4 Report No. 10603-ECA Environmental Action Programme for Central and Eastern Europe June 30, 1994 Environment Division Technical Department Europe and Central Asia, Middle East and North Africa Regions FOR OFFICIAL USE ONLY MICROGRAPHICS Report No: 10603 ECA Type: SEC Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not oth.erwise be disclosed without World Bank authorization BASIC FIGURES FOR COUNTRIES IN CENTRAL AND r4STERN EUROPE' Area Area 1990 Population Percent Cars Tele- Phys- Infant (OOOs relative Population 2 density. per urban phones' icians mortality' sq km) to France (OOOs) sq km Albania 29.0 0.05 3,200 113.0 35 n.a. n.a. n.a. 25.4 Armenia 29.8 0.05 3,300 110.7 68 n.a. n.a. n.a. 18.2 Azerbaijan 86.6 0.16 7,100 82.0 54 n.a. n.a. n.a. 23.3 Belarus 207.6 0.38 10,300 49.6 65 n.a. I10 41 11.8 Bulgaria 111.0 0.20 8,800 79.3 68 142 290 36 13.1 Croatia 56.5 0.10 $,760 84.0 51 167 259 24 10.4 Czech Republic9 78.9 0.14 10,360 131.0 78 207 270 36 12.1 Estonia 45.2 0.08 1,570 34.8 72 154 230 46 12.0 Georgia 70.0 0.13 5.400 78.3 50 87 134 55 19.6 Hungary 93.0 0.16 10,600 114.0 61 184 180 33 15.4 Latvia 64.6 0.11 2,680 42.1 71 110 280 50 10.2 Lithuania 65.2 0.12 3,750 57.1 69 128 220 40 9.8 Moldova 33.7 0.06 4,340 128.8 47 n.a. n.a. n.a. 18.6 Poland 313.9 0.57 38,180 122.0 62 138 137 21 15.9 Romania 238.0 0.43 22,760 95.8 54 61 130 22 22.7 Russia (European) 4,253.0 7.71 115,050 27.1 74 60 n.a. 47 17.4 Slovak Republic9 49.0 0.09 5,310 108.0 78 200 270 36 12.1 Slovenia' 20.3 0.04 2,000 98.7 56 289 328 19 8.2 Ukraine 604.0 1.09 51,700 85.6 67 60 n.a. 44 13.0 France 552.0 1.00 56,400 102 74 410 610 31 7.4 Netherlands 37.0 0.07 14,900 403 89 360 650 22 7.3 I/ Refers to most recent year (in most cases 1990) for which data are available. 2/ Population figures for Albania and Ukraine are for 1989; Croatia, Romania and Slovenia for 1991. 3/ Passenger cars per 1,000 inhabitants. 4/ Per 1,000 inhabitants. 5/ Per 10,000 inhabitants. 6/ Number of deaths before age one per 1,000 live births. 7/ Figures for cars, telephones, physicians, and infant mortality are for Russia as a whole, not just European Russia. 8/ Figures for urbanization are for Yugoslavia. 2/ Figures for urbanization, cars, telephones, physicians, and infant mortality are for Czechoslovakia. The metric system is used throughout the text. A list of Abbreviations is provided inside the back cover. FOR OFFICIAL USE ONLY PREFACE At the Ministerial Conference social change, not in isolated investments. "Environment for Europe", which took place on Attendance at the Lucerne Conference reflected 28-30 April 1993 in Lucerne, Switzerland, this new paradigm; not only were environment Ministers "endorsed the broad strategy, with its ministers from fifty countries represented, but principles and general priorities, contained in the many senior finance, economic, and sectoral Environmental Action Programme for Central ministry officials also attended, especially from and Eastern Europe (EAP) as a basis for action the twenty participating Central and Eastern by national and local governments, the European countries. Cormission of the European Communities and This Action Programme represents a by international organisations and financial synthesis of several major studies. As part of a institutions and private investors active in the broad consensus building process, they were region" (Paragraph 6 of the Ministerial reviewed by various expert panels and discussed Declaration, 30 April 1993). at international meetings prior to the Lucerne This endorsement was the culmination of Conference. The work was undertaken by the a two-year process of discussion and consensus World Bank and OECD under the guidance of a building among representatives from about 30 Task Force chaired by the Commission of the Eastem and Western countries and numerous European Communities. international institutions in the framework of the The innovative conclusions and Swiss-led Expert Group established after the fundamental recommendations would riot have Dobris Conference in June, 1991. From a been possible without the commitment of different perspective, the endorsement was the countless individuals, and generous contributions beginning of a substantive dialogue which is by several governments and institutions. The based on a much better understanding of how to major studies were funded jointly by the achieve tangible results in a situation where governments of Denmark, Germany, Italy, The serious environmental problems must compete Netherlands, Switzerland, the United Kingdom, with many other grave social and economic and the United States; and by the European demands. Commission, the OECD, and The World Bank. The great achievement during the two The Netherlands Government also financed the years since the Dobris Conference however goes editing of the Action Programme. Most well beyond the preparation of the Action important of all, however, was the dedicated Programme, for there has been a shift in effort of a number of the Central and Eastern understanding of how it might be possible to European countries, with whom we embarked achieve the greatest possible environrnental on a journey that is bringing us ever closer improvements with the available resources. together in our joint quest for a better There is now a recognition that improvements in "Environment fe- Europe." the environment are rooted in economic and d his document has a restricted distribution and may be used by recipients only in the performance of their | official duties. Its contents may not otherwise be disclosed without World Bank authorization. l This Report has been prepared by a team led by Richard Ackermann (World Bank) and comprising Gordon Hughes, Clyde Hertzman, Laszl6 Somly6dy, Kristalina Georgieva, Wendy Ayres, and Gretta Goldenman. The sections on economic and environmental policies and on forecasting draw upon the work of Rob 'Maas, Johannes Bollen and Jean- Paul Hettelingh (RIVM) and Michael Toman (RFF). The chapter on expenditure priorities is based on the work of Wynne Jones, Mark Ambler, John Marrow and others working under a contract with Coopers & Lybrand. The section on Transboundary and Global Concerns is based on a draft from Martin Uppenbrink (UNEP), and benefitted from extensive comments and review by Anton Eliassen, Harald Dovland, Ma.i Saether (Norway). The sections on biodiversity and nature conservation are based on contributions from Jean-Pierre Ribaut, Zbigniew Karpowicz and Liz Hopkins (IUCN). Information on the phaseout of Ozmne Depleting Substances was provided by Claus Hvash0j Jorgensen and Ulla Blatt Laursen under a contract with COWiconsult. The section on Non-Governmental Organizations includes con'ributions from John Hontelez, Mara Silina, Martin Kaspar, and Przem Czajkowski. The principal editor was Frances Cairp;ross. Many others provided helpful comments and contributions. Brendan Gillespie (OECD) and Anna Bramwell (EU Commiss;on) provided major inputs; and valuable advice was received from members of the Task Force, Expert Group, and others, in particular Alexander Avertchenkov, Dan Beardsley, Thomas Becker, Ruth Bell, Quincy Berengere, Lars Bjorkbom, Jan Boehringer, Anders Boheman, Philippe Bourdeau, Philippe Bourel de la Ronciere, Ralph Brieskorn, Giuseppe Cassini, Guy Clausse, Andrzej Czyz, Andriy Demydenko, Jeremy Eppel, Hermann Escher, Andrea Fennesz, Duncan Fisher, Richard Fort, Alexander Goudyma, Ronald Greenberg, Hugo Haider, Hans-Joachim Hermann, Theresa Herzog-Zimmermann, Paul Hofseth, Adam Isaacs, Oreola Ivanova, Jonathan Klavens, Miklos Koloszar, Zsuzsa Lehoczki, Kurt Lietzmann, Thomas H. Litscher, Bill Long, MAns Lonnroth, Ralph Luken. Timo Makela, Sheila McKinley, Alexander Meizer, Brian K. Muehling, Branimir Natov, Marek Novakowski, David W. Pearce, Grzegorz Peszko, Istvan Pomazi, Tue Rohrsted, Theodore E. Russell, Wilhelm Schmid, Karsten Skov, David Stanners, Daniel Stauffacher, Jernej Stritih, Ulf Svid6n, Josue Tanaka, Stanislaw Tarkowski, Daniel Thompson, Jan Thompson, Istvan Tokes, Hubert Menaida van Schouwenburg, Luis Veiga da Cunha, Ulla Weigelt, Henry Wyes, Harvey Yakowitz, Andre Yatchinovsky, and Anthony Zarnparutti. Valuable advice was received from colleagues in the World Bank, including especially Wilfried Thalwitz, Anil Sood, Marcelo Selowsky, Anand K. Seth, Robin Bates, Kathleen Stephenson, Anders Halidin, Helmut Schreiber, Bilal Rahill, Stephen Lintner, Nicole Glineur, Piotr Wilczynski, Peter Whitford, Mark Kosmo. Laszlo Lovei and David Wheeler were Peer Reviewers. The Action Programme and the many related administrative tasks depended criticalh, n the tireless assistance of Lucie A. Albert, Johnson Appavoo, Nathalie Lenoble (World Bank), and Anne Cariou and Leonora Lynch (OECD). A full draft of this report was discussed with Central and Eastern European governments in the course of a series of missions in March/April 1993. These missions were led by representatives from Austria, Denmark, Germany, The Netherlands, Sweden and the United Kingdom. Many thanks go to Jurgen Gneveckow, Lousewies van der Laan, and Bo Libert for their efforts to obtain translations of the Action Programme; to Stanislaw Sitnicki, Alexander Juras and Colin Woodard at the Regional Environment Center for organizing the translation and dissemination in Eastern Europe; and to all the countries and institutions sponsoring the translation and dissemination process. The EAP is being translated into 19 Central and Eastern European langt ages. The work program and the many studies leading up to this Environmental Action Programme for Central and Eastern Europe (EAP) were first described in a document entitled "Setting Environmental Priorities in Central and Eastern Europe." Many of the issues raised in that document are taken up in greater detail in this report and in the technical reports issued separately. ENVIRONMENT FOR EUROPE ENVIRONMCENTAL ACTION PROGRAMME FOR CENTRAL AND EASTERN EUROPE ABRIDGED VERSION Contents Page No. PREFACE EXECUTIVE SIMMARY (as adopted at the Ministerial Conference) ................. i I. INTRODUCTION: WHY AN ENVIRONMENTAL ACTION PROGRAMME? .... I Objectives ................................................ 1 The high costs of environmental cleanup ............................... 2 International assistance . .......................................... 2 The need to set priorities . ......................................... 3 Why a regional approach? . ....................................... 3 II. HOW TO SET PRIORITIES. 5 The costs of environmental damage. 5 Environmental damage and human health. 6 The main pollution problems. 7 Air quality. 8 Water quality .12 Solid and hazardous waste .14 Nuclear issues .15 Degradation of ecosystems and biodiversity conservation .15 Responding to the problem: Finding a balance between policies and investments .16 Selecting priorities .16 What is the problem, and how should it be solved? .16 First look at economic policies .18 Environmental policies and investments .18 Conclusions .18 MH. POLICY REFORS .............. ........21 The Effects of Economic Change on the Environmnnt .21 How will the economic transformation of Central and Eastern Europe affect the environment? .22 Removing energy subsidies .23 Other sectoral policies .25 Fiscal policies ..................................... 26 Scenario analysis ..................................... 26 Better Environmental Policies .................................... 28 Pollution charges. ................................... 31 Financing environmental expenditures .................... ... ... .. . 33 Envirounental standards .................................... 35 Enforcement .................................... 36 IV. BUILDING BETTER INSTITUTIONS . .............................. 38 A Commitment to the Environment .................................. 38 Legislative and institutional reform ................................... 38 Environmental legislation .................................... 38 Institutional adjustments ..................................... 39 Environmental monitoring and information systems ........... .............. 42 Constraints on policy and project inplementation ............ .............. 43 The legacy of central planning ................................. 43 The Western approach ...................................... 45 Local participation ........................................ 45 Management capacity, training and education ............. ............... 46 Developing new partnerships and involving the private sector ..47 Involving the private sector ..49 V. PRIORITIES FOR ENVIRONMENTAL EXPENDITURE .51 "Win-win" investments and worker training .52 Operation, maintenance and repair (OMR) .53 Immeuaiate priorities for public investment .55 Investments to deal with urgent problems specific to different countries .55 Low-cost measures to address longer term environmental problems .57 Financing environmental investments ...... ........................... 58 VI. TRANSBOUNDARY ISSUES: REGIONAL AND GLOBAL CONCERNS .62 Regional Concerns: Air Pollution .62 Policies to reduce transboundary emissions .64 Combining local and transboundary concerns .66 Regional Concerns: Water Pollution .69 Wetland management .70 Global Issues .71 Phaseout of Ozone Depleting Substances .71 Reduction of Greenhouse Gases .72 Conservation of bio-diversity .73 Management of Toxic Chemicals and Hazardous Wastes .74 Nuc!ear issues .74 Conclusions: The Key Messages .75 VII. PRINCIPAL RECOMMIENDATIONS ............................... 77 What governments must do ....................................... 78 What enterprises must do ......................................... 79 What government must do to address longer-term environmental problems .... ...... 79 Transboundary issues ........................................... 79 Reforming Institutions ........................................... 81 Implementation ............. .................................. 82 Boxes 1.1 Envirormental Investment Expenditures in Poland ..................... 3 1.2 Foliow-up of the Lucerne Ministerial Conference ..................... 4 2.1 Developing Country-Specific Priorities (Albania) ..................... 8 2.2 Portraits of different kinds of "Hot Spots" .................. 9 2.3 Nitrates in drinking water in Romania ........... .. ............... 14 2.4 Cost savings for one medium-sized town ........... .. .............. 17 2.5 Airborne Dust or Gases -- Which is more important? ........ ........... 20 3.1 Short-term threats to the environment in Russia during the transition ... ...... 22 3.2 Privatization and Environmental Liability .......... .. .............. 24 3.3 Reducing emissions from coal-burning ........... .. ............... 28 3.4 Finding the most efficient way to reduce environmental pollution .... ....... 30 3.5 Financing environmental protection in the Russian Federation ........ ..... 32 3.6 National environmental funds ................ .................. 34 3.7 Environmental standards in the European Union ...................... 36 4.1 Key features of National Environmental Action Plans ........ ........... 39 4.2 The French River Basin Agencies: An example of regional water management ... 41 4.3 The project cycle under Central Planning ..44 4.4 Proposed Project Fact Sheet ..46 4.5 Cost-effective wastewater management in a river basin: The Nitra River .. 48 4.6 The Regional Environmental Center for Central and Eastern Europe (REC) .. 49 5.1 Dealing with large, old industrial plants ..53 5.2 The diversity of pollution problems and remedies - an overview . .54 5.3 Checklist for cost-effective municipal wastewater investments . . 57 5.4 Biodiversity conservation: Short-term investment examples ... .. 59 6.1 The environmental damage caused by acid emissions . . ... 63 6.2 Low cost options to reduce sulfur dioxide pollution . . ... 64 6.3 Black Triangle Environmental Prograrnme . .. .. 66 6.4 Mechanisms to share the ourden of reducing transboundary pollution ..... 67 6.5 Environmental Programs dealing with international waters . . . .. 68 6.6 Wastewater investments which meet domestic and transboundary objectives .. 69 6.7 The Polish Debt-for-Environment Swap ..71 6.8 ODS Phaseout activities ..73 6.9 Global Environmer,t Facility Biodiversity Projects in Central Europe . .75 Annex Boxes A6. 1 Environmental improvements in the non-ferrous metals industry A6.2 Enviromnmental investments in the iron and steel sector- A6.3 The impact of industrial pollution on munmicipal wastewater and sludge treatment A6.4 Rural waLer supplies A6.5 The application of natural treatment systems: Szuigy, Hungary A6.6 Different types of wastewater treatment A6.7 Priorities and alternative technologies: Case study of an overloaded treatmnent plant A6.8 Environmental investments in the paper and pulp sector A6.9 Environmental investments in the chemicals sector Text Figres 2.1 Fuel use for households, commeice and services (percent shares in 1988) .. ..10 2.2 Fuel use for electricity (percent shares %~r public supply in 1988).......10 2.3 Number of passenger cars per 1000 persons (1990) .... . .......... . . . . 12 2.4 Average annual percentage growth in numbers of cars per 1000 pe.sons (1980-90) 12 6.1 Total emissions of S02 and NO,, from Central and South-Eastern Europe ....... 65 6.2 Total emissions of sulfur dioxide and nitrogen oxides from Russia .... ....... 65 6.3 Total emissions c' SO2 and NO,, from other countries of the former Soviet Union . 65 6.4 Emissions of clrion dioxide in Central and Eastern Europe ............... 72 6.5 Primary energy use in Central and Eastern Europe ......... ........... 74 Annex Figures A3. I Emissions of rarticulates in Hungary and Russia under alternative reform scenarios A3.2 71 issions of particulates in Romania and Ukraine under alternative env. standards A3.3 Emissions of sulfur dioxide in Hungary and Belarus A3.4 Emissions of NO,, in Hungary and Ukraine A3.5 Emissions of lead ir. Bulgaria and Romania A3.6 Emissions of cadmium in Belarus, Lithuania and Romania A3.7 Emissions of BOD in Russia A3.8 Particulate Emissions in Poland by Type of Source A3.9 SO2 Emissions in Czech & Slovak Republics by Type of Source A3. 10 Lead Emissions in Bulgaria by Type of Source Text Tables 2.1 Minimum Damage Costs from pollution emitted by high and low stacks ....... 11 5.1 Priorities for pollution control ................................. 56 Annex Tables A1.1 Major industrial plants located in pollution "hot spots" Annexes 1 Summary of human health problems and major industrial plants in pollution "hot-spots" 2 Occupational Health 3 Modelling the impact of economic reform and industrial restructuring 4 Why raise energy prices? 5 Environmental Standards 6 Investment priority detai,s in different sectors; Low-cost environmental investments Maps 1 Concentration of total dust (RIVM/IBRD 25296) 2 Total Deposition of Cadmium (RIVM/IBRD 25305) 3 Concentration of Sulfur Dioxide (RIVM/IBRD 25297) 4 Concentration of Sulfur Dioxide in 2010 (RIVM/IBRD 25298) 5 Locations of large point sources of SO2 emissions in the CEI region (IIASA) 6 Regional SO2 emissiors from all sources in the CEI region (IIASA) 7 Leaching of nitrate in agricultural soils (RIVM/IBRD 25312) 8 Exceedance of Critical Loads for acidity (RIVM/IBRD 25300) 9 Exceedance of Critical Loads for acidity in 2010 (RIVM/IBRD 25301-25302) 10 Aluminum concentrations in acidified soils (RIVM/IBRD 25304) Technical Reports (issuec separately) This report represents a synthesis of a two-year process involving numerous studies, detailed technical reports on the most important topics, joint meetings, workshops and international conferences. Following is a list of the major reports and conferences: Enviromnent and Health in Central and Eastern Europe Monograph evaluating the influence of environmental pollution on human health in ,omparison with other doterminants of health in 11 Central and Easterr European countries. The document summarizes the current knowledge about locations in the region where environmental pollution is known to have influeilced human health, and identifies the principal types of environmental exposure which Tfecting human health and could be subject to remediation through concerted ei.. ;irnmental action. A draft of the report, which was prepared for the World Bank, was discussed at a high- level meeting of health and environment officials and was sponsored by WHO, UNEP and the World Bank at t'he WHO Regional Office for Europe in Copenhagen (Denmark), March, 1993. Environmental Liability and Privatization in Central aMd Eastern Europe Book analyzing the legal and economic issues associated with questions of environmental liability in the privatization proces.. The document, prepared by the World Bank, is based on in international conference on privatization, foreign diruct investment and environmental liability hosted by the Polish Ministry of Environmnental Protection, Natural Resources and Forestry in Warsaw in May, 1992. The Conference, which was organized jointly by The World Bank, OECD and EBRD, brought together ministers, deputy ministers and other high-level officials responsible for privatization or the environrnent in 13 Central and Eastern European countries, as well as representatives from the private sector and the international conmmunity. Foreign Direct Investment and Environment in Central and Eastern Europe: A Survey Survey of large European and North American corporations to assess the importance they attach to environmental issues in deciding whether to invest in Central and Eastern Europe. Preliminary results of the survey, which was carried out by The World Bank and OECD, were discussed at the Conference on Privatiza.ion, Foreign Direct Investment and Environmental Liability in Warsaw (Poland) in May, 1992. Sectoral and Local Environmental Expenditure Priorities Extensive report analyzing expenditure options which offer the most cost-effective immediate environmental improvements in particular sectors and urban locations. The report contains an inventory of polluting plants in 12 Central and Eastern European countries and is based on detailed case studies in the following sectors: Power and district heating, refineries and petrochemicals, inorganic chemicals, organic chemicals, iron and steel, non-ferrous metals, pulp, small boilers and households. The report is scheduled to be discussed at a forthcOming international workshop. Municipal Wastewater Treatment in Central and Eastern Europe: Present Situation and Cost-Effective Development Strategies Report evaluating municipal wastewater treatment in Poland, the Czech Republic, the Slovak Republic, Hungary and Bulgaria. Data were assembled for 362 municipalities with a total population of 35 million (about half the total population of the five countries, and 70% of the total urban population). The data cover all towns with populations greater than 25,000 and in Poland some additional towns greater than 10,000. The data from 1ll five countries were assembled into a single computerized data base which was combined with an analysis of different technologies to evaluate the present status in the countries and to determine the cost of different approaches to upgrading existing wastewater treatment facilities. The report was discussed at a workshop at the International Institut_ for Applied Systems Analysis in Laxenburg (Austria) in March, 1993, and was attended by experts from the five countries studied. Scenarios for Economy and Environment in Central and Eastern Europe Report analyzing five specific scenarios of economic restructuring and the resulting environmental effects. The document reviews in particular the implications for environmental policy and different requirements for capital renewal. The air pollution emissions of the different scenarios are translated into Europe-wide maps of pollutant concentration and deposition levels. The report was discussed in detail during a workshop on economic restructuring and environment organized by the Government of Hungary in cooperation with UN/ECE and OECD and with the participation of the World Bank and the Netherlands Institute of Public Health and the Environment (RIVM) in March, 1993 in Budapest (hlungary). The workshop was attended by experts from 18 countries. Energy and Enviro'nient in European Economies in Transition - Priorities and Opportunities for Co-operation and Integration Proceedings of an OECD/IEA Conference heid in June, 1992 in Prague. The Conference report discusses the need for integrated policies for energy and environment that will address the major problems in both sectors effectively and efficiently. The report describes specific actions for policy integration, including: market-based energy pricing; actions to overcome barriers to energy efficiency; integrated energy-environment strategy development; inter-ministerial cooperation; and innovative funding mechanisms. The Conference brought together representatives of Central and Eastern European governments, of OECD Member countries and of international organizations, and executives from private companies and public utilities. Alternative Policy Instruments for the Control of Air Pollution - Case Study of Poland Report analyzing the potential effectiveness and efficiency of alternative policy instruments to control air pollution in Poland. The work was supported by the Polish Ministry of Environmental Protection, Natural Resources and Forestry (MOSZNiL) and was carried out jointly by Polish and international experts. The analysis focused on the likely gains to be rv.'ieved from applying economic instruments to control emissions of sulfur dioxi:e, nitrogen oxides, and particulate matter (i) at a national level, and (ii) in a specific geographical area (the city of Krakow). The results were presented and discussed at a workshop held in Warsaw in October, 1993. The workshop was organized by MOSZNiL and the World Bank and was attended by representatives of the environmental offices of most Polish provinces (Wojewodships), by provincial and national representatives of the state inspectorate of pollution control, as well as by Polish and international experts. Environmental Information Systems and Indicators: A Review of Selected Central and Eastern European Countries Report analyzing the collection and use of environmental information in Central and Eastern European countries, based on case studies carried out in Poland, Hungary, and the former Czech and Slovak Federal Republic. The report also presents key environmental indicators for these countries in the same comparable framework used by OECD Member countries. T hese country case studies and their recommendations were discussed by officials from central and eastern liuropean countries, OECD Member countries, and international organizations at a workshop held at OECD in December 1991. A similar monograph on environmental information systems and indicators in Belarus is also available. Taxation and Enviromnent in European Economies in Transition Report of an OECD workshop that examined the scope for reconciling fiscal and environmental policy objectives in economies in transition, including the use of taxes and charges on polluti( " and enviroamental damagc. The report includes case studies of Estonia, Hungary, k-oland, and the Russian Federation. The OECD workshop con,luded that, although a number of Central and Eastern i. ropean countries al,eady use environmental taxes, considerable scope remains to adapt and expand their use in the transition to a market economy. Economic Reform, Industrial Restructuring and the Environment This paper examines the relative contribution of supply and demand f;.ctors to prospective changes in emissions of key air and water pollutants in Centrai and Eastern European countries over the next 10-15 years. It develops a model of industrial growth and structural change to analyze the impact of various environmental policies as well as the environmental implicatiorns of broader economic factors including macroeconomic adjustment, market reforms, privatization and trade liberalization. World Bank, 1994 A number of additional reports are under preparation and will be issued and discussed in the period leading up to the next Ministerial Conference scbeduled at the end of 1995 in Sofiya, Bulgaria. Among these are the following: Agriculture and Environment in the Transition to a Market Economy Report based on an OECD Confer. nce held in September 1993 in Vilnius, Lithuania. The Conference brought together both agriculture and environment officials and expe. to discuss environmental problems related to agriculture and to consider ways for countries in transition to integrate their policies for agriculture, environment, and rural development, based on recent methods and experiences tried in OECD Member countries. Further Preparatory M; e: ngs In addition to the meetings at which the above reports were discussed, a number of other international workshops were organized to stimulate discussion and to generate consensus on some of the main elements in the Action Programme: Economic Instruments for Environmental Policies This meeting discussed the OECD Guidelines and Considerations for the Use of Economic Instruments in Environmental Policies. The meeting recognized that opportunities existed for the more effective application of economic instruments in transition countries, and that market-based instruments in combination with regulations could help integrate environmental considerations into the process of economic restructuring. The workshop was organized by OECD and UN!ECE in Geneva, Decernber, 1991 Environmental Policy and the Transition to a Market Economy in the Newly Independent States This seminar examined four key issues that unaerlie the Environmental Action Programmne for Central and Eastern Europe: economic restructuring and the environment (focusing on energy issues); privatization, foreign direct investment, and environmental liab'lity; resource pricing and economic instruments; and low-cost technological improvements in highly polluting industries. The seminar was held in Minsk (Belarus), December, 1992. It was hosted by the State Committee for Ecology of the Republic of Belarus and was organized by OECD. Environmental Action Programme for Central and Eastern Europe: Conference Summary i ENVIRONMENT FOR EUROPE ENVIRONMENTAL ACTION PROGRAMME FOR CENTRAL AND EASTERN EUROPE EXECUTIVE SUMMARY As adopted at the Ministerial Conferencea 28 April 1993 Introduction solutions. It is intended as a basis for each country in Central and Eastern Europe to set its own national The Environmental Action Programme (EAP) has environmental priorities, and to improve and promote been developed in response to a call by Ministers cooperation between and among Eastern and Western from east and west at their 1991 Conference, and in countries. the spirit of the United Nations Conference on The main constraints to implementation arise Envitonment and Development (UNCED). Despite from a general lack of financial and above all efforts by Central and Eastern European (CEE) institutional capacity rather than from issues that are countries to talKle environmental problems, specific to particular environmental problems or sometimes with international assistance, there are still potential solutions. Hence the most urgent problems a number of serious environmental problems which will only be solved if clear goals are established at require immediate and urgent action. the outset and the most efficient way to achieve each This Executive Summary presents an goal is identified. This appraisal of priorities, risks overview of the Action Programme and describes the and benefits is an essential prerequisite for a main features of the broad strategy and action sustainable development strategy which identifies framework that the Programme represents. This investments and policies in support of a socially and strategy is based on a "three-legg'd" approach of ecologically sound objectihe, thus avoiding the need policy reform, institutional strengthening and for costly remedies ex post. investment. The Action Programme illustrates a Some of the most significant environmental range of actions that could be taken to implement this improvements will be achieved through so-called strategic approach. The Programme concentrates on "win-win" policies and investments: these can be short-term, immediate action, but ensures that these justified entirely on economic grounds, but also entail actions are consistent with longer-term economic, substantial environmental benefits. Improvements in social and environmental objectives. energy and other resource efficiency are good examples. Why an Environmental Action Programme? The major environmental problems - Criteria for The resources availtble for environmental setting priorities improvement in the countries of Central and Eastern Europe, including the Forn-ier Soviet Union, will be Priorities should reflect the urgency and importance severely constrained over the next 5-10 years. The of environmental concerns. Setting environmental c.sts of meeting some environmental objectives will, priorities involves making difficult choices. however, be very high. The Environmental Action The damage to human health caused by poor Programme provides a framework and gnide for environrrental quality is the first concern in the identifying the highest priority problems; and for region -- as was the case in the West when major developing realistic, efficient and cost-effective environmental health threats were fiist addressed. a/ The Executive Summary has been left unchanged, whereas the main text has been edited and updated since the Ministerial Conference. ii Environmental Action Programme for Central and Eastern Europe: Conference Summnary Initial evidence suggests that the following types of different technologies, management, institutions, and environmental pollution have affected human health policy approaches applied. An important question (and also causing economic damage) in particular that should be asked is: "How much environmental areas in CEE: improvement can be achieved at different costs?" The answer will provide the flexibility to achieve the * Lead in Air and Soil from lead and zinc best result for the available resources. smelters and from transport; Establishing priorities involves a combination * Airborne Dust from household furnaces, of the following complementary measures: small-scale enterprises, power and heating plants, metallurgical and other large plants; * bettereconomicandenvironmentalpolicies; * Sulfur Dioxide and other Gases, especially * expenditures that are carefully targeted to in combination with dust. projects with high benefit to cost ratios; and a institutional development and capacity Other important health impacts arise from: building, including training, education, and exchange programs. * Nitrates in water from inadequately maintained/designed feed lots and agricultural Thcse are describeC in the following sections. enterprises, inappropriate fertilizer application, and rural septic tanks; Policy Reforms * Contaminants in food and water, especially where heavy metals or toxic chemicals threaten Economic Policies drinking water supplies either directly or through poor disposal of hazardous/nuclear waste. The transition from central planning to a market economy should not only improve the countries' But human htalth is not the only criterion to economic performance in the longer term, but will set priorities. In certain areas, the following are of contribute to environmental improvements by major significance: penalizing the massive waste of resources -- and the resulting pollution -- which characterized production * productivity losses caused by damage or in the past. Among the key factors that can bring destruction of physical capital and natural resources; about economic and environmental improvements are and restrictions on access by enterprises to government * the deterioration of or threa: of irreversible money ("hard budget constraint"), and removal of damage to biodiversity in general, and in particular subsidies on natural resources such as energy, to wetlands (lakes, reservoirs, rivers), grasslands, minerals, or water. Many CEE countries have coastal and marine ecosystems, forests and mountain already made major strides in reducing energy habitats. subsidies. These efforts should be -- and are being - - continued. Finally, priority might also be attached to Declining economic activity has brought low-cost/high gain measures to address issues of substantial reductions in emissions. Market reforms growing importance in the medium-to-long term and should allow these environmental improvements to be where there may be a long lead time to effect sustained or extended over the next decade by rhanges (e.g., transport). promoting a shift towards less resource-intensive and Each CEE country must decide how the cleaner activities and technologies. As the industrial resources can be best allocated to remedy the capital stock is renewed, emissions of most air problems that it regards as having the greatest pollutants -- other than those associated with traffic - priority, bearing in mind that the above problems - can be kept stable or even reduced until 2010 even nave been generally recognized as the most serious with quite rapid economic growth. However, concerns in Central and Eastern Europe. emissions of water pollutants will be less affected by The scarcity of resources does not just imply industrial restructuring because of the dominant that environmental investments should be scaled contribution of agriculture, households and services, down. Rather, the benefits of broad economic so that the focus of attention will shift from air to policies should be captured, and a judicious mix of water in the longer term. Environmental Action Programme for Central and Eastern Europe: Conference Summary iii How environmental priorities may evolve over time The analysis in this report highlights air pollution, The effects of industrial change on the disposal of especially that caused by particulates, as the solid wastes is mixed, since the total volume of highest environmental priority for Central and such wastes will decline -- primarily because Eastern Europe. However, environmental mining will decline -- but there are likely to be priorities will change as the pc icies, structural increasing problems in dealing with hazardous changes and investments discussed in this report wastes unless low waste technologies are rapidly mitigate some environmental problems and .nake adopted. others worse. As living standards begin to recover, both the size Preliminary analysis suggests that air pollution will and use of the automobile fleet are likely to grow dramatically improve as a consequence of higher quickly. The result will be increasing energy prices, the fall in the output of the photochemical smog and ozone exposure. The metallurgical sector, and investment in new volume of municipal waste will also rise rapidly as capital equipment with better environmental consumers begin to expect packaging standards controls. For water pollution, the prospect is equivalent to those in Western Europe. much less rosy. Over three quarters of BOD emissions come from municipal (household) The benefits attached to reducing environmental sources, so that general progress in raising the damage w%ill also alter. As the worst of the health dissolved oxygen level of rivers depends upon problems associated with air pollution are better municipal sewage treatment, which will be resolved, the amenity benefits of a clean t;oo costly for national and local governments to environment will gradually become more afford for some time to come. Discharges of important. This will focus attention on improving heavy metals and chemical pollutants are largely water quality for recreational purposes (iLe. an industrial problem whose solution depends on sewage treatment), and on better visibility (i.e. industrial investments in suitable pre-treatment vehicle emissions). methods. Such investments will not necessarily be undertaken in response to simple policy These considerations suggest that the primary changes such as higher energy prices or even focus of environmental policy will shift over the pollution charges. next decade from air pollution from stationary sources towards water pollution from both The projections discussed in this report suggest industrial and municipal sources, vehicle that the output of the food processing, wood emissions and the management of solid and products, paper and chemical industries -- all hazardous wastes. significant sources of water pollution -- will grow much faster than that of the building materials, In chapters Ill-VI, the EAP identifies the most metallurgy and electricity industries. The balance appropriate short-term measures in light of of industrial emissions will, therefore, shift expected longer-term developments. towards water pollution and away from air pollution. In certain instances, it may be appropriate to policies is a key factor in environmental provide incentives for environmental investments by improvement. the private sector, such as those that have the greatest potential to reduce major threats to human health or Environmental Policies natural ecosystems. However, environmental invest.ments that are made in the industrial and energy Targeted environmental policies, including a sectors should be consistent with least cost planning judicious mix of regulations and economic and policy objectives, and private sector decision- instruments, will be required to ensure that the making. More generally, the integration of potential benefits of economic restructuring are fully environmental requirements in the design of oral realized. For example, while removal of energy iv Environmental Action Programme for Central and Eastern Europe: Conference Summary price subsidies will bring about a reduction in energy Old and new enterprises use and hence pollution levels, pollution charges can complement these policies by promoting the use of Conflict between economic, social and environmental cleaner fuels and technologies. considerations is inevitable, especially when the To achieve the most cost-effective use of resources available to mitigate the social or resources, economic instruments, such as charges and environmental consequences are so limited. Some taxes, should be applied where appropriate. Existing old and highly-polluting plants will be allowed to CEE systems of pollution charges can be developed continue operating because of the large social costs of further to provide an effective incentive for sound closure. Even so, it is possible to insist that such environmental practices. There is scope for large plants improve their environmental performance savings in achieving environmental objectives by without committing any significant amount of applying simple market type approaches which are investment. realistic even in the current economic and Large gains can often be achieved by simple institutional situation. There is also considerable "good housekeeping" measures --better maintenance, scope for reconciling environmental and fiscal repairing leaks, installing better controls, insisting on policies. stricter standards of plant and process management. These are all highly cost-effective "win-win" actions Regulatory measures which will improve the economic results of enterprises as well as lessen the environmental As far as environmental regulations are damage that they cause. Such small-scale actions concerned -- for instance to control emissions of underpin the environmental improvements from heavy metals and toxic chemicals -- CEE economic policy transformation. They are essential governments should introduce a framework of because much of the large-scale introduction of standards Lnd requirements such as, where cleaner technolegies in different industrial sectors appropriate, that adopted within the EC or an may not occur until new markets for the different equivalent phased system like those in effect in the products have been identified, and the economic United States, Canada, or other OECD countries. viability of specific enterprises is assured. Many internationally accepted standards are being Thus, it is crucial that governments not direct reviewed in light of experience with the aim of all of their resources -- human as well as financial -- improving their efficiency. The framework of towards new investments or enterprises, since standards adopted by CEE countries should provide remarkable improvements can be made if the for the phased implementation of increasingly stricter managers of old plants are put under pressure to emission limits which, over a 10-20 year period, make continuous improvements and are rewarded would approach the internationally recognized appropriately for above average performance. standards that will be in effect at that time. Evidence suggests that the greatest contribution to Enterprises should be given a well-defined period to achieving a continuous decline in total emissions in comply with new standards which should be strictly the short to medium term is likely to come from enforced. For this reason, both economic improving the environmental performance of old instruments and regulatory measures should be plants which continue to operate. Moreover, to accompanied by strong monitoring and institutional achieve conditions equivalent to those in Western enforcement capacity to ensure their effective Europe, emissions per unit of output equivalent to implementation. those obtained by applying Best Available Ambient (i.e., immission) standards should be Technology (BAT) would, for the purpose of used as part of a decision framework to guide policy immediate improvement, only be required in some of making at the local level. Appropriately set, ambient the worst "hot spots" and only for some pollutants. standards reflect environmental and economic sustainability criteria. In addition, the efforts of Privatization several CEE countries to apply biodiversity conservation standards should be recognized and Ministries of Environment should work with expanded. Ministries of Finance, Industry and Privatization, as well as Health and Social Security, to ensure that Environmental Action Programme for Central and Eastern Europe: Conference Summary v environmental considerations are built into decisions activity picks up and viable enterprises can afford to about which plants or enterprises in the public sector invest in new technology. should be closed and which should be allowed to In the short term, however, public investment continue to operate. By affecting the pattern of is warranted: closures and the conditions which must be met before plants receive assistance to support their continued * to speed up the process of environmental operation, the environmental authorities can have a improvement where there are social and economic significant impact on the damage caused by old plants constraints (heavily polluting enterprises are not at a low cost. closed, households cannot quickly respond to Privatization can assist the changes promoted increased energy prices and cannot easily shift from by market reform. Governments can both expedite coal to cleaner energy sources, etc.); and privatization and facilitate environmental progress by 0 to begin to address environmental problems establishing clear rules assigning liability for past that will persist after the transition to a market environmental damage, and by holding the new economy (e.g., air emissions from mobile sources). ownership of enterprises accountable for all current emissions. In many cases, the government must be Environmental investments should only be willing to assume responsibility for past damage, but carried out if the following three categories of there are a variety of ways of structuring that expenditures are adequately addressed: recurrent cost responsibility to provide protection both for the financing for Operation and maintenance (especially government and for the environment. Environmental at the municipal level), environmentally beneficial audits -- which can be carried out without causing expenditures which can be justified on economic significant delay -- can be conducted to separate past grounds, and institution building: from on-going pollution. Where privatized enterprises are out of compliance, the enforcement of * OPERATION, MAINTENANCE, REPAIR, AND stricter environmental standards should be carefully SELECTED REHABILITATION OF EXISTING PUBLIC phased in. ENVIRONMENTAL SERVICES. Safe drinking water, The transition from central planning to collection and disposal of municipal waste, well- markets may result in irreversible effects on the rich functioning public transportation systems, and the biological and landscape diversity in part of Central monitoring of the disposal of hazardous, toxic and and Eastern Europe. CEE countries could be nuclear wastes are all vital concerns. These require supported through existing international conventions funds to cover recurrent costs; but they should and agreements in their efforts to identify networks generally not, in the short run, require major new of areas of high natural value, to develop policy for capital investments. protection and sustainable use within the transition * "WIN-WIN" INVESTMENTS. Small process, and to ensure a sustainable, environmentally- investments (often less than $0.5 million) in energy sound use of privatized land. Short-term assistance and water conservation -- metering, reducing in the provision of extension services in agriculture leakages --, low-input and low-waste technologies, and forestry, legislation and integrated planning are and above all expenditures on "good industrial required to prevent the kinds of develon,ments that housekeeping" and minor plant improvements which have occurred in Western Europe. reduce spills, leaks and material use. These are all investments which are justified on economic and Immediate investment priorities financial grounds alone, but which also have major environmental benefits. In the long term, market reform -- especially * INSTITUTION BUILDING. Different leveis of industrial restructuring -- in combination with government need to continue to build up a solid appropriate environmental measures, will take care of financial and tax base to ensure the availability of a large part of the emissions causing health and funds for meeting recurrent costs; industrial economic damage in the region. This will occur as managers should be trained in better management alternative sources of employment are found for practices; and institutions need to be developed that workers in economically inefficient and polluting can in the future make well-informed decisions such industries which need to be closed, and as economic as on water-related investments in a river basin vi Environmental Action Programme for Central and Eastern Europe: Conference Summary framework. Efforts should also continue in ecosystems, and the development of systems to promoting environmental topics in school education, collect, interpret and disseminate environmental data and in supporting worker training programs. all fall into this category. Environmental Investments Regional and global concerns Once these measures are assured, the priority The central element of a strategy to address regional categories for short-term domestic environmental or global problems of air and water pollution must be investments are: to build, as far as possible, on the overlap between the local and the transboundary impacts of measures 0 IMMEDIATEINVESTMENTSTOADDRESSTHE to reduce emissions. MOST SERIOUS HEALTH PROBLEMS. In areas with poor air quality, the initial priorities should be better Transboundary pollution dust controls for non-ferrous (lead, zinc, copper, aluminum) smelters and steel plants, and the use of AIR. Market reforms and targeted policies or cost-effective cleaner fuels in district heating plants investments to meet domestic environmental goals and households. With regard to water quality, the will lead to large reductions in emissions of regional priorities are pre-treatment of industrial wastewater, and global air pollutants. In considering further where heavy metals or toxic chemicals threaten the reductions in the CEE countries to meet regional and quality of ground or surface waters, and measures to global concerns, donors may wish to contribute reduce excessive levels of nitrates and towards measures to accelerate the necessary microbiological contamination in rural drinking water reductions. There might be scope for mutually supplies. For hazardous wastes, the priority must be beneficial agreements which could result in larger to ensure that leachates from disposal sites do not reductions in environmental damage than could be contaminate ground or surface water sources. obtained by spending the same resources * MEASURES TO DEAL WITH PROBLEMS domestically. SPECIFIC TO DIFFERENT COUNTRIES. These include wastewater treatment to protect valuable coastal, WATER. Maximizing the joint domestic and ecological and tourist resources, the phased transboundary benefit of improving water quality completion of incomplete wastewater treatment plants implies that resources need to be directed to reducing where appropriate and where this will have the most the flows of nutrients and emissions of harmful impact on water quality, and programs to prevent substances from agricultural, domestic and industrial irreversible damage to aind loss of productivity of sources (including dumping sites for radioactive important ecosystems at the domestic and waste) to bring about the overall reduction of transboundary levels. contaminants in coastal and estuarial locations. The * SUPPORT TO REINFORCE AND ACCELERATE Baltic Sea Environmental Programme to a large ENVIRONMENTAL INVESTMENTS BY ENTERPRISES IN extent reflects this philosophy. (From a domestic RESPONSE TO ENVIRONMENTAL POLICIES, such as for perspective, wastewater investments should focus on the reduction and treatment of saline water and other up-. ream areas.) discharges by mines, industrial wastewater treatment in pulp, textile, metallurgical and chemical plants, Global issues and for measures to reduce discharges of toxic materials from chemical and petrochemical plants. CEE countries have committed themselves to * Low COST MEASURES TO ADDRESS LONG- addressing acidification, global warming, the TERM ENVIRONMENTAL PRIORITIES where prompt depletion of the ozone layer and other regional and action can avoid the need to spend much larger sums global environmental problems in the co)ntext of the in the future. Improved transport management, relevant conventions, protocols and other forms of phasing out leaded gasoline and reducing vehicle international agreements. While action to meet these emissions, formulating and applying practices for commitments will continue well beyond the horizon sustainable agriculture and tourism, applied research of the Environmental Action Programme, as part of on the protection of threatened species and the EAP's policy reform and institutional and Environmental Action Programme for Central and Eastern Europe: Conference Summary vii investment programs, CEE countries may need to much more careful attention to the termns of reference take selected measures which go beyond those they for studies to ensure that the resulting proposals meet would take as part of economic transformation. clear objectives and address the financial and With regard to the phaseout of Ozone institutional constraints. Depleting Substances (ODS), they should, for example, focus on the aerosol and flexible foam Implementation sectors where ODS use can be eliminated at low cost, and prepare national recovery/reclamation/recycling The Action Programme establishes a partnership strategies. They should review national legislation between Eastern and Western countries. While the and strengthen institutional and technical capacity and responsibility for projects, policies and institutional measures in light of, for example, the Convention on improvements lies with CEE countries, Western Biological Diversity and the Basel Convention. governments and international institutions would provide technical assistance to support the policy and Institutional prerequisites to support policies and institutional reforms, and contribute toward the investments implementation of priority projects. The various partners must re-examine their policies and programs Experience in Western countries shows that in light of the Action Programme. Governments -- successful environmental policy requires the explicit not just environment ministries -- should actively commitment of the whole government, as well as the support this process. Inter-ministerial task forces cooperation of the independent sectors, and an open may be useful instruments for this purpose. approach to setting priorities and making choices. One of the principal challenges in The enthusiasm and expertise of non-governmental implementing the EAP is to find the best ways to organizations should be mobilized to contribute to the channel financial resources to, and to implement the successful implementation of environmental smaller-scale activities that can be carried out in the programs, particularly through close monitoring of short term, and to identify viable larger projects. their implementation. There are three elements to this approach. The greatest contribution to improved environmental management is likely to come from 1. A process for identifying priority actions strengthening local and regional institutions within which links the threats from the exposure of countries -- in particular, improving their capacity for populations or ecosystems to pollutants with identifying priorities, developing policy, ensuring alternative mitigation strategies and their costs. environmental compliance, and also for operating National environmental action programs will need to financial systems. National environmental authorities identify the problems, their impacts, and alternative should place more emphasis on policy coordination strategies leading to policy, institutional and and create task-oriented teams to work on priority expenditure actions at specific locations where there issues. Substantial savings are possible by making is a clear case for urgent environmental expenditures. environmental decisions at the level of river basins or The =ecessary calculations and analyses are not easy, air sheds, but this requires institutions that integrate and there are generally no simple relationships the different local and sectoral interests. between sources of environmental pollution and Studies for project preparation and industrial environmer,tal damage. However, in deciding on reviews need to be re-thought. They must focus on particular environmental actions, implicit assumptions those areas where scarce investment resources can are made in any case. provide the greatest benefits rather than offering pre- 2. Mechanisms to ensure that actions packaged recommendations based on conventional requiring modest expenditures which can bring Western technologies. In particular, far more effort substantial environmental improvements are speedily should go into project identification, rather than identified and implemented. Some CEE countries project preparation. Substantial local participation is have already launched programs of rapid essential both to formulate advice that can be environmental reviews, or audits, in different sectors. implemented and to improve local capacity to achieve Such reviews are essential steps to develop better environmental performance from existing recommendations for low cost environmental facilities. rhese changes in approach will require improvements. The small expenditures could be viii Environmental Action Programme for Central and Eastern Europe: Conference Summary financed through national and/or local pollution other preparatory expenditures. However, good abatement funds. External agencies could contribute feasibility studies should address alternative strategies to such a fund which would generally make financing and the phasing of investments. available in the form of loans at normal real rates of interest. In addition, grants could be made available Project Preparation Framework separately where "win-win" investments are not sufficient to remedy the most urgent environmental Discussions have been initiated to reinforce the problems. Again, some countries are already partnership under the Action Programme through a pursuing these ideas in practice. "Project Preparation Framework." This would 3. A framework for financing larger provide the necessary initial funding to help identify investments (typically through loans) which gives high priority environmental investments in particular emphasis to "win-win" opportunities but accordance with the Action Programme and to which can be combined with public funding to meet advance such proposals rapidly to the stage where high priority environmental goals that cannot be they can be financed either by CEE countries justified on economic grounds alone. Larger themselves, or through bilateral or multilateral investments of course require the full application of channels. the project-based approach with feasibility studies and Environmental Action Programme for Central and Eastern Europe: Conference Summary ix SUMMARY OF PRINCIPAL RECOMMENDATIONS * 3ase environmental priorities on a careful is in the interests of individual countries and comparison of costs and benefits. The resources Europe as a whole. By lowering the net cost of available for environmental improvements will be reducing transboundary flows, countries could severely constrained in Central and Eastern afford to act earlier or to adopt more stringent Europe for the next 5-10 years. It is essential reduction targets. that limited resources be applied to the most urgent problems first. * Clarify responsibility for past environmental damage. Uncertainty about who will be * Implement policies and invest in projects which responsible for past damage can discourage provide both economic and environmental foreign and domestic investment and can impede benefits. "Win-win" policies include removing the privatization process. For practical reasons, subsidies that encourage the excessive use of governments will have to bear most of the costs fossil fuels and water in industry, agriculture and of dealing with past emissions. Governments households. "Win-win" investments include must define clearly the environmental standards those in energy and water conservation, low- that new owners must meet and the period of input and low-waste technologies, and adjustment that will be permitted. expenditures on "good industrial housekeeping." 0 Set stwidards that are realistic and * Harness market forces for pollution control enforceable. Implement stricter standards over a wherever possible. Market-based instruments, 10-20 year period, and ensure that industries such as pollution charges, fuel taxes, and deposit comply with interim standards. refund schemes, can help achieve desired levels of environmental quality at much lower costs * Involve local people in setting priorities and in than traditional regulatory approaches. implementing solutions. Neither governments nor Regulatory instruments will still be needed to donor institutions are equipped to judge how local control emissions of some micro-pollutants such inhabitants value their environment. A as heavy metals -- particularly lead -- and toxic participatory approach is essential for the long- chemicals. run sustainability of environmental improvements. * Concentrate on local problems first. Many * More research, training, and exchange of people suffer health damage from exposure to information are needed to help decision-makers lead in air and soil, airborne dust and sulfur set sensible priorities. Research should focus on dioxide, from nitrates in drinking water and from the state of the environment in Central and contaminants in water and food. Solving these Eastern Europe. Much more information is also problems will do the most to improve health and needed on low-cost ways to reduce emissions of well-being. Measures to reduce emissions of air and water pollutants from non-ferrous metal pollutants in response to local concerns also smelters, iron and steel plants, chemical plants, should contribute to reducing transboundary and paper mills, and wastewater treatment plants and global emissions. on ways to conserve biodiversity. * Donor countries should consider providing * Finding, implementing, and financing solutions funding to accelerate measures to reduce will require building partnerships. Transferring emissions of transboundary and global emissions know-how and clean technologies will require in countries of Central and Eastern Europe. Such strong cooperation between East and West, funding would be particularly appropriate where between countries of Eastern and Central Europe, the marginal costs of reducing emissions are and within countries, between cities, institutions, lower in Central and Eastern Europe. Minimizing and enterprises. the net cost of meeting international agreements ECONOMIC INDICATORS FOR COUNTRIES OF CENTRAL AND EASTERN EUROPE GDP' Industrial production' Agricultural productionl Unemployment rate (%) Gross foreign debt (billion US$) 90 91 92 90 91 92 93 90 91 92 90 91 92 93 90 91 92 Albania -13.1 -27.1 -6.0 -7.5 40.0 .. .. -7.4 .. 13.0 8.6 .. 32.09 .. 0.4 0.5 0.6 Bulgaria -11.8 -16.7 -7.7 -16.3 -27.5 -22.0 -10.83 -6.7 -13.2 -12.9 1.7 10.2 15.6 15.77 10.0 11.4 13.0 Czech Republic 0.0 -16.0IO -8.0 -4.0 -25.0 -11.0 -6.06 -2.0 -14.010 . 1.0 4.0 3.0 3.07 8.110 9g310 9.510 Croatia -8.5 -23.4 -24.8 -11.3 -28.5 -14.6 -I.0 .. .. .. 9.8 15.4 17.8 17.76 .. 2.6 2.6 Estonia -3.6 -11.8 -32.0 -5.6 -9.5 -38.7 -37.84 -3.2 -20.8 -21.3 .. . 1. 1.5 3.27 . 0.4 Hungary -5.0 -11.9 -5.0 -10.5 -19.1 -9.8 -0.33 -4.0 -5.0 -23.0 1.7 8.5 12.2 13.07 21.3 22.7 21.4 Latvia -0.2 -3.5 -32.9 7.4 0.0 -35.1 -45.24 -17.2 -3.6 -13.0 .. .. 2.3 5.27 .. 0.8 Lithuania -5.0 -12.8 -35.0 0.3 -1.3 -56.9 -57.57 -11.5 -8.0 -30.0 .. .. 1.0 1.67 .. 1.0 Poland -11.6 -7.6 -1.0 -24.2 -14.0 4.2 8.84 -2.2 -0.9 -11.0 6.3 11.8 13.6 14.27 46.4 48.4 49.9 Romania -7.4 -13.0 -15.0 -17.4 -18.7 -21.8 -12.23 -3.0 -5.0 -9.2 .. 2.9 8.4 9.38 0.3 1.9 3.2 Russia 0.4 -9.0 -19.0 -0.1 -8.0 -18.8 -19.02 -3.6 4.7 -8.0 .. 0.1 0.8 1.06 38.0 67.0 77.7 Slovak Republic . . -16.0'o -6.0 . . -25.0 -13.0 0.02 . . -14.0/O -12.0 . . 12.0 10.0 12.07 . 9.31 9.510 Slovenia 3.4 -9.3 -6.5 -10.1 -12.4 -13.2 -6.94 1.0 -1.0 -17.0 4.7 10.1 13.3 14.16 .. 1.8 i.8 Ukraine -3.0 -10.0 -14.0 -1.0 -13.0 -9.0 -5.05 -7.0 -4.0 -20.0' 0.0 0.0 0.0 .. .. .. . I/ GDP at constant prices. Percentage change over the same period of the previous year. Figures for Lithuania and Ukraine are Net Material Product. Latest periodfor which data are available: 2/ January-March 6/ April 3/ January-April 5/ May 4/ January-May _/ June 5/ Febrary 21 March 93 10/ Refers to the Czech and Slovak Federal Republic Sources: Commission of the European Communities, Directorate General for Economic and Financial Affairs. 