of policy instruments to achieve these objectives becomes important. The choice of instruments depends on a consideration of:

• cost effectiveness i.e. meeting the objective at least cost 
• environmental effectiveness i.e. attainment of the environmental objective 
• administrative practicality i.e. ease of monitoring and enforcement, information requirements and administrative costs 
• dynamic incentives i.e. innovation and longer term factors 
• political acceptability i.e. cost and benefits in relation to the existing institutional framework

Environmental Problem - (see Environmental Themes in Source Book 1.2).

Environmental Protection - actions at international, national and local levels to prevent and, where possible, reverse environmental degradation. Includes conserving resources especially non-renewable ones, recycling old products, reducing the production of waste and disposing of it safely, developing cleaner technologies e.g. environment-friendly energy resources. It is usually supported by legislation (see also: Sustainable)

Equity - the net worth of a business (the value of shares in a company gives an indication of this).

Equity financing - the financing institution, instead of lending money to the project promoter, becomes his/her partner in business. The financing institution provides money in return for a share of project's profits. Once profits have paid back the return on investment, the financial institution sells its share of the business.

European Currency Unit (ECU) - a currency used as a unit of accounting by European Union institutions. It is the weighted average of the EU Member State currencies.

European Union (EU) - an economic and political alliance currently comprising 15 European nations. Its decision-making process involves several institutions, including the Council, European Parliament, European Commission (civil service), Economic and Social Committee, Committee of the Regions, Court of Justice and Court of Auditors.

Eutrophication - is defined as: the disruption of ecological processes caused by an excess of nutrients in the environment. The major effect of eutrophication are: The loss of oligotrophic areas with their plant and animal species; Massive growth of algae ("algal bloom") in surface water, threatening recreation, the fishing industry, and diversity in ecosystems; Pollution of ground water (particularly by nitrogen in the form of nitrates), which threatens drinking water supplies. The main substances causing eutrophication are compounds of Phosphorus (P) and Nitrogen (N).

Evaluation - checking or assessing. This is a specific step in the Project Cycle in which the results of a project are assessed and new projects ideas may be generated. Evaluation should be taken into account from the outset of project design. 

Evaluation should also occur at key stages throughout the life of the project. In this way it can be used as a means of steering and improving a project - it can expose faults in the original design. You need to know what you are measuring from the start - otherwise you will have no baseline to compare your results against.

(see also: Project Evaluation; Manual Section 3)

Ex Ante Evaluation - the result an activity or project is expected or intended to have, i.e. based on prediction and extrapolation; a way of assessing whether a proposed project is feasible (see also: Evaluation)

Ex Post Evaluation - the result after an activity or project has been implemented (see also: Evaluation)

Externality - an effect of a project felt outside the actual project itself, and not included in the valuation of the project. Such effects commonly include damage to the environment or public health 

Feasibility Study - an investigation which tries to clearly establish whether a project will work and achieve its expected results. Such a study usually evaluates in detail a project's technical design, its costs and benefits, social and environmental aspects, institutional issues, financial aspects, etc. Feasibility studies are usually carried-out in the preparation stage of the project cycle (see also: Source Book 9.28, 9.29).

Finance - money to implement a project; it is usually used to mean money lent, or equity provided, by a bank or similar financing institution (see: International Financing Institutions; Funds). 

Financial Analysis - deals with the cost and benefit flows from the point of view of a firm or individual; it traces the investment's monetary effects. For example, it is the analysis of the investments (payments) and revenues (income) of a soap factory, calculated in market or financial prices.

Financial analysis is carried out to: assess the financial effects of the project; determine efficiency of resource use; assess incentives; provide investment plan and debt repayment capacities; assess whether the investment resources are available at the required time; assess any changes needed in organisation and management. Financial analysis is used for project screening and selection (see also: Economic Analysis).

In financial analysis a cost is anything that reduces the monetary resources of the project. Benefits (or revenues) are all receipts that increase the project financial resources. Financial analysis takes into account subsidies, taxes, the ex-factory price of outputs and inputs including labour, the cost of borrowing capital (the return that could be earned by investing capital elsewhere).

(see also: Cost-Benefit Analysis - which is a technique commonly used in Financial Analysis).

Investment Appraisal - is essentially the financial analysis undertaken by a lender. It is the evaluation of the prospective costs and revenues generated by an investment in a capital project over its expected life. It includes the assessment of risks and whether to commit resources (Source: Dictionary of Economics). It is the evaluation of a project according to measures of financial return, i.e. a common set of values used by lenders to make financial comparisons between different projects.

