This report does not intend to give a comprehensive summary of the transitional path of the economy and environment relationship. The aim of this section is to provide a brief regional overview of some elements of the macroeconomic transformation. These elements are thought of providing the major framework for the introduction and implementation of economic instruments.
Full cost recovery pricing is an important consequence of the PPP. The implementation of the PPP is partially conditional on the ability of the public, private and household sectors to pay for environmental protection. The general pattern in trends the level of the GDP and income figures figures in CEECs is (i) a phase of recession started around 1990 with the deepest decline around 1991, 1992; (ii) recovery has started from 1993/1994. Major exceptions to this trend are the countries hit by war and Bulgaria where recession still continues. The pace of recovery in the countries fitting into the trend, however, is rather different. In many countries the level of real GDP and wage is still below the level in 1989. Other countries grow at substantial speed but. Per capita GDP and household income are still well below the average EU figures.
An incentive impact beyond the revenue raising function from the application of the economic instruments can be expected only if property rights are clearly established and prices are set by market forces. Therefore, the status of property right restructuring (privatization) and price liberalization provides the framework and, thus sets the limit forthe direct environmental impact of the economic instruments.
By 1997, the scope and extent of privatization and clear definition of related entitlements are in a wide range in the region. Clear definition of property related entitlements has evolved through very different privatization mechanisms. In several some countries large part of the state owned assets are turned into private property, but nbut not all these could claim to have a stable new property structure. In other some countries, privatization process has been slowed down and . mMany large and pollution intensive enterprises remained state owned. Those enterprises regularly receive isubsidies in different forms.
In many CEECs, an extensive price liberalization has taken place since 1989. In practice, the extentThe practice of price control remainsstill in force variesd across the region. Prices of certain raw materials often remain controlled. Criteria and rationale for price regulation in public utilities and services are often not transparent. Uncertain price setting rules effect provision of services which are relevant for environmental policy areas such as public transport, energy supply, water and waste management services are often not transparent.
Production costs were often not fully reflected in prices Price subsidies have been often used in CEECs prior to 1989. Price subsidies They have been largely removed since then, but several of them have been transformed into more hidden forms. In some countries, energy production remains substantially subsidized (for instance, coal). There is little known an about the environmental effect of remaining subsides in the sectors transport, energy and agriculture sectors in CEECs and related work and research should be initiated.
Public opinion polls and surveys in the region indicate that people do recognize environmental quality as an important problem. However, they perceive pollution as a state responsibility and expect the state as state responsibility to act against it. Similarly, it is also expected that the state should foot the bill and the ability and w including finances. illingness to pay for environmental quality appears to be rather low.
One of the most important institutional changes has been the decentralization of power and responsibilities. In case of publicly provided environmental services it is likely to create a closer match between local demand and supply of such services. It can, in turn, induce more proper pricing mechanisms for these public services. However, there are some drawbacks to the decentralization process: (i) many of the local authorities lack experience and expertise in designing and implementing environmental management systems; (ii) furthermore, they often lack the financial resources necessary to carry out their new responsibilities in these areas.
EU accession provides the dominating overall policy framework in CEECs. The strength of forces behind this framework may vary across the region but joining the EU is part of each country's short or long term strategy. The prospect of gradual economic integration into the Single Market has already guided private sector development, particularly in countries that have started accession negotiation. Major task for policy makersin the EU approximation is implementing the "acquis communautaire" which means adopting, implementing and enforcing EU legislation and policies in all areas.