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Environmental Assistance to Eastern Europe - Annual Report 2000

Table of Contents

1. Introduction

By Svend Auken, the Danish Minister for Environment and Energy

Visible environmental assistance to Eastern Europe

Environmental improvements in Eastern Europe are making great strides. Today, the environmental strain in the whole region has been substantially reduced. In countries applying for EU membership, this result has been produced by the closing down of polluting heavy industries together with extensive environmental measures.

In ten countries in Eastern Europe, negotiations for EU membership are progressing favourably. Their membership of the EU will be the best guarantee of economic progress, peace and stability in Europe. Surveys show that efforts to comply with EU environmental rules constitute one of the most expensive elements in the process - estimated by the EU Commission at approx. DKK 700 billion. Denmark demands the highest possible degree of compliance with environmental requirements before accession; otherwise, we run the risk that, for many years to come, a new enlarged EU will not be able to ensure continued environmental progress. The provision of substantial assistance towards enabling the applicant countries to live up to EU environmental standards will thus pave the way for early accession and is therefore given the highest priority in the new policy for environmental assistance to Eastern Europe pursued by the Danish Ministry for Environment and Energy.

The environment ministers in the applicant countries take the accession requirements very seriously - both with regard to legislation and to environmental investments. All of the applicant countries have come to realize that they will not be admitted unless they comply with EU environmental legislation, and many have come to appreciate that the introduction of a new set of environmental rules represents a unique opportunity to reform not only the laws, but also the institutions and agencies that will have to implement and enforce the laws. The Danish assistance comprises preparation for and implementation of environmental investments as well as technical assistance in , for example, the legislation area. Since the countries in question filed their applications for EU membership, there has been a growing demand for technical assistance in the environmental area. This is a positive sign, indicating both that reforms in the environmental area are underway in these countries and that they are now taking a more long-term view and focusing more on finding the most economically and technically feasible ways to solve the problems.

The applicant countries are still interested in receiving assistance with environmental investments. But as opposed to the situation just a few years ago, when major environmental investments were financed primarily via loans from development banks, it is now the EU pre-accession assistance that provides the bulk of the funding. The Danish Ministry for Environment and Energy has assisted the EU Commission in launching investment projects, and today we have close co-operation in this field in several of the applicant countries. As a result of this co-operation, many more environmental projects are being prepared and implemented today than earlier, benefiting the countries themselves and the firms participating in the projects.

The EU accession of the Eastern European countries entails the risk of establishing a new iron curtain and new barriers to co-operation with the Balkan states. An economic and environmental collapse in these regions will automatically spread to the EU. Political unrest, transboundary pollution and lots of poverty and environment refugees will be knocking on the doors of the EU. In the long term, our vision should therefore be to move a greater share of the environmental assistance towards east and south, as more and more countries accede to the EU. Danish environmental assistance has already moved in this direction, with the decision to phase out assistance to the Czech Republic and start co-operating with the Republic of Moldova.

These years, the SNG-countries are experiencing rising health problems on account of the poor environmental situation and the insufficient maintenance of environmental plant. With Danish backing, the OECD has analysed the economic conditions connected with, among other things, the drinking water supply in several of the countries and has developed strategies for financing improvements in this area. The analyses indicate a massive demand for investments, greatly exceeding the ability of the consumers to pay for them. On account of the economic situation in these countries, the possibilities of taking up international loans are limited, and private investors are interested in investing in the largest cities only, with prospects of a reasonable return on investments. These and other serious problems were discussed in Almaty in Kasakhstan at a midway-conference held between the Aarhus Conference in 1998 and the next pan-European Conference of environment ministers to be held in Kiev in 2003. It is to be hoped that the Kiev Conference will both induce the SNG-countries' own governments to give higher priority to the environmental area than today and induce donor countries to provide more assistance.

By drawing up an environmental restoration programme, the Balkan states themselves have taken the initiative to include the environment in the Peace and Stability Pact, which especially the EU has backed, in order to create durable peace in the area. Environmental co-operation - which is less controversial than many other policy areas - is expected to contribute to restoring confidence among the different population groups and between the populations and their public authorities.

In this connection, the countries are using the Aarhus Conference for access to environmental information, to participation in environmental decisions and to having issues tried in court with a view to restoring the confidence of their populations in public authorities.

By the end of 2000, environmental assistance has been instrumental in initiating projects to promote the ratification and implementation of the Aarhus Convention in Estonia, Poland, the Czech Republic and Moldova, and a number of feasibility studies have been prepared for projects in Croatia, Ukraine, Kazakhstan and Belarus.

The provision of target-oriented project assistance in this area is one of the factors contributing to the fact that the Convention is expected to come into force earlier than foreseen, hopefully by the end of 2001. The coming into force of the Aarhus Convention will be a major step in the right direction, not only with regard to the introduction of more democratic decision procedures in the environmental area in these countries, but also with regard to environmentally based decisions, for instance in relation to planning, VVM-procedures, environmental approvals, etc.

2. Comments

By Erik Hoffmeyer, former Governor of the Danish Central Bank, chairman of the Advisory Committee to the Danish Environmental Support Fund for Eastern Europe

As appears from this Annual Report, the work of the Advisory Committee has been influenced by economic and political developments in the Eastern European countries and by the resulting need to adapt our strategy for the provision of environmental assistance.

It is a well-known fact that according to official statistical estimates, the radical changes that took place in the political system and the elaboration of economic policies after 1989 led to a substantial decline in total production.

The mid-1990s witnessed an economic turnround, and within a short time, quite a few of the countries reached 1989-levels of production.

The rising wealth has triggered an increasing desire to acquire western market oriented technology. This, in turn, has led to a shift in the relative weighting between assistance for tangible investments (plant and machinery) and intangible investments (technical assistance, "know-how").

This has affected environmental assistance to some extent, as tangible investments - according to conventional thinking - are more valuable than the less clearly measurable intangible investments.

This played a part in the debate that took place when commemorating the 10^th anniversary of the launching of the environmental assistance programme for Eastern Europe. In this connection, it should be remembered that historic experience - not least from the time of the Marshall-aid - shows that technological know-how is a strong lever for economic growth.

On the political front, the enlargement of the EU towards east is of increasing importance to the strategy governing the provision of environmental assistance. Complying with the standards for membership demands great insight into environmental problems and knowledge of how to draw up a new set of rules. Also this development pulls in the direction of increased technical assistance.

Finally, it should be mentioned that conservation of natural amenities is given high priority in many recipient countries. There has thus been a move away from a situation where there was an almost desperate need to intervene against especially water and air pollution to a situation more similar to our own.

3. New initiatives

New strategy for the Danish environmental support programme for Eastern Europe, 2001-2006

Background

The new strategy of the Danish Ministry for Environment and Energy saw the light of day in March 2001, and the implementation of the strategy is now well underway.

Before being adopted, the strategy had been circulated for external comment, and the main themes were presented and discussed at a workshop with the Danish resource base on 29 November 2000. The workshop attracted great interest and a large number of participants representing companies, authorities and NGOs, and many committed and constructive suggestions for how to fine-tune the strategy were presented.

Purpose of the strategy

The overall purpose of the new strategy is:

	to contribute as much as possible to the protection of the environment in Eastern Europe by assisting the Eastern European countries that have applied for EU membership in their efforts to implement EU environmental requirements and international environmental conventions,
	to assist the SNG-countries and other non-EU applicant countries in their approximation to an enlarged EU and to reduce pollution endangering the health of the populations; to reduce transboundary pollution affecting EU countries; to protect nature and the biodiversity and to implement international environmental conventions,
	to contribute to ensuring that the political and economic developments taking place are environmentally sustainable, in particular by supporting a market-based development and advancement of democracy, including accountability in the private sector, involvement of the population and of NGOs in decision-making processes in the environmental area, and increased integration of environmental considerations in other sector policies,
	promote the use of Danish environmental expertise and technology of benefit to areas covered by this programme.

The strategy for the Danish environmental support programme incorporates all relevant environmental decisions taken by the Danish Folketing, relevant results and recommendations from the Report by the National Audit Office of Denmark on environmental assistance to Eastern Europe from 1999 and from the external evaluation of the environmental support programme concluded in October 1998.

Activity areas of the strategy

With the new strategy for 2001-2006, DANCEE has focused on especially two overall themes:

EU approximation as a driving force behind the improvements of the applicant countries in the environmental area and the "Environment for Europe aimed in particular at SNG-countries with no prospects of EU membership and therefore to a great extent lacking the political incentive to take measures to improve the environment. Efforts to promote EU policies and action plans as such and support the ratification of and compliance with international conventions will be intensified.

The activity areas for the coming strategy period continue to be improvement of the quality of air, protection of the quality of water and the supply of drinking water, waste, administration of natural resources and control of pollution caused by chemicals. The chemical area is a new prioritised activity area.

In addition, three multidisciplinary activity areas will be weighted more heavily in the new strategy: institutional strengthening, assistance for participation by the public in environmental decision-making processes and involvement of the private sector.

Implementation of the strategy

Implementation of the strategy will be effected by developing and implementing 3-year country programmes for the individual countries of co-operation and through a number of regional initiatives.

The purpose of the country programmes is to develop more long-term planning of activities under the Danish environmental support programme. The new set of country programmes will aim at focusing assistance on fewer activity areas and perhaps selected geographical areas, such as counties, in the country of co-operation. In connection with the country programming, the Danish assistance will be coordinated with that of other multi- and bilateral donors with a view to achieving a greater synergy effect.

The country programme will form the framework of the preparation of projects, primarily projects offered under the environmental support programme and projects invited as part of thematized rounds of applications. All country programmes are expected to be revised in 2001.

