Bulgaria

A. Background

The use of economic incentives for environmental protection

A. Introduced for entirely environmental purposes:

1. Fines, imposed on enterprises for polluting or damaging the air, waters, soils, etc. above the admissible levels are the most widely used economic instrument for encouraging changes in the polluters' behavior. They have been in force since 1978. The regulation on fines was updated and amended in 1993. The major changes in the regulation relate to a substantial increase of the fines and to the wider range of their components. The system of fines pursues two main objectives:
   • Economic compulsion for enterprises to take measures for decreasing pollution. There are some indications for practical effect of this function of the fines, due to the combination of the significant increase in their level and the financial independence of enterprises after the cessation of state subsidies.
   • Source of income for financing environmental activities. The ongoing practice of some enterprises to prefer regular payments of fines, rather than taking the necessary measures, serves as evidence for this function of the fines. Fines are a burden on the annual financial performance of the companies as they are not accounted for as operating costs on their balance sheets.

2. Additional import duty (besides the standard one), on the importation of old cars, registered 10 or more years ago. Introduced in 1993 by an Act of the Government, the duty is 10% of a car's value and the income goes to the National Environmental Fund. Unfortunately, this instrument is not effective enough as there is a lack of additional instruments for transport pollution reduction.

3. The Excise Act, enacted in 1994, provides an excise payment on 18 types of goods, among which are freon containing cosmetics (perfume packages containing freons - for perfumes in other kinds of packages it is not applied). The level of excise is 40% of their market price and goes to the state budget. The excise for the other 17 goods listed in this abstract (cars, cigarettes, alcohol, gasoline, etc.) is related to other than environmental considerations. For the excise differentiation between leaded and unleaded gasoline, see item B/b.

4. User charges on household waste collection and disposal and for sewerage and waste water treatment through collective facilities. Practically, these charges represent the payments for the services.

5. Administrative charges for permits, issued by MoE or its regional structures. The 1992 Environmental Protection Act provides for their reasonable inclusion in the discussed economic instruments category. The level varies between 1.5 - 90.2 ECU, while for issuing an Environmental Impact Assessment resolution it may well reach 15,033.00 ECU. The determination of administrative charges was based on the estimated costs of the respective agencies dealing with issuing permits (this includes, for instance, the costs of holding public discussions on EIA, hiring experts in the environmental expert councils, assigning expert studies on projects and EIA materials, distribution of materials etc.). The charge level is between 0.03% and 0.05% of the value of the site undergoing EIA, which could be less than 15,033 ECU. The EIA itself is performed by independent experts (including private consultant companies), assigned and funded by the site investor.

6. Emission charges. Introduced with the 1992 basic Environmental Protection Act for environmental pollution above the permissible level. 60% of the income from these charges go to the National Environmental Fund and 40% - to the Municipal Environmental Funds. However, at present such charges are not yet applied in practice.

   In 1993, the MoE elaborated a proposal for effluent waste water charges, for pollution within the permissible level. The main objective is fiscal and pursues collective financing for the construction of urban waste water treatment facilities. The determined level of the charges was based on the estimated costs for the treatment of 1 cubic meter of waste water to the requirements of the second category of water quality. The specific level of the charge for households and companies will be calculated on a quantitative basis and the charge per cubic meter, where for companies this will also be dependent on the degree of pollution. Companies in the process of constructing treatment facilities are exempted from charge payments. Provision is made for inflation-linked rate adjustment. From an accounting point of view, charges will be considered as operating costs of the companies. Estimates for the relative share of charges in the operating costs of companies will vary between 0.01 to 0.1% and can occasionally reach 1%.

   The two main reasons for the delay of the Government's approval for the waste water charges tariff are: problems with the collection of charges and other ministries' opposition to the charge levels. The following alternatives are under discussion: collection of the charges by the municipalities and not by water enterprises (as it was initially in the draft tariff); and the possible reduction of the charge rates.

   Now, a charge tariff proposal for environmental pollution from burned fuels is in the initial stage of development. An inter-institutional expert working group is established in order to find the best acceptable solution for all. According to the nature of the idea for this tariff, it should fall into the category of product charges. But as noted in A/g, there is a lack of a legal base for its enforcement at the present. Because of this, the MoE is using the text from the General Environment Protection Act, for charges for pollution up to the permissible levels (see beginning of A/f) for introducing charges on fuels. Most probably in the beginning only liquid fuels would be included. It would mainly be focused on the lead content in gasoline and sulphur in the rest of the liquid fuels.

7. Product charges. The Draft Waste Disposal Act, submitted for approval in the Parliament, makes provisions for charges on products, whose process of production or consumption, produce wastes which are quantitatively or qualitatively hazardous for human health or ecosystems. The Draft Act provides for the transfer of the respective income to the National Environmental Fund. With highest probability, the first products on which such a product charge would be levied are plastic bottles and bags. Later review will be necessary for the possibility of introducing it for batteries, pesticides, accumulator batteries (storage batteries), etc. Product charges will be introduced not earlier than in 2-3 years, mostly due to the extremely loaded schedule of the Parliament.

