Chapter 4: Poland

(continued)

4.3 Overview of the Market

Although there has been a decline in manufacturing activities, and a corresponding reduction in environmental pollution, Poland suffers from some of the most severe environmental problems in the region. Two of the most polluted areas in Europe - Upper Silesia and the Black Triangle - are located in the south and south west of Poland. Considerable environmental damage has occurred in the past, and continues to take place, e.g. the contamination of water resources and soil, deterioration of air quality, and inadequate storage and disposal of waste.

The continuing development of heavy industry and an energy sector mainly based on coal are among the key causes of severe pollution. While poor air and water quality are the most frequently cited problems, solid waste and wastewater, transport pollution, and energy related environmental degradation also represent major challenges.

Environmental legislation, generally quite developed, is currently being refined. Environmental skills among Polish technicians, policymakers and academics are well developed. Critical points for future environmental initiatives are major capital investments in improving the quality of water resources and air, institutional strengthening, awareness raising, training and clean technologies. Major support will be provided to enforcement agencies.

The Ministry of Environmental Protection, Natural Resources and Forestry (hereafter abbreviated to Ministry of Environment, or MoE) is the main governmental body responsible for environmental protection and management in Poland.

Several other ministries play an important role in environmental protection. The Ministry of Industry and Commerce is involved in the preparation and implementation of environmental regulations, and in the implementation of environmental programs in industry. Spatial planning, construction, and investment localization, as well as some aspects related to municipal water supply, waste, and wastewater management are the responsibility of the Ministry of Physical Planning and Construction. The Ministry of Health and Social Welfare is the main central institution responsible for occupational health and environmental hygiene; it also oversees drugs and foodstuffs, while the Ministry of Labor and Social Policy is partially responsible for occupational health and safety issues.

Most environmental permitting is administered at the regional level in the 49 provinces (voivodships, or wojewodztwa). Physical planning and construction permits, as well as utility contracts are issued at the local level in over 2,500 municipalities (gmina).

Workplace health & safety management is traditionally separated from environmental protection in Poland.

The State Inspectorate for Environmental Protection (Panstwowa Inspekcja Ochrony Srodowiska or PIOS) is the main body responsible for the enforcement of environmental regulations. The Inspectorate reports to the Ministry of Environment. The structure of the Inspectorate consists of a Head Inspectorate in Warsaw, and 49 voivodship inspectorates (Wojewodzka Inspekcja Ochrony Srodowiska, WIOS) operating at the provincial level. The inspectorates monitor compliance with environmental regulations and impose environmental fines.

The system for assessing environmental fees and fines is rather complex in Poland, and the scope of responsibilities of the various authorities varies depending on the environmental media and the nature of the payment (fee vs. fine). In general:

• Environmental fees are payable for the emission of regulated substances into air and water; fees are also due for water extraction and waste disposal. Fees are due irrespective of the level of compliance with relevant permits. 62 air emission parameters are covered by the fee system, including fuel combustion releases such as particulates (USD 30.8 per tonne), SO₂ and NO_x (USD 57.7 per tonne), CO (USD 15.4 per tonne), and CO₂ (USD 0.04 per tonne). Groundwater extraction is subject to a fee of USD 0.03 per cubic meter; the fee is multiplied by 2.5 in groundwater sensitive regions (uplands and mountains). Effluent discharge fees are calculated depending on the pollutant load. For instance, fees are paid for BOD (USD 0.8-1.5 per kg load), COD (USD 0.4-1.1 per kg), suspended solids (USD 0.6 per kg), and heavy metals (USD 7.6 per kg). The fees are further differentiated depending on industry, e.g. reduced fees apply to the food processing industry. Waste disposal fees are assessed based on an extensive waste list (160 types of waste, grouped in four categories - I to IV, from extremely hazardous to non-hazardous wastes). The fees, paid on an annual basis, vary from USD 19.0 per tonne of hazardous waste (e.g. waste with high heavy metal content, used oils, PCB, asbestos) to USD 1.4 per tonne of non-hazardous waste (e.g. wastepaper, construction and building waste). Note that the cost of treatment and disposal has to be paid separately to a waste disposal company.

