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Bulgarian Priority in
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Over the past few years Bulgaria has made progress in its transition to a market economy. Subsequent to a sharp economic crisis of 1996, a new government took charge in 1997 and a strict fiscal policy and currency board were implemented. Ambitious transformation, privatization and regulation plans were developed and partially implemented. In 1999, our economy continued to face major challenges. The effects of the global financial crisis in 1998 continued to be felt through weak external demand for Bulgarian goods and low export prices for our key commodities. In addition, the war in Kosovo blocked our main trade routes and reduced investors confidence in the region. These external shocks coincided with the most intensive phase of our enterprise privatization and restructuring program, causing unavoidable disruption in production as unviable enterprises were being phased out.
In response to these challenges, the government continued to carry out sound economic policies underpinned by the currency board agreements to which we remain fully committed. In the process of transition to free market economy, economic instruments gain importance in environmental policy of Bulgaria. In this situation, economic instruments can complement command and control mechanisms in specific cases and, these instruments can allow environmental problems to be addressed more quickly, more effectively and/or in a more cost-efficient manner. In this sense, economic instruments include fiscal instruments (pollution taxes, input taxes, product taxes, export taxes, import tariffs, tax differentiation, investment taxes credits, accelerated depreciation, subsidies), financial instruments (subsidies, soft loans, grants, location incentives, subsidized interest, revolving funds, sectoral funds, ecofunds, green funds), market creation (emission trading), etc. Bulgaria has experience with pollution charges and taxes, non-compliance charges ("environmental fines"), product charges (e.g., on gasoline and tires), tax differentiation or exemption (e.g., lower taxes for unleaded gasoline/petrol and tax relief for environmental equipment or investment), etc. but the full potential of these instruments is not exploited in Bulgaria. Among the measures already in place is the Environmental Protection Act adopted in 1991 and last amended in 1999 (with a further amendment now under preparation). This law provides a framework for environmental policies, specifying the roles and responsibilities of the various levels of government. The document gives a mandate to the Ministry of Environment and Waters and its regional and municipal bodies to fulfill the goals of national environmental policy. This law also provides the basis for all fines, fees, taxes and charges for environmental damages and pollution. In addition, the Environmental Protection Act recognized the need for financing mechanisms to support priority environmental investments, and determined the establishment of National Environmental Fund and municipal environmental funds. The functioning of most environment related funds, however, has been blocked by the currency board since early 1997. Among the continuing funds are the National Environment Protection Fund (NEPF), municipal environment protection funds (243 currently exist) and National Eco Trust Fund which was capitalised by a "debt for nature swap" with Switzerland.. In 1998, the total revenue of the NEPF, derived primarily from the tax on liquid fuels (75-80% of fund’s capital), revenues from privatization of state enterprises (17-18%), and penalties for violation of environmental regulations was 53.5 million BGL. In July 1999, an Energy Efficiency Law was adopted, which envisages the creation of National Efficiency Fund which will focus on energy efficiency investments. The lack of finances and reliable investment mechanisms continues to be one of the most problematic issues in solving existing and arising environmental problems in Bulgaria. Improved mobilization of financial resources, co-ordination of cashflows of different sources, and their orientation in accordance with the national priorities are important preconditions for realization of environmental improvements. This article was contributed by Daniela Stoytcheva, Ministry of Environment and Waters, Bulgaria..
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