Activities in the individual countries of co-operation will be adjusted concurrently with the accession of EU applicant countries. Furthermore, in the long term, the strategy anticipates a large number of initiatives in the Balkans.

The new strategy for 2001-2006 thus forms a strategic basis, whch has now been updated to accommodate the experience gained during the period 1993-2000, and which, at the same time, forms a flexible framework of continual changes in demands and activity areas which will inevitably occur in Central and Eastern Europe, the Balkans and the SNG-countries in the course of the next five years.

Strengthened project monitoring

In 1999, the evaluation which was made of Danish environmental assistance in 1998, was followed up by Report no. 11 by the National Audit Office of Denmark on Danish bilateral assistance to Central and Eastern Europe since 1994.

The evaluation as well as the Report by the National Audit Office recommended a strengthening of the project followup.

In 1999, the project follow-up was strengthened by implementing the external manual for project owners and the internal project manual for staff, setting up guidelines and goals for how to follow up on projects.

As a supplement to these tools, in 2000 DEPA initiated the development of monitoring plans for existing and new projects.

The purpose of the monitoring plans is partly to give higher priority to the monitoring of existing projects, partly to ensure an effective follow-up on the projects to allow DANCEE to take corrective measures if a project proceeds in a less acceptable way.

Depending on the complexity and size of the individual projects, an assessment was made in 2000 of the need to supplement the project follow-up tools that have already been implemented with further activities. An important tool to ensure better project follow-up on complex/large-scale projects is project visits and reviews.

So far, DANCEE has regularly visited existing projects, but the development of monitoring plans for existing projects in the individual countries of co-operation makes the prioritisation of visits more systematic and increases the quality of the visits.

A large number of the monitoring visits are made by local project coordinators, who speak the local language and are thus in a better position to collect information about the project recipients' opinions, needs and wishes in relation to the individual projects. This allows DANCEE to collect important information about projects that can otherwise be difficult to access.

In order to streamline and make the reporting by the local project coordinators to DANCEE more effective, a common reporting format for monitoring visits was developed and implemented in 2000, and the local project coordinators were also equipped with cameras for photo documentation.

ISPA

The pre-accession facility ISPA (Instrument for Structural Policies and Pre-Accession), amounts to ECU 1,000 million over the years 2000-2006, reserved for large-scale infrastructure projects in the new EU applicant countries in Central and Eastern Europe. Half of the money has been earmarked for transport projects and the other half for environmental projects. To qualify, the projects must exceed ECU 5 million, and it must be clearly documented that they assist the countries in meeting the accession requirements and complying with the EU environmental acquis. ISPA can make grants of up to 75%, exceptionally up to 85% of the public investment in an environmental project.

For each year, a fixed sum of ISPA funds has been allocated to each applicant country on the basis on the size (area), number of inhabitants and GDP of the countries.

Applicant countries have to submit applications for assistance to the Commission in accordance with the ISPA application format. This format requires clarification and documentation of a large number of aspects relating to the project, including a full feasibility study, financial analyses, VVM-analyses and tender documents.

The ISPA facility is administered by the DG REGIO (formerly DG XVI) of the Commission. If a project application is finally approved by the ISPA Management Committee, the Commission grants the amount and makes an international call for tenders based on the project information and documents submitted.

DANCEE support for developing TORs for the preparation of ISPA projects

At the beginning of 1999, it turned out to be a problem that no project preparation were taking place in the applicant countries for the ISPA facility starting in 2000 and that, on account of internal delays, the Commission did not have financial means available for granting technical assistance (TA) to promote the project preparation.

On the initiative of DEPA, DANCEE then, in the period from April to October 1999, granted DKK 5 million for initial project preparation of Terms of Reference (TORs) for about 65 ISPA environmental projects in nine out of the ten applicant countries (except Slovenia), based on projects initially selected as prioritised projects between the applicant country concerned and the Commission's DG XVI. Terms of Reference (TORs) were subsequently handed over to the individual applicant countries and to DG REGIO for further initiatives to be taken, such as the preparation of feasibility studies, financial analyses and tender documents based on TORs.

In January-February 2000, DANCEE financed appraisals/further project preparation of three of these projects at the request of DG-REGIO (totalling DKK 452,000), as the project prerequisites subsequently changed substantially, and as there was doubt as to whether the economic cost calculations were sufficient.

The preparation of the 65 projects has been a difficult task, partly because of the Commission's own deadlines, partly because in the initial phase of ISPA, DG REGIO continued to change the criteria for the ISPA projects and thus also for the TORs for the individual projects.

Furthermore, DG REGIO has failed to involve and use the experience gained by DG ENVIRONMENT (formerly DG XI) from their many years of co-operation concerning the PHARE programme in the recipient countries, which has prolonged the project identification process and given rise to misunderstandings and frustrations in the recipient countries.

It is estimated that without the Danish assistance to the recipient countries, there would be an acute lack of environmental projects in the pipeline for ISPA. DANCEE has been singled out for the work implemented by the Commission's DG REGIO, which has stated jointly with DG XI that without Danish assistance, there would have been no project preparation for the ISPA facility in 1999.

It has subsequently turned out (at the end of 2000) that, as a result of these efforts, at least as many environmental projects as transport projects have been approved by the ISPA Management Committee.

EU ISPA Management Comittee

Decisions regarding the allocation of funds are taken by the ISPA Management Committee, which has so far held eight meetings - the latest meeting was held on 9 February, 2001 - and DEPA has participated in seven of these meetings.

Formerly, the transport projects had proceeded a lot further than the environmental projects. One of the reasons for this was that the identification of projects was based on the ten European transport corridors selected under the TINA programme.

As of the end of 2000, the distribution of ISPA funding is now more or less evenly distributed between transport and environmental infrastructure projects, partly as a result of the Danish assistance provided during the project preparation. Furthermore, DG ENVIRONMENT (formerly DG XI) has launched the PEPA project (Programme of Priority Environmental Projects for Accession of the Applicant countries), assisting the applicant countries in defining clear priorities for environmental investments in the countries concerned. At the moment, financing strategies for two countries have been developed via this project. At the same time, the project is aimed at establishing a medium-term ISPA project pipeline in each single applicant country.

It appears from the enclosed list of projects from the ISPA Management Committee (handed out at the meeting in Brussels on 24 November, 2000) that until the end of 2000, the Committee had approved ISPA grants to a total amount of EUR 497,668,979 for 42 environmental projects and EUR 532,861,052 for 29 transport projects.

Ongoing discussions in the ISPA Management Committee are concentrated on the following main areas:

	the information level in relation to the presentation of ISPA projects in the Management Committee,
	involvement of DG ENVIRONMENT in the environmental assessment of the projects - especially in relation to the necessary VVMassessments,
	the ISPA support rate for the individual projects, including the economic sustainability of the projects,
	the capacity of the applicant countries and the regions in relation to the preparation and implementation of ISPA projects,
	project ownership- including privatisation of ISPA-assisted projects and co-financing with IFIs,
	monitoring of the ISPA projects during and after implementation,
	coordination with other assistance programmes, especially PHARE, and with the activities of bilateral donors in the recipient countries.

In connection with the most recent approvals of ISPA projects (November 2000), funds have been set aside for technical assistance (TA) to the recipient countries, in recognition of the fact that the capacity in these countries in relation to project preparation and especially implementation is insufficient at the moment. Training programmes and appraisal of the recipient countries' capacity in these areas have been initiated.

DANCEE assistance for the preparation of ISPA applications from the applicant countries

DANCEE has earlier assisted and is at the moment providing bilateral assistance to the applicant countries for the preparation of projects for ISPA financing in e.g. Bulgaria (two projects), Romania (six projects), Estonia (four projects) and Lithuania (one project). Project preparation typically includes all the preliminary work in the form of feasibility studies, financial analyses, VVM-assessments and drawing up of the final ISPA application. The applications are handed over to the applicant countries, which then forward the project applications for approval by the ISPA Management Committee.

These projects are pure TA-projects, as DANCEE has not calculated with a DANCEE investment component in the subsequent implementation phase, since international calls for tenders are made for ISPA projects. Generally, the ISPA Management Committee is not interested in co-financing the implementation of ISPA projects with bilateral donor funds. The remaining funds for a given ISPA project (the remaining 25%) have to be co-financed by the recipient country/region/city itself, often in the form of a loan. The participating banks have been the EBRD, NEFCO/NIB and EIB.

DANCEE has, however - as the only bilateral donor - participated in a cofinanced implementation of two ISPA environmental projects in Romania. In these projects, DANCEE follows the EU tender rules. For one project in Estonia, DANCEE has been asked to co-finance the implementation of a water and waste water project, and for this project, DANCEE follows internal (Danish) tender rules. DANCEE has been invited to finance these projects, as it has proved impossible for the recipient countries (the receiving region/city) to put up the co-financing needed (min. 25%). It should be remembered in this connection that the total costs of each ISPA project is minimum EUR 5 million.

Future DANCEE assistance for ISPA-projects

DANCEE closely follows the development in the applicant countries' ISPA environmental strategies and project pipelines and evaluates the need for assistance with ISPA project preparation activities. The purpose of this is to ensure that DANCEE does not support activities overlapping with existing ongoing preparation activities and that DANCEE is able to intervene with assistance to ensure that the applicant countries get their share of these large-scale ISPA environmental investments on time.

On the part of DG REGIO, funds have been set aside for ISPA project preparation in the applicant countries. The amounts allocated for this purpose are EUR 200,000 per project, which is estimated as being too low compared to the costs of a complete ISPA project preparation process. Furthermore, many of the applicant countries do not dispose of the advisory capacity needed to complete a qualified project preparation.