• Environmental fines are assessed when a company exceeds the emission limits set in the relevant operation permit. Air emission fines are 10 times higher than the respective emission fee. Excessive water extraction usually results in fines between two and three times the respective fee. Effluent discharge fines are determined by the level of violation in six pollution categories; fines are also due for excessive pH and temperature of discharged wastewater. For instance, fines for BOD and suspended solids are set at USD 0.3 per kg, while heavy metals and toxic substances are USD 5.4 per kg. Violation of a waste disposal permit leads to fines that are up to 18 times higher than the established fees. Interestingly, on a case-by-case basis, the payment of fines can be postponed or even canceled if the company significantly improves environmental performance in the problem area.

Regulations

• 1980 Environmental Protection and Management Act (amended and unified in 1993)
• 1974 amended Water Law
• 1994 new Physical Planning Act and Building Law
• Other acts such as those on forests and farming land, nature conservation, highway planning, geology and mining.

It should be noted there is no framework legislation integrating all environmental regulations in Poland (although a new framework Environmental Protection Act is currently being prepared and is expected sometime in 1999). Based on the local environmental situation, each Voivodship has the right to impose stricter regional environmental standards and regulations than those set out at the national level. On the other hand, some environmental standards are not legally binding and are used only as guidelines by the authorities.

The existing legal system poorly incorporates BAT/BATNEEC concepts (Best Available Technology and Best Available Technology Not Entailing Excessive Costs) in environmental standard setting, which often leads to too stringent standards and a routine approach to permitting. There are few provisions for individual approaches to environmental improvements at industrial facilities, including such concepts as transitional temporary permits, stepwise upgrading, etc.

Anticipated Regulatory Changes

In the mid-term (1997-2000) it is expected that the following major pieces legislation will be introduced:

• amendments to the 1980 Environmental Protection and Management Act, including improved environmental procedures in air emission control, emergency planning and responses;
• Waste Act, currently being completed within Parliament. The draft Act includes measures aimed at comprehensive waste management based on such principles as duty of care, and BATNEEC in waste recycling, treatment and disposal. A new system of waste classification based on the European Waste Classification Catalogue, and a new waste generation permitting system are expected to be incorporated in the new law.
• a new Water Law. Currently, various drafts are still being debated, particularly with respect to institutional and financial aspects;
• Framework Act for Environmental Management, intended for the integration of environmental law.

The major factor driving these legislative changes is harmonization with EU environmental law. Also, refined legal procedures seem necessary to improve enforcement of existing environmental legislation. The government is focusing on the use of economic instruments in environmental protection. It is expected that environmental fees and fines will be increased by between 20 percent and 50 percent above the level of inflation by the year 2000.

Total Country Spending on Environmental Protection

It should be noted that the increase in environmental expenditures was recorded at a time of drastic reduction in the rate of investment in other branches of the economy.

Environmental protection projects in Poland tend to be financed from the following sources:

• investors' funds;
• loans from the National Fund for Environmental Protection and Water Management. The main forms of financing are preferential loans, subsidies to commercial credits, and equity stakes in commercial ventures engaged in activity within the environmental field;
• low interest loans or grants from voivodship environmental funds;
• national and regional budgets;
• various types of low interest loans from the Environmental Protection Bank (BOS S.A);
• regular commercial credits;
• foreign assistance funds (debt-for-environment swap - Ekofundusz, PHARE funds, Finnish Eco-conversion Fund, World Bank, European Bank for Reconstruction and Development, etc.).

Table 4.6 presents a breakdown of the sources of environmental expenditures between 1991 and 1995. Between these years, approx. 40 percent of environmental expenditures in Poland were financed from national and voivodship environmental protection funds; about a third by investors' own funds; and less than a fifth from municipal budgets. The share of state budget and foreign assistance programs was lower than 5 percent.

There also exist some smaller financing sources, e.g. the Environmental Know-How Fund; the Agency for Agriculture Restructuring & Modernization (Agencja Restrukturyzacji i Modernizacji Rolnictwa); the Municipal Development Agency (Agencja Rozwoju Komunalnego); Foundation for the Support of Water Supply Development in Rural Areas (Fundacja Wspomagajaca Zaopatrzenie Wsi w Wode); the Small Grants Program of the Global Environmental Facility (Program Malych Dotacji GEF); Foundation for Polish-German Cooperation (Fundacja Wspolpracy Polsko-Niemieckiej); and the Umbrella Project. The above are foundations usually involved in consulting or training projects, or in low-budget investments. Overall, they are of minor importance as a financing source.

