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Mirjana Papafava, M. Econ. Head of Economic Incentives Department Ministry of Environmental Protection and Physical Planning Republic of Croatia

Environmental Strategy&

ENVIRONMENTAL FUNDIN CROATIA

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REAP Project No. 19REAP Project No. 19“Mini Workshop on the Future of Environmental Funds in CEE”

Prague, September 10-12, 2001

PRESENTATION:

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TOPICS

Figure 1. Environmental Strategy

Figure 2 Priority Activities Plan (PAP)

Figure 3 Priority Activities Plan (PAP) – Investment projects

Figure 4. Assessment of 10-year implementation costs

Figure 5. Fund for Environmental Protection and Energy Efficiency

Figure 6. Legal grounds for Fund establishment, legal status, organisation Fund´s bodies and management and application of regulations

Figure 7. Objectives and principles, Fund activities and funding methods and Fund resources users

Figure 8. Earmarking of funds

Figure 9. Funding mechanisms

Figure 10. Funding sources and allocation

Figure 11. Environmental Fund establishment benefits

Figure 12. International support

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REPUBLIC OF CROATIAREPUBLIC OF CROATIAEnvironmental StrategyEnvironmental Strategy

The Republic of Croatia has prepared the Draft Draft National Environmental StrategyNational Environmental Strategywith Action Planwith Action Plan ( (Environmental StrategyEnvironmental Strategy) ) in order to:

Reassess and restate its objectives and priorities in environmental protection Guide its:

over the medium term, including assurance of long-term stable financing based on:

Attract the interest and support of external partners

FIGURE 1

environmental policy formulation institutional development and investment planning

sustainable development principles partnership and shared responsibility

MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

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PRIORITY ACTIVITIES PLAN (PAP)PRIORITY ACTIVITIES PLAN (PAP)

Based on sustainable development principles and an assessment of environmental problems and priorities, thethe Environmental Strategy Environmental Strategy document includes strategic elements and an Action PlanAction Plan in each area of concern, summarised in the Priority Priority Activities Plan (PAP)Activities Plan (PAP) for the highest priority actions that need to be started in the next two years.

The PAP presents two sets of projects:The PAP presents two sets of projects:

1) Legislative/institutional/organisational projects

2) Investment projects

FIGURE 2MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

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PRIORITY ACPRIORITY ACTIVITIESTIVITIES PLAN ( PLAN (PAPPAP))

SectionSection: PriorityPriority IInvestnvestment ment PProjectsrojects

1) WASTE MANAGEMENT1) WASTE MANAGEMENT Remediation and reconstruction of existing sites Construction of new disposal sites Preparation of a pilot project for solid municipal waste management on islands and

in coastal area on the model of one island

2) WATER MANAGEMENT2) WATER MANAGEMENT Construction of sewage systems Construction of wastewater treatment facilities

FIGURE 3MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

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ENVIRONMENTAL ENVIRONMENTAL STRATEGSTRATEGY Y COST ASSESSMENTCOST ASSESSMENT

ENVIRONMENTAL STRATEGY

Assessment of 10-year implementation costs for: (bio US$)

Solid waste management………...….……….………...2.20

Wastewater treatment………….…………….………...5.00

Air quality protection……………………………….….0.56

Total…………………………………...………...…….7.76

Annual average (estimate)* ……………………US $ 776.0 mio /3.7% GDP/

Costs per capita at 2000 level * ……………….US $ ..1.712,78

__________________ Note: 1999 total investments in fixed long term environmental assets amounted to US $ 35.0 mio

/0.23% GDP /**Statistical yearbook, 2000

FIGURE 4MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

7MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

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Ministry of Environmental Protection and Physical PlanningMinistry of Environmental Protection and Physical Planning

ENVIRONMENTAL FUND

Ministry of EconomicMinistry of Economic Affairs Affairs

ENERGY EFFICIENCY AND RENEWABLE SOURCES FUND

FUNDFUND FOR FOR ENVIRONMENTENVIRONMENTAL AL

PROTECTIONPROTECTION AND ENE AND ENERGYRGY EFFICIENCYEFFICIENCY

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ENVIRONMENTAL FUNDENVIRONMENTAL FUND//from the Draft Environmental Fund Billfrom the Draft Environmental Fund Bill, , May May 2001/2001/

Legal groundsLegal grounds for Fund establishment for Fund establishment Law on Environmental Protection, Article 60, para 5 (Off. Gazette 82/94)

Legal status, organisation, Fund's bodies and managementLegal status, organisation, Fund's bodies and management legal person - public and non-profit institution owned by the Republic of Croatia established by the special law, regulating principal issues: - Fund set-up

- Fund organisation and activities

- Fund bodies and management

- financial sources, etc. Fund's Statutes regulate internal organisation, decision-making procedures, cooperation with external

state and other bodies, and international institutions Fund's bodies: Management Board and Managing Director, Management Board: - Representatives of relevant ministries, Croatian Chamber of Commerce, scientific institutions, independent NGO experts

- MB members are appointed and renounced by the Government of the Republic of Croatia upon proposal of the minister for the environment - Managing Director is elected through public procedure and appointed/renounced by the GRC

Application of regulationsApplication of regulations

Regulations on public institutions, the Environmental Fund Law, regulations on non-profit organisations and

non-budgetary funds, the Croatian Code of Obligations.

