[Front page] [Contents] [Previous] [Next]

Environmental Assistance to Eastern Europa - Annual Report 1998

4. Assessment

4. Assessment
 Denmark’s environmental assistance to Eastern Europe

4. Assessment

Assessment of Denmark’s environmental assistance: Conclusions and recommendations

In July 1997, the Danish Environmental Protection Agency (DEPA) initiated an external assessment of Danish environmental assistance to Eastern Europe since the start of the scheme in 1991 up to and including 1996. The assessment was made by Mikael Skou Andersen, Associate Professor at Aarhus University, in co-operation with PLS Consult and KPMG C. Jespersen, and was completed in the autumn of 1998.

The assessment consists of three parts: 1) A project assessment comprising questionnaires to all project contractors on the 496 projects supported during the period 1991-96 and a detailed assessment of 47 selected projects, 2) a country review dealing with the countries’ national environmental policies and their views on environmental assistance to Eastern Europe and 3) a main report with conclusions and recommendations.

Below is a brief summary of the main conclusions in the three parts of the assessment:

Project assessment

In the period under review, Poland was the main recipient, followed by Lithuania and Russia. The areas of assistance were concentrated on water and air, including energy production and sustainable energy.

At the beginning of the scheme, the main emphasis was on TA-projects, but from 1993, there was a marked shift in favour of investment projects. For the period as a whole, an average of 25% of the support was granted for equipment, but for the years 1993-96, this percentage reached as much as 35%.

342 completed projects showed that co-financing has been most pronounced in Poland, Lithuania, Slovakia and the Czech Republic, whereas it was very limited in countries like Romania and Ukraine. Some of the support was granted for preliminary projects with a view to catalysing loans from international financial institutions (IFI-loans). Twelve projects have thus secured a financing basis of approx. DKK 3.5 billion or well over three times as much as the support framework. At the same time, IFI financing paves the way for the participation of other donors.

The assessment of the environmental effects is based on DEPA’s database and on the responses obtained by means of the questionnaires sent to all project contractors. Generally, the environmental effects realised were more limited than had been estimated in advance. If, however, we include the expected environmental effects of projects still under implementation, the environmental assistance granted to Eastern Europe has meant a substantial reduction of emissions, especially of SO2, but also to some extent of CO2 and NOx. In the area of waste water, the realised and expected environmental effects have been calculated at about 50,000 tonnes of BOD equivalent to treatment of waste water from about 2.3 million person equivalents. In a number of projects there has been a drop in the effect from the beginning till the end of a project.

The 47 selected projects were assessed on the basis of seven parameters:

Involvement and co-operation
Target fulfilment
Co-financing
Communication of results
Environmental effect
Contribution to sustainable development
Transfer of relevant technology/know-how

This part of the assessment shows that the results of 35 projects out of the total of 47 projects were rated “satisfactory” or “very satisfactory”, while 8 were rated as “less satisfactory” and only 4 as “unsatisfactory”. None of the projects were rated as “very unsatisfactory”.

Country assessment

The country assessment has included 8 out of the 12 countries participating in the co-operation with DESF, viz: Poland, Lithuania, Estonia, Czech Republic, Romania, Russia and Ukraine. The main conclusions are the following:

International environmental assistance plays a part, especially in the Baltic republics, where 35-50% of environmental investments are procured in this way. In Poland, the share is 5%, and the demand is here for technology and know-how. Measured as a share of the GDP, Poland and the Czech Republic spent the bulk of resources on environmental investments among the countries under review.
Russia, Ukraine and Romania receive very limited environmental support from Western sources.
Denmark has been the largest bilateral donor in Poland, Lithuania, Slovakia, Romania and Ukraine.
The environmental assistance is characterised by a sharp distinction between countries with and without prospects of EU membership.
The problems in Russia, Ukraine and Romania affect public health.
The co-operation with the countries under review is generally good: Denmark is commended for supporting proper investments and for displaying great flexibility.
More equipment and less consulting is requested, however.

Summarising the main report

Based on the project and country assessments, the main report includes summarising conclusions and recommendations and more strategic considerations. These are stated briefly in the following:

Conclusions

The beginning was difficult, but since 1993, the support scheme has developed positively, with more emphasis on investments and on a closer dialogue with the recipients.
Co-financing on the projects is 2:1 in proportion to the grants and has resulted in a return percentage of not less than 130%.
The efforts made to persuade International Financing Institutions to grant loans have resulted in substantial amounts being provided as loans towards the restoration of the environment in Eastern Europe.
On the basis of reviewing 47 representative projects, project implementation has been found satisfactory.
Co-operation with the recipient countries’ national authorities has generally functioned well – the results obtained in Lithuania have been especially impressive. Recipients request more equipment, however, and less consulting.
Environmental effects are good, but somewhat smaller than assumed earlier.
The new tender procedure is estimated to lead to larger projects, but it is not very flexible and has to be be supplemented with the application model.

