Chapter 4: Romania

(continued)

4.3 Overview of the Environmental Market

Environmental Expenditures

The two major sources of environmental investments in Romania are private investments and allocations from the state budget. If the proposed decentralization of state spending is approved, other investment sources will emerge (e.g. a national environmental protection fund and local municipalities). According to the National Center for Statistics and other sources, total annual environmental expenditures remained constant at around 0.6 percent of GDP between 1993 and 1996. In 1996, total environmental investments amounted to more than USD 200 million. However, the amount of environmental investment in Romania is very low compared to the EU level, and the situation is worsened by the lack of economic instruments. It should be also noted that Romania will require massive environmental investment by both the government and industries to comply with EU standards.

TABLE 4.2: TOTAL ENVIRONMENTAL EXPENDITURES, 1993-1996
Year	Environmental expenditures (mln USD)	Share of GDP

1993	157.7	0.6%
1994	170.8	0.6%
1995	210.6	0.6%
1996	201.9	0.6%
Source: Environment Protection Strategy, Ministry of Waters, Forests and Environmental Protection (MWFEP), Bucharest, 1996; and MWFEP Report, 1997

TABLE 4.3: SOURCES OF ENVRIRONMENTAL EXPENDITURES, 1993-1996 (MLN USD)
Sources of funds	1993	1994	1995	1996

State Budget	90.9 (58)	96.6 (56)	119.9 (57)	80.7 (40)
Private Sector/ Municipalities	66.8 (42)	74.2 (44)	90.7 (43)	121.2 (60)
Total	157.7	170.8	210.6	201.9
Note: Number in brackets indicates the share of total environmental expenditure Source: Environment Protection Strategy, Ministry of Waters, Forests and Environmental Protection

In 1994 and 1995, government environmental expenditures accounted for 2.7 percent of the state budget. At that time, the state funds accounted for approximately 57 percent of total environmental spending. However, in 1996 the state budget's share decreased to 40 percent of total expenditures, or USD 80.7 million. The remaining USD 121 million came from the private sector and from municipalities. The investments from private enterprises were directed strictly toward pollution control and prevention, and investments from the State Budget were directed mainly toward water and forest management.

Government spending on the environment is expected to continue its decline in the coming years. The cabinet of the new coalition government stated that environmental funding from the state budget "will be reduced significantly through the introduction of economic reforms such as price liberalization, fiscal and monetary reforms, privatization, etc."

State Environmental Fund

The only fund currently devoted to environmental protection issues is the Water Fund, which is used mainly to finance investments in wastewater treatment, discharge control equipment and other water- and wastewater-related investments. However, this fund does not provide sufficient financial resources to finance the most urgent water-related projects.

Although Romania does not currently operate any broad environmental protection funds, the new government has announced plans to create an environmental fund as a basic instrument to implement the national environmental policy. Economic instruments such as user fees, disposal charges and non-compliance fines would generate income for the fund. In this way, the protection of the environment would not compete with other social programs for scare resources from the national budget.

The Romanian Environmental Protection Law, a second generation framework law which adopts the principles of precaution, polluter pays and public participation, was passed in December 1995. Among the provisions concerning the creation of the environmental fund was a section stating that the existing Ministry of Waters, Forests and Environmental Protection was not prepared to manage such funds.

Based on data from the Romanian National Commission for Statistics and the Ministry of Finance, the OECD estimated in 1995 that revenues from the proposed Romanian environmental fund for 1997 could amount to USD 53 million. The bulk of the income would come from charges for industrial water and from a 1 percent surcharge on the sale of fuel.

Environmental Priorities

Romania's environment faces severe problems with regard to water quality, waste management and air and soil pollution. In general, the quality of drinking water and of groundwater is not satisfactory, and the level of sewage treatment is low. Pollution that affects surface water and groundwater is mainly caused by untreated municipal and industrial wastewater and by nitrates spread by intensive farming. Furthermore, the treatment and disposal of waste is a major concern that reflects the weakness of existing waste regulations. In fact, waste management legislation does not exist, and the concept of hazardous waste management has not been introduced. Air pollution is also a big problem in larger cities and industrial areas and is caused mainly by heavy emissions from the energy, chemical, paper, mining and transport sectors, as well as from domestic heating. Improvements in the past have resulted mainly from decreasing economic activities and partly from remediating "hot spot" areas.

Clearly, up to now the environmental problems facing Romania have not been addressed. The main obstacle to implementing environmental projects is still the lack of financing. The low amount of environment investments is primarily due to a lack of environmental financing instruments.

According to the governing program of the new coalition cabinet, the future policy regarding natural capital will be "stable and predictable" and will address "both past and new responsibilities for the environment." The environmental policy has not yet been detailed as such, but can be found in the restructuring of the economy chapter of the government's program.

The following priorities have been highlighted as "policies toward the use of natural capital": development of an extensive monitoring system; studies to identify the real cost of environmental factors; production of management plans for highly polluted areas; introduction of environmental standards and development of professional accreditation; enforcement of environmental regulations; definition of environmental priority areas for public investments; use of economic instruments such as environmental taxes, environmental funds, etc. for stimulating a better use of natural capital; introduction of waste management systems; involvement of NGOs; and encouragement of partnerships.