Objectives of investment appraisal include:

• determining which investments make best use of an organisation's money 
• ensuring optimum benefits from each investment 
• minimising risk to the organisation 
• providing a basis for subsequent analysis of the performance of each investment.

Investment appraisal does not determine whether or not a project should be approved. The main function of the appraisal process is that it allows people with different self interests to agree on a ranking of a range of possible projects.

There are different ways to evaluate a project (see also: Cash Flow, Pay Back, Discounted Cash Flow, Net Present Value, Internal Rate of Return).

Financial Appraisal - the comparison of cash flow costs and benefits for different project options over the same time period. It should include a consideration of intangibles. Costs will include both revenue and capital, initial capital costs, cost of replacing assets, operating costs including staffing. Benefits will include income generated and savings in costs. Appraisal is usually carried out on the basis of a fixed cost date, i.e. the price at a fixed date, excluding the effects of inflation.

Financial Instruments - a term used to denote any form of funding medium - mostly those used for borrowing in money markets e.g. bills of exchange, bonds.

Financial Intermediaries - are local financial organisations (banks) used by an IFI to manage/ monitor its investments.

Financial Plan - a document setting out the objectives of a project, the inputs and outputs required to achieve these, and the forecast expenditure and income over the project life. The term 'business plan' is often used.

Financing Mechanism - the source of funding and/ or the way in which the money is made available. The most common mechanisms are: taxation, revenue (e.g. from pollution fines), loans, grants, debt for nature/environment swaps, credit lines, and savings in a bank account.

Framework - a broad overview, outline or skeleton, within which details can be added e.g. a strategic framework for national environmental policy setting the context for individual programmes and projects.

Funder - the party contributing part or all of the project's cost. The funder might be your own organisation and/or any combination of domestic and/or foreign sources (see: Bilateral funder; Multilateral funder).

Funding - a general term meaning (a) money to carry-out a project, or (b) the way in which money for a project is provided e.g. grant, loan.

Funds - a general term meaning 'money' of all types and from any sources.

GANTT Chart - a graphical representation of the main stages or activities in a project work plan over time, i.e. a form of bar chart; a useful project management tool (See: Source Book 9.24)).

Goal - a general description of the longer term status or situation which should be achieved. Wider Objective or Aim are comparable terms. (see also: Log Frame Analysis; Wider Objective).

Good practice - learning from other organisations that have developed successful projects or approaches to problems.

Grant - a payment made without expectation of goods or services in return. It is a direct payment to carry out the project.

Grant funding is, in principle, only available for projects which cannot reasonably be funded on the basis of a loan (e.g. from an Environmental Fund/ commercial bank/ IFI) or equity funding, but which are still regarded as important from a national or international standpoint. 

Grants on Interest Payments - a grant to bridge the difference between the market interest rate used by a bank and a more favourable interest rate that a funder would have offered if it had made the loan itself.

Green - projects where the main objective is to improve environmental quality or management.

Green Bank - a bank that lends funds for environmentally beneficial projects, or that sets stringent environmental criteria for project funding.

Greenhouse effect - is the potential extra warming of the earth resulting from increased concentrations of gases in the troposphere which interfere with the earth's radiation. The concentrations of these gases fluctuate naturally. However, at present they are increasing because of human activity. This has a worldwide effect on climate. The main greenhouse gases are: Carbon dioxide (CO₂); Chlorofluorcarbons (namely CFC-11 and CFC-12) and halons (bromide compounds); Methane (CH₄); Dinitrogen oxide (N₂O); Ozone (O₃); Water vapour (H₂O).

Guarantee - a written undertaking to cover all or part of any funding shortfall resulting from a borrower's failure to meet their commitments e.g. failure to make loan repayments (see also: Sovereign Guarantee).

Hard Project - a project may involve 'hard' activities such as construction or building works, i.e. a capital project with a physical result.

Hot Spots - specific locations which either emit or receive significant quantities of polluting substances. Hot-spots are usually prioritised by screening them for which ones there are viable project solutions in technical, institutional and financial terms (See: Source Book 9.15).

Housekeeping - keeping the office, business or industry working smoothly e.g. ensuring waste is minimised, problems identified and addressed quickly, supplies or products delivered on time, etc.

Idea - the product of thinking about a problem or issue; it is usually the starting point for a project proposal.

Identification - is the starting point for every project.It is the initial elaboration of project idea in terms of objectives, outputs and inputs with a view to determining whether or not to develop further a project proposal (See: Log Frame Analysis; Source Book 9.5).

Immediate Objective - a situation or status that project should specifically achieve immediately once it has been completed. This should reflect the project outputs. This may sometimes be referred to as a short term objective (see also: Log Frame Analysis). 

