Trends in Environmental Finance in EECCA

1
Trends in Environmental Finance in EECCA
EAP Task Force

• Carla Bertuzzi, Xavier Leflaive
• Paris, 22 February 2007

2
Outline of the presentation

• Rationale for the project
• A reminder on method
• Key messages
• Environmental protection expenditure (EPE)
• International environmental assistance (IEA)

3
Rationale for the project

• To provide analysis and policy conclusions on
  environmental finance in EECCA countries to
  Ministers at the Belgrade Conference
• a comprehensive picture of all sources of
  environmental finance in EECCA
• a basis for the ministerial discussion
• a synthesis of EAP Task Force work
• Two companion publications for Belgrade
• Category 1 paper on Mobilising environmental
  finance in SEE and EECCA (with PPC and the World
  Bank)
• Category 1 paper on Progress assessment in the
  implementation of the EECCA Strategy

4
A reminder on methodEnvironmental expenditure

• Environmental Protection Expenditure
• Protection of ambient air and climate
• Wastewater management
• Waste management
• Protection and remediation of soil, groundwater
  and surface water
• Noise and vibration abatement
• Protection of biodiversity and landscape
• Protection against radiation
• Research and development
• Other environmental protection activities

• Abater principle vs financing principle
• Sectors
• Public sector
• Business sector
• Specialised Producers of Environmental Services
• Household sector
• Type of expenditure
• Investment Expenditure
• Current Expenditure
• Receipts from by-products
• Subsidies/Transfers
• Revenues

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A reminder on methodProject organisation

• Build on existing work
• EAP Task Force work on environmental finance
• DAC database on ODA
• Collect up-to-date and reliable data
• In EECCA, via national administrations, on
  environmental expenditure and finance
• Analyse information
• Compatibility of data
• Crosscheck with international sources
• Key messages
• Discuss key messages
• Annual meeting of the network of environmental
  finance experts (February 2007)
• Annual meeting of the EAP Task Force (March 2007)

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A reminder on methodThe data collected

• 10 countries out of 12
• no reporting for Turkmenistan and Uzbekistan
• Scope
• domains covered air, wastewater, soil and
  groundwater, biodiversity, still little
  information on waste
• some countries included expenditure for the
  management of natural resources and their
  mobilisation
• Level of detail
• insufficient coverage of the public sector
• low reporting on transfers
• Data quality
• enhancement of the register
• specification on sectors coverage
• distinction between financing and spending
• estimation of investments for integrated
  technologies and cleaner products

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Structure of the report

• Economic trends in EECCA
• Environmental expenditure in EECCA
• Trends
• Share by domain, sector, type
• Sources of environmental expenditure
• International environmental assistance and
  financing
• Bilateral, multilateral
• Share by country, domain

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Key messages A sharp dichotomy

• In economic terms
• GDP, GDP per capita
• from USD 763.3 billion (Russia) to USD 2.3
  billion (Tajikistan)
• Growth performance,
• 26 per cent in Azerbaijan in 2006
• -0.6 per cent in the Kyrgyz Republic in 2006
• Drivers for growth
• energy- and resource-rich economies

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Key messages - EPEThree groups of countries

• In Russia, Ukraine and Kazakhstan
• between 1.6 and 1.2 of income allocated to
  environment protection similar to CEE countries
• environmental expenditure per capita remains low
  at less than 40 USD per year (some 50 USD in the
  Slovak Republic and 100 USD in Poland)
• In Moldova, Azerbaijan, Georgia, the Kyrgyz
  Republic and Armenia
• environment protection expenditure are less than
  30 million USD per year
• between 1.0 and 0.2 of GDP
• environmental protection expenditure per capita
  remains extremely low in both absolute and
  relative terms (less than 10 USD per capita per
  year)
• Belarus
• relatively high levels of environmental
  expenditure (499 million USD, 2.4 of GDP, 44 USD
  per capita)
• investments represent a significantly high share
  of environmental protection expenditure

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Key messages - EPEThree groups of countries

• Environmental protection expenditure, 2000-05,
  million 2003 USD

• Environmental protection expenditure per capita,
  2000-05

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Key messages - EPEUneven benefits from GDP growth

• Environmental protection expenditure as a share
  of GDP

12
Key messages - EPEConcentration on few domains

• Wastewater
• The lions share (between 43 and 67 of the total
  amount)
• Especially for countries where EPE is low
• Air attracts a significant share of the total in
  industrialised economies
• 37 in Kazakhstan 22 in the Russian Federation
  and Ukraine), in Armenia (32) and Belarus (20)
• Waste attracts relatively little attention
• except in Kazakhstan (18), Ukraine (15) and the
  Kyrgyz Republic (12)

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Key messages - EPEContrasted performances for
investments

• Environmental protection investments as share of
  GFCF and GDP per capita, average 2000-2005

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Key messages - EPEContrasted priorities for
investments

• The public and the private sector do not put
  their money in the same domain
• the public sector allocates most of its
  investments to wastewater
• the private sector invests mainly on air
• Types of investment, by domain, by country

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Key messages - EPETowards a measurement of
transfers

• Azerbaijan
• only marginal transfers between sectors
• Belarus
• 40 of the total amount spent by the private
  sector have been transferred
• the public sector is a net financier in the
  wastewater sector only
• Kazakhstan
• all expenditure from the private sector for air
  is financed by the firms own resources
• transfers from the public sector for wastewater,
  soil and groundwater, and biodiversity
• for waste, net transfers go from the private
  sector to the public sector
• Kyrgyz Republic
• there are (marginal) transfers from the private
  to the public sector only in the wastewater and
  waste domains (some 6 of the total expenditure
  of the private sector in each domain)
• Moldova
• the bulk of public expenditure is in
  biodiversity, where there are no transfer to
  other sectors
• transfers from the private sector are significant
  for wastewater only

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Key messages IEAA structural change

• Environmental assistance to the EECCA countries,
  2001-05, million USD

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Key messages IEAThe attraction of large,
oil-rich countries

• Donors and IFIs environmental assistance to
  EECCA countries, total 2001-2005

18
Key messages IEAA limited direct impact

• Neither ODA nor IFI finance can be a substitute
  for domestic environmental finance in EECCA
• Bilateral and multilateral environmental
  assistance remains marginal as a share of GDP
  (below 0.6 in most cases)
• Bilateral environmental assistance represents
  less than 5 USD per capita and per year
• Multilateral environmental assistance is below 3
  USD per capita and per year
• Demonstration and catalytic effects
• technology transfer
• development of new skills and know-how

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Key messages IEADifferent priorities, by domain

• Donors and multilateral environmental assistance
  by domain, total 2001-05

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Key messages An on-going challenge

• To scale up and disseminate the positive
  experiences from donor and IFI projects
• On the donors side
• improved coordination among donors and IFIs to
  avoid overlaps and competition
• On EECCA countries side
• explicitly identify environmental protection as a
  priority in national economic strategies and
  bilateral cooperation programme
• design sustainable and realistic finance
  strategies to achieve environmental goals
• strengthen capacity to plan, at both central and
  decentralised levels
• improve capacity to prepare and implement
  projects
• demonstrate capacity to achieve environmental
  objectives