Recommendations

include the health-related aspect, especially water supply;
announce annual amounts available for projects;
extend and improve the network of country co-ordinators;
increase the hardware share to an average of 50%;
improve the project assessment tools;
encourage the participation of local project partners;
introduce more standardised grants;
be careful about waste incineration projects;
establish fixed deadlines for consideration of project proposals;
improve monitoring of major investment projects;
improve the measuring of environmental effects;
improve the visibility of Danish-supported projects;
transfer grants directly to the Polish EcoFund;
reconsider the need for assistance to the Czech Republic and Hungary;
set up more reform requirements in Russia in co-operation with other donors;
place environmental attachés at selected Danish embassies.

The final result of the assessment is quite positive. Generally, the DESF-scheme has yielded a satisfactory return.

DEPA’s follow-up on the assessment

Generally, DEPA supports most of the recommendations of the assessment. The form of the environmental support is adjusted on a regular basis, and in 1999 a new project manual will replace the former “Guidelines No. 14” from DEPA. At the same time, efforts are being made to tighten the internal procedures in a so-called “cookery book” with internal instructions, rules, etc. In a memo of December 8, 1998 to the Advisory Committee to the Danish Environmental Support Fund for Eastern Europe, DEPA explains how it intends to follow up on each recommendation. This memo has been reproduced in the following (with the recommendations quoted verbatim from the assessment):

  1. “To include health-related aspects of environmental protection, particularly regarding water supply, more firmly in the DESF-mandate”.
     
    Water-supply projects ought to be given higher priority than has so far been the case. It is logical to combine waste water projects with drinking water projects and regard it as a whole for the sake of total water investments in e.g. towns. Furthermore, the health-related aspects ought to be included more directly than has been the case, when transboundary and global pollution aspects together with nature conservation have been the most important parameters. In major parts of the overall strategy material, including the Environmental Action Plan for Eastern Europe, EAP, people’s health is given the highest priority, which is also generally the case in environmental action as such. Besides, it is often easier to promote environmental projects in these countries if the health aspect is emphasised in the arguments put forward. Especially in NIS there seem to be good possibilities of putting more emphasis on the health aspect in connection with environmental problems. This ought to be done especially when assessing water projects, but this can also be relevant in the area of waste and in connection with air pollution in towns. DEPA thus agrees that health aspects should be accounted for when assessing the results, although quantitative and qualitative parameters have to be identified first.
      

  2. “To announce to the recipient countries the approximate amount available for projects in each country to allow the recipients to consider their priorities more carefully”.
     
    Announcing the annual amount available for each country will make it easier for the recipient countries to prioritise among environmental projects for which Danish support is applied for. In 1998, the amounts available have actually been accessible in DEPA in connection with the first pipeline at the beginning of the year. In several cases, these amounts have been announced to the recipient countries, but not in any systematic way. Beginning in 1999 in connection with the first pipeline for the new year, these amounts will be reported by the Danish country co-ordinators at their first meetings with the recipient countries. In this connection, it is important to emphasise that the amounts available are guidelines only and cannot be transferred from one year to the next.
     

  3. “To strengthen co-operation with the recipient countries by extending the network of country co-ordinators to all the involved countries”.
     
    Since the conclusion of the assessment, local project co-ordinators have been appointed in Poland and Bulgaria. At the present time, there are no co-ordinators in Russia, Ukraine, the Czech Republic or Hungary. For the past two years, DEPA has been discussing the appointment of a co-ordinator in Russia, but unsuccessfully, as the Russian State Committee for Protection of Environment is reluctant. Intensive negotiations are likewise going on with Ukraine. As far as Hungary and the Czech Republic are concerned, DEPA finds that no local co-ordinators ought to be appointed, as it is recommended in the Assessment that support for these countries is being reconsidered, cf. below.
     

  4. “To increase the use of the tender method and provide an effort to increase the average hardware share of DESF grants to a minimum of 50 per cent”.
     
    At the present time, the distribution for 1998 between the tender and the application model is estimated to be about 50/50, in other words, a small increase on last year. At the end of the year, a final count will be made. The tender model has first priority, but the application model is a good supplement and ensures the full utilisation of the allocated financial framework. Furthermore, the application model ensures that a broader section of the Danish resource base, especially industrial enterprises, are in direct contact with the scheme, and it has turned out that applications rather than tenders increase the possibilities of co-financing. In addition, the recipient countries are widely interested in the application model.
     
    DEPA finds that the recommendation to increase the hardware share of DESF grants to a minimum of 50% is too narrow and isolated. For the period 1993-96, the hardware share was 35% on average, and for the investment projects alone, the share was around 50%. Investment projects have a great share of consulting in connection with project design, project management, implementation of equipment, etc. It is difficult to imagine that this element could be much smaller if, at the same time, we wish to ensure the delivery, installation and optimal use of the equipment and the realisation of the objectives of the project. Moreover, further consulting is required if we wish to improve the ability to measure the environmental effects through ex-ante and ex-post measuring. Another factor is that the recipient countries’ co-financing to a great extent covers the purchase of hardware, which brings the hardware share to as much as 80% on average for investment projects.
     
