EUROPEAN COMMISSION DIRECTION GÉNÉRAL ENVIRONMENT Direction A- General and International Affairs ENV.A.2 - Climate change

Brussels, 18t February 2000 MaW D(0)

REC/WRI Workshop
Szentendre, HUNGARY 21-22 February 2000

"Financing Climate Protection in Central and Eastern Europe"

Author: Matthieu Wemäere

Subject: The EU enlargement and climate change strategies in Central and Eastern Europe countries.

Introduction:

The purpose of this paper is to examine how the establishment of climate change strategies in Central and Eastern Europe countries can be best articulated with the enlargement process.

The enlargement process aims at integrating new countries, for instance the CEEs, Cyprus and Malta, in a Community of States based on certain values and common objectives. Every Member State has both rights and obligations within and towards this Community. It is a dynamic process whereby each candidate country is required to develop political, economic, and social reforms in all areas with the view to fulfilling in time all membership criteria, bearing in mind that all the candidate countries will not accede at the same time.

The enlargement process places every candidate country in a regional perspective.

On the other hand, climate change is a global problem that has been first addressed at international level, with the adoption of the UNFCCC and the Kyoto Protocol. It is expected that these multilateral environmental agreements will be implemented at both international (in particular by using the flexible mechanisms under the Protocol) and national (where all Parties have to adopt policies and measures to mitigate climate change) levels.

With the enlargement process, the candidate countries are in a unique situation compared to the other UNFCCC Parties in a sense that they have to place themselves at two different levels of playing field obeying to two different agendas. While developing their own strategies for climate change mitigation for fulfilling their own commitments they subscribed by virtue of these international agreements, they have to combine these efforts with those required by the accession process whereby they will join a regional organisation, bearing in mind that the EU will implement the UNFCCC and the Kyoto Protocol on the basis of different arrangements.

The enlargement process could provide a sound basis for further developing national strategies in candidate countries. This should lead candidate countries to explore all synergies that possibly exist between the enlargement process and the establishment of those strategies for the implementation of the Kyoto Protocol all the more since a number of candidate countries are late in taking concrete actions for climate change mitigation.

Moreover, the enlargement process paves the way for closer political co-operation between the candidate countries and the EU in view of future international negotiations.

I. The enlargement process provides a sound basis for the establishment of national strategies for climate change mitigation in candidate countries.

The following 2 key elements of the enlargement process are of crucial importance:

• The approximation process
  
  
• The pre-accession strategies for the environment.

1. The approximation process.

1.1. The objective of the approximation process.

One of the key conditions for membership of the Union defined by the EU Accession Strategy at the Copenhagen Summit in 1992 is that the candidate countries align their national laws, rules and procedures with the entire body of EU legislation, so- called the Acquis Communautaire. The Acquis communautaire is the EU legislation in all areas but it also contains the principles, policies and objectives that have been agreed by the European Union.

This process of integrating EU law into national legal administrative systems is called the approximation process which requires from candidate countries to adopt or change national laws, rules and procedures but also to provide the institutions and budgets to ensure a practical implementation and an effective enforcement of these laws and rules aligned with the Acquis.

Approximation of the EU environmental Acquis will have positive effects, since a lot of measures lead to a reduction of greenhouse gas emissions. While this is not the end goal of environmental policies, substantial reductions in local, national and transboundary environmental pollution and improvements in the state of environment can be achieved through these legislative actions. The implementation of the framework legislation such as air, water, and waste offers a solid framework and driving force for integrating environmental considerations into many sector policies (urban transport, agricultural run-offs, industry).

As far as climate change is concerned, the Council Monitoring Decision n° 99/296/EC is particularly relevant. The principal requirements of this Decision are the following:

• Determine, on an annual basis and in accordance with the methodologies adopted by the Conference of Parties to the UNFCCC, the anthropogenic emissions by sources and removal by sinks of all greenhouse gases not controlled by the Montreal Protocol.
  
  
• Establish and implement a national programme for limiting and/or reducing anthropogenic emissions by sources and enhancing removals by sinks of all greenhouse gases. The programme should include information on data emissions, policies and measures taken or envisaged, estimates for emissions projections.

It is important to note that the level of details required by the Monitoring Decision is greater for the six GHG listed in Annex A to the Kyoto Protocol in comparison with UNFCCC requirements.

Implementing this Decision in the context of the approximation process could definitely provide the candidate countries a sound basis to develop a national strategy on climate change for the implementation of the Kyoto Protocol while complying with methodological requirements agreed at EU level.

The approximation of other pieces of the Environmental Acquis is also relevant for the definition of policies and measures for climate change mitigation, in particular:

• The Council Directive so called "IPPC" (Integrated Pollution and Prevention Control) No91/61/EC: for the harmonisation of collection data of emissions from industrial sources (establishment of the European Pollutant Emission Register (EPER)), but also for emission trading within the EU.
  