Impact - the effect or influence of an action or activity e.g. road construction impacts on the environment in a variety of ways.

Implementation - the process of realising a project in practice according with the agreed work plan. It involves Project Management and Monitoring.

In-kind Contribution - elements of a project that do not need to be purchased but are nevertheless real contributions e.g. land, buildings, equipment, staff, know-how, information, office facilities, interpreters and translation, licences, transport. Such contributions are an essential component of most projects.

Incremental cash flow - Comparison of the cash flows (sum of inflow and outflow of money) in the situation with and without the project. The difference can be attributed to the implementation of the project and is called 'incremental'.

Incremental costs - is a term used commonly by the GEF to describe the additional funds required by a project to deliver global benefits over and above national benefits (paid for by national funds).

Incentives - an inducement to stimulate an activity e.g. making grants available for environmental awareness raising is an incentive to develop such actions.

Indicative Programme Development - within a strategy or framework it is common practice to develop outline programmes. These give an indication of the type of projects that could be brought forward, the likely resources and timescales, but they do not have to specify actual projects

(see also: Project; Strategy; Framework)

Indicator - something (e.g. air quality) which allows you to measure whether a project is running properly and has achieved its expected outputs and objectives. 

Valid indicators are:

• independent - a separate indicator for each objective 
• verifiable - capable of unambiguous measurement 
• specific - clearly relate to the objective being measured 
• accessible - should make use of readily available data and information 
• sufficient number and detail - to allow reliable inferences to be drawn.

Information - facts, or data required to prepare a project proposal.

Input - resources (money, time, goods, services, ideas, know-how, technology, personnel) used to produce an output (see also: Log Framework Analysis).

Institutional Analysis - examines the operating environment, organisational structures, management, staffing, policies and procedures, of bodies involved in implementing a project. Institutional analysis tries to answer the question: is the organisation capable of carrying-out the project. Three aspects of institutional analysis are commonly distinguished:

1. the relationships between an institution and other bodies involved in, or which influence, project implementation; 
1. the structure and organisation within an institution; 
2. the expertise and skills of staff within the institution.

Institutional Development - describes projects which lead to the establishment of new organisations, structures and processes of working. In practice it is used inter-changeably with the term Institutional Strengthening.

Institutional Strengthening - is a general term used to describe projects which improve the working of institutions to perform their existing or new tasks. Institutional strengthening produce can include policy and legislative reform, organisational restructuring, training, education, information, provision of additional personnel, etc. Capacity-building is generally considered to be a sub-part of institutional strengthening which focuses on improving the expertise and skills of personnel (see also: Institutional Development; Capacity-building).

Intangibles - costs and benefits that cannot be quantified but are nevertheless significant. These can be ranked and weighted to reflect importance and priorities. 

Intangible Benefits - the positive changes brought about by implementing a project which are not measurable. They are part of the justification for the project, and include: standardised or rationalised systems; reduced risks; enhanced public image or staff morale.

Internal Rate of Return (IRR) - that rate of interest which discounts the flow over time of net revenue generated by an investment, such that the present value of the net revenue flow is equal to the capital sum invested. IRR is the discount rate at which the NPV(net present value) is zero.

(Source: Dictionary of Economics)

IRR is used in investment appraisal to determine whether a prospective project is viable. It is less easy to use than the NPV method. If the IRR is higher than the cost of capital then the project is worth undertaking from the financial perspective. It represents the rate of interest that money would have to earn elsewhere in the organisation to be a better investment. The higher the IRR the better the project.

(see also: Discounted Cash Flow; Net Present Value).

International Financing Institutions (IFIs) - international development or investment banks and related financial institutions e.g. the World Bank, EBRD (see: Source Book 9.11). 

IFIs may also provide:

• equity financing 
• advice and technical assistance, including institutional strengthening 
• support in coordinating different funding sources e.g. through the Project Preparation Committee. 
• assistance in managing funds provided by other donors.

• high administrative costs - suggesting a minimum loan size of 5-10 MECU; 
• can only cover a portion of project costs - generally 30-80%; 
• exposure to currency fluctuations; 
• the risk guarantee requirement - IFIs may require a sovereign guarantee.

Investment Operation Cycle - evaluation of the prospective costs and revenues generated by an investment in a capital programme over its expected life; includes assessment of risks and sensitivity analysis. 

Investor - an organisation putting its money into the project (see also: Donor; Funder).

Joint Venture - a business arrangement in which two organisations invest in a project over which both have partial control; collaboration without full scale merger (Source: Dictionary of Economics).

Lender - an organisation that provides money as loans - usually, but not exclusively, a bank or financial institution.

