Country Bulgaria
Bulgaria
Czech Republic
Estonia
Estonia
Hungary
Hungary
Latvia
Latvia
Lithuania
Lithuania Fund National Environmental Protection Fund
National Trust EcoFund State
Environmental Fund
Environmental Fund
Environmental Investment Centre
Central Environmental Protection Fund
Environmental Protection Fund
Environmental Protection Fund
Environmental Investment Fund
State Nature Protection Fund
Environmental Investment Fund
Year established (in current form) 1993
1996
1992
1990Legal status changed in 19991 2000
1993Legal status changed in 19992 1999
1996
1997
1987
1996
Major revenue sources (1997)
Fuel Charge (78.4 %) Privatisation (13.8 %)
Debt swap with Switzerland, World Bank grant Economic instruments (51%)
Privatisation (28%) Loan repayments (15%)
Profits/financial Operations (6.1%) Economic instruments (67%)
Privatisation (27%) Loan repayments (2%) State budget
(Loan repayment)
Economic instruments (82%)
Phare grant (4%) Loan repayments (5%) State budget
(Loan repayment)
Economic instruments, Loan repayments
Transfer from Latvian Environmental Protection Fund,
Phare grant, Other/international sources
Fines for violation of environmental laws and regulations
EU grant,
Economic instruments
Annual revenues (in million USD; data for 1997) 9.5
5.2
167
7.7
14 (in 2000)
81
114(in 2000)
9.1
2.6
1.14 (in 2000)
2.1
Disbursement mechanisms Grants (76.8%) Interest free loans (7.7%)
Equity investments (15.6%)
Grants (85%) Interest free loans (15%)
Grants (55%) Interest free/
Subsidised loans (44%)
Interest subsidies (0.6%)
Grants (90%) Interest free/
subsidised loans (10%)
Subsidised loans
Grants (75%) interest free/
subsidised loans (25%)
Grants, Loans, Interest subsidies, Loan guarantees Grants,
Subsidised loans
Subsidised loans, Loan guarantees, Equity investments
Grants
Grants, Subsidised loans
Environmental Charges and the Creation of a National Environmental Fund” was prepared in Albania in 1995. Though the law was in principle approved in 1996, it did not pass into legis-lation, and its final passage is still pending (Panariti 2000). The legal provisions for environ-mental funds were established relatively early in both of the republics comprising Yugoslavia, under the environmental protection laws of 1991 (Serbia) and 1996 (Montenegro). Yet the scope of these funds remained rather limited, both in terms of the revenues generated, and in their capacity to tackle the environmental issues within the turbulent political and economic environment that existed in the country (Mileusnic-Vucic 2000).
Earmarking17is the term applied to the practice of assigning revenue from specific taxes to finance specific services independent from the central government budgetary process.
During transition, earmarking has several advantages. Politically, it makes the introduction TABLE 3.1
Poland
Poland
Poland3
Romania
Slovenia
Slovakia
National Fund for Environmental Protection and Water Management
ECOFund Foundation
Krakow Provincial Fund
Fund for Environmental Protection Environmental Development Fund
State Environmental Fund
1989
1992
1993
2000
1994
1991
Economic instruments (55%)
Loan repayments (36%)
International (4%) Profits/financial operations (6%) Debt swaps with US, Italy, Switzerland, France, Sweden (84%) Profits/financial operations (15%) Norwegian grant (1%) Economic instruments (60%)
Loan repayments (24%)
Profits/financial operations (15%) Economic instruments Other sources
Privatisation (40%) World Bank loan (27%)
Loan repayments (23%)
Profits/financial operations (8.2) Economic instruments (75%)
State budget (24%)
419
33
15
n.a.
20
31
Subsidised loans (61%)
Grants (31%) Interest subsidies (3%) Equity investments (5%)
Grants (100%)
Subsidised loans (75%) Grants (25%)
n.a.
Subsidised loans (100%)
Grants (100%)
Sources: OECD (1999b), REC (2001e forthcoming) Symbols: n.a. = data not available
Notes:
1. The Estonian Environmental Fund was absorbed back into the central budget in 1999. The Environmental Investment Centre was established in 2000 and will administer funds from the state budget.