1993. Recent Economic Trends, Supplement A (8/9). National statistics. I. Environmental Action Programme for Central and Eastern Europe: Introduction 1 ENVIRONMENT FOR EUROPE ENVIRONMENTAL ACTION PROGRAMMEE FOR CENTRAL AND EASTERN ETROPE Edited and Revised Documeint 31 March 1994 Chapter Contents 1. Introduction: Why an Environmental Action Programme? II. How to Set Priorities Ill. Policy Reforms IV. Building Better Institutions V. Priorities for Environmental Expenditure Vl. Transboundary Issues: Regional and Global Concerns VIl. Principal Recommendations The resources available for environmental improvement in the countries of Central and Eastern Europe (CEE) will beseverely constrained overthenext5-JOyears. Thecosts of meetingsomeenvironmental objectives will, however, be very hi,h. The Environmental Action Programme provides a framework for setting national environmental priorities w ithin each country in Central and Eastern Europe and for cooperation between Easter,. and Western countries. The main constraints on implementation arise from a general lack of financial and above all institutional capacity rather than from the nature ofparticular environmental problems or potential solutions. So the most urgent problems will not be solved unless a clear goal is established at the outset and the most efficient way to reach that goal is identified. I. INTRODUCTION: VWHY AN ENVIRONMENTAL ACTION PROGRAMME? By establishing a consensus within and Objectives between countries of East and West, the EAP provides a basis for an evolving partnership to tackle The Environmental Acticn Programme (EAP) builds the most urgent environmental problems in the CEE on the efforts already being made by countries in region. CEE countries would undertake essential Central and Eastern Europe -- in some cases together policy and institutional reforms, and western with donors and financing institutions -- to address governments and international institutions would environmental problems. The goal is: make a commitment to provide technical and other assistance to support these reforms, and contribute * first, t^ make it easier to reach a consensus toward implementation of projects mutually agreed to within and between countries of East and West on the be of high priority. This requires that all partners most urgent environmental problems; and re-examine their policies and programs in light of the * second, to endorse a mix of policies, EAP. Working in this way, limited resources can be investments, and institutional reforms in which all used most efficiently, and a greater degree of countries and institutions involved can play an environmental protection secured than otherwise appropriate part. would be the case. 2 1. Environmental Action Programme for Central and Eastern Europe: Introduction Many CEE countries are actively developing power plants in Poland has been estimated to range and implementing environmental programs and from US$3 to US$10 billion, depending on the age of policies, albeit under severe constraints. The EAP is the plants selected. Scaling up this figure implies a a framework document that complements these cost of at least US$30-35 billion for all of the CEE activities by proposing ways to establish priorities. countries. As such, it is intended to provide the impetus for In addition, many governments in Central and different countries to adapt its ideas to their own Eastern Europe have made international commitments circumstances and to prepare their own action under global conventions, treaties and other forms of programs. The EAP offers ways to identify agreements which have substantial financial immediate actions, and a broad strategy to build implications, including the Montreal Protocol on environmental concerns into the economic Substances that Deplete the Ozone Layer (1987), the transformation of the countries of Central and Eastern Basel Convention on the Control of Transboundary Europe. Rather than prescribe what must be done, Movements of Hazardous Waste (1988), and the 1979 the EAP offers decision makers ways of looking at Geneva Convention on Long-range Transboundary the problems and applying their own judgment. It is Air Pollution (LRTAP), with its related protocols on meant to be a living document: as our understanding emission reductions for sulfur dioxide, nitrogen of tbe environmental problems improves and changes, oxides and volatile organic compounds. Other the EAP will be reviewed and updated. agreements to reduce land-based pollution of the marine environment may also require substantial The high costs of environmental cleanup commitments over the coming 20-30 years, such as those under the 1974 Helsinki Convention on the The recent political changes and the transition to a Protection of the Marine Environment of the Baltic market economy involve much economic and social Sea Area (HELCOM), as revised in 1992, the 1976 hardship for the countries of Central and Eastern Barcelona Convention for the Protection of the Europe. Concern for the environment has slipped Mediterranean Sea against Pollution, and the 1992 down on the agenda. Even now, however, CEE Bucharest Convention on the Protection of the Black countries continue to spend between 0.S % and 1% of Sea against Pollution (see Chapter VI). GDP on environmental policies. Some have passed strict new laws and regulations which will commit International assistance them to continued heavy investment. Because of the amounts of money at stake, environmental Initial information for Poland and Hungary suggests expenditures ought to be scrutinized in the course of that international assistance in 1991 amounted to reviews of public investment by those making slightly more than 5% of all environmental budgetary decisions. In Poland, for example, the expenditures. This low figure partly reflects low difference in annual costs between alternative disbursement levels, which in turn is an indication of approaches for reaching air-quality targets which the weak capacity of institutions to absorb have already been adopted is more than twice the international funding.2 In any case, CEE countries projected average annual spending in the power are meeting well over 90% of the costs of sector over the next 20 years.' environmental expenditures out of their own The costs of meeting Western environmental resources. standards are high. For example, the total costs in The Action Programme recognizes that the this regard for the new German Liinder have been bulk of resources for environmental expenditures in estimated to range between DM83 billion and DM321 Central and Eastern Europe has to be found in those billion, of which some DM53-150 billion would be c,untries themselves. At the same time, the EAP is required for building municipal wastewater treatment intended to provide a consistent framework so that plants meeting West German standards. To provide donors can provide urgently needed help with specific wastewater treatment meeting EU standards to the problems. Special assistarce or burden-sharing 300 major municipalities in Poland, the Czech and arrangements also may be appropriate when dealing Slovak Republics, Hungary and Bulgaria would cost with transboundary environmental problems. The at least US$50 billion. The cost of applying the 1997 establishment of innovative financing mechanisms in Polish emission standards (which are similar to the CEE countries as well as between CEE and donor relevant current EU standards) to existing thermal countries merits special examination. I. Environmental Action Programme for Central and Eastern Europe: Introduction 3 to its "implementability" or "bankability." But most Box 1.1 Environmental Investment of these justifications have nothing to do with the Expenditures in Poland goal, which is to reduce exposure of humans and ecosystems to environmental pollution and to enhance Expenditures have grown substantially in the productivity of natural resources.' Decision Poland, corresponding to the rapid increase in makers should therefore at least be offered a sound pollution charges and non-compliance fees up analysis which presents them with consistent options to 1992. In 1991, US$840 million was spent to achieve the principal objectives. For example, o.o tt,e environment from public and private t civ h rcploycie.Freape sources, corresponding to 1p% of G pP: there is little use in carrying out studies which recommend the strictest environmental standards State budget (grants) 5% when the funds are not available to carry out the National Fund (grants+soft loans) 15% necessary investments. Regional Environmental funds (grants) 25% The key to successful project development is Enterprises to focus first of all on describing the important (polluters' own resources + loans) 30% problems to be solved, and then identifying creative Municipalities options and approaches to addressing those problems (budgets +commercial loans) 20% in the most effective manner with the available International Assistance (grants +loans) 5% resources. This will involve a mixture of different Of the total environmental investment instruments, including not only investments but also expenditures, 45% was spent on water institutional development, economic and quality, 40% on air quality, and 1 5% on solid environmental policies. Similarly, national waste management. environmental action plans should set realistic and monitorable environmental quality targets, and propose a range of options covering policy, The need to set nriorities institutional and expenditure measures to achieve those targets over a specific period. In view of their significant environmental problems. To succeed, priority setting and the the countries of Central and Eastern Europe are faced development of environmental action programs in with the need to make big environmental expenditures CEE countries must involve the public. Non- at the very time when they are suffering economic Governmental Organizations (NGOs) can help to hardship that is worse than anything the Western initiate wider discussion. of the EAP, for example, market economies have experienced since World War through roundtables involving government, II. They cannot afford to waste their scarce community and business organizations. In addition, resources. Priority setting implies that there are the promotion of public participation would help to measures which should not be taken at this time, just facilitate mkany of the EAP's objectives. as there are actions which should be taken urgently. This report offers criteria for choosing priorities, and Why a regional approach? draws attention to the need to think carefully about problems and solutions. Experience in the wealthiest Each country in Central and Eastern Europe has its OECD countries suggests that some "solutions" do own specific environmental problems, which reflect not address the real problems. What should be the historical patterns of development and of the use and measure of success: the amount of investment in air misnse of natural resources. However, all share the or water pollution control, or a cleaner environment? legacy of former regimes. These diverse countries Some of the recommendations in this report therefore face a number of common problems which have apply equally to many Western countries. important environmental implications: Of course, many investment decisions are not made purely on the basis of environmental factors. * Large increases in energy prices, especially An environmental investment is often said to be for solid fuels and for households. These will be justified by the availability of local or foreign accompanied by much higher prices for other natural exchange, by the apparent willingness of local resources including mineral ores and quarry products; institutions to undertake it, by its demonstration * The gradual imposition of "hard" budget value, or various other elements that may contribute constraints on enterprises, together with a shift in 4 1. Environmental Action Programme for Central and Eastern Europe: Introduction their objectives from meeting production targets to Notes making profits and improving productivity; * The progressive replacement of out-dated 1. To achieve the improvements in air pollution emissions or out-worn capital equipment, mostly embodying currently mandated by Polish law, and to match tlPt equivalent of 1930s or 1950s technologies, by more modern capital EU standards for vehicle emissions over the next 25 years, will cost an estimated US$1.6 billion per year. A study carried out for typically found in OECD countries; the EAP has calculated that an approaci .nvolving emissions taxes ° Large changes in the structure of economic could reduce the costs of achieving the same target to US$0.7 activity, involving a move away from heavy industry billion a year. The potential savingsfor air pollution control alone towards services and certain industrial sectors -- e.g. is US$900 million per year. food processing, paper and paper products, chemicals 2. At the same time, international assistance to Poland and and automobiles; Hungary has probably been higher (certainly on a per capita basis) * A shortage of nianagement capacity, than to most other CEE countries. although labor is well-educated and in some cases exceptionally skilled. 3. Environmental improvement is one of three in,portant objectives of economic and social development. The other two objectives, which should be pursued simultaneously wherever In the general character of t: eir environmental possible, are economic efficiency (reduced economic costs) and problems and the direction in which they are likely to equity (fair distribution). Where tradeoffs among these objectives change, the similarities between the countries of are necessary, they should be clearly spelled out. Financial Central and Eastern Europe are stronger than the considerations (e.g., cost recovery) and -s""'. fs;hity differences. So, the regional approach adopted by are important in deciding how to achieve the objwctives in a the EAP allows the lessons of experience to be sustainable manner, not whether to pursue them in the first place. the EAP allows the lessons of experience to be shared in different countries and sectors. 24100._8.151 Box 1.2 Follow-up of the Lucerne Ministerial (i) channelling assistance to disseminate the Conference EAP approach and enable all CEE countries to develop their own national Action Programmes; At the Minister;al Conference "Environment for (ii) running training programs to build up Europe", in Lucerne, Switzerland, a Task Force capacity to identify, prepare and manage priority was established with the participation of Eastern environmental projects; (including FSl)) and Western governments and (Dii) engaging the private sector to promote international organizations and financial environmental improvements in enterprises; and institutions, to facilitate the implementation of (iv) enhancing the management of priority the EAP, and to provide for effective exchange of conservation areas. experience among CEE countries. The Task Force is co-chaired by a Central and Eastern The Task Force, which will concentrate above all European country on a rotating basis, together on institutional and policy issues, will liaise with with the Commission of the European Union; the Project Preparation Cormmittee which was OECD serves as the secretariat, with the active also established at the Lucerne Ministerial support of the World Bank and the EBRD. Conference to help with project preparation and Mechanisms for actively involving the informal investment. Its objectives are to itrengthen the sector (NGOs, the business and academic linkage between donors, international financial communities) are being identified. NGOs have institutions and Central and Eastern European already established various working groups and countries, and to promote the mobilization of held meetings with a view towards assisting in resources for the region. Finally, the Ministerial the implementation of the EAP. Conference agreed that all the partners At its first meeting on 27-28 September concerned should undertake to review the 1993 the Task Force adopted terms of reference implementation of the EAP as appropriate, inter and a work program, and agreed on a schedule alia through environmental performance reviews. for translating the EAP into detailed national Progress is to be reviewed at the next ministerial action plans. The Work Program consists of four conference which is scheduled toward the end of core activities: 1995 in Sofiya, Bulgaria. I. How to set Prioriti,.s 5 II. HOW TO SET PRIORITIES Setting priorities basically means ensuring that the policies followedfirst will achlieve the greatest gain relative to given objectives and available resources. That involves choices. The first concern in the region is the damaging effects of pollution on human health -- as it was in the West before the worst environmental health threats had been addressed. Human health in various parts of the CEE seems to have been affected by lead in air and soil, by airborne dust, by sulfur dioxide and other gases, especially when combined with dust, by nitrates in water and by contaminants in food and water. Major expenditures to ensure the proper disposal of waste, especially nuclear waste, and the safety of nuclear plants, are likely to be worries for the future. For now, good operation and maintenance are paramount requirements. Apart from human health, environmental policy may also need to take account of economic losses caused by damage or destruction of physical capital and natural resources, and of threats to coasts, lakes, forests and mountain habitats. It should give priority to measures that cost little, but are likely to have a big impact on problems which will get worse as time goes by and which may be easiest to solve if action is taken early. The Costs of Environmental Damage Environmental Damage and Human Health The Main Pollution Problems Degradation of Ecosystems and Biodiversity Conservation Responding to the Preblem: Finding a Balance between Policies and Investments To set priorities, policymakers need to ask the uses these methods to give an initial overview of the following questions: most serious types of problems. The chapter then looks in detail at human health as a particularly - What do people care about? Are they, for significant short-term worry, and concludes by instance, more concerned about dirty rivers, or the making recommendations on the most efficient ways conservation of wildlife, or the environment that will to achieve environmental objectives. pass to future generations? The answers involve value The central message is the need to balance the judgments; benefits of environmental policy against its costs. * In light of these value judgments, what are That will not be easy: people differ in the value the most serious environmental problems? This judgments they make about various kinds of question requires an estimate of the costs of environmental damage. But benefit-cost analys.is in environmental damage (or the benefits of the broadest sense offers a way to think environmental protection and remediation) relative to systematically about choices. When money and the gains that policymakers hope to achieve; and management capacity are scarce, as they are in * What are the most efficient ways to achieve Central and Eastern Europe, that is particularly different environmental goals? ,mportant. Both the costs of environmental damage and the The costs of environmental damage cost-effectiveness of the solutions will vary considerably over time, and so will environmental The economic and social costs of environmental priorities. damage are usually divided into three broad This chapter first describes some ways to categories: assess the costs of environmental damage. It then 6 11. How to set Priorities 0 Health costs. Environmental pollution may poor air quality in urban areas also imposes amenity lead to sickness and premature death. Human health costs. may be harmed by direct exposure to pollution, or Similar studies have not been carried out for indirectly through the impact of pollution on the other Central and Eastern European countries. physical environment. To assess the health However, as health damage is the primary cost of consequences of environmental damage in Central environmental pollution even in some of the and Eastern Europe means relying mainly upci wealthiest OECD countries, it is probably the largest epidemiological studies from OECD countries since component of environmental damage in Central and there are relatively few local investigations which Eastern Europe as well. Health is also an important control adequately for the contributory influences of concern in public perception: According to a recent factors such as smoking and diet. Gallup survey, 89% of Russians (80% of Poles) * Productivity costs. Environmental asked indicated they are concerned about the degradation reduces the productivity of natural pollution effects on personal health. resources and physical capital. It may disrupt the The costs of reduced productivity of natural services that nature provides, such as the natural resources and physical assets are much more cleansing of water, or the yield from fisheries. Or unevenly distributed. Discharges of saline water pollution may force people to spend more on cleaning from mines are a problem in Poland and a small part and maintaining houses and other buildings. of the Czech Republic. In the mining areas of * Loss of environmental quality, or amenity Ukraine, the dumping of mine and washery waste costs. A clear view, a pristine lake, a mature forest, and acid mine drainage are serious problems. and clean and quiet neighborhoods all add to the Exposure to particulates and acid pollutants may quality of life. People are willing to forgo damage materials as well as human health. Soil expenditure on other goods and services in order to contamination, salinization and acidification all cause protect endangered species and ecosystems, and enjoy considerable loss of agricultural productivity and the benefits of better environmental quality either for damage forests and lakes in some places. themselves or for future generations. This aspect of Little is known about the amenity value of a environmental quality is hardest to quantify, but its better environment in Central and Eastern Europe. loss particularly conflicts with the principle of Economic difficulties seem to have lessened the sustainable development, in that current generations importance people give to environmental problems. do not "meet their needs without compromising the Amenity losses may seem more important once the ability of future generations to meet their own most severe forms of pollution are dealt with, but needs."' they should not be an immediate priority for environmental policies, except in the few instances While figures for the total cost of where there are risks of irreversible sacrifices now. environmental damage are often quoted for various When air and water pollution is cleaned up, that will Central and Eastern European countries (ranging generally help to maintain healthy and diverse natural from 2-10% of GDP), these are rarely based on a ecosystems and landscapes. systematic assessment. Estimates which have been produced for Poland suggest that environmental Environmental damage and human health damage may have cost 3-4% of GDP in the mid-1980s, 2-3 times as much as comparable costs in Most governments will give the highest priority to Western European countries. The most important dealing with those aspects of environmental damage single component is thought to be the damage to which affect human health. Indeed, governments human health caused by air pollution, especially involved in the preparation of the Environmental exposure to high levels of particulates (soot and Action Programme for Central and Eastern Europe smoke in the air). The next most important elements have explicitly requested that special emphasis be are productivity costs imposed by high levels of given to human health concerns. In the past, the water salinity (caused by discharges from coal mines) links between information on human health and and BOD in the country's principal rivers.3 Finally, environmental action have been relatively weak in II. How to set Priorities 7 most CEE countries. So this section looks in more 0 airborne dust, which may cause acute and detail at the links between pollution and health. chronic respiratory conditions (sources include Since the mid-1960s, life expectancy in especially household coal burners, power and heat Western Europe, North America and Japan has plants, and metallurgical industries); and continued to rise, while in Central and Eastern 0 Sulfur dioxide and other gases, especially Europe, life expectancy has remained static or has in combination with dust (sources include power and even declined. This gap (of approximately 5 years) industrial plants as well as households using high- is primarily attributable to relative increases in sulfur coal or high-sulfur fuel-oil). mortality from chronic diseases in mid-life. However, the reasons for this relative increase are Maps 1-6 give an estimate of the areas where not yet clear. The explanation must involve some exposure to these pollutants occurs persistently. combination of factors in the socioeconomic and Because of synergistic effects between physical environments, behavior patterns and social airborne particulates and gases, the places where habits such as smoking and diet, and shortcomings in environmental health problems are caused by health care. airborne pollutants need to be carefully studied to The relative decline in life expectancy in CEE discover the relative importance of gaseous exposures has taken place in both heavily polluted and relatively and of dust. There is a large and growing body of unpolluted parts of the region. ;'hat suggests the scientific evidence that fine particle air pollution influence of environmental factors on health is not causes serious health damage and significantly raises paramount. On the other hand, it may be important. the risk of death -- even in the most advanced OECD Life expectancies in rural areas in Poland have countries. The most recent study, which followed surpassed those in urban areas in recent years, a 8,111 adults for 14-16 years and which adjusted for highly unusual demographic trend which may be age, sex, smoking, education level, and occupational associated with the fact that environmental pollution health risks, concludes that mortality is most strongly is concentrated in urban areas. In the Czech associated with air pollution with fine particulates.4 Republic, there is good evidence that dust and sulfur Apart from inhaling pc-'Iuitants, people also eat dioxide pollution increase the risk of infrot morality. and drink them. Pollutants in food and water have Moreover, declines in life expectancy in the Czech some effect on health, but are on average less Republic are correlated with the proportion of people prevalent and/or less clea related to ill health than living, in regions affected by heavy air pollution. lead, dust and airborne gases. Food in several parts Recent evidence from studies done in the West will of Central and Eastern Europe is a source of allow us to estimate the impact of respirable dust on exposure to heavy metals, pesticides, polycyclic overall mortality in Central and Eastern Europe. aromatic hydrocarbons, and chlorinated organics such Preliminary estimates show that the effect is likely to as PCBs. Many of these substances have be substantial. well-documented toxic properties and yet the effects The Action Programme has looked at on human health of ingesting largely unknown doses exposures that are not related to occupational health is uncertain. Other pollutants are ingested in water problems.2 Data from ten CEE countries have been contaminated with nitrates or with a variety of other used to tentatively identify locations where people are substances. Arsenic, viruses/bacteria, pesticides, exposed to specific health risks from particular kinds radionuclides, and chlorinated organics have all been of pollution. The specific locations are described in found in drinking water in various places in Central Annex 1. and Eastern Europe. Nitrate pollution of water is The most common health problems are the widespread in rural areas throughout the region, and result of exposures to a fairly narrow range of can be particularly harmful to infants (see Map 7). pollutants. The most important are: The main pollution problems 0 Lead in air and soil, which affects especially children whose mental development may Several parts of Central and Eastern Europe suffer be retarded (sources include lead and zinc smelters, from particularly serious environmental damage. and vehicle exhausts); However, in many respects, Central and Eastern 8 11. How to set Priorities Europe is not so unusual: air (and to a lesser extent heating season are more than six times the EU water) pollution is largely confined to cities where standards. A London smog in 1952 (which there are concentrations of industries, power plants, reportedly cost the lives of almost 4,000 people) homes and vehicles. At the same time, Poland, exceeded the present EU standard more than ten Ukraine, and especially Russia, contain some of the times; and current EU standards are frequently world's most extensivc areas of virtually untouched exceeded in many Western European cities during nature, which are highly sensitive to pollution. peak smog periods, which has led to the enactment of From a historical perspective, it is worth special smog-alert and smog-control measureE. One keeping in mind that some of today's "hot spots" in implication may be that, in the short run, CEE cities Central and Eastern Europe have had environmental need not just general emission controls, but better problems since the early part of the century. Central systems for dealing with air pollution emergencies. planning under the former regimes only perpetuated Air pollution also leads to acid rain, which is and exacerbated old patterns of pollution, preventing caused primarily by SO2 and NO, emissions from the changes that occurred in the market economies. The implication is that the experience in the market economies may be quite useful in helping CEE countries to Box 2.1 Developing Country-Specific Priorities identify which steps to take and which to Although all of the Central and Eastern European countries avoid. It should also be clear that it will addressed in this Environmental Action Programme face take time -- even under the best of similar types of problems inherited from the past, the circumstances -- to remedy the problems of immediate priorities for some countries will be very different the past. than for others. This reinforces the need for countries to develop their own environmental action programs that reflect Air quality their particular circumstances. These country-specific EAPs should be flexible and regularly up-dated to match the Air pollution is potentially the most serious changing economic and environmental conditions. short-to-medium term environmental problem for human health. It is also one Albania, for example, is much less industrialized than other that has received relatively little emphasis countries in the region, and while there are localized air inathas receirvenl relveliture emprrass coquality problems near industrial facilities, as a whole the in the environmental expenditure programs country does not have as serious air pollution problems as its of Central and Eastern European countries. neighbors. Albania's most serious environmental problems Polluted air is more difficult to avoid than are concentrated in its rural areas and include (i) deforestation polluted water. Its pervasive effects because of uncontrolled cutting of trees for fuelwood and damage human health, buildings and building materials; (ii) soil degradation due to poorly nature. Treating air pollution should be the maintained hillside terraces and overgrazing by livestock; and top priority for enviromnental policy. (iii) contamination of soil and groundwater supplies used for The most serious effects of air drinking and irrigation. Over 60 percent of Albania's pollution are on human health. Exposure population resides in rural areas and about 50 percent of the to pollutants will vary greatly from one country's gross national product is derived from agriculture place to another, depending on a number of and forestry, so these problems affect large numbers of placetoranothe, such dasgepend andum hero people and have significant economic impacts. The most factors, such as geography and weather serious problems affecting cities are unsafe and unreliable conditions. Maps 1 and 3 show the places drinking water supplies, which cause health problems and where local exposures to two of the productivity losses for urban residents. principal air pollutants -- particulate matter I and sulfur dioxide -- exceed annual average ambient standards of the European Union. power plants ai.d motor vehicles, and damages forests Occasional peaks in exposure may do more and lakes. The impact of acid rain, however, is not harm than the average level over the year. In straightforward, as it depends on climatic, biological Katowice, Poland, for example, maximum 24-hour and geological conditions which determine patterns of ambient concentrations of black smoke in the winter rainfall and the capacity of the soil to buffer acidity. II. How to set Priorities 9 Box 2.2 Portraits of Different Kinds of "Hot Spots" Regional Hot Spot: The mining districts of Lead. Psychological testing was carried out on Northern Bohemia the same sample, as well as on a group of 12 year-old children. This was done because high * Mortality rates from respiratory causes among lead exposures affect children's neuro-behavioral 1-12 month old newborns in the areas of highest responses, including IQ. Approximately 30% of ambient dust and sulfur dioxide levels are 5-8 children are expected to test "weak or very times higher than in places where air quality weak," which means below the first standard meets standards. deviation of the "normal" distribution. Instead, * Higher rates of low birth weight and congenital much higher percentages tested weak or very anomalies among newborns. weak on the tests: 73% on an 10 test; 58% on * Allergies and respiratory diseases are more a concentration test; 52% on a learning test; and prevalent among school children than in the rest 60% on a memory test. of the Czech Republic. * Children temporarily removed from the area to "Bad Town Planning": Dimitrovgrad, Bulgaria attend "nature school" in an unpolluted area show immediate evidence of improved red blood In Dimitrovgrad, thick, acrid smoke containing cell count which reverses when they return hydrogen fluoride and hydrogen sulfide comes home. from a single chimney at a fertilizer plant. High- * Higher mortality from lung cancer and other rise apartments and other settlements are located causes among both men and women than in the at the plant gate, their occupants exposed to high Czech Republic as a whole. levels of these emissions. Studies have shown be:ow normal physical development and lung A Town with a limited number of large point function in children from Dimitrovgrad. sources of pollution: Copsa Mica, Romania 0 50% of children from Dimitrovgrad have below Copsa Mica is home to several poorly maintained normal height, weight, and chest expansion for Industrial facilities, among them two lead their age. smelters. Health problems of particular interest * Lung function is poor. By age 14, "forced in the community include respiratory problems expiratoryvolumes"averagedapproximately25% from exposure to dusts and gases and below a control group of children from an neurobehavioral problems due to exposure to unpolluted town. lead. 0 An overall assessment was made of children's developmental status in Dimitrovgrad, compared Dust and Gases. One study examining pulmonary to the control town. Whereas 72% of control function in 371 Copsa Mica children aged 7-11 children had normal development, in Dimitrovgrad showed that of the exposed children 30% had only 18% of children were so classified. reduced lung function measured in terms of "peak expiratory flow" and 18% had reduced lung function in terms of "forced expiratory capacity", compared with 10% of the control group. This may have important implications in setting In recent years, air pollution in many areas in priorities for cleanup of transboundary air pollution. CEE has been decreasing. In the former Soviet Clearly, in some areas of Europe, acid rain has done Union, air pollution in the principal cities is reported serious harm to forests and ecosystems, and rapid to have declined by 10% during the 1980s, and the action may be warranted. This is particularly true nationwide reduction in emissions in Poland has been where soils are less capable of buffering acid 20-30%, and 1545% in Bulgaria over the past four depositions. 10 II. How to set Priorities years. In certain urban areas, pollution levels Figure 2.2 dropped even more. It is, of course, difficult to identify how far Fuel Use for Electricity these reductions result from improved pollution (% shares for public supply In 1988) controls and/or long-term economic restructuring, %0 e.hare and how far the cause is the temporary decline in so _ production. The discussion in chapter III sheds more a light on this question. 40 CAUSES OF AIR POLLUTION. A principle 2 cause of urban air pollution in Central and Eastem Coal Oil Ga, Nuclear Europe is the heavy reliance of households and small Fue; enterprises upon poor-quality coal. Smoke and soot CM 1 EB C 1F 1 11 Hun sy E3 PolC The Ilgort InfIrod. Iudo ,,ad for hosl e nwtdlon 1. Ih.pDI pubil -r eelo, Figure 2.1 but s.clud. usefw I l.aoprate.nio, Fuel Use for Households, Commerce and Services areas ('M shares In 1988) Central and Eastern Europe relies heavily on 70v ahare coal, which accounts for 75% of total primary energy so ... ................................ supply in Poland and 24% in Hungary, compared 60- .............................. .... ......... with 19% in OECD Europe. Figures 2.1 and 2.2 40 - .|L .... . . .. ........................... ...... . . (detailing patterns of fuel consumption by sector ^o- .... 1 - -- -calculated in tons of oil-equivalent) show that 20 1; 1 | g 0 | 0 j11 l_R__ i 1 households and the service sector rely far more on 0 11 | 2111 W coal in the CEE than in the West -- for example, Coal Oil Gas Electricity Heat 63% in Poland and 19% in the former USSR, Fuel compared with less than 5 % in Western Germany and ma Sulearle E CSFR 1 Nunoary E Poland Spain. DZ Remenl E3 USSR amI EC Anreragem CD__Romania___FEB __U_8R _____EC __A_r__g_ Not only do the CEE countries use proportionately more coal than Western Europe; from low chimneys (or "stacks") are especially more of the coal that is burnt consists of poor quality harmful to health. In many towns and cities -- brown coals and lignites. In an attempt to achieve especially in coal producing areas -- more than half greater self-sufficiency, the CEE countries developed the population is exposed to high levels of particulate reserves of brown coal and lignite during the 1960s and gas emissions from thousands of small coal and 1970s when the market economies were turning stoves used in homes for domestic heating, and in away from coal towards first oil and then gas. As a small- and medium size enterprises burning coal for result, by 1989 brown coal and lignite represented space heating and process heat. more than 75 % by weight of total solid fuel consumption for Bulgaria, the former CSFR, Local heating and home furnaces tend not to Hungary, Romania, and the territory of the former have any systems of pollution control, while large Yugoslavia, though the shares measured in terms of factories most often do, though only for particulates. tons of oil-equivalent are, of course, much lower In Katowice (Poland), for example, 46% of soot and because of the low calorific value of the solid fuels dust emissions come from low stack emissions of concerned. Even for Poland and the former USSR -- high-ash coal. In the republics of the former Soviet both countries with large reserves of hard coal -- Union, the availability of natural gas has helped to these shares were 32% and 28%, respectively. In reduce air pollution from small stoves in the principal contrast, the highest proportions of brown coal and cities, though not in smaller towns in coal producing lignite in total solid fuel consumption in Western II. How to set Priorities 11 Europe were 58% for West Germany aind 45% for such as Budapest, Kiev, Kharkov, Krasnodar, Spain, while for most countries the share was less Moscow and St Petersburg, air pollution from than 10%. transport is not yet a serious problem. Car The smoke from poor-quality coal, especially ownership is still low compared with Western when burnt by households and other small users, is European countries: in CEE in 1990 the number of especially harmful to health. This point is passenger cars per one thousand persons was on demonstrated by the following figures, which average only one-third that of Western Europe compare the minimum damage costs from pollution (Figure 2.3). Growth rates for passenger car fleets, emitted by high and low chimney stacks in Poland however, are among the highest in the world, and (Table 2.1).5 demand for motorized transport is likely to increase A recent re-calculation of the numbers as incomes rise and markets are liberalized suggests that the damage costs from emissions of (Figure 2.4). In addition, the proportion of freight particulates may in fact be as much as three times the carried by road (including multi-modal and container amounts indicated, i.e. US$180 and US$2160 per ton transport) in CEE is still much lower than in Western of particulate emissions from high stacks and Europe and is likely to grow rapidly with the households, respectively. development of new export markets. Thus, as The example of West Germany shows that, emissions from stationary sources are brought under given appropriate equipment and good maintenance -- control, and as vehicle ownership rises, mobile neither condition being satisfied in most CEE sources will contribute an increasingly important countries -- it is possible to burn lignite and low share of air pollution. grade coal in power stations and some large industrial In Central and Eastern Europe, mobile plants without causing significant pollution problems. sources (mainly road traffic) are responsible for However, the only way of controlling pollution from about 30-60% of emissions of nitrogen oxides, burning coal in smaller boilers and open grates is to between 40% and 90% of emissions of carbon require the use of expensive smokeless fuels. This monoxide, between 35 % and 95 % of lead emissions, undermines the economic attractiveness of using coal, less than 10% of particulate emissions, and less than so that most households and small or medium sized 5% of sulfur dioxide emissions (vehicles also emit enterprises will prefer to switch to electricity, gas or small quantities of a variety of toxins and carcinogens petroleum products if possible. such as benzene and aldehydes). Those proportions are, of course, higher in cities which have little ENVIRONMENTAL IMPACT OF MOTORIZED industry and which do not rely upon coal for TRANSPORT. With the exception of some large cities, domestic heating. In Budapest for example, transport Table 2.1 Minimum damage costs from pollution emifted by high and low stacks Sulfur Dioxide Particulate Matter Nitrogen Oxides Source US$ per ton High stacks 265 60 180 Low stacks (households) 650 720 460 Source: Environmental Assessment of the Gas Development Plan for Poland (World Bank) 12 11. How to set Priorities sources contribute about 80% of carbon monoxide Water quality and lead levels, 60% of nitrogen oxides, 75% of hydrocarbons (HC) levels (the precursors to As in Western Europe, many rivers in Central and ground-level ozone), and 12% of sulfur dioxide Eastern Europe are seriously polluted downstream of levels. In most cities in the region however, the principal urban areas, especially with organic waste contribution of home heating, power generation and (BOD), and probably heavy metals and industry to air pollution still outweighs the micro-pollutants from the discharge of industrial and contribution from traffic. Thus, while countries with municipal effluent which has been treated only reasonable air quality in most towns and cities should partially or not at all. However, few of the rivers rightly give priority to addressing the pollution are biologically "dead" (except for small streams associated with urban traffic, this would not be serving as "sewer canals") and, in general, they are appropriate for the majority of CEE countries where probably cleaner than rivers passing the main the main threat to health from poor air quality comes industrial centers in Western Europe up to 20 or 30 from emissions of particulates and sulfur dioxide years ago. from industry and home heating. While attention has been focused on (large) Figure 2.3 point sources of water pollution such as industrial Figure 2.3 plants (including intensive livestockl enterprises) or Number of Passenger Cars/1000 Persons municipal facilities, it is important to remember that NP rP non-point sources -- especially storm and agricultural runoff -- account for most discharges of nutrients into Passenger cars/1000 persons rivers and lakes (60-70% of nitrogen, 40-50% of S60- 330 | phosphorus). Estimates suggest that at least half the 60 -X pollution in the rivers draining into the Baltic Sea comes from non-point sources. 200 .- ( , 184 MUNICIPAL WATER SUPPLY. In Central and 160 . | . l S 142 138 128 Eastern Europe, water is used much more wastefully l00 - l } l 1 S1 1 iXl 1gl 0r than in Western Europe (partly because it is so o l lllll 1l!lll underpriced) and in a number of countries it is 50 - 1 11M111 Mfrequently in short supply. This problem has often OECD Eu , CoFR Hun Eat o l Lith Rom been solved by bringing in additional fresh water resources from increasingly greater distances and at Figure 2.4 growing cost. Standards of treatment for drinking water also Average Annual Percentage Growth In tend to be lower than in Western Europe. In general, Numbers of Cars/1000 Persons: 1980-90 municipal water supplies in most CEE countries have been treated adequately to prevent large outbreaks of Average annual percentage growth infectious disease. This is mostly due to the adequate 11 level of disinfection (chlorination), but it also reflects 84> 75 §the temperate climate as well as the widespread lll e.e 8.2 | reliance -- especially in rural areas -- on bottled 8 q E | E | W | i 8.1 |water.6 There is not yet enough evidence to be sure how far water in the CEE is polluted with 4 - 4 | 4 | 4 | X | X | 3.3 | carcinogenic substances (e.g., chlorinated pesticides). If the combination of inadequate supply and patchy 2M treatment persists, increasing amounts of investment 0 w Wp w wp) may be required to ensure the availability of Pol Hung Lith Rom Bul CSFR France acceptable drinking water. I. How to set Priorities 13 MUNICIPAL WASTEWATER. In the Central twenty times Western standards, and in about ten European countries (such as Poland, the Czech and different regions in Bulgaria, an average of 35-45% Slovak Republics, Hungary or Bulgaria), the current of the population is exposed to elevated nitrate levels. state of municipal water supply and sewage collection One of the primary adverse health effects is is generally adequate. This is much less the case in methemoglobinemia8 ("blue baby syndrome") which some of the republics of the Former Soviet Union. is life-threatening for infants. Recent preliminary In the whole region, however, a substantial fraction evidence suggests that careless and unsatisfactory of wastewater is discharged with little or no disposal of wastewater (e.g., septic tank runoff close treatment. The principal types of water pollution in to village wells) may be contributing significantly to urban areas are organic wastes, nitrogen and the nitrate problem. The next most important sources phosphorus compounds, and suspended solids from of nitrate pollution are agro-industries such as pig municipal sewers, and to a lesser degree chemical farms and feed lots, and of course the runoff from wastes from industry.7 To the extent that municipal fertilizers applied too heavily and frequently at the wastewater treatment plants are available, they tend wrong time of year. In all of these cases, the to be overloaded (more because of the wasteful use solutions will depend critically on educating and of water than because of the volume of actual training people, making them aware of the effects of wastes), improperly maintained and managed, or their actions. bypassed. All three Baltic countries have had to However, leaching of nitrate in agricultural close beaches in recent years to prevent inadequate soils is much more widespread in Western Europe, as sewage treatment in adjacent settlerments causing the shown in Map 7. In several countries in Western spread of infectious diseases. Europe, a high conccutration of cattle and relatively In the past, many large enterprises high fertilizer use (on average, double the application traditionally pre-treated the wastewater they rates in CEE) has led to accumulation of nutrients iDn discharged into the municipal wastewater systems. soil and leaching to groundwater that exceeds EU Today, as firms are split up and privatized, the costs drinking water standards. In CEE, by contrast, the of industrial pre-treatment are felt to be high, and rural population is more at risk because of the use of there is a risk that increasing amounts of industrial heavily contaminated shallow wells for drinking discharges (heavy metals, chemicals, PCBs, etc.) will water. flow directly into municipal sewers which are not equipped to handle such wastes. The metals content SALINE WATER DISCHARGES AND MINE in sludge threatens sludge use for agriculture and WASTES. The discharge of highly saline wastewater other means of disposal. On the positive side, the from a small number of coal mines is an important increases in water pricing and the collapse or water quality problem which particularly affects restructuring of industry often diminish the earlier Poland and to some extent the Czech Republic and overload of existing facilities. Also, a past tendency Ukraine. Such water is highly corrosive if used for to build unnecessarily large treatment plants means industrial or municipal purposes. Corrosion also that there is often adequate capacity once water damages infrastructure. In Poland, especially, much consumption is reduced. money has to be spent to treat saline water or to transport safer water. The productivity costs of these RURAL. WATER SUPPLY AND WASTEWATER, discharges probably account for the largest AGRICULTURAL AND NON-POINT SOURCE POLLUTION. component of total losses due to water pollution in The problems in rural areas are quite different and Poland (0.5-0.8% of GDP). potentially more dangerous to human health. First, Tackling this problem has a high priority in less than 10% of the population is served by public Poland, but the answer is not obviousz. water supplies, and there is little or no adequate Unfortunately, it is likely to be difficult or expensive wastewater disposal. Nitrate pollution, in particular, to deal with discharges of saline water from the affects a large part of the rural population (about mines which are responsible. These are among the 35% of the total population of Poland, Czech and most productive mines in Poland, yielding high Slovak Republics, Hungary and Bulgaria). In Borsod quality coal from deep but thick seams. Eliminating County, Hungary, for example, nitrate levels are the discharges altogether would either mean closing 14 11. How to set Priorities certain mines or require substantial costs to re-inject toxic in the short term, given the high concentration water into the mines or to desalinize it. New mining of heavy metals. techniques together with better management could reduce the volume of water discharged and its impact Solid and hazardous waste on the rivers affected, but these are only partial Reliable information on the volumes and composition of municipal and Box 2.3 Nitrates in Drinking Water in Romania hazardous wastes in Central and Eastern Europe is relatively sparse, especially Elevated nitrate levels are found in local water supplies in all but since it is believed that a significant 2 of the 41 districts of Romania. According to a 1 990 survey of proportion of industrial hazardous water supplies in 2,474 places in the countryside, 7% were wastes is disposed at municipal above 200 mg/I, 1 0% were between 100-200 mg/I, and a further landfills. This unsafe co-disposal of 19% were between 45-100 mg/I. In 14 districts (Mehedinti, hazardous and domestic wastes often Dolij, Olt, Teleorman, Calarasi, Constanta and Bucuresti-SAT in occurs in d landfills with the South; Tulcea, Braila, Galati, and Vaslui in the east; Botosani in and Suceava in the northeast; and Satu Mare in the northwest), inadequate protection against seepage more than half of the water supplies exceed the standard of 45 into groundwater. Toxic wastes stored mg/l. In these districts, up to 13% of the newborns a year were at industrial sites may also contaminate reported to develop methemoglobinemia. nearby soil and groundwater. Finally, Reporting of death from methemoglobinemia is patchy, so because of the growing shortage of it is difficult to provide accurate numbers. Some insights into the available landfill capacity, inadequate impact may be gained from a special study of children in high enforcement procedures, and rising nitrate areas in the Mehedinti/Dolj area. In 1989, 55% of the disposal costs, illegal dumping of both children in the study area had elevated methemoglobin in their hazardous and non-hazardous wastes is blood. In 1991, there were 181 cases of methemoglobinemia, . . . including 35 which were associated with diarrhea. In total, there inreasng (implyg potential additional were 9 deaths. If this death rate were to apply to other districts health costs from groundwater where methemoglobinemia is a common problem, it would make pollution). a significant contribution to infant mortality in those districts. In some sites, mining wastes and ash from thermal power generation, sometimes with a high radioactive content, are badly disposed of. Former solutions. At present the mines have little incentive Soviet military installations are also believed to be to find cheaper solutions, since they do not have to potentially dangerous sources of toxic wastes, not bear the costs of the damage caused by the only in the newly independent republics, but also in discharges. This is a clear case where appropriate Poland, the Czech and Slovak Republics, and pollution charges can be implemented in order to Hungary. Not surprisingly, little is known about provide an incentive to search for low cost solutions. wastes stored at former military sites, but their Indeed, recently, an increase in pollution charges is implications for environmental quality could be just reported to have led to an active search by a as serious as that of conventional hazardous wastes. consortium of mines for investment finance to install Mining of coal, lignite, and metals such as desalination equipment. It is unclear, however, chromium, copper, and iron contributes to whether all the mines are paying the required environmental degradation in areas near mining pollution charges. operations. In addition, spoil heaps of tailings from In Ukraine, the iron ore mines of Kryvyi Rih mining operations (and slag from smelting) produce almost 50 million ml/year of effluent, which contaminate nearby soil. Uranium mining and is not only saline but also contaminated with heavy milling releases radon and radon daughters which are metals and radionuclides from nearby uranium potential occupational hazards. It also releases deposits. Though the volume of water is much less process effluent and tailings which may contaminate than that discharged from coal mines, it is far more groundwater. II. How to set Priorities 15 Nuclear issues disposal arrangements have been, or will shortly be cancelled. Wastes will increasingly have to be stored Russia, Ukraine, Bulgaria, Lithuania, the Czech and and eventually disposed of in their country of origin Slovak Republics, and Hungary are all heavily with the result that many countries in the region must dependent on nuclear power. However, nuclear now construct or expand waste storage and disposal plants in the region are of widely varying quality, in facilities. Nuclear waste disposal involves varying terms of their basic design, of the standard of degrees of hazard depending on the characteristics of construction and management, and (often most the wastes and whether or not they are released into important of all) of their operation. Since the the environment. accident at Chernobyl in 1986, there has been widespread concern both in Western Europe and in Degradation of ecosystems and biodiversity the CEE countries about the safety of nuclear conservation reactors. However, only Germany has permanently shut any reactors, at Griefswald. A few others have Protected areas cover about 3-5 % of the land area in been temporarily closed, though not by choice, most of the countries of Central and Eastern Europe. including two in Armenia as a result of earthquake Most are classified as national parks, nature reserves, damage. and specially protected areas. They generally The prospects for closing the most unsafe encompass mountains and forests; wetlands and CEE reactors vary. Several countries are highly sensitive marine environments are not as well dependent on nuclear electricity, and cannot easily protected. In most of the countries, environmental switch to alternative sources of fuel. The Bulgarian degradation of protected areas has been quite limited. government has agreed to shut the four oldest There are some notable exceptions, however. In the reactors at its Kozloduy plant once alternative sources Czech and Slovak Republics, acidic deposition has of electricity have been developed. The speed with adversely affected 75% of the protected areas and which CEE countries are likely to shut plants will seriously damaged 25%, with the primary damage depend to some extent on future demand for being to trees, while in Poland 6 out of 18 National electricity, and on its price; for the time being, some Parks are located in zones designated as "ecological countries have become more reliant on nuclear hazard" or "ecological disaster." Addressing the power, because fossil fuels have to be paid for in sources of environmental pollution will therefore hard currency. reduce costs not just to human health but also to The priority for both CEE countries and living natural resources. Western donors should therefore be to improve the More importantly, biodiversity conservation management of nuclear plants, and to make low-cost involves policy on agriculture, forestry and fisheries. investments that yield high returns in improved The past practices of central planning in CEE safety. CEE countries also need to put in place countries, ironically, served traditional biodiversitv legislation to reassure western companies on the conservation well. The growing trend toward extent of their legal liability for refurbishment work decentralization, land privatization, and Western-style done at nuclear plants. The absence of such agricultural policies in Central and Eastern Europe legislation has been a considerable disincentive to creates formidable challenges for biodiversity western countries which want to undertake repairs protection, especially in the face of intense economic and improvements of nearby CEE plants. In the pressure to exploit natural resources beyond carrying longer run, proper pricing for electricity is essential, capacity at a time when neither the law nor public as it will allow choices on appropriate fuels to be money can offer much protection. taken in the right context. Biodiversity in CEE countries is richer than in A further problem is the safe disposal of Western Europe. It needs to be conserved at least as nuclear wastes. Up to now, the former USSR has much to avoid the productivity costs associated with arranged for the disposal of radioactive wastes from poorly functioning ecosystems than because of the nuclear reactors in those Eastern and Central potential irreversible loss of species. Maintaining European countries where it provided uranium, or biodiversity ensures functional diversity in the enriched locally produced uranium. These waste environment, which in turn promotes resistance to -- 16 11. How to set Priorities and resilience fiom -- disturbance (e.g. pests), environmental problems in most countries -- rich and adaptability (e.g. to climate changes), productivity of poor. natural systems, and also serves as a warning In principle, cost-benefit analysis means indicator of critical changes in the environment. ranking priorities so that the first (or next) $100,000 spent will have the greatest impact in bringing about Responding to the problem: Finding a balance environmental improvement. This process can be between policies and investments continued until the limit of available resources has been reached. In practice, the approach will This chapter began by suggesting three stages in inevitably be more complicated. There are many devising environmental policies. First, discover what possible projects with similar benefit-to-cost ratios in people care about; second, examine the costs of different sectors. The "pyramid" of priorities is achieving those goals; and third, look for the most therefore relatively blunt, and it is clear that many cost-effective policies. But it has emerged from the factors will contribute to what kinds of decisions are chapter that governments face many possible goals, made. and may find it hard to choose among them. This The criteria described here serve as much to section offers some thoughts on selecting priorities, identify what should not be done, as what is urgent. and on choosing policy instruments. For example, even if people set a high value on a particular kind of environmental damage, it may not Selecting priorities be cost-effective to give high priority to dealing with it. Attention is bound to focus upon the most A basic rule of thumb is to balance the costs of a dramatic environmental problems, i.e., on cases policy against its likely benefits. Such an approach where the costs of environmental damage are very provides a simple basis for ranking alternative high. However, sometimes the costs of remedying courses of action. The benefits of a measure are the damage may also be high. For example, equivalent to the amount of environmental damage addressing the problems of the unsafe disposal of that would occur if the investment or policy were not hazardous and toxic wastes or of poorly-designed implemented.9 This is, of course, quite different nuclear reactors may be judged to have high from focusing on financial indicators of profitability, environmental benefits, but the potential costs of since both the benefits and costs are defined in a remedying all of the problems that have been much broader sense: sound economic analysis also identified are also likely to be very large. In such includes quantification and where possible valuation cases, inexpensive measures designed to make of social (equity) and environmental factors and looks significant improvements would be more appropriate at the costs and benefits of an investment or policy to than massive programs of expenditure, most of which the country as a whole.'0 will have a relatively low benefit-to-cost ratio. Benefit-cost analysis offers a method of thinking systematically about choices. It is a What is the problem, and how should it be solved? standard -- though not always correctly used -- approach in market economies, but it has been Certain principles may assist policy makers in largely absent in the formerly centrally planned choosing policies. First, the environmental problem economies. The fact that benefit-cost analysis has should be clearly defined, for that will largely been in use for several decades does not mean, deternine the solution and the way it is implemented. however, that it is easy or without controversy. It This may seem obvious, but experience suggests that will always be hard to assess the benefits of any environmental solutions are frequently offered before given policy because people differ in the value the problem to be solved and the options for solving judgments they make about various forms of it are fully assessed. For example, there is a risk environmental damage. The priorities articdlated in that investments are made which later on turn out not this document reflect first of all a general view about to have solved the real problem. Thus, money may the paramount value of human health; beyond this, be spent to reduce the pollution from a large power the priorities are based on what appear to be the plant, when in fact most of the serious pollution is value judgments by governments tackling caused by home heating and small industries. 11. How to set Priorities 17 Similarly, policymakers may argue that the "solution" the economic savings can be more productively used to a problem of river pollution is a particular to retrain unemployed mine workers. municipal wastewater investment. But the same Next, policymakers should look for measures money might be used upstream -- to reduce effluents that solve several problems simultaneously, and avoid discharged by a small group of factories, say, -- to transferring problems from one environmental make a larger impact on ambient water quality. If medium to another." As several environmental policymakers define the "problem" as improving problems are sometimes related to the same cause ambient water quality rather than merely as treating (e.g. energy use or the use of certain minerals), some municipal wastewater, they will make a wiser measures (such as energy conservation or introducing decision (see Annex 5). Applying the same way of more efficient production processes in the metal thinking, it may not be necessary to install an industry) will reduce several kinds of pollution at the expensive scrubber in a power plant if it is possible same time. Often, end-of-pipe measures, such as to temporarily close that power plant (and obtain water purification or installing dust collectors, affect electricity from other power plants in the grid) when just one environmental problem; structural changes, weather conditions create dangerous levels of such as changing energy use and fuel mix, pollution. There may be many different ways to restructuring industrial processes, or imr1proving the solve a given problem -- some of them much less quality of products, will influeace several costly than others (see boxes in chapter V and environmental problems simultaneously. A reduction Annex 6). in the use of coal, for example, simultaneously diminishes the risks to health from dust and S02, Box 2.4 Cost savings for one medium-sized acidification, salinization of water and greenhouse town warming. Such measures should therefore often be given priority. An advantage of such structural Szeged is a town with a population of measures is that they reduce not onlv emissions but 180,000 which currently has no municipal also the need for inputs (e.g. of energy and wastewater treatment system. Plans have ata n the refore h e.a fin ncapybacd called for a technologically advanced matenals) and therefore have a financial payback. treatment plant, with a total investment cost Another principle that can be used to set of US$55 million. However, both local and priorities is that prevention always costs '=ss than regional water quality improvements would be cleaning up or mitigating environmental problems small because of the nature of the receiving once they have occurred. For example, in the long water. While it may be politically difficult to run it is cheaper to prevent soil pollution by justify no investment at all, it is possible to producing less waste and carefully managing it than design a sequence of actions that imply to clean up contaminated soils. Moreover, it is capital and operating cost savings of about hardly sensible to clean up the soil before the waste US$53 million over the next 20 years (12% stream is under control. Improving the efficiency of discount rate). These are savings for just one mining and industry -- and thus reducing losses -- medium-sized town. and applying stricter rules in waste management will be more urgent than a general programme to clean up These considerations also apply to situations soil. where inefficient environmental investments are Because prevention is much better than cure, proposed in order to deal with an underlying social or it is important to ensure that appropriate standards for political concern. Thus, in some countries, high-cost the future disposal of dangerous wastes or for nuclear end-of-pipe investments in the power sector are safety are introduced and enforced. Moreover, proposed in order to continue using low-quality coal partial solutions which offer substantial environmental so as not to become dependent on other countries for improvements at a modest cost may be strongly energy sources and in order not to close mines preferred to "permanent" but expensive measures. In employing significant numbers of people. Again, setting objectives for environmental policy it is the there may be lower-cost approaches to ob aining the incremental benefit-to-cost ratios that matter, since necessary electi city without causing serious air the basis of comparison must be how much pollution or jeopardizing energy security, and where environmental improvement can be obtained by 18 11. How to set Priorities spending an additional $100,600(J on one problem industrial restructuring, will bring a steady renewal rather than on another. of capital stock and better industrial management. * Adopt targeted environmental policies First look at economic policies whichl establish a framework of incentives and environmental institutions: for example, the system of Some economic policies -- including market reforms, fees and fines can be revised and consistently higher energy prices and improvements in industrial applied; environmental standards can be modified to efficiency -- are "win-win" policies in the sense that help achieve significant improvements in they contribute to more rapid economic growth while environmental conditions at least cost; or water also improving the environment. The costs of management can be reorganized in river basins to achieving the associated environmental benefits are improve the efficiency of planning for water supply low (they depend essentially on the available and treatment. Targeted environmental investments institutional capacity), so that such policies should should be directed especially to those problems which obviously be adopted as rapidly as possible. will persist or even deteriorate despite market reform and/or industrial restructuring. Environmental policies and investments 0 Concentrate environmental expenditures on those projects with the highest benefit-to-cost ratios. Targeted environmental policies -- such as pollution In the short term this is likely to mean that measures charges, regulations which are carefully designed and to reduce air pollution take a larger share of enforced, and the establishment of appropriate spending, but investments with high benefit-cost property rights -- are not costless, but their costs are ratios which deal with water pollution, I. nd quality typically low by comparison with the benefits that are and the preservation of biodiversity should also be generated by establishing appropriate incentives and implemented immediately. institutions. The development of appropriate 0 Devote modest resources to programs institutions is a lengthy process but crucial to the whose benefit-cost ratios are expected to be near the success of environmental investments. In the short top of the ranking in future but which have a long run, constraints on institutional capacity may even lead time from start to completion, such as certain mean that investments which might appear to have a investments to deal with vehicle traffic problems; large benefit-cost ratio ought to be deferred until they natural resource and biodiversity conservation can be implemented most effectively (e.g. in the programs which require additional research and/or water sector through the creation of river basin data collection; or wastewater management management). investments which depend on institutional reform. Conclusions One of the most important goals of the Action Programme is to show that difficult choices have to Balancing the many considerations is difficult. It is be made, and that resources should be concentrated an art, not a science, since the range of factors that on those problems where the greatest environmental must be taken into account is large, and the quality of benefits can be achieved relative to the costs. any data is often highly suspect. However, the general principles for establishing priorities can be summarized in the following four guidelines. They Notes are complementary and must be applied simultaneously; all are necessary for environmental 1. The general principle of sustainable development adopted improvement. by the World Commission on Environment and Development (Our Common Future, 1987). Sustainable development implies that the stock of overall capital assets remains constant or rises over time. 0 Support as much as possible those These assets include manufactured capital (machines, roads, and economic policies which also have environimental factories), human capital (human health, knowledge and skills), benefits: for example, market reform, and especially and environmental capital (forests, air, water and soil quality). market pricing of energy, and economic and Stated differenty, countries can consume up to an amount that will not run down the overall stock of capital. II. How to set Priorities 19 2. The effects of heavy metals and micropollutants are also 6. Nevertheless, drinking water is not always safe. There potentially significant. has been an epidemic of waterbome hepatitis A in Riga (Latvia) as a result of a temporary lack of coagulant to treat drinking water 3. To the extent that polluting industries affect both the from the Daugava River. In Jelgava, Latvia, an outbreak of milk- health of the communities in which they are located and, also, the bome dysentery based on contaminated water has been reported. workers who work there, a remediation strategy which targets There is also evidence of infections from contaminated water in St environmental health problems will also be effective in capturing Petersburg, Murmansk and Volgograd (in the Russian Federation, work places with significant occupational health problems. The 60% of the population is believed to be exposed to unsafe drinking best example of this is lead smelters, where significant community water). exposures to children and in-plant exposures to workers seem to coexist everywhere they have been measured in tandem in Central 7. Heavy metals and micro-pollutants could represent a and Eastem Europe. There are some important exceptions to this serious problem, too, though they are not usually captured because general pattem which are discussed in Annex 2. of limited measurement capability. On the other hand, even in those countries that possess advanced instruments, there is a lack 4. Elevated levels of particulate air pollution have been of funds to use them properly. Westem experience shows that it associated with declines in lung function or with increases in is very difficult and expensive to measure/identify all the micro- respiratory symptoms such as cough, s.ortness of breath, pollutants and their impact. Micropollutants are best dealt with at wheezing, and asthma attacks. Other studies have found the source. associations between paniculate air pollution and rates of hospitalization, chronic obstructive pulmonary disease, and 8. Methemoglob nemia is a blood diso-der; symptoms are restricted activity due to illness. (D.W.Dockery et al., An bluish skin, faintness, and shortness of breath. Severe anemia Association between Air Pollution and Mortality in six U.S. Cities, occurs because the blood loses the capacity to carry oxygen. New Englan dJoumal of Medicine 1993; 329:1753-9. This article also refers to 18 earlier studies.) 