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Environmental Assistance to Eastern Europe - Annual Report 2000

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.

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