  
• The "EMAS" Regulation No1836/93 allowing voluntary participation by companies in the industrial sector in the Community Eco-management and audit scheme: for monitoring, verification and compliance purposes.
  
  
• The Large Combustion Plants Directive No88/609/EEC which is currently being revised.
  
  
• The EU legislation on waste management, in particular the Directive on waste landfilling.
  
  
• The EU legislation on emissions from vehicles (Directive No70/220 as amended) and in general on air pollution from both stationary and mobile sources.

Common and co-ordinated policies and measures aiming at climate change mitigation that are going to be adopted in the form of regulatory measures at EU level in the context of the EU strategy post-Kyoto will also be part of the Acquis. The approximation of these policies and measures will be required from the candidate countries before they become full Member State. In this respect, it is important to note that the Commission is currently taking a number of initiatives for the adoption of common and co-ordinated policies and measures in the energy, transportation, agriculture, industrial and waste management sectors but also for establishing an emissions trading scheme at Community level.

• The Green Paper prepared by the European Commission on greenhouse gas emissions trading within the European Union.
  
  
• The list of proposed common and co-ordinated policies and measures for climate change mitigation to be presented by the Commission in the Environment Council of March 2000.
  
  
• The European Climate Change Programme for the participation of all stakeholders in the elaboration of common and co-ordinated policies and measures.

1.2. The application of the integration principle.

• Originally linked to EU environmental policy, the integration principle has been promoted to the rank of general principle following the adoption of the Amsterdam Treaty with a view to promoting sustainable development (Article 6).
  
  
• This principle is also part of the Acquis Communautaire to be referred to by candidate countries in the approximation process.

On a number of occasions (Cardiff and Vienna Summits + Special report on Integration at the Helsinki Summit in December 1999), EU Heads of State highlighted the area of climate change as the most obvious example for the need for integration of environmental concerns in other policy areas. Indeed, a large part of the possible emission reductions will have to be achieved through measures regarding energy, transport, agriculture, industry, etc.

• Accession is expected to accelerate the economic growth in candidate countries where emissions are likely to significantly increase in the coming years.
  
  
• In particular, the EU enlargement strategy on internal markets, transport and agriculture sometimes raises concerns of sustainability: e.g. some Trans-European networks are more consistent with EU climate policy compared to others that result in increased noise, pollution and loss of bio-diversity. In the urban context, the enlargement should give a new life to urban public transport that ensure a better quality of life while reducing greenhouse gas emissions from vehicles.

Consequently, with a view to further reducing greenhouse gas emissions, the adequate integration of climate concerns into the development of policy areas such as transport, energy, industry and agriculture is essential and should be the cornerstone of any accession strategy but also of any national strategy on climate change in candidate countries.

2. Pre-accession strategies for environment.

All candidate countries have concluded an Accession Partnership with the EU. These agreements represent a single framework for the implementation of the candidate countries' national programmes to prepare for EU membership. These include a National Programme for the Adoption of the Acquis (NPAA) and a multi-annual programming for all the financial resources available from the EU for preparing for accession.

• Progress in the approximation of EU environmental legislation in the candidate countries is quite slow and the necessary administrative reforms have only just started.
  
  
• It is proposed to the candidate countries, in partnership with the Union, before accession to draw up - and start implementing - realistic national long-term strategies for gradual and effective alignment with the environmental Acquis.
  
  
• candidate countries are invited to set priorities in establishing their long-term national strategies with the aim to contribute to the further development and detailing of the NPAAs.

It is left to the discretion of each candidate country to decide what areas are to be given a priority, taking particular needs and country-specific problems into account.

The prioritisation exercise provides a good opportunity for candidate countries to put an emphasis on climate change in the NPAA through an integrated implementation of different pieces of the Acquis Communautaire that are relevant with respect to climate change mitigation. It would also send a signal to the EU for an orientation of the financial assistance towards actions that address country-specific problems as well as climate change concerns.

• The NPAA could refer to or even integrate the national climate change strategies in which specific priorities could be highlighted in view of future allocation of EU funding.

II. The enlargement process can be supportive of the implementation of national climate change strategies in candidate countries and provide a sound basis for further political co-operation on climate change issues.

1. Financial assistance.

It is worth saying that the implementation costs of the enlargement process are huge and requires the candidate countries enormous efforts. That's why the EU has established financing instruments specifically dedicated to support them in this exercise, in particular in the environmental area. Besides the PHARE programme, which was the first financial instrument for accession assistance, new EU instruments have been recently created to attract fresh funds for environmental investment that can be used for financing climate friendly initiatives.

• ISPA Fund (Instrument for Structural Policies for Pre-Accession) is aimed at helping to ease the financial burden imposed by acceptance of and compliance with the Acquis Communautaire. It will help the candidate countries fulfil the objectives of the Accession partnerships. This instrument starts this year and will provide 520 Meuro grants a year between 2000 and 2006. Countries which accede before 2006 are expected to become eligible for funding from the Structural Funds. The ISPA Fund will focus on infrastructure investments related to the implementation of the Directives on air pollution, water and waste management implying the major implementation costs.
  