2. The Central Hungarian Fund was absorbed into the national budget based on a 1998 budget law creating uniform rules for ear-marked state funds (Government Decree No 217/1998). The revenue sources remain similar but have become a budget line of the Ministry of Environment.
3. Poland has a large number of sub-national environmental funds; Krakow Provincial Fund is one of the largest, and is listed here as an example of the size of regional funds in Poland.
of pollution charges more attractive to the public and polluters — who recognize that a por-tion of pollupor-tion payments will be recycled via subsidies for environmental improvement.
From an environmental perspective, it guarantees a reasonably stable flow of revenues, which can be used to help promote investment in the environmental sector. The earmarking of public revenues for environmental funds, while presenting advantages from an environ-mental financing perspective, however, raises a number of concerns in light of current OECD country practice regarding public expenditure. In 1995, the OECD developed the St.
Petersburg Guidelines for Environmental Funds in the Transition to a Market Economy;
which have acted as a benchmark for the development and evaluation of environmental funds in transition economies.
The arguments against earmarking as the best solution to financing environmental goals are numerous from the perspective of efficient public financing. The St. Petersburg Guidelines recognise that earmarking introduces rigidity into public spending programmes, which, by nature of the transition period, must respond flexibly to varying pressures.
Earmarking has the potential to lead to inefficient allocation of resources and the creation of vested interests that will push for extension of subsidised financing for longer than may be necessary. Moreover, while environmental funds play a short- to medium-term function of providing necessary financing to top-priority projects, they do not provide longer-term solutions to many of the underlying problems preventing investments in the environmental sector, such as deficiencies in the commercial banking sector and poor enforcement of environmental policies.
A comprehensive OECD study (1999c) maintains that the funds should still be consid-ered a “second-best” and transitional alternative to more direct application of the PPP. The study further concludes that funds have proved to be useful by: accelerating the pace of environmental improvement; catalysing the development of a domestic market for envi-ronmental finance; leveraging additional finance for envienvi-ronmental investments; enabling a more flexible use of financial resources, by avoiding certain bureaucratic constraints posed by normal budgetary procedures; and strengthening domestic capacities for project prepa-ration and policy implementation. Environmental funds accounted for 30-40 percent of total national pollution abatement and control investment expenditures in Poland during 1993-96. In Hungary, Lithuania and Slovenia this indicator was about 20 percent in 1996 (OECD/EAP Task Force, 1998).
4.1 INTRODUCTION
Chapters 4-9 analyse environmental taxes and charges implemented in the 15 CEECs in more detail. The discussion focuses on a regional comparison, and, where possible, the situ-ation in CEECs is compared with the situsitu-ation in EU member states. The informsitu-ation present-ed in these chapters is prpresent-edominantly baspresent-ed on country databases (Annex 1) designpresent-ed by the SIEI Secretariat and compiled by national experts. In addition, a series of national reports pro-vided by the SIEI expert network was used, as well as relevant information sources for OECD/EU countries. Every attempt has been made to be as up-to-date and accurate as possi-ble, despite the fact that the use of EIs for environmental policy is rapidly changing.
4.2. MOTOR FUELS
An analysis of excise taxes for motor fuels (petrol leaded, petrol unleaded and diesel) shows variation between the countries covered in this survey.18Table 4.1 presents excise tax rates on these fuel products in CEECs for the year 2000. As a benchmark, the EU minimum excise tax rates (Directive 92/82/EEC of 19 October 1992) have been used, and the compar-ison shows that a number of countries have not only reached but also exceeded these lev-els. Hungary and Slovenia have tax rates for unleaded petrol and diesel that are above the EU minimum excise tax rates. Several other countries are levying taxes on unleaded petrol that are in accordance with EU requirements. Noteworthy is the situation of two South Eastern European countries — FYR Macedonia and Albania. In FYR Macedonia, the rate levied on unleaded petrol in April 2001 is the single highest rate in the CEECs, and the rate
4. Economic Instruments for Energy Products
TABLE 4.1