FIGURE 6MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

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Objectives and principlesObjectives and principles Providing additional funds (i.e. not supplementary to the existing environmental fund sources) for drawing up and

implementation of environmental programmes, projects and related activities Financing the priority activities determined by the Environmental Strategy Respecting principles of transparency and publicity, objectivity and responsibility in decision-making, and

international standards of good practice Through allocation of resources, respecting the principle of reaching the highest overall benefits to the environment

with the available resources

Fund activities and funding methodsFund activities and funding methods:: financial services of granting : - incentive loans

- subsidies on interest

- guarantees

- grants (donations) other activities: - maintaining a database of environmental projects

- fostering cooperation with local and international financial institutions focused on project funding

- rendering consultancy on specific programmes, etc.

Fund resources usersFund resources users Any legal or physical person which complies with the Fund's prescribed conditions and procedures, from the private sector

(business) and public sector (units of local self-government, public companies, etc.)

FIGURE 7MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

ENVIRONMENTAL FUNDENVIRONMENTAL FUND//from the Draft Environmental Fund Billfrom the Draft Environmental Fund Bill, , May May 2001/2001/

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Earmarking of funds:Earmarking of funds:

Protection, conservation and improvement of air, soil, water and sea quality, climate change mitigation and ozone layer protection

Protection and conservation of the biological and landscape diversity Remediation, encouraging of waste generation avoidance and reduction, waste reuse and

treatment Environmental infrastructure improvement and construction Improvement in environmental monitoring and assessment, and environmental management

systems Encouraging sustainable use of natural resources Encouraging sustainable businesses and economic development Encouraging research and development projects and activities

FIGURE 8MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

ENVIRONMENTAL FUNDENVIRONMENTAL FUND//from the Draft Environmental Fund Billfrom the Draft Environmental Fund Bill, , May May 2001/2001/

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ENVIRONMENTAL FUND ENVIRONMENTAL FUND Activities envisageActivities envisage

Funding mechanismsFunding mechanisms::

Direct funding of projects not attractive for commercial financing, but being of public interest (local self-government units, public institutions, public companies)

Funding of commercial projects (developers) through commercial banks

Funding in collaboration with international organisations and financial institutions

Allocation of funds primarily through public tenders

FIGURE 9MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

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ENVIRONMENTAL ENVIRONMENTAL FUNDFUND

PERMANENT SOURCES State Budget funds generated by redirecting portions of charges, excise taxes and fines Extrabudgetary funds created by redirecting portions of the following charges: - Water charges in water management sector - Charge for multiple non-wood forest functions - Agricultural land conversion charge Instalment loan payments with interest New charges: - Environmental polluter charges - Environmental user charge

PERIODICAL SOURCES

1% of revenues from privatisation Funds based on international bilateral and multilateral cooperation Grants Other

LOANSLOANS

SUBSIDIESSUBSIDIES

GUARANTEESGUARANTEES

GRANTSGRANTS

BANKSBANKS ENVIRONMENTALENVIRONMENTAL

INVESTORSINVESTORS

FUNDING SOURCESFUNDING SOURCESALLOCATIONALLOCATION

Funding Sources and AllocationFunding Sources and Allocation

Source: Draft Environmental Fund Bill, May 2001

PUBLIC SECTOR

PRIVATE SECTOR

FIGURE 12MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

ENVIRONMENTAL FUNDENVIRONMENTAL FUND//from the Draft Environmental Fund Billfrom the Draft Environmental Fund Bill, , May May 2001/2001/

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Environmental Fund Establishment BenefitsEnvironmental Fund Establishment Benefits::

Permanent and steady source of additional (not substitute) environmental protection funding Efficient use of total available funds for financing environmental protection in Croatia Encouraging and promoting development of project background documentation Focal point for prospective environmental investors and donors at national, regional and local levels Supporting implementation of the Environmental Strategy, international environmental treaties,

regulations and documents Central database on projects, investments, funding sources for environmental protection Creating capacity for approval of applications for the use of funds Loan and subsidy granting and environmental evaluation criteria Additional market-based environmental funding sources and mechanisms – Polluter Pays Principle Systematic cross-linking of state authorities, financial institutions, businesses Systematic collaboration with international institutions and organisations Macroeconomic effects: - Direct contribution to permanent, systematic and efficient environmental protection and increased investment in sustainable development - Improved quality of total Croatian development and quality of life

FIGURE 10MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

ENVIRONMENTAL FUNDENVIRONMENTAL FUND//from the Draft Environmental Fund Billfrom the Draft Environmental Fund Bill, , May May 2001/2001/

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ENVIRONMENTAL FUNDENVIRONMENTAL FUND

 International SupportInternational Support

UNECE Committee on Environmental Policy in the 1999 Environmental Performance Review, supports establishment of the Environmental Fund as a step towards improved financing of environmental protection and efficient payments (revenues) and environmental expenditures during the transition towards the market economy

European Union, Stability Pact, the Regional Environmental Reconstruction Program for SE Europe (REReP) German Government through German Technical Collaboration Society (Deutsche Gesellschaft für Zusammenarbeit, GTZ)  

FIGURE 11MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department