8. Admission charges for protected natural territories are envisioned in the Draft Protected Territories Act, submitted for parliamentary approval. The charges would be paid by visitors to some of the protected areas. Revenue will be earmarked and is to be transferred into special accounts of the National and Municipal Environmental Funds.

9. "Nature" Tax. The Draft Nature Protected Territories Act provides for an annual tax payment for hotels, stores, sporting facilities etc., located in protected natural territories. It is estimated as a proportion of the building or the facility value. Revenue goes to the State Budget.

B. Environment - oriented modifications of existing taxes and charges, originally enforced for other than environmental purposes.

1. Differentiation of import duties for environment - oriented goods. Introduced by an Act of the Government in 1991. Initially for duty allowances, and since 1993 completely duty-free is the import of: environmental monitoring equipment; waste water treatment equipment; waste gas treatment installations and equipment; solid wastes treatment facilities; solar, wind, biomass energy production facilities; and, since 1994 energy-saving lamp production facilities. These are different pieces of treatment equipment which eliminate dangerous emissions to the atmosphere and could also be specified as equipment for the introduction of clean technologies. This measure is envisioned to stimulate the implementation of responsibilities to the conventions for the reduction of SO, NO, CO, etc. concentrations in the atmosphere. The normal duty for these goods varies between 10 and 20% of their value, which in some cases amounts to hundreds of thousands dollars. In this sense, the applied measure is of substantial importance for the companies, whose financial status is difficult and they normally use bank loans for purchasing environmental equipment.

2. Petroleum excise differentiation. Fuel excise is determined as a percentage of its market price. For leaded fuels the excise is 10% greater than the unleaded fuel excise. In force since 1994 through the Excise Act. The income is transferred to the state budget.

C. Subsidies and soft loans

  Subsidies for environmental activities have been related mainly to eliminating previous pollution. Interest-free loans are not widely used in practice. Such loans are granted by the National Environmental Fund, the Municipal Environmental Funds, the Structural Policy Fund, The Scientific Researches Fund. Soft loans from the State Reconstruction and Development Fund are also granted as financial support for environmental purposes. Tax allowances may also be considered as indirect subsidies. Duty allowances for importing environment oriented goods are indirect subsidies from the state, amounting to two million ECU for 1993 (meaning that the state has left this amount of money to companies and municipalities undertaking environmental investments and importing equipment and installations).

D. Pricing of goods, not in the domain of environmental policy but with environmental side-effects

  Despite the obvious energy price increases, the prices are still below the energy production costs. The trend, followed over the last few years, is targeted at ceasing state subsidies for energy production. However, due to problems specific to transition economies, this is a long and step-by-step process.

  Prices of liquid and solid fuels have repeatedly risen over the last few years, tending to follow the world market prices. Pursuant to the VAT Act and the Excise Act, in force since 1994, liquid fuels are charged by 18% VAT and excise, as follows:

	gasoline	below 93 oct.	70%
	unleaded gasoline	below 93 oct.	60%
	gasoline	above 93 oct.	110%
	unleaded gasoline	above 93 oct.	100%
	diesel fuel	below 93 oct.	30%

  Prices of liquid fuels for August 1994 in ECU per 1000 liters are, as follows:

	gasoline	98 oct.	518 ECU
	gasoline	93 oct.	410 ECU
	unleaded gasoline		385 ECU
	gasoline	96 oct.	511 ECU
	gasoline	91 oct.	406 ECU
	diesel fuel		278 ECU

  Coal is charged by 18% VAT.

  The Government periodically defines limit prices of liquid fuels and liquid gas. These prices are calculated according to the methodology of the National Commission on Prices to the Council of Ministers. One of the price elements is the excise tax. For example, if the price in leva of n liters of imported gasoline is 5000 leva, it is multiplied by 110% for gasoline over 93 oct. In this case the result of 500 leva is added to the initial 5000 leva and becomes one of the elements for the price definition. The excise tax is indirect in nature, paid by the final consumers, but enters the state budget through the producers or importers of goods who are liable to excise.

  Several bills take up and develop the essential provisions of the Framework Environmental Protection Act, in relation to conditions and user charges for mineral resources, water, wood material, herbs, wild-game, forestry and the dispossession of agricultural lands for construction and industrial purposes, etc.

  The general objective of payments for natural resource use is to reflect both production and recovery costs, as well as their value in relation to international market prices.

General conditions for the functioning of economic incentives for environmental protection

Macroeconomic situation

  The tendency in industrial production by the most polluting sectors (energy production, non-ferrous and ferrous metallurgy, chemical industry) is very similar. For the period between 1989 and 1992 a continuos fall of the production was observed. In 1993, compared to 1992, production in the above-mentioned sectors shows some growth as follows: energy production 4.2%; ferrous metallurgy 21.0%; non-ferrous metallurgy 18.0%; and, chemical industry 5.1%. Overall industrial production of all sectors, however, declined by 6.6%.

