Implementing the Environmental Fiscal Reform – Greening the State Budget in Lithuania Jurate...

Implementing the Environmental Fiscal Reform – Greening the State Budget in Lithuania

Jurate Varneckiene

Center for Environmental Policy, Vilnius, Lithuania

November 20, 2003

Prague

Main categories of economic instruments in Lithuania

Taxes/ charges (emission charges, product charges, taxes on natural resources)

Deposit – refund systems (reusable items)

Enforcement incentives (non – compliance fees)

Subsidies (grants, soft loans, interest subsidies)


Emission charges were introduced in 1991

New law on emission charges adopted in 2002

The objective is to prevent or reduce possible damage to the

environment, to accumulate funds

Water, air and soil pollution


Emission charges are paid by stationary sources which obtain environmental permits

Emission charge rates stable in period 2004 – 2009

Polluters may be exempted from the emission charges

Emission charges on air pollution from mobile sources


Waste disposal charge is foreseen in strategic documents

Product charges were introduced in 2003

Product charges on: Packaging, Tires, Batteries, Mercury luminescent bulbs, Filters (oil, fuel), Hydraulic shock absorbers.

The purpose is to stimulate financially the collection and recycling of some waste streams, to reduce the consumption of these products

Charge exemptions exist


Taxation of natural resources The purpose is to promote the responsible use of

natural resources Tax is paid by persons and legal entities that must

obtain permit for the extraction of resources Tax is levied on the extracted amount of almost all

types of natural resources Fiscal mean to generate income rather than

incentive to change the behavior


Oil and gas extraction taxation

The Law on Oil and Gas Resource Tax was amended in 2003

Basic rate is as a percentage of the extracted oil/gas sales price

Tax allowance mechanism exists

Tax revenues amounted 23 – 26 million € in resent years

Deposit – refund system

Voluntary and market driven for refillable beverage containers

Mandatory deposit for certain reusable packaging established since 2003, however it is not yet operational

Enforcement incentives (non – compliance fees, fines)

Non – compliance fees for exceeding pollution allowable limits

Fines for emissions without permits or concealed emissions

Fines for concealed amount of natural resources extracted

Use of revenue from environmental taxes/charges

A majority of environmental charges are earmarked

Major part of revenue generated from emission charges and tax on oil and gas

Revenue (million €) 2000 2001 2002

Emission charges 14.1 20.5 23.2

Natural resource taxes 4.3 4.3 5.9

Tax on oil and gas 12.5 23.9 25.9

Total 30.9 48.7 54.8

Use of revenue from environmental taxes/charges

Allocation of revenue from environmental taxes/charges in Lithuania

CHARGE ON ENVIRONMENTAL POLLUTION

Emission chargesCharges on

packaging and other products harmful to environment

TAX ON STATE NATURAL RESOURCES&TAX ON OIL AND GAS

Fines for concealed pollution, non-compliance fees for exceeded limits/concentration

Tax on mineral resources, water extraction, fishing permits

Charge on hunting resources

NESP National Environmental

Support ProgramSTATE BUDGET

Packaging/ product waste management

program

LEIF Lithuanian Environmental

Investment Fund

MESPs Municipal Environmental

Support Programs

100 %

30 %70 %100 %

100 %

70 %30 %

Subsidies

Major sources for environmental subsidies/grant financing

State and municipal budgets;

Environmental funds/ programs;

International support (pre – accession funds, bilateral aid, IFI’s)

Subsidies

State budget

A major part of subsidies used for co-financing ISPA projects in water and waste sectors

State grants incorporated in the Public Investment Program (PIP)

Investments via PIP: 7.1 million € in 2001 8.7 million € in 2002

Subsidies

Lithuanian Environmental Investment Fund

Provides grants, soft loans, interest subsidies

Priority areas: Waste management, Water protection, Atmosphere protection

Budget (expenditures) – 5.7 million €

Number of projects supported – 42

Subsidies

National and Municipal Environmental Support Programs

Grants for small investment projects, technical assistance

Supported areas are atmosphere and water protection, remediation of past pollution, public awareness raising, etc.

National Environmental Support Program accounted 1.27 million € in 2002

Municipal Environmental Support Programs spent ~7 million € in 2001

Subsidies

Subsidy schemes (energy efficiency/housing project, public sector energy efficiency, etc.)

Administered by Central Project Management Agency (CPMA, established by the Ministry of Finance)

The purpose is to ensure efficient management of sovereign loans and other assistance funds

Schemes provide subsidies for energy saving measures

Implementing the Environmental Fiscal Reform – Greening the State Budget in Lithuania Jurate...

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