9. The costs from actual environmental damage and the costs due to man-made (e.g. nuclear accident or species extinction) or 5. Assumptions: Most emissions from low stacks are in natural (e.g. earthquakes) disasters are captured in the same urban areas. About 24% of emissions of SO2 and NO,, and 45% framework. They are both expressed in terms of the willingness of particulate matter from low stacks are deposited in urban areas. to pay either to avoid/remedy the damage or to reduce the Emissions from high chimney stacks are assumed to be fully probability of an accident. dispersed and so to be either exported or deposited uniformly over the country. In the case of Poland, this implies that about 5% of 10. "Shadow" prices are used when true economic values of emissions from high stacks are deposited in urban areas. costs are not reflected in market prices as a result of various Emissions from high stacks primarily cause forest and agricultural distortions, such as trade restrictions, taxes, or subsidies. This damage. All damage to health and buildings has been assumed to applies as well to environmental "extemalities" which only persist occur in urban areas, and all damage to forests and agriculture has because of an implicit subsidy to the polluter. been assumed to occur in runl areas. Monetary damage functions have been assumed to be linear functions of deposition above the 11. For example, scrubbers to reduce air pollution create critical load, so that the marginal value of a ton of avoided large amounts of solid waste. depositio.1 is the same wherever the reduced deposition takes place. 06281153 20 II. How to set Priorities Box 2.5 Airborne Dust or Gases -- Which is More Important? The work described in this report has come at a Thus, from a health perspective, it is time in which new knowledge is rapidly emerging difficult to come up with a strong theoretical about the impact of air pollution on human rationale to concentrate on either dust or gases health. Of particular interest is the role of certain to the exclusion of the other. In practice, the list gases and vapors (especially sulfur dioxide, of places in the region where airborne pollution oxides of nitrogen, ozone, and hydrocarbons) in threatens human health include some where the precipitating acute respiratory episodes and primary exposure is to dust; some where the exacerbating chronic bronchitis and asthma. At primary exposure is to one or more gas or vapor: the same time, the impact of respirable dust on and many where the problem is a combination of mortality (in addition to its role in respiratory the two. This same pattern holds true for morbidity) is being recognized from studies of a regional hot spots, areas with a confluence of variety of large cities in the West with point sources, and areas where the 'bad town concentrations of ambient dust which are much planning" model best applies. lower than in many places in Central and Eastern Knowledge of the relative importance of Europe. The most recent study, by Dockery et the health impacts of dusts and gases does not al. (1993), which followed 8,111 adults in six give a basis to set environmental action priorities U.S. cities for 14-16 years and which adjusted which would target one and neglect the other. for age, sex, smoking, education level, and However, even if the health impacts of dusts and occupational health risks, found that the city with gases is similar, the cost of controlling the former the worst fine particulate air pollution had a 26% is typically much lower. Strategies aimed at higher mortality rate than the city with the least controlling dust while incidentally reducing pollution of this kind. gaseous emissions are therefore potentially the most cost-effective. The following table shows typical costs of controlling particulates, S02 and NO. emissions from coal-fired plant in the power and district heating sectors using pollution abatement devices. The results highlight the relatively low cost of controlling particulates compared with either SO2 or NO. emissions. Typical Costs of controlling emissions from the power and district heating sectors Pollutant Abatement Removal Abatement technology efficiency cost ($ per annual % tonne emission avoided) Particulates Electrostatic Precipitators (ESP) 97 - 98 1 5 - 65 High efficiency ESP 99 - 99.9 20 - 90 Baghouse 99 - 99.9 15 - 65 Mechanical Collector 50 - 90 10 - 70 S02 Dry sorbet 50 - 80 400 - 3,500 Semi-dry FGD 80 - 95 600 - 4,000 Wet FGD 96- 98 800- 5,000 NO. Low-NO. burners 30 - 70 750 - 7,000 SCR 80 - 90 5,000- 45,000 Priority should be given to: * fitting particulate control devices to plants that currently have no such facilities installed: and * repairing or upgrading existing facilities that are currently not working to design capacity. I. III. Policy Reforms 21 III. POLICY REFORMS The transition from central planning to markets should help to improve not only the countries' economic perfornance in the longer term, but their environments. Among the key factors are increases in energy prices, and hard budget constraints on public and private enterprises. These provide powerful incentives to reduce waste of resources and to improve industrial "housekeeping" in ways that reduce pollution emissions. Many CEE countries have already made big strides in raising energy prices. Privatization should assist these changes, provided that liability for past environmental damage is clearly assigned, and enterprises are held accountable for all current emissions. Markets are no panacea. Targeted environmental policies will also be required to ensure that the potential benefits of economic restructuring are fully realized. To achieve the most cost-effective use of resources, the CEE countries should, where possible, rely upon economic instruments to achieve environmental goals. Existing systems of pollution charges can be developed to provide an effective incentive for sound environmental. F tices. Simple market type approaches are not just ,ealistic even in the current economic and institutional site.. ..on; they also provide the scope for large savings. Where regulatory policies are more appropriate -- especially to control emissions of heavy metals and toxic chemicals -- governments could adopt either the EU framework of standards or an equivalent system which provides a 10-20 year adjustment period. The implementation of stricter emission standards should be phased, allowing industries an extended but well-defined period to comply with them. Ambient standards should be used to guide local policy making. The greatest contribution to achieving a continuing decline in total emissions is likely to come from improving the environmental performance of old plants wvhich continue to operate in the medium term. The Effects of Economic Change on the Environment Better Environmental Policies Enforcement The Effects of Economic Change on the process of replacing existing capital equipment and Environment incorporating new technology. As a result, the average amount of pollution generated per unit of The shape of environmental policies and investments output will decline. These structural changes will in Central and Eastern Europe will be determined by take time, but they will have a large impact on the profound economic changes which are emissions over the next 10-15 years. transforming incentives, institutional arrangements Economic reform will not and need not be and the composition of economic activity. The justified on environmental grounds. Still, many transition from central planning to markets will (though not all) of the policies which make up the eventually improve both economic performance and typical reform package in Central and East European environmental performance. In the past, production countries -- macro-economic stabilization, pricing involved massive waste of resources. Now, reforms, privatization, industrial restructuring and incentives which encourage the more efficient use of trade liberalization -- can be expected to contribute to energy, minerals and water will also reduce air and reducing environmental degradation. Environmental water pollution. As enterprises have to take account considerations simply reinforce the case for of the true opportunity cost of capital, the emphasis implementing these reforms as rapidly as is politically will shift from large capital investments that use the possible. products of heavy industry towards a continuous 22 III. Policy Reforms Privatization may contribute towards transformation. The earlier the initial decline is improving environmental quality, provided that clear, reversed, the more stringent will have to be the credible and enforceable environmental regulations policies that are implemented to prevent a worsening are in place. However, competition often determines in environmental conditions. the behavior of enterprises as much as the form of ownership. Policies to promote competition, How will the economic transfonnation of Central and including breaking up large monopolies, are as Eastern Europe affect the environment? important as privatization in obtaining the best response to higher energy prices, pollution taxes or To answer this question, a number of scenarios have regulatory measures. Privatization clarifies the tasic been prepared for the Action Programme, based on of management, and allows it to concentrate on analysis of the structural, institutional and operating efficiently and profitably subject to meeting microeconomic changes expected to occur in the environmental constraints. There will, of course, be economies of Central and Eastern Europe over the bargaining over what those constraints should be, but next two decades. Box 3.1 Short-term threats to the environment in * Weaker enforcement on controls on Russia during the transition hunting and fishing plus intrusion into protected areas by poachers may deplete wildlife stocks, In its recent State of the Environment report for especially of some endangered species. This '992, the Russian Government identified the danger would be exacerbated by a shortage of following ways in which the current economic money to staff the agencies responsible for the difficulties might threaten the country's management of protected areas. environment: * The decentralization of government responsibilities might encourage local authorities * Inadequate expenditures o n to assign rights to exploit natural resources maintenance and capital replacement could lead without imposing appropriate requirements to to serious environmental accidents and more protect the environment and without ensuring routine spills and wastage. that the natural resources are properly managed. * A shift to poorer quality raw materials and, with higher prices for exportable oil, to coal The Government's primary recommendations may lead to greater dust emissions and the concentrate on (i) the need to avoid creation of more solid waste. environmental accidents caused by bad * An increasing risk of illegal logging, maintenance and management, and (ii) the more reliance on clear-cutting and poorer forest importance of providing resources and management could threaten large areas of the strengthening the institutions concerned with Taiga, especially in Eastern Siberia. protecting natural resources such as timber, wildlife and rare habitats. the negotiations will take place between parties with Forecasting the impact of economic clearly defined responsibilities. transformation in Central and Eastern Europe on the Economic decline in Central and Eastern environment is fraught with difficulty. Even short- Europe in the last three years has already resulted in term predictions about the macroeconomic a reduction in emissions and this will continue up to consequences of stabilization programs or about the at least 1995. However, this decline provides behavior of enterprises have proved notably hard to nothing more than a temporary abatement of the get right. Without some idea of the nature of the pressure on the environment. The critical question is changes that are likely to occur over the next decade, whether emissions can be stabilized or reduced though, huge amounts of money could be wasted on further as economic activity begins to recover from investments in environmental improvements which the deep recessions that have accompanied economic turn out to be redundant. An important by-product III. Policy Reforms 23 of economic change will be extensive environmental aggregate economic growth, while, within the gain: The environmental damage associated with industrial sector, there will be a shift from activities excessive energy use and with some forms of heavy which are important sources of air pollution to those industrial production will fall sharply. It is therefore which discharge water pollutants. The growth in important to have a vision of what the economies will private transport and in packaging will pose new look like in 5 or 10 years' time. problems for cities and towns in coping with traffic Some of the short-run effects of economic pollution and municipal waste. transition on the environment may be harmful. This 0 The past emphasis on meeting output has particularly worried the Russian government that targets meant that many industries were notoriously has considered how to address these problems wasteful in their use of materials (including energy), (Box 3.1). The concerns Russia identified are mainly labor and capital. Simple changes in the organization related to weaknesses in the framework of of production will allow enterprises to reduce such environmental policy and under-funding of waste, to eliminate over-manning and to get more government monitoring and enforcement activities, output out of the same stock of capital. The rather than to the economic transformation itself. economies will thus be able to produce more final Broadly, the economic transformation is likely output for the same volume of resources and other to affect the CEE economies in two ways. First, the inputs, thereby reducing the amount of waste they structural changes will reduce demands on the generate. environment. These changes will be encouraged by * Economic restructuring will also eventually the removal of energy subsidies and the proper lead to new investment. The replacement of old pricing of energy, and by privatization. They will plant and equipment by new capital embodying bring about new investment in less polluting modern technologies brings an environmental "free technologies. Second, when growth resumes, it will lunch."' In response to the need to meet stricter create new environmental pressures. The rest of this environmental standards in the West, the designers section looks at the way structural change will and manufacturers of capital equipment and plant influence the environment, and at the main findings have developed new processes and machinery which of the scenarios. These show clearly that economic generate much lower emissions than in the past. reform needs to be backed up with environmental Even without a need to meet tighter emission limits, policies. Later parts of this chapter discuss the range it will be economically efficient for industries such as of policies from which CEE governments can choose. textiles, paper, chemicals and metallurgy to invest in The most important structural influences on capital which will bring substantial reductions in their environmental prospects in the short and medium average levels of emissions per unit of output. The term are as follows: main scenarios presented below are based on these environmental improvements, combined with the * The shares of national income devoted to assumption that new plants will be required to meet investment have already declined dramatically. Even emission standards typical in North America and as the economies recover, investment shares, Western Europe (though not in West Germany where particularly in heavy or basic industries, will be standards are stricter). much lower than in the past because investment was so inefficient. This implies a permanent drop in the Removing energy subsidies demand for the output of heavy industry relative to national income. One of the main forces driving structural change, and * The composition of private and public one of the most painful but essential features of the consumption will gradually change in a number of market reforms in all countries in Central ard ways. Overall, a smaller fraction of income will be Eastern Europe is to raise the basic level of energy spent on industrial goods, and a higher share on prices paid by industry to world market levels or processed foods, paper and chemical products, and higher. This can be justified solely on grounds of transport equipment. Spending on services will also economic efficiency (see Annex 4) but the changes grow rapidly. The implication of these changes is will have large environmental benefits. The after-tax that growth in industrial output will lag far behind prices paid by industry and households may rise 24 III. Policy Reforms Box 3.2 Privatization and Environmental Liability Uncertainty about responsibility for past aspects of large individual deals and to provide environmental damage is a significant general guidance in the case of medium and small discouragement to foreign investment, especially enterprises. Practical considerations imply that, in heavy industries. A survey of large North in one form or another, governments willbear the American and European corporations conducted costs of dealing with past pollution. The funds by the World Bank and the OECD found that and staff required to carry out detailed companies that had made o, considered environmental inventories dictate that these investments in the region rated environmental should be limited to a small number of the largest risks on a par with many factors usually enterprises, especially when foreign investment considered important in foreign investment is involved. decisions, including exchange rate risks and Once an environmental audit has been political risks. The companies most concerned completed, then the terms of the privatization about environmental issues were companies in can specify the environmental clean-up that is to highly polluting industries (mining, chemicals, be undertaken by the new owners and the pulp and paper, petroleum refining, and ferrous discount built into the sale price to take account and non-ferrous metals), companies with less of the costs involved. Both parties must be investment experience in the region, and realistic in the negotiations. Potential purchasers, companies that follow relatively strict corporate especially those from countries with very strict environmental policies. environmental regulations, may be inclined to At the same time, not enough attention allow for a more comprehensive clean-up than has been paid to problems of environmental the government would choose to undertake. On liability in domestic privatization programs. Part the other hand, the new owners will have an of the problem is an absence of information about incentive to minimize the costs of meeting their the causes and extent of past damage. In clean-up objectives and should be able to act theory, with complete information, the issue is more rapidly. On isolated sites where the nature straightforward: either the government accepts of past pollution can be clearly identified, the responsibility for dealing with the consequences balance of advantages is likely to lie with of past damage or the obligation is transferred accepting a lower privatization price in return for along with the assets of the enterprise and a commitment to undertake specific remedial reflected in their price. In practice, it is the lack actions. Where multiple sources or great of information about what has been done in the uncertainty is involved, governments would be past that gives rise to the greatest difficulties. It best advised to retain the responsibility for is essential that responsibility for past rectifying past damage. environmental problems be decided before After privatization, enterprises must be privatization, when property relationships are still fully responsible for the consequences of their simple. This requires: (a) clear legal rules -- either emissions. If they inherit old, polluting plant and in legislation or in specific contracts -- defining equipment which must be modified or replaced to how any costs will be allocated; (b) where meet current environmental standards, this will possible, technical information on the extent of be reflected in the value of the assets. The pre-existing contamination and the potential costs government for its part must be willing to define of rectifying the damage; and (c) an the environmental standards that the privatized administrative decision about what remedial enterprise is required to meet and the period of action is required. The extent of past liability adjustment that will be permitted. To ensure that should be established as clearly as possible at the this means something, Ministries of Environment time of ownership transfer to avoid the kind of must set up monitoring systems to track the uncertainty and protracted legal battles that can performance of newly privatized enterprises as otherwise be expected in the future. well as those remaining in public ownership. Ministries of Environment will need to work with the authorities responsible for privatization to negotiate the environmental 111. Policy Reforms 25 further, to Western European levels, if governments price of coal will no longer be so attractive), and that decide to impose taxes on the consumption of energy in turn will tend to reduce emissions of most air either to generate revenue to reduce fiscal deficits pollutarts. In Russia and other FSU countries, the and/or for environmental reasons. The extent of the relative price movements will bring less clear adjustment in real energy prices will vary greatly environmental benefits, though they are likely to across countries and between industrial and household encourage the continued substitution of gas for other consumers, since households are more dependent on fuels. subsidized energy such as electricity and district heat. The difficulties of making the adjustment A comparison of prices paid by industrial users prior should not be underestimated. Provided that the long to the reforms with those typical in Western Europe run goal of raising energy prices to market levels is implies that the range of the necessary increases in clearly promulgated, it is reasonable to phase the energy prices relative to the prices of other industrial increases over a period that reflects the economic and goods varies from less than 25% in Hungary to over social costs of adjustment. Some countries have felt 300% in the former Soviet Union. All countries, that their economic situation does not permit a including Russia and other states of the former Soviet gradual series of price increases, while the Union, have raised real energy prices substantially circumstances of other countries may be such that over the past 2-3 years.2 As a result, the process of concerns about a rapid rise in unemployment are adjustment is largely complete in Hungary, is well more important. The crucial issue is that this advanccd in the Czech Republic, and Poland, but has progress should be sustained with, if necessary, only just started in the Russian Federation and other transitional assistance to vulnerable enterprises and FSU countries. households which bear the brunt of the adjustment. Allowing energy prices to rise to market However, such assistance should not be tied to levels will have two effects which have a bearing on current levels of energy consumption so that those air pollution: concerned have an incentive to conserve energy wherever that is possible. i It will promote energy conservation, so that the energy intensity of economic activity is likely to Other sectoral policies fall in most countries by one-half over the next decade; and While energy subsidies stand out for their overall * It will also bring about a shift in the impact on the environment, many other sectoral composition of fuel use. policies are both economically and environmentally undesirable. In agriculture, fertilizer and pesticides Historically,governmentshaveencouragedthe subsidies have encouraged the careless and excessive consumption of domestic sources of energy. In most use of these inputs with the result that agricultural Central and South-East European countries this run-off has had a serious impact on both surface and means that coal was favored in order to reduce ground water quality in many CEE countries. dependence upon imported supplies of oil and gas. Special assistance for intensive livestock operations In the Russian Federation, the preference was for oil has greatly exacerbated this problem in some regions. and, more recently, for gas whose environmental The reduction or removal of these incentives over the effects are more benign. last three years has led to a marked improvement in There will be large relative shifts in the prices rural water quality in Poland, Bulgaria and the Baltic of various fuels. The prices of coal in Bulgaria, the states. Czech Republic, Hungary, Poland, and Slovakia have Natural resources used to be underpriced in to rise much more than either oil or gas prices to all of the CEE economies. As a result, economic come into line with West European prices. As a considerations played little role in decisions about the consequence, significant increases in electricity and exploitation of reserves or the use of natural heat prices will be required (because these are a resources as industrial inputs. It was common to function of coal prices). These changes will mine very low grade reserves, thus causing encourage substitution towards oil and, especially, disproportionate environmental damage per tonne of gas in all uses including power stations (because the concentrate. At the same time, recovery rates were 26 III. Policy Reforms typically low so that the residual metal contents of Scenario analysis spoil heaps was high which led to continuing problems of heavy metals leaching into rivers, lakes Key results from the scenario analysis are shown in and groundwater. Similar problems characterized Annex 3 and Map 4.3 These are taken from two forestry operations despite the centralized control of complementary studies carried out by R!VM in the State Forestry Services. On the other side, the Netherlands4 and by the World Bank.' The World metallurgical, pulp and wood processing industries Bank study, based on a detailed industrial model had little incentive to economize on their use of raw summarized in Annex 3 focused on the links between materials. Many of the environmental problems the nature of economic and industrial reform and the associated with these industries can be traced to the environment. On the other hand, the RIVM study neglect of simple measures designed to reduce the used a slightly different model to focus on the waste of raw materials or of intermediate products. technical possibilities for reducing emissions and on Audits of large plants in CEE countries have the spatial distribution of pollution. This study shows identified an enormous number of (often highly) how economic reform combined with different profitable opportunities to reduce losses of inputs or environmental standards affects the average to recover valuable materials from waste streams, concentrations of key pollutants across the region and which will generate significant environmental benefits provides the basis for identifying how policy may provided that natural resources and other inputs are alter conditions in environmental hot spots. efficiently priced. AIR POLLUTION. The results of the scenario Fiscal policies analysis show that the environmental benefits of economic reform can be high. In many countries, The transition from central planning has caused a total emissions of particulates and sulfur dioxide fiscal crisis in most countries as traditional sources of decline by 70 percent or more in the period 1990- revenue have collapsed while governments find it 2005, even if their Gross Domestic Product recovers difficult to collect new taxes. Government spending to pre-reform levels. Declines of 50 percent or more on environmental protection has come under great in other air pollutants such as NOR, air-bome lead pressure. In an attempt to offset any public and cadmium are likely. However, in order to expenditure cuts, Ministries of Environment and sustain these declines over time, and to achieve them other environmental groups have sought tax in countries where some pollution levels are very privileges for environmental expenditures by high to begin with (especially in the FSU), policies enterprises and other private bodies. Experience will be needed to restrict emissions below the level suggests that these efforts are likely to be self- that can be attained at a negligible cost by modern defeating. Special tax privileges for one sector technology. In particular, emissions of NO, and lead rapidly proliferate, so that their ultimate effect is to may grow rapidly in the next century as a result of encourage rather than discourage activities which traffic growth unless measures are adopted to cause environmental harm. During the transition the improve the environmental performance of motor prime concern must be to eliminate tax and other vehicles and/or to limit their use in polluted urban incentives which damage the environment. Once this areas. has been achieved, the next step is to penalize such The crucial question is whether tighter activities by, for example, imposing heavier taxes on emission standards should be imposed on all plants or leaded gasoline rather than on unleaded gasoline or only on new or rehabilitated plant and equipment. on other highly polluting fuels. Such measures The scenarios show that, for most pollutants, the improve the government's budgetary position while environmental gains from imposing EU standards on reinforcing the incentives to reduce environmental new capital alone are modest. In order to achieve damage. the very large reductions in emissions that are shown to be possible by 2010, it will be necessary to insist on retrofitting or scrapping old capital which does not meet these emissions standards. The costs of accelerated capital replacement would partly be 111. Policy Reforms 27 covered by the greater efficiency of new capital, but if enterprises improve their environmental nonetheless the financial burden is likely to be large. performance in these ways, their economic results are A program that requires retrofitting or capital also likely to get better (chapter V provides some replacement for all plants in hot spots but not specific examples). It is crucial that governments elsewhere would certainly offer the most cost-effective should not direct all of their resources -- human as wayforward if governments wish to go beyond what well as financial -- towards new investments or can be achieved by imposing stricter environmental enterprises, since remarkable improvements can be standards on new or rehabilitated plant and equipment made if the managers of old plants are pressed to alone. make improvements and rewarded appropriately Projections such as these show what can be when they succeed. achieved, given the technology that is readily Costs must play a central role in setting available in the West, but they do not tell us how it emission reduction targets. It is much cheaper to should be done. Emission standards are only one install dust collection and filtering systems on both possible instrument of environmental policy. The new and old plant than to install some kinds of sulfur analysis later in this chapter indicates that other or NO, emission controls, and the benefits are likely instruments may be preferable on economic or to be higher (see chapter 11). Thus, it is sensible to institutional grounds. Further, the fact that emissions aim for larger reductions in emissions of particulates, could be reduced by the amounts shown does not air-borne lead and heavy metals than of gases. The imply that this should be the target for environmental relationship between the costs of control in new and policy in all or any of the countries. For example, old plants is important in deciding how far to go in even stricter emission controls via the application of retrofitting or scrapping old plant, which in turn Best Available Control Technologies (BACT) would determines the length of the transitional period that reduce average emissions per square kilometer in should be allowed and the stringency of the Central and Eastern Europe to a level only one-fifth intermediate emission standards. of that in Western Europe because of differences in The scenarios show that large sources such as income per head and population density. A power and heat plants and heavy industrial plants BACT-approach would, therefore, make sense only account in some countries for nearly 80 percent of in regional hot spots, even if the goal is to achieve dust and sulfur dioxide emissions and 50 percent of ambient environmental conditions equivalent to those lead emissions (Annex 3). Thus, applying EU in Western Europe. standards (or their equivalent) only to large sources The phasing of stricter environmental controls will achieve almost as much as applying theni to all must be considered carefully. To the extent that a sources, large or small. That is just as well: in country is going to rely upon the application of general, it is much easier to monitor and enforce stricter controls to new plants, it is essential that environmental policies that apply to a small number appropriate standards or other instruments should be of large sources than to many small sources. Some introduced before investment recovers after the instruments -- e.g. differential fuel taxes, regulations trough of the economic recession is past. The concerning fuel specification or vehicle equipment -- scenarios suggest that environmental policies and can be applied uniformly to all sources but substantial investments which reduce emissions will reinforce the resources are needed to ensure that they are not effects of economic reformi and restructuring. nullified by poor maintenance. Economies of scale Some old and highly-polluting plants will be in control technologies combined with institutional allowed to continue operating because the social costs considerations mean that environmental policies of closure are too large to be contemplated. Even should focus on large sources initially. This needs to so, it is possible to insist that such plants improve be carefully distinguished from public environmental their environmental performance without committing investments which may in some cases be more any significant amount of investment. Large gains appropriate in the household and small-scale industry can be achieved by simple "good housekeeping" sector (Box 3.3). measures -- better maintenance, mending leaks, To control emissions of NOR, VOCs and lead installing better controls, insisting on stricter from vehicles will eventually call for the installation standards of plant and process management. Indeed, of catalytic converters on all automobiles. This will 28 Ill. Policy Reforms Box 3.3 Reducing emissions from coal-burning 3. It is desirable that the reduction of emissions from low chimney stacks should be 1. Over the medium-to-long term, faster than that which would occur as a result of households and other small-scale users of coal economic forces alone (see 1). It is therefore are likely to switch to gas and other fuels. legitimate for this to be part of a public Coal-burning will therefore become increasingly investment program; confined to large users (as in Western Europe); 4. At the same time, however, 2. In the short run and during the environmental standards and policies should be transition, the damage to the environment and to used to ensure that large coal users reduce their health. from the use of coal by small businesses emissions. Enterprises and utilities should be and households will continue to be high, partly encouraged to internalize the environmental costs because these users will not be able to afford to of their activities and should generally finance change; their own investments (see chapter V). take a considerable period to come into effect. In the they should not be neglectcd on this account. It is short run, product standards can be changed to therefore important that Ministries of Environment reduce the lead content of gasoline. Indeed, should work with Ministries of Finance, Industry, automobiles without catalytic converters can operate Privatization and Health to ensure that environmental on unleaded gasoline. Controls on vehicle emissions considerations are built into decisions about which will be required in due course because of the plants or enterprises in the public sector should be expected growth in traffic volumes, but these are not closed and which should be allowed to continue to an immediate priority and could be left until after operate. By affecting the pattern of closures and the 2000 which allows time for the efficiency and cost of conditions which must be met before plants receive control equipment to improve. assistance to support their continued operation, the environmental authorities can have a significant WATER POLLUTION. The scenarios show that impact on the damage caused by old plants. emissions of BOD and other water pollutants barely decline or rise after 1995, even if large reductions in Better Environmental Policies industrial emissions occur. Households and small sources dominate the discharge of these pollutants Most Central and Eastern European countries have and the only effective solution is large scale environmental legislation which could be used even investment in municipal wastewater treatment. This now to bring about improvements in environmental will take several decades and the effect on water conditions. In the past, local and national quality will vary greatly from place to place. It is governments were unwilling to enforce their own thus essential to ensure that scarce resources are rules because priority was always given to allocated to maximize the improvement in ambient maintaining levels of production. As more power is conditions by choosing the most cost-effective given to environmental agencies at a local level and methods and standards of wastewater treatment. as governments disengage from direct involvement in the ownership and management of industry, it should CONCLUSION. The lesson of the scenarios is become possible to establish an effective system of that structural change alone will not secure long-term environmental regulation. However, the choices will environmental quality. But governments will not find be difficult. With falling output and rising it easy to phase in strong environmental policies unemployment, the authorities may be understandably while their economies are in transition. The costs of reluctant to enforce strict environmental rules if that environmental damage, especially to human health, means closing down industrial plants. are as real and as potentially large as the other Once environmental priorities have been social costs of industrial restructuring. They tend to drawn up, policy instruments have to be chosen. The be less visible and more long term in character, but choice is sometimes posed as one between 111. Policy Reforms 29 "command-and-control" (CAC) approaches, which complement to -- emission limits, provided these are use regulatory instruments such as emission permits, well enforced and take account of regional variations and "market-based" (MB) approaches which rely on in ambient conditions. economic incentives such as pollution charges or In practice, the choice comes down to some taxes, tradeable discharge permits and deposit-refund combination of the CAC and MB approaches. The schemes. Politicians and industrialists generally key problem is one of information and monitoring. prefer a command-and-control approach, because There is little point in relying upon either emission regulation offers the prospect of certainty in permits or pollution charges unless appropriate achieving pre-determined emission limits and is arrangements can be made to monitor either or both generally regarded as easier to implement. the volume and concentration of discharges. As past On the other hand, there is overwhelming experience in Central and Eastern Europe shows, evidence that, in most circumstances, it is much more mandating particular technologies or controls may be costly to achieve some level of emission reductions ineffective if poor operating and maintenance with command and control rather than market-based practices are allowed to render them partially or instruments. The reason is that the cost of cleaning wholly ineffective. In all cases environmental policy up emissions is not the same for all sources. has to rely upon a reasonable degree of voluntary Therefore, the cheapest method of meeting the compliance by enterprises and pollution sources as a reduction target is to encourage those with the lowest purely adversarial relationship is likely to delay the costs of clean-up to reduce their emissions by more implementation of, or undermine the effectiveness of than those facing higher costs. This may appear to both regulatory measures and market incentives. be inequitable to the different industries or plants For mass pollutants -- such as dust, sulfur involved, but why should different rules apply to dioxide, BOD and suspended solids -- and/or large responsibility for environmental cleanup than to other sources, market-based approaches are both feasible aspects of economic production: industries invest in and attractive, especially where there is a range of specific countries and locations where they have a production processes and control options or where comparative advantage in terms of the costs of technology is changing rapidly. For micro-pollutants physical inputs, labor and capital. Similarly, and/or small sources, the problems of monitoring are polluters should clean up more where they have a much more intractable and either specific regulations greater comparative advantage. This is an essential or indirect market incentives via the cost of inputs condition for economic efficiency. may be the only effective alternatives. Since there The severe financial constraints in Central and may be substantial uncertainty about the costs and Eastern Europe suggest that the governments in the consequences of adopting alternative instruments, an region might have to give more serious consideration important consideration guiding the choice must be to market-based instruments than has been usual in the relative costs of making mistakes, that is, of Western Europe. Moreover, some of the imposing too strict controls or achieving too little environmental issues which are receiving attention -- reduction in emissions. such as wastewater treatment or acid rain -- are Detailed assessments are needed of the among those where the costs of relying on CAC suitability of different comrbinations of instruments approaches are particularly high. for dealing with various environmental problems in Even though CEE countries have embryonic Central and Eastern Europe. These must focus on markets at best, the use of MB instruments is not as practical issues of implementation as well as an unrealistic as might seem at first. In several of the economic assessment of the relative costs of the countries in the region, there is paradoxically a fairly alternative approaches.6 But at this point, it is long tradition of environmental charges which have possible to reach some general conclusions: been applied with varying effect. Moreover, there may be institutional mechanisms (e.g., negotiated * A regulatory approach is usually the right emission permits) for simulating the use of way to deal with micro-pollutants such as heavy market-based instruments, until such time as these metals and most toxic chemicals. The costs and can be applied directly. It is important to note that difficulty of monitoring emissions of such pollutants this is not necessarily a substitute for -- but rather a are large, the costs of making mistakes often high, 30 III. Policy Reforms cost. This includes air pollutants such as Box 3.4 Finding the most efficient way to reduce dust, sulfur coxide, nitrogen oxides as well environmental pollution as water pollutants such as organic material, suspended solids and some heavy metals. Setting a broad environmental quality goal and allowing Where pollution charges have been applied enterprises to find the most efficient way to meet that goal in the past in CEE countries, they have can be far more effective than introducing regulations which usually been set too low to cause any change prescribe specific controls for specific sources of pollution. A good example is provided by a refinery of a major of behavior among enterprises; United States oil company which was forced as a result of 0 Tradeable discharge permits have narrow regulations to solve relatively minor pollution threats an advantage over pollution charges in that at major expense while far more important problems were they offer relative certainty about the total neglected. level of emissions. However, they can offer Specifically, the oil company was required to spend an effective alternative only if the number of US$31 million to rebuild the refinery's waste water sources within the area covered by the treatment plant to prevent 3 tons of benzene, a toxic permits is sufficient to sustain a reasonable chemical, from evaporating into the air annually. At the level of permit trades without any one same time, 15 tons of benzene pollution annually is source having a disproportionate influence evaporating from a part of the plant not yet addressed by the ou ha a dipoprin influence environmental regulation: the marine terminal on the river ung tre permit eenin th where ships unload oil and load gasoline. Controlling usmg tradeable permits has been m the benzene pollution there would have cost only about US$6 United States. There a scheme for phasing million. But oil company officials will not do anything until out lead in gasoline was successful, but the regulations are made final in two or more years. The other schemes have been less so. The 1990 reason for the reluctance is that the regulations now are so Clean Air Act is expected to lead to a large specific in defining how a company should control pollution increase in the role of permit trading in that if the equipment did not exactly fit every requirement, meeting overall targets for reducing it might have to be dismantled, making the investment a emissions of sulfur; waste. 0 The principal problems in introducing market-based instruments arise I from the distributional consequences of alternative levels of charges or permit while the range of control costs seems to be relatively allocations. It may be necessary to adopt transitional small. Appropriate regulation includes technology arrangements which mitigate the immediate impact of standards which require enterprises to install certain the new control system on existing sources. For kinds of process or end-of-pipe controls; instance, pollution charges could be increased * Emission standards or limits may be used gradually or a substantial share of permits could be either to mandate use of a specific technology or as allocated to existing sources. Such provisions may instruments to achieve a desired level of play an important role in ensuring that proposed environmental quality outside the plant concerned. schemes are politically acceptable. Until recently, The former has been the usual approach in Western environmental policies in the OECD economies were Europe while the latter was the intention of based primarily on CAC approaches, but there is legislation in the former Soviet Union, though it was now a significant shift towards greater reliance upon rarely effective in practice. Since continuous market incentives as the costs of meeting stricter monitoring of emissions may not be possible or may environmental goals have increased. Countries such be prohibitively expensive, it is common to rely upon as the United States, Netherlands and those in random spot checks or a regular schedule of Scandinavia have put tradeable permits, effluent intermittent monitoring to enforce the standards. charges or environmental taxes at the core of their * Pollution charges -- which have a tradition policies to tackle major environmental problems; in a number of CEE countries -- can be used in 0 Product charges and deposit refund dealing with emissions from large or medium schemes have been used with considerable success in industrial plants that can be monitored at reasonable many countries to deal with various types of solid III. Policy Reforms 31 waste and to encourage recycling of glass and environmental expenditures via an Environment Fund aluminum. This approach is now being expanded to or an equivalent arrangement. While linking control the disposal of hazardous wastes in Thailand revenues and expenditures is generally not and other proposals are under consideration recommended -- the effect may be to induce elsewhere. There is considerable scope for inefficient taxation or spending -- the loss of introducing similar arrangements in Central and economic efficiency may be a political price worth Eastern Europe in order to provide appropriate paying in order to introduce an effective system of incentives to reduce the generation of waste as well pollution charges. So long as cost-based fees are as to ensure that it is properly managed. used to finance the fundamental regulatory functions, it does not matter too much if the rest of the revenue Polluricn charges from pollution charges is used solely to finance environmental improvements. A fall in the amount Several countries in Central and Eastern Europe -- of revenue collected would indicate a decline in total including Bulgaria, the Czech Republic, Hungary, emissions and thus in the clean-up expenditures, so Poland, Russia, Slovakia and Ukraine -- have that the arrangement provides a greater degree of legislation which allows Ministries or provincial flexibility in setting expenditure levels than is typical governments to impose emission fees and fines on for most other assigned taxes. polluters. In many other countries -- for example, Poland has raised the level of its pollution Belarus and Croatia -- such legislation has recently charges by about 10 times in real terms since 1990, been introduced or is being actively considered. providing a genuine incentive to reduce emissions. Such emission fees and fines can form the basis for The revenue collected in this manner goes to national efficient systems of pollution charges. and provincial environment funds and is used to In most countries, it will be necessary to raise finance various environmental investments. There the level of the charges dramatically and then to nave been problems in collecting the revenue from enforce payment of the charges levied. This will many enterprises whose financial situation was, or provide a very powerful incentive to enterprises to was claimed to be, such that they could not make the find low cost methods of auating their emissions, payments for which they were liable. In the even if th.y cannot afford to make large investments Katowice region -- one of Poland's most polluted (but in new plant and technology. Often, good wealthiest) areas -- only 26% of all environmental environmental management is just a reflection of fees and fines were collected in 1992. The Ministry good industrial management. The great merit of of Environment announced in late 1992 that pollution pollution charges is that they mobilize the ingenuity charges would be reduced temporarily by 90 percent and skills of plant managers while they avoid the to allow industries time to adjust. The negative danger of enforcing technology standards which may reaction to this decision from enterprises and from be unnecessarily costly or rapidly outdated (Box 3.4). environmental groups has demoi.strated that the A clear distinction must be drawn between (a) pollution charges were having their intended effect of fees for emission permits or pollution charges whose encouraging polluters to invest in reducing their purpose is to cover the administrative and monitoring emissions (some enterprises had apparently already costs involved in any system of environmental starned to make investments in response to these regulation, and (b) pollution charges which are linked changes and perceived the reduction as unfair). to the amount of damage caused by emissions. Abrupt changes in the level of charges disrupt plans Reliance upon cost-based fees to finance regulatory based on the assumption that the charges will be expenditures are common in Western Europe and much higher than in the past. should be regarded as a minimum requirement in the Pollution charges are generally set too low. CEE countries to ensure that the environmental In Poland the charges for emissions of saline water authorities have sufficient funds to fulfill their basic are not set high enough to force the mines concerned responsibilities for monitoring and enforcement. to control their discharges (though the sharp increases Pollution charges generate additional govemment in charges has prompted the mines to give serious revenue that can be used for any purpose, though in consideration to more limited measures designed to practice it is usual to use the revenue to finance reduce emissions). In this case the government was 32 III. Policy Reforms concerned that charges set high enough to reflect 0 An efficient system of pollution charges fully the damage caused by saline water would cause that reflect the environmental damage caused by the mines to shut down, destroying jobs and forcing emissions will impose a heavy fiscal burden on greater dependence upon imported energy. While enterprises that have never had to meet strict this view is understandable, it neglects the fact that environmental standards in the past. Since the the costs of the damage caused by saline water are financial position of many enterprises is already equally real even though they may be not be weak, enforcing payment may lead to bankruptcies immediately apparent to the many enterprises and while a failure to levy the charges due will other organizations which have to bear them. undermine the credibility of the system. Box 3.5 Financing Environmental Protection in the Russian Federation In the last three years, the Russian Federation The Ecological Funds were expected to receive at has been establishing a system for financing least 80-90 billion rubles from pollution charges environmental improvements which does not rely in 1993 -- equivalent to US$85 million at an upon transfers from the government budget. exchange rate of US$1 = 1,000 rubles. This Ecological Funds have been set up at federal, revenue should rise rapidly as pollution charges provincial (oblast), and local levels to channel are increased in real terms, though the decline in resources to programs of environmental the output of heavy industries such as metallurgy protection, nature conservation, scientific and chemicals will reduce the sums received by studies, technological development and the Funds. compensation for the health damage caused by pollution. The government s also negotiating a loan of US$50 million from the World Bank to establish These Funds rely primarily upon the revenue a National Pollution Abatement Fund which would generated by pollution charges (both fees and finance the foreign exchange cost of projects to fines), waste disposal fees, and other payments reduce losses of raw materials and intermediate made to compensate for the environmental products or recover valuable materials from consequences of past actions by enterprises and waste streams. Finance will be provided in the other organizations. They are empowered to form of loans which must be repaid in foreign i n v e s t in the development of currency and which will bear a commercial rate environmentally-sound technologies or in of interest. enterprises with appropriate environmental objectives. Poland's experience with pollution charges suggests lessons for other countries. Two main Both of these issues are much more acute issues must be addressed in implementing any system during the transitional period while enterprises adjust of charges: to the new policy regime than they are in the long run. Those regulations which are retained can be * The relationship between regulations and amended or eliminated to ensure that they do not economic instruments must be carefully considered. undermine the impact of the pollution charges. In Poland, emission standards have not been linked to Various arrangements can be introduced to pollution charges either in the way they operate or in cushion transitional difficulties. None is ideal, but the implied weight placed on reducing emissions of countries could consider one or a combination of the different pollutants. Enterprises are confused and following: feel that they are being unfairly subjected to inconsistent signals; * Impose a relatively low charge on emissions up to the level specified in each plant's 111. Policy Reforms 33 emission permit but require that the full charge government in general. Thus, the transitional should be payable on all emissions above that level. arrangements that are implemented must reflect the This is equivalent to the original system of fees (low authorities' willingness to follow through on difficult pollution charges) and fines (full pollution charges) cases in order to achieve their environmental goals. which was or is still operated in several countries. It It is better to accept a lengthy transitional period provides a strong incentive to reduce emissions to the than to set targets which few believe or are able to permitted level, but sacrifices some of the efficiency meet, since deadlines that are always postponed are gains which can be achieved by encouraging plants much worse than longer deadlines that are regarded with low control costs to reduce their emissions as being firm. below the level specified in their permits. For this reason, the quantity of emissions subject to the lower Financing environmental expenditures charge should be gradually reduced to zero over a period of 3-4 years; In all market economies, the balk of environmental * Apply a uniform pollution charge to all investments are financed by enterprises out of their emissions which is gradually increased over a period own resources.' Environmental expenditures must of years to the level implied by estimates of the compete with other claims on investment budgets, so damage caused by emissions. This approach enterprises have a substantial incentive to improve provides less of an incentive to redure emissions their operating practices or to find other methods of immediately, but may be more practical if emission reducing the costs of meeting their environmental permits are ambiguous or have not been issued for obligations. In Central and Eastern Europe, many sources; however, the philosophy has become deeply ingrained i Impose the full rate of pollution charges that improvements in environmental performance from the beginning, but introduce a 'banking" depend upon new investment, even though much can scheme under which enterprises can defer payment of be achieved at little or no cost by "good the charges in exchange for making larger reductions housekeeping," better maintenance, simple in emissions or paying higher emission charges in improvements irn process controls and similar future. There must be a limit on the amount that can measures. be "borrowed" in this way, so that the length of time Both economic and environmental allowed for "paying back" the deferred sum of considerations dictate that environmental policies pollution charges must be rathei short -- no more should focus on achieving the maximum than 4 years. This arrangement reflects the reality environmental benefits from the removal of energy that the government is likely to be unwilling in the and other subsidies and from other opportunities to short run to bankrupt heavy polluters which are implement 'win-win" measures. This will encourage unable to pay their pollutio.i charges. However, it enterprises to look beyond investment in end-of-pipe will be credible only if the authorities take steps to controls as the primary method of reducing emissions make clear that enterprises which fail to "repay their and will accustom them to the need to assess loans" will be closed down in future. One way of environmental expenditures on a par with other doing this might be to take out a lien on the property investments or operating expenses. The and other assets of privatized enterprises which defer government's role in financing such expenditures payment, so that their new owners cannot evade the should, as far as possible, be limited to the provision charges by asset-stripping. of loan finance on quasi-commercial terms. Strictly, this should not be necessary if appropriate incentives No system of pollution charges or other -- higher energy prices, pollution charges, etc. -- are economic instruments can change the underlying correct. However, the financial state of the banking political choices. If governments give priority to system may be such that it is unwilling to make maintaining production and employment, then medium term loans to enterprises, especially thoEe environmental policies which threaten these goals will which have not been privatized, so that government be set aside in one way or another. Adopting policies lending or government guarantees may be necessary which are not enforced will just undermine the to fill the gap in the range of loan instruments. credibility of the environmental authorities and of the 34 111. Policy Reforms Mcst countries in Central and Eastern Europe Viewing pollution charges as a mechanism for have established Environment Funds to receive and financing environmental spending has other disburse revenues from pollution charges and other disadvantages. Their main purpose is to ensure that sources. In the short run these offer a mechanism enterprises and others bear the cost of environmental Box 3.6 National Environmental Funds The National Environment Funds in Bulgaria, the Czech Republic, Hungary, Poland, and the Slovak Republic together total more than US$600 million derived from environmental fees, taxes and fines. 4 Key Features Bulgaria Czech Republic Hungary Poland Slovak Republic In full operation since- 1993 1991 1993 1989 1991 Sources of Income: - Fees, fines x x x x x - State budget x x x x - Fuel tax x - Revenues x x Types of Disbursements: -Grants x x x x x - Low-interest loans x x x x x - Guarantees x Portfolio investments x 1993 budget (US$ million) 7 100 45 440 40 Source: The Regional Environmental Center for relaxing the tight budgetary constraints on damage that they impose on the general community. government spending. They are also a way of If effective, polluters will change their behavior to lessening opposition to raising pollution charges if reduce emissions and, therefore, revenues. Funds enterprises see that revenue raised from such charges which see their role as financing specific types of is being used to finance environmental expenditures. investment have a tendency to become self- Unfortunately, both of these aspects have their perpetuating bureaucracies and they are likely to set disadvantages in the longer run. Off-budget funds charges at a level that is too low in order to which receive tied revenues such as road funds maximize revenues over the longer termn. Thus, financed by gasoline taxes have a very mixed record Environment Funds should be established with a around the world. They tend to distort government limited mandate which ensures that their performance spending decisions and, if they become widespread, is reviewed at regular intervals and that they cease to they can narrow the scope for fiscal policy to an operate after a period of, perhaps, 10 years. Their unacceptable degree. Spending for environmentai operational arrangements must take account of the purposes must eventually be evaluated on an equal fact that they control public monies and should, footing with other budgetary programs and justified therefore, be subject to the standard rules of public by reference to the benefits that are generated relative spending covering accountability, management and to the cost of raising revenue or of not spending it to transparency. meet other objectives. The role of Environment Funds in relation to general environmental policies must also be carefully 111. Policy Reforms 35 defined. In general, the disbursement of money from Countries in the region may decide to adopt such funds should be linked to implementation of the stricter standards, for example ones equivalent to priorities and meast'res identified in a National (or those applied to new sources in the European Union Regional) Environmental Action Plan. If this is not today on the grounds that this will accelerate the rate done, there is a danger that a Fund may undermine of decline in emissions from the most heavily the consistency and effectiveness of tnvironmental polluting industries. However, there is a familiar policy by pursuing its own objectives which will dilemma in following this approach. If there are probably be shaped by the ease of disbursing funds significant costs involved in meeting the stricter for investment. standards, then applying them only to new plants will have the effect that enterprises will prefer to keep Environmental standards older plants operating longer so as not to have to make the large investments in new equipment. The There are three kinds cf environmental standards result, at least in the medium term, may be higher which serve quite different purposes in environmental costs and higher pollution. One way of resolving this policy: dilemma is to require that all plants should meet the stricter standard by the end of a transitional period. * Ambient standards set maximum levels of This is the approach that is followed by European a pollutant in the receiving medium (air, water and Union directives with transitional periods that may be soil). as long as 15 years. It involves greater expenditure * Emission standards8 set maximum amounts on environmental controls but ensures that there can of a pollutant that may be given off by a plant or be no long term disparity between the environmental machine. performance of old and new sources.9 The impact of * New Source Performance Standards applying EU new source emission standards either to (NSPS) are specific emission standards -- always new sources alone or to all sources by 2010 is based on the Best Available Control illustrated in various of the scenarios described in Technology(BACT) -- in which the emission standard Annex 3. is only applied to new plants. It is crucial to set realistic target dates for the implementation of stricter emission standards. Annex 5 provides more detail on the role of these Several CEE countries have proposed or adopted different types of environmental standards. emission standards that are based on either EU or The first two kinds of standard are often German precedents. Box 3.7 shows that the EU linked. In many regulatory systems, a plant that framework of standards is much more complex than wants an emission permit may have to show that is usually understood. In several cases -- for emissions will not raise typical concentrations above example, the Czech Republic and Poland -- the the level prescribed by the ambient standard. period allowed for the implementation of equivalent Ambient standards for air quality in most standards is less than 10 years and may be as little as Central and Eastern European countries are 5 years. While the reasons for seeking better considerably stricter than EU ambient standards, and environmental performance are understandable in the the number of pollutants for which ambient standards context of long term goals of joining the EU, have been promulgated tends to be greater than is experience in Western Europe suggests that such common in EU/OECD countries. But such strict implementation periods are much too short. standards may be counterproductive. Given the Industries in Western Europe have had several limited resources for monitoring, it is difficult or decades to adapt and even now there are many plants impossible to track all of these pollutants. For all which have difficulty in meeting current emission environmental media, it would be better to adopt a standards. Lengthy adjustment periods (of up to 25 simpler set ofambient standards which reflect current years) have been provided for new member states of analytical capacity. This capacity will increase over the EU to come into conformity with EU emission time, so that ambient standards for other pollutants standards and even then it is likely that derogations could be temporarily suspended rather than repealed. from certain standards -- especially on water quality -- will need to be granted.'