    Other factors seem to indicate that we ought to strengthen our TA. It is becoming more and more important to see Danish environmental support in an international perspective. In the EU approximation countries it is important that Danish environmental support is targeted at EU environmental requirements and that we, as far as possible, pass on our experience from Danish environmental administration at national, regional and local levels with a view to strengthening the Eastern countries’ own institutions. Furthermore, we have to take advantage of our flexibility to assist the EU approximation countries in identifying a number of investment projects to channel the substantial EU resources earmarked for the approximation process. If this is not done by donors, it is generally assessed that the recipient countries will not be able to design a sufficiently qualified project pipeline and invite tenders for the projects.
     
    The need to help the recipient countries prepare projects for international financing is relevant not only in the EU approximation countries, but also to a great extent in NIS. Moreover, international co-operation will require more and more that we follow up on compliance with international conventions. We have to help the countries in the East meet their obligations in these areas, and we have to make an effort to get more countries to participate. Also this work will pull in the direction of a higher TA share.
     
    And last but not least, in future, an increasing part of the environmental support will have to be spent on financing the TA-component in relation to projects under the MKØ-scheme (Environmental Soft-Loan Programme for Eastern Europe), as MKØ is used mainly for equipment. This should be followed closely in the near future, however, as it is a new model.
     
    The conclusion is that DEPA agrees with the recommendation to focus on investment, but emphasises the need to think of alternative sources of financing equipment; otherwise, the resources available under the DESF facility will not be put to the best use.
     

  5. “To advertise transparently the possibility to submit applications for DESF grants at specified deadlines, with indication of priority activ- ities and countries”.
     
    The assessment team recommends making the application model more visible by advertising the possibility of submitting applications by specified deadlines, with an indication of priority activities and countries.
     
    DEPA is planning to hold a public meeting at the beginning of next year to focus attention on the possibilities under the DESF, present the new project manual and, at the same time, advertise application rounds.
     

  6. “To revise the project assessment system to include also financial cost-effectiveness methods, providing yardsticks for reasonable costs per unit of emission reduction”.
     
    There is a need to improve the existing project assessment tools by using the cost-effectiveness criterion.
     
    As an immediate follow-up on the assessment, DEPA has roughly estimated the pollution reduction per krone granted to waste water projects. As the result of waste water projects, there has thus been a nitrogen reduction equivalent to the nitrogen pollution from 3.2 million person equivalents. If the result of this treatment is compared to the total amount allocated to waste water treatment, the cost is in the region of DKK 100 per person equivalent. Danish consultants have calculated the corresponding initial costs of expanding Danish treatment plants as a result of the Water Environment Plan to have been in the region of DKK 135-150 per person equivalent. The figures are interesting, and it is certain that a better understanding of this can lead to more focused assistance.
     
    A proposal for cost-effectiveness indicators will be prepared, ie a set of yardsticks for what may be regarded as reasonable costs of a given emission reduction, and this will be integrated into the project assessment.
     

  7. “To encourage the participation of technical experts and companies from the recipient countries in the projects and to provide credit for such inclusion in the project assessment”.
     
    It has turned out that involving Eastern European technical experts and firms in the implementation of the projects ensures a markedly greater success than if Danes carry out most of the tasks on their own. The project itself becomes much better technically, any problems arising are solved more quickly, the transfer of know-how is increased, and the possibility of spreading the results increases. The criterion is already included in the scoring system and in the assessment parameters for the tender projects, but it is necessary to give this parameter a more central place in connection with the assessment of the project contractor’s qualifications. In principle, the Eastern Europeans ought to pay for these services themselves, but from Danish quarters, there should be a better understanding of the financing of such services. This is already the case to a great extent today.
     

  8. “To develop more routine project packages than can be replicated with fixed shares of DESF grants, in particular for waste water treatment, coal-to-gas conversions and cleaner technology, and in general to allow replications of projects where reasonable”.
     
    DEPA takes up a sympathetic attitude to the recommendation to introduce more standardised package solutions. Even today, there are a number of examples of projects that are replicated, both within the same country and in other countries, such as the “no-dig” methods of sewer rehabilitation, waste water treatment, removal of stocks of old pesticides, geothermal plants, decentralised power heating, projects in the area of nature, etc. It is true that there have been insufficient replications of projects. This is a problem, especially in the Russian-speaking countries, and the reason is that these countries cannot afford to replicate the projects in other towns or in other factories, whereas replication has been much more frequent in for example Poland. Therefore, it is important to emphasise the possibility of replication whenever it is realistic, and, at the same time, to make greater efforts to ensure this replication and to follow up on the projects. This ensures the greatest environmental effect of the least resources.
     
    1999 will see the development of more of such package solutions in areas with limited possibilities of replication.
     

  9. “To avoid projects related to waste incineration, except where clear and firm commitments can be provided ex-ante by the relevant authorities”.
     
    So far, DESF has been reluctant to establish waste incineration plants. Several preliminary projects have been established, but until this date, no plants have been opened. In connection with waste incineration plants, it is very important to have clear indications of attitudes on the part of the recipient countries. But the question should be seen in the context of the concrete environmental problem that the incineration of waste could solve.
     