  
• LSIF (Large Scale Infrastructure Facility) is a PHARE facility for co-financing environment and transports. It has financed 138.5 MEuros grants towards environment investment in 1998 and 1999. It is also funding project preparation for ISPA. This facility could support policies and measures aiming at reducing GHG emission from the transport sector.
  
  
• PHARE will be gradually transformed into a pre-structural funds instrument designed to partner regional development plans as well as implementing the Acquis, with a priority given to institutional building. This could be used for developing inventory methodologies for the implementation of the GHG Monitoring Decision No99/276/EC. Capacity building enhancement for project-development, in particular for AIJ and JI projects could also be eligible.
  
  
• SAPARD is a separate instrument for agricultural pre-accession aid which also run from 2000 to 2006 with 500Meuros grants per year. It will be possible to use this instrument for funding agri-environment projects as well as environment actions as part of rural development programmes. Projects aiming at reducing methane emissions from land-use and agricultural practices could potentially be eligible under this Fund.

It is important to note that the DG Environment of the Commission has recently launched a programme called PEPA (Programme Environmental Investment programme for Accession) which will help the candidate countries to develop the necessary environmental investment financing strategies for accession, including the creation of an extensive database of environmental investment needs for the whole region. This programme will be also used for allocating funds under ISPA.

All these funds can potentially support either the establishment of national strategies on climate change or the implementation of policies and measures in relation to climate change mitigation in the candidate countries. No doubt that a national strategy giving priority to certain policies and measures could serve as a catalyst in encouraging the EU to further finance activities related to climate change mitigation. It is also important that the policies and measures are linked to the NPAA to facilitate the link with the accession process.

Candidate countries can also benefit from funding allocated under other EU financial instruments that are not specifically dedicated to accession strategy since they have been progressively open to them. Activities linked to climate change mitigation can be financed through these instruments provided that they fulfil their respective objective and eligibility criteria. As far as climate change activities are concerned, the more promising are the following:

• LIFE Programme (under revision, to be adopted very soon) financing environmental demonstration located in candidate countries.
  
  
• Fifth Action programme on Research & Development (Energy & Environment, including energy efficiency, renewable energies..).
  
  
• Energy programmes (SAVE II, ALTENER II, INCO II…).

Of course, these financial instruments could also be used for the implementation of the UNFCCC and, in the near future, of the Kyoto Protocol by supporting private investors from the EU and candidate countries to develop Activities Implemented Jointly (AIJ) under the UNFCCC and/or Joint Implementation projects under the Kyoto Protocol.

2. Political Co-operation in the UNFCCC negotiation process.

The enlargement process provides a good basis for strengthening the political co-operation between the candidate countries and the EU in the international negotiation process.

Since they have convergent interests in view of being part of the same Community of States in the future, the enlargement process naturally bring together the EU and the candidate countries in developing common positions in the context of the Kyoto negotiations.

Concretely, the candidate countries and the EU have established a fruitful political co-operation, notably under the German and Austrian Presidencies, presenting joint submissions to the UNFCCC Secretariat and appearing as a coherent negotiation group before the other delegations and groups of delegations.

This co-operation is to be reinforced in view of the negotiations at COP6 where the major political decisions must be taken for an early entry into force of the Kyoto Protocol. The EU and the candidate countries should further exchange views on some key negotiating issues, notably on emissions trading and Joint Implementation.

Conclusion:

The enlargement process requires from both the EU and candidate countries a mutual effort. As such, it helps candidate countries to prepare themselves for being ready to act as a Member State by the day of accession. This date might be very different from one candidate to another but the ultimate objective is the same so as to make the enlarged European Union operating well.

As far as climate change is concerned, membership will have important consequences for candidate countries in as far as specific measures for the implementation of the Kyoto Protocol will be used at Community level notwithstanding national implementation measures. This raises a number of questions concerning:

• The participation of "new member States" in the EU bubble and the necessary revision of the Burden Sharing Agreement concluded in Environment Council of June 1998. This is particularly important for the second commitment period in as far as Article 4.5 of the Kyoto Protocol specifies that any alteration of an Regional Economic Integration Organisation (REIO) would not affect existing commitments under the Protocol, but shall only apply for the purposes of those commitments under Article 3 that are adopted subsequent to this alteration.
  
  
• The negotiations of new quantified targets for all Annex I Parties for the second commitment period taking account the consequences of the enlargement of the European Union.
  
  
• The participation of "new member States" in an EU scheme on emissions trading if they join before 2008.
  
  
• The opportunity of the establishment of a Community Programme for JI activities in the context of an enlarged Union.

Author: Matthieu Wemäere, European Commission, DG Environment, Climate Change Unit.