Letter Contract - a shortened form of contract used only used where the money value is small (see also: Contract; Loan Document).

Loan - a sum of money lent by one person or organisation to another, usually with interest. Loans differ from grants in that they have to be repaid. This requires that the recipient is creditworthy, can provide security against default and has a cash flow sufficient to make the interest and capital payments.

Under normal market conditions various actors in the economy have a wide range of ideas about projects which would bring monetary revenues and other benefits in future. However, they often have little money at present to fund these projects. Banks have money. Banks sell their money - they give away capital now and get it back later together with a price for it, which constitutes banks' profits. This price for capital sold to projects' promoters (cost of capital) is called interest rate. The interest rate is also a reward for the banks for taking the risk of lending money. Project promoters are willing to pay this price since they usually enjoy the revenue from the project which is high enough to pay back the capital, interest rate and still yield net income to project promoters as their profit. Several factors determine the price of loans on the market, such as the cost at which banks borrow money from other banks, the demand (willingness to pay) for loans, or the perceived risk that either project or project promoter will fail.

Soft loans are loans that are provided on terms which are more favourable than could possibly be obtained on the market. The soft loan, thus includes a monetary gift, which drives a wedge between what project promoter actually pays for the loan and what he/she would have to pay if he/she were treated equally with other project promoters. There are many ways of "softening" the terms of loans. A bank may simply accept a lower price (lower interest rate). The bank may also be willing to wait longer for repayment without rising interest rate (longer maturity). The bank may be willing to defer payment of capital or interest (grace periods), require less strict securities or give the larger amount of capital than otherwise would have been given. Annex 3 of the OECD St. Petersburg Guidelines (1995) gives illustration of how this grant element hidden in a soft loan can be calculated.

Loan Document - the documentation sent by the lender to the borrower setting out in detail the terms and conditions on which an offer of funding is being made. This is the normal approach for a large project involving an IFI.

Loan Guarantees - a legal obligation to compensate a lender if the borrower fails to repay a loan. This reduces the risk of lending and the borrower can receive funds on more favourable terms

Loans Provided through Financial Intermediaries - these take advantage of the commercial banks' skills in financial management of loans. For example, a loan provided by an Environmental Fund could be channelled through a commercial bank. In this case, the bank would be responsible for the financial appraisal required, while the Fund would appraise the technical, environmental and economic aspects of the project.

Local Skills - skills available within the CEE country that can be used in a project.

Log Frame Analysis (LFA) - also known as Logical Framework Analysis, Logical Framework Approach, Log Frame and Project Framework (the latter being a modification of LFA).

LFA is a means whereby a project may be structured and described in a clear and analytical manner; it is a development of the 'management by objectives' approach. It is a method which provides a structure for designing a project and a tool for project management and evaluation. The Phare Programme requires that projects be described using this method. 

The log frame specifies what the project is attempting to achieve and indicates the means by which the achievement may be measured. It makes the project logic explicit.

LFA comprises four main steps:

• establishment of objectives 
• establishment of relationships between inputs, outputs, and objectives 
• identification of verifiable indicators and means to measure them 
• systematic recording of assumptions made when designing project, i.e. the assumptions supporting the cause-effect relationships between inputs, outputs and objectives.

1. Wider Objective - the reason for undertaking the project; the situation, or status which will be achieved over a longer time period and to which the project will directly contribute (e.g. the wider objective of an energy efficiency project could be achieving the national target for stabilising greenhouse gases. The project itself will not on its own achieve the wider objective but it will contribute significantly towards its achievement over time). 
1. Immediate Objective - the situation or status which will be achieved immediately once a project is completed; it is the motivation behind the outputs (e.g. in an energy efficiency project, the immediate objective might be to reduce energy losses by 20% from a specific town or industrial plant); 
2. Outputs - the specific results to be achieved by the project which will enable the immediate objective to be achieved (e.g. in an energy efficiency project the results might be: 250 houses fitted with improved wall and attic insulation, double glazing windows and energy-saving light bulbs). 
3. Inputs - the activities to be undertaken and the resources needed to produce the outputs (e.g. in an energy efficiency project the inputs required would be a specified quantity of insulation materials, windows, energy-saving light bulbs, and qualified personnel to supervise and carry-out the work). 
4. Indicators - which are relevant, independent and can be precisely defined in order to demonstrate that the objectives of the project have been achieved (e.g. in an energy efficiency project the indicator might be energy use per household, or per unit of production). 
5. Means of verification (MOV) - the means to ensure that the indicators can be measured effectively, i.e. specification of the types of data, sources of information and collection techniques (e.g. in an energy efficiency project the means of verification might be the gas and electricity bills for each house before and after the project). 
6. Assumptions and risks - the factors beyond the control of the project which may influence its success (e.g. an energy efficiency project could assume that the government's policy of providing 50% grants for energy-saving measures in houses will continue. Therefore there is a risk to the project that the policy might change in part or in total).