It is DANCEE's experience that both the applicant countries and DG REGIO would like to have the ISPA projects prepared with bilateral assistance via the DANCEE programme. This has turned out to give a higher quality in the project applications and to shorten the preparation time.

DANCEE would like to continue to offer technical assistance to the applicant countries for the preparation of ISPA projects, but in connection with this work, DANCEE would like to focus more on identifying project components for internal (Danish) financing during the implementation phase.

Furthermore, DANCEE is going to focus on the needs of the applicant countries for assistance during the implementation phase and on the need for assistance in the recipient regions during the implementation and subsequent takeover/ operating phase of the ISPA projects. What DANCEE has in mind here is especially building up (through training and education) the administrative capacity of the receiving region/city in relation to operation and maintenance of large-scale ISPA environmental infrastructure plants.

4. Environmental effects of the assistance

CO₂-reductions via projects for environmental assistance to Central and Eastern Europe

Overview of DANCEE projects 1991-2001 with reduction of CO₂

In recent years, the focus has been on the possibilities of reducing CO₂ releases into to the atmosphere. In the following, a number of figures for CO₂ reductions resulting from DANCEE investment projects initiated during the period 1991-2000 will be presented. With a few, not very important exceptions, Table 1 of the overview comprises all projects where the project has in all probability led to a reduction in CO₂.

The figures comprise finalised as well as ongoing projects. It should be emphasized that the figures are subject to some uncertainty as described in a later section.

Table 1:
DANCEE investment projects with CO₂-reductions (tonnes) initiated 1991-2001, total costs, DANCEE grants and Danish exports in relation to the projects broken down into recipient countries

As appears from the table, DANCEE has provided grants totalling DKK 173 million for projects with CO₂ reduction as a main or subsidiary purpose, corresponding to about 6 percent of the total grants provided during the operation of the programme. The main recipients have been the Czech Republic, Poland, Lithuania and Slovakia, and the biggest reductions have been achieved in Poland and Slovakia.

Generally, there has been a high degree of co-financing - 90 percent in total - seen in a DANCEE context. This reflects the fact that, as a main rule, the projects have been economically profitable for the project recipients, who have therefore been able and willing to take on a substantial share of the financing themselves. It also reflects the fact that especially major profitable energy projects are and have been very interesting for the international banks. The degree of own financing, however, is a lot higher in rich countries such as Poland and the Czech Republic, whereas it is relatively low in Russia, Ukraine and Bulgaria.

The figures for Danish exports in relation to the projects are systematically and substantially underestimated, as DANCEE's project data base comprises export figures for finalised projects only. The figures stated can therefore be regarded as an absolute minimum only, as exports in connection with ongoing projects are not made up and reported until the project has been finalised. Even these uncertain figures indicate, however, that there is a substantial Danish export potential in this area and that Danish products are competitive, as total imports of the project recipients greatly exceed total Danish grants.

Table 2 attempts to illustrate special Danish positions of strength as reflected in DANCEE's project portfolio. Only projects fitting into the main categories indicated are included in the table, which explains why the project population deviates somewhat from table I. It should be emphasized that only investment projects are included, so the figures cover only to a lesser degree Danish positions of strength within counselling and efficient use of energy. 

Table 2
DANCEE investment projects 1991-2001 with CO₂-reductions broken down into main categories, DANCEE's grants, total investment and Danish exports

Note: DH = District heating, PH= Power heating

Cf. table I, 85 percent of DANCEE's grants for projects with CO₂ reduction have been provided for five main areas, all of which, with the exception of the cement industry, are related to energy-supply technologies. (On the other hand, it can be mentioned that the portfolio of the IØ Fund to a higher degree is dominated by investments in branches of Danish firms operating within energy-saving technologies in final use (Rockwool, Danfoss).)

DANCEE's share of the project financing ranges from 4 percent for the geothermal plants to 37 percent for windmills. These differences reflect the marked preference of international banks and financing institutions (IFIs) for large-scale, profitable projects with stable cash flows and limited risks - like e.g. the geothermal plants. Smaller projects (single windmills) are not attractive for IFIs because they normally involve relatively large transaction costs. It also plays a part that some projects have been implemented in poor countries such as Bulgaria and Romania, whereas e.g. the geothermal projects have been concentrated in the somewhat richer countries like the Czech Republic, Poland and Lithuania.

As indicated above, the figures for Danish exports are systematically and substantially underestimated. By way of example, neither of the two projects within the cement industry has been finalised yet, so no export figures are available for this category. The figures indicate, however, that geothermics/district heating and windmill projects have generated exports whose value far exceeds the size of the DANCEE grant.

Reduction costs for CO₂

The costs of reducing CO₂-emissions in the assisted projects have not been systematically calculated. DANCEE has initiated a project for the development of indicators for cost efficiency and has, in that connection, asked the consultant to look at reduction costs for CO₂ so far and develop indicators for future projects. The results found up till now indicate that the data collected so far for the individual projects are not sufficient for calculating reliable figures for the costs of reducing CO₂. Efforts are being made to improve DANCEE's project database in this area and other areas.

In their report "Criteria and Perspectives for Joint Implementation" prepared by the Nordic Council of Ministers in 1997, the Council evaluated two DANCEE-assisted projects (a geothermal project in Pyrzyce, Poland, where DANCEE was responsible for 4 percent of the financing, and a windmill project in Jesenik in the Czech Republic with 15 percent DANCEE financing). The actual reduction costs for these two projects have been calculated at US $ 2/t CO₂ and US $ 87/t CO₂ respectively. The windmill project is atypical, however, as the windmills in Jesenik turned out to have been erected in the wrong place.

As mentioned above, a number of the assisted CO₂ projects are economically profitable, and in those projects, the costs of reducing CO₂ are therefore negative.

The projects assisted by DANCEE have contributed to paving the way for export of a number of technologies on commercial terms. According to several producers of biomass boilers, Eastern Europe is now an important market. No attempt has been made to make up the size of this export separately.

Uncertainties in the figures

Only figures for investment projects have been included in the survey. CO₂ reductions recorded in relation to pure TA-projects are thus not included in the calculations. Such reductions are very limited though.

A number of projects with an indicated CO₂-reduction have been omitted because of inconsistencies in the available data or because there is reason to doubt their actual environmental effect.

For non-finalised projects, there are only preliminary estimates available of the CO₂-reductions and costs of the project, and no figures at all are available for Danish exports in relation to the project. Experience seems to indicate, however, that estimates of the emission reductions are rarely changed on finalising the project. The missing figures for Danish exports in relation to the project lead to systematically and substantially underestimated figures in tables 1 and 2. It has been decided to include the figures anyway as an indication of the very considerable Danish export potential in the energy area.

Furthermore, the figures from the database on CO₂-reductions are vitiated by some uncertainty because systematic assessments of the "baseline" against which the project should be assessed have very rarely been made, and measurements to verify the estimates have been made even more rarely.

Finally, the reduction figures have been supplied by the firms that have implemented the projects, and the figures have only to a limited extent been subjected to thorough, independent assessments.

Limitation of waste water discharge from Poland into the Baltic Sea

As a main recipient of DANCEE assistance in the period 1991-2000, Poland has focused its initiatives on the water sector. During this period, 109 projects (out of a total 232 projects) have been initiated with the purpose of improving the quality of water in rivers, as a source of drinking water supply, and in the recipients, including the Baltic Sea.

The table below shows the distribution of funds for water projects:

Table 1:
DANCEE assistance for the water sector in Poland 1991-2000

More than 99 percent of the run-off in Poland takes place into the Baltic Sea. The Vistula river alone, which is one of the largest rivers in Europe, contributes with more than 56 percent of Poland's total run-off to the Baltic Sea. Untreated waste water from the cities was led into the rivers and via the Vistula and the Oder rivers ended in the Baltic Sea, which caused a heavy pollution, especially with nutrative salts and organic substances.

As appears from the table, since the launching of the Øststøtte, improvement of the water quality inhe Baltic Sea has been given high priority, and more than 82 projects have been initiated. Initiatives have been targeted at municipal waste water treatment plants, which have mainly been upgraded with removal of nutrative salts (N- and P-removal).

The figure below shows the distribution of the financing:

If you look at the upgrading of the municipal waste water treatment plants, the environmental effects achieved are considerable. The abatement of pollution from all municipal waste water treatment plants in the period 1991-2000 has been calculated at:

For comparison, the annual reduction thus corresponds to the removal of the waste water amount from a city with 180,000 inhabitants!

The DANCEE-assisted projects have thus contributed to a reduction in organic substances of more than 15 percent in the Baltic Sea. This reduction corresponds to more than three times the emission from all Danish waste water treatment plants.

5. Status of sector-integrated environmental assistance

Sector-integrated environmental assistance in the Baltic Sea region

In May 1997, the Danish government adopted an overall strategy for environmental assistance to Eastern Europe with special emphasis on the Baltic Sea. According to this strategy, part of the environmental assistance given to Eastern Europe has to come from Danish sectoral ministries/agencies for implementation of Baltic Agenda 21 and in preparation of EU membership of the former Eastern European countries in the Baltic Sea region.

Baltiv Agenda 21

Baltic Agenda 21 is the first regional Agenda 21 to follow up on the Rio Conference. It was the prime ministers of the Baltic Sea region who, at a meeting in Visby in May 1996, decided to draw up the Agenda. The decision was endorsed at the meeting of the Baltic Sea Council in Kalmar in June 1996, and in Saltsjöbaden in October of the same year, the environment ministers adopted a declaration with further details for a Baltic Agenda 21.