The environmental protection strategy presented in 1996 by the former representatives of the Ministry of Waters, Forests and Environmental Protection (MWFEP) is still the only valid reference related to environmental priorities and mentions the following strategies and priorities:

Short-term objectives (before 2000)

reducing by 20-30 percent the emissions in the 14 "hot spots"
reducing sulfur dioxide and nitrogen emissions by 20 percent, and chlorine and H2Cl by 40 percent
reusing wastes collected from gases and used waters by 10-15 percent
increasing reuse of solid wastes by 20 percent
recovering the soils with exhausted capacity deposits of solid residues
controlling dumping of municipal waste
irrigating 1.5 million hectares and planting 50,000 hectares of forest belts
combating soil erosion on 1.5 million hectares used for agriculture
increasing the forestry area by 200,000 hectares

Medium-term objectives (before 2005)

reducing by 50 percent the existing water shortage
improving the quality of surface waters by raising the length of first category rivers to 60-65 percent of total and reducing the length of degraded rivers (D category) to 10-15 percent of total
diminishing air pollution by 20-30 percent of 1989 levels for SO₂, CO, NH₃, CH₄
reducing heavy metals pollution by 80 percent
zero emissions of greenhouse gases affecting the ozone layer (by 2008 for certain gases)
increasing forestry area by 30 percent
recovering 70-80 percent of the Danube Delta

Long-term objectives (before 2025)

reaching living conditions compatible with the standards of advanced countries
reducing pollution to an acceptable level according to EU standards
complying with international conventions and agreements

To some extent the priorities set in the short-term strategies also reflect Romania's environmental expenditures. As shown in the Table 4.4, priorities for environmental spending in 1995 were air pollution control technologies, which accounted for almost 41 percent of total spending; water and wastewater-related projects (32 percent); and waste management (20 percent). A significant increase can be expected in waste management as well as water and wastewater investment.

TABLE 4.4: ENVIRONMENTAL EXPENDITURES BY MEDIA, 1995
Media	% of Total Expenditures

Water and wastewater	32%
Waste management	20%
Air pollution control	41%
Others	7%
Source: Environment Protection Strategy, Ministry of Waters, Forests and Environmental Protection, Bucharest, 1996

Legislation and Enforcement

Romania has many laws for environmental protection, both old and new. However, compliance with these regulations is generally weak, mostly because of poor economic conditions, poor management practices and poor dissemination of information. For example, a number of new orders passed by the ministry and implemented by the authorities are still unknown to the public and not yet legal as they have been not published as part of the official government collection of laws, Monitorul oficial.

The most important environmental regulation is the Environmental Protection Law (no. 137/1995), passed in December 1995. It is a second generation framework law based on the principles of precaution, polluter pays and public participation. As it is only a framework law, the Environmental Protection Law is complemented by specific laws, government decisions, government orders, ministerial decisions and ministerial orders.

All new laws, governmental decisions, orders of the minister, decisions and standards are drafted in compliance with the EU regulations. Certain provisions and standards of Romanian legislation actually exceed the EU standards.

However, one of the biggest problems with environmental legislation in Romania is the lack of implementation and compliance. This is due to the absence of incentives, weak enforcement, insufficient technology, financial constraints and poor public participation.

Romania is also a signatory party to various international and bilateral environmental conventions and agreements (Ramsar, Basel, Montreal etc.). However, according to legislative experts, there are certain Romanian environmental laws which must be revised in order to fully comply with some of these conventions and agreements.

The following institutions are responsible for enforcement of environmental legislation in Romania:

environmental protection agencies;
municipalities;
local health authorities (health and veterinary police);
district water authorities (branches of AR);
district forest authorities (branches of ROMSILVA); and
the police.

In 1995, an organizational structure was established to deal with EU integration, including law harmonization. This included three separate offices: the Parliamentary Committee for European Integration, the Interministerial Committee for European Integration and the Governmental Department of European Integration.

Compliance with EU requirements will take a long time. Romania's problems are particularly serious in the areas of solid and hazardous waste management, where, except for a draft law currently under consideration, legislation is almost non-existent. The national regulations concerning air pollution are not comprehensive enough to meet EU standards, and major changes are required. Also, safety regulations related to radiation protection and radioactive waste management need to be formulated.

Environmental Administration

Environmental administration is coordinated on the national, regional and local level in Romania.

In 1990, the Ministry of Environment was established, and in 1992, it was renamed the Ministry of Water Resources, Forests and Environmental Protection (MWFEP). The MWFEP operates 41 Environmental Protection Agencies, one in each county, and the Administration of the Danube River Delta. Furthermore, the autonomous Romanian Water Authority (Apele Romana) operates 10 branches along the major rivers and tributaries; and the autonomous Forest Authority (ROMSILVA) operates 41 branches, again one in each county. Both the Water Authority and the Forest Authority report directly to the MWFEP.

In addition, there are several research institutes that focus on environmental protection: the Institute for Research for Environmental Engineering, the Institute for Maritime Waters, the Institute for Research and Forestry Planning, the Institute for Soil Science and Agro-chemical Research, the Institute for Hygiene and Public Health, and others.

There are also agencies, offices and inspectorates organized by county governments or that function as part of other ministries (e.g. the Ministry of Health, Ministry of Agriculture and Food). Most of the institutions mentioned are involved in licensing discharges to the environment.

REC * PUBLICATIONS * EMERGING ENVIRONMENTAL MARKET 2 * ROMANIA