The political transition and reforms of the legislative and institutional framework have been successful as well. The Czech Republic, Hungary, and Poland have joined the Organization for Economic Cooperation and Development (OECD), with Slovakia and Slovenia expected to follow in the near future. The above countries, with the exception of Slovakia, have also recently been invited to begin negotiations to join the European Union, with membership envisaged as early as 2002. Thus, the harmonization of domestic structures and legislation with those of the European Union is considered a high priority.
As shown in Table 1.1, total environmental spending from both the government and private sectors in the surveyed countries exceeded USD 3 billion in 1995. It is expected that, in actual numbers, environmental expenditures will grow at the rate of between 6 and 12 percent annually.
| TABLE 1.1: TOTAL ENVIRONMENTAL EXPENDITURES IN 1995 | ||
|---|---|---|
| Country | Expenditures (USD mln) | Share of GDP |
| Czech Republic | 1,185 | 2.6% |
| Hungary | 385 | 1.1% |
| Poland | 1,308 | 1.1% |
| Slovakia | 232 | 1.0% |
| Slovenia | 150 | 0.8% |
| Total | 3,260 | - |
A major change is expected in the financing of environmental protection. Currently, the main sources of funds for environmental projects include the state budget (including state environmental protection funds), municipal budgets, and investors' own funds. In the coming years, the share of business contributions is expected to rise sharply, while the contributions from the state budget will decrease.
The bulk of state financing is allocated to the construction of wastewater treatment and sewage facilities, and public water supply projects, while the remainder is mainly allocated to air protection and waste management projects. Costs of projects in the latter two categories are covered mainly by individual industrial plants and municipalities.
Based on a review of secondary sources, the market for pollution control equipment in the Czech Republic is estimated at between USD 600 and 700 million per year, with an annual growth rate of some 6 percent. Two-thirds of the market is based on domestic production, and one-third on imports. The Hungarian market for environmental technologies was estimated at between USD 127 and 289 million in 1995. The estimated size of the Polish market for environmentally safe technologies for burning coal and generating power was USD 240 million in 1995; for pollution control equipment it was estimated at USD 330 million, and for industrial process controls USD 98 million. The size of the environmental technology market in Slovakia was estimated at USD 174 million in 1995. However, the figures above should be taken with care.
The resources of state funds can account for a significant proportion of a country's environmental spending. In Poland, for instance, its respective fund covered about one-fourth of the total outlays for environmental protection in 1995. The resources are generally used to finance national and regional public infrastructure projects, local projects (such as the construction of wastewater treatment plants and potable water systems) whose costs exceed the capabilities of local budgets, and projects in priority areas.
State environmental funds' main activities are to provide financial support for investments, usually through loans offered with preferential conditions. Other forms of support are also used, and include grants, subsidies to bank credits, equity involvement and others. The form of financing available from these funds depend on the project type, the investor, and the financing institution.
Table 1.2 presents the breakdown of expenditures from state environmental funds for 1995. As shown in Table 1.2, the bulk of funds' expenditures was allocated to air and water protection projects, which is an indication of state environmental priorities. As noted already, the proportion of state funding is generally much larger in water related projects, where the most frequent investors are municipalities. In contrast, for air pollution control projects (mainly at stationary industrial sources), a high percentage of the project cost is covered by investors' own funds, while waste management projects are mainly financed from municipal budgets. Slovenia is an exception, where almost half of all disbursed funding was loaned to private individuals to support conversion to cleaner domestic heating sources.
| TABLE 1.2: BREAKDOWN OF 1995 EXPENDITURES OF STATE ENVIRONMENTAL FUNDS | |||
|---|---|---|---|
| Country | 1995 Expenditures | Number of Funded Projects | Expenditures by Sector |
| Czech Republic | USD 191 mln | 364 | Water protection (44%), Clean Air Program (34%), Other air protection (14%), Waste (5%), Nature protection (2%) |
| Hungary | USD 42 mln | 267 | Water protection (41%), Air protection (39%), Waste (12%), Nature protection (8%), Noise (1%) |
| Poland | USD 427 mln | 970 | Air (40%), Water protection (25%), Mining and geology (8%), Land protection (4%), Nature conservation (3%) |
| Slovakia | USD 34 mln | 962 | Wastewater (30%), Air protection (28%), Water supply (22%), Waste (10%), R&D (5%) |
| Slovenia* | USD 10 mln | 1,257 | Air protection (57%), Water protection (29%), Waste (14%) |
| Source: REC Bulletin, Autumn 1996 (based on information from the respective funds) * Data for Slovenia is for 1996, as no significant expenditures were made during 1995. |
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State environmental funds generate revenues mainly from economic instruments for environmental protection, such as user fees, disposal charges, and non-compliance fines. Air emission fees and wastewater charges make up the major source of revenues, although actual solutions vary from country to country. In Hungary, for instance, taxes on fuel, car tires and batteries, and coolants are channeled to the respective fund. Additionally, since 1995, a waste packaging fee has been applied to any goods where packaging is required. In the Czech Republic, in addition to the revenues from air, water, and waste fees and fines, a third of the 1995 funding came from for the national Clean Air Program. Recently, significant income has started to come from loan repayments and servicing.
The level of enforcement is still inconsistent. Enforcement policies mainly rely on monetary penalties, but also include environmental standards, restrictions, and permitting systems. Additionally, enforcement policies are often implemented by local governments without coordination at the national level, which results in considerable differences in both requirements and levels of enforcement. Also, with the rapid growth in the number of small and medium-sized enterprises, compliance monitoring is often difficult.
The main environmental policy instrument applied to industry is the permit system including fees and fines for non-compliance. Most of the collected environmental fees and fines are earmarked for environmental purposes, and make up a major part of the revenues of state environmental funds, or municipal budgets for environmental protection.
The system for assessing environmental fees and fines is rather complex, and the scope of responsibilities of various authorities varies, depending on the environmental media and the nature of the payment (fee vs. fine). In general:
The effectiveness of monetary penalties as an incentive to improving compliance is limited. The polluter-pays-principle is employed, but levels of charges are not high enough as yet to be a major stimulus for polluters to introduce environmental improvements. Furthermore, fee collection rate is far from 100 percent. However, CEE countries are undertaking activities aimed at increasing base fee rates, indexing charges to inflation, and improving collection.
Policy coordination, refinement of legislation, better enforcement of regulations, education and institutional strengthening, the development of clean technologies, and priority capital investments for air and water quality are the likely focal points for future environmental actions.
Ministries of environment are usually in charge of determining national environmental policy and implementation plans, maintaining pollution monitoring systems, coordinating environmental projects of national importance, and maintaining international cooperation. Additionally, each country has different administrative structures for various areas, such as health care, agriculture, forestry, water management, physical planning, and transport. Responsibility also varies by media (air, water, soil).
Environmental compliance monitoring and enforcement is carried out by regional environmental inspectorates. Most environmental permitting is also administered at the regional level, in addition to developing local standards, collecting charges, imposing penalties and developing regional environmental policies.
Physical planning and construction permits, as well as utility contracts, are generally issued at the municipal level. Municipalities are increasingly responsible for waste management and wastewater treatment, including operating the systems, and calculating and collecting charges.
Governments collect environmental information, such as records of compliance or discharge monitoring, for processing, storage, and distribution, but often do not provide timely access to the public. National statistical offices are mainly responsible for processing and disseminating environmental information. State of environment reports are generally published by ministries of environment.