    Whenever possible, DESF follows the Danish prioritisation regarding waste removal – ie 1) cleaner technology; 2) recycling, 3) incineration; 4) depositing – and international rules (agreements, conventions and EU Directives) applying to the provision of grants for waste projects in Eastern Europe. According to Danish experience, for a large number of waste fractions, incineration is a better solution than depositing – also from a purely environmental point of view. But at the same time, from a technical-economic point of view – incineration is a far more complex solution, which it is extremely difficult to implement safely in Eastern Europe.
     
    An analysis of the possibilities and limitations of the incineration solution carried out in the form of a feasibility study – also accounting for the compliance of the plant with EU legislation and international agreements – is a prerequisite to supporting incineration as a solution to a waste problem.
     
    Incineration solutions are necessary in the future waste treatment structure in Eastern Europe for two primary reasons: First, there will be fractions of hazardous waste that cannot be treated any other way, and incineration is the internationally recommended solution to the problems of the vast stocks of old pesticides in Eastern Europe that represent a serious environmental and health threat. Second, incineration ranks higher than depositing in an EU framework, and the EU landfill directive imposes limits on the amount of biodegradable waste to be deposited, which animates the Member States to incineration of refuse and/or increased recycling.
     

  10. “To provide technical assistance to further the strengthening of environmental funds and establish transparent and accessible information systems in the environmental ministries”.
     
    Strengthening the environmental funds is already a high-priority activity which DESF will continue to work on. Greater transparency and access to information in the Eastern European environmental ministries will be promoted as a follow-up on the Publicity Convention on citizens’ environmental rights, the “Aarhus Convention”.
     

  11. “To establish fixed and guaranteed deadlines for consideration of project proposals”.
     
    Under the application model, the maximum time for consideration of applications is four months. If the applicant is asked to elaborate on specific questions, the time for consideration may be prolonged, but the time allowed for such questions should not be included in the four months. Several project contractors have expressed the wish to have more precise indications of when to expect a reply.
     
    In future, the practice of handling applications will be tightened in the project manual and in internal guidelines, so that applicants will feel better informed.
     

  12. “To introduce firm procedures for monitoring and inspection of DESF investment projects, possibly also by third parties”.
     
    Monitoring of projects ought to be improved, in particular in the form of inspection. The practice followed in several projects today and to be incorporated into future guidelines is the following: An inception report is to be handed in after about three months, and subsequently, quarterly progress reports and, at the conclusion of the project, a final report is to be submitted.
     
    In addition, it is the country co-ordinator’s responsibility that the individual projects are visited by DEPA to the extent possible, but for projects of longer duration (2-3 years), the project ought to be visited at least twice; once at the beginning of the project, for example in connection with the inception meeting, and once during the project period, preferably towards the end of the project, where there will be more to see in the case of investment projects. In certain cases, responsibility for the project visits can be assigned to the local project co-ordinator, who also has the responsibility for a closer follow-up on the projects locally.
     
    Experience has shown that institutional projects often have to be followed more closely, for example by the consultant participating in some of the project management meetings. In connection with the preparation and planning of the individual project, the extent of the need for inspection will be decided upon. Standards for inspection are being elaborated as part of the internal guidelines.
     
    DEPA is also considering whether to introduce mid-term assessments in the case of major investments and TA projects running for more than three years or in the case of problem projects. Subsequent project assessments are made and will continue to be made in selected cases. These assessments should be conducted by third parties.
     

  13. “To introduce firm procedures for ex-ante and ex-post monitoring of emissions, in order to substantiate environmental effects of DESF projects”.
     
    It is necessary to find a way of measuring and verifying the actual environmental effects of the projects. Measuring programmes are expensive, but have to be initiated in the case of major investment projects. In future, it will be required that a “base line” study is carried out during the inception phase, including an ex-ante picture of emissions based on actual measurements. In connection with the finalisation of the project, an ex-post picture of emissions will likewise have to be drawn up – again based on actual measurements. It is possible that these measurements should be made in a follow-up phase if it is not possible to measure the effects immediately after the conclusion of the project.
     
    In addition to obtaining a better substantiation of the actual environmental effects, it will be possible to measure a number of derived effects at the same time. In waste water projects, these derived effects include reductions in the load of heavy metals and substances harmful to the environment, improved sludge processing, working environment conditions and energy optimisation.
     
    In the nature area, other indicators should be introduced.
     

  14. “To improve the network of country co-ordinators by annual seminars and a more precise assignment of responsibilities”.
     
    There is a need to strengthen co-operation with the local project co-ordinators and in that way reap full benefit of their services in relation to concrete projects. At the beginning of 1999, a seminar will be held to bring together all the local co-ordinators in Copenhagen in order to systematise the co-operation between the local project co-ordinators and the employees at DEPA responsible for the individual countries.
     

  15. “To extend and improve informational activities on the supported projects, for instance through DESF signposting at major investment projects”.
     
    It is important to improve the visibility of projects under the DESF scheme. Experience so far shows that we get too little publicity on the many good projects. Denmark is the largest bilateral donor in the environmental area in Poland, Lithuania, Slovakia, Romania and Ukraine, which ought to be known in the individual countries. In future, it will be demanded in connection with major investment projects that information about the project is publicised during the establishment of the project, and that a sign is posted after its completion that the project received support from Denmark.
     
