Economic measures

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Economic measures to support better environmental
performance
Dr. Piero Carlo Frigerio FinPiemonte expert
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INVESTMENT Application of financial resources
for the purchase of assets, equity holding, joint
ventures, know-how, patents and services liable
to provide direct or indirect economic benefits
in subsequent periods. Investment may therefore
be made in fixed assets, extraordinary expences,
deferred charges, working capital. Investment
activities take the form of proposals.
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PROPOSAL A proposal is the set of specific
investments required to achieve a
pre-established objective, clearly identificable
both economically and financially.
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PROJECT A project includes definition of the
means, resources and time required to make
the investment. Each proposal may
therefore comprise a number of different
projects in which part of the proposal is
implemented in conformity with the
pre-established timetable and objectives.
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The profitability of an investment proposal is
assessed, calculating the following indices
internal rate of return pay-back
period net present value
break-even point
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SOURCES OF FINANCING Report must provide an
overview of possible sources of financing to
cover the planned investments, indicating in
particular own funds recourse to
short/medium/long terms loans
indicating the
interest rate possible facilitations,
specifying the sums that can be
obtained, saved, financed and the relative rate
of interest in the case of loans
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Evaluation parameters for calculation of the
amount of investments cannot be defined a
priori. These parameters could for example refer
to the following indicators Turnover
Net profit Employees Owners capital etc.
although there is no direct link between these
indicators and the capability to make an
investment.
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Every company shall be free to define the amount
of investments, which it is willing to apply in
the future. From the companys point of view the
yearly fixed investments must not compromise the
profit too much. Any investment for Fixed
activities results in an immediate depletion of
its financial position, comparable to the amount
of the expense done. In particular, environmental
investments, in relation to the economic asset of
the farm, have only negative effects, since
environmental benefits (hardly definable) are of
public interest, mostly.
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We argue that the investments for environment
protection should not exceed on average 15-20
of the total year investments in order to be
sustainable. State Authority should favour
investments dedicated to fixed assets, by
providing industry with various economic benefits.
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Fixed investments for the improvement of the
plant management Benefits should address
investments on technology, in order that industry
achieves as soon as possible the efficiency
degree as to compete in the global market.
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Fixed investments for the improvement of the
environmental quality Regardless of the
procedures of public supports, we suppose that
public benefit for investments should be higher
for environmental investments than for
technology investments.
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Industries are currently eligible for EU
financing of investments. As a EU Member State
Slovakia has become the recipient of all the EU
policies and programmes. Among others, this means
the possibility to apply for a support from the
Structural Funds in the framework of the European
Regional Policy. In particular, measures aimed
at the introduction of technologies that enhance
environmental performance are encouraged.
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It is therefore possible that the investments
sustained by a company for the purpose of
protection of the environment will be
considerably reduced against the total necessary
amount. Requirements and procedures are reported
in Reference Document on Economics and
Cross-Media Effects DRAFT September 2003 European
IPPC Bureau (final version expected by December
2004)
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To realize the actions suggested by BATs, three
main aspects, at least, are fundamental to be
carefully analysed capability to carry out big
investments, as regards the amount of money and
the technical difficulties capability to run new
settlements (recent BATs could require specific
skills which are not available in the
company) economic capability to support the
investments and to get cash.