  Despite the transformations, the national economy has not yet resumed its growth and inflation is still growing, reaching 79.5% in 1992 - and 63.9% in 1993. For the period 1990 -1993 the real GDP continuously decreased, compared to the previous years. The decline is slowing: from 9.1% in 1990 and 11.7 in 1991 to 5.7% in 1992 and 4.2% in 1993. Compared to 1989, GDP has decreased by about 28%. On prices of the respective year the mass of GDP is in 1991 - 131.1 billion leva (5.8 billion ECU); 195.0 billion leva (6.9 billion ECU) in 1992 and 286.1 billion leva (8.6 billion ECU) in 1993. Per capita GDP is 15,182 leva (670.6 ECU) for 1991; 22,833 leva (813.1 ECU) for 1992 and 33,773 leva (1015.4 ECU) for 1993. For 1993 the consumption is about 93% of GDP, the accumulation of capital - about 16% and the negative foreign trade balance - 7%. Investment costs for 1993 are by about 8% greater than these in 1992, but compared to the prices in 1990 they present 67% of the 1990 investment cost level. The decline of investment activity, especially in the state-owned industrial enterprises, is explained by the delay of structural reform, the rise of investment commodities' prices, the high requirements for bank credits, the difficulties in the products' realization, the heavy debts of state-owned enterprises to banks (which at the end of 1993 exceeded 35% of their balance sheet).

  The gross industrial production is still showing a tendency to decline, though there are some estimates showing a slower rate of decline. The gross industrial production in 1993 decreased by 6.6%, compared to 1992. In the state-owned industrial sector the 1993 decline, compared to 1992, was 7.4%, while in the private sector there was a growth trend in 1993 by 23.3%, compared to 1992 production levels.

  The relative share of the private sector in GDP has grown from 9.1% in 1990 to 19.4% in 1993. However, considering the small relative share of the private sector, the rapid growth of its production can hardly offset the overall decline.

  Unfavorable tendencies can be seen in the development of labor resources. The number of employed in 1993 is 30% less than in 1989. Employment (per 100 citizens) has decreased from 49.1% in 1989 to 38.3% in 1992 and in 1993 reached the extremely low percentage of 36.2. The relative share of registered unemployed within the labor force rose from 1.7% in 1990 to 16.4% in 1993. The average salary per month in the public sector has changed from 361 leva (100 ECU) in 1990 to 3145 leva (96.4 ECU) in 1993, which is about 9 times in terms of leva, while the total income growth is 7.7 times. The income growth is far behind the growth of user prises, however, which for the period 1991-1993 increased 16.9 times. This makes it evident that the real income of employed has decreased by about twofold.

  Privatization is still in its initial stages and does not progress as rapidly as desired. Initially slowed down due to legislative hesitation and hampered by burdensome procedures for balancing valuation, it marks an irregular and slower than expected rate. In the process of development is a package of regulatory amendments to the already existing Act for "mass privatization", as well as practical implementation procedures. Towards the end of 1993 privatization has taken place in 115 mainly commercial and service companies ( which is 47,8% of the total number of privatized enterprises). Heavy industrial enterprises have not been privatized yet. In view of the state of the economy and of the relevant legislation, foreign investors are still somewhat reluctant to invest in Bulgaria. Towards the middle of 1993 there were some 3600 companies with foreign shareholders on the trade register, with an estimated capital investment of 60 mln USD.

  Though slower than expected, agrarian reform is in progress. Towards the end of 1993 the right of land ownership has been restored to 18% of the total applicants and, together with the provisionally distributed land (pending the conclusion of the judicial procedure under way), this percentage is 47.3%.

  It is within this difficult economic situation that efforts are continuously made for widening the use of economic instruments in the environmental field.

Status and perspectives of economic instruments in the State Environmental Policy

• Updating the environmental legislation and its harmonization with the legal principles of the European Union;
• Institutional strengthening of state and municipal environmental authorities;
• Elaboration and introduction of new mechanisms of inter-institutional cooperation, and;
• Integrated environmental policy, programs and measures for solving the problems of environmentally endangered areas - e.g., "hot spots", etc.

  Since June 1994 an updating of the Environmental Action Plan is in progress, reflecting the changes in the economic situation. A substantial part of the Strategy and the Action Plan represents the development and implementation of economic instruments. The policy in the this field includes both the development of new instruments and adaptation of existing ones to the new circumstances.

Environmental legislation

  Environment oriented economic instruments are also applied pursuant to the Forestry Act, The Local (Municipal) Taxes and Charges Act, etc. The present Environmental Protection Act is in harmony with the general decentralization tendency in all spheres of economic and public life and widens the scope of rights and responsibilities of local authorities.

Financing of environmental protection

1. The budget deficit increased from 4.1% in 1991 to about 9% in 1993, and environmental subsidies from the state budget decreased respectively;
2. Insolvency of companies and limited loan access, due to high interest rates, and;
3. Limited resources in the National and Municipal Environmental Funds.