    Concerning the spreading of information about DESF, we have got off to a good start in 1998. All the country programmes are described in an English publication, and the Romanian publication was published recently with a review in English as well as Romanian of all Danish-supported environmental projects in the country. The publication is also accessible on the Internet.
     
    A number of other information initiatives, including a new information strategy, are in the pipeline. Among other things, the strategy will contain proposals for joint presentation material, logo, etc. for the DESF Facility, Danced and MIKA North.
     

  16. “To consider untying the assistance to Poland by placing financial means directly in the Polish EcoFund in return for a seat on the Board, as other countries have done”.
     
    Other countries such as Finland, the USA, France and Switzerland – and most recently Sweden – have transferred money directly to the Polish EcoFund as part of the “debt-for-nature” SWAPs.
     
    An earlier proposal to do the same was rejected by DEPA, the main reason being that it will be more difficult to control the funds than in the case of normal bilateral support. As a starting point, one might say that it is a new type of support and that it is necessary to perform a consequential analysis of what the proposal entails.
     
    In 1999, DEPA will perform an analysis of advantages and disadvantages of transferring funds to EcoFund.
     

  17. “To reconsider the need for assistance to the Czech Republic and Hungary”.
     
    Earlier, considerable environmental activities were carried out in Hungary and the Czech Republic. The assistance granted to Hungary was quite small in 1996, however, and no projects were implemented in 1997 or 1998. Hungary belongs to the more affluent countries which have come a long way in their transition process from planned economy to market economy, and the country has not been very interested in cooperating under the DESF Facility. In the light of this, it must be just a formality to declare assistance to Hungary discontinued, but to retain the possibility of providing assistance in special cases to individual projects.
     
    With the Czech Republic, on the other hand, co-operation has been quite substantial over the years, and the Czechs regularly apply for assistance. However, activities in the Czech Republic ought to enter a phase now with the focus over the next two years on EU approximation, primarily in the form of legislation, etc and project preparation for major EU funds. After that, activities in the Czech Republic should be reconsidered.
     
    Poland is at a similar level of development as Hungary and the Czech Republic, but Poland is a firmly integrated part of the Danish Baltic Sea Initiative. For this reason, the support for Poland cannot be discontinued.
     

  18. “In Russia, Ukraine, Belarus and Slovakia to improve donor co-ordination in order to tie the Western assistance more closely to suggestions or requirements for reforms of environmental policy and its institutions”.
     
    The international co-ordination ought to be tightened in relation to Russia, Belarus and Ukraine, whereas Slovakia is already sending other signals after the formation of the new government. The coordination should be made primarily in the established fora, such as the informal Nordic co-operation and the Project Preparation Committee (PPC), where donors and international sources of financing co-operate.
     

  19. “To strengthen the co-ordination with other Danish ministries and the recipients as well as with the wider economic and political issues at stake in the region, by placing environmental attachés (with environmental insight) at Danish embassies in Warsaw, in Russia and in one of the Baltic states, if possible, at a reasonable level of cost”.
     
    DEPA agrees that appointing environmental attachés at the mentioned embassies would be a strengthening, but such attachés would have to be financed out of administration funds. Experience from Danced shows that one person will cost about DKK 1.8 m a year, which it would be unrealistic to draw from the limited administrative funds of 3.5% of the framework. However, co-operation with the embassies will be strengthened in future through a more systematic exchange of information.

Denmark’s environmental assistance
to Eastern Europe

– feature article on the assessment of environmental support for Eastern Europe by Mikael Skou Andersen, Associate Professor, Aarhus University [3]

Increasingly, Denmark’s support for the transition in Eastern Europe consists in environmental assistance. In 1998, the environmental assistance came to approx. DKK 655 million, equivalent to 55% of the total Danish support for countries behind the former iron curtain. Denmark is thus the Western donor country focusing most on providing environmental assistance to Eastern Europe. The assistance is provided both through DEPA’s environmental support scheme and under a number of sectoral programmes in various ministries. In addition, there is the Environmental Investment Facility under the Industrialisation Fund for Eastern Europe and the Environmental Credit Scheme under the Export Credit Scheme.

So what are the results of the environmental assistance? The first complete and independent assessment of the assistance provided by DEPA in Eastern Europe in the years 1991-96 is now available. The assessment has brought the Danish environmental projects into focus and rated the results. At the same time, the co-operation between the Danish authorities and the environmental authorities in the Eastern European countries has been assessed. This article will first give an overview of the development and state of the Danish environmental policy in some of the principal recipient countries and subsequently present an assessment of the results of the Danish environmental assistance.

In the revolution year 1989, the protests against the planned economies’ wearing down of natural resources and the effects thereof on the citizens’ health were one of the most important themes in the showdown with the old regimes. Immediately after the fall of the Wall, new environmental ministries were therefore set up and new laws passed to control pollution all over Eastern Europe. The economic transition process to market economy has meant, however, that the populations in Eastern Europe have got other problems to cope with. The attention paid to the environment has been fading, but this has not made the problems any less serious.

