Environmental Aspects of the EU Enlargement
Environmental Market: The EU accession countries still need to spend approximately Euro 50-100 billion in order to implement the EU environmental directives as they stand today. Yet this expenditure will be a net gain to the accession countries as the social benefits (neglecting any commercial profits) will be positive from better ecosystem and human health (lower medical costs), greater tourism and lower remediation costs of the damaging effects of particularly airborne pollutants. In 2000 ECOTEC, an advisor to DG Environment, estimated the total costs as Euro 78-108 billion and since then substantial investment has been made by the candidate countries.
Financing this Expenditures. Financing for these amounts will come through expenditures by industry, national budgets (see table below), EU funds such as Sapard, LIFE and others, domestic environmental funds and banks (in Poland for example EkoFundusz (www.ekofundusz.org.pl) and the Bank for Environmental Protection (www.bosbank.pl)), and private financing. In particular, venture capital financing for environment entrepreneurs will come through two EBRD sponsored funds: the Central and Eastern European Environmental Investment Fund (www.eip.biz) – co-sponsored by CDC IXIS – and Talkie’s energy efficiency fund. In addition the EBRD plans to set up a fund focused on biodiversity protection.
Funds available: In many countries local environmental funds provide some financial support for BOT, BOO and other projects. For example in Poland, which has the largest of such funds, the National Fund for Environmental Protection (www.nfosigw.gov.pl) provided PLN 1.9 billion in loans, subsidies or grants to develop environmental investments. Similarly the EkoFundusz provided PLN 150 mm for 207 projects in 2001.Carbon emissions related financing has come from the Dutch Erupt program, the World Bank’s Prototype Carbon Fund. Structuring of complex environmental financings has been executed by Vertis Environmental Finance (www.vertisfinance.com) in Hungary and Slovakia and Evanston Capital Advisors (www.evanstoncapital.ro) in Romania.
Competition from Local Industrial Firms. While numerous multinational environmental firms have entered the central European market, the sector is still dominated by a large number of small local entrepreneurs. While, there are many firms involved in the environmental sector that do not consider themselves to be environmentally focused – such as pump manufacturers for water distribution -there are significant numbers of small firms directly focused on the environment business market in central Europe. In Poland the number of firms directly involved in environmental contracting or management (excluding the energy sector) has jumped from approximately 300 in 1997 to over 1000 today and the size of the largest firms involved have grown from Euro 30 mm in sales per annum to close to Euro 50 mm during the same time period. In Hungary, there are at least 300 environmental companies and the largest have over Euro 10 mm in annual revenues. The numbers for the Czech republic are slightly larger than in Hungary.
Environmental NGO’s have been very active in central Europe and have had a significant impact on environmental legislation which in some cases is actually stricter than EU legislation. These NGO’s are quite important in the development of commercial projects as many precedents exist of NGO’s stopping projects that did not meet European Union best practice standards. There exist over 2,700 environmental NGO’s in the 15 countries covered by the Regional Environmental Center (www.rec.org).
For more analyses see the