° 36 111. Policy Reforms Enforcement sufficient random checks to ensure that enterprises operate their monitoring systems properly. Quite In the past, enforcement was regarded as a marginal apart from the cost advantages of self-monitoring, it activity. Those responsible for it often found is an important mechanism for enhancing themselves advising enterprises how to avoid fines or environmental awareness among the senior managers other penalties rather than insisting that and other staff. Internalizing environmental concerns environmental legislation be properly implemented. in this manner will reinforce the philosophy that But investors (especially foreign investors) set great enterprises should, wherever possible, attempt to store by a predictable regulatory regime with avoid causing environmental damage rather than evenhanded enforcement of national and local leaving matters until they are obliged to take action standards. Environmental policy makers should, by external intervention. Requiring that information therefore, regard the question of enforcement as a on air and water pollution emissions be made public central one. Without adequate provisions for can also serve as a powerful incentive to comply with consistent enforcement, new legislation is not credible environmental rules. and may be seen as unfairly putting those who choose Reliance upon self-monitoring will only be to comply at a disadvantage. " possible if enterprises and other pollution sources To minimize costs of monitoring and have had some influence in the process by which environmental objectives are set, regulations are drafted Box 3.7 Environmental standards in the European Union and other instruments are introduced. This does not The EU framework of environmental standards is more than simply a set mean that they should have a of specifications of ambient and emission limits. It involves targets (some veto over such policies but it of which are not numerical) which need to be converted to workable recognizes the reality that objectives to be implemented over specified periods. To the extent the EU governments cannot enforce has established specific standards, these are usually associated with a policies which are widely lengthy phasing-in period with intermediate targets. In other words, the EU perceived to be infeasible, framework is as much a process as a product. In most EU countries, this inequitable or ill-conceived by process was initiated in the early 1 970s, and it has taken 20 years to those whom the policies achieve compliance with some intermediate targets. There are few EU emission standards and those that exist are affect. At best, the outcome subject to exemptions, For example, lignite-fired plants may exceed willbeformalcompliancethat emission limits if it is determined that lignite is an essential fue! and is effectively undermined by implementation of controls would entail excessive costs. Such a provision, the exploitation of loopholes applied in CEE, would allow some of the lignite-fired power stations in the or other ways to subvert the region to continue operating. A more important exemption is contained in goals of the policies. the directive dealing with emissions from industrial plants. This Recognizing this, the recommends the adoption of BACT provided that this does not entail process of enhancing excessive economic costs. Some of the richest EU member countries have environmental performance in developed their own ambitious sets of emissions and ambient standards most OECD countries has that allow no such exemptions. Countries in Central and Eastern Europe which seek to meet EU relied heavily upon negotiated standards could embark on the process of adopting the framework now. agreements between the The main issue then is to determine realistic and appropriate intermediate environmental authorities, targets. One of the principal benefits of adopting the framework of EU specific industries and other standards is that it could replace many existing standards, which are interested parties. These mostly too strict to be enforceable. agreements are "voluntary" in the sense that those affected had the option to refuse to participate, but at the risk that enforcement, it is important to rely upon the authorities might have imposed stricter self-monitoring by enterprises combined with requirements on them. For the authorities, the III. Policy Reforms 37 advantage of such agreements is that (a) they reduce 5. Hughes, Gordon, Economnic Reform, Industrial the costs of monitoring and enforcement which can Restructuring and the Environment (Washington, DC: The World be partly undertaken by industry bodies, and (b) the Bank, 1994). overall cost of controlling emissions may be reduced 6. The OECD's Guidelines on the use of economic by treating an industry implicitly as a bubble, with instruments in environmental policy together with a number of enterprises achieving different emission targets related publications on Westem experience of the application of reflecting their control options and relative costs. economic instruments provide valuable guidance on how pollution Peer pressure within the industry can then be quite charges, tradeable permits and similar instruments might be effective in ensuring and monitoring compliance with introduced. the agreement. 7. In the United States, over 60% of the cost of protecting the environment is paid by private facilities to comply with environmental standards. Local governments assess taxes and user Notes fees to finance an additional 20% of the cost. The remaining expenses are paid by state and federal agencies and are atso raised through taxes, user fees, and altemative financing sources such as 1. If old capital equipment were scrapped at rates typical of revolving funds. market economies, less than one-half of the existing stock would still be operating in its present m.nner after 10 years. 8. In some CEE countries, the term "emission limits" is used, to indicate that the emission standards are only in reference 2. Average energy prices in Hungary are now at or above to physical emissions from the plant, regardless of the technology West European prices. Industrial prices for coal, oil and gas in used. In contrast, Western emission standards often imply the Bulgaria, the Czech Republic, Poland, Romania and Slovakia are requirement of a type of technology. at or close to import or export parity prices. After falling during the early months of 1992, the real prices of coal, oil and (most 9. The process of phased, negotiated compliance at the local recently) gas for industrial users in most states of the former level is further elaborated in chapter IV. Soviet Union have risen substantially above their pre-reform levels. Electricity and heat prices have tended to lag behind other 10. It is interesting to compare current environmental energy prices, as have household prices for coal and gas. conditions in Central and Eastem Europe with those prevailing in However, these account for less than 30 percent of total energy the West 10-20 years ago. For example, a comparison of the Elbe consumption in most countries, so that the overall picture is one (former German Democratic Republic) and the Rhein shows that of substantial progress in raising energy prices to market levels, concentrations of k. pollutants were roughly the same in 1988 in thereby encouraging greater efficiency in the use of energy. the Elbe as they were in 1970 in the Rhein. 3. Scenario I refers to the likely outcome if only new 11. In the late 1960s, France experimented with a law that installations in CEE are equipped with Westerm European required zero discharge and imposed severe penalties for technology prevailing today. violations. The law was universally viewed as unreasonable and so was never enforced. Less control was accomplished under this 4. Bollen, J., J.-P. Hettelingh and R. Maas, Scenariosfor law than would have been accomplished with a less stringent law Economy and Environment in Central and Eastern Europe. RIVM that could have bLcn enforced. (National Institute for Public Health and Environmental Protection), Bilthoven, The Netherlands, 1994. I 1203 38 IV. Building Better Institutions IV. BUILDING BETTER INSTITUTIONS Experience in Western countries shows that successful environmental policy requires the explicit commitment of the whole government, and an open approach to setting priorities and making choices. The greatest contribution to improved environmental management is likely to come from strengthening local and regional institutions within countries -- in particular, improving their capacity for economic and financial analysis. National environmental authorities should place more emphasis on policy coordination. Substantial savings are possible by making environmental decisions at the level of river basins or air sheds. Studies for project preparation and industrial reviews need to be re-thought. 7hey should focus on those areas where scarce investment resources can provide the greatest benefits rather than offering pre-packaged recommendations based on conventional Western technologies. Substantial local participation is essential. The terms of reference for studies need to be drawn up to ensure that the resulting proposals meet clear objectives and take account of financial and institutional constraints. A Commitment to the Environment Legislative and Institutional Reform Environmental Monitoring and Information Systems Constraints on Policy and Project Implementation Management Capacity, Training and Education Developing New Partnerships and Involving the Private Sector A Commitment to the Environment Legislative and institutional reform The success of environmental policies depends on the Environmental legislation explicit commitment of the entire government backed up by the electorate. But popular commitment, In the past, all Central and Eastern European although vital, is not enough. The quality of countries had developed stringent, but not enforceable institutions is an equally important aspect of environmental legislation. In many of these environmental policy. Without sound institutions, countries, the new governments face a problem. good intentions will never be translated into reality. Some of the legal environmental requirements, A country's environmental performance is not especially the existing ambient standards for water principally determined by decrees from its and air pollution, are unrealistically strict. However, environmental authority. Rather, the environmental to downgrade them would cast a better light on the authority mediates, facilitates, and leads by environmental performance of the former communist persuasion.' In industry, better management alone governments. would solve many of the most serious environmental While the CEE countries are reluctant to problems. But the CEE countries are handicapped by soften their environmental standards, most of them do an imbalance between high technical expertise and want to redesign the system of environmental relatively weak management capabilities in their management, and often see the starting point as the environmental institutions, a situation that is passage of comprehensive environmental laws. aggravated by the general lack of incentives for These laws would set the institutional, regulatory and highly qualified individuals in government. These executive framework. In most cases the key legal are problems to which there are no easy solutions. innovations include defining the status and the IV. Building Better Institutions 39 functions of the central environmental agencies CEE countries have an opportunity to learn (Ministries of Environment or their equivalents) and from mistakes in OECD countries and to develop the local environmental authorities; introducing the more responsive institutions. In practice, this means polluter-pays-principle; designing specific policy above all strengthening the integration of sectoral and instruments; instituting environmental impact environmental institutions responsible for industrial assessments; and opening access to environmental development and energy on one hand, and agriculture Box 4.1 Key features of National Environmental Action Plans In October 1993, the Government of Canada * Undue speed to produce a document hosted a meeting organized by OECD to review as a product rather than as a vehicle for experience gained throughout the world with the achieving more fundamental objectives, would development and implementation of longer-term rather frustrate the process and prevent it from environmental plans. Much of this experience is being really country-driven. relevant to the preparation of National * National planning for sustainable Environmental Action Plans in Central and Eastern development should be seen as flexible in Europe. substance, responding to changing needs, and in The following were among the major format. conclusions of the workshop: * Major stakeholders in the society must participate both in the design and the * There exists no unique model for a implementation of the plan. country-based NEAP. Each case must be tailored 0 Determination and perseverance of to the particular situation. officials as well as the commitment and * Emphasis should be more on the leadership of politicians are essential for success. process of working out a strategy or a plan rather 0 A strong monitoring-of-performance than a plan for its own sake. The process has a capacity should be developed. value in itself. 0 Clear performance goals and (if * A good starting point is to determine possible) quantitative targets should be and improve the information base. established. information. and forestry, land privatization, tourism, and The social and economic upheavals in the transport on the other hand. Environmental agencies CEE countries impose two constraints on the should avoid becoming over-extended and instead effectiveness of these comprehensive laws. The more focus their attention on a limited set of objectives that ambitious they are, and the tougher the standards can have a significant impact on the policies they set, the greater the danger that the turbulence of implemented by the sectoral ministries. transition may make it difficult to implement them. If, on the other hand, they are written in a flexible Institutional adjustments manner, their implementation requires a series of Ministerial Ordinances or Regulations to specify the In all CEE countries, environmental institutions ned general definitions. But continuity in the policy reform. The top priorities for institutional changes process is vulnerable to changes in government. As should be: (i) shifting responsibilities for a result, enforcement is undermined. environmental management from central to local Besides, when comprehensive environmental authorities; (ii) increasing coordination among laws exist, legislators become less interested in ministries on environmental issues; and (iii) integrating environmental concerns in the economic improving the functional capacity of the reform laws. A shortage of qualified environmental environmental ministries. specialists and lawyers, and a lack of tradition of transparent legal processes may lead to the DECENTRALIZATION OF ENVIRONMENTAL introduction of key economic reform laws with little MANAGEMENT. At present, local and regional or no consideration of environmental issues. agencies in CEE countries are primarily responsible 40 IV. Building Better Institutions for implementation, monitoring, and enforcement, institutions which manage river basins. Many CEE while national authorities are responsible for countries have expressed an intent to establish river coordinating and setting overall environmental policy basin management authorities; in some countries, and objectives. Regional institutions are also these have existed for some time but need to be sometimes charged with environmental management strengthened. Financing mechanisms and channels which goes beyond local political boundaries, as is have to be developed, and the responsibility for the case, for example, with River Basin Boards in standard-setting established. Authorities should Poland. ensure -- in collaboration with municipalities -- that Decentralization is a mixed blessing for necessary recurrent costs can be met from, among environmental policy. Local governments throughout other things, user fees and pollution charges. The the region are acquiring administrative responsibilities French system of river basin agencies may provide from central governments, usually without adequate some interesting lessons to CEE countries developing powers to raise revenue. As central funding has been their own systems (Box 4.2). drastically reduced, most local authorities are now Large-scale investments should await the dependent on the limited funds that they can raise establishment of well functioning river basin locally. At the same time, they have little power to authorities which can make sound decisions on the levy their own taxes. In order to compensate for the best ways to improve water distribution and quality. shortfall in revenues, one result can sometimes be Where the development of these institutions is unrestrained exploitation of natural resources, delayed, any proposal for substantial investments in especially of those found in protected areas which are the water sector should, at the very least, be relatively unexploited. For example, there is a evaluated by experts with a brief to examine the growing number of instances, notably in Russia, implications of the proposal for the river basin. As where logging restrictions have been waived over the example of the Nitra River suggests (Box 4.5), a forests both within and outside protected areas. system-wide analysis of priorities with regard to Such exploitation is aggravated by the wastewater management alone has the potential for rejection of the concept of planning which is reducing costs by 80 percent. perceived as synonymous with centrally planned economies and therefore anathema to land use INCREASING INTER-MINISTERIAL strategy. Consequently, development master-plans COORDINATION ON ENVIRONMENT. Effective are drawn up that often ignore any previous concept environmental policy requires commitment to of planned control. Instead, they seek to maximize coordinated actions between economic and sectoral what potential the locality may offer, in order to raise ministries. Most of the countries of Central and living conditions and maintain an already frayed Eastern Europe have recognized the value of infrastructure. separating regulatory responsibilities for natural Another consequence of decentralization is resource management from resource exploitation the threat of policy fragmentation. In Hungary, for (e.g., by pla-ing regulatory responsibilities in a example, the adoption of a decentralization law ministry of environment rather than, say the ministry doubled the number of municipalities to 3,200. As of agriculture or forestry). However, the central a result, the average size and population of environmental ministries and agencies in Central and municipalities is tiny. This miniaturization often Eastern Europe have tended to be ignored by other makes it impossible to take environmental actions on central authorities. As a result, macroeconomic goals the required scale, which is generally larger than the and policies are set with little or no consideration for territory of the municipality. Since all connections their potential environmental impact. It is best to between regions used to formerly be directed through create formal mechanisms for cooperation between the central government, it is now hard to create joint the environmental agencies and other ministries and programs and implement appropriate environmental agencies. (For example, the U.K. has created a management functions. As a consequence, scarce "Green Ministers" Cabinet Committee.) resources are used in a less efficient way, without proper coordination between neighboring regions. STRENGTHENING ENVIRONMENTMINISTRIES. CEE countries need to create strong local Environment ministries need an organizational arms for national environmental agencies. In structure which emphasizes policy and coordination, particular, they need to create or strengthen the rather than implementation (which is better left to IV. Building Better Institutions 41 regional and local institutions). One technique is to resources that are becoming available in the create a senior position to deal with policy issues. reforming banking sector.2 Some western countries are devising an approach to * Develop carefully monitored programs for environmental management which considers the CEE local and ministerial officials to spend time effects on all media (air, water, wastes, etc.). In the working side-by-side with colleagues in Western Netherlands, for instance, the Ministry of institutions3, and for mid-level officials and business Environment has created two sets of staff teams; one organized around clusters Box 4.2 The French River Basin Agencies: An Example of Regional Water of issues (acidification, Management chemical hazards) and the other around target groups There has recently been an important change in the system of water rights (refineries, farmers, in France. A law of 3 January 1992 considers water as a common heritage builders). It is also and thus closely associates the users of the country's six river basins in its important to build a close management. It is based on an integrated approach with a dual objective: working relationship with satisfaction of user needs anc conservation of the natural environment. ministries of health, many The central Ministry of Environment establishes basic water policy, of which traditionally have lays down regulations and organizes overall planning in consultation with, been responsible for and assisted by, the Interministerial Water Council. Specific aspects of ambient environmental water management are entrusted to technical ministries. The "Prefets," aided by territorial public services, are responsible for local control of water monitoring. Such a and fishing. They authorize uses and discharges, apply legislation specific relationship should help to to pollution or dangerous installations, enforce compliance with ambient establish the vital link water quality standards and approve project design documents related to between health objectives water and fishing. and environmental policies Overall coordination at the level of a large river basin is provided by and investments. the Basin Committee and approved by the national authorities. The Basin The following Committee organizes meetings of users, local authorities and central institutional improvements government. It defines the policy and management of the catchment area. are desirable: It eve' jates and judges the charges and programs suggested by its executive agency, the Water Agency. Since 1967, each of the six main river basins 3 Create a First of the country has its own Water Agency. The Water Agencies raise the money to support projects to clean up Deputy Minister (or domestic, industrial and agricultural pollution through levies collected from equivalent senior) position users in proportion to the quantity of water abstracted or consumed, and/or for Environmental Policy the amount of pollution discharged. The levies are fixed by each Agency in and Regulations to shift accordance with priorities decided in each catchment area and after attention from technical to consultation with the Basin Committee. They are redistributed to local economic policy issues, and councils, enterprises and farmers to support investments in water from day-to-day control to conservation and protection. The Water Agencies do not act as project strategy development and managers for such investments. policy implementation. Each Agency implements a five-year plan which defines priorities, * Design task determines the nature of the work to be carried out, and identifies the orientd(teran aser amount of financing required. Agencies also collect data on water quality oriented (rather than sector and on human activity in the catchment area, land use, and other oriented) teams under the environmental parameters. The Agencies also contribute to research on new Deputy, to connect various environmental issues. existing departments and to provide links between ministries. executives from Western institutions to work in CEE * Create positions for financial analysts and ministries and regional offices. economists to develop new mechanisms for * Set up cabinet-level committees for environmental financing that do not require scarce environment and development, bringing together the central government management resources and that ministries of environment with economic and sectoral could build, for example, on financial and human ministries. 42 IV. Building Better Institutions o Establish temporary task forces of many CEE countries, much of the environmental data high-level officials to prepare the work for these come from questionnaires and calculations based on cabinet-level committees, and provide career and the characteristics of production processes. For other professional incentives to encourage example, in Poland 90% of environmental data is participation. collected this way, and only 10% by monitoring. * Designate staff from the ministry of Monitoring networks need to be extended in ways environment to participate in strategy development in that ensure the compatibility, comparability and sectoral ministries, and invite staff from those reliability of the data collected. The tendency for ministries to Working Groups in the ministry of state-of-the-art technology to "drive" the system environment on relevant issues. should be resisted -- equipment should be procured * Withintheministryofenvironment,create strictly to fill the information needs which, in turn, capacity for evaluating policies (especially those that should derive from clearly established policy affect industry, agriculture and infrastructure) and set priorities. Statistical methods will continue to be long-term targets for key environmental indicators. important and, in those cases, sample surveys should replace more costly census methods. Environmental monitoring and information After years of relative isolation, CEE systems countries need to strengthen the links between their environmental information systems and international ENVIRONMENTAL INFORMATION AND THE arrangements. The need for objective, comparable TRANSITION PROCESS. A substantial amount of information at the European regional level underlies environmental information is available in many of the the request by Environment Ministers at Dobris for CEE countries. However, much of it is scattered, is the first pan-European report on the state of the of variable quality and accuracy, was collected for environment. Some steps have been taken to lirk differing purposes and is often not comprehensive in national and international systems, e.g. UNEP/GEMS coverage or historical record. At the same time, the and UNEP/GRID, as well as UNEP/IRPTC. In the transition to democratic, market-based societies is framework of regional agreements such as the Baltic fundamentally altering public and private sector Sea Helsinki Convention, some upgrading and expectations of, and demands for, such information. harmonization of monitoring systems has been Environmental information is needed to set achieved. Work with international organizations like priorities; to monitor and enforce compliance with GEMS, GRID, UN/ECE, Eurostat and OECD has regulations; to integrate policy; and to inform helped improve the comparability of environmental decision-makers, the public, the private sector, NGOs information. These efforts should continue and and interest groups. should receive further impetus from the establishment The challenge is to redesign existing systems, of the European Environment Agency. upgrading the quality of existing arrangements where As the role of the state has shifted from necessary, discarding activities which do not meet architect to regulator of economic activity, the main users' needs or which are not cost-effective, and responsibility for producing environmental progressively filling in the most important gaps. One information in CEE countries has shifted from central priority should be to strengthen the availability of statistical offices to environment ministries. This has quality information in those areas with the greatest important implications for environmental information risks to human health and of irreversible systems: the objectives they serve, how information environmental change. Another priority is to ensure flows and to whom, the methods which are used. that reliable environmental information is available Environment ministries must now coordinate flows of f r foreign and domestic investors on issues such as information throughout and beyond government, to the environmental conditions at and around sites reach the new users of environmental information. where hazardous substances have been used or This will mean working with other government discharged. departments -- especially ministries of health which have traditionally collected data on ambient TECHNICAL DESIGN OF INFORMATION environmental quality -- and with the private sector SYSTEMS. Once the framework of the environmental and NGOs. They must also improve the flows of information system has been established, attention information between the central and local/regional should focus on the methods used to collect data. In levels of government. IV. Building Bcttcr Institutions 43 DIFFUSION OF ENVIRONMENTAL for frequent audits). With appropriate penalties for INFORMATION. One of the most powerful forces for violations, it has been demonstrated that high rates of environmental improvement in OECD countries over compliance are poss:ole even with tight budgets. the last 20 years has bcen increased public awareness In deciding on the number of monitoring sites and pressure. This contrasts starkly with the and stations, priority should be giver to areas with situation in CEE where information on environmental the highest ambient levels of pollutants which damage conditions was often a state secret. When data was human health. It is better to have fewer but effective disseminated publicly, it was sometimes distorted and monitoring stations than many poorly operating ones. falsified. T'his is especially true since these monitoring stations It is therefore crucial to improve the diffusion will be collecting the information upon which future of environmental information. In practical terms this environmental policy, planning, and management may mean producing regular slate of the environment decisions are based. Successful implementation of reports; developing environmental indicators; using pollution charges and fines is predicated upon multi-media communication techniques to reach a accurate information and sound monitoring, and wide audience range; preparing "user friendly," eventually reaching agreements on transboundary summary-type brochures on specific resources and pollution issues in the region will also depend on their management; promoting information-sharing more reliable monitoring. arrangements with key groups, such as professional bodies, business, NGOs and labor unions; and Constraints on policy and project implementation providing environmental information/fact sheets targeted, for example, on specific regions, investors The legacy of central planning or managers in different industrial sectors.4 Given the lack of experience with such approaches in CEE, Abandoning central planning has proven to be much this is an area where Western assistance would be easier than learning to identify, prepare, appraise and particularly useful. implement policies in a decentralized but sound manner. For many officials in Central and Eastern POLLUTION MONITORING AND ENFORCEMENT. Europe, the routine of centrally controlled resource All of the countries of Central and Eastern Europe allocation is so entrenched, that ministries often have fairly extensive monitoring systems with usually continue to design investment programs in the hope hundreds of ambient air and water quality monitoring of obtaining financial support from the West. In stations in each country. However, their operation is some cases, Western donors have tended to reinforce sometimes inefficient since measurements are not old habits. CEE countries are now discovering that always taken regularly or systematically, and after several years of "studies," financing for tangible monitoring is often carried out by different projects has fallen far short of expectations. This is government agencies and scientific research institutes generating increased skepticism about the value of and unevenly coordinated. At many monitoring sites such studies in both donor and CEE countries. for air and water pollution, equipment is either not Part of the problem is that donors do not operating, is poorly maintained, or is being operated understand how the influence of central planning by people with inadequate training. Calibration of carries over to today, and CEE authorities have existing monitoring equipment is also poor, and the difficulty comprehending arcane aspects of financing use of some manual equipment further compromises and procurement common in the West. Box 4.3 the consistency and reliability of monitoring data. provides a synopsis of the investment cycle under Much can be achieved by promoting central planning. It highlights the fact that decisions self-monitoring of continuing compliance5 by on resource allocation tended to be subjective and enterprises, with random spot-checks by the politically motivated, and took little notice ui authorities. As part of this process, the linkage efficiency and performance quality.6 between monitoring and enforcement can be Because of the "soft budget" approach and tightened. One way that has been recommended in the scarcity of equipment and mat^.;als, the several countries involves making the future investment pattern was characterized by: (i) easy frequency of monitoring or spot-checks depend on the access to finance; (ii) rapid project design (with few past record of compliance (e.g., sources found in studies, typically amounting to less than 5% of violation twice in a row could be put on a watch list project costs); and (iii) slow impleme,.tation. 44 IV. Building Better Institutions Box 4.3 The Project Cycle under Central Planning Identification. The first phase in the * the initial time schedule had to be investment process consisted of proving that revised, and a new starting date requested; action was economically feasible and consistent * the construction process proceeded in with the planning priorities. Although the spurts -- different tasks were carried out proposals typically originated with a municipality according to the availability of material and or ali enterprise, the project proposals went back equipment (often necessitating design changes); and forth between four key governmental * changing government priorities institutions -- the Planning Committee, the resulted in a gradual reallocation of funding sectoral ministry, the Ministry of Finance, and the towards other projects, and the amount of Ministerial Council -- before it was approved. funding available fell short of the required amount; Design. This phase tended to be short. 0 frequent postponements did serious All parties -- the municipality, the sectoral harm to project quality. Often, the project began ministry, and the design company -- were equally operation before construction was finished. keen to proceed quickly once the construction Temporary solutions tended to become project had been approved. permanent. As a result, the original plans Typically, only 4-5% of total investment became outdated, and part of the completed costs were allocated to complete the physical works needed repairs; design work. This was considered enough even * because they worked badly, projects when specific technical or geological problems could not generate sufficient revenues to pay for arose. The specialists undertaking the design operation, repair and maintenance. They were work were normally not expected to carry out therefore chronically short of money -- especially broader analyses involving a determination of if they needed hard currency -- and further design least-cost solutions, changes in scale, etc. changes were often made to avoid the need to Outside consultants were used only on rare procure parts with foreign excht. - occasions. The "economic" analysis tended to be confined to a simple financial statement of Operation and maintenance -- where construction materials and equipment. Once the practiced -- was often unable to make up for the design was completed, the product had to be problems that had occurred during construction. approved by an investment control office, and by Sooner or later, the only solution to this representatives of the municipality. accumulation of difficulties would appear to be new investments. It was often easier to start all Implementation. Although financing was over again than to improve performance. available, projects frequently could not proceed because of shortages of construction materials, qualified labor, necessary equipment, and supporting infrastructure. The consequences were as follows: Implementation delays often led to a situation in SIGNIFICANCE FOR CURRENT PRACTICES. which incomplete projects were prematurely put into The legacy of past practices influences current operation. Subsequent deficiencies in operation and investment behavior in three ways. First, polluters maintenance resulted in proposals for new capital frequently oppose actions except in cases of investments as the only solution to the accumulated emergency.7 Second, they prefer problems. Frequently, it used to be easier to launch investment-intensive solutions to low-cost a new capital investment cycle than to improve the improvements such as better housekeeping. Third, performance of what already existed. the tradition of centralized investment decision-making on a case-by-case basis (instead of IV. Building Better Institutions 45 within a broader national or local strategy) slows where local financial resources are especially scarce, down the transition of responsibilities from the and where pre-packaged recommendations based on government to the business community. conventional Western technologies may be quite inappropriate. 7The Western approach Anecdotal evidence suggests that many of the consultant studies that have been carried out in CEE In contrast, the typical Western approach involves a countries have failed to take account of the particular series of incremental steps over a relatively long local circumstances, and have been completed with period. Often, 20% or more of total project costs minimal local participation. The nature of are spent on project identification, preparation, international assistance programs has frequently design and appraisal. In the case of an industrial tended to reinforce the old central planning habits, by enterprise, the process might work as follows: pushing governments to propose specific projects, at a time when the specific problems were not clearly * review of plant operating procedures and defined, and it was not clear how they should best be management practices, and/or diagnostic tackled. A large number of consultant studies in CEE environmental audit to determine the immediate start from the assumption that a particular project priorities; should be undertaken without examining possible * "zero-cost" improverrents involving alternatives that might be more efficient. Moreover, managemrent, maintenance, and "housekeeping" such studies often ignore the lack of institutional modifications; capacity and money which are essential if the project * concurrently, small capital improvements, is to be implemented. intended, for example, to make a product using fewer Much more emphasis must be placed on the or less toxic raw materials, or to redesign equipment crucial early steps in designing a project. These are so that the waste can be re-used; as follows: 3 at the same time, a detailed environmental audit, examining long-term targets, including 0 from the outset, there should be extensive projection of likely changes in laws and regulations; consultation and agreement with the implementing 3 detailed design study of technological agencies and the project beneticiaries what improvements involving control and process changes; environmental problem is to be solved, and why. 3 implementation of these investments over Policy reforms or structural changes that affect the a 5-7 year period; and viability of the proposed project should be clearly * extended phasing-in period of the new specified. A useful first step might be to disseminate technology, including staff training and further a standardized "fact sheet" which presents small-scale investments to fine-tune and optimize the information that is of particular interest to local new process technologies. stakeholders (Box 4.4); 0 feasibility studies should be better In the West, "studies" in a broader sense designed. The terms of reference of such studies make up a significant and important aspect of the should address not only the technical case for whole process of environmental improvement They investment, but also the financial and institutional represent a way for planners, managers, and wo.-kers requirements for implementing the project. to work with each other to identify and solve the International financial institutions could be involved problem. They generally lead to innovations which when preparing terms of reference; can be justified on economic grounds alone, but 0 the chosen solution should be the most which also bring significant environmental benefits. efficient one (for such an analysis, see for example Box 4.5 describing wastewater management in the Local participation Nitra River Basin), and ideally one that pays for itself (for example, by saving energy); Environmental reviews and consultant studies are 0 greater use should be made of local meaningless unless they are carried out in close expertise. This would help to develop local skills, cooperation with the "clients." This is particularly and could provide a better understanding of local essential in Central and Eastern Europe, where circumstances and be more cost-effective than using enterprise staff need exposure to new approaches, international experts.8 To make progress in this 46 IV. Building Better Institutions Many different types of training in Bx 44 P e Penvironmental management are needed, Box 4.4 Proposed Project Fact Sheet not only in environment ministries, but also in public and private industry. T,tle and summary Objectives ("Problem to be solved") Programs are also needed to teach the Partners involved in developing project proposal public to become more actively involved in Donor (if any) making and implementing environmental Implementing agency policies. Type and amount of financing Western donors are providing (financial, consultancy, in-kind) some financial and logistical support for For technical assistance: roles of international and environmental education, training and local consultants, and share of work collaborative East-West research. The Progress to date TEMPUS program of the European Future work Commission specifically promotes links Report on assessment by implementing agency and/or rivolved between Eastern and Western universities. parties: name of assessor, and summary of results Educational assistance is available through Report on assessment by funding institution (if applicable): EdRegional Environmentalenteroin name of assessor, and summary of results the Regional Environmental Center in For studies and technical assistance: steps taken Budapest (Box 4.6), and through a US- to ensure implementation of recommendations EPA incentive for developing training courses. UNEP supports Post-Graduate Source: East West Environment Ltd.,IndependentAssessmentofEnvironmentaI Courses in Environmental Management Assistance to Central and Eastern Europe, Apr. 1993. together with Germany and UNESCO, and a Training Programme in Environmental Management for Industrial Manage:s from CEE. These initiatives, however, often are not weil coordinated either by donors direction, some donors will have to face up to the or by recipients. problem of tied aid -- more grant money should be The specific type of assistance which is most made available for qualified local consultants; urgently needed will vary according to the 0 the following points should be determined circumstances of individual countries. The in advance and in detail: how the project will be secondment of CEE country experts to western implemented, which institutions will be responsible private and public institutions (and, where for it, how it will be financed, what legal appropriate, of western experts to work in Central impediments may exist, and how the project fits into and Eastern European Environment Ministries) is one the existing policy framework. All these issues can particularly effective mechanism, provided the be dealt with only by the enterprise and/or local experts are clearly required on return to pass on their government involved, if necessary with help from the experience. Such secondments would be especially central ministries. useful for cross-sectoral issues, and for designing effective legislation and implementation procedures. Only after these steps have been taken is it Assistance to upgrade economic analysis and other meaningful to proceed to technical feasibility studies. techniques to support decision-making is a priority. Environmental education and training faces a Management capacity, training and education number of conunon problems throughout the region: The countries in Central and Eastern Europe have 0 public lack of interest, which results in well developed educational systems and a highly low sales of environmental publications and an qualified labor force. For several years, absence of media coverage of environmental issues; environmental education has been incorporated at all 0 lack of demand for environmental teaching levels, from pre-school to university. education and training (especially on a university However, the emphasis has invariably been on level) because of the relatively low priority given to technical skills, as opposed to management and environmental issues; policy-making skills, or general public awareness. IV. Building Better Institutions 47 * lack of coordination between various administration; public finance and taxation; ministries dealing witi, development of environmental privatization programs; and economic restructuring. education and training and between educational Increasing public awareness and commitment institutions; to active environmental policy should be an important * delays in providing curriculum target of education and training. It requires broad development, teaching materials, textbooks, involvement of professional educators, NGOs and the teacher-training programs, and other essentials; media. The NGOs in Central and Eastern Europe * resistance to environmental training by could be assisted in developing core teams for those managers and government officials who are not providing leadership, fundraising capacity and involved directly in environmental management, but logistical support in this area. who have a strong influence over economic reform (e.g. ministry of finance employees, factory Developing new partnerships and involving the managers, municipal authorities); and private sector * lack of experience in Western practices of managing environmental training and research, which HISTORICAL ROLE OF ENVIRONMENTAL NGOs. In leads to what Western donors see as an inadequate Central and Eastern Europe, nature conservation use of available technical and financial assistance, organizations existed for many years, but did not and therefore a reluctance to increase support for enjoy the liberty to consider broader environmental these purposes. issues. In the 1980s, environmental pollution and its effects on human health were increasingly recognized In order to promote efficient environmental as serious problems. People started to set up education and training, the countries in Central and independent environmental organizations, initially in Eastern Europe need to take four steps. They Poland and Hungary. In the Soviet Union, the should: (i) survey the existing institutions involved in Chernobyl disaster caused a sudden outburst of environmental education and training, and decide how citizens' initiatives. By the end of the 1980s, most to improve their performance; (ii) review and CEE countries had independent environmental redesign the teaching programs at all levels; (iii) organizations, legally or illegally. In several develop teaching techniques tailored to the particular countries, they acted as a focus of opposition to the audience; and (iv) evaluate financial needs, available old regimes. Many environmentalists played a role sources of funds, and the managemen. of money. in the political transition in 1989. An educational training program should be As a consequence, environment was high on developed and implemented for high level the political agenda of the first democratic decision-makers at national and local levels. It governments and in several cases, environmentalists should be designed in two formats -- for top-level became part of the new administrations and/or ministerial and business staff (ministers and deputy representative bodies. On the other hand, the ministers, and managers of big enterprises) in a traditional nature conservation organizations in most workshop format, and for middle level staff countries suffered from the trarqition, which deprived (ministerial, municipal and business experts) in them of their privileged status. As economic and formal training sessions. Particular emphasis should social problems increased, environmental be placed on providing training for enterprise organizations found it hard to keep people involved. managers in business planning, marketing and Moreover, the state of the environment could no management skills. Enterprise managers should, at longer be used to attack the old system. a minimum, understand the opportunities for combining better financial performance with energy THE CURRENT IMPORTANCE OF and water conservation. ENVIRONMENTAL NGOs. Environmental NGOs raise Environmental training could be incorporated public awareness, stimulate changes in public in all technical and financial assistance projects with attitudes and policies, put forward viable alternatives environmental impact. Elements of environmental and often implement them to set an example. In education could also be integrated in training CEE, the role of NGOs is even more important than programs in a variety of subjects, such as in in the West, for the following reasons: economics and management; local government and 48 IV. Building Better Institutions Box 4.6 Cost-effective Wastewater Management in a River Basin: The Nitra River in the Slovak Republic The Nitra is a tributary of the Vah River which enters the Danube downstream of Bratislava. Its catchment area covers about 5,000 km2 and includes about 600,000 inhabitants. Its length is about 171 km. The overall BOD discharge to the river system is about 10,000 tons/year, of which approximately 70% is of municipal origin. The water quality in the upstream reaches of the river is high. However, there is a gradual downstream deterioration due to municipal and industrial discharges. BOD may exceed 30 mg/I, an extremely high value leading to dissolved oxygen (DO) depletion at times during the summer. The purpose of this example is to illustrate the cost savings of a regional least-cost policy: Minimum Discharge Policy. The costs from imposing EU emission standards (BAT) on all municipal plants, corresponding to the minimum-discharge policy, are very high (capital costs US$64.7 million, and annual operation, maintenance and repair costs over US$14 million). Of course, water quality improves markedly (e.g., minimum DO concentration rises to almost 7 mg/I). This result provides an upper bound on costs and water quality improvements. Regional least-cost strategies designed to meet a uniform ambient standard (see table below). (i) Meeting a minimum ambient DO concentration of 4 mg/I at all monitoring points (the limit for second-class water in many European countries), the least-cost policy has capital costs of US$13.2 million -- one fifth that of BAT (a savings of over US$50 million in capital costs). (ii) To achieve a standard of 6 mg/I for dissolved oxygen (limit for first-class water), the least-cost policy implies capital costs of US$25.6 million -- almost US$40 million less than the capital costs for BAT. (iii, Finally, if a water-quality goal not deviating more than 20% from the BAT policy is accepted, the investment cost is still about US$23 million lower (the annual OMR costs are also significantly reduced). Control technologies. The different policies use alternative mixes of the following six municipal wastewater treatment technologies: M mechanical only; CM chemically enhanced mechanical; B biological; BC biological with the dosage of chemicals; BCN biological-chemical with de-nitrification. Dewatering and anaerobic sludge treatment are assumed for sludge treatment for all alternatives. The example assumes that no sewer construction is required due to the satisfactory state of the existing system. A cost summary for the different options is provided in a box in chapter V. The analysis considers 11 major point sources: 8 muniicipal and 3 industrial. The municipal sources included contribute approximately 90% of the total municip,;! BOD load to the river; the industrial source, about 70% of the total industrial load. The remaining loads are considered to be non-controllable sources. Ambient Water Capital Cost OMR Cost DO Min TP Max TN Max Quality Standard Control Policy (US$rm) ( M)5 (mg/l mg/li (mg/li none base case 0 0 0.7 1.8 7.8 none min. discharge (BAT) 64.7 14.4 6.9 0.4 4.1 DO a 4 mg/I least-cost (i) 13.2 2.8 4.0 1.3 7.3 DO ! 6 mg/I least-cost (ii) 25.6 6.6 6.0 0.7 6.7 DO 2 6 mg/l I TP < 0.5 mg/l) least-cost (iii) 41.9 10.2 6.1 0.5 5.8 TN s 6 mg/I Symbols: DO - Dissolved Oxygen; TP - Total Phosphorus content of water; TN - Total Nitrogen content of water; OMR - Operation, Maintenance and Repair; BAT - Best Available Technology; mg/I - milligram per liter IV. Building Better Institutions 49 * A strongenvironmental movementensures involve CEE NGOs in regular discussion about their that environmental issues remain on the political activities in the region.9 agenda; In particular, CEE governments should * the transition period in principle provides provide full access to environmental information and a unique opportunity to establish the basis for the right to particip.te in environmental impact sustainable development, by avoiding the mistakes of assessments. In the West, countries differ in the the West. Environmental organizations can play an extent to which these rights are granted. important role in this regard, drawing in part on the Environmental NGOs have proposed that U.S. information available to them from colleagues in the legislation and practice be followed with regard to West; access to information, and Dutch legislation and * environmentalorganizationscancontribute practice with regard to environmental impact substantially to strengthening the fabric of society. assessment. In principle, this corresponds quite They can mobilize the population and motivate people closely to the public disclosure rules of the European to take on special responsibilities. Union. THE NEED FOR SUPPORT TO ENVIRONMENTAL NGOs IN CEE. Environmental organizations Box 4.6 The Regional Environmental Center everywhere basically rely on volunteers, but the for Central and Eastern Europe (REC) economic situation in CEE has made voluntary work difficult. In any case, environmental organizations The REC is an independent, non-profit need a professional nucleus and financial resources. foundation, established in 1990 by Hungary, the United States, and the Commission of the They are unlikely, at least in the short term, to build European Union. Seven additional donor a strong financial base from membership and governments have since joined these individual donations. Governments could consider sponsors: Austria, Canada, De.nmark, Finland, financial support to such NGOs in order to assist Japan, The Netherlands, and Norway. Major them to play the necessary roles described above (as activities include grants programs, an is being done by some Western governments in their information exchange program that provides own countries, as well as by the European Union). access to environmental reports and In this context, the bilateral and European databases, a junior fellowship program, and a Union support to institutions like the Regional REC initiatives program that brings together Environmental Center (REC) or the Dutch both Western and Eastern groups to share Foundation for Environmental Contacts with Central their experiences in solving key environmental problems. The REC currently has offices in and Eastern Europe should contirue. These Bratislava, Budapest, Bucharest, Sofia, and mechanisms are a good way to support environmental Warsaw. NGOs in the region, and especially those based on open membership. In addition, a number of Western and international NGOs have programs in CEE countries that merit financial support. Western governments could consider directing part of their support to CEE through NGOs in their own countries CONDITIONS FOR A STRONG ENV:KONMENTAL or organizations ill CEE which are run by NGOs. NGO-sECTOR. Authorities and business need to recognize the case for encouraging enviromnental Involving the private sector NGOs to be participants in the public debate about sustainable development and the development of In the long run, the private sector will play the key practical policies. NGOs should be invited to the role in Central and Eastern Europe in determining relevant advisory boards, delegations, negotiations, what kind of environmental conditions will prevail. etc. This should not be restricted to pure The volume of production and financial commitment environmental and nature conservation issues, but by the private sector is likely to far outstrip that of extended to all the areas that are related, especially the public sector within the next 20 years. This trend economic questions. Western govermnents, is being reinforced by the growth of foreign direct multinational institutions and western business should investment. 50 IV. Building Better Institutions Over the years, private industries in OECD 5. Continuing compliance is distinguished from initial countries have found it to be in their own interest to compliance. The latter usually applies to technology standards for pursue environmentaly sound policies. Indeed, some which compliance can be inspected before a plant starts operation pursue evo eaysnp(see the discussion of New Source Performance Standards in industries pride themselves as being leaders in chapter III). environmental management. In the same spirit, the International Chamber of Commerce has developed 6. In Bulgaria, for example, sharp fluctuations in the World Guidelines on the Environment and the structure of environmental capital investments can be observed between 1980 and 1989. The share of air protection investments Business Charter for Sustainable Development. In dropped from almost 29% in 1980 to only 2% in 1985. and then Western Europe, the chemical, electricity, natural rose to 20% in 1989. gas, coal, and petroleum industries have all prepared various codes of conduct. At a conference in 7. There are impo.tant exceptions. Quite frequently, Budapest in November, 1991, a set of Guiding enterprise managers understand that selected process changes Principles on the Environment, Industry and would be in the financial interest of the firm as well as reduce Principles on the Environment, Industry and pollution emissions. However, shortages and constraints on the Investment Decisions in Central and Eastern Europe availability of foreign exchange have prevented them from taking were put forward by the European Commission as a the desired action. If (public or private) enterprises are to be basis for further action. responsible for their operation, they must have equal access to financial resources -- whether foreign exchange or domestic finance -- as the govemment. Notes 8. This does not imply that special preference should be given to local consultants. If the latter are to meet intemational 1. Charles Weiss et al., Patterns of Environmental standards, they should, in general, compete with intemational Management (The World Bank, Washington DC: 1994). This consultants. On the other hand, govemments and enterprises report reviews the experience with regard to pollution management should insist much more on joint activities between ititemational in selected OECD countries. and local consultants, with clear terms of reference based on a strategic approach, and with careful supervision. 2. Poland is experimenting with innovative mechanisms. 9. Participation of NGOs is vital to ensure public 3. Central and local govemment officials from CEE knowledge of issues that are of immediate concem -- and the countries that visit Westem countries would be required to agree possibility to take action where needed. The rights of NGOs to remain in their govemment jobs for at least, say, one year; -on should not, however, be confused with the democratic rights of all retuming. individuals in society, whose interests may not always be represented by NGOs representing a special interest. 