The fundamental idea of Baltic Agenda 21 is that economically important sectors of society shall assume responsibility for development and economic growth taking place on a more sustainable basis than has hitherto been the case in the regional development process. The environmental obligation has to be integrated into the economic and political development in sectors such as industry, energy, agriculture, forestry, transport and tourism.

In the process of implementing Baltic Agenda 21, these sectors have been responsible for determining the goals for sustainable development within their own sectors and for elaborating sectoral action plans, and they have likewise been responsible for the implementation. The environment ministries play a more secondary role in the process as consultants and co-ordinators.

The following presentation of the action plans for the individual sectors does not include the forestry sector, whose action plan is supported through the co-operation between DEPA and the Danish Forest and Nature Agency.

The action plan for industry is aimed at

	improvement of the framework for businesses through development of economic incentives to improve the environmental management in industry; harmonisation of industry-related legislation, including the work environment and job safety; implementation of international conventions and agreements of importance to sustainable development within the Baltic Sea region;
	development of eco-effective instruments for the different industries; implementation of environmental management systems (EMS); consideration of environmental factors in all forms of activities and reporting;
	extended and improved co-operation on research and development and transfer of know-how and technology within the Baltic Sea region.

The action plan for energy is aimed at

	strengthening co-operation between authorities;
	increasing the use of sustainable energy and promoting energy efficiency and energy savings;
	co-operation on research and development.

The action plan for agriculture is aimed at:

	education and training;
	development of a Virtual Research Institute for sustainable agriculture on the basis of the existing NOVABOVA in the Baltic Sea region;.
	elaboration and implementation of agro-environmental legislation and policies.

The action plan for fishery is aimed at

	development of long-term strategies for the most important fish stocks: cod, salmon, herring and sprat;
	re-establishment of resorts that are important to fish and fishery in inner waters;
	creation of a sustainable aquaculture.

The action plan for transport is aimed at

	implementation of a project on the development of guidelines, criteria and recommendations for infrastructural investments in a sustainable transport system;
	provision and strengthening of co-operation between governments on more rational goods transport, especially by improving railway and shipping services;
	development of regional strategies supporting sustainable sea transport.

The action plan for tourism is aimed at

	legislation on sustainable development and tourism;
	environmental management systems and development of control methods within tourism.

The goals and action plans for sustainable development prepared by the sectors and the plans for the further work to be carried out under Baltic Agenda 21 were endorsed by the Baltic Sea Council in June 1998.

Sector-integrated environmental assistance - which countries

Sector-integrated environmental assistance was initiated in 1998, replacing the former environment-related sectoral assistance. Sector-integrated environmental assistance is provided in Estonia, Latvia, Lithuania, Poland and in the Russian regions of St. Petersburg and Kaliningrad close to the Baltic Sea.

- other goals of the assistance

In addition to implementing Baltic Agenda 21, the assistance is aimed at supporting the process towards EU accession in the four applicant countries, Estonia, Latvia, Lithuania and Poland. Importance is also attached to the fact that the assistance is intended to supplement other donor assistance.

- appropriation in 2000

The Danish Folketing appropriated DKK 172 million via the Appropriation Act for 2000, distributed on seven ministries/agencies for a three-year period. The breakdown and consumption for 2000 is shown in the table.

Table 1
Breakdown of appropriation for 2000 in DKK million

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- activities of ministries distributed on sectoral action plans

The Danish Agency for Development of Industry and Trade contributed to implementation of the action plan for industry through the industry-related environmental programme aimed at making Eastern European trade and industry competitive through substantiated compliance with international environmental standards and, at the same time, ensuring an environmentally and economically sustainable development. The purpose of the projects is to introduce environmental management in companies and promote the use of cleaner technology. The projects were implemented in the food, textile, wood, electronic, metal and pharmaceutical industries of the recipient countries.

The Ministry of Labour contributed to implementation of the action plan for industry through a programme consisting of components within work environment and environment and employment.

The Danish Energy Agency, the Ministry of Housing and Urban Affairs and the Danish Emergency Management Agency contributed to implementation of the action plan for energy, including atomic power safety.

In the Danish Energy Agency's programme, comprising all co-operating partners in the Baltic Sea region covered by the programme, the focus was on energy efficiency, including district heating and power heating, institutional development and conversion to less polluting and sustainable sources of energy and energy savings in industry, public buildings and housing. In co-operation with DEPA, special assistance was being initiated in Lithuania after the decision by the Lithuanian government to gradually close down the Ignalina atomic power plant.

In their programme, the Ministry of Housing and Urban Affairs focused on energy efficiency in buildings, taking their starting point in the end users. The concrete projects were aimed at both legislative aspects, e.g. through adjustment of standards, and direct at the end-users, through counselling and information about energy-efficiency measures.

In their programme, the Danish Emergency Management Agency supported the establishment of a warning system in case of atomic power plant accidents.

The Ministry of Food, Agriculture and Fisheries contributed to the implementation of the action plan for agriculture. The programme contained projects on nitrate pollution, organic agriculture, approval of pesticides and establishment of incinerating plants.

The Ministry of Transport contributed to the implementation of the transport action programme with a regional project on multimodal transport and handling of customs documents in St. Petersburg and Estonia.

Organising the assistance - programme development.

Programme proposals for sector-integrated environmental assistance are being developed in co-operation between sectoral ministries in Denmark and the recipient countries.

- approval of environmental content

The environmental content of the programmes has to be approved by the environment ministries in the recipient countries and by DEPA in consultation with the Advisory Committee for Environmental Assistance to Eastern Europe.

- support functions

The Danish embassies in the recipient countries advise the sectoral ministries on local conditions. DEPA co-ordinates the assistance and is responsible for contact with the environment ministries in the recipient countries.

6. General comments on the appropriation

Breakdown of projects into countries and activity areas in 2000

In 2000, approval was given for grants for 238 projects to a total amount of DKK 572 million. Total expenses, including expenses for projects initiated earlier, amounted to DKK 390 million, cf. figure 2.

Figure 2
Approval for grants and expenses. In DKK million 1997-2000

Grants are made on the basis of either applications or tenders. In 2000, the tender projects¹ amounted to DKK 204 million or about 37 percent of the total amount made available.

In accordance with the overall strategy of the Government for environmental assistance to Eastern Europe from 1997, special emphasis has been put on providing assistance for the Baltic Sea region, which has received 51.5 percent of the total assistance granted to Eastern Europe, cf. figure 3.

Figure 3
Geographical distribution of approvals.
Percentage distribution 2000

In 2000, projects to a total amount of DKK 45 million have thus been initiated in Latvia, DKK 34 million in Lithuania, DKK 39 million in Estonia, DKK 74 million in Poland, DKK 76 million in Russia. In the rest of Eastern Europe, approvals have been granted for projects in Romania (DKK 62 million) and Ukraine (DKK 53 million), while projects amounting to DKK 43 million have been initiated in the Czech Republic and Slovakia, and projects amounting to DKK 19 million have been initiated in Bulgaria. The remaining DKK 98 million has been spent on cross-border projects, including also the Baltic Sea region, e.g. as contributions to the Nordic Environmental Finance Facility² and regional projects.

By a resolution passed by the Danish Folketing on 4 May 1999, the Danish government was requested to strengthen initiatives in the SNG-countries (the association of formerly Soviet republics) and to strengthen the environmental efforts by the recipient countries by involving civil society. In the former Soviet republics, but also in the EU applicant countries, there is a large financing need within the environmental sector. DEPA continues to work with a number of initiatives to map this need, e.g. by developing national and regional financing strategies for selected countries and regions. These strategies in combination with environmental action plans for the areas in question are intended to attract further assistance to help solve the prioritised environmental problems.

Assistance has been given to the SNG-countries in connection with activities related to the Environment for Europe-process³ and to the resolutions passed at the latest Pan-european Environmental Ministerial Conference held in Aarhus in 1998. This assistance includes, among other things, development of the above financing strategies, some of which, at national as well as regional level, were presented at a ministerial conference held in Almaty, Kazakhstan in 2000. Initiatives to ensure concrete implementation of citizens' environmental rights (the Aarhus Convention) by involving civil society in the form of NGO's have been further strengthened (in the same way as it was strengthened in 1999) in a number of SNG-countries in the context of the Environment for Europeprocess.

Made up by activity areas, the water sector accounted for about 30 percent of all initiatives in 2000, cf. figure 4. The primary purpose of these activities has been to limit pollution of the Baltic Sea in the context of the international agreement on the Baltic Sea, the Helsinki Convention, and to comply with the EU Directives within the water sector.

Assistance granted within the air sector accounted for about 10 percent in 2000, cf. Figure 4, and the purpose of this assistance has been to limit transboundary pollution and reduce the release of greenhouse gases, while assistance in the waste sector aims at settling the "sins of the past" in the form of deposits of chemicals, etc. Besides, higher priority continues to be given to nature projects and institutional projects. The latter should be seen in the light of the EU applicant countries' preparations for accession to the EU and is reflected in assistance towards institutional capacity building.

In 2000, the nature resource sector was subsidised with about 13 percent of the total environmental assistance granted. This assistance, which is planned by the Danish National Forest and Nature Agency in close co-operation with DEPA, is aimed at protection and management of nature, sustainable forestry, and environmental and nature education. In addition, assistance is granted annually for a cultural environmental project, and an attempt is made to integrate the cultural environment issue into other projects. In the EU applicant countries, the assistance granted focuses primarily on implementation of EU Directives, including the Birds and Habitats Directives, and on the establishment of the joint Natura 2000 network of protected nature areas. In both applicant and non-applicant countries, high priority is given to implementation of international conventions in the nature sector. Many projects thus support compliance with the Biodiversity Convention and more specific conventions like Ramsar (wetlands for birds), Washington (CITES for trade in endangered animals and plants) and Bern (such as establishment of a pan-european EMERALD network of protected areas). The nature resource projects focus on capacity building, information and education with a view to assisting the countries involved in handling the future protection. NGO's (in Denmark as well as in the recipient countries) are involved in many of the projects as driving forces in the implementation of projects. Initiatives in the nature sector have so far been concentrated on the Baltic Sea-area, but in 2000, project co-operation within this area has been initiated with Slovakia and Bulgaria, partly as a result of the two countries' wish for accession to the EU.