On the contrary: the environmental and energy problems are an integrated part of the transition problems of Eastern Europe. There is still a large waste of energy and materials in industry and a large economic loss resulting from the worn down energy and water supply systems. Insufficient waste and waste water treatment affect public health in a negative way – e.g. when sewage water flows into the water supply systems and spreads diseases and infections. Regional security problems are aggravated because of the large energy consumption and the dependence on imported energy, not least from Russia.

Among the political decision-makers in Eastern Europe today, there is limited understanding of the need to link environmental and economic modernisation. In several of the countries, especially in Russia, environmental politics receives very low priority. But there are also countries where the environmental policy pursued is more active than it used to be, especially in Poland.

Western assistance to solve environmental and energy problems continues to be modest, both in view of the need and compared to the share financed by the Eastern Europeans themselves. Assistance is provided first and foremost by the Nordic countries and by other relatively small European countries like Holland, Austria and Switzerland. Large countries such as the US and England provide consultancy only, but no direct support for investments. The international financial institutions, like the World Bank and the EBRD, work slowly and elaborately and, relatively speaking, have granted limited credits for environmental purposes. EU support programmes have considerable budgets also for environmental purposes, but especially the TACIS programme does not work fully professionally in the environmental area.

The Eastern Europeans therefore have to pay for and finance the bulk of the environmental restoration themselves. In countries like Poland, the Czech Republic and Russia, Western assistance accounts for less than 5-7% of the total environmental investments. In the smaller Baltic countries, the environmental assistance is a more decisive element, however, as it amounts to between 35% and 50% of environmental investments.

Countries like Poland and the Czech Republic must be estimated as having an environmental modernisation capacity which is relatively large for the region. This is the result of important decisions that were taken in the years of revolution and which bind the decision takers today. In Poland, it was decided in 1989 to establish independent ecofunds at national as well as local levels, which by means of environmental charges on pollution and consumption of resources were enabled to raise the necessary capital for environmental protection. The national fund Fundusz is independent of the ministry of the environment and the finance ministry and has been responsible for well over half of the environmental investments made during the 1990s. At the same time, part of Poland’s foreign debt was converted to the independent EcoFund. This has made considerable progress possible, in particular within waste water treatment, which now approaches the level of Southern and Central Europe. At the same time, the Polish Ministry of the Environment is relatively strong with extensive competencies.

In the Czech Republic, the velvet revolution led to the introduction of stringent laws, especially in the field of air pollution, as suggested by the independent and influential Federal Environmental Commission. An environmental fund was also established, but it was weaker and had fewer funds available than the Polish EcoFund. With the “velvet divorce” between the Czech Republic and Slovakia in 1993, the Environmental Commission was dissolved, however, and the environmental ambitions of the two republics soon decreased. The air pollution laws remained in force, however, and by applying the “polluter-pays principle” have led to very substantial investments in industry. The result of this is that, today, the Czech Republic is the country in Europe spending the largest proportion of its GDP on the environment. At 2.3%, it is somewhat higher than Poland’s 1.8% and substantially higher than Denmark’s 1.1%. Also in the waste water area the Czech Republic is well underway. Under Vaclav Klaus, there was a shift towards more traditional growth-oriented policies, with practically no new environmental initiatives.

In Slovakia, Meciar’s regime led to what can best be described as dismantling of environmental politics. The ministry of the environment lost important areas of competence, environmental expenditure on the Budget was reduced to a minimum, and environmental organisations were persecuted. Where pollution declined, this was mainly the result of a decline in production.

After the collapse of the Soviet Union, the three Baltic states were in a special situation. It was not until 1988 that Gorbatjov set up a Committee for the Environment, and it had only weak regional units in the Baltic republics. After the independence, these units were supposed to take over the role of independent ministries. In the small Estonian ministry of the environment, the staff of only 100 has elaborated more than 37 new acts since 1991. The economic situation has been much inferior to that of Poland and the Czech Republic, however, and the Estonian EcoFund disposes of limited resources. Lithuania experienced the most disastrous decline in GDP; from 1991 to 1996, GDP fell by 60% after the links had been cut off to the Soviet planned economy. An independent ministry of the environment was not set up until 1994, and there is no environmental fund. The Baltic republics, however, received very considerable environmental support from especially the Nordic countries. While Finland was the most important donor country for Estonia, Denmark developed co-operation with Lithuania in particular. Considerable progress has been made, especially in the area of waste water treatment, (modern plants are being constructed in most large towns), and funds have likewise been provided to strengthen the administration itself. Even though the Baltic countries share a number of problems, they are in a class different from that of the other former Soviet Republics when it comes to environmental politics.

The prospects for development are dismal in Russia, also in the environmental field. The ministry of the environment established under Gorbatjov was dismantled again in 1996 and replaced by a State Committee devoid of influence and without representation in the government. Competences concerning the use of raw materials and resources were transferred back to the traditional production ministries. The small environmental fund had to spend its scarce funds on paying salaries to the employees of the State Committee. And, at the same time, the problems are enormous. Millions of tonnes of poisonous waste are being deposited in open lagoons. The drinking water supply is not bacteriologically safe for more than half of the population. There are practically no political reforms or initiatives in the Duma aimed at the vast energy and resource wastage in Russian industry and in the energy sector. In Ukraine, the situation is not much better. Cities of more than a million inhabitants like Lviv and Sevastopol and others are supplied with water only three hours in the morning and three hours in the evening, as the water supply pipelines are perforated – and from the leaky sewers, waste water flows into the drinking water pipeline system. The costs of cleaning up after Tjernobyl still take up large sums, and the country continues to be fully dependent on Russian gas and oil.