4. A powerful tool used in the United States to raise awareness by enterprises and the public is the so-called Toxic Release Inventory: Enterprises are required to publish the types and quantities of the major toxic pollutants they emit. This has led 8202 many enterprises to voluntarily reduce the amounts of pollution they emit. V. Priorities for Environmental Expenditure 51 V. PRIORITIES FOR ENVIRONMENTAL EXPENDITURE' While market reforms will eventually take care of a large part of the emissions causing the most serious health and economic damage in the region, public investments will be needed to speed up the process of environmental improvement. This should be complemlented by two other categories of expenditures required to make best use of the available resources: (i) Funding to cover the operational, maintenance and repair costs of existing public environmental services, especially the treatment of drinking water and sewage, the collection and disposal of municipal was,e, and maintaining inventories of and monitoring the disposal of hazardous, toxic and nuclear wastes; and (ii) "win-win" investments which can be justified on economic grounds alone but which bring substantial environmental benefits. Energy coaservation, low input and low waste technologies allfall into this category as do expenditures on "good housekeeping" and minor plant improvements which reduce spills, leaks and material use. Beyond this, the priority categories for environmental expenditures are: 0 Immediate investments to address the health problems identified in Chapter 11. In areas with poor air quality the initial priorities should be better dust controls for non-ferrous smelters and steel plants and the substitution of gas for coal in district heating plants and households. With regard to water pollution, pre-treatment of industrial wastewater where heavy metals or toxic chemicals threaten the quality of ground or surface waters, and measures to reduce excessive levels of nitrates in rural drinking water supplies are the priorities. For hazardous wastes the priority must be to ensure that leachates from disposal sites do not contaminate ground or surface water sources. Support could be provided to reinforce and accelerate environmental investments by enterprises in response to new environmental policies such as the reduction of saline water discharges by mines, industrial wastewater treatment in pulp, textile and chemical plants, and measures to reduce discharges of toxic materials from chemical and petrochemical plants. * Efficient investments to deal with urgent problems specific to different countries. These include appropriate wastewater treatment to protect valuable coastal, tourist and ecological resources, the phased completion of incomplete wastewater treatment plants where this will have the most impact on water quality, and programs to prevent irreversible damage tC important ecosystems. * Low cost measures to address lo:sg term environmental priorities where prompt action can avoid the need to spend much larger sums in future. Plhasing out leaded gasoline and reducing vehicle emissions, funding applied research on the conservation of ecosystems, and the development of systems to collect, interpret and disseminate environmental data all fall into this category. "Win-win" Investments and Training Operation, Maintenance and Repair Immediate Priorities for Public Investment Investments to deal with urgent problems specific to different countries Low-cost measures to address longer term environmental problems Financing Environmental Investments This chapter focuses on environmental expenditures period of 5-7 years, the urgent environmental and investments whose primary purpose is to mitigate priorities identified in Chapter I. Other the environmental danage caused by past or current environmental investments will move up the priority practices, though they may bring simultaneous ranking later in this decade as the implementation of economic or other benefits. Further, it identifies the Action Programme reduces the damage associated only those expenditures which will address, over a with the most urgent problems. Thus, the exciusion 52 V. Priorities for Environmental Expenditure of particular investments or problems from the list of "Win-win" investments and worker training priorities discussed below does not imply that they are unimportant, but rather that they should have As concern has grown about the damage to human lower priority in the allocation of scarce resources. health caused by industrial emissions, industries have As discussed in Chapter III, the process of responded by developing plans based on large capital renewal associated with industrial investments in new technology and sophisticated restructuring and recovery from economic recession controls. However, the resources to fund such will lead to the replacement of out-dated and investments have not been available and it is, in any polluting technologies by modem industrial processes case, often not clear whether the general economic with much improved environmental performance. performance of the industries concerned would Pollution charges and stricter environmental warrant the commitment of the capital that is regulations will direct private investment towards envisaged. It would be better to take a number of more efficient and less polluting technologies. This smaller and more manageable steps which might will, however, take place over a period of 15-20 make a substantial improvement to the environmental years because the countries of Central and Eastern performance of heavily polluting industries, such as Europe cannot afford to replace their capital stock in the following: a much shorter period. The industrial investments outlined below are 0 Standard "good housekeeping. " Energy intended to mitigate the impact of continuing to rely and environmental audits can identify a range of upon old capital equipment in the intervening period managerial and process changes which would reduce and to bring forward investment in less polluting energy consumption and emissions at negligible cost. technologies. Nonetheless, the limited resources The installation of thermostats and other simple available mean that capital renewal will remain the controls can improve combustion efficiency, reduce most powerful agent of environmental improvement spills, leaks and waste of raw materials or heat in the medium and longer run. Effective economic losses. Increasing energy and raw material prices or reforms and good economic policies are therefore the imposition of pollution charges provides a strong essential to the health of the environment, as well as incentive for managers to consider the financial of the economy and society. benefits of such measures and to spend the money on The industrial sector in Central and Eastern any equipment and training that may be required. Europe uses technologies and produces a composition These are mostly "win-win" investments which can of output that were characteristic of the industrial be justified on economic and even financial grounds market economies 30 or more years ago. Over the alone: but which bring substantial environmental last 20 years the Western countries have invested in benefits; capital deepening, adopting more energy efficient and * In-plant improvements of process less polluting technologies which make better use technology or to control emissions that can achieve a both of their capital resources and the skills of their substantial reduction in the concentration and volume work forces. On the other hand, the formerly of emissions. Low input and low waste technologies centrally-planned countries concentrated on capital all fall into this category. Good examples are found widening, achieving higher levels of output by in the area of industrial wastewater treatment. building more and/or ;arger plants rather than by Simple chemical or biological treatment may allow a improving the level and quality of output from much higher proportion of water to be recycled existing plants. New technology was introduced in a within the plant -- reducing the volume of discharges discontinuous manner, often by licensing or imitating -- or may cut down the quantity of suspended solids Western know-how, in the form of new plants. and organic waste that is discharged into rivers. There is little evidence of the continuous growth in Recovery techniques can also be applied to solid factor productivity associated with both wastes from metallurgical plants, power stations and learning-by-doing and investment in small-scale mines; enhancements to both physical and human capital that 0 End-of-pipe controls with a modest cost. has proved to be the mainspring of economic growth The standard example of such measures is the in market economies. installation of better dust filters in metallurgy or V. Priorities for Environmental Expenditure 53 metal-working plants to reduce the discharge of metal improvements can produce surprisingly large dusts in flue gases. A range of non-ferrous metal benefits. It follows that investments must be smelters in Central and Eastern Europe are notorious reinforced by expenditures on management and sources of lead, zinc, nickel, cadmium and other worker training and other programs to ensure that metal dusts which damage the health of the they bring the best possible returns in terms of population living in surrounding areas. By contrast, improvements in environmental quality. dust filters and other controls in lead smelters in the United States are able to ensure that those living no more than I km from the source do not have significantly higher levels of blood lead than Box 5.1 Dealing with large, old industrial plants those living at a much greater distance. Similar patterns can be Whether to invest in pollution control in the large old industrial found for emissions of benzene and "dinosaurs" depends on economic factors. The choices are (i) to close down such plants as rapidly as possible; (ii} to permit them to other toxic organic chemicals from continue to operate for a limited period as in the past; and (iii) to oil refineries, petrochemical and permit them to continue to operate provided that environmental other chemical plants. While it may improvements are implemented. In almost all cases, modest not be possible to achieve such high environmental investments could generate a good return within 2-3 levels of emission reduction without years. For these, the crucial point is that the choice should be large investments in redesigning restricted to (i) and (iii). If the government (or the enterprise) is plants or processes, significant unwilling to finance such improvements, then this amounts to a improvements can typically be made decision that the social benefits of keeping the plant open do not at low cost. outweigh the costs, and the plant should be closed. If that is politically impossible, then the govarnment should fix an absolute Thus, new capital investment maximum term for the continued operation of the plant which is Thus, ne captal inestmet substantially less than the payback period for potential environmental is only one part of the way that investments. economic change will bring about This approach allows governments to make clear choices environmental improvement. about the trade-off between the social costs of unemployment and Indeed, it may not even, be the most of continuing environmental damage. It suggests, further, that all important part. The case studies public enterprises should be subject to a gradual tightening of reported below and many other environmental conditions for continued operation under which examples consistently emphasize the managers are held accountable for making progressive improvements importance of "good housekeeping" in environmental performance while they continue to receive and of plant hygiene. This is a government financial assistance. management issue. Mi amount of investment in better processes or environmental controls will solve the environmental problems of Central and East Europe Operation, maintenance and repair (OMR) countries unless it is backed up by effective supervision and maintenance. It is frequently argued that safe drinking water, well- On the other hand, major improvements can functioning public transportation systems, and be made with minimal resources, simply by ensuring collection and disposal of municipal waste are "basic' that plant and equipment is properly maintained, that rights. At the same time, the priorities described environmental controls operate according to here give the impression that there should be no specification, and that leaks and spills are promptly investment in these areas. This impression derives dealt with. In large part this is a matter of from a confusion between capital investments and commitment to and pride in achieving a better expenditures to cover ongoing OMR costs. Based on environmental record. Trivial but symbolic steps the general evidence throughout Central and Eastern such as publicizing the achievement of plants or work Europe -- and accepting that there may be significant groups which make significant environmental exceptions in different countries -- water supply 54 V. Priorities for Environmental Expenditure Box 5.2 The diversity of pollution problems and remedies This box draws on selected case studies to and equipping handling operations with water illustrate the diversity and site specific nature of sprays and filter systems would substantially pollution problems and their possible remedies in reduce emissions. These measures would cost the sectors studied. about $0.5 million. Simply closing the side of The case study at Trebovice power and the existing concentrate building would give a district heating plant in the Czech Republic worthwhile improvement at a cost of less than revealed that three of the eight boilers at the $20,000. The installation of better process plant (representing 65% of total capacity) are control would improve overall process and energy only fitted with mechanical collectors. The efficiency, and hence reduce pollution. Basic remaining boilers are fitted with ESPs, some of instrumentation and control systems would cost which have been operating for 15-20 years and about $0.5 million. Other priority actions at are in poor condition. Parts such as collecting Copsa Mica include: replacement or repair of the and discharge electrodes are likely to be worn ESP fitted to the acid plant which was not out. Replacement of existing mechanical operational during the visit and obviously had not collectors and repair and modernization of been so for sometime; use of the hoods fitted to existing ESPs would substantially reduce lead kettle operation which can be swung into particulate emissions. position over the kettles, but which were not During the visit to the Kosice iron and being used during the visit; and replacement of steel plant in Slovakia, burnt lime fines were torn filter bags in existing bag houses. being deposited on the iron ore beds. As a At the PO Kaust" plant at Volgograd in result, the area around the yard was being Russia, a new membrane process plant has been covered with dust, despite moderate wind delivered to the plant but the funds are not conditions. This material would be better available for its installation. This plant would returned to the sinter plant landing yard which is replace the existing mercury and diaphragm covered. All four units of the sinter plant have units, thereby eliminating mercury and asbestos cyclones fitted, while two have ESPs fitted to the pollution. sinter breaker and screening areas but not the At the Carom SA organic chemicals plant sinter exhaust stack. As a result, emissions from at Onesti in Romania the SBR plant needs the stacks are dirty and will almost certainly attention to the dryer section which is leaking contain relatively large amounts of fine oxide styrene and butadiene. This could be improved dust. The solution to these problems would by improved venting and control of vapo.s. The involve changes in operating practices to improve investment required would only be about sinter quality, and replacement of the ignition and $200,000. Generally, better monitoring at the filtration systems. The total cost of these site would identify leaks and enable appropriate measures is esi.imated at $12-18 million. The repairs to be made. coke ovens F.c Kosice display signs of age and The case study at the Plock refinery and need repair. Most of the doors were leaking and petrochemicals plant in Poland identified a there was a constant haze emanating from the number of cost-effective measures to control top of the ovens. Detailed studies would be VOCs. These include: improved sealing on needed to determine the precise measures asphalt oxidation to reduce emisz.ons of needed to reduce the emission levels but polyaromatic hydrocarbons (PAHs) at around replacement of rehabilitation of the coke ovens $1 million; modernization of existing equipment may be necessary in the medium term. This to better engineering design, venting of process would cost $100 million or more for Kosice. units to appropriate devices such as flares, At the Copsa Mica lead smelter in floating roof tanks etc for approximately Romania much of the lead reaching the $5-1 0 million; and improving maximum enclosure environment comes from the concentrate stage and venting of air from around the loading point and handling. The site needs cleaning to remove to a control device at a cost of around deposits of concentrate that have accumulated $200,000. around the site. Enclosing the storage building V. Priorities for Environmental Expenditure 55 systems in urban areas require much better households in those towns and cities where the maintenance, but not necessarily new capital average concentration of particulates during the investments (water supply in rural areas figures as a winter months exceeds 150 fig/m3. high priority in the list below). Similarly, public transport services should be maintained at an (d) The provision of facilities to pre-treat adequate level, but the evidence suggests that major the wastewater discharged by small and medium-sized new capital inve~stments may not be warranted in the industrial plants where contamination of groundwater short-to-medium term. Municipal waste management and rivers by heavy metals is a significant problem, is a growing problem, but expenditures in the short for example in towns and cities with a concentration run should probably focus on better compaction of tanning, electro-plating and other metalworking equipment and landfill management to ensure that plants. existing landfills are used in a more efficient and safe manner. Finally, the systematic treatment of (e) Assistance to facilitate the proper hazardous, toxic or nuclear wastes is far beyond the installation of domestic septic tanks and the reach of what CEE countries (or, for that matter even appropriate disposal of manure from intensive the wealthiest OECD countries) can afford, but this livestock operations in rural areas where levels of should not preclude carefully monitoring the disposal nitrates in drinking water drawn from shallow wells of such wastes, maintainign inventories, and typically exceed 10 mg of nitrate-N per liter.3 undertaking the most urgent remedial measures where human health is at immediate risk. (f) Measures to ensure that the disposal of domestic, toxic, nuclear and other hazardous wastes Immediate priorities for public investment is carefully monitored and that leachates from disposal sites do not contaminate ground or surface Analysis of environmental health issues carried out in waters, especially sources used for the abstraction of the course of preparing the Action Programme, and drinking water supplies. initial comparisons of the costs and environmental benefits of various investment programs, indicate that Box 5.2 and Table 5.1 provide examples of the following sets of measures should receive priority major sources of pollution and identify some of the in the allocation of investment resources for pollution control measures which are likely to offer environmental improvement over the next 5-7 years. the most cost-effective opportunities for reducing This is a summary list; the various issues are airborne emissions of pollutants harmful to health in described in more detail in Annex 6 of this report the major industrial sectors. and in the study on Sectoral and Local Environmental Expenditure Priorities prepared in support of the Investments to deal with urgent problems specific EAP. to different countries (a) The installation of dust collection The foregoing priorities apply generally to all of the systems and filters to non-ferrous metal smelters countries in the region, though the size of each which are located within 5 km upwind of significant problem differs from country to country according to centers of population. Priority should, in particular, their patterns of industrial production and of fuel be given to lead, zinc, copper and aluminum plants. consumption. There are, in addition, other areas for investment which should receive priority in individual (b) The installation of equipment to reduce countries because the environmental problems emissions of dust, smoke and soot, and carbon concerned are particularly damaging in specific monoxide from iron and steel plants, especially those circumstances. Among the investments that might be relying upon open hearth furnaces. undertaken on this basis are: (c) Investments either to replace coal by gas or to permit the burning of smokeless solid fuels in district heating plants, commercial premises and Table 5.1 Priorities for Pollution Control Sector Plant Pollutant Technology/Technique Power and district heating Boilers Particulates ESPs or bag houses Refineries and petrochemicals Catalytic cracker SO2 de-SO, catalyst Ethylene VOCs Improved vesting, good housekeeping BTX VOCs Floating roof tanks Inorganic chemicals Chlor-alkali Mercury Good housekeeping N fertilisers Particulates Prill scrubber Organic chemicals LDPE VOCs Improved venting EDC/VCM/PVC VOCs VCM stripping column, residue Butadiene VOCs incineration Ethylbenzene VOCs Improved venting Styrene VOCs Polystyrene VOCs Good housekeeping, residue SBR VOCs incineration Improved venting, good housekeeping Improved venting, good housekeeping Iron and Steel Raw materials handling and storage Particulates Water sprays, gas collection and cleaning system (bag house) Coke ovens Particulates Repair and rehabilitation Steel making Particulates (stack gases) Gas collection and cleaning system (bag houses or scrubbers) Non-ferrous metals Raw materials handling and storage Particulates Water sprays m Smelters Particulates Gas collection and cleaning system Pulp Chemical pulp VOCs Gas collection and cleaning system H2S Gas collection and cleaning system 2 Small boilers and households Boilers, coal stoves Particulates, SO2 Basic insulation measures, boiler control, fuel switching Particulates Particulate control devices (boilers), replacement coal stoves V. Priorities for Environmental Expenditure 57 (g) The installation of municipal Low-cost measures to address longer term wastewater treatment plants in towns and cities close environmental problems to important tourist or wildlife areas, especially on the Adriatic, Baltic and Black Sea coasts, Lake To complete this list of short term investment Balaton, the Mazurian Lakes and the Carpathian and priorities, there are certain longer term environmental Rhodope Mountains. concerns whose future cost can be greatly reduced by relatively inexpensive measures taken now. The (h) The completion of partially constructed most important of these longer term priorities wastewater treatment plants either in the upstream concerns the prospective deterioration of urban air sections of seriously polluted rivers or where the qudity caused by the growth in traffic that will take bacteriological quality of water downstream of large place when the economies of Central and Eastern towns and cities is particularly poor or where Europe start to grow again. Pollution from mobile discharges are causing an unacceptable decline in the sources is not currently a primary concern in most quality of water in rivers or lakes from which towns and cities because of the high level of exposure drinking water is abstracted. to lead, articulates and other air pollutants from stationary sources. However, in cities such as (i) Implementation of sustainable rural Budapest, Moscow and even Warsaw, traffic is development projects in defined areas of high already or will soon be one of the main contributors biodiversity and great ecological importance that are to the moderate or sometimes high ambient levels of under threat. Such projects should combine better air pollution that they experience. The following management of protected areas with ecological!v expenditures would have a high return both by benign agricultural/forestry, tourism and other reducing current emissions and avoiding much worse activities. problems in future: Box 5.3 Checklist for cost-effective municipal wastewater investments In order for municipal wastewater treatment investments to succeed, it is clear that there must be a sound financing plan, and that the right institutions must exist to ensure the sustainable operation of the investment. It does not make sense, however, to invest a large amount of effort in this aspect if the benefits of the underlying investment are small compared to the costs. For example, if the installation of secondary wastewater treatment would cause little or no improvement in the ambient water quality, it may be better to defer the investment for the time being or limit it to primary treatment. This would be much less expensive and would not involve the large operating costs which require complex revenue raising arrangements to ensure the availability of recurrent financing. The following is a checklist of factors that should be considered before proceeding with municipal wastewater investments: [I Have measures been taken to reduce domestic and industrial water consumption? I Has industrial wastewater been pre-treated? 11 Is it possible to re-use and/or re-cycle water? 1 I Can the proposed investment be analyzed in a river basin context? If so, have the merits of this investment been compared with the benefits from different kinds of investments in other parts of the river basin? Note that a least-cost solution to achieve improved ambient water quality may involve different (or no) technologies at different locations. I1 Has the most cost-effective technology been used to achieve a desired ambient water quality improvement? I 1 Has there been an economic analysis to assess the benefits (in terms of ambient water quality) that could be achieved by phasing investments over ten or more years? 58 V. Priorities for Environmental Expenditurc (j) The establishment of vehicle testing in plants which are not viabie at world prices. Such stations co.i bined with facilities for better vehicle plants should be shut as soon as possible. maintenance in order to enforce reasonably strict However, there is a case for extending short emission standards for the commercial diesel vehicles term government (or external) support to finance the -- buses and trucks -- which are the principal mobile installation of better pollution controls in a number of source of particulate emission; highly polluting industries. The question that must be asked for each plant is whether the stream of (k) A program to phase out leaded future income from the plant has a positive present gasoline and to require that new vehicles value if the value of its existing capital equipment is (automobiles, buses and trucks) should, fiom some treated as a sunk cost.4 If it does, the government appropriate future date, meet the emission s.andards could make a contribution to the cost of laid down by the EU. Most of the cost of these environmental investment, in the form of either measures will be borne by refineries, automobile grants (based on the revenue from fees) or manufacturers and their customers, but resources for (preferably) loans paying realistic real rates of technical assistance and to deal with special interest which must be repaid over a period of 5-7 transitional problems would speed up the years. implementation of these programs; Plants with negative net worth might still be kept open temporarily if a sufficient premium were (1) Resources to fund applied research into attached to maintaining employment or output in the a number of environmental problems for which industry or locality. There would then be a trade-off solutions may be very costly (e.g., treatment of between the amount spent on environmental nitrate pollution) or where implementation of improvement and the length of time that the plant is remedies has been difficult. Such research could permitted to operate. A simple system of categories focus on ecologically acceptable agriculture and could be established which takes account of the forestry practices -- especially their economic costs damage caused by the plant. Those in the worst and benefits. Funds could also be given to support category might be required to close down within two specialized research institutions engaged in important years, while those causing less damage might be conservation efforts (e.g., botanical gardens); and to allowed to continue to operate until 1996 or 1998. undertake well-defined studies on the ecologi al By suitable measures, plants could move themselves damage caused by large-scale development proj cts into a higher category and thus extend their permitted such as dams, canals, and large tourism life, even if they had no permanent future. Again, developments; and government loans can be justified by the various factors which limit access to capital markets. (m) Resources to strengthen the collection The prospective competitiveness of and and dissemination of data on the state of the demand for the output of many industrial plants is environment and natural resources. Particular highly uncertain. However, few sectors will attention should be paid to the forms of experience a medium term decline in demand of environmental damage and related issues which more than one-half, so it is possible to devise a define the main priorities in this Action Programme. simple ranking mechanism which could be used to identify those plants which would be eligible for Financing environmental investments immediate environmental investments. A scheme along the following lines could easily be introduced: As a general principle, governments should contribute to the cost of environmental investments in 0 Establish an Industrial Pollution Fund (IPF) enterprises only on condition that the enterprise also to finance enviromnental investments in the most makes a contribution and if the cost of the investment polluting industrial sectors: metallurgy, chemicals, is judged likely to be recovered over the remaining pulp & paper, non-mineral metal products. The IPF economic life of the plant. In effect, the latter would provide a combination of grants and loans condition means that investments should not be made amounting to not more than, say, $2.5 million to finance high priority environmental investments.5 V. Priorities for Environmental Expenditure 59 Box 5.4 Biodiverslty conservation -- short-term Investment examples The following sites have been selected on the basis of situation renders the area extremely vulnerable to their regional importance for biological diversity and unsustainable exploitation of the natural resources. vulnerability to immediate threats which would result in Croatia: Lonjsko Poije Nature Park, Middle Sava irreversible damage. Further, the approach proposed Valley. The park covers one of the largest demonstrates the twin advantages of: (i) conservation semi-inundated areas left in Europe (50,560 ha). Its of the biological and landscape (including cultural) regional importance is particu!arly clear in threatened diversity and, (ii) income-earning activities for local breeding of migratory bird populations (e.g. spoonbill, people. A mix of integrated activities are required white stork) but also in its otter population and including direct short-term and medium-term waterplant communities. There are four important, investment, technical assistance for policy and interdep'.ndent habitat types: alluvial forests; open institutional support, and training. Negotiations regularly flooded grassland; traditional farmed between international donors and a range of national landscapesandfishponds. Thethreatsincludedrainage and local government departments should be able to and transformation of wetlands into arable land; fashion appropriate financing packages. The projects over-intensive use of forests; air and water pollution offer an opportunity to put into practice and test the from nearby industrial plants and intensification of calls from UNCED for sustainable development and to agriculture; alterations in the hydrology through apply the principle of cost effective prevention of construction of dikes; and proposed dam construction degradation in Eastern and Central Europe rather than and transport routes. Maintenance of the landscape expensive cure as is the case in western Europe. and biological diversity depends on solving the Albania: Karavastas Lagoon/Dijvaka Pine Zone. economic reasons for migration from the region as well This area is located on the coast 100 km south of as adjustments in agricultural, industrial and transport Tirana. It has world importance biologically by virtue of policy. a nesting colony of Dalmatian Pelican and is said to Romania: Retezat National Park and Buffer have several endemic plant species, including orchids, Zone. Of the species identified on the site, 5.2% are but a detailed survey is required to confirm this. The endemics and one plant (Draba dorner) covers just 400 occasional occurrence of the Mediterranean Monk Seal m2. The scientific reserve within the site is considered and White Tailed Eagle, both threatened on a regional to be the European genetic center for certain grasses scale, have been reported. The site is threatened by and spurges. Twelve fish, 32 bird and 22 mammal inappropriate tourism, agriculture and hunting and is species are found in the park. Threats include a 2 extremely vulnerable in that there is no effective legal million cm3 lake and an associated hydro-electric plant protection or management plan, and the economic which will eventually generate 348 MW, and which are plight of the local population encourages short-term already nearing completion, tourism development exploitation above the carrying capacity of the natural without an overall manegement plan, and overgrazing. systems. The presence of former state farms in the vicinity of the Bulgaria: Strandja Mountain and Adjacent park (now partially abandoned) offers the possibility of Coastline. The overriding natural value of the area lies providing a model of ecological reconstruction that in its forests which cover more than 81,000 ha. could be replicated elsewhere. Eastern Europe contains areas of forests that are now The Russian Federation: Losiny Ostror (Elk unique in Europe. There are 15 endemic species and Island) National Park, Moscow. The park is unique in Strandja is the only place in Europe where the wild Europe and possibly the world, as the only natural Medlar tree is found. All five of the reptile species at complex of such size (13,000 ha) partially within the the site are in the International Red Data Sook. boundaries of a large capital city with, above all, a Regeneration of natural forest in the place of population of beavers. Forty-five species of mammal plantatioas depends in part on grazing, yet there is are present including elk; rare birds visit on migration. serious decline in the size of the human population The park is the only virgin natural area surviving around (1.09% a year between 1975 and 1985). The area Moscow and contains one of a handful of virgin forests also has forty historically interesting houses and outside Zapovedniki in central Russia. Threats include churches which have been identified for restoration. increases in traffic using the roads across and around The region is suffering from encroachment of the park; air, soil and water pollution; pressure from ecologically damaging tourism along the coast (sand unregulated visitor numbers and illegal encroachment dunes have already been destroyed and marshes with built structures. A successful project to manage polluted), inappropriate forestry methods, new this natural "island' will not only save severely land-ownership arrangements in the absence of land threatened habitats and species but will also serve as a use guidelines and management plans, and water valuable demonstration for other similar projects on the pollution from pig farms. The depressed economic borders of urban areas. 60 V. Priorities for Environmental Expenditure Most probably, it should operate as a specialized unit into receiving waters which are relatively clean and under the National Environmental Fund reporting lie upstream of large centers of population; jointly to the Ministries of Environment and of Industry; (p) Investments to mitigate discharges of * Enterprises should be eligible for assistance saline water from mines in countries such as the from the IPF if they are in the top 50 percent of all Czech Republic, Poland and Ukraine, provided that enterprises in their sector on both of two criteria -- the costs of such investments are recovered over the their profitability (revenues minus material and labor long run from the mines responsible for salt water costs as a proportion of total revenues), and the emissions. average youth of their capital equipment; * The IPF should retain consultants who None of the cases under (o) and (p) involves would carry out a rapid environmental audit of any serious and continuous damage to human health, plant where an investment has been proposed by an though the economic losses caused by saline water enterprise satisfying the criteria above. The are large. However, in cases (n) and (o) evidence consultants should be asked to assess whether the that effluent discharges are contaminating drinking proposed investment will have the effect of water sources with heavy metals or toxic chemicals substantially reducing emissions of pollutants which is sufficient reason to move the issue into the threaten the health of those working in or living near category of problems deserving immediate attention. to the plant and whether the proposal is a For chemical plants -- category (n) -- there are real cost-effective method of reducing such emissions.6 but unquantified hazards to health. Plant employees Such an assessment could be completed within a are at greatest risk, but emissions of mercury, VCM month and the proposal should be approved if the (vinyl chloride monomer), and BTX (benzene, report is positive; toluene and xylene) can pose a significant threat to * Enterprises should be required to match the health of people living close to chemical plants. finance provided by the IPF dollar for dollar. Most The exposure of workers should be covered under the of the finance should be provided in the form of normal provisions of occupational health and safety loans repayable over 5 years at modest real rates of legislation, while action under environmental interest -- say 5 percent per year; legislation is required to deal with off-site exposure. * External donors could contribute to the IPF In all cases the implementation of "good itself and second staff for periods of at least 6 months housekeeping" procedures will greatly reduce to train those responsible for carrying out the rapid emissions, which tend to originate from leaks and environmental audits and for evaluating the financial spills that are allowed to persist. Such procedures status of enterprises. will, usually, pay for themselves many times over by reducing losses of raw materials or products and by In addition to the type of expenditures lowering the costs of standard operations. classified under (a), (b), and (d), an Industrial The government may need to bear a larger Pollution Fund operating in this manner might also share of the cost of environmental improvements for finance: small industrial operations than for larger plants. This is because of the difficulty of monitoring their (n) The installation of equipment to reduce emissions, which makes the application of economic leakages of heavy metals, toxic gases and discharges incentives or regulations much more difficult. of toxic wastes -- to the air, in wastewater or in solid Improvements in environmental performance may wastes -- from petrochemical and other chemical also be less closely linked to general efficiency gains, plants, especially those located close to substantial so that the enterprises concerned will be more towns and cities; reluctant to invest in eliminating or treating their emissions. (o) The provision of industrial wastewater More generally, government investments treatment facilities in plants -- for example in the should be concentrated in the medium term on textile and pulp and paper industries -- which dealing with emissions from small industrial units, the discharge heavy loads of BOD and other pollutants service sector and households. They must be used to V. Priorities for Environmental Expenditure 61 discourage coal burning, to encourage domestic Notes energy conservai.on and to find low cost methods of treating the large volumes of sewage that now pollute 1. Transboundary and global problem- and action required rivers and groundwater. These are measures which are mosdy dealt with in chapter VI. A much more complete economic transformation will not bring about and discussion of some of the issues contained in this chapter and in Annex 6 is provided in the technical report on Sectoral and Local which typically require intervention by the public Environmental Expenditure Priorities prepared as a basis for the sector. EAP. Most small scale users of coal are very happy to switch to gas, even if it costs more, because of the 2. Econonic justification refers to the benefits accruing to convenience and labor-saving that it allows. The the country and include social benefits in the broadest sense; principal constraint is the availability of capacity in financial justification refers to the enterprise. local gas distribution networks to meet a widespread 3. The proposed threshold is based on the standard WHO demand for household heating. In Bulgaria, gas guideline, which is identical to US guidelines for the quality of supplies were restricted to large industrial consumers, public drinking water. The threshold allows a considerable margin so a new distribution system will be required. in of safety so that a less strict threshold of 20 mg/I of nitrate-N would prevent almost all cases ot methemoglobinemia. The EU Poland, local pipelines were designed to meet drinking water standard specifies that nitrates should not exceed 50 household demand for cooking but not for heating. mg/l of NO3 which is equivalent to 11 mg/I of nitrate-N. Thus, a substantial investment program spread over a decade or more will be needed to develop the 4. I.e., the residual capital of the enterprise is considered to infrastructure required to enable households to switch have no economic value. away from coal to gas. Priority should clearly be 5. If budgetary constraints are severe, then this upper lirnit given to the distribution of gas in areas where could be reduced to ensure that no grant or loan exceeds 5-10 exposure to particulates and/or sulfur dioxide is percent of the fund's total resources. especially high and the bumning of coal makes a large 6. In ecologically sensitive areas the environmental audit contribution to this air pollution. could be extended to cover an assessment of whether the As far as possible, such public investments investment would contribute to the prevention of irreversible should be designed to act as catalysts which stimulate .amage to local ecosystems. private responses to the incentives provided by policy reforms and mobilize private investment to bring about economic changes that have environmental benefits. There is also a more traditional role for public investment to finance high priority projects in those sectors which require collective action to provide basic environmental services -- for example, infrastructure services such as waste collection and disposal, management of water resources as well as nature conservation, information services and research. !~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 62 VI. Transboundary Issues: Regional and Global Concerns VI. TRANSBOUNDARY ISSUES: REGIONAL AND GLOBAL CONCERNS A strategy to address regional or global problems of air and water pollution must build, as far as possible, on the overlap between the local and the transboundary impacts of measures to reduce emissions. Market reforms and policies or investments to meet domestic environmental goats will lead to large reductions in emissions of regional and global air pollutants. If further reductions are required in the CEE countries to meet regional or global con-er.as, then donors may wish to consider bilateral or multilateral funding to cover the net incremental cost of me 'ting stricter emission targets. Such arrangements would be particularly appropriate where the marginal costs of reducing emissions vary widely across countries. Maximizing the joint domestic and transboundary be,efits of improving water quality implies that resources should primarily be directed to the reduction of emissions from coastal or estuarial sources. This will contribute to the preservation of coastal ecosystemns as well as reducing the nutrient flowvs which are the main source of transboundary damage. Regional Concerns: Air Pollution Regional Concerns: Wazer Pollution Global Issues Management of Toxic ChemiLals and Hazardous Wastes Conclusions: The Key Messages All environmental problems have a local origin, but are of more concern to neighboring countries than may affect a much broader area. The solutions to suspended particulates. CEE countries therefore are these problems likewise will have implications sometimes urged by neighboring countries to give locally, across boundaries and globally. For priority to reducing their contribution to acid rain. example, emissions from burning fossil fuel originate The costs of reducing suspended particulates at one point and must be controlled there. The are much lower than the costs of addressing sulfur impact can be local, if soils and air inmmediately dioxide output (Box 2.5). A recent study oi air surrounding the source of the emissions are pollution in the southeastern Polish town of contaminated; it may be transboundary, if the Tarnobrzeg found that the benefits of reducing sulfur emissions descend some way off as acid precipitation; dioxide were invariably lower than the costs, while and it may be global, as emissions cointribute to the the benefits of reducing suspended particulates by up cumulative build up of greenhouse gases. to 70% ntivariably exceeded the costs. The local Action to control the broader effects of local balance of wosts and benefits, in other words, may problems has been taken principally through regional differ substantially from the regional or global and global agreements. In this Action Programme, balance. the focus is on measures which minimize the net costs of complying with international agreements by Regional Concerns: Air Pollution addressing, as far as possible, both the domestic and transboundary damage caused by emissions. Transboundary air pollution in Central and Eastern However, it is important for individual CEE Europe is dominated by the problem of acid rain, countries to be clear about whether the reason for which is linked to emissions of sulfur dioxide and pursuing a particular policy is local or regional. For nitrogen oxides from power stations, large industrial example, the main local effects on air pollution of plants, small scale and household burning of coal and burning fossil fuel arise in terms of suspended other fuels, and motor vehicles. Box 6.1 describes particulates, which are an important cause of damage some of the scientific aspects of the environmental to health; the effects on health from sulfur dioxide damage caused by acid emissions. The CEE emissions are less severe. But sulfur dioxide countries are important contributors to transboundary emissions, through their effects on acid precipitation, VI. Transboundary Issues: Regional and Global Concerns 63 Box 6.1 The environmental damage caused by aluminum that would otherwise be bound up in acid emissions rocks and mineral partic!es. An excessive level of aluminum damages roots, reduces che capacity of Sulfur dioxide (SO2) is an irritant which, in plants to take up necessary trace elements such high concentrations, can cause acute respiratory as calcium and magnesium, and interferes with conditions. In conjunction with high levels of water transport within trees which increases exposure to particulates it is implicated in the sensitivity to drought. Acidification of rivers and excess mortality observed during severe smogs lakes can result in drastic changes in their and it worsens the morbidity associated with ecosystems including the complete loss of fish chronic respiratory problems. Exposure to high stocks. levels of nitrogen dioxide can also worsen the The dose-response relationships between health of those with pre-existing respiratory acidic emissions and damage to forests, crops and problems. But it is through its contribution to the lakes are complex and still poorly understood. generation of photochemical smog and ozone Rainwater has not become significantly more acid (another respiratory irritant that aggravates the (lower pH) in Central Europe over the last 50 condition of people with asthma and heart years, but the area covered by highly acid rainfall disease) that NO, emissions have their main effect has increased greatly. Evidence from Germany on health. and other West European countries suggests that High levels of SO, and NO, emissions can forest loss may be linked to the long term effects damage buildings and other structures because of of acid depositions but that a variety of other relatively high concentrations of acid and of sulfur (often site-specific) stress factors are also particles in rainfall. Much concern has been involved. expressed about damage to cultural artifacts and The nature of the damage to ecosystems especially historic buildings in cities such as caused by acid rain means that it is necessary to Krak6w and Prague. It is, however, difficult to distinguish between "stock" and "flow" aspects of disentangle this damage from that caused by poor the problem. Long term acidification of soils is a maintenance and mistaken attempts at restoration "stock" problem which cannot be quickiy reversed in the past. While the scale of the damage to by reducing the level of current depositions, materials caused by acid emissions is uncertain, though applications of lime and nutrients and thuy undoubtedly give rise to amenity costs changes in silvicultural practices may mitigate its because they reduce visibility. The presence of consequences. At the same time, it is possible to sulfate and nitrate particles plus acid aerosols, as define "critical loads" which represent the a result of either direct emissions or their maximum "flow" of acid depositions that can be secondary formation in the atmosphere, leads to absorbed by specific soil types without provoking light scattering. Further, gaseous nitrogen dioxide a tendency to acidification. These critical loads absorbs light at the high end of the spectrum, define a measure of long run sustainability which which gives the atmosphere a reddish-brown can be used in setting the ultimate goals of tinge. The result is a haze which may extend over environmental policy. However, in setting a large region such as Upper Silesia and Northern priorities for short term actions, countries must Bohemia or Eastern Ukraine. Alternatively, also consider how far immediate measures to topographical features may concentrate the haze reduce acid emissions will affect the amount of over a city. damage that will occur over the next few years. Depositions of sulfur and nitrogen or "acid The implication is that short term priorities rain" are primarily associated with the long should focus on the local, health-related, damage distance transport of acid aerosols formed in the caused by acid emissions while damage to atmusphere from a mixture of dilute hydrochloric, ecosystems should be the basis for a longer term nitric and sulfuric acids plus ammonium sulfate reduction in emissions from those sources and and nitrate. Rainfall gives rise to wet deposition regions which have contributed most co which rapidly infiltrates soils, groundwater, rivers acidification in the past. Any measures to and lakes. Both dry and wet depositions may alleviate the local damage caused by sulfur dioxide cause direct damage to trees and other vegetation and other emissions should be consistent with by affecting their plant chemistrv and pathology. achieving a declining trend in emissions, which Acidification of soils leads to a leaching of plant would not, for example, be the case with a tall nutrients combined with the mobilization of stack policy. 64 VI. Transboundary Issues: Regional and Global Concerns flows of acid pollutants -- Maps 5 and 6 illustrate measures which address both peak and average levels the distribution of acid emissions in the area of the of exposure to acid pollutants. Central European Initiative (CEI). They are also The crucial questions about policies to reduce large recipients of acid depositions from other pollution that crosses boundaries arv (a) how far they countries, so that, for example, almost 50 percent of should go beyond policies that can be justified on the Poland's acid depositions originate from outside basis of their local benefits alone? (b) how should Poland. Thus, environmental policies to address the these additional measures be financed? Answeis to problems caused by acid rain must take account of both questions de-pend upon the nature of the cost the flows between countries and of the juint efforts curve for reducing total emissions and the marginal by European countries to reduce emissions. This was benefits of improving local ambient conditions. The one of the motivations for the development of the larger are the marginal local benefits relative to the Geneva Convention on Long-Range Transboundary costs, the less will be the investment and other costs Air Pollution and its related protocols. of meeting specific targets for reducing While public attention has tended to focus on transboundary flows. the transboundary dimension of sulfur and nitrogen oxide emissions, the damage caused within individual Policies to reduce transboundary emissions countries by these emissions (either on their own or in combination with particulates) is at least as Substantial reductions in emissions of acid pollutants important. There will often be important local can be achieved at relatively low cost by a benefits from reducing emissions of sulfur, combination of fuel switching (both to low sulfur particularly in regions where ambient concentrations of sulfur dioxide are high -- for example, Box 6.2 Low cost options to reduce sulfur dioxide pollution Northern Bohemia, Upper Silesia and the areas near to large * Use low sulfur coal or tuel oil lignite-fired power stations in Poland, Bulgaria, Hungary and * Switch from burning coal to fuel oil, or from both to gas other countries. Appropriate measures to control sulfur * Temporarily close down large industrial plants -- e.g. iron & emissions in such locations may steel mills, large petrochemical plants, pulp mills -- when there are be in the national interest without temperature inversions or sulfur dioxide levels are very high any regard to transboundary S Reduce the number of operating hours per year of power concerns. The transboundary plants burning sulfurous fuels by placing them lower in the ranking that benefits of such measures governs how plants are brought on-stream as the total demand for reinforce the case for action. electricity increases. Studies of the transport of acid pollutants show that an average of only 10-25 percent of sulfur and NO, emissions stay within the 150 km grid fuels and to gas) and changing the utilization of square from which they originate. Of course, the installed equipme-;C. Beyond a certain point which average concentration of these gases is highest in the will vary from coantry to country, further reductions area where they arise. Particular combinations of in emissions will typically involve a large increase in topography and weather may temporarily trap the marginal costs of control. emissions in smog close to the ground and cause Emissions of sulfur and NO, from large dramatic increases in respiratory morbidity or stationary sources are prime candidates for the mortality, especially among children and the elderly. application of economic instruments -- either Such smog emergencies can cover wide areas over pollution charges or tradeable permits.' An several countries and are greatly exacerbated by high appropriate system of pollution charges can easily be concentrations of particulates. They can be alleviated developed within the frameworlk of current legislation by requiring power plants and other large sources in most Central and East European countries. either to close down temporarily or to switch fuels. Mobile and small scale emissions of sulfur can be This illustrates the importance of implementing covered by imposing differential charges on fuels. In due course, it will be necessary to require that new VI. Transboundary Issues: Regional and Global Concerns 65 vehicles should be fitted with catalytic converteis in Figure 6.1 order to avoid a rapid increase in NO, emissions as well as traffic-related urban pollution. Over the next Total emisslons of sulfur dloxide and nitrogen oxides from decade, however, it is likely to be more cost effective Central and South-Eastem Europe to concentrate on reducing sulfur and NO, emissions tlndso.wf 19890e-o100 from large sources. WI Even if a country does not intend to rely upon eo market-based instruments to reduce emissions of so sulfur, the idea of pollution charges provides the 40 , --_ -, basis for ranking alternative measures to meet a given 20 target. The cost curve of different measures for a particular country is constructed by considering what 1 Io . gm 201O measures would be implemented if a tax of, say, Y . US$100 or US$200 per ton of sulfur emitted were NOX-ffNO-EC imposed. The information provided Ly this analysis WoMd ank eulirtt tells us where capital-intensive controls such as desulfurization of oil or of flue gases appear in the cost curve. Such estimates are essential to any Figure 6.2 attempt to assess the extent to which CEE countries may require assistance in order to conf. mn with the Total emissions of sulfur dioxide and nitrogen oxddee fro:n targets now being negotiated for a second sulfur Russ!a protocol under the Convention on Long-range Indk=VM i98-eo_-¶w Transboundaiy Air Pollution. It is essential to examine the costs of reducing emissions of sulfur from groups of sources in so aggregate rather than applying a piecemeal plant-by- 4 0t - -= = plant approach. The alternatives for reducing sulfur -- emissions from a single source may be quite limited. The main ones are: the use of low sulfur coal or oil; 1If&o 19s 20o 20(28 21o0 switching from coal to oil or gas; the installation of * a._. . SC ew in-furnace controls or of FGD; or the partial or *N _ft.rw I complete closure of the source. If emissions come Wo fkz Gmtos from several sources, the key question is how the total reduction is to be shared out. Again, the answer can be found by mimicking the ways in which Figure 6.3 sources would respond to the imposition of different levels of pollution charges on sulfur emissions. For Total emlsalons of sulfur dioxide and nitrogen oxides from examnple, this would take account of possible other countries of the former Soviet Union adjustments in the number of operating kours for Indo tWhi 9889o010 power-generating plants. It would clearly not be ° efficient to commit large sums to installing expensive a° controls at a high-emission plant if an equivalent so reduction in emissions cou!J be achieved by operating ,0 the plant for fewer hours per year and replacing its 20 output with production from a low-emission plant, albeit one with higher operating costs. *- m190 cm P0I 2010 The great merit of relying upon market-based *s2 - v _ 802 -C nei instruments is that they allow enterprises to find low NO.6 - N.- SC cost solutions which may not be apparent to Wod Sak esmtn regulators. It follows that models are likely to overestimate the marginal cost of reducing emissions and ftie level of the emission charge necessary to meet a particalar target. 66 VI. Transboundary Issues: Regional and Global Concerns A study of the costs of controlling sulfur emissions from vehicles. Even so, the imposition of emissions for the United Kingdom illustrates the EU standards on new capital and vehicles alone implications of this approach.2 The savings permitted should result in a reduction of almost 50 percent. by adopting a single target for total UK emissions or These results show that it is possible to ensure targets for separate regions witnin the country instead that total emissions of acid pollutants from the of imposing uniform technological standards or countries of Central and Eastern Europe follow a emission targets on all individual emitters are declining trend towards meeting long term goals potentially large. For example, if a single target for based on criteria of sustainability such as critical Great Britain were established and plants were loads, without imposing excessive costs. Map 9a allowed to trade sulfur emission permits, the cost of shows that under the scenario in which EU standards achieving the level of emissions implied by applying are achieved by 2010 for all new plants (Scenario 1), the EU's Large Combustion Plant (LCP) directiv& to critical loads for acidity would be exceeded mainly in each individual plant would be 15-20% lower than the most sensitive areas of Central Europe. If the the cost of imposing the same limit on each plant much more expensive policy of bringing all CEE separately. large sources up to EU standards were adopted In the longer term, increasing attention could (Scenario 2), there would be no significant also be given to Integrated Resource Planning, exceedances in Central Europe (see Map 9b). A especially in the power sector: Power stations may more selective approach is therefore required which find it less expensive to obtain "additional" power would rely more heavily on economic incentives capacity by financing energy savings investments rather than uniform emission standards, and which among their clients, rather than to invest in new would fo( us on key hot spots. power production facilities. To achieve this, power Reou^tion targets are currently being production and energy savings will eventually be negotiated within the framework of the Convention given equal weight, thus offering additional on Long-range Transboundary Air Pollution; in opportunities for r- lucing emissions of pollutants contrast to the first sulfur protocol discussions, those associated with t _riergy sector. for a second sulfiur protocol are based on internationally differentiated reduction targets, to take Combinintg local and transboundary concerns into account differences in reduction costs and in damages at different locations. The nature and For the most part, there is no conflict between phasing of these targets must, of course, also reflect measures that reduce local, national and transboundary damage. As the scenawio analysis demonstrates, the pursuit of Box 6.3 Black Triangle Environmental Programme appropriate economic and industrial policies will lead to a substantial fall in The Black Triangle Environmental Programme was established emissions of sulfur dioxide and of NO, in August 1991 by the environment ministers of Poland, for most countries in the region up to the Czechoslovakia, and Germany. The Commission of the EU later end of the century. This point is became the fourth official partner (the Czech Republic took reinforced by Figures 6.1-6.3 which show over the functions of the CSFR). To date, a framework plan has been endorsed, a Programme Coordination Unit established Centoal misn SofthEastem Europol Rut ssfo in Usti nad Labem (Czech Republic), and a joint air monitoring Central and South-Eastern Europe, Russia system is being established. and other European countries of the former Soviet Union. Under a combination of economic reform and minimal environmental regulations, emissions of the short and medium term priorities of each col.try, sulfur dioxide could fall by 40-60 percent over the for which a clear understanding of the national as next decade. Stricter but affordable tnvironmental well as the transboundary benefits of emission policies (equivalent to requiring that all new capital reductions is essential. meets current EU emission standards) could ensure A future international agreement aimed at that emissions of sulfur dioxide are at least halved by reducing transboundary environmental damage may, 2005. For NO, the decline in emissions in the base for a particular country, entail abatement measures scenario is rather less, especially for Central and whose cost cannot be justified on purely local and/or South-Eastern Europe, because of the growth of national grounds, including the benefits of the VI. Transboundary Issues: Regional and Global Concerns 67 Box 6.4 Mechanisms to share the burden of reducing transboundary pollution The transboundary benefits of reducing air beneficiaries to buy permits, which will lead to the po!lution can be "internalized" in various ways: difficulties outlined in the Direct Deals described above. The great advantage of tradeable permits Direct Deals. Countries that expect to benefit is that they can provide the basis for reducing from a reduction in emissions may offer to finance total emissions from a group of countries at part of the cost of installing controls or adopting minimum cost without requiring the monetary other measures to reduce emissions. So long as payments associated with compensatory premia. there are only a small number of origin and Thus, a permit scheme would be more appropriate destination countries involved, negotiations of this for global pollutants like carbon dioxide whose kind can lead to an efficient outcome. The main origin is unimportant than for regional pollutants difficulty is that transboundary flows from a sing!e like sulfur dioxide whose origin is critical to the country (or, even, from a single large emitter) will marginal damage caused by emissions. typically cause damage in several countries. Certain preblems are common to all of Some beneficiaries may, then, be tempted to these schemes and, indeed, to any international "free-ride" by offering less than the full value of agreement to reduce emissions of acid pollutants. their benefits from a reduction in emissions in the Monitoring total emissions is difficult and hope that other beneficiaries will contribute a estimates of total emissions are quite uncertain. larger share of the cost of reducing emissions. It is hard to devise enforceable penalties for Strategic behavior of this kind will achieve less countries which fail to honor undertakings to than the efficient level of emission reductions. reduce emissions, though most will wish to do so, if only to retain their credibility in future Compensatory Premia. The idea of pollution international negotiations. Payments under any charges can be extended to introduce a system of mecha.Aism may be staged or linked to the premia for countries which reduce their emissions implementation of specific investments in below agreed base levels. Beneficiaries could emission controls, but these canno; avoid the contribute to a fund which would be used to pay problem that the extent of emission reductions each source country a premium (per tonne of may depend upon the maintenance and operation sulfur or NO.) reflecting the transboundary of the control equipment. benefits of incremental reductions in its emissions International negotiations over emission which should be built into the comparisons of the targets are what economists call a "repeated costs and benefits of alternative domestic game" since they occur at more or less regular measures and would shift the balance towards intervals. Some people have, therefore, more stringent reductions. This approach avoids suggested that any mechanism involving many of the difficulties of multilateral negotiation compensation for reducing emissions will when there are several beneficiary and source encourage some source countries to increase their countries, but strategic behavior by beneficiaries emissions. In fact, this will not happen so long as may still result in a lower level of compensation it is possible to monitor levels of emissions, which and reductions than would be efficient. is an essential pre-condition for any such agreement. Assuming that there are domestic Tradeable Permits. Each country would be benefits from reducing emissions, any allocated permits corresponding to the basic level compensation offered will be less than the of emission targets. Countries wishing to see marginal cost of controls, so that strategic larger reductions in permits could buy but not use behavior of this kind would leave the country permits from the source countries whose worse off. In any case, countries are rightly emissions most affect them. This mechanism is concerned about their reputation which is a more transparent than direct negotiations and critical aspect of any repeated game, since the should lead to a more efficient result, but, as for penalties for being thought of as an unreliable all permit trading schemes, the non-uniform partner can be high. The short term gains from impact of emission reductions in different such strategic behavior will, therefore, be greatly locations causes problems. Where one country's outweighed by the prospective costs. emissions affect several countries, it will be necessary to put together a coalition of 68 VI. Transboundary Issues: Regional and Global Concems reductions made by other parties to the agreement as environmental or other objectives. Some countries well as the wider economic and political benefits of might, therefore, decide not to participate in the international cooperation. The Stockholm agreement or might find themselves unable to afford Declaration, in the spirit of the Polluter Pays to make the emission reductions which they had Principle, states that countries in this situation should committed themselves to. bear the costs of reducing emissions to avoid causing Provided that the total benefits of emission significant damage to the environment in other reductions to all the countries involved exceed the courtries. Nonetheless, for hard-pressed countries in costs, there should be ample scope for those who Central and Eastern Europe the costs of undertaking benefit most to assist individual CEE countries to an accelerated program of emission reductions to meet more ambitious targets. Such agreements meet such international obligations may involve an would leave all parties better off. Box 6.4 illustrates unacceptable diversion of resources from domestic a number of ways that international agreements could Box 6.5 Environmental Programs dealing with international waters The Baltic Sea Programme Black Sea Environmental Management Programme In April 1992 a Convention on the Protection of the Marine Environment of the Baltic Sea was The Black Sea Environmental Management signed in Helsinki. At the same time Ministers Programme has been initiated in conjunction with from 12 countries in the Baltic Sea basin adopted the Global Environment Facility and other donors a strategy for addressing the environmental in cooperation with the littoral states -- Bulgaria, problems of the Baltic Sea outlined in the Baltic Georgia, Romania, the Russian Federation, Sea Joint Comprehensive Environmental Action Turkey, and Ukraine. The program's main Programme. In preparing the Programme detailed purpose is to identify the principal sources of studies of wetlands, agricultural run-off and pollution of the Black and Azov seas, which has atmospheric deposition of pollutants were carried resulted in extreme eutrophication and a drastic out as well as pre-feasibility studies in eight decline in fish populations and biodiversity. former centrally-planned economies (including the Eastern states of Germany). Environmental Programme for the Danube River Implementation of the Programme was estimated to cost at least 18 billion ecu over 20 The main objective of the Environmental years (at 1992 prices). Measures to reduce Programme for the Danube River is development emissions from 98 hot spots in Central and of a Strategic Action Plan (SAP) for Eastern Europe -- covering both point and environmental improvement in the Danube non-point sources - would cost at least 8.5 countries. The actions proposed (including billion ecu. Among thess hot spots, 47 have investments, technical assistance and been identified as priorities which would require institutional development) will be closely linked to an estimated budget of 6.5 Lilli.on ecu to cover the implementation of the Danube Convention the cost of investments and other measures to which is to be signed in 1994. The Plan is not deal with their emissions. designed as a donor program, but as a tool for A task force has been established to the countries themselves to set realistic pricrities finalize the Programme, co-ordinate and monitor for the implementation of the Convention -- a its implementation, and to update it periodically. process to which the donor community has Efforts are being made to ensure that feasibility indicated an interest to contribute. studies are carried out as rapidly as possible for the measures required at the priority hot spots. On 24-25 March 1993 a conference was held in Gdansk to mobilize resources to fund the initial stage of the Programme with the participation of bilateral donors and multilateral financial institutions. VI. Transboundary Issues: Regional and Globai Concerns 69 be made more flexible. Minimizing the net cost of and Intemational Lakes. Similarly, there are a meeting intemational agreements is in the interest of number of international conventions to manage both individual countries and of Europe as a whole. discharges where coastal areas and inland seas are By lowering the net cost of reducing transboundary shared.4 flows, countries could afford to act earlier or to River pollution has different local and regional adopt more stringent reduction targets. Countries impacts, depending on the type of the receiving water which provide assistance will not agree to open-ended and the pollutants involved. In many cases, the local conmnitments, so that any such arrangements could effects of pollution from organic material (oxygen only operate over a strictly limited period. depletion) are compensated by the "self-purification" Thereafter, recipients would be expected to meet the capacity of rivers. This is the case if the flow is final targets without help, so that the agreements reasonably rapid and dilution is large (as for the main would not affect the long-term commitment to the river Danube). Thus, some rivers carry large loads Polluter-Pays Principle. of suspended solids, BOD and to some extent phosphorus, without causing local problems.5 Regional Concerns: Water Pollution However, there are large problems in the Baltic and Black Seas -- into which these rivers flow -- caused When a river or lake is shared by several countries, primarily by phosphorus and nitrogen loads. This pollution and conservation become a regional issue. peculiar feature of water pollution calls for strong A number of international conventions regulate access international coordination. to and use of these shared resources. The most relevant is the 1992 ECE Convention on the Protection and Use of Transboundary Watercourses Box 6.6 Possible wastewater investments * Estonia. Improvements at the Haapsalu which meet both domestic and westewater treatment plant can protect the transboundary objectives ecologically valuable resources of Haapsalu Bay with its unique curative mud and of Matsalu Bay, The Baltic Sea program sets out an extensive list a protected area important for migratory birds. of wastewater treatment projects to be * Russia. Investments in the wastewater implemented gradually over the next two treatment plants at Kaliningrad and St decades. Applying the criteria developed for the Petersburg. The current efficiency of the former Action Programme to these projects suggests is so close to zero that the investment will that a number of them should have priority substantially improve the quality of nearby because they will generate substantial local or coastal waters and protect the Kursiu lagoon. national environmental benefits, as well as The overloaded treatment plant- in St Petersburg significantly reducing pollution in the Baltic. are responsible for 40% of BOD and 50% of These projects include: phosphorus from all point source discharges to * Poland. Treatment plants at Gdansk, the Gulf of Finland. The project would Gdynia and Szczecin with the inclusion of concentrate initially on collection and primary denitrification capacity in order to reduce treatment of untreated discharges and on discharges of nutrients whi-.h encourage algal pre-treatment of the industrial wastewater that blooms that are jeopardizir j valuable coastal accounts for nearly 90% of heavy metal ecosystems and tourist rzvenues. discharges to the Gulf of Finland, especially * Lithuania. -he completion of the copper and chromium. partially constructed treatment plant at Klaipeda plus support for pre-treatment of industrial In all of these cases, it will be important to phase wastewater discharged to municipal sewers. the expenditures over a considerable period in This investment together with improvements in order to obtain the maximum benefit both nature conservation and coastal management of domestically and in the Baltic from the resources the nearby Kursiu lagoon will protect an available. Primary treatment with chemical important area for recreation and ecosystems. enhancement will often be the best approach in * Latvia. Rehabilitation and extension of the short term. Then, as more resources become the Liepaja wastewater system, again with available, plants ca.. je extended to incorporate provision for pretreatment of industrial various degrees of biological treatment or wastewater, will protect recreational facilities. denitrification. 