  For the 1992 - 1993 period, about 3 million ECU were granted from the PHARE Program, mainly for purchasing monitoring equipment for the national environmental monitoring system. Part of an estimated 3.3 million ECU grant from the Global Environment Facility have also been allocated for the Management of Protected Territories project and another 0.1 million ECU for saving the "Srebarna" reserve.

  Through bilateral cooperation, the MoE was granted almost 5 million ECU for two automatic air-monitoring stations (from the German Government); for waste water treatment equipment from the Government of USA, and; for monitoring equipment for the Black sea and support for ecological training from the Government of Japan.

  In the near term, budget subsidies for environmental purposes will be reduced as the capacities of the National and Municipal Environmental Funds grow. The Funds accumulate income from the applied environment oriented economic instruments, which means that in parallel with the widening of their scope, the income mass will grow. Economic instruments will also encourage the companies to undertake pollution reduction measures, which will increase the share of the companies' contribution. Economic instruments (charges and fines) will be applied on companies making such provisions with certain allowances. This general tendency is already observed for 1994. In 1993 the National Environmental Fund disposed of about 3,1 million ECU, mainly from:

	Fines from companies	54,4%
	Additional import duties for old cars	32,4%
	Administrative permit charges	6,8%
	Miscellaneous	8,4%

  For the first six months of 1994 the National Fund income is 1,6 million ECU, which is far better compared to the same period of 1993, taking into account the inflation index. Estimates for additional income growth are based on:

• the 1994 amendments to the Privatization Act, which provide for a 5% transfer of privatization income to the National Environmental Fund; this revenue will be used for the general programs of the Environmental Protection Fund (no special earmarking).
• the forthcoming updating of fines for damages on protected territories, animals and plants, which would also go to the National Fund, and;
• the expected introduction of Waste water emission charges.

  The Municipal Environmental Funds accumulate their basic income from: a 30% share of the fines, paid by companies in their territories; targeted state budget subsidies for environmental programs, and; grants from the National Fund, and from local and foreign sources. (The Municipal Funds' financial capacities are still very limited.)

  Environment oriented money are also allocated from other specialized sources such as "Scientific research funds", "Structural policy funds", etc. Income from these sources does not exceed 0.2 million ECU and is not included in the general official accounting of expenditures for the environment.

  First steps towards a "Debt for Nature" swap were made with the creditor states from the Paris Club, which is encouraging and will create better financing capacities for implementing the environmental policy. The readiness of the Bulgarian Government for applying a "Debt for Environment" swap has been stated to the creditor countries from the Paris Club and was initially accepted. Negotiations are underway with experts from the World Bank and other international institutions on the most suitable mechanisms for using such a mechanism. There is no finalized concept so far.

Author's Note

B. Overview on the use of economic instruments in Bulgaria

User charge on municipal waste

STATUS:
  In force since 1951

AIM:
  This charge is levied to cover the costs of collection, transportation and disposal of household wastes. The organization and control of collecting and transporting household wastes is completely in the responsibility of the municipalities.

SUBJECT:
  Households, companies (mainly commercial), institutions. The main part of the charge revenue comes from administrative institutions (state and private offices) and from industrial offices in urban areas for household-type waste.

OBJECT:
  Household types of wastes

LEVEL:
  Determined on the basis of the estimated annual costs for supporting the activities of waste collection. There is no fixed absolute specific level of charge for the different subjects. The charges are determined as follows:

• For households - annually as a percentage of the value of the dwelling (for 1994 in the capital it is 0.04%, which for the average Sofia household is about 70 leva per year = 1.1 ECU); this sum is far too little to cover the costs of waste treatment. The main reason for the inadequate charge level is to a great extent political and can be explained as follows:

  The Local Taxes and Charges Act provides only the approach for defining this charge. This percentage is defined by municipal advisors (on the major's proposal). It is observed that the municipal administration, avoiding conflicts with the population (the majority of which suffers severe economic difficulties) refrains from raising this percentage. It is expected that these problems will find their solution when the election system mechanisms become truly operational.

• For industrial enterprises and institutions - annually in percent of the net value of the company or institution's building (for 1994 0.25% of the capital value).

INCOME:
  Information on national level about the income from this user charge has been collected only since 1994. For the first seven months of 1994 the income is 10.9 mln ECU.

USE OF INCOME:
  The revenue is added to the overall budget of the municipality, and then periodically funds from this budget are allocated to the municipal enterprises which manage household wastes.

IMPLEMENTATION AND EFFECTIVENESS:
  Calculation, invoicing and collecting of the charge is performed by the responsible bodies (listed below), during the collection of other taxes and charges and its difficult to determine the specific costs for its administration. On review of the charge effectiveness the following problems are critical:

1. There is a possibility to use the revenue from this user charge for purposes other than environmental (public health, education etc.). Due to the heavily restricted budget during the past few years this possibility has almost become a regular practice in most of the municipalities.

