Chapter 3: Hungary

(continued)

3.3 Overview of the Market

The environment does not receive the same attention now as it did in the early nineties. However, the country does have one of the most advanced systems of environmental management in Central Europe, and its environmental problems, while widespread, are not on the same scale as those of some other countries in the region.

Hungary suffers from widespread and ongoing environmental degradation (e.g. poor water quality throughout the country) rather than from specific local environmental problems. The exception might be the Budapest area (with a fifth of the country's population), where specific environmental problems are encountered, e.g. air pollution. The rapid growth of small and medium-sized enterprises is considered to be a contributing factor to the ongoing degradation of the environment, since enforcement of environmental regulations is poor.

The most critical environmental problems are related to water quality. Uncontrolled runoff has led to the contamination of water resources, further exacerbated by discharge of untreated sewage. Half of the country's sewage is discharged untreated. There are also increasing problems with air pollution from high-sulfur power production, industry, households and transport, and with the management of municipal and hazardous waste (Hungary has some 2000 illegal dump sites).

The consolidation and refinement of the national environmental strategy is needed in the coming years, as well as the integration of environmental concerns with other areas of government. Major upcoming initiatives are likely to involve capital investments, awareness raising, institutional improvements, and environmental management.

Total Country Spending on Environmental Technology

The government has adopted its own National Environmental Plan (hereafter NKP), which determines the main environmental priorities over the coming six years. According to the NKP, environmental expenditures will reach 1.7-1.9 percent of the Hungarian GDP.

The National Environmental Plan estimates the share of individual sectors in terms of the total environmental expenditures. According to the plan, expenditures on water protection account for 55 percent of the total, while spending on air protection accounts for 15-16 percent, and waste management for 12 percent. The share of air protection expenditures is expected to double within the next six years, as Hungary is to introduce a new law on air protection in 1997. During the same six-year period, the share of waste management expenditure is expected to rise to 19 percent from the current 12 percent.

Detailed statistical information outlining annual expenditures on environmental technologies is not available, as it is not tracked by the National Statistical Office. Therefore, the figures provided below are estimates, as explained in the text.

In 1995, the Regional Environmental Center (REC) conducted a survey of environmental businesses in the Czech Republic, Hungary, Poland, and Slovakia. Table 3.3 shows the distribution of income among Hungarian environmental businesses by business activity.

Assuming that environmental technology expenditures account for 80 percent of technical services, for 100 percent of environmental products, and for 50 percent of the remaining two categories (the balance is spent on services), one can estimate that roughly 75 percent of total environmental expenditures is spent on environmental technologies.

For comparison, a 1995 OECD survey gives similar results (Table 3.4). The survey analyzed sector trends in the global environmental market. The methodology used in the survey assumed that expenditures on water and wastewater treatment, waste disposal, and air quality related-activities were mainly related to investment goods (environmental technologies).

As presented in Table 3.4, technology expenditures account for about 75 percent of all environmental spending, with services representing the remaining quarter.

According to Hungarian statistics on annual environmental expenditures, and based on the assumption discussed above that spending on environmental technologies accounts for three quarters of total expenditures, total environmental technology spending in Hungary is estimated at HUF 31 billion (USD 192 million) in 1994, and HUF 45 billion (USD 289 million) in 1995.

Statistical yearbooks for 1992, 1993, 1994 and 1995 provide data on spending by sector in Table 3.5.

The first figure in each of the cells shows the value of investments in millions of Hungarian Forints. The second figure, in brackets, shows the value of investment in millions of US dollars. Those categories not highlighted in bold are not considered relevant to the survey.

In analyzing the data above, the following factors relating to the nature of the statistical data collection system in Hungary have to be considered:

• data on investments for each year are given in current Forint prices, i.e., figures are adjusted to account for inflation. The inflation rate was 23 percent in 1992, 22.5 percent in 1993, 18.8 percent in 1994, 28.2 percent in 1995, and estimated 23-24 percent in 1996.
• only expenditures of organizations with more than 50 employees are considered.
• the figures do not include environmental technology investments which are made as an integral part of the modification of the technological process, or those which serve to improve occupational health and safety by reducing noise and vibration.

Considering the above, it is likely that actual investments were 10-30 percent higher than indicated.

Assuming the 75 percent share of environmental technologies, excluding expenditures on nature protection and protection of biodiversity, and allowing an additional 20 percent to account for companies with less than 50 employees not captured by the above statistics, spending on environmental technologies can be estimated at USD 151 million in 1994, and USD 127 million in 1995.