70 VI. Transboundary Issues: Regional and Global Concerns Transboundary water pollution raises many of There is considerable uncertainty about the the issues of the appropriate balance between local extent of the transmission to the sea of BOD and and international concerns that have been discussed nutrients from upstream cities, industries and for the case of transboundary air pollution. Problems agricultural run-off. While big rivers such as the arise from the relationship between neighboring Danube, the Dnieper, the Don, the Dvina, the Oder countries along the banks of international rivers. For and the Vistula carry large loads of these pollutants example, phosphorus and nitrogen levels in the into the Black Sea and the Baltic, it is difficult to Danube are already very high by the time the river establish what proportion of the total load originates reaches Slovakia; from there on, it is very difficult to from sources more than 100-200 km upstream. achieve any significant improvements in the water During the initial stages of programs to address these quality of the Danube in the downstream countries. pi ablems it will generally be advisable to concentrate One simple solution would be to set a target that the the limited resources for dealing with transboundary quality of water that leaves the country is no worse pollution on downstream sources. As better than the quality of water in rivers 'hat enter the information becomes available on both the principal country. The strict application of this goal may not sources and the transmission of pollutants, it will be be feasible or, indeed, sensible where large cities or possible to develop a more comprehensive framework industrial centers are located just upstream of a for emission reductions in international river basins border. Nonetheless, it embodies the fundamental which will maximize the domestic and transboundary principle of international law that upstream countries benefits of control expenditures. This implies that should not cause appreciable harm to countries over the next 3-5 years countries should follow a downstream. two-pronged strategy of concentrating domestic Most of the international concern about resources on protecting coastal waters and improving transboundary water pollution has focused on the upstream water quality -- see Chapter V -- while long term threat to enclosed seas such as the Baltic, external resources are directed towards downstream the Black Sea and the Mediterranean. These sources which have the most direct impact on the sea problems are primarily associated with flows of concerned (Box 6.6). nutrients and the danger of eutrophication. The In coniunction with these measures it is impact of untreated sewage discharges from coastal important to build up the information and a towns and cities in the Baltic and the Black Sea also framework of cooperation needed to take stronger raises issues of coastal zone management, although action in future if justified. This would cover: such discharges are more easily tackled because there are substantial local benefits from reducing them and * an assessment of water pollution affecting the costs involved need not be large. shared water resources as a basis for determining the Chapter V gave high priority to investments most cost-effective control measures; to prevent irreversible damage to sensitive coastal * the development of systems to collect and ecosystems and to protect economically valuable exchange information about trends in water quality coastal industries -- especially tourism and fishing. and emissions;6 Such measures, which are important for purely local 0 the coordination across countries of water reasons, will also make a significant contribution to policies and regulations affecting shared water basins reducing BOD and nutrient loads in the Baltic and -- including, if appropriate, a joint water basin Black Seas. Thus, transboundary considerations management agency responsible for implementing reinforce an already strong case for giving priority to cooperative programs. such investmepts over other forms of wastewater treatment. Wetland management Taking account of transboundary as well as local concerns may justify the installation of The management of water resources and quality has treatment technologies in coastal centers which a significant impact on inland and coastal wetlands, remove more nitrogen and, perhaps, phosphorus than which are internationally important because of their those which would be appropriate on the basis of role as habitats for migratory birds. These issues are locai considerations alone. The additional investment addressed by the 1971 Ramsar Convention on required would justify international assistance Wetlands of International Importance, to which most (Box 6.5). Central and East European countries are now Parties. The Danube and Volga deltas, Lake Balaton and VI. Transboundary Issues: Regional and Global Concerns 71 Lonsjko Pole are among the most important sites in Global Issues the region. The immediate threats are from the expansion of agriculture and of settlement which Phaseout of Ozone Depleting Substances leads to the drainage of wetlands. Heavy metals and toxic chemicals pose a more insidious threat to bird The stratospheric ozone layer shields people, plants and fish, and are reported to have caused serious and animals from the sun's harmful ultraviolet (UV) declines in various species in the Danube and Volga rays, and is a factor in determining the earth's deltas, (though over-exploitation may also have climate. There is a scientific consensus that the played a part). These concerns reinforce the protective ozone layer is being depleted by human importance of dealing with epiissions of toxic use of certain chemical agents, particularly materials from chemical plants as outlined in chlorofluorocarbons (CFC) and halons. These Annex 6. chemical compounds are used in aerosol propellants, Among the z -tions which can be undertaken hard and soft foams, refrigeration and air immediately to support longer term programs for the conditioning, industrial solvents, coatings and integrated management of wetlands are to: adhesives, and in materials for fire: extinguishing. A reduction in total stratospheric ozone is expected to * support current measures to protect the increase ultraviolet-B radiation at ground levels with Danube and Volga deltas; adverse consequences for human health and the * complete inventories of wetlands anti assess earth's ecosystems.7 potential threats to their future health; The Montreal Protocol of the 1985 Vienna * ensure that wetland management is Convention for the Protection of the Ozone Layer integrated into the broad framework of policies for now requires phase-outs for the production and water management and nature conservation with due consumption of halons by 1994, of CFCs by 1996, account being taken of the scope for multiple use and of other ozone-depleting substances (ODS) by managemerit. 2000. All the main producers and consumers of ODS in the CEE region are Parties to these agreements. Unlike the reduction of eniissions of Box 6.7 The Polish Debt-for-Environment Swap In 1992, an independent foundation (ECOFUND) In its first year of operation, ECOFUND was established to manage the funds arising from supported 25 projects totalling about US$20 an agreement by the 17 creditor nations of the million, including desulfurization of power plant Paris Club to swap 10% of Poland's debt for emissions, waste-water treatment plants, and investment in environmental projects. The Paris replacement of coal with geothermal enerp,v. Club specified that this debt reduction must be ECOFUND finances only the implemer acion based on separate bilateral agreements between phase of environmental investment projects. Poland and the creditor countries. To date, the Given the significant size of some of the United States, France and Switzerland have investments that are being supported by the completed such agreements. The full potential ECOFUND, the question has been raised whe,her amount of debt that Poland could reduce by this it does not (i) redirect the investment program swap mechanism is about US$3.1 billion. away from some of the highest priority domestic The Polish Government has decided that environmental problems, and (ii) encourage the swap money should target environmental technologies which may not be most cost- projects that provide mutual benefits for creditor effective in achieving both transboundary a.nd countries and Poland. These include (i) reducing local benefits. The investments may also tie ip long-range transboundary air pollutants, (ii) scarce local resources for long-term operation reducing pollution of the Baltic Sea, (iii) lowering and maintenance. emissions of greenhouse gases and phasing-out substances damaging the ozone layer, and (iv) protecting biodiversity. 72 VI. Transboundary Issues: Regional and Global Concerns sulfur dioxide or the treatment of sewage, the in emissions will, of course, be less if economic phase-out of ODS is not a policy which has local reform proceeds more slowly, while faster economic benefits that justify much of the cost. The gains are reform enhances the initial decline but leads to higher purely global. emissions after 2000 because of the higher rates of Box 6.8 outlines the main issues now facing economic growth that it permits. several CEE countries in their efforts to phase out the use of ODS. ODS use can be eliminated at very low Figure 6.4 cost from aerosols and flexible foam. Substitute technologies already exist. SLarcity of capital is the key constraint. These projects are riot expensive and Emissions of carbon dioxide In Central end Eastern Europe may be candidates for international funding (on a (Total emissions from all countries) grant or loan basis) given the potential global I 00e wIth 1988-80-100 environmental benefits. In the technology-intensive 0 , , sectors (mainly refrigeration), developing non-ODS -- technologies will be much more difficult. Several e= companies in CEE have established technology - - alliances with multinational companies to facilitate l access to new technologies. I.1 Governments in Central and Eastern Europe l200 2005 2010 should prepare national recovery-reclamation- Year recycling strategies to ensure a sufficient supply of -em.cilo Om bwrm+Fr r4 Om refrigerant to maintain the existing stock of capital Wod 5, uthate goods relying on ODS (mainly cooling, air conditioning and refrigeration equipments). Refrigeration appliances have operational lifetimes of Further reductions in emissions of carbon an average of 20 years, and during this period, many dioxide and other greenhouse gases, especially have to be refilled with refrigerant. Investments in methane, could be achieved by collecting the gas recovering and recycling ODS-refrigerant will avert associated with oil production rather than flaring it, the need to retir- equipment prematurely. by minimizing natural gas losses from transmission and distribution systems, and by installing more Reduction of Greenhouse Gases efficient compressors on gas pipelines. These investments will typically generate high rates of As the ene.-gy intensity of production and the share of return over and above their environmental benefits. coal in total energy demand decline in Central and Some projects of this kind are under way or are at Eastern Europe during the next decade, CEE's the plannixig stage -- primarily in Russia -- and the emissions of carbon dioxide will fall. provision of technical assistance to develop more Figure 6.4 shows the projected emissions of wov'd clearly be justified. There have also been carbon dioxide until the year 2010. The Central and prc sals to utilize coal-bed methane resources, East European countries covered by these projections especially in Poland and Ukraine. The economic account for a little over 20% of total world emissions returns to such investments are highly uncertain at of carbon dioxide from industrial sources. Under the present but their potential environmental benefits main reform s, ,nario (see Annex 3), their emissions could warrant the provision of technical and financial would fall by 46% in the period up to 2000, so that assistance to develop pilot schemes. economic reform in the region should lea,1 to a These changes follow directly from policies reduction of 10% of global carbon dioxide emissions and investments that are economically ar from industrial sources. This is equivalent to 80% of environmentally desirable for the countries the total emissions from the European Union themselves. Further measures to implement the 1992 countries combined, or to the total emissions from all United Nations Framework Convention on Climate of the countries in Asia other than China and India. Change would have to be assessed in the context of Economic recovery and growth will lead to an the limited resources available and the relative increase in emissions after 2000, unless measures are priorities attached to other environmental problems -- adopted to reduce further the energy-intensity of local and transboundary -- for which these resources production and dependence upon coal. The reduction might be used. In the future, reliance upon national VI. Transboundary Issues: Regional and Global Ccncerns 73 Box 6.8 ODS Phaseout Activities Refrigeration * RIGID FOAM. Introduce the 0 Support research and development to internationally available reduced-CFC foam manufacture refrigerators and freezers using the formulations (which use 50% fewer ODS). Keep new HFC- 1 34a compressors, now established as abreast of international developments and the international standard for domestic experiences with HFC and HCFC-blends and with refrigeration appliances; complete water-blown rigid foams. * Develop and implement a CFC recovery and recycling program to help meet the demand Aerosols for CFC refrigerants for refrigeration applications * Make capital available for production of and air conditioners, including improved servicing ODS substitutes. arid maintenance procedures. Solvents Foar. e* Disseminate technical information to * FLEXIBLE FOAM. Encourage the this sector's numerous sme' users through development of water-blown foam manufacturing seminars and demonstration r :cts. Establish for soft foam products. The use of HCFC or a technical clearing house within industry other chemical based blowing agent is not associations serving the solvent users. recommended given the cost and production-related health considerations, Fire Protection especially now that most qualities of foam can be * Introduce measures to recover and produced without using these substances. recycle or destroy the large stock of halons which has accumulated over the last few years. Consider participating in the planned international Halon Bank. taxes on the carbon content of fuels would minimize Conservation of bio-diversity the economic cost of m eting national targets for reducing carbon dioxide emissions. They would There are a number of existing international and provide direct economic incentives to reduce the use regional legal agreements that regulate various of all fossil fuels by encouraging the development of aspects of the protection and management of renewable sources of energy as well as to switch biological diversity, either through protection of from high to low carbon fuels (i.e. from coal to gas). species or of ecosystems and habitats. The broadest In addition, an arrangement which allowed countries legal instrument is the convention on Biological to trade national emission reduction targets would Diversity, signed by over 150 States at the time of provide the flexibility required to ninimize the UNCED. The status of biological resources and overall cost of meeting a fixed target for reducing diversity of species has traditionally been good in the carbon dioxide emissions over the whole region. region because population densities are so much Overall, the marginal cost of reducing lower than in Westem Europe. However, the emissions of carbon dioxide and other greenhouse transition to market economies together with high gases (GHGs) from countries in Central and Eastern levels of pollution in some vulnerable areas is Europe will remain well below the equivalent beginning to be harmful. marginal costs for Western Europe for many years. There are various suggestions for immediate Internationally as well as nationally, countries should actions that can be undertaken to allow c-untries to reduce GHG emissions in ways that give the greatest fulfil their commitments under the Conventions as reductions at the lowest cost. For West European well as setting in place the necessary support countries, that implies using much of the resources structures to protect species and habitats. These devoted to greenhouse warming to reduce carbon should be taken in conjunction with the measures emissions from the CEE countries. discussed in Chapter V as well as the actions in the report on Nature Protection presented to the Lucerne Conference. They include: 74 VI. Transboundary Issues: Regional and Global Concerns * completing inventories of biolkgical Nuclear issues resources; *building up the institutional and human The safety of nuclear power plants in the CEE resources required to assess and manage biological countries is regarded as a matter of both national and resources; international concern. Work so far supported by * revising national legislation to conform international donors has been mainlv limited to with the provisions of the Convention on Biological assessments of the need for improvements to Diversity; operating safety. * preparing national strategies for the conservation of biological resources and Figure 6.5 implementation of the Convention. Primary Energy Use Management of Toxic Chemicals and Hazardous in Central and Eastern Europe Wastes Indices with t18S-905100 The concern here is not only toxic chemicals 100 -7 originating in commerce, services, agriculture and so industry, but also radioactive substances produced by Go energy generation, research and medicine and 40 military activities. While the disposal of these wastes 20 is primarily of national concern, it becomes a 0 regional or even global issue when accidents occur, W' s .me 2-= 2005 20 or when wastes are transported across boundaries. Various international agreements regulate the c,i . 8 EtUInfElw FO8U Eurmp management and transport of hazardous substances, including the 1957 European Agreemlnt Concerning the International Carriage of Dangerous Goods by The 1992 Munich G-7 Stmimit adopted a Road (ADR, as amended), the 1986 Convention on multilateral program to improve ope:ational safety, Early Notification of a Nuclear Accident; 1986 make immediate technical improvements to plants Convention on Assistance in the Case of a Nuclear based on safety assessments, and enhance regulatory Accident or Radiological Emergency; the 1989 regimes. In addition, the program will create the Convention on the Control of Transboundary basis for longer-term safety improvements by Movements of Hazardous Wastes (Basel Convention); examining the scope for replacing less safe plants the 1992 ECE Convention on the Transboundary with alternative energy sources and more efficient use Effects of Industrial Accidents. of energy, ar1 the potential for upgrading plants of Changes in governance in the region have more recent design. The Summit extended the important implications for the management of existing G-24 Coordination mandate to the new States hazardous substances. Of particular concern is the of the former Soviet Union and proposed the setting rapid loosening of state controls tha; could result in up of a supplementary multilateral mechanism to unregulated transport of hazardous substances across provide for financial support for immediate measures borders. not covered by bilateral programs. Immediate actions could be directed to: The period of economic stabilization and transformation provides a good opportunity to put * assessment of the state of industrial plan:s sound long term energy policies into place and to that generate hazardous wastes as well as the related develop non-nuclear sources of electricity supply. disposal and transport facilities; Figure 6.5 shows that primary energy demand in * improvement of safety measures, including both Central and South-Eastern Europe and the better institutional, technological, managerial systems former Soviet Union is projected to decline by more and equipment; than 20% from 1989/90 to 1995 and will not rise * strengthening the institutional and technical significantly before 2000. Electricity demand will capacity to comply with the provisions of the Basel grow as a share of total energy demand, but it is Convention. unlikely to recover to pre-reform ievels in any country much before 2005. ENI)3 VI. Transbotndary Issues: Regional and Global Concerns 75 Box 6.9 Global Environment Facility Biodiversity Projects in Central Europe Country Project Areas & Ecosystems Adjoining Projects Specific Innovations Belarus * Byelovezhskaya forest * Poland GEF Conservation planning and * Berezinsky wetlands * Poland Forestry (World research outreach programs * Pripyatsky forest Bank supported) Ukraine * Carpathians Biosphere 0 Poland GEF Management of forest Reserve forests and alps c Slovak GEF fragments and introduction of wildlife corridors and land use planning for biodiversity protection Slovak S Morava floodplain forests * Ukraine GEF Environmental NGO Small Republic and wetlands 0 Poland GEF Grants Program; * Tatras forests and alpine * Poland Forestry (World development of tri-national meadows Bank supported) trans-border Trust to * Eastern Carpathians 0 Austrian Eco-Fund maintain coordinated forests and meadows Activities management of the international biosphere reserve in the Eastern Carpathians Czech * Palava wetlands and * Slovak GEF Environmental NGO Small Republic floodplain forests * Poland GEF Grants Program and * Sumava forests * Poland Forestry (World improved wildlife * Krkonose alps and forests Bank supported) management; establishment * Austrian Eco-Fund of revenue mechanisms and o FACE project at use of economic measures Krkonose to maintain use below determined ecological carrying capacities Poland * Bialowi3za primeval forest * Ukraine GEF Establishment of a gene * Suoety forests 0 Czech GEF bank to protect genetic * Slovak GEF diversity at risk because in- situ conservation is not possible due to pollution. Conclusions: The Key Messages to bear in mind the possibility of making simultaneous improvements to reduce cross-border or Given their limited resouices, the countries of global environmental damage. Central and Eastern Europe need to give priority to Where the costs of mitigating transboundary those environmental measi',es which promise the environmental damage exceed the local benefits, it is greatest gains at the lowest cost. Generally speaking, reasonable for CEE countries to ask their richer such measures will be primarily local in their impact, neighbors for assistance. From the point of view of because the average concentration is greatest near the West European countries, there may sometimes be point(s) of emission. greater gains to be had from spending money on However, many such measures will also have reducing sources of pollution in Eastern Europe than beneficial side effects on those kinds of pollution by spending it at home, where standards are already whose impacts cross borders. When designing high. This principle is likely to hold in areas as policies that bring local benefits, it will be important 76 VI. Transboundary Issues: Regional and Global Concerns diverse as global warming, nuclear safety and river 4. * the 1972 Convention on the Prevention of Marine quality. Pol u.tion by Dumping of Wastes and Other Matter (London The synergy that exists between reducing Dumping Convention), as amended; a the 1Q73;1978 International Convention for the domestic and transboundary pollution may sometimes Prevention of Pollution from Ships (MARPOL), with its annexes: dictate domestic priorities. Policies whose gains * the 1974 Helsinki Conventionon the Protection of the arise both in a CEE country and beyond its Marine Environment of the Baltic Sea Area, as revised in 1992; boundaries may not be ecconomic if considered in 0 the 1976 Barcelona Convention for the Protection of purely ntoa trs Btthe Mediterranean Sea against Pollution, with its related protocols; purely national terms. But, by persuading 0 the 1990 Intemational Convention on Oil Pollution neighboring countries that tiiey will also enjoy some Preparedness. Response and rooperation: of the gains from such policies, and securing a 0 the 1992 Bucharest Ccnvention on the Protection of contribution from them towards the cost, CEE the Black Sea against Pollution, with its related protocols. countries may tind that measures with domestic 5. A large portion of nitrogen compounds is converted benefits become more affordable. sooner or later to nitrate which is persistent and not eascyd rem,ved. "Self-purification' is therefore less effective in assuring the quality of drinking water resources -- a problem which is Notes compounded by the inability of existing water treatmnent plants to cope with nitrate contamination. There may also be local problems witn phosphorus which can cause high algae biomass if 1. The United States has introduced a systema of uradeable lih odtosaefvrbeadtefo sso. Exstn permits for large and medium sources in the Clean Air Act hght conditons are favorable and the flow is siow. Existng Amendments of 1990. In principle, this system could be extended wastewater treatment facilities cannot cope with this problems. to small scale sources by requiring that fuel suppliers must acquire 6. For example, Bulgaria and Greece are considering the permits to cover the estimated emissions of small scale consumers possibility of establishing a system which would monitor of gasoline, heating oil or coal. Emissions trading in the US.* is discharges into rivers that flow from the Balkan and Rhodope gradually beginning to be a well-accepted process in the power Mountains into the Mediterranean, including the Martsa and sector and is expected to result in substandal resource savings and Struma Rivers which are among the most polluted in Bulgaria. additional industrial growth. 7. Human health: Incheases in non-melanoma skin cancer Mechanisms in the Control of Acid RPin. Envirommental and cataracts, and in the incidence or severity of infectious Economic Research Series (Department of the Environmenta .iseases due to suppression of human immunological systems. Londonm HMSOv 1992)t Ecosystems: Reduction in the numbers of phytoplankton, arsd inhibited growth and photosynthesis of certain plants. 3. The European Union's Large Combustion Plant (LCP) directive sets stringent targets for reducing emissions of SO2 and NO, from large sources. The policies for implementing the 9125 directive vary across countrics but effectively all new and many existing large plants (> 300 MW) will be required to install flue gas desulfurizatioit or in-furnace sulfur controls plus low NO. burners and selective catalytic reduction if they are to continue operating into the next century. VII. Principal Recommendations 77 VII. PRINCIPAL RECOMMENDATIONS Thi chapter draws together the main themes of the report. Nine key messages stand out: (i) Countries have many opportunities to implement policies and invest in projects which provide both economic and environmental benefits. "Win-win "policies include removing subsidies that encourage the excessive use offossilfuels and water in industry, agriculture and households. They also include investments in ene;-gy and water conservation, low-input and low-waste technoicgies, and expenditures on "good industrial housekeeping. " (ii) Environmental pnorities should be based on a careful comparison of costs and benefits. The resources available for environmental improvements will be severely constrained in Central and Eastern Europe for at least the next 5-10 years. It is essential that limited resources be applied to the most urgent problems first. (iii) Market forces should be harnessed to control pollution wherever possible. Market-based instruments, such as pollution charges, fuel taxes, and deposit refund schemes, can help achieve desired levels of environmental quality at much lower cos.s than traditional regulatory approaches. Regulatory instruments will still be needed to control emissions of micro-pollutants such as heavy metals -- particularly lead -- and toxic chemicals. (iv) Countries should concentrate on local problems first. Many people suffer health damage from exposure to lead in air and soil, airborne dust and sulfur dioxide, from nitrates in drinking water and from contaminants in water and food. Solving these problems will bring the biggest gains in health and well-being. Measures to reduce emissions of pollutants in response to local concerns should also contribute to reducing transboundary and global emissions. (v) Standards need to be realistic and enforreable. Countries should implement stricter standards over a 10-20 year period, and ensure that industries comply with interim standards. Local people should be involved in setting priorities and in implementing solutions. Neithergovernments nordonor institutions are equippedtojudge how local inhabitants value their environment. A participatory approach is essentialfor the long-run sustainability of environmental improvements. (vi) Responsibility for past environmental damage needs to be clarified. Uncertainty about who will be responsible for past damage can discourage foreign and domestic investment and can impede privatization. For practical reasons, governments will have to bear most of the costs of dealing with past pollution. Governments must define clearly the environmental standards that new owners must meet and the period of adjustment that will be permitted. (vii) Donor countries should consider providing funding to accelerate the reduction of transboundary and global emissions in countries of Central and Eastern Europe. Such funding would be particularly appropriate where the mnarginal cost of reducing emissions is lower in Central and Eastern Europe. Minimizing the net cost of meeting international agreements is in the interests of individual countries and Europe as a whole. If the net cost of reducing transboundary flows is lowered, countries will be able to afford to act earlier or to adopt more stringent targets. (viii) More research, training, and exchange of information are needed to help decision-makers set sensible priorities. Research should focus on the state of the particular environment of Central and Eastern Europe. Much more information is also needed on low-cost ways to reduce emissions of air and water pollutants from non-ferrous metal smelters, iron and steel plants, chemical plants, paper mills, and wastewater treatment plants and on ways to conserve biodiversity. (ix) Finding, implementing, and financing solutions "'ill require building partnerships. Transferring know-how and clean technologies will require strong cooperation between East and West, between countries of Eastern and Central Europe, and within countries, between cities, institutions, and enterprises. 78 VII. Principal Recommendations Priorities In Detail REORGANIZE PRIORITIES FOR PUBLIC SPENDING. * Design and select public investments to W&wt governments must do accelerate the impact of industrial restructuring on the environment and to reinforce market incentives IMPROVE STANDARD-SETTING. for economic change; * Adopt a framework of environmental e Provide funding to cover t.ie operational, standards that allows for a gradual tightening over a maintenance and repa.r costs of existing public 20-30 year period, and enforce interim standards; environmental services, especially the treatment of * Adopt a realistic set of ambient standards drinking water and sewage, the collection and which can be easily monitored and enforced; disposal of municipal waste, and maintaining * Do not set uniform emission standards at inventories -- and monitoring the disposal -- of a country-wide level. Allow for substantial variation hazardous, toxic and nuclear wastes; in emissions at different locations and sources. Set 0 Invest in 'win-win" projects which can be the most stringent requirements -- such as the justified on economic grounds alone but which bring adoption of Best-Available Control Technology -- for substantial environmental benefits. These include hot spots where economic transformation and capital improvements in energy efficiency, water replacement will not bring ambient concentrations of conservation, the adoption of low input and low criteria pollutants down to acceptable levels. waste technologies, and minor plant improvements which facilitate "good housekeeping;" CLARIFY ENVIRONMENTAL LIABILITY. 0 Provide funding for training, internship - Clarify responsibility for past and exchange programs, for the development of environmental damage. Uncertainty about who will environmental education curricula, and for other be responsible for past damage can discourage activities which raise local capacity for effective foreign and domestic investment in heavy industries decentralized decision making; and impede privatization. For practical reasons, 0 Publicize how improvements in governmunts will have to bear most of the costs of management and operating practices can achieve dealing with past emissions. Governments must environmental improvements with existing plant and define clearly the environmental standards that new equipment; owners must meet and the period of adjustment that 0 Require existing large sources to improve will be permitted; their environmental performance. This strategy will * Establish a monitoring system to make it yield most of the benefits derived from an attempt to possible to distinguish between damages caused by achieve lower emissions for all sources, large or past pollution and current emissions; define the small, but at much lower cost; environmental standards that privatized firms will be * Aim for larger reductions in emissions of required to meet and the adjustment period to be particulates, air-borne lead and heavy metals than for permitted; sulfur dioxide or nitrogen oxides since it is much less * So as not to delay privatization, limit full expensive to control emissions of the former than the environmental audits to a small number of the largest latter; firms. Set aside a portion of privatization proceeds * Require all non-ferrous metsllurgy and to pay for any clean-up subsequently required. parts of the chemical industry to reduce or eliminate their discharges of heavy metals -- particularly lead USE THE MARKET. -- to air and water. * Reduce energy subsidies, providing transitional assistance if necessary for households or GIVE PRIORITY TO THE FOLLOWING PUBLIC industries disproportionately affected; INVESTMENTS. e Choose market-based instruments for * Invest in measures to reduce emissions pollution control wherever possible, building on from low stacks in urban areas where home heating existing frameworks of pollution charges. These can is a significant contributor to high ambient help achieve desired levels of environmental quality concentrations of particulates and sulfur; at much lower costs than traditional regulatory 0 Install dust collection systems and filters approaches. Regulatory instruments will still be to non-ferrous metal smelters -- particularly lead, needed to control emissions of micro-pollutants such zinc, and aluminum plants -- which are located 5 km as heavy metals and toxic chemicals. In some upwind of significant centers of population; regions, tradeable permits may be appropriate. VII. Principal Recommendations 79 * Install equipment to reduce emissions of * Provide industrial wastewater treatment dust, smoke, and soot, and carbon monoxide from facilities in plants -- for example in the textile and iron and steel plants, especially those relying on open pulp and paper industries -- which discharge heavy hearth furnaces; loads of BOD and other pollutants into receiving * Make investments to replace coal with gas waters that are relatively clean and that lie upstream or to permit the burning of smokeless solid fuels in of major centers of population; district heating plants, commercial enterprises and * Install equipment to reduce leakages of households in towns and cities where the average heavy metals, toxic gases and discharges of toxic ambient concentrations of particulates exceeus 150 wastes -- to the air, in wastewater or in .olid wastes micrograms per cubic meter; -- from petrochemical and other cher,-ical plants, * Invest in facilities to pre-treat the especially those located close to substantial towns and wastewater discharged by small and medium-sized cities. industrial plants where contamination of groundwater and rivers by heavy metals is a significant problem -- What dovernment must do to address longer-term for example in towns and cities wvith a concentration environmental problems of tanning, electro-plating and other metalworking plants; * Establish vehicle testing stations combined * Facilitate the installation of domestic with facilities for better vehicle maintenance in order septic tanks and the appropriate disposal of manure to enforce reasonably strict emission standards for the from intensive livestock operations in rural areas commercial diesel vehicles -- buses and trucks -- where levels of nitrates in drinking water drawn from which are the principal mobile source of particulate shallow wells typically exceed 10 mg of nitrate-N per emission; liter; * Develop a program to phase out leaded * Ensure that the disposal of domestic, gasoline. Require that new vehicles (automobiles, toxic, nuclear and other hazardous wastes is carefully buses and trucks), from some appropriate future date, monitored and that leachates from disposal sites do meet the emission standards laid down by the EU. not contaminate ground or surface waters, especially Most of the cost of these measures will be borne by sources used for the abstraction of drinking water refineries, automobile manufacturers and their supplies; customers, but resources for technical assistance and * Install municipal wastewater treatment to deal with special transitional problems would speed plants in towns and cities close to important tourist or up the implementation of these programs; wildlife areas, especially on the Adriatic, Baltic and 0 Fund applied research into a number of Black Sea coasts, Lake Balaton, the Mazurian Lakes environmental problems for which solutions may be and the Carpathian and Rhodope Mountains; ve.y costly (e.g., treatment of nitrate pollution) or O Complete partially constructed wastewater where implementation of remedies has been difficult. treatment plants either in the upstream sections of Such research could focus on ecologically acceptable seriously polluted rivers or where the bacteriological agriculture and forestry practices -- especially their quality of water downstream of najor towns and economic costs and benefits. Support could also be cities is particularly poor; channelled to specialized research institutionsengaged * Implement sustainable rural development in crucial conservation (e.g., botanical gardens); and projects in defined areas of high biodiversity and to undertake well-defined studies on the ecological great ecological importance that are under threat. damage caused by large-scale development projects Such projects should combine better management of such as dams, canals, and major tourism protected areas with ecologically benign developments; agricultural/forestry, tourism and other activities. 0 Strengthen the collection and dissemination of data on the state of the environment What enterprises must do and natural resources. * Invest in mitigating discharges of saline Transboundary issues water from mines in countries such as the Czech and Slovak Republics, and Poland, provided that the costs AcID AIR POLLUTION. of such investments are recovered over the long run 0 Combine local and transboundary from the mines responsible for salt water emissions; concerns. Implementing gcod economic and 80 VII. Principal Recommendations environmental policies in response. ocal concerns TRANSBOUNDARY WATER POLLUTION. will do much to reduce transboundary emissions; 0 Install treatment technologies in coastal * Choose market-based instruments -- such centers which remove more nitrogen and, perhaps, as pollution charges or tradeable permits -- to phosphorus than those which would be appropriate on minimize the costs of meeting international the brsis of local considerations alone when agreements; transboundary effects are imporant. International * Provide a framework which allows groups assistance would be appropriate for those countries Li of countries who might each benefit from cooperation Central and Eastern Europe which border on to share the burden of achieving larger reductions in international seas threatened by transboundary emissions than would be warranted on purely pollution; domestic grounds. In particular, donor countries * Ccncentrate on downstre, m sources might consider arrangements by which they dui i-.g the initial stages of tackling tne problem. contribute to the incremental costs of meeting stricter This implies a two-pronged strategy of focusing or earlier targets for emissions reductions in Central domestic resources on improving upstream water and East European countries. qilality while external resources are directed towards downstream sources which have the most direct PHASEOUT OF OZONE DEPLETING SUBSTANCEC. impact on the sea concerned; * In the short term, focus on the aerosol and 0 Develop the framework of cooperation flexible foam sectors where ODS use can be needed to take stronger action in the future if eliminated at v.ry low cost; jdstified, including: * To facilitate access to new technologies in the technology-intensive sectors (mainly (i) gathering information on water pollution refrigeration), encourage companies in CEE to affecting shared water resources to determine establish technology alliances with multinational the most cost-effective control measures for companies; controlling pollution; * Prepare national recovery/reclamation/ (ii) developing systems to collect and recycling strategies to ensure a sufficient supply of exchange information about trends in water refrigerant to maintain the existing stock of capital quality and emissions; goods relying on ODS (mainly cooling, air (iii) coordinating across countries water conditioning and refrigeration equipments). policies and regulations affecting shared water basins -- including, if appropriate, a REDUCTION OF GREENHOUSE GASES. joint water basin management agency * Collect the gas associated with oil responsible for implensenting cooperative production rather than flaring it, minimize natural gas programs. losses from transmission and distribution systems, and install more efficient compressors on gas WETLAND MANAGEMENT. pipelines to reduce emissions of carbon dioxide and * Support current measures to protect the other greenhouse gases, (especially methane), beyond Danube and Volga deltas; what will occur as a result of economic reform. * Complete inventories of wetlands and These investments will typically generate high rates assess the status of resources which they offer and of return without taking any account of their the potential threats to their future health; environmental benefits; 0 Ensure that wetland management is * Use market-based instruments -- such as integrated into the broad framework of policies for carbon taxes -- wherever possible to reduce emissions water management and nature conservation with due of greenhouse gases. Encourage the development of account being taken of the scope for multiple use an arrangement which allows countries to trade management. national emission reduction targets; * In the European context, West European CONSERVING BIO-DIVERSrrY. countries could make the best possible use of their * Complete inventories of biological resources devoted to greenhouse warming by resources; allocating a substantial fraction to reducing energy * Build up the institutional and human use and carbon emissions from the CEE countries. resources required to assess and manage biological resources; VIl. Principal Recommendations 81 * Revise national iegisldtion to conform with municipalities to overcome administrative the provisions of the Convention on Biological fragmentation; the environmental divisions ot local Diversity; authorities sharing a particular environmental system * Prepare national strategies for the (e.g. a watershed or an "airshed") need better conservaticn of biological resources and horizontal links; (iii) increase efficiency of municipal implementation of the Convention. services with significant environment impact such as water, district heating, solid waste management and MANAGING TOXIC CHEMICALS AND HAZARDOUS urban transport; (iv) strengthen environmental WASTES. planning, project preparation and financial * Assess the state of industrial plants and management capacity at the loca level. activities that generate hazardous wastes as well as * Institutions that manage river basins the related disposal and transport facilities; should be created or strengthened and given * Improve safety measures, including appropriate autonomy. They need finance. through institutional, technological, managerial * CEE countries should share experience systems and equipment; and know-how through, for instance, the Regional * Strengthen the institutional and technical Environment Center. capacity to comply with the provisions of the Basel Convention. STRENGTHENING ENVIRONMENT MINISTRIES. * Environment ministries should emphasize Reforming Institutions policy and coordination, rather than implementation, which is better left to regional and local institutions. THE KEY PRIORITIES. They should build a close working relationship with e A clear government commitment and ministries of health, which have often have been environmental objectives set in the context of a broad responsible for ambient environmental monitoring, to participatory approach is a fundamental prerequisite establish the vital link between health objectives and for longer-term successful environmental policy. environmental policies and investments. i Donors should make greater use of local * Bilateral donors should facilitate the expertise. Not only would this help to develop local secondment of CEE country experts in western skills, it can also provide a better understanding of institutions (and western experts should be made local circumstances and be more cost-effective then available to assist in Central and Eastern European using experts from donor countries. Donors should environment ministries). Such secondments would be address the problem of tied aid. especially useful for cross-sectoral issues, and for * Environmental objectives should be based designing effective legislation and implementation on realistic assumptions about the availability of procedures and for helping to upgrade economic financial and human resources. analysis and other techniques to support * Much more emphasis should be placed on decision-making. the front-end of the project cycle, (i) establishing O Improve cooperation between ministries, objectives; (ii) identifying efficient solutions amucg perhaps by setting up cabinet-level committees for a range of institutional, policy and technological environment and development, and by designating options; (iii' and identifying what is needed for staff from the ministry of environment to participate successful implementation. in strategy development in all sectoral ministries. * Be cautious in developing comprehensive environmental laws; the rapid political and economic IMPROVING MANAGEMENT CAPACITY, TRAINING AND changes may make them difficult to implement. EDUCATION. * Integrate environmental concerns in the * CEE countries should design and economic reform laws wherever possible. implement educational training programs for high-level decision-makers a. national and local STRENGTHENING INSTITUTIONAL CAPACITY. levels, in close collaboration with local institutions. * To build a local envirommental Training programs could be supported by voluntary management capacity and establish appropriate contributions from donors, with CEE countries coordination mechanisms, CEE countries should: (i) providing the on-site organization and support. clarify roles and responsibilities for environmental e CEE countries should establish a network management among national, regional and local of national institutions invelved in environment levels; (ii) strengthen co-operation between training. The purpose of the network would be to 82 VII. Principal Recommendations promote exchange of information between those recognize CEE NGOs as regular discussion partners institutions and their counterparts in other countries, for their activities in and related to the region. and with external financial partners. * Provide NGOs with access to * All bilateral and multilateral assistance environmental information and permit their projects with a direct imp'-t on the environment participation in environmental impact assessments. should include some environmental training. Consider following U.S. legislation and practice concerning access to information, and Dutch IMPROVING ENVIRONMENTAL MONITORING AND legislation and practice conc rning environmental INFORMATION SYSTEMS. impact assessment. * Expand gradually envi-onmental * Consider providing financial support to information systems in accordance with priorities and NGOs. resource availability. As resources become available, expand coverage of: (i) water quality parameters Implementation (e.g. biological indicators, phosphorus and heavy metal levels); (ii) marine discharges; (iii) pesticide ASSISTANCE PRIOR TO INVESTMENT. use; (iv) ambient air concentrations of carbon * CEE countries should clearly specify monoxide, hydrocarbons, and lead; (v) exposure to commitments to policy reform and structural change noise from traffic, airports and other sources; (vi) that affect the viability of a project. wastewatcr treatment, including the numbers of * .EE countries should better design households connected to sewage systems, capacity of feasibility studies. The teims of reference for such treatment systems and degree of treatment prior to studies should address not only the technical case for disposal; and (vii) volumes and sources of solid waste investment, but also the often neglected financial and and hazardous waste. institutional requirements for implementing the * Extend monitoring networks, project over time. Donors should involve comparability and reliability of the data collected. international financial institutions when preparing Replace costly census methods with sample surveys. terms of reference. * Strengthen links between CEE countries' environmental information systems and international PROGRAM MANAGEMENT. systems. 0 CEE countries should undertake programs o Promote self-monitoring of enterprises, in an integrated manner in support of long term with random spot-checks by the authorities. country and regional strategies, not as an aggregation Consider making the future frequency of monitoring of individual proJects, and should establish effective or spot-checks depend on the past record of program and project management procedures. compliance (e.g., sources found in violation twice in a row could be put on a watch list for frequent STRENGTHENED COORDINATION. audits). With appropriate penalties for violations, it * The key functions of coordination should has been demonstrated that high rates of compliance be: (i) to monitor whether priority issues are being are possible even with tight budgets. addressed in investment and technical assistance * Give priority to monitoring areas with the programs; (ii) to stimulate corrective actions when highest ambient levels of pollutants which damage priority needs are not being addressed; (iii) to put human health, e' en if it rreans transferring air and/or CEE countries with a particular need for assistance in water pollution monitoring stations from other parts touchi with potential providers of assistance; (iv) to of the country. help avoid duplication of effort by collecting and effectively disseminating information on assistance STRENGTHENING NON-GOVERNMENTAL activities; (v) to review and share experience gained, ORGANIZATIONS both by donors and recipients. * Encourage authorities and business to recognize the role and importance of environmental THE PRIVATE SECTOR. NGOs as full participants in the public debate about 0 Provide clear "rules-of-the-game" for the sustainable development and the formulation and private sector in order to attract foreign investment implementation of practical policies. Invite NGOs to and remove uncertainty for business. In developing the relevant advisory boards, delegations, national strategies, give priority to clarifying negotiations, etc. Western governments, environmental liability issues and establishing multinaticnal institutions and western business should appropriate Environmental Impact Assessment VII. Principal Recommendations 83 procedures. Western donors should support the 0 Establish a mechanism to enable the EAP development of the local environmenta' services to function as a "living document", elaborating key sector. elemenes of the strategy and providing feedback on * Encourage companies to use The Budapest the original strategy. Guiding Principles on Environment, Industry and Investment Decisions in Cen.tral and Eastern Europe PROMOTE DEVELOPMENT or NATIONAL for guidance with regard to the environmental ENVIRONMENTAL ACTION PROGRAMS. dimension of investment. This may facilitate the * CEE countries should take the lead in transfer of technology and know-how. developing environmental action programs specific to their needs and the environmental problems they REVIEW OF IMPLEME"ITATION. face. This process should start with a clear * All countries concerned should report agreement on priorities among all interested parties periodically on adaptation and implementation of the in the country. Efforts should then concentrate on EAP. NGOs can be encouraged i contribute to this choosing the most cost-effective way to achieve the effort. desired objectives within the given financial and * In monitoring the State of the institutional constraints. Environment in Europe, the European Environment Agency should take account of environmental trends in "hot spots" or critical regions identified in the EAP and national strategies. Summary of Human Health Problems Annex 1 Page I ANNEX 1 SUXtAIARY OF HUMAN HEALTH PROBLEMS AND MAJOR INDUSTRIAL PLANTS LOCATED IN POLLUTION "HOT-SPOTS" IN BULGARIA, CZECi 4ND SLOVAK REPUBLICS, HUNGARY, POLAND, ROMANIA; LATVIA, LITHUANIA, ESTONIA, BELARUS, UKRAINE, AND EUROPEAN RUSSIA This sunmary outlines those environmental health problems in Central and Eastern Europe for which reasonably credible epidemiologic data are available. It is meant to be a comprehensive summary, but there are obstacles to achieving this goal. Health outcomes in the various regions with similar chemical exposure problems have not necessarily been investigated to an equal degree, and different methodologies of varying credibility have been used. This is particularly a problem for chronic and multifactorial diseases which require advanced epidemiologic methods that are not commonly understood in Eastern Europe. Thus, the following summary draws attention to those chemical exposure problems which have been adequately studied, but does not mean to imply that other, well recognized episodes of environmental pollution or degradation have not led to human health problems. The problems described here are primarily the result of exposures to lead in air and soil, airborne dust, sulfur dioxide and other gases,' and nitrate in water. 1. Places where there is a problem with overexposure to lead among children (37 locations in 7 countries): This problem is important because it may lead to neurobehavioral deficits which will have long term effects on children's educational attainment. Evidence of neurobehavioral deficits among exposed children has been found in several of the following places: (a) Poland. Katowice Wojewodship - Szopienice, Miasteczko, Zyglin, Lubowice, Zabrza, Toszek, Bytom, Bojszow, Brzeziny, and Brzozowice. Legnica-Glogow area - near copper smelters (note: quality control problems with blood lead data). (b) Czech Republic. Central Bohemia - Pribram (note: quality control problems with blood lead data). (c) Hungary. Inner Budapest, RGmhany, Szolnok. I/ There is a need to carefully review the places with enviromnental health problems due to airborne exposures to evaluate the relative importance of gaseous exposures in the absence of dust. Annex 1 Page 2 Summary of Human Health Problems (d) Bulgaria. Plovdiv, Asenovgrad, Kuklen, Kurdzhali (results of lead studies of adults in Voden, Kremikovtsi, Jana and Pernik imply that there are probably overexposures to children, too). (e) Romania. Bucharest, Copsa Mica, Baia Mare (probable). (f) Russia (European).2 St. Petersburg, Berezniki, Podolsk, Yaroslavl, Samara, Nizhnyy Novgorod, Ulyanovsk, Rostov-na-Dony, Kursk, Astrakhan. (g) Ukraine. Kostiantynivka (probable). 2. Places where there are documented associations between acute respiratory diseases (sinusitis, pharyngitis, bronchitis and laryngitis) and air pollution (46 locations in 10 countries): (a) Poland. Krak6w. (b) Slovalda. Bratislava. (c) Czech Republic. Central Bohemia - Neratovice, Kralupy. North Bohemia -- Usti rnaa Labem, Teplice, Most, Chomutov, Decin. (d) Hungary. Dorog, Ajka. (e) Bulgaria. Ruse, Vratsa, Devnya, Srednogorie, Krekikovtsi, Asenovgrad, Shvistov, Dimitrovgrad, Sofia, Gabrovo, Varna, Kameno, Burgas. (f) Estonia. Narva/Kohtla-Jarve/Sillamae area, Kunda. (g) Lithuania. Jonava, Kaunas. (h) Latvia. Olaine. (i) Romania. Slatina, Baia Mare, Tasca, Sendreni- Galati, Savinest, Suceava, Hunedoara, Mintia, Otelul Rosu, Navodari, Remicu-Vilcea. 2V This and the following information on European Russia is preliminary and subject to verification. Summary of Human Heaith Problems Annex 1 Page 3 (j) Russia (European). Arkhangelsk, Berezniki, Voskresensk, Cheboksary, St. Petersburg. (k) Ukraine. Zaporizhzhia. 3. Places where there are documented associations between chronic respiratory diseases (chronic bronchitis/emphyse:ina and asthma) and air pollution (29 locations in 9 countries): (a) Poland. Regional association between S02 levels and chronic bronchitis and asthma rates throughout the country; also found specifically within Krak6w. (b) Czech Republic. North Bohemia -- Usti nad Labem, Teplice, Most, Chomutov, Decin. (c) Hungary. Dorog, Ajka, Nagyteteny (in District 22 of Budapest), Borsod County (especially Karincbarcika and Miskolc). (d) Bulgaria. Ruse, Razlog, Vratsa, Devnya, Srednogorie, Plovdiv, Asenovgrad, Kremikovtsi, Pernik. (e) Estokida. Narva/Kohtla-Jarve/Sillamae area, Kunda. (f) Lithuania. Jonava, Kaunas. (g) Latvia. Olaine. (h) Russia (E-aropean). Sterlitamak, Ufa, Chaykovskiy (Perm oblast). (i) Romania. Turda, Copsa Mica. 4. Places where there is reasonably strong evidence of a connection between excess infant and lung cancer mortality and air pollution (8 locations in 3 countries): (a) Poland. Katowice -- infant mortality in areas with the highest dust levels. Krak6w -- Lung cancer in relation to community exposures to steel mill emissions. Annex I Page 4 Summary of Human Health Problems (b) Czech Republic. Infant mortality (especially post- neonatal respiratory mortality) in regions with the highest dust and S02 levels. (c) Russia (European). Berezniki, Nizhnyy Novgorod, Dzerzhinsk, St. Pcetrsburg, Lipetsk. NB: Other places where correlations between air pollution and adult mortality and/or cancer incidence are likely valid, but require furtner investigation, include the mininp listricts of North Bohemia (lung cancer, all cancer, total mortality), the mnost polluted districts of Central Bohemia (total moriality), Ziar nad Hronom region of Slovakia (total morta ty), L6dz (total mortality) and the mining district of southern Bulgaria (lung cancer). 5. Places where there are documented associations between abnormal physictogical development and air pollution (18 locations in 7 countries): (a) Poland. Krak6w -- reduced pulmonary function among adult males exposed to acid rain emissions. Katowice -- average h_moglobin levels among mothers and children reduced by about 20% below normal. (b) Czech Republic. Rates of low birth weight are increased in the regions with the highest levels of dust and SO2. Central Bohemia -- increased rates of "small for gestational age" babies in the regions with worst environmental quality. -- reduced pulmonary, hematological, and immune function in children from most air polluted a e s. Mining Districts of Bohemia -- reduced hematological and immune function in I,hildren. -- delayed bone maturation in children. Teplice and Usti nad Labem, North Bohemia -- increased rates of congenital anomalies. Summary of Human Health Problems Annex I Page 5 (c) Hungary. Nagyteteny -- anemia among children. Ajka -- reduced pulmonary function among children. (d) Bulgaria. Dimitrovgrad -- reduced pulmonary function and reduced growth rates among children. (e) Estonia, Narva/Kohtla-Jarve/Sillamae area -- reduced hematological and immune function in children. Kehra -- reduced pulmonary function among children. (f) Romania. Slatina, Copsa Mica, Turda -- reduced pulmonary function among children. Copsa Mica, Baia Mare -- growth retardation. (g) Ukraine. Mariiupil, Zaporizhzhlia -- increased rates of congenital anomalies. 6. Places where nitrates in drinking water are widespread, requiring water replacement to protect newborns against methemoglobinemia (Widespread in 6 countries): Methemoglobinemia is a form of chemical asphyxia wherein the oxygen carrying capacity of the blood is chemically inhibited by nitrates: (a) Slovakia. Widespread problem. (b) IIungary. Borsod County -- widespread problem. (c) Bulgaria. Districts of Haskovo, Burgas, Varna, Razgrad and Lovech -- widespread problem. Also in Stara Zagora, Pazardgik Targovichte. (d) Belarus. Brest, Gomel, Grodno, Vitebsk, Minsk, Mogibv oblasts. (e) Lithuania. One-third of country covered by water replacement program for pregnant women. (f) Romania. Widespread problem throughout the country. Annex I Page 6 Summary of Human Health Problems 7. Places with problems with arsenic: (a) Slovakia. Ziar nad Hronom -- increased rates of non-melanoma skin cancer and hearing loss in children downwind of the aluminum plant. (b) Hungary. Bekes County -- high levels of arsenic in the water supply, with evidence of arsenic-related skin conditions and intestinal colic among children, as well as a possibility of increased rates of stillbirths and spontaneous abortions. (c) Bulgaria. Srednogorie -- increased levels of arsenic in surface water and in the soil. (d) Romania. Arad-Lipora-Ineu districts -- area is contiguous with Bekes County, Hungary. High rates of skin cancer have been found here. (e) Russia (European). Cherepovets, Kamensk- Shakhtinskiy (Rostov oblast), Tyrnaua (Kabardino- Balkariya), Vlauikavkaz. 8. Other Health Effects of Contaminated Drinking Water Supplies: (a) Latvia. Riga -- large waterborne hepatitis A outbreak Jelgava -- large milk-borne dysentery outbreak based on contaminated water supply. (b) Romania. -- carcinogenic substances exceeding standards have been measured in water samples from 32 of 41 districts in the country. -- chlorinated pesticides found in many water supplies around the country. (c) Russia (European). Sankt-Peterburg, Murmansk, Volograd, Kurgan, Novgorod oblast, Mordovian Republic. 9. Places with other problems: (a) P?oland. Krak6w - ongoing problems with fluorosis near an aluminum smelter. Summary of Human Health Problems Annex 1 Page 7 Turow, Silesia -- high prevalence of methemoglobinemia near lignite power plant. (b) Slovakia. Michalovce -- PCB exposures, with mini- epidemic of Potter's Syndrome (congenital agenesis of kidneys) in the late 1970s. (c) Belarus. Gomel oblast -- thyroid cancer in children following Chernobyl. (d) Estonia. Widespread beach closures to protect against the spread of infectious disease. (e) Latvia. Water supply in Daugavpils closed twice in the last two years to protect against chemical spills upstream on the Daugava River in Belarus. Brocenai -- large-scale community asbestos exposure. Liepaja -- multiple concerns from electromagnetic radiation from radar stations. Olaine -- disordered immune function in adults. (f) Romania. Several towns/cities with high airborne asbestos levels. Suceava -- neurological symptoms in children exposed to carbon disulfide. (g) Russia (European). Kalingrad, Novgorod, Lepecsk, Syktyrkar, Kandalaksha, Cherepovets -- high airborne benzo(a)pyrene levels. Dzerzhinsk, Serpukhov -- High levels of polychlorobiphenyls in air, soil, water, vegetation, and breast milk. Ufa, Shchelkovo, Chapayevsk, Dzerzhinsk, Moscow, Murmansk -- high concentrations of dioxin in the soil on grounds of industrial plants and in the ashes of waste incinerators. (h) Ukraine. Thyroid cancer in 3 contaminated areas of Ukraine following the Chernobyl accident. Annex 1 Page 8 Summary of Human Health Problems The information collected and evaluated from nine CEE countries provides the following overall picture: Poland -- The predominant environmental health threat in Poland is the regional hot spot in the Katowice-Krak6w area. Threats to human health are mostly due to airborne exposures, and secondarily to deposition of metals (especially lead) in soil. Widespread water pollution has not been shown to be a significant risk to health at this time, presumably because there is a tradition of not using tap water for drinking. Czech Republic -- Air pollution in the mining districts of Northern Bohemia forms a regional hot spot, which is the primary source of environmental health problems. There are smaller areas of concern in industrial areas of Central Bohemia and Moravia, as well as in Prague. As in Poland, water pollution is not a major current concern with respect to human disease. Slovak Republic -- The pattern in the Slovak Republic is different from Poland and the Czech Republic, in that nitrates in drinkiiig water in rural areas appear to be a significant problem. In addition, there are human health problems associated with air pollution from specific plants in a handful of specific locations. Hungary -- In Hungary, areas with human health problems in relation to the environment tend to be old industrial areas with a confluence of airborne pollution sources, such as Borsod County and the industrial areas of Budapest, or areas with a single major point source, such as Ajka. Waterborne exposures to nitrates are important as well in Borsod County, and there are problems with naturally-occurring arsenic in water in B6kes County. Bulgaria -- The pattern in Bulgaria is similar to Hungary with a mixture of single and multiple point sources of air pollution predominating. However, the number of areas with documented associations between air pollution and human health outcomes is much larger in Bulgaria than in Hungary. Nitrate pollution of water is a widespread problem, affecting drinking water supplies in rural areas throughout the Western part of the country. Romania - Most of the air pollution related problems in Romania are due to intense exposures from single point sources. These tend to be clustered in certain parts of the country, especially in the area of Transylvania near Cluj. Nitrate pollution is common in 38 of 41 districts of the country. Baltic Countries -- Aside from prodigious dust emissions from a cement plant in Kunda, Estonia, and a small number of other local concerns, air pollution problems in the Baltic Countries tend to have less health significance than in other parts of Central and Eastern Europe. Instead, problems with water pollution have come to the fore. Rural Lithuania has problems with nitrates which are iuman health significance. Riga has Summary of Human Health Problems Annex 1 Page 9 had an epidemic of waterborne hepatitis A as a result of a temporary lack of coagulant to treat drinking water from the Daugava River. All three countries have had to close beaches in recent years to prevent the spread of infectious diseases due to inadequate sewage treatment in adjacent settlements. Russia -- It is not clear whether or not the principal environmental health problems in Russia are the same as those in the rest of Central and Eastern Europe. Russia's size and tremendous diversity impose significant obstacles to generalization. The task is made more difficult by the fact that relevant information has, according to one estimate, been generated by more than 100 different institutes around the country. A preliminary assessment suggests that industrial facilities are the most important sources air pollution causing respiratory and developmental problems in urban and industrial locations in European Russia. Chief among these are chemical plants, which emit organic vapors and irritant gases, and petroleum refineries, which emit polycyclic aromatic hydrocarbons. As in other parts of Eastern and Central Europe, emissions of lead from lead smelters, lead-cadmium battery plants, and storage battery factories have been linked with high blood levels in children living in the vicinity of the plants. Suspended particulate matter is a concern in many urban areas. Finally, there is concern about exposures to ionizing radiation in communities adjacent to military-industrial facilities. As in other countries in the region, it appears that elevated nitrate levels in drinking water may be a widespread problem. Arsenic, pesticides, and petroleum products may also be contaminating drinking water in some places. Annex 1 Page 10 Table A1.1 Major industrial plants located in selected pollution "hot-spots" Nature of environiental problems Numnber of plants Country Location Pop 'n Epidemio- High levels High Power and Iron Non- Rerining Organic Inorganic Pulp ('000) logical of dust, SO2 levels district and ferrous and chemicals chemicals links or both of lead heating steel metals petrochem. Bulgaria Dimitrovgrad 56.2 A, P = 2 1 Devnya 30.0 A, C 0 1 1 I Kurdzhali 58.0 Pb 0 _ _ 1 Sofiya 1,221.4 A * 1 1 Ruse 210.2 A, C * Plovdiv 374.0 Pb, C * Stara Zagora 186.7 1 Pernik 97.2 Pb, C * 1 2 _ Vratsa 80.5 A, C 0 1 Kremikovtsi Pb, A, C I 1 Varna A I__ Burgas A 1 I _ 1 Raziog C 2_3_ 4 Other 2 - 3 1 -1 4 Czcch Northern Bohemia: _ Republic Usti nad 106.4 A, C . _ Labem _ Litvinov 29.9 * _ 1 1 1 Most 70.8 A, C = _ _ _ Central Bohemia: Armex 1 Page 11 Nature of environmental problems Number of iants Counhy Location Pop'n Epidemie- High levels High Power and Iron Non- Refining ! J.ic Inorganic Pulp ('000) logical of dust, SO, kvels distiict and ferrous and chet,o*als chemicals links or both of lead heating sted metals petroch, In. Prague 1,215.6 0 _ ' I __= Kladno 73.3 0 1 Melnik 19.7 * * 3 Pubram Pb 1 Neratovice A 1_ Kralupy A I I il Southem Bohemnia: Sokolov 28.5 * I Plzen 174.7 0 1 1 1 Ostrava 331.5 1 2 2 _ Bmo ,2.2 I Other 31 2 4 3 4 6 Slovakia Bratislava 442.9 A 3 1 1 1 Ziar nad Hronom 21.4 * 1 Other 8 1 2 2 2 3 6 Hungary Borsod-Abauj- Zemplen industrial zone: Karincbarcik C _ 1 a Ozd 1 Budapest C, P SS1 _______ Annex I Page 12 Nature of environmenta problems Number of plants County Locaion Pop'n Epidemuo- High levels High Power and Iron Non- Refning Organic Inorganic P_p ('000) logical of dus4 SO, levels ditrdct and ferrous and chemicals chemicals links or both of lead heaing steel metals petrochem. Nordiem Transdanubian region: Dorog 13.0 Pb * I _ Komarom 19.6 1 Tatabanya 73.8 * 1 I Central Transdanubian region: Ajka Pb 1 Baranya County: Pecs 0 1 Szolnok = _ 1 Other 24 2 2 4 2 3 _ Poland Katowickie: Dgbrowg 139.2 M 0 * 2 G6micza Chorz6w 131.5 M * 1 2 §wiQtochowi 60.6 M 0 0 1 cc Katowice 366.9 M, P 0 0 1 1 Tamnowskie 74.4 M * 1 Gory Zawiercie 57.1 0 1 Rybnik 144.8 * 1 Bytom 323.2 Pb * . 