2. The method for calculating the charge level is not directly related to the volume of the wastes.

LEGAL BACKGROUND:
  The Local (Municipal) Taxes and Charges Act

RESPONSIBLE BODIES:
  Design of the instrument: Members of Municipal Councils on proposal from the municipal administration;
  Revenue collection: The local taxation offices to the Ministry of Finance
  Enforcement: The local taxation offices to the Ministry of Finance
  Revenue use: Members of the Municipal Council on proposal from the municipal administration.

PERSPECTIVES:
  Alternatives for a new Local (Municipal) Taxes and Charges Act are under discussion. It is expected that the new Act will only set out the obligations for payment of taxes and charges, with the determination of charge rates to be completely left to the municipalities.

INFORMATION SOURCES:
  Ministry of Environment (MoE) and Ministry of Finance (MoF)

User charge on sewerage and sewage treatment

SPECIFICATIONS:
  This charge is paid for the collection of effluent waste waters and their treatment. For discharging effluent to the public sewerage systems a permit is required, issued by the competent authorities. The volume of the waste waters is estimated as equal to the volume of water withdrawn from the water supply system, if waste water measuring mechanisms are not available. Upon availability of measuring mechanisms, the charge is set based on the quantity discharged.

STATUS:
  In force since 1951

AIM:
  Revenue for covering the costs for sewerage and waste water treatment

SUBJECT:
  Households, companies and institutions

OBJECT:
  Household and industrial waste waters

LEVEL:
  It is calculated per cubic meter of discharged waste waters, based on the average cost for maintenance of the collective sewerage and waste water treatment systems. The legal regulations for price formulation of industrial products is used for accounting purposes*. Households, with some small exceptions, do not pay for waste water treatment service and the difference is compensated for by the public sector. In most cases, the revenue covers the costs for waste water treatment. For example, the charge paid in September 1994 in an average town in Bulgaria (Dobritch), according to the content of certain polluting substances in the waste water is between 60 and 100 ECU per 1000 m3 of waste water. It should be noted that the level of this charge in most cases is updated every 2-3 months.

  The households are paying only the sewerage charge, while the industrial sector pays both for sewerage and waste water treatment.

* The charge for waste water (which by nature is a price), does not fall into the scope of Government controlled goods and services prices. From a legislative point of view, there are no limitations for this charge level. But it should be noted that in areas where the water supply and sewerage companies are municipal ones, the charge level is approved by the municipal officers and the same problems exist in this case as mentioned under the user charge on municipal waste.

INCOME:
  Information for the income on national level is not collected

USE OF INCOME:
  The charges go directly to the water supply and sewerage companies, which have the status of state-owned companies, subordinated to the Ministry of Territorial Development and Construction, or to municipal companies. These companies spend their income for maintenance of the sewerage and waste water treatment systems.

IMPLEMENTATION AND EFFECTIVENESS:
  Problems:

1. Ineffective system of imposing fees in case of delayed payment and for enforcing obligatory payment, due to gaps in the legislation;
2. Organizational problems in collecting the charge. The collection of the charge is performed not more than once or twice in a year, while the expenses for this service are dynamic (i.e., inflation changes are not reflected); and (this is mainly valid for Sofia) there is a shortage of charge collecting offices, taking into account that almost all the households are paying the charge in cash there.
3. Lack of motivation for decreasing the water consumption and respectively of the waste water quantities, due to collective measurement of water consumption in the majority of the residential buildings.

LEGAL BACKGROUND:
  The Local (Municipal) Taxes and Charges Act and Ordinance of the Government for the enforcement of the Act.

RESPONSIBLE BODIES:
  Design of the instrument: The specific level is determined by the water supply and sewerage companies, where for the municipal companies this level is approved by the Municipal Councils;
  Revenue collection: The charge is calculated, invoiced and collected by the collecting offices of the water supply and sewerage companies;
  Enforcement: The water supply and sewerage companies;
  Revenue use: The water supply and sewerage companies;

PERSPECTIVES:
  Alternatives for restructuring the activities and the status of the water supply and sewerage companies are under discussion. An improvement of the charge collection system is expected, as well as a charge for waste water treatment for households.

INFORMATION SOURCES:
  MoE

Fines for environmental damages or pollution

STATUS:
  In force since 1978 with last amendment in 1993.

AIM:
  The motivation for introducing fines for damaging or polluting the environment (water flows and basins, air, soil, noise levels and electromagnetic fields, mineral resources) in the past years was based on the necessity for changes in the behavior of polluters, in relation to the size of the imposed fine. The compulsory economic instruments are designed to encourage measures for lowering harmful emissions within limits and for generating financial resources. For the period 1992-1993 there is evidence for positive effect, but it can hardly be separated in quantity from the influence and the overall decline of the industrial economic activity, and the respective reduction of pollution rates. Revenues are increasing in their mass, but they practically decrease due to inflation. There is a methodology for determining fines for noise and electromagnetic fields above the limits but they are not enforced for the moment due to a lack of appropriate measuring equipment in the Inspectorates. The fines for damaging subsurface earth resources are related to damages due to improper performance of some geological and mining activities, as well as violations of the technological processes for production and treatment of mineral resources, resulting in losses of useful components. Practically there have been no fines enforced for the last one year, for there have been no reported damages due to violations of the mining enterprises - all of them state owned.

