An internationally developed methodology was elaborated for addressing environmental issues in CEECs and presented as Environmental Action Plan for CEE (EAP) in Luccerne. The EAP philosophy emphasizes the need for priority setting across environmental problems and devising cost-effective strategies for solving priority problems. In that framework proper pricing and application of economic instruments as incentive measures have important roles. On the basis of EAP approach, national environmental strategies have been developed in most countries. These reiterated the need for extended use of economic instruments but put most of the emphasis on the revenue raising potential rather than the incentive function.
Between the years of 1991-1996, new environmental legislation was passed in all CEECs. There is usually a framework environmental act and specialized legislation on air quality protection, water, and waste management. Polluter Pays Principle and Precautionary Principle are named as important underpinnings of these legislation. In practice, PPP, however, PPP is almost exclusively quoted in connection with environmental charges, fees and fines. Then, revenues from these instruments, as a general rule, are earmarked into environmental funds. In many CEECs there are separate acts on environmental charges and natural resource fees. Usually environmental policy makers expect a direct incentive impact only of one economic instrument and that is a subsidy.
New environmental legislation has been designed in an EU compatible manner from fairly early years of transition. Taking the most developed EU countries as examples has often resulted in ambitiously strict standards and requirements. Meantime, enforcement tools are rather vaguely defined. Low level of environmental awareness and limited environmental information available to public constrain the chance to use public participation and public pressure as effective enforcement tool.
It is often stated that the lack of financing is a major problem in environmental policy in the region. While it is certainly true in a relative sense that the environment is often too low in the policy agenda, still a realistic policy must consider financial constraints. There is no doubt a huge need for environmental investments, especially considering cost estimations for EU approximation. New financing mechanisms should be devised and it should be increasingly based on private financing, but comprehensive environmental funds can play a useful role in the transition. Economic instruments are providing for the main revenue source of most environmental funds established in CEECs. In light of the huge need for environmental investments, new economic instruments are proposed to raise additional earmarked revenue.
It is estimated that about 120 billion ECU are needed for approximation to EU standards in water, air and waste in the ten CEECs with Europe Agreements. On a per capita basis, expenditures on environmental protection may need to raise manifold. The lion's share of financing should come from domestic resources, and increased revenue from already existing and new economic instruments plays an important role here. It reinforces, however, the pressure to concentrate on the revenue raising aspects at the expense of incentive effects which is already present in most national environmental legislation. While official documents often refer to environmental charges as possible instruments to address EU approximation financial needs, few mention the use of economic instrument in flexible manner that would reduce approximation costs.
Apart from the direct environmental aspects, the approximation process will also bring further EU accession has environmental impact through connecting CEECs to unified market with product qualification systems that takes production technologies into account. fiscal and custom policy harmonization. This offers a chance to eliminate environmentally harmful subsidies but can also affect different forms of subsidies provided for environmental protection, as well.
EU policy on environmental charges and taxes is explained in different documents. There is general emphasis on the need for more extended use in the Fifth Environmental Action Plan, but a more detailed guide is in the Communication on Environmental Taxes and Charges in the Single Market. It states, "This Communication is presented in order to support these activities, and ensure that the environmental taxes and charges are used in a way compatible with Community legislation. The Communication is a first step in the Commission's treatment of the use of environmental taxes by the Member States. ...It also aims to clarify both the possibilities and constraints for Member States to act in this field. ...It shows that there is considerable room for action by the Member States to implement fiscal instruments, while respecting the Treaty obligations."
The EU environmental legislation, however, is dominated by command and control measures. The accession negotiations center on those and seem to leave little room for flexible mechanisms. It is an interesting question for instance whether existing water charges comply with the Urban Waste Water Treatment Directive. For example, some experts think that the Slovenian water effluent charge could be a more cost efficient instrument to achieve the EU standards than the mechanisms mentioned in the Directive. These types of questions should be raised during negotiations.