Figure 4.
Distribution of grants by activity areas. Percentage distribution 1997-2000

As mentioned earlier, in the administration of the Danish Support Programme for Eastern Europe, great emphasis has been put on assistance to EU applicant countries in Eastern Europe. Denmark supports a large number of investment and institution-building projects with focus on implementation, inspection and ratification of EU demands on the applicant countries within the nature and environment sector. The majority of these projects belong under the Directives on air, water, waste and industry, the so-called investment-heavy Directives, and the nature Directives.

Information activities regarding environmental assistance to Eastern Europe received high priority in 2000, both internally in the Ministry and through participation in the cross-ministerial information activity in the context of The Cross-ministerial Committee for Eastern Europe. These activities will be continued as part of the future assistance.

Development in investment and technical assistance projects, 1991-2000

Background

From 1991 to 2000, the annual framework for assistance to Central and Eastern Europe has increased from DKK 75 million in 1991 to DKK 541 million in 2000. This framework is fixed in connection with the annual Budget negotiations, whereas the application of the funds is laid down in strategies and country programmes prepared by DEPA. Strategies and guidelines reflect the criteria formulated from time to time by the Danish Government and the Folketing for application of the funds. Besides, the external evaluation of the Support Programme in 1998, the report by the National Audit Office of Denmark in 1995 and again in 1999 and the ongoing co-operation with the Advisory Committee to the Danish Environmental Support Fund for Eastern Europe have influenced the use of funds and the day-to-.day management of the support to Eastern Europe.

As the environmental support for Eastern Europe is organised in the form of co-operation between Denmark and the individual countries, also the countries' own prioritisation of how Danish support can be put to best use has greatly influenced the use of the funds. Often the use of the funds is the result of a compromise between the recipient country's wish to utilize the Danish grants in a special way and a Danish wish to achieve coherence and visibility in activities.

When the support was politically adopted in 1991, it was in the light ofan acute pollution situation in Eastern Europe, and it was necessary to begin by solving these serious environmental problems first. It was also clear that the Danish support in itself was not sufficient to solve the problems and that co-operation with international financing institutions, with other donors and,above all, with the recipient countries themselves was necessary in order to secure sufficient funds for reducing pollution to an acceptable level.

The strategy for Environmental Support for Eastern Europe from 1993 focused on ensuring that the support should contribute to reduction of especially the acute pollution situation in Eastern Europe and that this should be effected through the transfer of technological solutions from Denmark. It was also part of the strategy that Danish funds should be used to initiate activities that could attract funds that are substantially larger than the Danish funds. As will appear from the following review of how the framework has been used, support for investment projects continues to be at the heart of the environmental support given to Eastern Europe.

It was also clear, however, that environmental problems in Eastern Europe had been allowed to develop to such a degree because of a lack of awareness from political quarters. Another factor contributing to the seriousness of the problems was the fact that existing laws and administrative procedures and the staff charged with implementing them did not have sufficient clout and knowhow to solve this task. Based on experience gained from e.g. eveloping countries, this entailed the risk that new acute problems would arise unless efforts were made to establish administrative procedures and knowhow in these areas.

In the strategy for the Environmental Support for 1993 and in the most recent strategy, it was therefore emphasized that Danish technology as well as knowhow should be transferred to the recipient countries and that the weighting between these should reflect the current environmental situation and the needs for knowhow and capacity-building.

Development in investment and technical assistance projects

The development in investment and technical assistance projects is followed closely by DEPA, as the projects are categorized according to whether a project is an investment or a technical assistance project. The categorization is stored in a datbase, and the distribution between these categories appears from DANCEE's Annual Reports.

Investment projects are characterized by involving construction of physical plants and transfer of technology - as a main rule Danish equipment - to a recipient country. Investment projects usually comprise both consultancy and equipment, but can also be pure investment projects, with the funds for hardware coming from other sources. The investment projects fall into three categories comprising preparation, implementation and follow-up on the transfer of technology.

Technical assistance projects comprise four categories: support for developing plans and studies; support for setting up monitoring systems; preliminary studies for projects that can be either investment projects or technical assistance projects and transfer of knowhow in the form of training and capacity-building. The effect of this assistance is more long-term and can often be calculated only as an indirect environmental effect.

Figure 1 shows the development in investment projects and technical assistance projects from 1991 to 2000 for the total environmental support, comprising both EU applicant countries and countries in the former Soviet Union.

It can be seen that the part of the framework going to investment projects increases with the increasing framework up to 1997, and after that year, support for investment projects is by and large maintained, but with a slight downward tendency in 2000. It also appears that the increased focus on investment projects introduced with the strategy in 1993 made itself felt the very same year.

The fall in investment projects in 1999 and 2000 is offset to some degree by an increase in technical assistance projects in preparation for investment projects (TA3), however. An analysis of these projects shows that some of them involve preparation of projects financed by an international financing institution such as EBRD or preparation for financing via the EU's pre-accession facility ISPA. The preparation of these ISPA-projects financed via Danish assistance has led to a quicker approval and launching of more ISPA environmental projects to a total value of several hundred millions of Danish kroner. These projects are disposed by invitation to tender by the EU, and Danish companies can submit their tenders. And sinc also these projects have direct and great environmental effects, they contribute to maintaining the focus of the environmental support on assistance towards solving the most serious and most highly prioritised pollution problems in Eastern Europe.

Up to and including 1994, all projects for which assistance was granted, were so-called application projects, with a Danish project owner applying for support for a project in the recipient country. From 1995/96 the recipient countries began increasingly to demand more strategic projects, and the Danish funds often formed part of the preparation for major investment projects in co-operation with international financing institutions and the EU. This requires a greater initiative for preparation of projects from DANCEE, and this is the background to introducing a tender model, where DANCEE can prepare and invite tenders for these more strategic tasks. As a consequence, a larger share of the funds from the framework is now spent on developing plans and preliminary studies, so category TA1 increased steadily from 1996 until 2000. There have been fluctuations, however - typically in some years there was more focus on preparation of projects, which were then submitted to tenders the following year.

In 1997, a number of the countries DANCEE co-operates with, applied for EU accession. The EU posed a number of demands on the countries in this connection, which greatly influences not only the way these countries prioritise their own efforts in the environmental field, but also the way they prioritise support from donors like DANCEE. In response to this, DANCEE prepared a report on the need for support to these countries, a report (Enlargement of the EU towards East, Environmental Perspectives) showing not only large investment needs, but also large needs for support for incorporating EU legislation into the countries' own legislation, capacity-building to implement the legislation and control that it is complied with.

Starting in 1997, the recipient countries have increasingly requested support from DANCEE in these areas , and as can be seen from figure 1, DANCEE has complied with this request, reflected in the increase in support for category TA4 since 1997 (institutional building, capacity-building and training). DANCEE developed a model project for establishing an EU approximation strategy, which was implemented in several countries and helped them identify which directives it would be most difficult for them to comply with and to prioritise the initiatives they would need to take. As a result of DANCEE's initiative, several countries increased their administrative manning and intensified their efforts to prepare for EU accession.

At the same time, this approximation strategy serves as a framework also for projects supported by DANCEE, where DANCEE has focused on the legal framework and the conditions for the private sector, especially industry's environmental activities in the recipient countries, on the legal framework and planning in the waste sector , in the air sector, etc. Especially in the waste water area, several countries have taken initiatives centrally and decentrally to build up capacity to prepare and implement investment projects, a capacity which is an absolute necessity if these countries are to receive their share of the many pre-accession funds from the EU. DEPA is of the opinion that this support is very visible in the recipient countries, and that the Danish support has greatly affected the progress made in accession negotiations and in establishing the administrative systems needed to manage EU environmental legislation after accession. DEPA is also of the opinion that this support helps ensure that environmental demands are made on the public and private sectors in Eastern Europe, and that this will lead to the development of a considerable export potential for Danish consultants and suppliers.

The technical assistance has only to a limited extent led to the transfer of Danish technology, but there have been examples of information and data processing systems, model systems and laboratory equipment. On the other hand, the Danish consultancy industry has been able to build up networks and contacts to local co-operation partners, which will mean nye markets in future.

In addition to requiring the applicant countries to comply with environmental directives, the EU has further required that all new investments made in the countries have to live up to EU environmental standards for waste water, drinking water, waste, large incineration plants, etc. This factor together with a number of other aspects has made it increasingly difficult for Danish firms to live up to the quality standards set by DANCEE and the EU applicant countries in application projects. One application round initiated by DANCEE in the summer of 1999 thus resulted in only a limited number of good projects, primarily in Russia and Poland.

In 1998, the EU decided to support the accession of the EU applicant countries primarily in the investment area by establishing ISPA (Instrument for Support to Pre-accession). As ISPA makes grants of up to 75 percent of the costs of environmental projects exceeding DKK 40 million, this means that loans from the international financing institutions are no longer demanded, and that they are used almost exclusively to finance projects that the countries cannot find room for in their budgets.