SUBJECT:
  Legal persons (companies, enterprises from all sectors of industry, agriculture etc.), sources of polluting substances above the admissible levels for the respective components of the environment.

OBJECT AND LEVEL:
  Determination of the level of fines for each source of pollution is based on measurements made in conformity with the Bulgarian State Standards. Measurements and analyses, as well as findings of damages are performed by the Regional Environmental Inspectorates of the Ministry of Environment. The fine level (in leva) is proportional to the quantity of polluting substance exceeding the admissible level, to the time duration of emissions and the single unit size of the fine, fixed in the respective component tariff. The total fine, for each specific subject is formulated as a sum of the separately calculated fines for the different substances.

  The amendment of 1993 introduced a fixed level, in leva, per kilogram of each substance or indicator, 16 times greater than the previous (1987) levels. This increase compensates for the increase of prices in 1990. At this stage there is no regulatory mechanism for adjusting for inflation. In the complex economic situation it is difficult to differentiate the influence of the real fine level increases on polluters' behavior. The common practice is to enforce increased fines in environmentally endangered regions for localized pollution over the admissible limits. As an example we may point out the region of Dimitrovgrad, where the chemical industry is prevalent. As a result of point pollution in the form of untreated waste waters discharged to the river Maritsa, there were damages of the fauna of the river and a great amount fish were poisoned. The Minister of the Environment enforced a fine seven times greater than the increased fine level for water pollution of water flows and basins above the admissible levels.

  The polluting substances and indicators which subjected to fines are different for each of the environmental components.

  There is a differentiation where the calculated fine for excessive pollution of the respective environmental component within the boundaries of national park or reserved area is tripled, and when the pollution is in the boundaries of other kinds of protected territories and sanitary zones around water-supply sources or drinking water supply facilities, the fine level is doubled. There is another provision for cases of proven damages or pollution, above the admissible levels, in ecologically aggravated regions or regions with increased risks for the human health, where the Minister of Environment has the right to increase the level of the particular fine. The Government, upon precise data analyses, determines the regions with "aggravated environmental status". The mechanism for fine level determination for each of the environmental components is annexed below.

INCOME:
  The total annual income from fines (on prices of the respective year) amount to:

	1990	21,154 mln. leva	(= 5,860 mln. ECU)
	1991	15,299 mln. leva	(= 0,676 mln. ECU)
	1992	36,959 mln. leva	(= 1,316 mln. ECU)
	1993	73,848 mln. leva	(= 2,220 mln. ECU)

  The average % of income collected is about 70% of fines imposed, due to the ineffective system for enforcement of sanctions for delayed payments, resulting from the legislative gaps. These gaps are related to the penalty decrees on dereliction of due payments, which is mainly due to inappropriateness of old acts given the changes of the transition period.

USE OF INCOME:
  Since 1993 income from fines are being allocated, as follows: 30% to the Municipal Environmental Funds and, 70% to the National Environmental Fund. The generated income is used for financing targeted environmental projects and activities.

IMPLEMENTATION AND EFFECTIVENESS:
  The performance of control on meeting the emission standards by the Regional Inspectorates on behalf of the Ministry of Environment leads to administrative costs, which are rapidly growing. The relative share of fine administration costs is varying up to 30% of the income, depending on the specific environmental component to which it is applied. The procedure of monitoring, calculating and imposing the fine to each specific subject requires time and personnel. Imperfections in the compulsory measures and the lack of interest accruing on delayed payments further burden the practical application of this economic instrument . Its practical application over the past few years did not provide the expected effect of the "polluter-pays" principle.

  The great share of state-owned companies in the basic economic sectors and the necessary capital investments from the budget for meeting the rather stringent standards, lead to practical difficulties in implementing solutions at this time. On the other hand, the widening of the private sector mainly in small enterprises and the lack of a mechanism for penalty indexation in accordance with inflation, together with the uniform method of fine determination, does not encourage the introduction of treatment facilities. This leads to a change in the function of the instrument, where the fine becomes a voluntary payment for excessive pollution of the environment. An updating of the fixed level of fines for each polluting substance is forthcoming, and in long-term perspective this economic instrument is expected to be replaced by charges for pollution of the environment.

LEGAL BACKGROUND:
  Ordinance, in force since 1978, last amended in 1993: Governmental Decree No. 24 of February 4, 1993 on the "Regulation for defining and enforcing fines for damaging or polluting the environment above the admissible levels". This Decree includes all fines for the various environmental media.