2 __ Annex 1 Page 13 N-tum. of enviromnental problems Number of plants County Location Pop'n Epidemio- High levels High Power and | Iron Non- Refining Organic Inorganic Palp ('000) logical of dust, S02 levels distrit and ferrous and chemicals chemicals links or both of lead heating steel metals petrochem. Szopienice Pb . , _ Krakowskie: Krak6w 751.3 A, C, M, * 1 1 P Legnickie: Leguica 106.1 Pb = _ _ _ Glogow 73.9 Pb 2 _ Torufiskie: Torun 202.0 = 1 Wroclawskie: Wroclaw 643.6 1 Other 64 6 5 10 5 13 17 Romania Bucharest 2,325.0 0 * 4 Piatra Neamt 117.3 . 1 2 Zlama 9.3 * * 2 Brobeta Tumu Severin 108.0 _ 1 Galati 305.0 * 1 1 Craiova 297.5 *2 1 Tirgu Mures 166.0 = 1 Slaina 74.0 A, P 0 I 1 Hunedoara A 0 1 T Copsa Mica Pb, P 1 = = Annex 1 Page 14 Nature of environmental problems Number of plants Coutay Location Pep'n Epidemio- High levels High Power and Iron Non- Refining Organic Inorganic Pulp ('000) logical of dust, S02 levels district and ferrous and chemicals chemicals _ _ _ _ li~~~~~~~nks or both of lead heating steel metals petrochem. Baia Mare Pb, A 2 Suceava A 1 1 Mintia A I Otelul Rosu A I Navodari A I I Remicu-Vilcea A Turda C, P 1 1 Other 20 5 3 12 7 10 11 Estonia Narva 82.3 A, C, P 2 Tallinn 484.4 * 2 Kohtda-Jarve A, C, P 2 1 Kehra p 1 Other 5 Latvia Ventspils 50.4 * Liepaja ______ 2 Riga _ 7 2 Other = Lithuania Kaunas A,C 0 2 Siauliai 0 1 Kedainai *_1 Vilnius * 3 Annex 1 Page 15 Nature of environmental problems Number of plants_ County Location Pop 'n Epidemio- High levels High Power and Iron Non- Refunng Organic Inorganic Pulp ('000) logical of dus4 SO, levels district and ferrous and chemicals chemicals links or both of lead heating steel metals petrochem. Klaipeda _ 1 Jonava A, C = Other 11 _ I Belarus Polotsk = = Magilev * I Grodno _ = 1 Gomel * 1 1 Minsk 2 Novopolotsk I 1 1 Other 4 1 1 Western Lipetsk * 2 1 Russia Novgorod Pb, M 0 Smolensk 0 1 Kashira (Moscow oblast) Nizhnckamsk 0 1 1 (Tatariya) _ _ Segezha (Karelea) * I Krasnodar * I I Balakovo (Saratov 0 1 oblast) 1 Gubakha (Perm oblast) _ = r = Annex I Page 16 Nature of environmen problems Number of plants Couwy Lecaaon Pop 'n Epidemou Higkh k,el lfigh Power and kren Non- Refujing Organic Inorganc PAlp ('VWf) locd of d7st S) klvels dwd and ferous and chencals chemicals lnks or both of lea heatig steel mealos petrochem. Dzerzhinsk M _ 1 1 (Nizbegorod oblast) Saratov * 1 1 Astrakhan Stepnoy Pb 0 Novokuybyshevak 1 (Samara oblast) Kirovo-Chepetsk _ 1 (Kirov oblast) Novocherkassk * 1 (Rostov oblast) Syzran (Samara oblast) Tolyati (Samara oblast) _ Saint-Petersburg Pb, A, M _ 2 1 I Berezniki = Pb, A, M I = = 1 Yaroslavl Pb 1 Samara Pb _ Nizhnyy Pb, M 1 Voskresensk A _ Ufa C 3 Other 20 9 10 20 15 7 23 Ukraine Donetsk 1,110.0 0 2 1 Kryvyi Rih 713.0 * 1 1 1 Odessa 1,115.0 = = = - _ 1 = Annex 1 Page 17 Nature of environmental problems Number of plants Counby Lation PopIn Epidemio- High levels High Power and Iron Non- Refining Orgaic Inorganic Pulp ('009) logical of dutst, S0 levels distrct and ferrous and chemicals chemicals lIns or both of lead heating sted metals petrochem. Zaporizhzhia 884.0 A,P 1 2 1 Dneprodzerzhinsk 300.0 1 1 1 Dnepropertrovsk 1,179.0 0 1 2 I _ Mariiupil 517.0 P 0 2 Makeeva 0 I I Kiev 2,602.0 * 1 _ Kostiantynivka Pb 1 1 _ Other 7 4 2 16 5 8 5 Key: A = places where there are documented associations between acute respiratory diseases and air pollution. C = places where there are documented associations between chronic respiratory diseases and air pollution. M = places where there is reasonably strong evidence of a connection between morality and air pollution. P places where there are documented associations between abnormal physiological development and air pollution. Pb = places where there is a problem with over exposure to lead among children. Occupational Health Annex 2 Page I ANNEX 2 OCCUPATIONAL HEALTH' There is a high degree of overlap between the locations of environmental health concern and the areas of industrial concentration in Central and Eastern Europe. This is not surprising since three of the principal environmental health threats are dust, toxic gases, and lead: all of which are emitted in large degree from industrial sources. To the .xtent that these polluting industries affect both the health of the communities in which they are located and, also, the workers who work there, a remediation strategy wnich targets environmental health problems will also be effective in capturing workplaces with significant occupational health problems. The best example of this is lead smelters, where significant commnunity exposures to children and in-plant exposures to workers seem to coexist everywhere they have been measured in tandem in Central and Eastern Europe. However, there are some important exceptions to this general pattern which need to be carefully considered in the development of an environmental action program. These include two types of locations: those where environmental health problems exist in the absence of occupational health problems and, conversely, those where occupational health problems exist in the absence of environmental health problems. In many locations in Central and Eastern Europe stack emissions from industrial sources are prodigious but in-plant exposures are trivial, or, at least, no worse than would be expected in comparable facilities in the West. This would appear to be true for many coal-fired power and heating stations as well as certain cement plants, such as the one in Kunda, Estonia. But the phenomenon is not confined to these sorts of facilities. In general, the environment inside industrial facilities, except in Romania, seems to be relatively closer to Western norms than conditions in the adjacent communities, despite a widespread lack of basic safety equipment and exceedingly lax enforcement of health and safety regulations. A good example of this is the Huta Sendzimira steel works near Krakow. The facility has historically been a principal source of air pollution for Krakow and was represented tc us as a dangerous place to work, since only 13 percent of the workers were said to retire without a disability. However, our visit to the facility revealed that this statistic distorted the realities of working conditions in the plant, which were no more threatening than an average North American steel piant. It turned out that the high rate of disability could best be explained as a response to the exceedingly generous disability pension benefits that existed for workers in heavy industry in Poland, rather than the workers' experience of disability per se. Routinely reported data on worker absenteeism and occupational disease across Central and Eastern Europe reveal a pattern which supports these perceptions. Absenteeism rates tend to be high (probably reflecting benefit-driven behavior), while occupational disease rates tend to be no higher than in Westem countries. This latter statement, however, must be taken with three important qualifications. First, certain occupational diseases are under-diagnosed and under-recognized in Central and Eastern Europe. Most important among this group are occupational cancers, whicL have received no recognition at all as occupational diseases and very little investigation has been done of them. Second is the problem 11 Country-specific details are in the underlying technical report on Environnent and Health in Central and Eastern Europe. Annex 2 Page 2 Occupational Health of political interference in the reporting of occupational disease. In Czechoslovakia, a political decision was made in the early 1980s to suppress data on silicosis cases at the national level. In Romania, financial incentives were exerted on plant physicians to keep the number of reported cases of occupational disease below a targeted value on an annual basis. Anecdotes about less systematic forms of misreporting came out in other countries. Finally, the prevalence of the "traditional" occupational chest diseases, silicosis and silicotuberculosis, certainly is higher amnong Central and Eastern European workers in exposed occupations than among their counterparts in the West. This third qualification of the occupational disease statistics points directly to the nature of many of those places where there are severe occupational health problems in the absence of environmental health problems. These tend to be places with heavy workplace dust exposures in the absence of large scale emissions into the community, in other words, in mines. This generalization would seem to apply to many underground coal and uranium mines in Central and Eastern Europe. A good example is found in Pecs, Hungary, where a uranium mine and a coal mine were both in production until recently. There is currently a mini-epidemic of lung cancer which began among the miners from the (now defunct) uranium mine, while, at the same time, the coal mine (still operating) has been producing 100-120 new silicosis cases per year among a workforce of 4100. Nonetheless, commnunity air quality is not of particular public health concern. Similarly, epidemiologic data for uranium miners in Czechoslovakia suggest an ongoing lung cancer risk there. To be sure, there are examples of especially dangerous workplaces, other than mines, in Central and Eastern Europe which do not coexist with significant commnunity exposures. But, when countries other than Romania are considered, it is fair to say that a large proportion of the dangerous workplaces that do not lead to community exposures are in the energy sector, and should become targets of closure or reinvestment as part of a program of reform in that economic sector. Scenario Model Annex 3 Page 1 ANNEX 3 MODELLING THE IMPACT OF EcoNonIc REFORm AND INDUSTRIAL RESTRUCTURING Five scenarios have been examined: (i) The "main scenario" whose key assumptions are outlined below. This is regarded as the most plausible outcome over the next 20 years on the basic premise that a reasonably comprehensive reform program will be pursued over the next 5 years. The environmental performance of new capital equipment is assumed to be equivalent to the environmental standards operative in Western Europe and the United States during the early 1980s. This means that the emissions from new plants will be similar to the average level of emissions from West European or U.S. plants operating today. (ii) The "slow/delayed reform scenario" which asurnes that pricing and other market reforms are delayed until 1995/96 and that the reform process proceeds rather slowly so that incentives to reduce energy consumption and to invest in new, more efficient, capital are much weaker and operate over a longer time period. This scenario implies that any economic recovery after 1995 will be much weaker and that growth in the decade 2000-2010 will also be lower. Environmental standards are as for the main scenario. (iii) The "accelerated reform scenario" assumes governments press ahead with radical economic reforms and strict enforcement of hard budget constraints for enterprises. These pressures, combined with an active policy to encourage foreign investment, will shorten the period of adjustment to new incentives and higher prices. The immediate decline in employment and output will be greater because more of the old capital stock is scrapped but the subsequent recovery will be more rapid with faster economic growth through the decade 2000-2010. Environmental standards are as for the main scenario. (iv) The "EC standards for new plants scenario" - referred to as ECS NP -is based on the same economic assumptions as the main scenario but assumes that all new capital equipment is required to meet emission standards equivalent to those applied in the European Community in the early 1990s (rather than the early 1980s). (v) The "EC standards for all plants scenario" - referred to as ECS AP -adds to the previous scenario the assumption that all plants are Annex 3 Page 2 Scenario Model gradually required to conform to current EC emission standards by 2010 by the installation of end-of-pipe controls or by appropriate changes in process technology. Comparison of the first three scenarios illustrates the impact of differences in the nature and speed of economic reform on the countries' cavironmental problems, while comparison of the scenarios specified in (i), (iv) and (v) illustrates the contribution of alternative environmental policies. Figures A3.1-A3.7 show the projected paths for emissions of various pollutants in different countries in the region. In each case the two solid lines define the band into which the countries fall. The top line represents the outcome for a country with high emissions over the period and the lower solid line a country with low emissions. The figures show that in almost all cases emissions continue to fall until after 2000 as a result of the combined impact of higher energy prices, industrial restructuring and new investment. Emissions of NO, are one exception to this pattern because growth in the number and use of vehicles can easily outstrip the decline in emissions from stationary sources. Slower economic reform leads to a slower decline in emissions but over a longer time span. Still, delays in economic reform imply that emissions will be higher throughout the whole of the two decades studied. Accelerating economic reform also accelerates the rate of decline of emissions, and their recovery as economic growth bounces back. Scenario Model Annex 3 Page 3 Figure A3.1 Emissions of particulates in Hungary and Russia under alternative reform ,;enarios Indices with 1988-90=100 100 so 0 ......................... 60 x ~~~~~~~. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ........ ... _. . ... ...... . . . 2 0 .... ... . . -. ............ .............. . . . . . . . .. . . . . . . . 1988-90 1995 2000 2005 2010 Year X Hungary - base -* Russla - base + Russia - slow reform i- Russia - faster reform World Bank estimates Particulate emissions under alternative reform scenarios. Hungary had higher energy prices and a lower level of energy-intensity in 1988 than other countries in Central and Eastern Europe. Economic reform has therefore reduced energy-related air pollution much less than elsewhere. In Russia, however, the gains will be large with a fall of 77% in total particulate emissions for the main reform scenario. Slower reform means that the decline will be less, though still significant. Faster reform implies a greater initial fall in emissions, offset by faster economic growth after 2000. Bulgaria, Poland, Ukraine and other FSU republics should follow paths similar to tnat for Russia, whereas Romania and the Czech and Slovak Republics lie between Hungary and Russia. Map 1 (at the end of this report) presents the regional concentration levels for total dust in 1990. In the south-western part of Poland, northern Bohemia, in Eastern Germany near Leipzig and in the Ukrainian Donetsk area, concentration levels exceed WHO-guideline values for yearly averages (60-90 pg/m'). Annex 3 Page 4 Scenario Model Figure A3.2 Emissions of particulates in Romania and Ukraine under alternative environmental standards Indices with 1988-90=100 1003 s o .... ............................................ . . . . so ....... . 40 .. .'. . . . .. X- =- -=-= 198M-90 1995 2000 2005 2010 Year U- Romanla - base + Romania - EC new plant i- Romania - EC all plant Ukraine - base X- Ukraine - EC all plant World Bank estimates Particulate emissions under alternative environmental standards. Romania can expect only a modest reduction in particulate emissions from economic reform alone because it already relies heavily on gas for power generation. The imposition of stricter standards only on new capital equipment implies a relatively small improvement in emissions; applying the same standards to all sources progressively would reduce emissions in 2010 to a tiny fraction of their 1989 level. Though reform makes a much bigger contribution in Ukraine, it too would benefit from the gradual implementation of stricter standards for all sources with particulate emissions less than 10% of their 1990 level by 2005. With a few exceptions, imposing stricter standards on new capital equipment alone does not lead to a significant reduction in pollution, unless performance standards for the new sources are very strict indeed. It is the reduction of emissions fror7 old plants which is critical to achieving substantial improvements beyond those provided by economic reform. Economic reform and new investment can lead to substantial changes in the composition of emissions by source type. Figure A3.8 below illustrates how the source composition of particulate emissions in Poland will change under alternative scenarios. Scenario Model Annex 3 Page 5 Figure A3.3 Emissions of sulfur dioxide in Hungary and Belarus Indices with 1988-90=100 1003 8 0 . ...X... >. .... ... .. .-.--.-....... -. % -. ... r .... .. ......... . 60 ~~~... ... \<........ ....... ...... ......... ..... ........... 60 . ..... ....'. 4 0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \ - 80 1988-90 1995 2000 2005 2010 Year --Hungary - base 4- Hungary - EC all plant * Belarus - base X- Belarus - EC all plant World Bank estimates Sulfur Dioxide Emissions. The pattern for SO2 emissions is similar to that for particulates, though in Hungary the decline due to economic reform is less for S02 than it was for particulates. In part this reflects a reported decline of 25% in SO2 emissions from 1980 to 1989. A similar decline is reported for the European part of the former Soviet Union, but the published data cannot be reconciled with more recent data on trends in energy consumption in the former Soviet republics during the 1980s. Total emissions of S02 fall to 28% of their 1990 level by 2005 in Belarus before rising again as a result of economic growth. Applying stricter controls progressively to all plants would reduce Hungarian emissions to 30% of their 1989 level by 2005 and to less than 10% of their initial level in all countries except Poland. Economic reform alone should reduce emissions to less than 40% of their initial level in Bulgaria and Ukraine as well as Belarus, with Russia and other FSU republics falling in the range of 40-50%. Figure A3.9 below illustrates how the source composition of S02 emissions in the Czech and Slovak Republics will change under alternative scenarios. Map 3 shows those regions where concentration levels of S02 exceed WHO-guideline values (yearly average of 40-60 jg/im3). In the south-western part of Poland, northern Bohemia, in eastern Germany near Leipzig, in the Ukrainian Donetsk area and in the area near Moscow, concentration levels exceed WHO-guideline values for yearly averages. Map 4 shows that in 2010 no large-scale areas are expected to exceed annual average WHO guideline values for S02, assuming that all new investments utilize current Western technology ("Scenario 1 "). Note, however, that due to local conditions within grid cells (especially in urban areas), extreme values may be higher at a sub-grid scale. Daily average values are still expected to be exceeded in a number of areas. Annex 3 Page 6 Scenario Model Figure A3.4 Emissions of NOx in Hungary and Ukraine Indlces with 1988-90=100 140 120 1995_2000 = 20052010 80 _ .....-.-._.... 60~~~. . . . . . . . . . . . .. . . . . . . . ~. . . . _ 40 .. .. . .. . ..; .......... . . ... 1988-S10 ~1995 2000 2005 2010 Year -U Hungary - base * Hungary - EC all plant X- Hungary - EC all plant -Ulkraine - base Ukraine - EC all plant World Bank estimates Nitrogen Oxide Emissions. Emissions of nitrogen oxides in Hungary are the clearest case of economic growth outstripping any gain that higher energy prices might induce in energy efficiency. While coal is the main source of particulates and sulfur dioxide, the use of petroleum products is responsible for a substantial fraction of NO. emissions. In 1989, Hungarian coal prices were less than one-half of comparable West Eurooean prices, while prices for petroleum products were above U.S. prices and only about 30% below West European prices. All the other countries outside the former Soviet Union had prices for petroleum products which were relatively less distorted than coal prices. As a consequence, total emissions of NO, from the Central and South-Eastern countries only falls to 66% of the initial total by 1995 and rises thereafter to 97% by 2010. On the other hand, prices for petroleum products in the Soviet Union were only one-fifth of West European prices on average, whereas coal prices were about one-half of West European prices. Thus, the decline in NO. emissions is much more dramatic in all of the FSU countries, with Ukraine's emissions falling to 44% of the 1990 level in 2005 before rising slowly thereafter. Strict emission standards applied to all existing plants and equipment would be required to bring Hungary's emissions down to the same ratio by 2010. However, the application of stricter emission standards to new equipment alone has a significant impact in this case, leading to an average growth in NO. emissions which is much lower than the general rate of economic growth. Scenario Model Annex 3 Page 7 Figure A3.5 Emissions of lead in Bulgaria and Romania Indices with 1988-90=100 100 20~~~~~~~~~~X -)K _.; 1988-90 1995 2000 2005 2010 Year -Romania - base + Bulgaria - base * Bulgaria EC new plant X- Bulgaria EC all plant World Bank estimates Lead emissions. Economic reform should lead to a substantial reduction in emissions of lead particles in Bulgaria, but the improvement is both less and more transitory in Romania. The differences reflect the relative contributions of the non-ferrous metals sector, combustion of fuels in other large plants, and leaded gasoline. Whwre non-ferrous metal plants make a substantial contribution to total emissions, as in Bulgaria, total emissions can be sharply reduced even without a large shift to the use of unleaded gasoline. This is because the initial decline in production is followed by a reduction in emissions of lead per unit of output associated with new equipment and stricter controls. In Romania, however, stricter standards on the lead content of gasoline are crucial if total lead emissions are to be reduced substantially. Tne projection for EU standards applied to new plant alone assumes that the average lead content of gasoline is reduced to 0.15 grams per liter. This would lower the 2010 index of total emissions to 55 (from 80). The projection for EU standards applied to all plant assumes that one-half the vehicle stock will rely upon unleaded gasoline by 2010, which yields an emissions index of 17 at the end of period. Figure A3.10 below illustrates how the composition of lead emissions by source type in Bulgaria will change under alternative scenarios. Annex 3 Page 8 Scenario Model Figure A3.6 Emissions of cadmium in Belarus, Lithuania and Romania Indices with 1988-90=100 60 ..... . .............. ...______=............ 40 .. . . . . .. .. .. .. .. .. .. 20 ... -._..... . . .. . . . 100 1988-90 1995 2000 2005 2010 Year -Belarus - base + Uthuanla - base * Romanla - base X- Romanla - EC all plant World Bank estimates Cadmium and other heavy metal emissions. Emissions of heavy metals (other than lead), for which cadmium is used as a general indicator, depend upon output in the metallurgy industry and on the use of coal and oil. Lower output from the metallurgy sector, greater energy efficiency and better environmental performance as old plant is scrapped all lead to large falls in cadmium emissions in Belarus and Lithuania. The main scenario for Romania indicates a sharp initial fall in emissions followed by a gradual rise. This upward trend can, however, be reversed by the gradual introduction of stricter environmental standards for all plants, so that total emissions in 2010 would be only 10% of their initial value. Map 2 shows hot spot areas of cadmium emissions in Poland (Katowice), the Czech and Slovak Republics, Hungary, Romania, Bulgaria, Croatia, Ukraine (Dnipropetrovsk) and Russia (Caucasus, Murmansk). Scenario Model Annex 3 Page 9 Flgure A3.7 Emissions of BOD in Russia Indices with 1990=100 120.I 100) .. . . . . . . . . . . . . . . . ............. 80 .. . . .. . . . .. . . . .. . . . .. . . . .. . . . 7.7 : 60 40 .. . .. . . ... .. . .. . .. . .. . .. . . __-- >X4, 20 ~.-............................................ 1990 1995 2000 2005 2010 Year w Tota - base *Total - EC all plant + Large Industry - base X- Large - EC all plant World Bank estimates Water Pollution. Large industrial plants account for less than 15% of total emissions of BOD in Russia. The remainder comes from households and small industrial plants which are likely to discharge their effluent to municipal sewers. Thus, a substantial drop in large industrial emissions up to 1995, even if reinforced by stricter environmental standards for all plants, has a relatively small impact on total emissions. Even if governments encourage or require small industries to discharge their wastewater to central pre-treatment or treatment plants, the relative contribution of municipal discharges to water pollution will grow over time. In view of the limited resources available for treating these discharges, any significant improvement in water quality on a broad basis must depend upon investment in facilities and technologies which optimize ambient water quality in a manner which accommodates the constraints on investment. Annex 3 Page 10 Scenario Model The key assumptions characterizing the different scenarios are: o The path. for GDP follow current World Bank estimates up to 1995. For most countries, GDP levels out between 1993 and 1995 at 65-75 percent of its pre-transition level. In the main scenario GDP is assumed to increase at 6.5 percent per person per year over 1995-2000 and at 4 percent per person per year over 2000-2010. These growth rates are high but historical experience suggests that they can be achieved if the necessary reforms are implemented. The accelerated growth scenario follows an East Asian pattern, whereas the slow/delayed reform is based on growth rates post 1995 that are similar to those achieved by the former Soviet Union. * The share of investment in GDP falls sharply to 1995 and recovers thereafter but only to 20 percent in 2000 and 25 percent in 2010 - well below past levels. Slower or faster growth implies correspondingly lower or higher investment shares. * The composition of private and public consumption gradually shifts by 2010 towards the pattern typical of middle income countries with similar incomes measured in terms of purchasing power parity. * Improvements in x-efficiency and the adjustment of energy and other inputs per unit of output using old capital are phased over a period of 10 years in the main scenario. This adjustment period is 20 years for the slow/delayed reform scenario and 5 years for the accelerated reform scenario. Under the latter it is assumed that 20 percent of the initial capital stock is scrapped by 1995 as enterprises contract or close down. Under the slow/delayed reform scenario it is assumed that new investment has input-output coefficients based on typical former Soviet technology rather than Western technology. * The long run aggregate elasticity of energy use in industry is approximately -0.5 for the main and accelerated reform scenarios. This is typical of the long run responses of West European economies to the two oil shocks. Under the slow/delayed reform scenario it is only -0.075 which is more typical of the response of centrally planned economies to price changes in the past. Note that the short run price elasticities are much lower because the adjustment to higher prices is phased over 5, 10 or 20 years as appropriate. ° Lags have been built into the adjustment process to reflect the slow initial response of industrial energy consumption to changes in output, so that energy-related pollution declines more slowly than might be expected from a simple link between industrial output and energy demand. Scenario Model Annex 3 Page 11 * The detailed assumptions about the manner in which the stricter environmental standards in the ECS NP and ECS AP scenarios will affect various emission coefficients are described in a Background Paper to the Action Programme. In particular, the coefficients relating to emissions of NO, and lead from household use of oil products, which is assumed to be almost entirely comprised of gasoline in automobiles, do not imply that all new automobiles will be fitted with catalytic converters. For the ECS AP scenario it has been assumed that 50% of the vehicle fleet will run on unleaded gasoline. Because the model is based upon detailed projections at an industry level, it is possible to distinguish between those industries -- referred to as heavy industry -- which are typically characterized by large individual sources and other production whose emissions derive from many small sources. The distinction is important because it is much easier to monitor and enforce emission standards for a limited number of large sources in the paper, chemical, cement, metallurgy and heavy engineering industries than for the much greater number of medium and small enterprises in other branches of the industrial sector as well as agriculture, services and households. The relative contributions of different types of source to total emissions of some key pollutants are shown in the following figures. Annex 3 Page 12 Scenario Model Figure A3.8 Particulate Emissions in Poland by Type of Source In0dice. Ila" totalOO sao t20 . small aourcee s0 Heavy Induatry Power/hseat plante toe8 2000 2000 EC All 2010 2010 EC All Year Figure A3.9 802 Emissions in the Czech & Slovak Republics by Type of Source ICdices. 1989 total-ltO 120 100 so IIIm Hvy Industry - mal o0 1 Power/beat - EC all Powerlh.at plants 40 20 - _ t9a. 20002000 Ec All 2010 2010 EC All Year (Date were not avllable an thS aparate republics) Figure A3.8. For particulates, investment in new power and heat plants or in rehabilitating existing ones will greatly reduce the contribution of these sources to total emissions in countries like Poland. Remember, also, that this reduction in the share due to power and heat plants accompanies a large fall in total emici.ons. The reducdon in emissions from large industrial sources is less than for total emissions, unless stricter standards are a'pplied to existing as well as new plants. If strict standards are applied to all plants, then it is small sources - households, services and small industry - which make the largest contribution to total emissions. Still the overall level of emissions is so much lower that this would hardly warrant stricter environmental controls on small sources over the time period considered. Fire A3.9. For sulfur dioxide, as for particulates, large reductions in total emissions are not uniformly spread across different types of source. The share of power and heat plants tends to fall, especially when stricter standards are applied to all such plants. The share of heavy industry tends to rise in the absence of stricter standards, whereas with stricter standards it is the share of small sources that tends to rise. However, small sources never become the largest contributor to total emissions of sulfur dioxide, so that environmental policies and controls should focus on the power and heat sector and on large industria plants. Scenario Model Annex 3 Page 13 Figure A3.10 Lead Emissions In Bulgaria by Type of Source Indices, 1989 total-100 120 100 2 OI1 small sources eo = Heavy Industry Power/hoat plants 40 1900 2000 2000 EC All S0l0 2010 00 All Year Figure A3.10. In Bulgaria, as in all countries, vehicles are the major source of lead emissions. Emissions from heavy industrial plants originate both from non-ferrous metal smelters, some of which can be cleaned up at a reasonable cost, and from the combustion of coal and oil. The latter can only be reduced by installing controls to reduce all dust and particulate emissions. Thus, changes in the contribution of large industrial sources to total lead emissions after the initial economic downturn depend upon the relative strictness of controls on vehicle emissions and dust emissions from large plants. For vehicles, improvements in average fuel efficiency combined with an upgrading of gasoline quality will bring about a gradual decline in the share of lead emissions from small sources under the main scenario and the scenario with EC controls applied only to new equipment. On the other hand, strict controls applied to all large industrial plants mean that an increasing share of (the much lower) lead emissions will come from small sources. This implies that reducing lead emissions even further will depend upon an almost complete shift to the use of lead-free gasoline. Slower economic reform leads to a slower decline in emissions but over a longer time span. Still, delays in economic reform imply that emissions will be higher throughout the whole of the two decade studied. Accelerating economic reform also accelerates the rate of decline of emissions, but this means that the trough is reached more rapidly and continuing rapid economic growth can lead to the total level of emissions overtaking those under a scenario in which both reform and economic growth are less rapid. Why Raise Energy Prices? Annex 4 Page I ANNEX 4 WHY RMSE ENERGY PRICES? Until 1990, energy prices were set well below market levels in all Central and Eastern European countries. Raising energy prices is the classic win-win policy which improves economic efficiency and generates large environmental benefits. This report emphasizes the environmental consequences of adjusting energy priccs to world market levels. But what are the economic arguments? In summary, most sources of energy are prime examples of commodities which can be traded freely. This means that a country which sells energy at domestic prices below the world market price is sacrificing the difference between the domestic selling price and the world price. Consider the case of crude oil in Russia. In mid-1992 this was being sold to Russian refineries at a price of Rb 2200 per ton while the equivalent export price was US$120 per ton or Rb 15000 at the then prevailing market exchange rate of US$1 = Rb 125. This would not matter if the level of oil demand in Russia were unaffected by the domestic price, since the price differential would simply represent an income transfer from oil producers or the government to oil consumers. However, Russia is now the most energy-intensive economy in the world with total energy consumption armounting to 6,000 kilograms of oil-equivalent per person for a GNP per person of about US$2,500. It uses about 8 times as much energy per dollar of GDP as the average for Western Europe. Even allowing for harsh weather it is clear that low prices lead to higher levels of consumption and wasteful use of energy. Simple calculations suggest that an immediate decision to raise energy prices to the world market level should, over a period of 5-6 years, halve that level of energy-intensity. This would enable Russia to export an additional 90 million tons of crude oil per year worth more than US$10 billion (after allowing for changes in total GDP). Since Russia's revenue from exports of goods and services outside the former Soviet Union was about US$53 billion in 1991 and is expected to be little more than US$35 billion in 1992, the additional oil exports would imply a substantial increase in Russia's ability to import capital equipment or consumer goods from the rest of the world. This is a simple measure of the potential gains from increasing domestic energy prices to world market levels. There would, of course, be some capital investment (and social) costs involved in raising energy efficiency to adjust to higher energy prices, so thai the net gains are somewhat more difficult to estimate. But the difficulties of adjusting to higher energy prices are usually exaggerated, aid US$10 billion per year can buy a large amount of energy conservation. Russia is an oil exporter, but the story is essentially similar for Ukraine which is a large net importer of oil. In its case the burden of low domestic energy prices (for a given level of world prices) is felt in a reduced capacity to import goods and services from the rest of the world. Similar calculations suggest that the cost of its oil imports could fall by US$2-3 billion per year over the next 5-6 years. While information on Ukraine's trade balance is lacking, this figure may be compared with the country's total foreign debt in convertible currencies which was estimated to be about US$10 billion in late 1991. Source: Based on material in Russian Economic Reformn: Crossing the 7hreshold of Structural Change (Washington, DC: The World Bank, 1992). Environmental Standards Annex 5 Page I ANNEX 5 ENVERONMENTAL STANDARDS There are three kinds of environmental standards which serve quite different purposes in environmental policy: * Ambient standards set maximum levels of a pollutant in the receiving medium (air, water and soil). Ambient standards offer a simple method of establishing priorities since areas (or stream lengths) which comply with the relevant ambient standards are considered to require no further intervention, while other areas may be ranked by the extent to which concentrations exceed the ambient standards. Ambient standards require an explicit agreement on the environmental quality objectives that are desired, and the costs that society is willing to accept to meet those objectives. Because ambient standards can be set at different levels for different locations, it is possible to use them to protect valuable ecosystems in a way that would not be possible by using emission controls.' It has been usual to establish an ambient standard for a pollutant by reference to the health effects of different levels of exposure (as discussed in Chapter II), although certain countries have been moving more recently toward ambient standards based on the capacity of natural ecosystems to absorb environmental pollution. Historically, ambient standards in the rich market economies have been continually tightened in the light of medical evidence on the impact of certain pollutants, and as the demand for better environmental quality has increased. * Emission standards2 set maximum amounts of a pollutant that may be given off by a plant or machine. They may be established in terms of what can be achieved using the "Best Available Control Technology" I/ An example of this differentiation is the setting of 'critical loads" for acidic depositions in different areas of Europe. "Critical Loads" are a specific application of an ambient standard designed to protect vulnerable ecosystems from the damage caused by acid rain. They are a quantitative estimate of an exposure to one or more pollutants below which significant harmful effects on specified sensitive elements of the environment do not occur, according to present knowledge. Critical Loads illustrate that it i iay be desirable to set joint ambient standards for several pollutants which interact or reinforce each other. Another example is the joint ambient standard for particulates and sulfur dioxide that has been adopted by the EU. 2/ In some CEE countries, the term "emission limits" is used, to indicate that the emission standards are only in reference to physical emissions from the plant, regardless of the technology used. In contrast, Western emission standards often imply the requirement of a type of technology. Annex 5 Page 2 Environmental Standards (BACT) or by trying to estimate the volume or concentration of a pollutant in exhaust gases or wastewater discharges that is compatible with ensuring that areas around the plant meet the ambient standards that are defined for the pollutant. Content standards, such as fuel quality standards, may influence the amount of, e.g., sulfur in fuel oil or the recycled content of packaging. * New Source Performance Standards (NSPS) are specific emission standards -- always based on BACT -- in which the emission standard is only applied to new plants. They are a special and very rigid form of grandfathering since emissions from existing plants are treated differently from emissions from new plants. If it is costly for a plant to install the controls necessary to meet NSPS, they have the effect of prolonging the economic life of existing plants by imposing a cost handicap on new plants -- of course subject to the influence of other economic and technological factors. Environmental Expenditure Priorities (Details) Annex 6 Page I ANNEX 6 PRIORITIES FOR ENVIRONMENTAL EXPENDTURE (Details) Immediate Priorities for Public Investment Non-ferrous metal smelters (a).' Highest priority should be given to eliminating the bulk of dust emissions from lead, lead-zinc and copper smelters where there are towns or cities that are located within the dispersion zone around the plants. There is also a case for tackling fluorine emissions from aluminum smelters but the necessary measures are substantially more expensive. The dust from lead, lead-zinc and copper smelters can include lead, arsen c, cadmium and other toxic heavy metals in substantial quantities, especially if old-fashioned reverberatory furnaces are still in use. The damage to human health caused by such emissions is generally large, especially if they affect a substantial population, with the worst sufferers being children whose development is affected by exposure to lead. Since children are the principal victims of lead pollution, the costs are incurred over a long period of time and it is important to deal with the problem as soon as possible in order to prevent harm to those born in the next few years. It is not only direct exposure to airborne dust which is the source of damage but the deposition of heavy metals on soils which may move up the food chain or leach into drinking water. Thus, even after the installation of adequate dust control equipment it will be important to maintain a cordon sanitaire around smelters to prevent soils which are already contaminated with high levels of heavy metals from being used to grow crops or for grazing. These areas are often best suited for growing trees. Remarkable improvements in the damage caused by non-ferrous smelters can be achieved by improving plant management and hygiere. Even a cursory inspection may rcveal very simple measures that can be taken to reduce wind-blown dust, energy losses and other fugitive emissions. A common problem is the poor handling and storage of metal ores which results in large quantities of dust being distributed around the surrounding area. Investment in water sprays, partial (or complete) enclosure of stockpiles and conveyors, and careful attention to cleaning roadways are the clearest possible example of good housekeeping measures which pay for themselves. The costs involved are small in relation to the value of the ores that are lost. Even at apparently well-run plants it is possible to make large improvements by better management and meticulous attention to the details of plant housekeeping. The largest lead smelter in the United States (at Herculaneum, Missouri) was able to halve the ambient level of lead just outside its plant without any new investment, by taking steps to: (i) coordinate operations, (ii) anticipate problems and act before they caused significant emissions, and (iii) ensure that emissions are constantly monitored and that all staff are involved in measures to bring them down. By making the plant's environmental performance a constant concern of both management and workers, most CEE smelters should be able to 1/ The letters in parentheses refer to the list of expenditure priorities discussed in Chapter V. Annex 6 Page 2 Environmental Expenditure Priorities (Details) Box A6.1 Environmental improvements in the non-ferrous metals industry Lead and leadizinc smelters. Lead and zinc are produced in Bulgaria, the Czech Republic, Poland, Romania, Russia, and Ukraine. Production is characterized by low grade ore and outdated technology, as well as financial weakness -- high indebtedness and lack of funds for investment. Some of the ores treated in the CEE countries would not be considered econoniic in Western Europe, both because of the low metal content and the potential pollution problems. Indeed, the future of many plants is highly uncertain. In 1991 the Bulgarian Government announced that all primary production of lead would be closed down, although this has not yet happened. It appears that the lead and zinc subsectors are the weakest of the non-ferrous metal activities in the CEE countries. The main environmental problem concerns emissions of dust containing lead which can contaminate soils and affect children in a wide radius around a plant. In the plants studied -- Plovdiv in Bulgaria and Copsa Mica in Romania -- the main sources of dust emissions were: (a) dust creation in handling the metal concentrates including unloading trucks or railway wagons, mixing and crushing operations, and transferring it to the sinter plant; (b) wind-blown losses of concentrates from stockpiles; and (c) fume and dust emissions from the sinter plant, blast furnace and other refining operations. The worst problems at both plants seem to be associated with handling the concentrates and with losses from stockpiles. Drastic reductions in output since 1989 have reduced emissions from both plants more than proportionately because concentrates are handled more carefully and dust control systems are no longer operating far beyond their design capacity. In the long run, neither plant is likely to be economically viable at current levels of output, unless the size of their workforces is drastically cut, since they are operating at less than halt the scale of equivalent plants in market economies. The immediate priorities are to control dust from concentrate reception, stockpiles and handling. At Copsa Mica, a simple system of water sprays to damp down the stockpiles -- at a cost of less than $1 00,000 - would have a big effect, provided that the water drained from the stockpiles is properly treated. Completion or installation of perimeter walls (or even complete enclosure) plus other measures to prevent spillage - costing less than $2 million at each plant -- would greatly reduce the dispersion of dust. These should be "win-win" investments since most or all of the costs involved should be recouped from lower losses of concentrate. Similar "good housekeeping" measures could also reduce other emissions to both air and water at a very small cost. At Plovdiv the dust collection system within the plant has been substantially upgraded in the last two years with the installation of new hoods and baghouse filters and the upgrading of the old equipment. The plant's management expects to be able to meet the new emission standards which came into effect in January 1993. Similar measures are the second priority at Copsa Mica. A sum of $2 million should be sufficient to repair and modernize existing controls and to install additional hoods and filters. The sulfuric acid plants at both Plovdiv and Copsa Mica are both in a bad state of repair. Most of the sulfur dioxide produced in the sintering and roasting operations and in the blast furnace is emitted to the air rather than being recovered. New acid plant could not be justified economically, but repairs and upgrading to process more of the sinter plants gases could reduce SO0 emissions substantially. The cost would be of the order of $3-4 million for Copsa Mica and $6-8 million for Plovdiv, part of which could be defrayed by the higher sulfuric acid yield from the plants. Similar measures will be required at several other lead or lead-zinc smelters in the region. In particular, three lead-zinc smelters in Upper Silesia at Bukowno, Szopienice and Olkusz in Poland, at Ordzhonikidze in Russia, and at Kostiantynivka in Ukraine plus the zinc smelter at Chelyabinsk in Russia are prime candidates for such investments. (continued) Environmental Expenditure Priorities (Details) Annex 6 Page 3 Environmental Improvements in the non-ferrous metals industry (Box A6.1 continued) Copper smelters. The greatest environmental problem with copper smelters in the region concerns emissions of lead and arsenic which occur as contaminants in copper ores. There are three important sources of these emissions: (a) particulates in gases from the smelting and conve:sion operations and dusts created in preparing and handling copper concentrates; (b) liquid effluents derived from hydro-metallurgical operations which are discharged to settling ponds; and (c) large volumes of smelter slags which may lead to the leaching of heavy metals into ground or surface waters if not handled properly. Installation of new dust controls -- electrostatic precipitators, scrubbers or baghouses -- would cost $5-1 0 million for a smelter producing 100-200,000 tonnes of copper per year. Upgrading existing facilities should be much cheaper: the costs vary from site to site but an expenditure of $2-3 million per plant would have a large impact on dust emissions from most CEE plants. Water treatment and measures to prevent leaching from solid wastes can be more expensive -- for example, $10-1 5 million for a water treatment plant utilizing precipitation techniques and closed circuit systems to reduce water use - but, again, it is possible to make significant improvements to existing facilities for relatively modest expenditures. The priority sites for such expenditures include: Alaverdi in Armenia; Pirdop in Bulgaria; Glogow and Legnica in Poland; Baia-Mare in Romania; Krasnouralsk, Kushtym, Mednogorsk, Pyshma and Sredneuralsk in Russia; and Krompachy in Slovakia. Aluminum smelters. Aluminum smelting is a highly electricity-intensive operation whose economic viability in most CEE countries is very uncertain once electricity prices have been raised to reflect true long run marginal costs. This is true even in Hungary with its domestic reserves of bauxite and the low operating costs of nuclear power, because the country relies heavily upon electricity imports from Ukraine whose marginal cost should determine the price at which power is supplied to the aluminum smelter. With such doubts about their long run prospects, it is difficult to justify the large expenditures -- $50-100 million -- that would be required for pot-room refits to eliminate fluorine emissions at most of the aluminum smelters. For sorme of the Russian smelters -- for example, those at Kamensk, Krasnoturinsk, and Volgograd -- such investments might be appropriate because low cost coal plus the prospect of surplus generating capacity may yield marginal costs of power that are low enough to sustain continued operation. For other aluminum smelters in the region (e.g., Zaporizhzhia in Ukraine) the highest priority must be better management and "good housekeeping" to reduce dust and leaks from pipes. A case study of the plant at Ziar nad Hronom indicated that: (a) the equipment for handling bauxite was old and there were considerable raw material losses in the form of dust emissions; (b) the solid/liquid separation stage of producing alumina from bauxite has poorly controlled and archaic technology with the result that there are substantial caustic emissions; and (c) in-plant hygiene in the alumina reduction pot-lines is very poor and leads to severe emissions of pot-gases laden with tar, fluorine and particulates. The plant's environmental strategy relies upon the replacement of existing facilities by a new smelter by late-1994, but funds to complete the necessary investment are not guaranteed. Unless completion of the new smelter and closure of the old facilities within the next 2-3 years is assured, low cost measures would be justified to reduce dust losses of bauxite and to improve plant controls and hygiene. No detailed costings are available, but an expenditure of S2-3 million at most should result in substantial reductions in emissions. Annex 6 Page 4 Environmental Expenditure Priorities (Details) reduce the environmental damage that they cause and improve their economic prospects even without substantial investments. Most smelters already have dust collection systems, but they are either poorly maintained or inadequate to cope with the volumes of air coming from sintering plants and furnaces. The costs of installing new baghouse dust filters or electrostatic precipitators designed to eliminate more than 99 percent of dust emissions are quite modest, so that the complete replacement of existing controls may be cheaper in the long run than any attempt to upgrade them. For a typical lead or lead-zinc smelter, the cost of an appropriate baghouse filter svstem would be of the order of $6 million, while an electrostatic precipitator (ESP) costing about $10 miilion might be required for a typical copper smelter. Some of the aluminum smelters in Central and Eastern European emit hydrogen fluoride and other fluorides in amounts which are a serious health hazard for those living close to the plants. Aluminum smelting is highly energy-intensive, so that many (probably most) smelters will be seen to be uneconomic as energy prices are raised to world levels, even taking account of the special electricity tariffs that are usually established for the industry. On the other hand, many of the enterprises -- especially those in Russia -- have taken advantage of current price distortions to operate their plants at full capacity despite the decline in domestic demand by exporting the surplus to the world market. Installing adequate environmental controls is more expensive than for other non-ferrous smelters -- the cost might be as high as $35 million for a smelter producing 100,000 tonnes of raw aluminum per year -- so that any decision to invest must first take account of the viability of the plant at realistic energy prices. Closing plants (especially those in or close to urban areas) or reducing their capacity is the first step. Only after this has been carried out should new investment in environmental controls be contemplated. Iron and steel plants (b). Every country in Central and Eastern Europe, other than Hungary, has two or more large urban areas whose air quality is grossly polluted by iron and steel plants which belch out particulates, sulfur dioxide, carbon monoxide and miscellaneous hydrocarbons. At the same time, the economic prospect of the ferrous metallurgy industry in the region is dire. Domestic demand for its output is not likely to rise above 60 percent of pre-reform levels before the end of the century while export possibilities are severely constrained. The quality of output tends to be poor so that the existing plants are competing in the most price-sensitive part of the market and, if capital costs are properly taken into account, they have little chance of competing successfully with mini-mills that rely on electric-arc furnaces. Thus, most of the industry can survive only by utilizing capital stock that is fully depreciated and that is economic because of the region's low labor costs. Much of the iron and steel industry in Central and Eastern Europe relies upon out-dated and inefficient technology which results in poor environmental performance. Open hearth furnaces account for almost half of crude steel production. By ensuring that steel capacity with the worst environmental record is shut down, governments can achieve substantial reductions in emissions as well as enhancing average levels of productivity and energy-efficiency for their steel industries. In many cases this will mean that open hearth units will be closed at plants which combine both open hearth and basic oxygen steel-making -- for example, two-thirds of total capacity at both Chelyabinsk and Magnitogorsk in Russia consists of open hearth units. In the face of such pressures, Poland has already decided to restructure its steel industry, cutting capacity by at least one-third and modernizing the remaining plants to reduce energy costs and improve the quality of output. The installation of better environrmental controls should be an absolute Environmental Expenditure Priorities (Details) Annex 6 Page 5 Box A6.2 Environmental investments in the iron and sterol sector The main sources of particulate emissions from iron and steel plants are materials handling and storage, coke ovens, the sinter plant, blast furnaces and steel converters. Most plants have reasonable facilities for primary gas collection and cleaning for coke ovens, sinter plants, blast furnaces and oxygen converters, especially where the exhaust gases are used to fuel other stages of the operation. Thus, attention must focus on secondary collection of fugitive emissions including those from charging and discharging steel converters. These emissions may be high because of poor maintenance or careless operating practices in the past and dealing with them will involve the installation of ventilation hoods, fans and filters or precipitators whose costs will be highly plant-specific. Better arrangements for dust suppression are required, for exarnple, at Kosice in Slovakia. Water sprays, partial enclosure of conveyor belts and other simple measures can reduce dust emissions, especially those generated by handling fine ores in dry and windy weather. The investment cost would amount to $1-2 per tonne of steel-making capacity or up to $10 million at Kosice. At Kosice, all four units of the sinter plant have cyclones, while two have also had electrostatic precipitators fitted to the sinter breaker and screening areas but not to the sinter furnace. As a result, the emissions from the stacks at Kosice are dirty, and will almost certainly contain relatively large amounts of fine iron oxide dust. The solution to the problem, which is expensive, will involve changes in operating practice to improve the sinter quality, and the replacement of the ignition and filtration systems. The total cost of these measures applied to two of the units (two are expected to be closed) is estimated at $12-18 million. The sinter plant at Kryvyi Rih has a very bad dust problem, partly because it uses low quality waste and sludge from the iron beneficiation plant. A combination of better housekeeping, installation of fans with sufficient capacity to capture and clean waste gas prior to stack discharge and the use either of iron ore pellets or of higher grade fines could achieve large reductions in emissions. The plant management would like to invest in a new sinter preparation plant, but more 1;-nited investment to improve the existing unit would probably be justified. Controlling particulate releases from coking ovens is largely a matter of good operation and maintenance. For example, adherence to a regular charging and discharging schedule and effective control of oven heating can assist in minimizing brickwork damage and hence gas leakage. Where plants have been poorly operated and maintained, significant repairs may be needed to affect a reduction in emissions. The coke ovens at Kosice, Kryvyi Rih, and Mariupil (the latter is located in the middle of a city of 500,000 people) display signs of age, misuse and the need for urgent repair. Most of the doors were leaking and there was a constant haze emanating from the top of the ovens. Detailed studies of the coke ovens would be required to determine the precise measures needed to reduce the emission levels but replacement or extensive rehabilitation of many of the coke batteries may be necessary in the medium term. This would be expensive, with a cost of $100 million or more for Kosice. Improvement of primary particulate controls plus installation of secondary fume collection and cleaning for basic oxygen converters in existing plants may cost up to $10 per tonne of steel-making capacity. For example, the electrostatic precipitator on one of the Basic Oxygen System (BOS) units at Kosice was ineffective -- the stack was emitting a thick plume which deposited red dust around the surrounding area -- and may need repair or replacement at a cost of up to $8 million. It is unlikely to be worth investing significant sums in open hearth plants whose economic life is likely to be limited. Prime candidates for environmental upgrading include the SOS units at: Kremikovtsi in Bulgaria; Trinec in the Czech Republic; Katowice and Krak6w in Poland; Galati in Romania; Chelyabinsk, Cherepovets, Lipetsk, Magnitogorsk, Nizhniy-Tagil, Novokuznetsk and St. Petersburg in Russia; Kosice in Slovakia; and Kryvyi Rih, Mariiupil (both the Azovstal and the llyich plants) and Yenakiyevo in Ukraine. Annex 6 Page 6 Environmental Expenditure Priorities (Details) requirement for any plant that receives modernization investment. It is unlikely that any plants with open hearth furnaces will be modernized, so that the typical cost of new controls to meet reasonable (but not strict) emission standards for air pollutants would amount to $20 million per 1 million tonnes per year of output capacity for a basic oxygen plant. This would cover all of the stages of steelmaking, including the sintering plant, coke ovens, furnaces and finishing. Towns and cities with old steel plants have always been among the dirtiest areas in any country, whether in market or formerly centrally planned economies. Ambient levels of particulates are especially high, which leads to high levels of both acute and chronic respiratory disease as well as a variety of heart and other conditions. The damage done by particulates is usually exacerbated by relatively high ambient levels of sulfur dioxide and carbon monoxide. All of these health conditions can be alleviated by better air quality (even for longstanding sufferers), so that eliminating the pollution from steel plants will lead to a gradual improvement in the health of the local population. Thus, the benefits of investing in better environmental controls for steel olants are typically large because of the size of the population affected and the health gains that can be achieved in a reasonable period of time. There is substantial scope for "win-win" investments in a combination of good housekeeping, better operating practices and greater energy efficiency which would also improve the environmental performance of those plants which continue to operate. For example, an evaluation of Ukraine's steel industry estimated that increased use of scrap could reduce coal requirements per conne of finished steel by 20% or more. One operational measure that is standard in the West but is not used by most Ukrainian mills is the injection of tar, oil, gas or coal in the tuyres of the blast furnace to provide heat and reducing gas. This permits a saving of 100-200 kg of coke per tonne of pig iron. Other such measures include: heat recovery from the sinter cooler, installation of top pressure recovery turbines on blast furnaces (already used on one of Kryvyi Rih's furnaces), gas recovery from basic oxygen converters without combustion, and installation of regenerative burners and thennal insulation for heating furnaces. In many plants, process controls are primitive by comparison with Western facilities, so that the installation of better controls could have a substantial impact on energy and raw material use and on emissions. Coal burnt by households and in small-scale boilers (c). Though the volume of coal burnt in power stations and large industrial plants is generally several times that used by households and in small scale boilers, it is the latter which are responsible for much of the local concentrations of particulates and sulfur dioxide in the majority of the most polluted urban areas in Central and Eastern Europe. For large boilers, it is possible, at modest cost, to install electrostatic precipitators or other dust filters to eliminate 98 percent or more of the particulate emissions. In any case, high chimneys and the relatively high velocities of such emissions disperse them over a relatively wide area within a country. In contrast, the emissions from burning coal on a small scale are not dispersed and cannot easily be controlled. Thus, in tackling excessive exposure to particulates, government or donor financing should concentrate on the use of coal in households, small commercial and industrial premises, and small district heating units (see Box 3.3). This does not mean that emissions from power stations and similar large sources can be neglected, but rather that the solution for the large sources is clear -- install and maintain appropriate electrostatic precipitators. The capital costs of these controls should be borne by the enterprises responsible for emissions and appropriate incentives provided either through pollution charges or with regulatory constraints. In due course the costs of environmental controls on power stations must be built into electricity tariffs, so that consumers bear the full cost of electricity including all environmental costs. Environmental Expenditure Priorities (Details) Annex 6 Page 7 The necessary adjustments in electricity tariffs to reflect long run marginal costs (LRMC) are much greater than the average increase in energy prices that is required to reach economic levels in all CEE countries -- especially for domestic consumers -- and governments have made less progress in this respect than for other energy prices. As a consequence, the financial situation of electricity utilities is often poor and they can ill-afford environmental investments. The best solution is to eliminate price controls since they are an inefficient instrument of social policy. If this is not possible, governments might consider providing special, repayable loans to finance the early installation or upgrading of filters on those power stations responsible for the worst pollution. Since the demand for electricity has fallen substantially in most countries and is unlikely to recover quickly, such finance should be provided only for power stations whose continued operation is supported by a least cost power planning study that takes proper account of environmental costs. Studies of the damage caused by air pollution consistently identify the economic costs of average ambient levels of total suspended particulates in excess of 75 Ag/m3 as one of the two largest components of the total damage. The other component is usually the loss caused by lead emissions, though such estimates are controversial because they depend criticallyupon the value attached to the lowering of children's IQ associated with excessive levels of lead exposure. In addition, high levels of particulates associated with the burning of coal have substantial material costs because of the soiling of clothing, buildings and other physical assets. Estimates of the total environmental damage caused by particulates in some countries of Central and Eastern are currently being reviewed and updated, but preliminary work suggests that the cost might amount to $750-1,000 million dollars per year in Poland. This damage is concentrated in the most polluted areas of Upper Silesia and a small number of other urban areas that have traditionally relied upon coal for domestic heating. There are basically two ways of eliminating or, at least, drastically reducing the emission of particulates from small scale sources. The first is to require that all users burn smokeless solid fuel rather than ordinary coal or coal briquettes, while the second is to substitute some alternative fuel -- normally gas -- for coal. Reliance upon smokeless fuel involves little investment in the distribution of alternative fuels or in the installation of new boilers, so that it is relatively simple to achieve provided that the investment in carbonizing plants required to supply smokeless fuel is ensured. The difficulty is, however, that most households and other small users have a strong preference for gas over solid fuels, so that a market cannot be guaranteed for smokeless fuel plants while investments in gas distribution and conversion will, in any case, proceed in response to consumer demand. An appropriate strategy would be to provide the resources required to accelerate the substitution of gas for coal in large, heavily polluted urban areas. In parallel, governments could adopt a policy of requiring the use of smokeless fuels in smaller towns whose average levels of particulate exposure during the heating season exceed some critical value -- probably 150 gg/m3. The Gas Development Plan for Poland estimated that the total cost (at 1990 prices) of extending gas distribution for heating purposes to all urban areas would be about $5 billion over two decades to 2010. The population living in those urban centers worst affected by particulates amounts to about 6 million people out of a total urban population of 24 million, so that the cost of a priority program of gas conversion might amount to $1.25 billion if implemented over the remainder of the current decade; less than $200 million per year. The full costs of such a program should eventually be paid by gas consumers who would benefit substantially from the wider availability of gas. Experience in many countries shows that households and other small scale users of coal are prepared to pay a premium for the convenience, Annex 6 Page 8 Environmental Expenditure Priorities (Details) cleanliness and labor-saving advantages of gas. Thus, the role of external donors should be (i) to provide technical assistance to minimize the costs of gas distribution programs, and (ii) to make available loans on conventional banking terms which would be repaid from the revenues of gas utilities in the usual manner. Treatment/pre-treatment of wastewater from small industrial plants (d). In most parts of Central and Eastern Europe, it is usual for small and, sometimes, medium scale industrial plants to discharge their wastewater to municipal sewers. At a minimum, this can place a large burden on municipal wastewater treatment plants (where they are operating) and the nature of industrial effluent may severely reduce the efficacy of biological or other treatment processes. Since these industrial effluents may contain significant amounts of heavy metals, organic chemicals or heavy concentrations of COD and BOD, municipal treatment plants may also not be adequately equipped to prevent serious contaminiation of the receiving waters. A crucial part of the long run strategy to deal with industrial wastewater from all industrial sources should be to encourage "win-win" investments in cleaner technologies which minimize both water use and waste generation. New, clean technologies reduce total emissions by 50 percent or more with no economic penalty. A combination of realistic charges for water consumption