DEPA chose to enter into co-operation with the EU and, as one of the few donors, now co-operates closely on preparation and, for a few projects, on implementation of ISPA projects. The establishing of ISPA means that the finance ministries in the recipient countries have become more aware of the environmental area, and as a result, the central management of national funds for co-financing of investment projects has been increased. As a result of this, the possibilities of DANCEE or of the applicants for funds within the framework of identifying suitable investment projects with a high degree of co-financing in these countries have been reduced in recent years. The way DEPA evaluates the situation is that the decision to co-operate with the EU was the right strategy, as it has contributed to maintaining DANCEE's profile as an agency supporting projects with a visible environmental effect. The disadvantage has been that it has not in all cases been possible to ensure that DANCEE could invite tenders for an investment project, but has had to accept that this was to be done in the form of an EU call for tenders.

Another factor that has increased assistance within institutional strengthening and capacity-building TA4 is the decision to increase initiatives in the nature area. Up through the 90's, there is an increased awareness that Eastern Europe has great natural assets and resources that need to be protected and managed more effectively., and a strategy is drawn up for this sector in 1996. A substantial share of the assistance goes toward stregthening the implementation of EU Directives in the recipient countries and towards complying with international conventions in the nature area, but also initiatives to improve the sustainability of the infrastructure in nature parks are included- Assistance to infrastructure in e.g. nature parks is provided by supporting e.g. the setting up of visitors' centres and thus gives very visible results, which can rightly be regarded as investment measures. The total nature resource assistance, which in 2000 amounted to about 13 percent of the environmental support is categorized as capacity building TA4, however.

In 2000, there was a further increase in TA4. In addition to the factors mentioned before, an important factor contributing to this increase is that efforts to involve civil society in environmental support in accordance with the resolution by the Danish Folketing in 1999 were intensified. From this time on, more assistance has been granted to environmental organisations, to measures to follow up on the Aarhus Convention, etc.

Figure 2 gives an overview of the development in the former Soviet Union, where EU accession is not on the agenda. It appears from the figure that support for investment projects has been rising steadily during the whole period, and that support for this category of projects accounts for 50 percent or more of the total support. If TA3 is included, the percentage of investment projects is more likely to be between 60 and 70 percent. As mentioned earlier, application projects still represent a substantial part of the investment projects in the SNGcountries.

For the SNG-countries, there has been no increase in technical assistance projects since 1997, the same as was the case in the EU applicant countries. The SNG-countries continue to request primarily investment projects, and the reform process, which really got off the ground in the EU applicant countries in 1997, still remains to be seen. As DEPA evaluates it, it is more difficult for the SNG-countries to benefit from a technical assistance project than it is for the EU applicant countries.

The further development for investment and technical assistance projects

The changed conditions for Danish environmental support reflects to a great extent the fact that a reform process is underway. There is no point in stating that we wish to return to a situation where we were allowed to decide which type of assistance we wanted to grant. The recipient countries have got too far for this in their own planning of activities. It is important that also the Danish resource base prepares itself for this changed situation, which will entail that at least once in a while, Dansh grants are spent on preparing and implementing projects, for which tenders are invited internationally by the EU or by the international financing institutions.

It is part of DANCEE's strategy for future support to maintain investment assistance at the present level. The recipient countries have to agree, however, if this objective is to be maintained.

In connection with country programming, which is being carried out these years, the aim is to maintain a balance between investment projects and technical assistance projects with an even distribution between the two types of projects. A higher share of investment projects is planned in the SNG-countries and in countries that are far from accession, i.e. Romania and Bulgaria, and in the Balkans there is a great, not yet utilized potential for DANCEE for investment projects.

In applicant countries that are closer to accession, the "window" to investment projects has been closed somewhat in recent years, as a result of the increased central management of co-financing funds, so continued co-operation with EU's ISPA Programme seems to be the best possibility for ensuring that Danish investment projects continue to achieve a high degree of co-financing. The strengthened initiatives on the part of DANCEE towards the private sector and promotion of the environmental support programme are other initiatives which can maintain visible projects with direct environmental effects in the EU applicant countries.

For the technical assistance projects, the situation for the EU applicant countries is such that the countries that have proceeded the furthest in the accession process have by and large fulfilled the legislation requirements and also live up to most of the requirements in the international conventions that the EU is a co-signatory to. Most of the countries lack administrative capacity, however, to implement and control and monitor whether the legislation is being implemented and enforced. Moreover, the issue of environment still does not rank so highly on the agenda in the private sector that has to comply with the law. The intention is to strengthen the involvement of civil society in the environmental area, both in the EU applicant countries, in the SNG-countries and in the Balkans. These efforts are beign supported actively by DANCEE, e.g. by supporting the ratification and implementation of the Aarhus Convention in the countries.

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Figure 1
Activity types under DANCEE - all countries

Figure 2
Activity types under DANCEE - SNG-countries

Please note the different scales along the two y-axes

7. Environmental projects in the individual countries of co-operation

The distribution of grants under the Danish environmental support programme in 2000 in DKK million to recipient countries broken down into grants for technical assistance and investment activities and the distribution of grants to recipient countries broken down into activity areas appear from appendix 1.

Environmental projects in Bulgaria

In 2000, the co-operation with Bulgaria has been characterized by continued assistance within the two main sectors of water and air. Especially assistance within water pollution has been intensified. Furthermore, co-operation was initiated in 2000 on the management of natural assets, where potential activity areas were mapped at meetings between the Bulgarian environmental and forestry authorities and the Danish Environmental Protection Agency. The highest priority was given to formulating a project for the establishment of a network of protected areas to comply with the Bern Convention and the preaccession requirements of the EU.

A number of preliminary studies have been initiated for the upgrading of waste water treatment plants in the Black Sea region, where most waste water is being discharged into the water without treatment. An existing waste water treatment plant receiving waste water from the two municipalities of Obzor and Byala is being upgraded. Besides, preparation studies are being conducted in the two cities of Veliki Preslav and Balchik, where the whole water cycle is being examined, i.e. water supply, sewerage and waste water treatment. As Bulgaria wishes to apply for EU/ISPA financing for these projects, the projects will also comprise applications to ISPA. In Varna, which has received grants from DEPA before, further project preparations are to be carried out to ensure that subsequent investments live up to EU requirements.

The concrete projects within the air sector have been translated into preparation activities and the launching of an IPPC project with the preparation of permits for five major heavily polluting companies. The project is a follow-up on a project carried out earlier in relation to the IPPS Directive. Another project within the air sector concerning the phasing out of HCFC is also a followup on a project on ozone-depleting substances (ODS) carried out earlier. The project is intended to create the basis of Bulgaria fulfilling the Montreal Protocol. An investment project at the Rousse power plant in northern Bulgaria is intended to reduce the air pollution by mounting an electrically separating deduster. Furthermore, a preliminary study has been initiated concerning the use of alternative energy sources at a district heating plant.

Within the industrial sector, a preliminary study concerning collection and recovery of lead in batteries is being conducted in one of Bulgaria's largest companies. Additional equipment has been provided for an existing landfill project.

During the period under review, one major EU approximation project related to the IPPC Directive has been launched. This does not mean that the EU approximation process does not receive high priority, but Bulgaria has wanted the Danish assistance this year to be focused mainly on preparation projects for the coming ISPA financing. Incorporated into all other initiated projects is the requirement that EU legislation is being complied with.

All investment projects are characterized by a high level of local co-financing   from the Environmental Protection Fund of the Bulgarian Ministry of Environment and Waters. As a result, involvement in the projects has increased considerably. Furthermore, the Swiss donor, the National Trust Eco Fund, often contributes about one third of the total amount, which paves the way for launching large-scale projects.

In 2000, DKK 5.4 million was allocated for investment in filters, membranes and waste water treatment equipment. DKK 4.3 million was allocated for technical assistance for HCFC and for the drafting of permits. The remaining grants of DKK 9.4 million have been provided for preliminary studies, out of which DKK 5.6 million has been spent on preliminary studies at waste water treatment plants by the Black Sea, which are expected to trigger subsequent investments by DEPA and ISPA respectively. Since 1993, DKK 104 million has been allocated for projects in Bulgaria.

The co-operation with Bulgaria is based on the country agreement between Denmark and Bulgaria, which was drawn up in 1994 and renewed in 1999. Furthermore, a country programme was elaborated in 1997, describing the different activity areas. Co-operation takes place with the international department of the Bulgarian Ministry of Environment and Waters (MoEW), and projects are initiated only after approval by the MoEW. The local project co-ordinator (LPC), who is in close contact with the MoEW, municipalities, etc., is in charge of the day-to-day work of co-ordinating projects. The LPC also monitors the projects. An extended country programme is planned for implementation in 2001, involving an analysis of the different sectors with a view to selecting activity areas, and the selection of specific regions for future project activities. The country programming will take place in close co-operation with the MoEW.

Environmental projects in the Czech Republic

In June 2000, an agreement was entered into with the Czech Republic for phasing out environmental assistance over the next few years. It was agreed to initiate projects only within EU approximation and projects to ensure that ongoing projects could be finalised in a satisfactory way.

The focus of the environmental assistance granted in 2000 has thus been on EU approximation and on rounding off assistance within areas that have received Danish grants in previous years.

Assistance to the Czech Republic has therefore amounted to only DKK 11.1 million, out of which DKK 5.8 million was granted for approximation projects and DKK 5.3 million to round off ongoing projects.

Environmental projects in Estonia

In 2000, co-operation with Estonia was dominated by Estonia's wish for EU approximation within the environmental sector. Incorporated into all the projects started up in 2000 are clear objectives of strengthening Estonia's approximation to the EU.