Table 4.7 presents information on environmental spending by sector. In 1995, spending on air protection accounted for 53 percent of total expenditures (approx. USD 700 million), on water protection for 37 percent (approx. USD 480 million), and on waste management for 9 percent (approx. USD 124 million).

Information concerning spending on environmental technologies is not tracked by the Central Statistical Office, and there are no publicly available up-to-date market assessments for environmental technologies in Poland. As a guideline, the 1993 Environmental Technologies Export Market Plan, prepared by the Office of Environmental Technologies Exports, estimated that the size of the market for environmentally safe technologies for burning coal and generating power would reach USD 240 million in 1995; the estimate for pollution control equipment was USD 330 million, and for industrial process control USD 98 million.

National Environmental Protection Fund

Most of the environmental fees and fines collected are earmarked for environmental purposes, and make up a major part of the revenues of the National and Regional Environmental Funds. An analysis of the Fund's revenues for 1993 reveals that industry is effectively the main financier of environmental investment. The main environmental policy instrument applied to industry is the permit system including fees and fines for non-compliance.

Table 4.8 presents information on the National Fund's expenditures. During the period 1990-1995, the Fund's financial resources were directed mainly toward air protection (45 percent of the total) and water protection (mainly wastewater treatment) projects (40 percent of the total), which indicates the priority areas in national environmental policy.

Ekofundusz and the Debt-for-Environment Swap

By 1997, Poland had signed bilateral agreements with the following countries:

Finland (1990)	USD 17 million (10% of the debt)
US (1991)	USD 370 million (10% of the debt)
France (1993)	USD 63 million (10% of the debt)
Switzerland (1993)	USD 66 million (10% of the debt)

Sweden was also considering signing an swap agreement in mid-1997.

Ekofundusz was established by the Minister of Finance in 1992, as an independent non-profit foundation charged with administering the financial resources made available via the debt-swap scheme courtesy of the US, Switzerland and France. A separate agreement with Finland was reached earlier, establishing a bilateral mechanism managed by a special Polish-Finnish Task Force. The Finnish funds are managed by Eko-Efekt, a company in Gliwice fully owned by the National Environmental Protection Fund.

Expenditures of Ekofundusz are presented in Table 4.9.

Foreign Assistance Programs

The PHARE program of the European Union is the main foreign source of environmental protection project financing in Poland. Financial participation of foreign countries is very limited in comparison with Poland's total spending on environmental projects. Major donor countries include Denmark, Netherlands, Germany and the US.

Table 4.11 presents details of foreign financial participation by environmental sector.

Foreign financing was mainly directed toward air protection projects, and the protection of water resources, which corresponds well with national environmental priorities.

During the period 1991-1995, the largest proportion of foreign funds was spent on pollution control installations and construction of treatment plants; and deliveries of state-of-the-art technical equipment.

Another significant category included various technical and feasibility studies, as well as the preparation of master plans. However, it is expected that in the near future this category of services will be to a large degree provided by local companies.

Priority Areas for Environmental Protection

National Environmental Policy Priorities

The major sources of funding are industrial enterprises themselves (up to a third of the total expenditures) and environmental fees & fines channelled through national and regional environmental funds (up to 50 percent of national expenditures). Considerably less is spent from the state budget and foreign assistance programs. In recent years, Poland has spent some USD 1 billion annually on environmental protection, about 1 percent of GDP, with both actual spending and the share in GDP growing.

In 1991, the National Environmental Policy Statement, adopted by the Government and Parliament, underlined the commitment to clean up the environmental negligence of the past, and to introduce a policy based on the principles of sustainable development. Short, medium and long term objectives were developed in order to resolve the most important issues, to control the trends in environmental deterioration, and to integrate environmental aspects with economic and social issues. Presented below are the environmental priorities based on the National Environmental Policy Statement, and the Executive Program prepared by the Ministry of Environment.