plus pollution charges based on the volume and characteristics of discharges to sewers will provide a strong incentive for the adoption of these technologies. Resources devoted to disseminating information and providing technical expertise .elating to these technologies should produce substantial environmental and economic benefits. Box A6.3 The impact of industrial pollution on municipal wastewater and sludge treatment: Case Studies Nov6 Z5mky, the Slovak Republic. The use of chemicals can be extremely effective in upgrading existing mechanical and biological plants. Nov6 Zamky in Slovakia is one of many plants in the CEE region which are highly overloaded in spite of the decreasing water consumption. Because the plant works at full capacity, action is needed regardless of the quality of the receiving downstream stretch of the Nitra River. The traditional enlargement of the existing biological plant would cost about $1 1-14 million. On the other hand, retrofitting costs to the mechanical-chemical-biological process would be only about $4-6 million. Such an upgrading would be able to cope with the high flow of industrial sewage (60% of total) and would be flexible enough to cope with the likely further reduction in water consumption. Sludge management is not adequate at present; any alternative would require an additional $1-2 million. The most cost-effective solution may therefore be to pre-treat the industrial effluent rather than to mix it with the municipal sewage. Hradec Krfilov6, the Czech Republic. The lack of pre-treatment of industrial wastewater causes serious problems when it comes to treating the sludge left over after wastewater has been treated. This is illustrated by a case study at Hradec Kralove in Eastem Bohemia, where the sludge was to be used in agriculture. This was a common practice under the former large agricultural cooperatives and relatively lenient sludge quality standards. The situation has however changed significantly: (i) the state controlled farm cooperatives are being dissolved and land returned to its former owners; (ii) the government aims to minimize the transmission of sludge contaminants to humans through the food chain; (ii) there is greater understanding of the sources of sludge contaminants. A technical evaluation of the sludge disposal alternatives is planned. Components of the program will include development of a prototype pre-treatment program to improve sludge quality, a re-evaluation of disposal/use alternatives, an assessment of sludge dewatering technology, selection of specific disposal/use sites, and preparation of detailed cost estimates. The situation at Hradec Kralove illustrates problems that occur throughout CEE countries: the quality of the sludge is poor due to a lack of industrial wastewater pre-treatment. Environmental Expenditure Priorities (Details) Annex 6 Page 9 Where there are concentrations of small industrial enterprises engaged in tanning, textile dyeing, electroplating or other metal processing activities in a town or city, the most cost-effective approach to environmental protection will be to invest in one or two industrial treatment or pre-treatment facilities designed specifically to remove the persistent, toxic and bio-accumulating substances. The total cost of such a facility will, of course, depend upon the precise nature of the effluent that it is designed to handle but it will rarely be large. As an example, a central facility to remove chromium, COD, BOD and other pollutants from the effluent produced by nearly 200 tanneries in Italy required a total investment of about $20 million to treat 10,000 mn3 of wastewater per day. At the same time, it is equally important to reduce the total volume of effluent to be treated by encouraging enterprises to switch to tanning technologies which do not rely upon chromium. On a smaller scale, a facility to treat 6,000 m3 of wastewater from textile activities might involve an investment of $2-2.5 million. Based on available data, discharges of industrial wastewater have not been a significant threat to human health in the region, because water authorities have been able to obtain water from unpolluted sources. To meet the demand for water they have had to incur increasing costs to pipe uncontaminated water to treatment plants, sometimes over considerable distances. At the same time, it is certainly the case that careless and unmonitored discharges of industrial effluent from small industrial plants have caused or may cause irreversible damage to groundwater in a number of industrial towns and cities. As the costs of treating such emissions centrally is relatively small, public investment to provide such facilities should generate a good return in terms of reducing environmental damage. As for some of the other priorities, the case for public intervention and provision of treatment facilities rests on the difficulty of monitoring emissions from small industrial plants and of enforcing regulations or pollution charges designed to reduce emissions of the most damaging pollutants. The long run cost of operating central facilities should be recovered from the firms that use them, who should also be barred from discharging their effluent to public sewers. By providing the initialfunds required to develop central treatment plants, the government or external donors will provide the basis for local environmental authorities to take strong action against enterprises that neither treat their own discharges nor ensure that it is dealt with by a central plant. Rural wastewater treatment (e). Excessive levels of nitrates in shallow wells and other sources of drinking water are a widespread problem in the rural areas of many countries in Central and Eastern Europe. However, as with many diffuse environmental problems, tackling it involves a large number of small measures designed to reduce discharges of nitrates and to ensure that groundwater sources used for drinking are protected from the infiltration of nitrates resulting from the careless disposal of human and animal wastes. These measures involve a large component of agricultural extension and public education as well as programs to finance the relatively small individual expenditures required to install septic tanks or simple systems to collect and treat wastewater in larger villages and small towns. The most important thing is proper legislation followed up by effective enforcement to ensure that the location, design, construction and operation of septic tanks meet the permit conditions. Without that, septic tanks are nothing more than point sources for groundwater pollution. A short term program to reduce the incidence of methemoglobinemia among infants should concentrate on monitoring nitrate levels in the affected areas combined with public education and the provision of bottled water for families at risk. This is strictly a palliative approach, but it is necessary as an interim step because other measures to reduce levels of nitrates will take a long time to affect exposure levels. Annex 6 Page 10 Environmental Expenditure Priorities (Details) Box A6.4 Rural Water Supplies The question how best to provide rural households with access to safe drinking water gives rise to some difficult environmental choices in many parts of Central and Eastern Europe. As in many other countries, it is expensive to provide piped water to remote rural communities. Further, if piped water is installed, the level of water consumption per person tends to rise dramatically, which can lead to substantial problems in dealing with the resulting wastewater. In many communities the provision of piped water has far outstripped the capacity of existing septic tanks with the result that the quality of groundwater supplies, especially from shallow wells, is deteriorating rapidly. The solution is not to deny piped water to rural communities, provided that they are willing to bear an appropriate share of the investment and other costs involved. However, these costs must include provision for expenditures that will be required to adequately dispose the resulting wastewater, so that water and sewerage are seen as joint rather than separate activities. Discounts could be given to those households which maintain adequate septic tanks whose outflows do not jeopardize neighboring wells. For those households that cannot or choose not to be connected to piped water supplies, the crucial concern must be education about the importance of protecting their water supply -- usually from a shallow well from pollution caused by septic tank discharges. Intermittent monitoring of the quality of water from non-piped sources should also be carried out, so that measures to protect babies and other vulnerable individuals can be taken if required. Once the population is better protected from existing problems, policy should concentrate on reducing the flow of nitrates into groundwater, especially from intensive animal husbandry and rural housing. This need not involve substantial government expenditure on capital projects since much of the necessary finance should be found by the households and agricultural enterprises responsible for the offending discharges, but the nature of the problem m',ans that a substantial commitment to demonstration projects, dissemination of good practice and the provision of advice will be required. It may also be necessary to offer grants or loans on special terms to speed up the necessary investments and changes in practice. Agricultural extension which explains how to reduce fertilizer applications can substantially reduce nitrate run-off from intensive arable agriculture, especially if it is combined with increases in fertilizer prices. Rural communities will need different facilities according to their population, area and location. At one extreme there are scattered individual households for which proper septic tanks are clearly the solution, while at the other end are villages with 2,000-5,000 inhabitants that will require some kind of sewage collection network and a small scale treatment facility. In between, the appropriate solution will depend greatly on population density and the physical characteristics of the land (the cost of installing a collection network for a community of 500-1,000 people could easily dominate the cost of treatment facilities). The size of each community is not the only issue, since small but closely spaced communities could be served by a single treatment plant with interconnected collection networks. Natural treatment systems, such as artificial wetlands, can be used as low cost alternatives to conventional treatment if an appropriate site is available. The immediate priority for public investment should be to ensure that the manure from feedlots, dairy and pig farms, and poultry units is properly managed, so that highly concentrated effluent is not allowed to seep into the ground and is not discharged into neighboring streams or rivers. Quite apart from the contribution such activities make to levels of nitrates in groundwater, they can have a devastatirg impact on river quality and aquatic life if the untreated liquors from manure heaps are simply piped into nearby surface waters. The responsibility for financing improvements in the treatment and Environmental Expenditure Priorities (Details) Annex 6 Page 11 Box A6.5 The Application of Natural Treatment Systems: SzUgy, Hungary The village of Szugy, with a population of 1,200 and residential area of 74 ha, is located in rolling terrain in north Hungary. There is currently no piped water and no sewerage network in the village. Shallow dug ground-water wells are highly contaminated by nitrate, necessitating the partial supply of bottled water and usalje of deep wells (shallow wells also continue to be used). Nitrate contamination originates from both fertilizer application and improper on-site sewage disposal. The local government plans to obtain public water from the closest town, Balassagyarmat. Designs have been prepared for a wastewater sewer system and a natural root-zone treatment facility. The treatment will consist of pre-settling, root-zone method (RZM), and disinfection. The system is planned to be constructed on an area of 4 hectares owned by the local government. The filter beds will be Installed in beds sealed with a 1 5-cm thick compacted clay layer. Reeds will be planted with shoots on a 40-cm by 40-cm grid. The estimated construction cost is US$140,000. However, when the project was initially let out to bid, the local government received proposals for conventional primary/biological treatment plants that were about 30 to 80% more costly than the RZM proposal. The cost for the conventional plants ranged from US$180,000 to US$280,000. Operation, maintenance and repair (OMR) cost for the RZM system is about one-third that of the traditional system. The feasibility of the RZM system was analyzed for six villages in a lowland region of the Slovak Republic near Bratislava. Populations in the six villages range from 400 to 2,200. Four alternative wastewater treatment systems were studied: (i) individual traditional biological treatment plants for each village; (ii) two similar regional plants, (iii) a single regional plant; and (iv) individual natural treatment systems for each village. Investment costs of the first three options ranged between US$1.4-2.0 million while the natural system would require only US$1.2 million. disposal of manure is similar to that for other environmental problems caused by small or medium sized industrial enterprises. Over the long run, enterprises should bear the full costs themselves, but governments may find it difficult to privatize agricultural enterprises with an uncosted commitment to invest in environmental improvements. This implies that assessments of likely costs plus initial improvements might be financed by loans made available now, subject to the conditions: (i) that such loans must be repaid when the enterprises are privatized, and (ii) that privatization is on the basis of making appropriate further investments to remedy any remaining problems. In some areas, where there are several enterprises in a particular locality, it may be sensible to invest in collective treatment and disposal arrangements and transport effluent to a central facility. Projects which provide finance and technical assistance for such facilities may be excellent candidates for support from donors. Toxic, nuclear and other hazardous wastes (f). As for old wastes, experience from the West suggests that cleanup should be approached cautiously, and tnat only those sites that could cause damnage to water supplies or otherwise imply immediate danger to human health should be cleaned up right away. Other sites should, as a rule, be cordoned off and carefully monitored with information being registered in a national inventory of waste sites. Inappropriate transport and disposal of dangerous Annex 6 Page 12 Environmental Expenditure Priorities (Details) substances could be riskier than leaving the sites untouched for the time being. Moreover, financial limitations in CEE countries argue strongly for this approach.2 Investments to deal with urgent problems specific to different countries Municipal wastewater treatment plants (g and h). In many countries of the region there are numerous partially completed municipal wastewater treatment plants. It is, therefore, tempting to conclude that the completion of such plants should have a high priority under the Action Programmne. While this may, indeed, be true for some such plants, there will be many that should not be completed, either because they were ill-conceived in the first place or because the resources could be better devoted to other objectives. The design of such plants was often predicated on assumptions about operating costs -- for example about the price of energy -- which are no longer valid, so that modifications in the proposed treatment method might be appropriate even where completion can be justified. Completing the plants would, in any case, often be expensive: the total cost in Poland has been estimated at over $1 billion, though the situation is much better in the Czech Republic. The expenditures necessary to complete partially completed plants should be assessed on exactly the same basis as other elements of the Action Programme. Bygones are bygones, so the issue is what are the net benefits from spending additional resources in this manner rather than on, say, control of particulate emissions in highly polluted towns and cities. The two categories of wastewater treatment plants identified in items (g) and (h) of the list of investment priorities are placed there bicause they are likely to generate the largest benefits from any investment in this sector. Howevcr, the process of setting priorities is a complex one and the recommendations are intended as general guidance rather than specific precepts to be followed in all circumstances. The economic losses due to the pollution of beaches and of surface waters in other tourist areas can be large.3 Equally, the long term costs of careless disposal of wastewater in areas of high ecological value are substantial, especially relative to the comparatively small expenditures that are required to protect these areas. Deterioration in the quality of water in sources from which drinking water is abstracted can, in many cases, be compensated by more stringent water treatment, but there may be a considerable economic cost involved. Where deterioration is associated with the presence of heavy metals or toxic organic compounds, the costs will be even higher since it will usually be necessary to seek out altemat ve water sources which may imply substantial additional investment or operating costs. Usually, such deterioration is a result of industrial activities, hence the emphasis on the protection of drinking water 2/ In the U.S., only 63 of the 1,200 sites on the National Priority List of hazardous waste sites (32,000 potential sites have been identified) could be cleaned up during the last 12 years, at a cost of US$1I billion. Under the Superfund procedure in the U.S., it has been estimated that the cost of litigation has amounted to 55% of actual ci:an-up costs. Moreover, between 1986 and 1988, only US$166 million was recovered from private parties, or roughly 7% of the US$2.4 billion spent on Superfund cleanups. 3/ The local importance of the tourist and inshore fishing industries, together with the threat to groundwater sources used for drinking water from industrial discharges, are likely to justify high priority being given to municipal wastewater treatment in Istria, Croatia, and other localities along the Mediterranean coast, combined with measures to assure the pre- treatment of industrial discharges from the chemical, metalworking and food processing industries. Environmental Expenditure Priorities (Details) Annex 6 Page 13 supplies in priority categories (d), (f) and (g). However, if lack of municipal wastewater treatment is the reason for a serious threat to the maintenance of drinking water supplies, then investment in an appropriate treatment plant should be regarded as having equal priority with investments in category (d). While large investments in municipal wastewater treatment will undoubtedly be required over the next two decades, it should always be borne in mind that measures to reduce the volume of sewer discharges can have a substantial impact on the scale of the resources required. A variety of measures -- varying from dealing with leaks and dripping taps to the installation of low volume toilets -- can reduce household discharges by 30-50 percent. Publicity, technical advice and even the provision of free plumbing services reinforced by the incentives provided by appropriate charging for water use and sewer discharges are all expenditures which bring environmental improvements and economic gains. A broad range of wastewater treatment technologies is available that can be designed reliably to meet specified rates of removal and emission standards (see Box A6.6). The differences in capital and operating costs between wastewater treatment plants designed to achieve different levels of treatment are substantial. For a population of 100,000 the investment cost for mechanical treatment would typically amount to $10 million while chemical enhancement of existing mechanical treatment plants would add only an extra $2 million, but bring a significant improvement in BOD, SS and TP removal, and allow capacity expansion. Various levels of biological treatment would increase investment costs to between $15 million and $25 million. The amounts of different pollutants removed from the wastewater stream also differ. For instance, chemical enhancement significantly reduces the phosphorus content of the final discharge. Traditional biological treatment is more effective in reducing the BOD content while none of the above methods is really efficient in terms of nitrogen removal. It follows that there can be no single best technological option, since the choice depends upon the quality of the receiving waters both at the point of discharge and further downstream. In the industrial countries plenty of experiunce is available on how to design, construct and operate treatment plants of various kinds. The starting point is always the standards set by legislation for effluent and, sometimes, ambient water quality standards -- often attached to a given technology ("Best Available Technology"). The development of appropriate standards can take decades. The CEE countries face this process now. They should recognize the time span required, and plan to move towards West European standards over a period of 15-25 years as resources become available.4 The strategy suggested here is based on the multi-stage construction of wastewater treatment plants (in consonance with the gradual updating of standards). The first stage is aimed at the removal of organic matter and, in some cases, phosphorus where local conditions warrant it -- e.g. the need to protect lakes. Later, extensions (for removing P and N in varying degrees depending on local and regional needs, standards, etc.) can be added as resources become available, since the original design should already have allowed for these process modifications. This is an unusual procedure in Western Europe where plants are generally constructed in one stage as a result of more relaxed financial constraints. In contrast, the strategy advocated here implies building many wastewater treatment plants with medium removal efficiency rather than a few advanced ones with high removal efficiency. 4/ It is worth noting that in OECD countries as a whole, 40% of the population (330 million people) are not served by wastewater treatment plants. Annex 6 Page 14 Environmental Expenditure Priorities (Details) Box A6.6 Types of wastewater treatment Municipal wastewater treatment plants are designed to remove organic material (characterized by BOD), suspended solids (SS), phosphorus (P) and nitrogen (N) at required levels (depending on the type of receiving water, its desired quality and planned wdter uses). For this purpose, various physical, biological and chemical processes -- or a combination of these -- can be used. Examples are sedimentation, metabolizing organic compounds by bacteria, and precipitation. * Mechanical treatment (M) removes particulate matter primarily by sedimentation in a settling tank. * The addition of chemicals (prior to the settling tank) for precipitation enhances sedimentation, leading to Chemically-enhanced Mechanical treatment (CM) requiring practically no additional capital costs but still leading to significant upgrading (and good performance even in comparison to biological treatment). * "Traditional' Biological treatment (B) incorporates an aeration basin after the settling tank in order to allow bacteria to oxidize a substantial fraction of the remaining organic wastes. * Biological-Chemical treatment (BC) enhances biological treatment by adding chemicals to improve primarily the efficiency of phosphorus removal by precipitation and expand capacity. * Finally, advanced biological-chemical treatment (BCN) .ncorporates an anoxic basin (oxygen is absent, but nitrate is available) for denitrification, and also sometimes an anaerobic tank for biological phosphorus removal. Chemicals may be added for increasing efficiency and improving economy. This method is the most expensive of the treatment options in terms of capital costs and requires careful management by specialty trained staff. * 'Natural" (extensive) treatment systems (including artificial wetlands and the root-zone method) can be low-cost alternatives depending on site-specific conditions. The area requirement is larger than for the technologies mentioned above, but operation is simple. BOD and SS removal is acceptable, while P and N removal is not yet properly understood. (The Kis-Balaton reservoir at the inflow of the Zala River to Lake Balaton in Hungary operates partially as an artificial wetland, with positive experiences.) The processes differ also in the composition, treatment and disposal of the sludge that they generate. The table below shows how the technologies differ in terms of their typical removal rates for BOD, Phosphorus, Nitrogen, and Suspended Solids, and the associated capital and operating costs. Treatment Process Typical Remowal Rm (%) for: BOD Total Total Suspended Phosphorus Nitroeen Solids Mechanical (M - primary) 30 15 15 60 Chenically-enhanced mechanical (CM) 55-70 75-90 25-30 80-90 Traditional biological (B - secondary) 90 30 30 90 Biological-chemical (BC - secondary) 90-95 90-95 35 90-95 Advanced (BCN) 95-97 90-95 60-85 90-95 7ypical Cos (Mechanical Trea tnaet I) Capital Annual OMR Total Annual Costs Costs a/ Costs bl Mechanical (M - primary) 1.0 1.0 1.0 Chemically-enhanced mechanical (CM) 1.1-1.3 1.6-1.9 1.3-1.5 Traditional biological (B - secondary) 1.8 1.7 1.8 Biological-chemnical (BC - secondary) 1.7-1.9 2.2-2.6 1.9-2.1 Advanced (BCN) 2.1-2.6 2.6-3.3 2.3-2.9 al OMR = Operation, .aintenance, andReplacement (includes dewatering and anaerobicstabilizationforsludge treatment). h/ OMR plus amortization of capital costs @ 12% interest rate over 20 years of economic life. Environmental Expenditure Priorities (Details) Annex 6 Page 15 Box A6.7 Priorities and alternative technologies: Case study of an overloaded municipal wastewater treatment plant The municipality of Zvolen in the Slovak Republic (population 42,000) has a high level of water and wastewater infrastructure: more than 95% of the population is connected to the water supply system and the combined sewer network. Because of poor construction of the sewer system, groundwater infiltrates the sewer system and adds to the volume of waste water. Industrial wastewater represents about 20% of the total. The existing treatment plant is 18 years old and has a traditional primary and biological (Activated-Sludge Process) design. The plant should handle about 250% of the amount of water for which it was originally designed, and 1 50% of the BOD load. More than 10,000 m3 per day is discharged to the Hron River without any treatment. Several alternatives to solve the existing treatment problems are being discussed. Investment costs for treatment (including sludge management) range from US$26-30 million. The annual operation, management and repair (OMR) cost is around US$2-2.5 million based on the assumption for all options that the original capacity will be expanded by 50%. Funds are not available for the treatment upgrade and space is limited. However, the planned capacity expansion is probably not needed. If the sewer rehabilitation is completed, groundwater infiltration will diminish. A further flow reduction is anticipated due to increasing water prices. As a result, it is estimated that the future discharge may be reduced by about 40 to 50%. Thus, the best alternative may be to upgrade the first stage of the plant to chemically-enhanced primary treatment and retain the existing activated sludge unit. If the ongoing extension of the final clarifier is completed (at an investment cost of slightly below US$3 million, including the costs associated with the increase in sludge production and treatment, and an annual OMR cost of around US$1.5 million), this treatment scheme will meet both the existing standards and those proposed for 2004. The solution is about ten times less expensive than the alternatives currently being discussed, and little additional area is needed for construction. The same strategy applies also to the completion of unfinished treatment plants and the upgrading of existing ones. Chemical enhancement can be effective for upgrading both mechanical and overloaded biological treatment plants. Since it removes about one-half of BOD, the size and cost of any biological process can be significantly reduced (or the capacity increased). Innovative application of various chemicals in combination in low doses -- such as metal salts and synthetic polymers -- lead to a much smaller increase in the amount of sludge produced by comparison with traditional biological methods. The results of work carried out in preparing the Action Programme5 suggest that priority in the short-term should be given to ensuring that chemically-enhanced mechanical and/or biological treatment is installed wherever expenditure on municipal wastewater treatment is warranted. This implies that for most of the incomplete plants the appropriate action will be to spend limited sums in order to enable them to provide mechanical or chemically-enhanced mechanical treatment as soon as possible, while deferring any plans for more elaborate treatment until these can be assessed in the context of an overall plan for water quality management in the relevant river basin (or coastal zone). Small amounts of money spent in this way can achieve significant improvements in water quality and amenity, while attempts to follow the original plans are likely to be frustrated by lack of resources and may generate 5/ Details are provided in the technical report on Municipal Wastewater Treatment in Central and Eastern Europe. Annex 6 Page 16 Environmental Expenditure Priorities (Details) Box A6.8 Environmental investments in the paper and pulp sector The composition of pulping processes installed in CEE countries is broadly comparable with that for West European plants, though few plants are designed to use recycled paper. Thermo-mechanical pulp making has been adopted more rapidly in Western Europe while the much lower demand for packaging materials in the CEE region has favored the use of simple chemical or mechanical processes rather than combined semi-chemical processes. The environmental problems of CEE pulp mills seem to be particularly associated with the control of wastewater treatment plants and the treatment of condensate liquors from chemical pulping. Primitive controls -- for managing the pulping process as well as treating wastewater -- combined with very limited adoption of water recycling means that CEE plants tend to waste much more energy and water than their Western equivalents. Other techniques, such as steam stripping of condensates and black liquors in Kraft and sulfite plants, could pay for themselves by reducing energy costs while also lessening the burden on wastewater treatment facilities. The costs of such measures varies greatly from plant to plant but an investment of $2-3 million for a plant producing 50,000 tonnes per year should permit significant improvements in both efficiency and environmental performance. Chlorine-based bleaching is believed to be a significant source of pollution from many CEE kraft mills since they have not been subject to the increasingly stringent emission standards applied to most Western plants with respect to emissions of chlorinated and halogenated organic compounds (known as AOX and including such compounds as pentachlorophenol and dioxin). AOX emissions cannot be eliminated but they can be largely removed from wastewater and disposed of safely in solid form. Further, a variety of options are available to minimize the amount of AOX produced -- this can run to 1-1.5 kg per tonne of ptilp with chlorine bleaching of kraft pulp. Pre-bleaching technologies such as improved pulp washing, exclusion of condensate liquors from wash waters, extended cooking in the digestion stage, oxygen addition to reduce the lignin content of pulp, and better process control rely more on process modifications rather than end-of-pipe controls with potentially large investment requirements. A case study of the Sloka pulp plant in Latvia, which primarily produces chemical pulp using a sulfite process, showed that the plant's principal environmental problem concerned emissions of various organic compounds such as lignosulfonates and phenols. The plant would benefit from better process controls, though their main benefit would be economic since they would reduce energy and material inputs and improve output quality. Separate treatment of condensate liquors would involve an investment of $2-2.5 million, but the cost could partly be recovered by burning the methane and distillate produced. The lignosulfonate problem arises because the wastewater treatment plant cannot degrade this material efficiently, so that it would be better to remove and reprocess it in solid form. Both the cost and the economics of any investment in such reprocessing are highly uncertain. Chemical pulp plants can be highly unpleasant neighbors because of the malodorous nature of their gaseous emissions even though the gases emitted are generally not hazardous to health. An investment of $0.5-1 million can reduce emissions of hydrogen sulfide, other sulfur compounds and aromatic VOCs to air by 80% or more. little in the way of additional benefits in the form of better water quality and amenity (see Box 4.3). The approach of updating standards gradually and relying upon multi-stage technology must be complemented by careful planning at a water basin or sub-basin level in order to maximize the impact of expenditures on water quality. The management of water quality in a river basin should be regarded as an exercise in system planning similar in character to the planning of a power system. Both are complex, highly-interrelated systems which need to be analyzed as a whole rather than treating each investment decision as if it could be decided on the basis of limited iocal information. It is, therefore, Environmental Expenditure Priorities (Details) Annex 6 Page 17 inappropriate to impose uniform emission or technological standards on all municipal wastewater treatment plants within a river basin. A more flexible approach will be required in order to achieve long ran improvements in the water quality of rivers in Central and Eastern Europe at a cost that can be afforded by the countries concerned (see Box 4.5). Biodiversity conservation priorities (i). Since the most polluted areas are relatively well-defined and do not evenly cover all of Central and Eastern Europe, it is possible to prevent deterioration in those areas that are relatively untouched -- at a fraction of the costs of the investments required to address the main pollution problems. This is true especially for some of the remaining large, contiguous unspoiled areas (such as the Mazurian Lakes in Portheast Poland and parts of the Taiga in Russia), and for the remaining wetlands which, according to recent studies, are the most vulnerable ecosystems in the CEE region. As part of conservation measures for such sites, investments should ensure above all that tourism and other facilities in pristine areas meet rigorous standards for waste water treatment. Revenues from tourism and other recreation activities could provide funds for investment and maintenance expenses in protected areas. Where protected areas are located in polluted zones (e.g., in Poland, 6 out of 18 national parks are located in regions of "ecological disaster" or "ecological hazard"), conservation of living natural resources requires, in the first instance, the same kinds of measures as are called for to address the impact of environmental degradation on human health. In some cases, and only if no other possibilities are available, ex situ conservation of species through special measures (e.g., creation of gene banks) may be called for.6 With regard to protected areas, the basic premise is that investments should focus on establishing and funding integrated management plans for existing designated areas. Standard procedures for environmental impact assessment should be used to ensure that new activities do not adversely affect the conservation values of these areas. In Western Europe, biodiversity conservation is concentrated on 10% of the land area which cannot easily be isolated from the encroachment of nutrients and pollutants from intensive agriculture on the remainder of the land area. Hence, even if all existing protected areas (in Western or Eastern Europe) were managed in exemplary fashion, conservation could not be assured. It is therefore not enough to improve the management of protected areas alone; to prevent irreversible loss of species and habitats requires awareness and actions in agriculture, toirism, and industry. In other words, conservation should be embedded in all economic activity. CEE countries, in collaboration with the Council of Europe and IUCN, have proposed five site-based projects in areas of outstanding biodiversity as examples of an integrated approach serving both conservation and development objectives (see Box 5.4). Another 22 projects from the region have been proposed and are being discussed. A complete picture of the areas that are or should be protected will not emerge until completion of the CORINE extension to CEE countries, the work in CEE for the State of the Environment Report, and completion of the IUCN ecosystem surveys. §/ A project financed by the Global Environment Facility (GEF) is underway in Poland to provide institutional support for biodiversity conservation management activities and a forest gene bank to conserve tree species found in the old-growth Bialowieza National Park. Annex 6 Page 18 Environmental Expenditure Priorities (Details) Green Lungs of Europe Proposal. In March 1992, Environment Ministers of Belarus, Lithuania, Latvia, Poland, Russia, and Ukraine established a working group to prepare a proposal for a Green Lungs of Europe program aiming to protect regions in those countries richest in biodiversity.7 The program has its roots in the concept of the Green Lungs of Poland -- the north-eastern part of the country that remains largely unharmed by industrial pollution. The Green Lungs of Europe proposal foresees the development of sustainable practices in all productive sectors. Natural Resource and Forest Management. Some temperate forests are as rich in species as tropical forests although the diversity is not in the tree species themselves but in the organisms which inhabit or depend upon them. Russia contains 42 percent of the world's temperate forests. A recent WWF study has found that the most serious threat to temperate forests is logging. Economic pressures and lack of capacity to enforce legislation is enabling timber exploitation to proceed in protected areas. This is a matter of great concern in Russia because of the threat to the Taiga from uncontrolled logging, but similar considerations apply in other countries and to the exploitation of mineral and fishery resources. External resources and technical assistance is required to enable governments to redirect the activities of Departments of Forestry and Natural Resources and to retrain their staff as well as to introduce new legislative and regulatory regimes governing the use of these resources. In the case of forestry this will involve the introduction of stumpage fees plus a combination of incentives and regulations to ensure that privatized forestry and logging operations manage their resources in a sustainable manner and that an appropriate share of the resource rents accrues to the government. The experience of other sub-Arctic countries would be especially useful as a basis for providing the necessary technical assistance. Technical and financial support for sustainable use and protection could be directed through national Biodiversity Conservation Strategies. In some areas, it may be possible to generate the resources required to enhance the management of national parks and protected areas from the user fees and tourism taxes that can be earned by encouraging ecologically-sensitive tourist development. Care must be taken to ensure that such revenues do not just disappear into the general budget of either national or local government and that a reasonable share of the revenues is reinvested to protect the natural, ecological and other characteristics that provide the basis for tourist development. Low-cost measures to address longer term enviromnental problems Traffic (j), (k) and natural resource management related concerns (1) are either cases where the maxim that prevention is much cheaper than cure applies or where it is necessary first to develop a proper understanding of the environmental processes involved before making any substantial commitment of resources. The amounts of public expenditure involved will be small. Technical assistance, training and research support are the obvious areas where external donors can support these measures. 7/ Estonia joined the working group in February 1993. Environmental Expenditure Priorities (Details) Annex 6 Page 19 There are numerous policy options available for the control of emissions from transport sources which can be grouped in three broad categories: * Measures to reduce or limit the growth of vehicle traffic, such as parking fees and prohibitions, fuel taxes, vehicle emission taxes, urban tolls, area/corridor licensing, and land-use planning to reduce the volume of traffic from residential to commercial areas. Measures aimed at commercial vehicles including mandatory night-time deliveries, and user charges; * Traffic management, including measures such as car-free zones, computerized traffic signals, traffic routing, and parking enforcement. * Measures to limit emissions per vehicle-km. These include emissions controls, fuel-efficiency standards, and fuel quality standards. For vehicle emissions standards to be effective, countries must have in place inspection and maintenance programs. Pollution abatement strategies should be tailored to each city, and to its level of emissions and air quality. Much more research on the cost-effectiveness of various policy options is also needed. However, even in the absence of detailed information, it is possible to suggest some priorities: * Since high blood-lead levels have been recorded in several cities in CEE, and since the benefits of reducing lead emissions almost certainly outweigh the costs, reducing lead emissions from transport sources should be a priority. Cost-effective measures may include: (i) taxing fuels differentially according to lead content, and (ii) reformulating the leaded grade of motor fuel; * Since the vehicle stock in CEE is, on average, old (in Hungary, 42% of passenger cars are over 10 years old, and 62% are over 7 years old), poorly maintained, and includes a high proportion of cars with highly polluting two-stroke engines (in Hungary, two-stroke engines comprise nearly one-third of the vehicle fleet), cost-effective strategies may involve targeting these vehicles. Possible measures may include an ownership tax which rises as the vehicle ages and an ownership tax on vehicles with two-stroke engines. Alternatively, governments may offer subsidies for scrapping vehicles or incentives (such as tax breaks) for the acquisition and use of "clean" cars; the latter approach has been practiced in a number of Western European countries as a transition measure before making control technology (such as catalytic converters) mandatory. Now that new EU and UN/ECE regulations require strict emission controls from 1994, CEE countries may wish to adopt these standards for new motor vehicles; * Because of their intensive use, the amount of pollution emitted by buses, trucks, and taxis is very high in relation to their proportion in the vehicle fleet. Therefore concentrating on high-use vehicles may be a Annex 6 Page 20 Environmental Expenditure Priorities (Details) cost-effective approach for many urban areas. A recent study comparing options for the control of emissions from mobile sources in Budapest concluded that the least expensive way is to replace standard diesel bus engines with "clean" engines (which are also more fuel efficient than standard engines). Another study showed that retrofitting high-use vehicles such as trucks to operate on "clean" fuels such as liquid petroleum gas or compressed natural gas may be cost-effective for some cities. Finally, it may be cost-effective to target taxis for emission controls. O It may be correct to discourage a large shift of freight transport from rail to road. In part this can be achieved by ensuring that trucks bear the full cost of the environmental and congestion externalities that they cause in the form of heavy license fees and fuel taxes. One promising measure is to finance the development of rail container-handling facilities, since it is the cost of transferring freight from road to rail or vice-versa which has discouraged the combination of long distance rail freight with local road distribution in Western Europe. In general, modal transport (the use of containers and truck-trailers which can easily be moved from road to rail and back to road for local distribution) tends to be a very cost-effective way to simultaneously address transport and environmental objectives. Of course, in large countries with long average hauls such as Russia, rail will continue play an important role in freight transport so long as its efficiency is improved and emphasis is given to the timely delivery of valuable and time-sensitive cargoes. Measures to strengthen public transport, including subsidies, are often proposed in West European cities as a way of reducing environmcntal damage caused by urban traffic. However, in Central and Eastern Europe most cities already have extensive public transport networks, though some require substantial rehabilitation. Their main problem is a continued reliance upon government subsidies when public expenditure is under extreme pressure. The solution, which has already been tried in some CEE countries, is to raise fares substantially in order to finance the modernizaiion of bus fleets (diesel buses are a big source of traffic pollution) and to enhance the quality of service offered. Reliable and frequent service is the decisive factor in persuading people to continue using public transport. At the same time, automobiles and trucks should bear the full cost of the environmental damage that they cause as well as the infrastructure they require. Fuel taxes, vehicle license fees, parking charges and even road user charges for vehicles operating in congested city centers are all possible elements of a package designed to internalize the costs associated with vehicle use. If such a package is implemented, the case for additional public spending on public transport is weak, since the experience of the rich countries suggests that such expenditures have only a marginal effect in shifting passengers and freight from private vehicles to public transport. Environmental Expenditure Priorities (Details) Annex 6 Page 21 Box A6.9 Environmental investments in the chemicals sector Chemicals and petrochemicals plants in Central and Eastern Europe vary widely in age. Many would probably have been shut down some time ago in the market economies. For example, PVC plants based on an acetylene route are unlikely to be able to compete directly against ethylene-based processes now standard in the West. Older plants were often designed with limited pollution controls or before the dangers associated with certain chemicals were fully appreciated -- e.g. the carcinogenic monomer VCM produced in PVC plants. Finally, the state of maintenance of older plants is often poor, so that simple "good housekeeping" measures can do much to reduce spills and leaks that are the source of substantial emissions -- e.g. refinery emissions of VOCs from leaks in heat exchangers into cooling waters, or large styrene losses from driers. The investment cost of achieving these improvements in maintenance and operating practices is typically small -- less than $5 million even for large plants. Inorganic chemicals. Chlor alkali plants relying upon mercury cells account for 10-1 5% of total emissions of mercury in the CEE countries. Emissions can be almost eliminated by switching to membrane cells, but this is a relatively expensive option -- though a case study of P0 Kaustik in Russia revealed a plant in Volgograd which had the necessary equipment but lacked the funds to install it. A combination of minor equipment modifications to recover lost mercury, better operating practices and possible conversion from graphite to titanium anodes would permit substantial reductions in emissions lof the order of 80-90%) at a cost of about $6 million per plant or about $200 million for all plants in the region. Among the large emitters which should receive priority in the allocation of such funds are: Dzerzhinsk, Volgograd, Berezniki and Sterlitamak in Russia; and Lyssychansk in Ukraine. (The latter has serious dust emissions which could be reduced by better housekeeping and attention to reducing dust during conveyance.) Borsod Chem in Hungary was another plant studied. This used to emit substantial quantities of mercury to both air and water, but air filters and better water treatment combined with water recycling have largely eliminated these emissions, though there is still a need to dispose safely of sludges and other solid wastes containing mercury. Past practices have left a legacy of contaminated land, especially below the electrolysis unit. Mercury has largely been washed out of the river sediment in the section of the Sajo river downstream of the plant and there seems to be no serious problem of groundwater contamination. Some investment may be warranted to prevent further intrusion of mercury from the electrolysis unit into the ground underneath, but measures to deal with existing soil contamination should probably be deferred until more is known about the extent and nature of seepage from the site into ground or surface waters. Synthetic soda ash plants using the Solvay process generate a large volume of saline water effluent which is difficult to deal with. Most inland CEE plants discharge their effluent -- typically 1,000-2,000 tonnes per day containing up to 15% of chlorides -- into nearby rivers. This can cause serious damage. Solutions rely upon use of settling lagoons, extraction of lime solids plus the return of concentrated brine to spent brine cavities (assuming that solution mining is the source of the brine feedstock). Lagoons must be carefully constructed and managed to avoid contamination of nearby soils and groundwater. The total cost of such measures would amount to $8-12 million for a plant producing 500,000 tonnes of soda ash per year. A modest part of this cost can be recovered from the sale of lime from lime beds. Plants where some or all of these investmeoits have high priority include Govora in Romania, Bashkiria in Russia and Lyssychansk in Ukraine. Air emissions of hydrogen fluoride from the processing of phosphate rock are the principal problem associated with the production of phosphoric acid for fertilizers. Most CEE plants have relatively low efficiency absorbers which could be replaced by high efficiency Venturi scrubbers at a typical cost of $0.5-1 million. Plants where such an investment may be justified include: Gomel in Belarus; Kedainiai in Lithuania; Gdansk in Poland; and Balakovo, Cherepovets, Krasnodar and Voskresensk (Moscow) in Russia. (continued) Annex 6 Page 22 Environmental Expenditure Priorities (Details) Environmental investments in the chemical sector (Box A6.9 continued) Organic chemicals. The main environmental problems are to be found in plants producing ethylene intermediates including PVC. There are a number of acetylene-based PVC plants in the CEE region which are both uneconomic and produce substantial dust emissions; they should be closed down as quickly as possible. For ethylene-based plants concern focuses on emissions of vinyl chloride monomer (VCM) and of other chlorinated organic compounds. VCM is a carcinogen which is primarily a threat to plant workers but may pose a threat to those living near to PVC plants. Emissions depend partly on plant design, on the collection and treatment of vent gases, the extent of fugitive emissions, and on the method of dealing with slurry from the recovery vessel. The most cost-effective way of reducing VCM emissions include: (a) the minimization of losses in the VCM recovery system; (b) carbon adsorption of VCM from vent gases; and (c} steam stripping of VCM from slurry. The total investment cost of these measures would amount to $10-12 million for a plant producing 75,000 tonnes per year of PVC. A further $3-6 million would be required to install a proper high-temperature incinerator to deal with chlorinated organic residues. Plants where such an investment may be justified include: Devnia in Bulgaria; Usti nad Labem in the Czech Republic; Wioclawek in Poland; Tula in Russia; Novaky in Slovakia; and Lyssychansk and Severo-Donetsk in Ukraine. The case studies indicated that investment in an incinerator to dispose of chlorinated effluents would be a very high pri *rity at PO Kaustik in Volgograd. An appropriate unit could serve the whole Volga basin whose ecosystem is increasingly threatened by water discharges containing a variety of chlorinated hydrocarbons. Other changes in operating practices including the separate treatment of water effluents from different sources within the plant, and a steam stripper for the PVC unit would also reduce emissions of chlorinated organics. The Chimcomplex and Carom plants near Onesti, Romania, share a wastewater treatment plant that is overloaded cnd is suffering from substantial corrosion. There are plans to upgrade this plant -- at a cost of $10-15 million -- but an expenditure of $1-2 million on centrifuges and presses could reduce the volume of suspended solids and BOD in water sent for treatment. A further expenditure of up to $5 million on process controls, better maintenance and simple upgrading should result in substantial reductions in both air and water pollution together with lower operating costs. Refining and petrochemicals. One important type of emissions from refineries and petrochemical plants is of miscellaneous VOCs to air and hydrocarbons in water effluent. Some aromatic organic compounds, notably benzene, may be a severe threat to the health of plant workers in certain CEE plants and there are concerns about general levels of benzene exposure in a number of Russian cities. A combination of improved seals on equipment plus floating roof covers on storage tanks offers something close to a "win-win" solution to the most serious leakages of VOCs. Costs depend greatly on the design and capacity of the plant concerned but $0.5-1 million should be sufficient for a typical plant producing benzene, toluene or xylene while up to $10 million might be required for a refinery processing 10 million tonnes of oil per year. Reductions in product losses should certainly be sufficient to repay the cost of the latter investment within a short period. For Plock in Poland the total cost of such investments might amount to $15 million covering both the refinery and the petrochemical plant. Water discharges from refineries may be contaminated with oily wastes while wastewater treatment plants tend to accumulate sludge containing a mixture of heavy oil and other chemicals. Quite large investments -- of the order of $20-40 million -- are required to deal with these emissions but the oil recovered can either be L_ it or converted to other products that can be sold to recover much of the cost. Good housekeeping practices, especially the separation of effluent streams, can reduce the volume of such wastes and the associated losses of products. A case study of the Burgas refinery in Bulgaria showed that an expenditure of $5-6 million on improving the plant's separators, its sewer system and its wastewater treatment plant could substantially reduce water emissions to the Bay of Burgas and thus to the Black Sea. Possible Low-Cost Environmental Investments Annex 6 Page 23 LOW-COST ENVIRONMENTAL INVESTMENTS INDICATIVE LISTING OF POSSIBLE ACTIONS Industry Problem Technologies/Actions Typical Costs per Plant Potential Locations (US$) NONFERROUS METALS INDUSTRY Lead & zinc 0 Lead emissions which can * Install Water sprays to damp down stockpiles 100,000 * Bulgaria: Plovdiv smelters affect children living within a * Install of perimeter walls, plus other 2 milion * Romania: Copsa Mica large radius of the plant; measures to prevent spillage * Poland: Bukowno, Szopience & Olkusz * SO2 emissions from sulfuric * Install new hoods, & baghouse filters; repair 2 million 0 Russia: Ordzhonikidze & Chelybinsk acid plants & modemize old controls * Repair & upgrade sulfuric acid plants to 34 million (Copsa Mica); process more of the sinter plants gases 6-8 milion (Plovdiv) * Install devices to contain zinc powder when 10,000 0 Poland: Silesia Metallurgical Works, dumping from hoppers to carriages & when Katowice unloading at screening station; utilize industrial vacuum cleaner Copper Lead and arsenic emissions 0 Install new dust controls -- ESPs, scrubbers, 5-10 million 0 Armenia: Alaverdi smelters baghouses * Bulgaria: Pirop * Upgrade existing facilities 2-3 million 0 Poland: Glogow & Legnica * Initiate water treatment & measures to 10-15 million 0 Romania: Baia-Mare prevent leaching from solid wastes 0 Russia: Krasnouralsk. Kushtym, Mednogorsk. Pyshma & Sredneuralsk * Slovakia: Krompachy Aluminum Emissions of pot-gases containing 0 Install low-cost measures to reduce dust 2-3 million 0 Slovakia: Ziar nad Hronom smelters tar, fluorine, & particulates losses of bauxite & to improve plant controls hygiene 0 Russia: Kamensk, Krasnoturinsk, & * For plants likely to remain viable, install 50-100 million Volgograd potroom refits to eliminate fluorine euissions 0 Ukraine: Zaporozhe Possible Low-Cost Environmental Investments Annex 6 Page 24 Industry Problem Technologies/Actions Typical Costs per Plant Potential Locations (US$) IRON AND STEEL PLANTS Iron and steel Particulate emissions, especially * Install ventilation hoods, fans & filters, or plant-specific * Ukraine: Krivoi Rog plants secondary emissions from precipitators * Slovakia: Kosice charging and discharging steel * Install water sprays and/or partially enclose 1-2 per tonne of steel-making converters conveyor belts to reduce dust emissions, capacity especially during dry and windy weather * Change operating practices to improve sinter 12-18 million quality; upgrade or replace ignition & filtration systen:s * Install fans with sufficient capacity to capture 50 million & clean waste gases prior to stack discharge; use iron ore pellets or higher grade fines Coking ovens Particulate emissions 0 Improve operational & maintenance procedures e.g. by adhering to a regular charging & discharging schedule & control over oven heating * Replace or rehabilitate coke batteries 100 million Basic oxygen Particulate emissions 0 Improve primary particulate controls & install 10 per tonne of steel-making * Bulgaria: Kremikovski converters secondary fume collection capacity (8 million for 0 Czech Republic: Trinec Kosice) 0 Poland: Katowice & Krakow * Romania: Galati * Russia: Chelyabinsk, Cherepovets. Lipetsk, Magnitogorsk, Nizhniy-Tagil, Novokuznetsk, St. Petersburg a Slovakia: Kosice * Ukraine: Mariupol & Yenakiyevo Possible Low-Cost Environmental Investments Annex 6 Page 25 Industry Problem Technologies/Actions 7)pical Costs per Plant Potential Locations (US$) PAPER AND PULP MILLS Paper and pulp * Discharge of condensate 0 Initiate steam stripping of condensates & 2-3 million (plant producing * Latvia: Sloka mills liquors black liquors in Kraft & sulfite plants 50,000 tonnes/yr) * Emissions of chlorinated & 0 Remove AOX from wastewater & dispose of halogenated organic solids; minimize amount produced using pre- compounds (AOX) bleaching technologies such as improved pulp * Emissions of lignosulfonates washing, exclusion of condensate liquors & phenols from wash waters, extended cooking in the * Emissions of hydrogen digestion stage, oxygen addition to reduce sulfide, other sulfur lignen content of the pulp, & better process compounds, & aromatic control VOCs 0 Treat condensate liquors 2-2.5 million * Reduce water usage by: recycling, installing 1.5-2 million 0 Poland: Swiecie Cellulose & Paper control devices, continuously supplying water Works from thickeners to wastepaper plant; install hydrocyclones, reuse water from compressor station & vacuum pumps, separate fibers from water, treat water from thickeners for reuse CHEMICAL AND PETROCHEMICAL PLANTS Chen.ical & VOC discharges * Improve operating & maintenance procedures < 5 million petrochemical plants Inorganic Mercury discharges * Undertake minor equipment modifications to 6 million * Bulgaria: Devnia chemical plants recover lost mercury; implement better 0 Poland: Oswiecim operating practices, & possibly convert from 0 Russia: Dzerzhinsk, Volgograd, graphite to titanium anodes Berezniki, Sterlitamak * Ukraine: Lysichansk Synthetic soda Saline water discharges * Construct settling lagoons; extract lime 8-12 million (plant producing * Romania: Govara ash plants solids; & return concentrated brine to spent 500,000 tonnes soda a Russia: Bashkiria brine cavities ashlyear) * Ukraine: Lyshchansk Phosphatic Hydrogen fluoride air emissions * Install high efficiency Venturi scrubbers 0.5-1 million 0 Belanus: Gomel fertilizer plaints 0 Lithuania: Kedainiai * Poland: Gdansk * Russia: Balakovo, Cherepovets, Krasnodar, Voskresensk (Moscow) Possible Low-Cost Environmental Investments Annex 6 Page 26 Industry Problem Technologies/Actions lvpical Costs per Plant Potential Locations (USt$) Organic Emissions of vinyl chloride * Minimize losses in the VCM recovery 10-12 million for a plant * Bulgaria: Devnia chemical plants monomer (VCM) & other system; install equipment for carbon producing 75 tonnes/yr of * Czech Republic: Usti nad Labem chlorinated organic compounds absorption of VCM from vent gases; PVC 0 Poland: Wloclawek inplement steam stripping of VCM from 0 Russia: Tula slurry * Slovakia: Novaky * Install proper high-temperature incinerator to 3-6 million * Ukraine: Lysichansk, Severo-Donetsk deal with chlorinated organic residues * Russia: PO Kaustik in Volgograd e Romania: Chimcomplex & Carom plants * Install centrifuges & presses to reduce 1-2 million near Onesti suspended solids & BOD in water sent for treatment (a further expenditure of 5 million on better process controls, maintenance, & sinple upgrading will reduce air & water pollution and allow lower operating costs) Refining & * VOC emissions 0 Install improved sea's on equipment& 0.5-1 million (plant 0 Poland: Plock (15 million for both the petrochemicals * Hydrocarbon discharges floating roof covers on storage tanks producing benzene, toluene refinery & petrochemical plant) or xylene); 10 million (refinery processing 10 million tonnes of oil/yr) Refineries Oily discharges * Initiate good practices, e.g. separation of 5-6 million 0 Bulgaria: Burgas effluent streams; improve sewer systems & wastewater treatment plants * Optimize clay dosage with automated process 8.600 0 Poland: Silesiau Refinery Works, control; improve batching facility; optimize Czechowice-Dzce oil storage; incinerate in the factory power plant after coating the coal with a water suspension of the clay Possible Low-Cost Enviromnental Investments Annex 6 Page 27 industry Problem Technologies/Acions Typical Costs per Plant Potential Locations (US$) MUNICIPAL WASTEWATER TREATMENT New Sewage discharge * Consider chemically-enhanced primarv 18 million for a town of wastewater treatment 200,000, e.g. Szeged, treatrnent plants Hungary Overloaded * Require pre-treatment of industrial waste plants with before discharge to municipal wastewater significant treatment plants industrial * Upgrade traditional treatment plants to 5 million (including sludge pollution chemically-enhanced yimary treatment treatment) in a town such as Nove Zamky, Slovakia I/ Being implemented as part of the Norwegian transfer of know-how programs in waste-minimization. IBRD25296 CENTRAL AND EASTERN EUROPE CONCENTRATION OF TOTAL DUST AVERAGE CONCENTRATION IN 1990 tJ 2 ' o ~~~~~~~~~~~~\ >J 'T~~~~~~~N ~~~~~~~~~~ -) --< < ~~~) ,-7', ,~~~7 ,, ) i' N r <\ /> CUBIC-METER: 1 : 20-40~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- I ,-' . -,~~~~~~~~~.. .. .. . MICROGRAM PER MAP 1 CUBIC METER: W<20 LI]20 -4O 40 - 60 he bounaries, coarsde drninoatons 60-90 Zon;:ntnisho d _ 9Q8 Bank Group, any judgrnent on the legal _ >90 v stas otony rerray, an onrs=emen or occeptonce of such boundories Computations: RIVM MARCH 1994 IBRD 25305 CENTRAL AND EASTERN EUROPE TOTAL DEPOSITION OF CADMIUM 1990 r >=s~~~~~~~~~ ,e~~~~~~~~-, A GRAS HA/R MA 2,S X ) I 2 The bondris cohm dw > on at~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I t7cidd ~~~~~~~~~~~~~~~~~~~~~" ..f....~ 7. . ..e''''& - C > 4h kxnor o iwe, ofbn, bnoundaries Computations: RIVM MARCH 1 994 IBRD 25297 CENTRAL AND EASTERN EUROPE CONCENTRATION OF SULFUR-DIOXIDE AVERAGE CONCENTRATION IN 1990 <;'~~~~~~~~~~~~~~~~~~' 2 N r A~ ~ F 4~~~~~~~~~~~~ MICROGRAM PER CUBIC METER MAP 3 11I1<10 W 10-20 20 - 40 Theboundories,ors,deoninotions _ o~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~nd ony othor informotion shown an this 40 - 60 mop do nor imply, on the port oT Wold Bon arup. any judgmeant an the legal _ >60 tt of anytets oo anrenonnient Computations: RIVM MARCH 1994 IBRD 25298 CENTRAL AND EASTERN EUROPE CONCENTRATION OF SULFUR-DIOXIDE AVERAGE CONCENTRATION IN 2010, SCENARIO 1 Z~~~~~~~~ C/ ~ / S .~~~~~ , 1r~~~~~~7 0~~~~~~~> :.: ,'-'''- 0 - 2 /~~~~~~ ( ~~~~~~Z o o '/ ngeo1h*1 m~ S AO' - 60 (dt cls os' pero ap 4C, myj ,. -' stsofon raor,oranyend ere m > 60 (data class doesn't oppear on map) or acceptance f sc b Computotions: RIVM <~~<' g I ..St- + MICROGRAM PER MAP 4 CUBIC METER: < 10 20420 ond any other ,nfooln enahan shown t _ 40 -60 (data class doesn't appear on map) 8Za.' Goup ny j:dnenton the legal _ > 60 (data class doesn't appear on map) OrcehncOstboundaor,es Computations: RIVM MARCH 1 Northern Bohemia Q~~~~ tzS; ~~~1000 t tyr ._ ~~~~A 65 to 35025 ( * ~~~~~~30to 65 (31) s%;s,~ ~ ~~~~~1 lto 30 (56) - ^ l~~~~~~~~~to 10 (I 79) Numbers in parentheses indicate the number of LPS in each range OI11A SA Locations of large point sources of SO, emissions in the CEI region DIIASA t / km2 /yr ,1 *~~~~~ 1001o 130 J 7 @1|1 SO~~6tolOO 20to 50 t~~~~~~~~~~~~I i lto 20 E 4to 10 El Oto 4 Regional SO~ emissions from all sources in the CEI region IBRD 25312 CENTRAL AND EASTERN EUROPE LEACHING OF NITRATE IN AGRICULTURAL SOILS A. .b~~~~. COMPUTED LEACHING IN THE MAP 7 TOPSOIL IN MG/L IJ No data 110 -25 C]25 - 50 _ 50 - 100 Te bmad=, dw,omi,m > 100 WKb wi*H Mountainous regions, SethGeu, -r/ udeO forest and natural areas or I I Compubtions: RIVM MARCH 1994 IBRD 25300 CENTRAL AND EASTERN EUROPE EXCEEDANCE OF CRITICAL LOADS FOR ACIDITY 1990 C,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5 EQ/HA/YR~~~~~~~~~~,f7 MA.P ' 8, < ^-=-1'0' * *-A 500 I 00 Mebounaris, clors deomma,o) ~~~~~~~~t adayoheVnomin h- nt, 100 -200 wpcl nt mpy,onth prfofTh wr/ *?t!~~~~~~~~~~~~~~~~~~nkGop ugen nthCea > 200 "s f o; ;rio-y oranyendrseen C~ ~ ~~~~~~~~~racpac fsc onhe Computations: RIVMs, >2 V WI C>~~~~~~~~~~~~AACH19 IBRD 25301 IBRD 25302 CENTRAL AND EASTERN EUROPE CENTRAL AND EASTERN EUROPE EXCEEDANCE OF CRITICAL LOADS FOR ACIDITY EXCEEDANCE OF CRITICAL LOADS FOR ACIDITY 2010, SCENARIO 1 2010, SCENARIO 2 I t gt 1111 " I e MAP 9A MAP 9B EOQ/HA/YR Scenario 1: Current Westem energy efficiency and Scenorio 2: Current Westem energy efficiency and emission emission standords in new investments EQ/HA/YR standards applied to all equipment < soo < soo 500 - 1000 500 - 1000 P. kon d- 1000 - 2000 o bOo- 2000 rnporoITh.Won _ >2000 >2000 2000 (data closs doesni' appear on map) ConputMs: RfM Computotcns: RIVM JULY 1994 JULY 1994 IBRD25304 CENTRAL AND EASTERN EUROPE ALUMINUM CONCENTRATION IN ACIDIFIED SOILS MAP 10 IN THE TOP METER OF 5. _ GROUDWATRWINMG/ < 0 5.0 Bank Group, =ai~r7'jug.etn teleg statu oF any tertOV oran eno'sm or accetance of such boundaries Computations: RIVM MARCH 1994 ABBREVIATIONS ASP A tivated-Sludge Process BACT Best Available Control Technology BAT Best Available Technology BATNEEC Best Available Technology Not Entailing Excessive Cost BOD Biological Oxygen Demand CAC Command and Control Cd Cadmium CEE Central and Eastern Europe CIS Commonwealth of Independent States CO2 Carbon Dioxide COD Chemilical Oxygen Demand COMECON Council for Mutual Economic Aid CPE Centrally Planned Economy CSFR Czech and Slovak Federal Republic DO Dissolved Oxygen EAP Environmental Action Programme for Central and Eastern Europe EBRD European Bank for Reconstruction and Development EU European Union (formerly European Communities) ECE Economic Commission for Europe (U.N.) ECU European Currency Unit EIB European Investment Bank ESP Electro-Static Precipitator FGD Fiue Gas Desulfurization FSU Former Soviet Union (also referred to as Newly Independent States) GDP Gross Domestic Product GEF Global Environment Facility GEMS Global Environment Monitoring System (UNEP) GHG Greenhouse Gas GNP Gross National Product EIBRD International Bank for Reconstruction and Development (World Bank) IFI International Financial Institution IIASA International Institute for Applied Systems t.nalysis (Laxenburg, Austria) MIF International Monetary Fund IUCN International Union for the Conservation of Nature and Natural Resources (now World Conservation Union) LCP Large Combustion Plant LRMC Long-Run Marginal Cost LRTAP Long-range Transboundary Air Pollution MBI Market-Based Instrument N Nitrogen NGO Non-Governmental Organization NIS Newly Independent States (Former Soviet Union) NO° Nitrogen Oxide NSPS New Source Performance Standard(s) 03 Ozone ODS Ozone-Depleting Substance(s) OECD Organisation for Economic Co-operation and Development (Paris) P Phosphorus Pb Lead PM Particulate Matter (PMIO = Particulate Matter smaller than 10 1sm) SO2 Sulfur Dioxide Rb Ruble (Russian Currency) TN Total Nitrogen (in water) TP Total Phosphorus (in water) TSP Total Suspended Particulates (in air) TSS Total Suspended Solids (in water) UN United Nations UNCED United Nations Conference on Environment and Development UNECE United Nations Economic Commission for Europe (ECE) UNEP United Nations Environment Programme US$ United States Dollar(s) VOC Volatile Organic Compounds WHO World Health Organization