A major marine monitoring project has thus been started up as the direct consequence of the EU Commission's screening report. Furthermore, two projects have been prepared with a view to obtaining financing of up to 75 percent of the total investment under the EU pre-accession programme ISPA (with a minimum project size of DKK 35 million). The IPPC II-project is a direct follow up on the successful IPPC project in Estonia (singled out by the EU Commission as an exemplary project), and an investment project in the paper mill Horizon Pulp & Paper contributes directly to ensuring that this company complies with the BAT-note of the IPPC Directive.

In accordance with the accession negotiations with the EU, Estonia gives priority to focusing on the implementation of the Birds and Habitats Directives on establishing the Natura 2000 network. In 2000, DANCEE has taken further steps to prepare new and extend existing projects in these areas. As far as conventions are concerned, assistance was given to ensure popular participation and to strengthen the dissemination of information about nature in the form of an NGO-managed project for implementation of the Aarhus Convention.

A waste data registration project aimed at county and regional authorities is a follow-up on the earlier national waste data registration project. These projects will bring Estonia's waste registration, planning and reporting into line with the requirements laid down in EU directives. As a result of Estonia's strong position here, the European Waste Theme Centre has selected Estonia as one of two focal points for waste reporting in Central and Eastern Europe.

There have been relatively many TA-projects, partly as the result of the wish for EU approximation, but also because some of these TA-projects pave the way for investment, and some are intended to ensure the quality and sustainability of existing projects. One of these is the hazardous waste project, where DANCEE has previously invested DKK 11 million in mud pumps, registration and laboratory equipment. Furthermore, an appraisal of the feasibility studies for five (six) towns included in the SMIP-programme (Small Municipalities Improvement Programme) will be carried out before tenders are invited for implementation of the project.

Finally, a feasibility study of the management of health care waste in Estonia has been initiated, likewise intended to pave the way for investments. This project is a natural extension of DANCEE's involvement in solving environmental problems within the hazardous waste sector in Estonia.

Environmental projects in Belarus

In 2000, DEPA's new strategy in relation to Belarus was implemented. In accordance with the conclusions of the EU Council in September 1997, Denmark pursued a very restrained policy towards Belarus. Apart from a few NGO-projects, no new projects were launched, but in spring 2000, it was decided to follow the interpretation of the EU Council conclusions followed by the Tacis Programme, namely that Member States can start up new projects with Belarus provided it is regional or transboundary projects, humanitarian projects or NGOprojects.

In the autumn of 2000, DEPA therefore initiated a project identification mission with a view to identifying such projects in Belarus. In 2000, the framework for Belarus was well over DKK 5 million, and in December, DEPA granted DKK 4.5 million for a sludge project at the waste water treatment plant in Brest on the border of Poland. The sludge lagoons in Brest pose an acute threat to the Polish drinking water intake. Poland is interested in co-operating to find a solution to the problems in Brest and have invited the Belarussians to apply to the Polish Environmental Fund for co-financing. This project is an investment project involving a substantial supply of equipment.

In addition to the Brest project, DEPA extended the contract wiht OVE, Denmark and Belaya Rus, a Belarussian NGO, publishing a news letter »Green News« and launching environmental information campaigns in different schools in the country.

Environmental projects in Croatia

Environmental projects in Latvia

In 2000, DKK 45 million was granted under the DANCEE programme to support 23 projects. This represents a slight fall on 1999, when 28 projects were initiated. The project portfolio for 2000 contained a number of projects with main emphasis on the following three activity areas - the water sector, nature protection and EU approximation.

Various factors have influenced the prioritisation and management of the Danish environmental assistance. EUapproximation is a recurrent theme in many projects, as EU approximation is one of the most highly prioritised areas in Latvia.

A tentative estimate of the investment needed to comply with EU environmental standards shows an investment need of EURO 1.2 billion. The bulk of these investments will be made within the water sector (drinking water and waste water) and in the waste sector.

Projects where EU approximation and capacity building are dominant will receive higher priority in future. As part of a general strengthening of the Latvian Ministry of Environment's projects in the water sector, assistance has been granted for appointing a long-term expert in the 800+ Water Secretariat. Similar projects in other sectors are expected to be initiated in future, depending on the degree to which privatisation gains ground in Latvia.

In the nature resource area, a number of important activities were initiated within the field of nature education, protection of the fauna in water courses and rivers and implementation of the EU Directives on protection of birds and habitats. The latter was effected via assistance to a project supporting the setting up of an EMERALD network, which, to begin with, meets the requirements of the Bern Convention, and which later on in connection with Latvia's accession to the EU can meet the requirements of the joint Natura 2000 network. In 2000, a project was also formulated to ensure capacity building for implementation of the national Latvian biodiversity strategy and action plan. The project is intended to strengthen the Latvian Ministry of Environment's ability to draw up prioritised action plans, including financing plans for implementation of strategy and action plan.

Co-operation with the Latvian environmental authorities has been extremely good and well-functioning. Establishing a local project co-ordinator function in the Latvian Ministry of Environment has strengthened co-operation, and the functions of the project co-ordinator will increasingly consist of monitoring projects supported by the DANCEE programme.

Environmental projects in Lithuania

In 2000, a total amount of DKK 34.5 million was granted for 31 projects in Lithuania.

This represents a slight increase in the total number of projects compared with 1999, but a major fall in the total amount of assistance (in 1999, this amount was DKK 57 million).

A number of factors have influenced the prioritisation and administration of the Danish assistance in 2000.

In the autumn of 1999, the Lithuanian Parliament adopted a new energy strategy, involving among other things, a gradual decommissioning of the Ignalina nuclear power plant, which is of the same type as the power plant in Chernobyl.

As a follow-up on the adoption of this strategy, the Danish government decided to grant special assistance to Lithuania - in the form of the so-called "Iganalina package".

The "Ignalina package" aims at contributing to a sustainable development of the energy sector in Lithuania and focuses especially on projects within the following areas: energy savings (with special focus on electricity), demonstration plants for the production of electricity at combined heat and power plants, continued rehabilitation of the district heating system (as a prerequisite to power plant heat), capacity building in the Lithuanian environmental administration.

"The Ignalina package" is expected to be implemented within a time horizon of two or three years and has a total value of about DKK 100 million, to be paid out through the existing schemes for assistance administered by DEPA and the Danish Energy Agency. In addition, a Danish contribution of DKK 20 million has been made to the "Ignalina International Decommissioning Support Fund", administered by the European Bank of Reconstruction and Development.

Assistance to projects comprised by the "Ignalina package" began to be provided in 2000 with environmental and energy audits being carried out in 12 of the most electricity-consuming Lithuanian companies, to pave the way for investments in energy- and resource-saving initiatives in these companies. This activity accounted for one third of the total assistance provided in 2000.

The approximation of Lithuania to EU environmental policies, requirements and standards continued to play an important role in the Danish assistance provided in 2000, and this aspect is thus an integrated part of the vast majority of the projects assisted.

Danish assistance to projects within the water sector accounted for one third of the total Danish assistance in 2000. The bulk of the project mass concerns investment-preparing and capacity-building projects, but also direct investment assistance was granted for the construction of a waste water treatment plant and a water treatment plant in Ignalina.

In the waste sector, assistance has been granted to follow up on the new Lithuanian waste legislation, primarily by developing tools (guidelines) for municipal authorities.

In the institutional area, assistance was granted for capacity building in the Ministry of Environment of the Republic of Lithuania in relation to the preparation of ISPA-assisted projects, and the Danish assistance to an EU environmental advisor to the Ministry was continued.

In the nature sector, assistance in 2000 was concentrated on country programming and preparation of a tender project (2001) within environmental education and nature information.

In addition, DANCEE supported the first phase of establishing an early warning and emergency system in relation to radioactive contamination of surface water around the Ignalina NPP. This project is being co-ordinated in close co-operation with the Danish Emergency Management Agency.

The effects of the economic crisis in Russia in 1998 lessened very slowly in 2000, with Lithuania experiencing moderate economic growth. The state budget for 2000 contained only a minor allocation to environmental investments. Together with a limited Lithuanian capacity to prepare projects and a distribution of authority between different institutions which has not yet been clarified, few new environmental investment projects have been initiated in Lithuania in 2000.

This is also reflected in the distribution of assistance on the different types of projects, as only two were investment projects, while the other projects focused mainly on providing technical assistance. Half of the total allocation to Lithuania was the result of applications.

The Ignalina package

As a follow-up on the decision taken by the Ministry of Environment of the Republic of Lithuania to decommission the Ignalina nuclear power plant, the Danish government declared that it was prepared to increase assistance to Lithuania towards establishing a sustainable replacement for the Ignalina NPP.

The assistance - the so-called Ignalina package - consists of a number of concrete activity areas and projects and will be handled through the existing environmental assistance programmes administered by DEPA and the Danish Energy Agency.

In 2000, assistance amounting to DKK 12 million was granted under the DANCEE programme to 13 projects.

The projects assisted aim at reducing the electricity consumption and pollution from a number of the most resource-demanding Lithuanian companies. In 2000, energy and environmental audits were thus carried out in 15 companies. The results of these energy and environmental audits will form the basis of energy and pollution-reducing initiatives in thse companies in question.

The following projects are comprised by the Ignalina package:

Environmental projects in Moldova

In 2000, it was decided to select Moldova as a new country of co-operation for environmental assistance. A programming of the co-operation for the next three years has been carried out with an indicative framework of DKK 13 million for each of the three years. Assistance is expected to be focused on the water sector.

The programming is expected to be completed by May 2001.

Parallel to the programming, funds were set aside for preparing three project documents for the most highly prioritised projects in the programming.

In 2000, an initiative was taken to implement parts of the Aarhus Convention.

Co-operation with Moldova was limited in 2000. The initiatives taken were very positively received in Moldova.

