Poland

Current Situation

Political Situation

Economic Situation¹

GDP, steadily growing since 1993, is forecast to increase to 5 percent in 1995 and 5.5 percent in 1996. Manufacturing accounts for 40 percent of GDP; the agricultural sector accounts for only 7 percent of GDP but employs 25 percent of the Polish labor force.

Electrical engineering, transportation, clothing, food, chemicals, paper and wood are among the industries showing the highest real growth rates. Other areas of opportunity include telecommunications, banking, tourism and housing development. Privatization, however, is moving along slowly.

Environmental Expenditures

For government spending, the strategy for environmental investments in Poland is based on the priorities of the National Environmental Policy and on Poland's international obligations. Currently, about 47 percent of the financing for environmental investments is provided by environmental funds, and about 41 percent by enterprises, local administrations and private users. Only 7 percent comes from the state budget, and 5 percent from foreign assistance. Poland has maintained a stable level of expenditure for environmental protection above 1.0 percent of GDP for the last two years.

Poland's National Fund for Environmental Protection and Water Management (NFEP) plays an important role in financing environmental projects. In the period 1990-1993 the NFEP concluded 1,606 agreements totaling USD 718 million (85 percent loans, 15 percent grants). In the first quarter of 1994 there were 700 agreements with a total value of about USD 67.7 million. The main recipient sectors were air protection (42 percent), water and water management (41.6 percent) and land surface protection (6.1 percent).

Between 1990-1993 NFEP investments were responsible for reducing annual emissions of sulfur dioxide by 246,000 tons, nitrogen oxides by 5,000 tons, particulates by 120,000 tons and carbon monoxide by 50,000 tons. According to the State Inspectorate for Environmental Protection (SIEP) these estimates are 9.0, 0.5, 6.2 and 0.6 percent, respectively, of their 1993 values.

In the water protection sector, the government constructed new waste water treatment plants, increasing the overall capacity by 3.1 million m³/day, and installed 846 km of sewers. Investments in potable water treatment infrastructure have resulted in an increase in water retention reservoirs of 127 million m³, an increase of water supply mains by 356 km and an increase in the capacity of water treatment stations by 182,000 m³/day. In the field of land surface protection, Poland increased the capacity of municipal dumps by about 7.5 million tons. This has helped alleviate the serious capacity shortage.

The NFEP's main activity is to provide financial support for investments, usually through soft loans. Support can also come in the form of grants for environmental education, nature conservation, the development of programs and studies, and for geological and mining activities. The NFEP gives preference to solutions which allow comprehensive protection of the natural environment and water resources. The income of the Fund comes from fines and charges for the use of the environment.

Another important institution financing environmental protection in Poland is the ECOFUND. This fund was established when the international community relieved a portion of Poland's sovereign debt with the stipulation that the money be earmarked for environmental projects. The funds are used to reduce emissions of acid gases and greenhouse gases, as well as for reducing the use of controlled substances by Polish industry. The overall amount available under eco-conversion is about USD 3 billion.

The ECOFUND can provide no more than 30 percent of the total investment cost, though the limit for municipal investments is up to 50 percent for nature conservation and 80 percent for environmental education.

To receive funds from either the NFEP or ECOFUND, the project initiator must submit a technical description, an economic analysis and a timetable for implementation. The basic funding priorities include:

• improving the environment in 27 threatened areas
• protecting natural areas
• supporting pollution prevention projects
• meeting Poland's international obligations
• reducing low-level emissions of air pollutants, particularly through coal-to-gas conversion projects and the use of alternative energy sources
• preventing transboundary air pollution by reducing the emissions of sulfur dioxide and nitrogen oxides
• protecting the Baltic Sea by reducing the pollutant discharge from Polish territory
• reducing greenhouse gases emissions (carbon dioxide, carbon monoxide, nitrogen oxides, sulfur dioxide, methane)
• promoting new technologies and organizational methods (pilot projects)
• promoting a domestic environmental service and technology industry
• training Polish specialists for public environmental education programs
• upgrading waste water treatment plants selected as priorities for the Baltic Sea protection by the Helsinki Convention

The government is currently promoting the development of a financial infrastructure to fund the large, pro-environmental restructuring of the industrial sector. There is a growing need to involve large commercial banks in financing environmental protection activities; because of the traditionally large doses of grants and soft credits in this area, banks cannot compete in this sector. Other obstacles for commercial financing include: insufficient knowledge of environmental laws; insufficient strategies by banks towards environmental investments, due to the relatively weak position of the national environmental policy; difficulties in assessing risk in environmental investments due to poorly developed environmental criteria; lack of environmental criteria for assessing credit applications.

An important achievement with regard to environmental investments in Poland was the establishment of the Bank for Environmental Protection, which gives preferential credits for investments in environmental protection. Since the bank operates on a commercial basis, the NFEP covers the difference between market and preferential credit rates.

Environmental Priorities²

During the last three years, there has been a decrease in the importance attached to environmental protection issues, with priority now given to achieving economic benefits. Fortunately, due to the establishment of the NFEP, the environment does not have to compete directly with other sectors for scarce state budget resources.

An important event affecting Poland's environmental priorities was entry into the Europe Agreement on 1 February 1994, a move that established the association of Poland and the European Union along with Poland's application for EU membership. This act obliges Poland to harmonize its environmental laws and standards with those of the EU and establish close cooperation with the EU in combating environmental pollution. Poland will have to substantially increase financial and human resources to restructure both environmental protection activities and the economy to EU standards. Another important factor is Poland's ratification of the international environmental conventions and associated protocols that require Poland to undertake a number of pollution abatement activities.