In Romania, there is a little more light at the end of the tunnel, with political and environmental reforms having been limited until recently. It is true that pollution here is more serious than in the other former buffer states. But even if Romania is not among the first group of countries to become members of the EU, the country attaches great importance to living up to international conventions, especially in the area of nature protection. So far, the country has received only modest attention from international donors, but thanks to Danish initiatives, a national environ- mental action plan has been drawn up, and the Romanian ministry of the interior is fully aware of Danish competences within the area of cleaner technology.

In conclusion, it can therefore be said that despite many problems that remain to be solved, Poland and the Czech Republic have come a long way and have spent internal resources to an impressive degree. In an intermediate group, we find the Baltic countries, which have made some progress, especially thanks to Nordic environmental assistance. Russia, Ukraine, Romania and Slovakia make up the environmental rear guard, as the problems here are still enormous and political reforms are relatively limited.

The Danish environmental initiatives in the region should be assessed against this background.

From 1991 to 1996, DKK 1.2 billion was spent on support for 496 environmental projects in the Eastern European countries. The support has been in the form of bilateral assistance, where applications and projects have been formulated by Danish enterprises and institutions, but subject to approval by the recipient countries.

During the first two years, the economic framework was modest, but the support has gradually been increased. Political priority has been given to the countries in the Baltic region. Well over 30% of the funds have been spent on projects in Poland, which has been the main recipient country, especially during the first years. Well over 26% have been spent on Russia and Lithuania respectively, where initiatives gained momentum from 1994. The principal activity areas have been waste water treatment, sustainable energy projects and air pollution abatement. 37% of the funds have been spent on projects related to waste water. Substantial grants have also been made towards institutional strengthening of environmental management and towards nature protection.

It is no easy task to provide effective environmental assistance, especially not when it has to be provided on bilateral terms. How do we ensure that Danish competences within environment and energy can be matched by the needs and the priorities of the recipient countries? How do we ensure that the assistance reaches the recipients without drowning in bureaucracy and perhaps corruption? How do we adapt Danish technologies to conditions in the recipient countries? Many of the same questions that are raised in relation to traditional development aid may also be raised in relation to environmental assistance.

Assessment of the environmental assistance to Eastern Europe has therefore been quite extensive, and in addition to a main report, there are now two part reports and eight country reports – a total of more than 600 pages to shed light on the problems and results. Danish project contractors have been interviewed and a representative sample of 47 projects have been subject to in-depth assessment and analysis. Authorities, stakeholders and independent experts have been interviewed in eight recipient countries.

The assessment shows that after some uncertain steps during the first two years, environmental assistance has now found a form which, overall, has led to satisfactory results. When assessing the selected projects according to a systematic method both in relation to their own objectives and in relation to the general objectives of the environmental support scheme, it turns out that four projects are rated unsatisfactory, while eight projects are rated less satisfactory and 35 satisfactory or very satisfactory. What characterises the good projects in particular is that the action has been taken to solve serious environmental problems, that the goals have been achieved and that they have a high demonstration value.

The problems experienced during 1991 and 1992 had to do with the fact that at that time, assistance was mainly in the form of consulting and relatively non-committal East-West exchanges of views and experience. The political and administrative chaos immediately after the upheavals made it difficult to identify concrete projects, and during this period, too many resources were spent on mapping out and report writing.

In 1993, however, partly on Eastern European initiative, a more investment-oriented strategy was initiated, where consulting was combined with a transfer of Danish environmental equipment, often as part of larger project packages with other financial sources (environmental funds, municipalities, utilities) contributing as well. Two-thirds of the funds were spent on investment projects, but consulting has continued to be an essential element. Since 1993, the hardware share, ie the share of the funds spent on environmental technology as such, has been well over 35%. The philosophy has been to ensure that the Eastern Europeans got the right equipment through proper project preparation and to supply consulting on the use of the equipment. In 1996, the tender model was introduced for investment projects, eventhough the possibility of submitting applications still exists.

In rounded figures, the more investment-oriented strategy has had the effect that since 1993, support has been granted annually for about 40 major environmental investment projects in Eastern Europe. These projects include modernisation of treatment plants, rehabilitation of water supply, establishment of geothermal plants, windmills, filters for smoke removal, cleaner technology in industry, etc. Danish resources have not been sufficient to cover all the project costs, and the Eastern European countries have therefore co-financed a great part of the activities – as a matter of fact, Danish grants come to only about one-third of the project costs. Co-financing is highest in Poland and lowest in Ukraine and Romania.

The extensive co-financing has led to an additional export of Danish environmental technology. It is difficult to calculate the size of exports precisely, but for the completed projects it amounts to DKK 400 m, and as many of the largest and most investment-intensive projects are still being implemented and therefore are not included in the figure, there is every indication that the final export effect will be substantially greater.