RESPONSIBLE BODIES:
  Design of the instrument: Governmental Ordinance.
  Revenue collection: The Inspectorate of the Ministry of Environment.
  Enforcement: The Minister of Environment through the central administration and the regional inspectorates
  Revenue use: For environmental activities: 30% to the municipalities and 70% to the National Environmental Protection Fund. The allocations of the National Fund are performed by its Governing Council, and of the municipal funds by the respective municipal councils.

INFORMATION SOURCES:
  MoE

Fines for air pollution above the permissible level

STATUS:
  In force since 1978, last amended in 1993.

SUBJECT:
  Legal persons (electrical and thermal production plants, chemical plants, heavy industry, etc.), with stationary emission sources (processes, technological facilities) of polluting substances above the permissible levels.

OBJECT:
  Determination of pollution levels for each stationary emission source is based on measurements, according to the Bulgarian National Standards. Measurements and analyses are carried out by the Regional Environmental Inspectorate of the Ministry of Environment. Different emission level standards are applied, based on the type of production process fuels (more liberal for facilities set in operation before the end of 1995, more stringent for new facilities). For example: The gas emissions from electrical and thermal boilers with a capacity over 50 MW should not exceed the values in mg/m3 of sulphur oxides, defined according to the type of the fuel used:

	1. Local coal	3500 mg/m3
	2. Imported coal	2000 mg/m3
	3. Liquid fuels	1700 mg/m3

  For gas fuels, the limits are as follows:

	dust	10 mg/m3
	NO	500 mg/m3
	CO	100 mg/m3

  Emissions from combustion with heating capacity of 500 KW to 5 MW in mg/m3 of sulphur oxides, according to the type of fuel used is:

	1. solid fuels	2000 mg/m3
	2. liquid fuels	1000 mg/m3

  For gas fuels, the limits are:

	NO	200 mg/m3
	CO	100 mg/m3

LEVEL:
  The level of the fine (in leva) is proportional to the excess quantity of pollutant, the time duration of emissions and the unit size of the fine. The total fine value is formulated as a sum of the fine for each of the polluting substances. The total number of polluting substances is 16, with a fixed single fine unit in leva per kilogram. Some of the most important rates for C are (for exchange rate: 1 ECU = 33.26 leva):

	NO2	0,90 leva/kg	(0,027 ECU/kg)
	SO2	0,30 leva/kg	(0,009 ECU/kg)
	phenols	7,50 leva/kg	(0,230 ECU/kg)
	dust	0,20 leva/kg	(0,006 ECU/kg)
	soot	0,70 leva/kg	(0,022 ECU/kg)
	lead	330,00 leva/kg	(9,920 ECU/kg)

  The calculation mechanism for the fine level is as follows:

         n
    A =  Q x (KFi - KHi) x T x Ci x 3,6 x 10-3
        i=1

whereas:

A   is the size of the fine in leva per month;
Q   the quantity of gases discharged in the atmosphere in cubic nanometers per second;
K_Fi   the actual concentration of the i-th polluting substance in the discharged gases in milligrams per cubic nanometer;
K_Hi   the level of permissible discharge gas emissions in milligrams per cubic nanometer;
T   the time period of gas discharge in hours per month;
C   the unit size of the fine for the i-th polluting substance in leva per kilogram, and;
i   the kind of polluting substance.

INCOME:

	1990	3.380 mln. leva	(= 0.936 mln. ECU)
	1991	1.682 mln. leva	(= 0.074 mln. ECU)
	1992	8.537 mln. leva	(= 0.304 mln. ECU)
	1993	23.265 mln. leva	(= 0.700 mln. ECU)

IMPLEMENTATION AND EFFECTIVENESS:
  Problems are related mainly to enterprises from the energy producing sector, still funded by the state. The existing operating thermoelectric plants in Bulgaria are quite old and are operating with local high sulphur content coal, without exhaust gas treatment facilities for the sulphur oxides. These plants are assessed very high fines (for millions of leva). There is a procedure for appealing against the fines and the final decision is made before court. The judicial procedure is rather slow and bureaucratic.

LEGAL BACKGROUND:
  Regulation on the Procedure for specification and imposition of sanctions for polluting or damaging the environment above the permissible limits.

INFORMATION SOURCES:
  MoE

Fines for pollution of waterflows and basins above the permissible levels

STATUS:
  In force since 1978, latest amendment in 1993

SUBJECT:
  Legal persons (all economic sector enterprises), discharging waste water with harmful substances into waterflows and basins at concentrations above permissible levels.

OBJECT:
  Three water categories are defined in accordance with the use of waterflows and basins:

1. water category - for drinking, in food industries, etc., requiring drinking water quality;
2. water category - used for fishery, water sports, watering places for animals, etc.
3. water category - for irrigation, industrial purposes, etc.