Environmental projects in Poland

In 2000, Danish environmental co-operation with Poland has focused especially on projects intended to assist Poland in the approximation to EU environmental requirements.

A number of projects aimed at supporting Poland in the implementation of a number of EU Directives have thus been prepared and initiated. These Directives are the IPPC Directive (Integrated Pollution Prevention and Control), the Directive on Access to Information, the Aarhus Convention and the EIA Directive (Environmental Impact Assesment). The projects are implemented through assistance to the Polish Ministry of Environment Protection, Natural Resources and Forestry and through pilot projects in selected regions. Furthermore, a project informing about EU environmental requirements via conferences, etc. is being implemented.

The special assistance directed at the three southern regions (Wroclaw; Katowice and Krakow) has been continued. The focus has been on projects within the waste sector, which is a highly prioritised sector in Poland because it requires a considerable effort to comply with the environmental requirements of the EU.

Assistance within the waste water sector continues to account for a substantial share of the project portfolio, however, as also this sector receives high priority in Poland. Nearly all of the WWTP in the regional capitals have now been upgraded to EU standards, but there is still a great need to rehabilitate/construct WWTP to EU standards in the small municipalities.

Since the launching of the environmental support programme in 1991, total assistance within the waste water sector has accounted for almost 40 percent (corresponding to about DKK 240 million). An appraisal of all finalised projects within muncipal waste water treatment has been initiated in order to get an overall assessment of the Danish assistance. This appraisal is expected to be finalised at the beginning of 2001.

In the nature area, a review of the project launched in 1999 in the Bialowieza national park and forest district has been initiated. Furthermore, a project concerning sustainable management of wetlands and protection of the biodiversity based on the EU Birds and Habitats Directives, the Nitrates Directive and the Water Outline Directive has been initiated.

The monitoring of Danish projects in Poland has been strengthened in 2000 by appointing another local project co-ordinator, so that there are now two local project co-ordinators in Poland. Both co-ordinators are employed in the Polish National Environmental Fund Fundusz

At the end of the year, Steen Gade, the Director of DEPA, participated in the Danish export drive for environment at the POLEKO fair in Poznan. The Danish environmental businesses had a central place at the fair and were visited byAntoni Tokarczuk, the Polish Environment Minister, among others.

Project title	Sewerage Construction and Waterworks Raciborz
File no.	124/031-0211
Project recipient	Raciborz Municipality
Project manager	Rambøll
Project description	The purpose of the project is to upgrade the city's waterworks (65,000 inhabitants) to observe EU water quality standards (the works were destroyed during the flloodings in 1997) and to extend the existing sewerage network to include two small parts of town.
Environmental effect	Reducton of waste water discharge from the two districts: BOD: 27.4 tonnes/year SS 32: tonnes/year Total notrogen (N): 4.4 tonnes/year Total phosphorus (P): 1.2 tonnes/year Improvement of drinking water quality for 65, 000 inhabitants
Grant	DKK 9,823,697
Total costs	DKK 51,000,000

Project title	Protection of the Vistula River and its River Basin
File no.	124/031-0218
Project recipient	Wroclawek Municipality
Project manager	AEC
Project description	The purpose of the project is to attach eight small towns to an existing waste water treatment plant and to install a mini waste water treatment plant on 81 small private properties. In connection with the mini waste water treatment plants, a slam treatment plan will be drawn up for the area.
Environmental effect	Reduction of waste water discharge: BOD: 22,720 kg/year Total nitrogen (N): 4,130 kg/year Total phosphorus (P): 962 kg/year.
Grant	DKK 3,350,000
Total costs	DKK 14,775,000

Project title	Extension of Gryfino Waste Water Treatment Plant, Phase II
File no.	124/031-0231
Project recipient	Gryfino Municipality
Project manager	COWI
Project description	Gryfino Municipality has previously received support for the WWTP (preliminary study and engineering design for the Gryfino WWTP). In connection with the visit by the Advisory Committee to Gryfino, the city has applied for grants for an extension of the plant (to 70,000 PE and in compliance with EU discharge standards). The purpose of this project is to identify the needs of the municipality (technical consultancy and equipment for the plant).
Environmental effect	Reduction: BOD5: 260,245 kg/year SS: 480 kg/year Total nitrogen (N): 41,245 kg/year Total phosphorus (P) : 8,395 kg/year In addition, the reduced waste water discharge will contribute to improving the drinking water quality of Szczecin, which uses the Oder River as a drinking water intake. Finally, the improvement of the water quality in the Oder River means an increased protection of the biodiversity in the nearby national park, situated along the river along the Polish-German border.
Grant	DKK 6,047,539
Total costs	DKK 12,400,000

Environmental projects in Romania

In 2000, like in 1999, the goal has been to ensure close and goaloriented co-operation between the Romanian Ministry of Environment, the EU delegation and the DANCEE programme. The idea has been to utilize the Danish flexibility, experience of implementation and parts of the bilateral funds to catalyse allocation of further funds to Romania and to ensure implementation of projects. This has been effected within the framework of the two EU facilities, the LSIF (Large Scale Infrastructure Facility) and ISPA.

In 2000, the co-operation between the above-mentioned partners in relation to ISPA has been concentrated on Arad, Craiova and Piatra Neamt, and in relation to LSIF, on Brasov, Mangalia, Oltenita and Jiu Valley.

In the Danish activity area, the County of Neamt, three projects have been initiated. A major waste project has been initiated in the County of Neamt in co-operation between EU-ISPA, DANCEE and the Romanian authorities. Furthermore, the possibilities of implementing an environmental project at the paper mill Petrochart are being examined. Finally, it has been decided to continue co-operation with the local environmental authorities in the County of Neamt.

Priority has also been given to assisting initiatives to reduce the substantial air pollution from power plants in Romania. Demonstration projects in Brazi and Isalnita have been initiated.

In 2000, the possibilities of launching environmental activities within the textile industry in Romania will be examined with a view to implementation in 2001.

Environmental projects in Russia

In 2000, co-operation with Russia was intensified. With total assistance in 2000 amounting to well over DKK 75 million, Russia is now the largest recipient of DANCEE assistance - a tendency which is expected to continue in 2001.

The assistance continues to be concentrated on the Baltic-Sea run-off area with focus on St. Petersburg and the Leningrad region, Kaliningrad, Novgorod and Pskov. Besides, the co-operation with the Moscow region has been continued, and one new project has been initiated in Smolensk.

In 2000, the co-operation has been affected by the restructuring of the Russian administration after the election of Putin as new President at the beginning of the year. In the environmental area, this has meant that the old environmental committee has been placed under the Ministry of Natural Resources. Also governor elections have been held in several regions, but the restructuring now seems to have been finalised, at any rate within the environment and nature sector. 2000 thus saw a renewal of co-operation with old partners as well as establishment of co-operation with new partners.

The application round in Russia, which was announced in connection with the publication of DANCEE's new project manual in 1999, has also in 2000 triggered some good projects and meant that a number of projects have received higher priority. At the same time, environmental financing strategies for the water sector have been prepared for Novgorod and Pskov. In Kaliningrad assistance was given to developing a financing strategy within the water sector, and efforts will be made to include also the waste sector in the financing strategies. In total, the vast project experience gained together with the new environmental financing strategies give a good input for the programming of environmental assistance in Russia to be carried out by DANCEE in 2001.

Like in earlier years, assistance has been concentrated on the water sector also in 2000 - waste water as well as water supply and rehabilitation of the mains network. Forty-five percent of total assistance to Russia thus went to water projects. The majority of funds have been spent on equipment supplies, and it is characteristic that a relatively high degree of Russian co-financing has been achieved for these projects, especially in the St. Petersburg and Moscow areas.

Within nature resource management, substantial assistance was granted in 2000, corresponding to about 30 percent of the total framework. Russia is characteristic in having conserved a nature holding values which are either exterminated or endangered in Western Europe. The economic recession has had the effect, however, that there are few resources available for enforcing nature protection in the protected areas. At the same time, a partly uncontrolled utilization of natural resources poses a serious threat. A number of projects were therefore initiated in 2000, with a view to strengthening nature education and management.

In Pushkin outside St. Petersburg, assistance is given to establishing a nature school inspired by Danish experience. In the Valdai national park, which is of a size corresponding to that of the total Danish state forests, the park administration is assisted in providing nature education, and the long-term foundation of the park is strengthened through nature-based tourism and naturefriendly forestry. In the Yuntolovski nature reserve west of St. Petersburg, assistance is given to strengthening the involvement of the local population in the protection of the area, which is located right next to a satellite suburb with 300,000 inhabitants. In the South Eastern part of the Chudskoye lake, the establishment of a Ramsar area with a view to protection of birdlife is being assisted.

Within the cultural environment area, a project was initiated in 2000 for the restoration of the Inner Courtyard of the State Hermitage Museum (the Winter Palace). In future, the Inner Courtyard will be the main entrance for the 3-4 million visitors to the Museum per year. The project is linked up with the Danish assistance for rehabilitation of the heating system of the Museum.

In the air sector, projects corresponding to well over 20 percent of total assistance to Russia were initiated, e.g. within energy savings and reduction of air pollution from the metal industry in St. Petersburg.

A small amount of assistance has been given to the waste sector in connection with incinerator no. 3 in Moscow. The waste sector is expected to gain increasing importance in future, however. Danish assistance in the range of DKK 8 million has thus been indicated for the cleaning up of the plant for hazardous waste in Krasny Bor outside St. Petersburg.

As something new, DEPA has started a regional project in Russia and the Baltic countries on the POP (Persistent organic substances) Convention. Also the chemical area is expected to come to play an increasing part in Danish assistance to Russia because of the large accumulation of organic substances from the Russian industry in the environment in Arktis.