Long-list - used to describe the result of first step in a project identification process, where all project ideas and proposals are grouped in a clear and concise way. This can then form the basis for further selection of projects. It may also be used in project appraisal processes.

Marginal costs - "the incremental total costs associated with producing one additional unit of output".

Matchmaking - to ensure that projects requiring funding are considered by the appropriate organisations.

Matrix - a grid like array of interconnected elements - a helpful tool for setting out 2 or 3 dimensions, e.g. time, resources, actors

Means of Verification - the means by which change in the value of indicators can be measured (e.g. reports, monitoring campaign, interviews, company records). This enables you to check the availability of inputs and the achievement of outputs and objectives (see also: Logical Framework Analysis).

Milestone - a planned target which indicates a specific point of achievement in a project; it is used to monitor progress in a project (see also: Source Book 9.24).

Mission - (a) a term used to describe a period of time (usually ranging from 1 day to several months) working away from home office or from home country; (b) a statement issued by an organisation setting out their key objectives and tasks (see also: Vision).

Mitigation - steps that can be taken to minimise the adverse environmental impact of a project. It can be achieved through:

(a) design - by changes in location, technology, raw materials supply, engineering design, site layout and landscaping, access arrangements, architecture

(b) pollution control - by introducing measures to minimise production of waste, control polluting releases, discharge waste streams to less sensitive locations, dispose of waste by less polluting methods

(c) working practices - by defining standards to be followed during construction and long term operation: site housekeeping, noise, dust and litter control, fencing to prevent damage to neighbouring sites, traffic controls, working hours, sourcing of construction work force, housing, welfare; procedures for managing temporary relocation of people

(d) effective management - by setting up systems to ensure: management responsibilities for environmental protection at all levels; effective monitoring of impacts and response to identified problems; prompt handling of complaints; regular auditing; liaison with relevant authorities and affected communities.

(Source: EC DGVIII, Environmental Training Workshop, September 1993).

Monitoring - the regular collection and analysis of information about a project (usually at least financial, technical and institutional) in order to check performance compared with its stated objectives, outputs, budget and work plan (see also: Project Monitoring).

Multi-Agency - More than one body or organisation involved in project development.

Multi-Criteria Analysis - the use of more than one factor to judge performance (see Source Book 9.15).

Multi-Disciplinary - involving people from different professional backgrounds or with different qualifications; brings different perspectives and skills together to work on a problem, often in a multi-disciplinary team.

Multilateral Funders - international or inter-governmental organisations which generally provide technical assistance and aid, and International Financing Institutions which generally provide loans, equity and technical assistance (see: Source Book 9. 11).

Municipal Risk Guarantee - the local or municipal government concerned guarantees the pay back of a loan; i.e. takes part in the credit risk and thus allows the project promoter to have access to capital at a price which otherwise would not have been available.

National Environmental Action Plan (NEAP) - Within the framework of EAP each country is preparing a NEAP. This provides a comprehensive framework for environmental policy, strengthening of institutions and making investments. The overall objective is to develop a comprehensive programme for the reduction of environmental pollution and improvement of the environment at the lowest possible cost. The NEAP should interpret strategies and policies in terms of practical problem-oriented programmes, with an emphasis on the efficient use of available financial and human resources. They should contribute towards the achievement of sustainable environmental policies.

The Bulgarian government, for example, approved a NEAP in early 1992. This was based on an Environmental Strategy Study carried out with support from The World Bank, the USEPA and USAID.

National Environmental Funds - set up in several CEEC to ensure that money collected for environmental purposes e.g. through fees, charges and fines, are available for investment in environmental projects (see: Source Book 9.9).

Negotiations and Presentation - (see: Project Negotiation/Presentation; Project Cycle)

Negotiation Skills - most project development activity involves dealing with a range of people and organisations with differing attitudes and working practices. Negotiation skills are the ability to communicate, discuss and agree on something among people with differing objectives. Effective negotiation skills are important for project developers (see: Project Negotiation/Presentation).

Net Benefit - the amount of money remaining after all payments made are subtracted from all payments received.

Net Present Value - this is a value calculated in cost benefit analysis. The NPV discounts all the cash inflows (income) and outflows (payments) over the life of the project to their present day value. The choice of discount rate reflects the cost of capital (see also: Time Value of Money; Discounted Cash Flow; Discount Rate; Internal Rate of Return).