There are a number of other environmental priorities that include:

• establishing an efficient system of environmental information management and monitoring based on computerized data management systems
• establishing the Committee for Sustainable Development, composed of high-level government representatives and other groups
• conducting environmental audits for property transactions by the Inter-ministerial Team for Addressing Environmental Problems in Privatization. Environmental audits are often made at plants that are subject to "capital privatization." The cost of necessary environmental restoration is taken into account, and responsibility for clean-up is negotiated between the seller and purchaser.
• increasing the area of land subject to protection in Poland. Presently, about 23.7 percent of the country's area is subject to various forms of protection. There are 19 national parks in Poland covering 0.8 percent of the total area of the country, three of which were established in 1993.
• increasing clean production efforts by switching from "end-of-pipe" to "elimination at source" solutions. This has resulted in increased interest in clean production technologies and processes on the part of decisionmakers and industry. About 150 industrial plants have voluntarily signed the Declaration of Cleaner Production, and there are plans for establishing a Cleaner-Production Center in Poland.

Regulatory and Enforcement Environment

• the collection efficiency of environmental charges was generally high and ranged from about 50 percent for waste water, to almost 90 percent for waste and sulfur dioxide
• the collection efficiency of environmental fines was lower, ranging from 4 percent for waste to over 90 percent for nitrogen oxides
• a separate problem is inefficient collection of charges and fines for the discharge of saline mine water, which remained at a level of 5 percent

The basic principle of the environmental law in Poland is that economic entities are responsible for the consequences of their activities on the natural environment, and for addressing the damage they cause. In practice, the enforcement is relatively weak since Poland does not close enterprises for failure to pay environmental charges.

One can observe the effectiveness of enforcement by looking at the 80 most polluting plants in Poland. A list of these was made public by the media, and all of these plants were placed under the special supervision of SIEP and the respective Voivodship environmental divisions. By decision of the respective Voivodas (provincial governors), these plants were obliged to implement environment-friendly production technologies and to install environmental protection equipment. The result of these special measures was a 60 percent reduction in particulate emissions, a 40 percent reduction in gas emissions, a 70 percent lower chemical Oxygen Demand (COD) charge in waste water and a 40 percent decrease in the total quantity of collected waste.

Maximum discharge limits are issued by the environmental divisions in each Voivodship office based on an assessment of their environmental impact. The SIEP ensures that the Voivodships comply with national environmental standards.

In addition to pollution fees, Poland requires polluters to pay noncompliance fines based on the pollutants discharged into the environment above its maximum discharge limit. Generally they are much higher than emissions fees. In the period 1992-1993, SIEP imposed 12,000 fines totaling USD 141.7 million, and there were 391 cases submitted for prosecution.

Payment of fines can be suspended if the plant implements investments which will limit or eliminate emission of pollutants into the environment. It was noted that the application of this tool is very successful, since 77 percent of plants which have used this option fully implemented their pro-environment investments.

Key Actors in Environmental Protection at the National Level

Policy implementation at the regional level is performed by the Voivodship (Provincial) Divisions of Environmental Protection, except river basin management. This is performed by the Regional Water Management Authorities.

Enforcement of environmental laws and monitoring of the state of the environment are the responsibility of the State Inspectorate for Environmental Protection (SIEP). The Inspectorate is composed of the chief inspectorate and Voivodship Inspectorates, supported by a network of laboratories. The SIEP is the main source of information on the state of the environment in Poland.

To ensure that environmental considerations are taken into account during the privatization process, the Inter-ministerial Team for Addressing Environmental Problems in Privatization was established in 1992 as a joint body of the minister of privatization, the minister of environmental protection, and the chief inspector of environmental protection.

The Polish government established the Regional Authorities for Water Management in 1991, with the task of balancing surface and ground water resources. Tasks of the Water Management Authorities include: developing conditions for water usage from river basins, protecting the quantity and quality of water resources, developing water management programs, examining investments affecting water management in river basins, monitoring surface and ground water quality, implementing methods of leakage detection in water supply networks, issuing water rights permits for water transfers and building flood protection facilities.

Seven water management regions were established, and the Regional Authorities for Water Management are directly responsible to the minister of environmental protection. The expected enactment of the new Water Law will greatly enhance their operations, as it includes the power to determine the level of water charges in their areas.

There are about 400 environmental NGOs in Poland, of which about 36 are actively working on a regional or national scale. The majority of these organizations weren't established until the end of the 1980s and the beginning of the 1990s. Most are small groups, largely composed of young people, and often perform "watch dog" functions at the local level. There are also larger organizations such as the Polish Ecological Club, the Green Federation, the Nature Conservation League and the National Environmental Education Center which are all active on a national level. Furthermore, there are political parties with a declared interest in environmental protection, such as the Green Party and the environmental faction of the Democratic Union.

Status of the Polish Environmental Business Sector

Half of the activity in the Polish environmental market comes from the sale of environmental products and technologies, providing the best market out of the four countries in the survey. Table 25 presents a matrix of the revenues generated by surveyed Polish environmental companies by media and activity.

Environmental products generated the most revenues, specifically those related to the protection of surface water and municipal water treatment. Following products, technical services captured approximately 38 percent of the market activity. Again, companies were most active in providing water-related services.

When looking at the market activity for each media, 48 percent of the combined annual revenues for all companies came from water-related services and products. Air-related services and products accounted for 22 percent, and solid waste and soil contamination-related services and products accounted for 17 percent.

More than the other Visegrad countries, 8 out of 10 Polish environmental companies employed less than 30 full-time employees. Privatization seems to be going well in this sector with about 85 percent of the companies operating as private enterprises. This sector is older, on average, than the other markets; only half the companies were established after 1989.

Since the sector is relatively young and small, the demand for information and professional training was high. The most popular topics included environmental regulations, financing environmental investments and new environmental technologies.

The following section presents the responses to each question and selected correlations from the REC's survey of 150 environmental businesses in Poland.