Comparing the two sets of figures, one can conclude that the Hungarian market for environmental technologies was between USD 164 and 192 million in 1994, and between 127 and 289 million in 1995. Substantial growth is expected in the coming years. Table 3.6 provides some additional insight into the distribution of environmental investments.

Finally, a major change is expected in the financing of environmental protection. Currently, about 75 percent of total environmental expenditures are made from the state budget (including the Central Environmental Protection Fund). At the same time, businesses only contribute 9 percent. At the end of the six-year National Environmental Plan, it is expected that the former figure will decrease to 55 percent, while the share of the business sector will grow to 40 percent.

Priority Areas for Environmental Protection

The total volume of municipal solid waste generated in Hungary is currently estimated at 20 million cubic meters annually (approx. 2.5-3 million tons), which is twice the 1980 figure. Between 0.4 and 0.5 million tons (approx. 15 percent of the total) are used or treated (including incineration), while the remaining part is landfilled. Most municipal waste landfills (which also receive a major portion of industrial waste) will reach capacity in the near future. According to the list prepared by the Central Statistical Office, there are 602 landfills operated in Hungary, but some experts think the actual number could be as high as 3,000. Many landfills do not meet current technical and environmental requirements, and will have to be modernized or will need to be closed.

Since 1981, only Budapest has maintained a noteworthy incineration capacity. About half of the city's waste is incinerated. As no suitable location is available to construct new landfills in the Budapest area, the construction of new incinerator(s) is a possibility.

Approximately 3.3 million tons of hazardous waste is produced annually in Hungary. Forty percent of the total amount is red mud from aluminum processing and is stored in landfills as no viable recycling technology is currently available. The disposal of the remaining 2 million tons of hazardous waste is one of the most important environmental problems. Currently, one modern hazardous waste landfill is operated in Aszod (with a capacity of 5,000 tons per year), while one modern hazardous waste incinerator exists in Dorog (with a capacity of 25,000 tons per year). Smaller amounts of waste are incinerated in various ovens and kilns. A significant proportion of hazardous waste is stored on-site at the source (in so-called temporary storage facilities), because waste generators are not able (or are not willing) to pay the costs of proper disposal. Existing provisions in the law do allow this.

The government is undertaking a number of measures to address the problem of waste management. Legislation on hazardous waste was adopted on Sept. 1, 1996 (102/1996. (VII.12) sz. Kormanyrendelet), while a new law on waste management, regulating municipal and non-hazardous industrial waste is under preparation and is expected to come into force in 1997. Product fees ("green taxes") have been imposed on fuels, tires, refrigerants, car batteries and packaging materials (e.g. paper, plastic, glass, metal and other products). The government also intends to establish a nationwide collection and recycling scheme, and is providing the means for the project through the Central Environmental Protection Fund (KKA). The application mechanism was initiated in 1996.

In Hungary, water production (including potable, industrial and agricultural) has decreased from 5,513 million cubic meters in 1992 to 4,554 million cubic meters in 1995. The decrease in water consumption was particularly strong in mining, the energy sector, the processing industry, agriculture and in private consumption, and can be attributed to the decline in industrial activities, and to increasing water prices. Currently, 96 percent of the Hungarian population has access to the water supply system, but only 53 percent are connected to sewage systems.

Wastewater treatment is a serious problem in Hungary, and the lack of adequate sewerage systems in many municipalities is the key cause of the current situation. A number of major cities in Hungary lack proper wastewater treatment facilities. For instance, 80 percent of wastewater generated in Budapest is discharged into the Danube without any treatment. Overall, only 53 percent of Hungary's population is served by sewer systems. Of the country's 3,176 towns and villages, 454 have sewer networks and only 400 have wastewater treatment plants. Currently, 54 percent of generated wastewater is discharged untreated. About 8 percent of wastewater is treated mechanically, 36 percent is treated mechanically and biologically, and only 2 percent undergoes additional tertiary treatment. In all likelihood, actual proportions are probably even worse, because of the illegal dumping of wastewater. The objective of the government policy is to ensure that 90 percent of all wastewater is discharged into the sewage system and treated properly by the year 2010.

Currently, some 50 percent of the Hungarian population is exposed to excessive noise levels from transportation. As regards occupational noise protection, all newly established industrial facilities have to keep noise levels below specified limits, while existing facilities must comply with these new limits by the year 2010.