Short-term priorities (to be implemented during the mid-nineties, and which are still in progress):

• change of manufacturing profiles, closure, or implementation of environmental protection measures in industrial facilities emitting dangerous substances into the air, disposal of toxic substances into wastewater, or storage of dangerous substances;

• implementation of the coal quality improvement program (removal of sulfur, increasing the calorific value of pulverized coal); improvement of management efficiency; and air emission control installations (reduction of particulate and SO₂ emissions into the air);

• noticeable reduction in dust and gaseous emissions, particularly in Upper Silesia as well as in other regions; reduction of low-stack and diffuse emissions;

• reduction of shortages in high-quality drinking water supply in urban areas, mainly through the construction of wastewater treatment plants in cities located along the tributaries of Vistula, Odra, and Pomeranian Rivers; simultaneous modernization of waterworks systems, and increasing water retention capacity as well as improved water resources management;

• radical reduction of the solid waste burden through the implementation of adequate management systems for industrial and municipal solid wastes, and disposal of toxic wastes;

• gradual elimination of food crop production on soils affected by toxic substances;

• initiation of the reduction of adverse environmental effects caused by communication and transport;

• improvement and extension of monitoring systems along Polish borders (air, water, solid waste);

• intensive reforestation program, particularly in watershed areas and on land unsuitable for agricultural use;

• environmental education of the public, with particular emphasis on the awareness of responsibility for the state of environment and respect for nature.

With regard to air quality protection, the following priorities have been identified:

• reduction of SO₂ emissions to the air by 30 percent by the year 2000 compared with 1980 levels (i.e. from 4.2 million tons per year to 2.9 million tons);

• reduction of NO_x emissions to the air by 10 percent (i.e. from 1.5 million tons per year to 1.3-1.4 million tons);

• reduction of dust emissions to the air by about 50 percent (i.e. an increase in the particulate removal efficiency of flue gases emitted by industrial and power generating plants from 92 percent at present to 96 percent by the year 2000);

• reduction of air emissions of volatile organic substances, hydrocarbons (including benzo-a-pyrene), heavy metals and other air pollutants;

• actions to counteract global climate change (i.e. reduction in emissions of CO₂ and other gases causing the greenhouse effect, and protection of the ozone layer);

• 50 percent reduction of pollution loads discharged by industry and municipalities into rivers. The goal is to be achieved through the decrease in the amount of untreated industrial and municipal wastewater from the current 0.5 billion, and 1.2 billion cubic meters respectively, to 0.1 billion and 0.6 billion cubic meters by the year 2000, as well as by increasing the rate of highly effective wastewater treatment systems (biological and chemical) in the overall wastewater treatment from the present 48 percent of total volume to 70 percent in the year 2000;

• improvement of sanitary conditions in rural areas by supplementing village water supply systems with adequate sanitation;

• alleviation of water shortages in urban areas, and the provision of water supply for drinking and production purposes in rural areas;

• reduction of the negative impacts of saline water from mining discharged into the Upper Vistula and Odra Rivers;

• use of deep groundwater aquifers for drinking water supply; termination of industrial use of these resources except for the food and pharmaceutical industries;

• proper treatment or safe storage of all hazardous wastes;

• 20 percent reduction in the generation of all high-volume industrial wastes requiring storage or dumping, and increasing the rate of their utilization;

• creation of a system of pre-selection and recycling of municipal wastes, and introducing technologies for composting, incineration, and biogas production;

• reclamation of degraded and contaminated land;

• implementing noise control measures so that less than 25 percent of the population will be temporarily exposed to noise levels exceeding legal standards;

• creation of a system for the early identification of non-ionizing radiation, and counteracting the threats to the environment from ionizing radiation and catastrophic emissions of chemical substances.

• introduction of environment-friendly, modern manufacturing techniques throughout all production processes; support for the implementation of clean technologies rather than for the use of "end-of-pipe" equipment;

• remediation of environmental damages and the creation of a system preventing their repeated occurrence;

• restructuring of the economic system to work in tune with environmental protection so that economic gains are linked with the state of the environment;

• consolidation of environmental, cultural, and ethical values beneficial to the environment;

• consolidation of the policy of sustainable development as the basis for economic and social policy of the state, local municipal self-governing bodies, enterprises, and institutions, as well as individual citizens.

