EAP Task Force

Trends in Environmental Finance in EECCA

Carla Bertuzzi, Xavier LeflaiveParis, 22 February 2007

EAP Task Force 2

Outline of the presentation

Rationale for the project

A reminder on method

Key messages– Environmental protection expenditure (EPE)– International environmental assistance (IEA)

EAP Task Force 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

EAP Task Force 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

EAP Task Force 5

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)

EAP Task Force 6

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

EAP Task Force 7

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

EAP Task Force 8

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

EAP Task Force 9

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

EAP Task Force 10

Key messages - EPEThree groups of countries

Environmental protection expenditure, 2000-05, million 2003 USD

Environmental protection expenditure per capita, 2000-05

Armenia

Azerbaijan

Belarus

Kazakhstan

Kyrgyz RepublicMoldova

Ukraine

0

200

400

600

800

1 000

2000 2001 2002 2003 2004 2005

mill

ion

2003

USD

Russian Federation

5 000

5 200

5 400

5 600

5 800

6 000

Armenia

Azerbaijan

Belarus

Kazakhstan

Kyrgyz R.

Moldova

Russia

Ukraine

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005

cons

tant 2

003 U

SD pe

r cap

ita

Poland

Slovak Rep.

Portug.

0

20

40

60

80

100

120

2003 2004

cons

tant 2

003 U

SD pe

r cap

ita

EAP Task Force 11

Key messages - EPEUneven benefits from GDP growth

Environmental protection expenditure as a share of GDP

Armenia

Azerbaijan

Belarus

Kazakhstan

Kyrgyz Rep.

Moldova

Russia

Ukraine

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000 2001 2002 2003 2004 2005

% G

DP

Poland

Slovak Rep.

Portug.

0

0.5

1

1.5

2

2.5

3

2003 2004%

GD

P

EAP Task Force 12

Key messages - EPEConcentration on few domains

Wastewater– The lion’s 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%)

EAP Task Force 13

Key messages - EPEContrasted performances for investments

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

Moldova

Kyrgyz Rep.Armenia

Azerbaijan

UkraineBelarusKazakhstan

Russian Federation

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

0.0 1.0 2.0 3.0 4.0 5.0

environmental investments % GFCF

GD

P p

er

ca

pit

a,

PP

Ps

EAP Task Force 14

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

Armenia Azerbaijan Kazakhstan Kyrgyz Republic

Ukraine

Priority 1 air wastewater air wastewater wastewater

Type of investment

end of pipe end of pipe end of pipe end of pipe some process integrated

Priority 2 air

Type of investment

some process integrated

EAP Task Force 15

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

EAP Task Force 16

Key messages – IEAA structural change

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

0

100

200

300

400

500

600

2001 2002 2003 2004 2005

mill

ion

US

D

bilateral donors IFIs

EAP Task Force 17

Key messages – IEAThe attraction of large, oil-rich countries

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

IFIs

Azerbaijan4%Belarus

0.5%

EECCA Reg.1%

Tajikistan3%

Ukraine6%

Uzbekistan7%

Kyrgyzstan0.4%

Moldova1%

Georgia2%

Kazakhstan10%

Armenia3%

Russia63%

Bilateral donors

Armenia7%

Azerbaijan6%

Georgia5%

Moldova2%

Russian Fed.21%

Kazakhstan27%

Belarus0.3%

EECCA region12%

Turkmenistan

0.1%Tajikistan

3%

Ukraine5%

Uzbekistan7%

Kyrgyz Rep.5%

EAP Task Force 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

EAP Task Force 19

Key messages – IEADifferent priorities, by domain

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

IFIs

Land3%

Water Supply and

Sanitation32%

Other environmenta

l aid4%

Biodiversity2%

Pollution control

2%

Environmental policy

2%

Water Resources

Management31%

Renewable Energy

24%

Solid Waste Management

0.2%

Bilateral donors

Water Supply and Sanitation

41%

Land2%

Other environment

al aid4%

Biodiversity2%

Pollution control

3%

Environmental Policy

28%

Water Resources

Management12%

Renewable Energy

5%Solid Waste Management

3%

EAP Task Force 20

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