Another aspect of the investment strategy is the efforts to obtain loans from the international financial institutions such as the World Bank and the EBRD. The lack of knowledge of project assessment and financing in Eastern Europe has made it difficult to take up loans, but the pilot projects under the Danish scheme have triggered the provision of very substantial amounts of loans totalling DKK 6 Bn, which is several times the Danish financing framework. Some of these loans go towards water supply projects in St. Petersburg and in the Crimea, where the need far exceeds what Danish funds can finance. Some of these loans are also expected to lead to export of Danish equipment, but there are no strings attached.

Consulting engineering firms in particular have played a dominant role as project contractors under the DESF Facility. Part of the explanation for this is the conditions you have to work under in Eastern Europe and the relatively narrow Danish resource base in this context. A total of 20 consulting engineering firms are responsible for two-thirds of the activities under the scheme, which may cause misgivings. Suppliers of equipment and machinery contribute via the advisors’ projects, however, and thus benefit greatly from the scheme.

On the part of Eastern Europe, scepticism has been expressed because of the high cost of using Danish consultants, and the Eastern Europeans generally prefer more hardware and less consultation. It is emphasised that Eastern Europe has a high level of education and knowledge at its disposal, and that these countries are therefore primarily interested in spending the funds allocated on advanced Danish environmental equipment. But since it is the Danish enterprises that formulate the projects, it cannot be ruled out that consulting engineers have an interest in increasing the consulting share at the expense of the equipment share. At the same time, the absence of fixed framework amounts for activities in the individual countries or regions gives the recipients an incentive to accept the projects suggested, even if the hardware share is smaller than might have been wished for. Therefore, there is reason to think about how the hardware share of the projects can be increased, and the assessment recommends that in future, the hardware share accounts for 50% or more. This would also make it possible for more enterprises – especially small Danish enterprises – to contribute under the scheme. Compared to quite a few other donor countries that do not grant any assistance to investments at all, but only to consulting, Denmark is recognised in all countries as one of the few providing “real” assistance. At the same time, Denmark has been the largest bilateral donor in Poland, Lithuania, Slovakia, Romania and Ukraine.

The more investment-oriented policy pursued since 1993 has also yielded significant environmental results, even if they are somewhat more modest than originally estimated in the air pollution area. As part of the assessment, the environmental effects of completed and ongoing projects have been measured. As some of the largest and most ambitious projects funded in 1995 and 1996 had not been finalised in mid-1998, a substantial share of the environmental effects has to be indicated as expected. The total results are expected to be, among other things, a rehabilitated waste water treatment capacity of 2.3 m person equivalents, a reduction of SO2-emissions equivalent to one-quarter of Denmark’s own emissions and a CO2-reduction equivalent to 0.8% of Denmark’s emission. The environmental effects are distributed very unevenly over the projects, and by aiming more at environmental effect per krone spent, it must be expected that more significant reductions can be achieved under the scheme.

Do you get more environment for the money in Eastern Europe? It depends on what you would otherwise have spent the money on. For the approx. DKK 1.2 Bn granted in environmental assistance from 1991 to 1996, we could, for instance, have built about 50 km of motorway in Denmark. But the interesting question is whether the pollution reduction per krone is bigger in Eastern Europe than in Denmark – and how much bigger. During the assessment, it has not been possible to answer that question, for one reason because of the very diverse projects and their composite financing base. But it is our impression from working on the assessment that pollution reductions to be realised in Eastern Europe exclusively by means of Western technology and Western consultants are not necessarily much cheaper than if the projects had been implemented on Danish ground. On the other hand, co-operating with the Eastern Europeans and involving them in the projects makes it possible to take advantage of the lower factor costs in the East.

The assistance provided to promote environment and health in Eastern Europe should not be provided in the only expectation that it is cheaper, but especially because it can catalyse a more active and sustainable environment policy that can contribute to stabilising the recipient countries’ economies. With the results already achieved in the EU accession countries Poland and the Czech Republic, it will now be possible to step down environmental assistance to the benefit of countries where problems are still very serious – Russia in particular. In the case of Russia, however, Denmark, together with the other bilateral donor countries, will have to accompany the assistance by certain demands or proposals for environmental reforms, in particular the setting up of environmental funds and the introduction of user payment for waste water and energy. From a Danish point of view, dissolving the Russian ministry of the environment is not acceptable either.

The provision of environmental assistance has clear security undertones, however, and should also be provided from a security perspective. By helping the Eastern countries with know-how and expertise within e.g. water, waste and energy, Denmark helps solve basic problems relating to standards of living and economy, signalling that their problems are not irrelevant to us.

Mikael Skou Andersen, Associate Professor, Ph.D., Department of Social Science, Aarhus University, Denmark.

“Denmark’s environmental assistance to Eastern Europe 1991-96: an assessment of project achievements, environmental policy performance and the role of foreign assistance. In co-operation with PLS Consult and KPMG. Copenhagen: Denmark’s Environmental Protection Agency”.

Notes:

  1. Miljødanmark, December 1998, vol. 12, no. 6

[Front page] [Contents] [Previous] [Next] [Top]