The 1994 National Environmental Policy Programme to the Year 2000 has been developed as an ambitious plan to implement the medium-term policy objectives. Its main priorities are related to the reduction of environmental pressures on the air, water and soil, development of waste treatment and disposal facilities, water resources development, as well as the expansion/enlargement of nature conservation areas. The total budget required for the Programme to the year 2000 is estimated at USD 13 billion. Previous estimates of the overall cost of environmental improvements to the end of the 1990s ranged from USD 35 billion to 50 billion.

Priorities of the National Environmental Protection Fund

The Fund is the largest financing institution in the field of environmental protection in Poland, and the only one of its size in the CEE region. About 25 percent of the total expenditures for environmental protection are covered by the Fund. Fund revenues in 1995 amounted to USD 416 million, and over its six years of operation, the Fund granted more than 3,000 loans and subsidies, totaling over USD 600 million. The Fund also manages resources from foreign assistance programs.

The priority areas for environmental protection investments financed by the National Fund include:

• Water resources protection, by providing financial support for the construction of water and wastewater treatment plants, water saving technologies, construction of closed water circulation and multiple-use systems;

• Air quality protection by supporting modern technologies, particularly for the reduction of energy consumption and elimination of harmful air emissions; rationalization of heating systems; production and installation of pollution reducing equipment; the use of alternative sources of energy; and the encouragement of modern technological improvements to reduce the environmental impact of road transport;

• Protection of land surface, and improvements in waste management by supporting low and non-waste technologies; utilization and treatment of industrial and municipal wastes, proper handling of hazardous wastes (including hospital wastes); waste re-use at source; reclamation and re-cultivation of degraded soils;

• Geological and hydrogeological research; development of mining technologies and the processing of minerals; collection and purification of mining waters; re-cultivation of areas degraded by mining activities;

• Conservation of nature by providing financial assistance for projects implemented in regions under special care; projects focused on organization and management of teaching, training, and research centers (scientific facilities) in national parks; restitution and reintroduction of endangered species; complete protection of forest stands and biocenosis; restoration of natural heritage in parks and palace gardens registered as historical sites;

• Environmental education by supporting training projects, radio and television programs; support for environmental education programs on a national scale;

• Monitoring of the environment and financial support for the implementation of projects resulting from the National Environmental Monitoring Program.

• grants, used for co-financing of priority projects, environmental education, and high-risk pilot projects;

• preferential loans, covering up to 50 percent of project cost, except in those projects undertaken by local authorities, where up to 70 percent is available. The preferential interest rate is just above the discount rate of the National Bank of Poland;

• subsidies to bank credits (e.g. from the Bank for Environmental Protection) to cover the difference between the commercial interest rate and the preferential rate (this mechanism is being phased out);

• partial loan write-offs, whereby a part of the debt is cancelled for borrowers who meet the agreed criteria and Fund conditions;

• equity involvement.

Ekofundusz Priorities

The Council of Ekofundusz, consisting of members from Poland and the creditor countries, sets the foundation's priorities, evaluates its operation, and makes final funding decisions. Ekofundusz provides support in the following four areas:

• long-range transboundary air pollution abatement (SO₂ and NO_x);
• increased control of contamination and eutrophication of the Baltic Sea;
• greenhouse gas abatement, mainly through promoting new energy-efficient technologies and CFC emission reduction;
• protection of biological diversity.

Submitted projects need to fulfil at least one of the following technical criteria:

• efficiency, i.e. high environmental benefit-to-cost ratio;
• promotion of new technologies and organizational techniques, particularly through demonstration projects;
• development of the environmental protection sector and environmentally sound manufacturing in Poland;
• enhancement of professional expertise of Polish specialists and/or environmental awareness of Polish society.

The Ekofundusz grants up to 30 percent of the total project cost, except for municipal and nature conservation projects, where it may cover, respectively, a maximum of 50 percent and 80 percent of the total project cost. Funds are only available at the investment stage (except nature resource protection), and feasibility studies and project support are not eligible for assistance.

It is worth noting that the debt-for-environment swap mechanism has become a useful tool for introducing and promoting businesses from the creditor countries to the Polish environmental market.