  For each category of surface water flows there are standards for admissible pollution levels, based on four groups of indicators:

1. general physical and inorganic chemical indicators;
2. general indicators for organic polluting substances;
3. indicators for inorganic substances of industrial origin, and;
4. biological indicators;

  The total number of these indicators is 87. With respect to the damage value, there are 27 indicators and substances which may be extracted, the exceeding of which can be sanctioned. There is also a regulation for the admissible content of damaging substances in waste water effluent in the urban sewerage systems.

  The number of polluting substances and indicators is defined upon their specific harmfulness. Definition of the pollution rate for each source of pollution, is based on physico-chemical analyses of water samples, in accordance with the Bulgarian National Standards. Sampling and analyses are performed by the Regional Environmental Inspectorates of the Ministry of Environment.

LEVEL:
  The fine level (in leva) is proportional to the waste water debit, the excessiveness of polluting substance concentration or indicator, the time duration of emissions and the fixed fine level (leva/kg.) for the respective substance or indicator. The most important of the 27 Polluting substances and indicators are:

	pH	2.00 leva/kg	(0.060 ECU/kg)
	BOD	2.00 leva/kg	(0.060 ECU/kg)
	COD	2.00 leva/kg	(0.060 ECU/kg)
	Suspended solids	0.80 leva/kg	(0.020 ECU/kg)
	Ammonium nitrate	4.00 leva/kg	(0.120 ECU/kg)
	Nitrate	0.80 leva/kg	(0.020 ECU/kg)
	Nitrite	200.00 leva/kg	(6.000 ECU/kg)
	Cyanides	160.00 leva/kg	(4.810 ECU/kg)
	Lead	240.00 leva/kg	(7.220 ECU/kg)

(at exchange rate : 1 ECU = 33.26 leva)

  The calculation formula for determination of the fine level is as follows:

         n
    A =  Q x (KFi - KHi) x T x Ci x 3,6 x 10-3
        i=1

whereas:

A   is the size of the fine in leva per month;
Q   the quantity of gases discharged in the atmosphere in cubic nanometers per second;
K_Fi   the actual concentration of the i-th polluting substance in the discharged gases in milligrams per cubic nanometer;
K_Hi   the level of permissible discharge gas emissions in milligrams per cubic nanometer;
T   the time period of gas discharge in hours per month;
C   the unit size of the fine for the i-th polluting substance in leva per kilogram, and;
i   the kind of polluting substance.

  The following formula is applied for alkaline water reactions in determining the indicator reaction activity (pH):

    A = Q x (KF - KH) x T x C

  For acidic water reactions the following formula is applied:

    A = Q x (KH - KF) x T x C

whereas:

KH   is the Standard for permissible level of reaction activity (pH), determined in accordance with the specification requirements;
KF   the actual value of the reaction activity (pH);
A   the fine level in leva per month;
Q   the DEBIT of waste water in litters per second, and;
T   the waste water discharge duration in hours per month.

INCOME:

	1990	14.744 mln. leva	(= 4.084 mln. ECU)
	1991	10.250 mln. leva	(= 0.453 mln. ECU)
	1992	16.335 mln. leva	(= 0.491 mln. ECU)
	1993	39.359 mln. leva	(= 1.118 mln. ECU)

INFORMATION SOURCES:
  MoE

Fines for soil pollution or damages

STATUS:
  In force since 1978, latest amendment in 1993

SUBJECT:
  Legal persons (all economic sector enterprises), damaging or polluting the soils in the process of their activities, discharging wastes without administrative permits or not using the prescribed project technology (best available technology) for rendering the wastes harmless.

OBJECT:
  According to the estimated damage or pollution of soils, there are 12 groups of pollutants, defined as:

• pesticides in concentrations above the permissible limits;
• heavy metals and metalloids above the permissible concentrations;
• surface pollution with wastes, and;
• presence of radioactive substances in the soil, etc.

LEVEL:
  Calculated as the sum of the separately determined fines for each pollutant (in leva per square meter) plus the measured damaged or polluted area. Some of the major types of pollutants, with fixed fine levels are:

	solid household wastes	25.0 leva/m2	(0.75 ECU/m2)
	construction wastes	35.0 leva/m2	(0.75 ECU/m2)
	mineral fertilizers	40.0 leva/m2	(1.20 ECU/m2)
	industrial wastes (incl. hazardous waste)	40.0 leva/m2	(1.20 ECU/m2)
	radioactive substances	350.0 leva/m2	(10.5 ECU/m2)

  Fine level is calculated as follows:

    A = S x C

whereas:

A   is the fine level in leva;
S   the damaged area in square meters, and;
C   the fine level for damaging or polluting an area of one square meter.

  In cases when the pollution is a function of various kinds of waste, the fine level is fixed for the waste with the highest unit size, on the above formula.

INCOME:

	1990	3.026 mln. leva	(= 0.8382 mln. ECU)
	1991	3.367 mln. leva	(= 0.1487 mln. ECU)
	1992	12.087 mln. leva	(= 0.4304 mln. ECU)
	1993	11.223 mln. leva	(= 0.3374 mln. ECU)

INFORMATION SOURCES:
  MoE