Eco-innovation in Hungary - European Commission in Hungary 1 Eco-Innovation Observatory T he Eco-Innovation Observatory functions as a platform for the structured collection and analysis

EIO Country Profile

2013

Eco-innovation in Hungary

Eco-innovation in Hungary 1

Eco-Innovation Observatory

The Eco-Innovation Observatory functions as a platform for the structured collection and analysis of an extensive range of eco-innovation information, gathered from across the European Union and key economic regions around the globe, providing a much-needed integrated information source on eco-innovation for companies and innovation service providers, as well as providing a solid decision-making basis for policy development.

The Observatory approaches eco-innovation as a persuasive phenomenon present in all economic sectors and therefore relevant for all types of innovation, defining eco-innovation as:

“Eco-innovation is any innovation that reduces the use of natural resources and decreases the release of harmful substances across the whole life-cycle”.

To find out more, visit www.eco-innovation.eu

Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the European Commission.


Eco-Innovation Observatory Country Profile 2013: Hungary

Author: Annamária Virág

Coordinator of the work package: Technopolis Group Belgium


Acknowledgments I would like to thank the following people for their kind contribution to the preparation of this report.

Ms Beatrix Kiss, Ministry of Rural Development

Ms Katalin Papp, Ministry of Rural Development

Ms Hilda Farkas, Association of Environmental Enterprises

Mr Miklós Gyalai-Korpos, PANNON Pro Innovation Services

A note to Readers

Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the European Union. A number of companies are presented as illustrative examples of eco-innovation in this report. The EIO does not endorse these companies and is not an exhaustive source of information on innovation at the company level.

This brief is available for downloaded from www.eco-innovation.eu/countries

Comments on this brief are welcomed and can be provided at www.eco-innovation.eu/hungary


Table&of&contents&

Summary .............................................................................................................................................. 5%

1% | Introduction................................................................................................................................... 6%

2% | Eco-innovation performance ....................................................................................................... 7%

3% | Selected eco-innovation areas and new trends....................................................................... 10%

4% | Eco-innovation barriers and drivers in Hungary ..................................................................... 12%

5% | Eco-innovation policy landscape.............................................................................................. 14%

6% | Good practice examples ............................................................................................................ 17%

References........................................................................................................................................... 22%


Summary The total financial resources used in Hungary by the research and development sector in 2012 exceeded 301 million Euros (Hungarian Central Statistic Office, HCSO). Annual R&D expenditure in Hungary equals 120 Euros/capita, which is a quarter of the EU average, but exceeds the average of the new EU member countries.

2013 was a year of transition for both the EU and the national funding instruments. Hungary – similar to other member states – has to find new opportunities to continue to improve its eco-innovation performance and to establish policies which promote this. In the Central-Eastern European region, Hungary is ranked 3rd in terms of R&D expenditure, which in 2011 totalled 1200 million Euros.

Compared to 2012, Hungary’s overall eco-innovation performance has declined and it now ranks 23rd among the 28 European countries. This is due to a strong reduction in eco-innovation inputs, the low level of government environmental and energy R&D appropriations and outlays, and the total value of green early stage investments.

Even though the National Environmental Technology Innovation Strategy 2011-2020 (NETIS) declares the Hungarian Government’s commitment to mainstream the concept of green economy, and accordingly to the scenarios cited in the National Energy Strategy 2030, the government has recently agreed a finance package with Russia for the construction of two new reactors at the Paks nuclear power plant. The government concluded this agreement with no preceding public consultation. Contrary to this commitment no investment has been made in wind power since 2011, which has resulted in production capacities remaining at the 2011 level of 329 MW. Hungary is planning to reach 7-800 MW of wind production by 2020.

Despite the high number of green industry activities and the growing number of policies and strategies, Hungary has to face an increasing number of environmental problems. Between 2009-2014 EEA and Norwegian Grants together made 133 million Euros available for the Hungarian economy, of which 79 million Euros target environmental programmes (e.g.: green industry innovation, bilateral research partnerships, energy efficiency, renewable energy use, climate change adaptation).

Hungary is lagging behind the Western European countries in the use of renewable energy sources, and the energy efficiency of buildings has still not improved to the required level. Geothermal energy represents a great potential for the country’s energy production but its use is negligible.


1 | Introduction

Hungary, with a population of 9.9 million people and 9.3 million hectares of land, of which 5.8 million hectares are agricultural land, is situated in the Carpathian basin and enjoys 2200 hours of sunshine per year. The utilisation of renewable energy resources could represent one of the breakthrough points in Hungary’s economy. The theoretical potential of renewables represents 2600-2700 PJ (HAS). The national feed-in tariff system METÁR has yet to be introduced. The share of primary and final energy from renewables in 2011 was of 8.2%, with a target of 14.65% by 2020 (REN 21). The use of solar energy in Hungary does not reach 1 percent in the total usage of renewable energy; compared to 70 MW in the Czech Republic and 1000 MW in Germany, 1 MW of installed pv-systems in Hungary is insignificant. Biomass potential in Hungary is underused; however, there is a total feasible resource potential of 145-188 PJ/year. Only 10% of the biogas market is being utilised. In Szarvas a 4.2 MW plant was set up in 2011. The 38-40 biogas plants in Hungary, with the exception of one, all use imported technologies.

Among the most pressing environmental problems which present potential for eco-innovation we have to mention1:

• air pollution (PM 2,5, PM 10, O3) (EEA, 2013) • extreme water events, such as water scarcity and droughts during extremely hot summers,

and flood prevention and protection in periods of heavy precipitation (the Danube peaked at 8.91 metres in Hungary in June 2013 with 1300 people from 34 villages forced to leave their homes)

• waste reuse systems need to be designed and there is a need for a more effective waste recycling system, especially for industrial wastes and by-products

• wastewater treatment processes and livestock breeding methane emission.

The EU Commission recommendations2 for Hungary list the following as principal concerns in social and economic areas: • low employment rate is paired with very low rates of labour market participation in the EU • businesses would benefit from a reduced administrative burden, less corruption and more

competition in public procurement • the issue of Early School Leavers and a concern about whether the on-going higher-education

reform can improve access for disadvantaged pupils • long-delayed reforms in the energy and transport sectors are having a detrimental effect on

public finances.

Hungarian people's health status is poorer than what may be expected given the country’s level of economic development, and worse than in neighbouring countries. Community infrastructure is in some places in an extremely dilapidated state.

Natural resources and biodiversity are declining continuously due to large-scale agricultural farming. Hungary has to confront land degradation, erosion, high nitrate contamination in the soil and destruction of a number of natural habitats. Parallel to the damage caused to the variety of insects, there is a noticeable decline in the amphibian, bird, reptile and mammal populations which feed on them.

The impact of the landfill tax introduced in 2013 is not visible yet, but it is desirable as an additional source of revenue and remains a reasonable means of pricing environmental impacts. Hungary is overly dependent on fossil fuels, most of which come from abroad. There is, however, still no efficient exploitation of solar and geothermal energy, or relevant energy saving solutions.

1%Further%information%and%source:%http://www.climateadaptation.eu/hungary/climate?change/%

2EU% Commission% recommendations% are% available% at:% http://ec.europa.eu/europe2020/europe?2020?in?your?

country/magyarorszag/index_en.htm%


2 | Eco-innovation performance

The analysis in this section is based on the EU 28 Eco-innovation scoreboard (Eco-IS) for the year 2013. Eco-IS via its composite Eco-innovation index demonstrates the eco-innovation performance of a country compared with the EU average and with the EU top performers. Eco-IS is based on 16 indicators which are aggregated into five components: eco-innovation inputs, eco-innovation activities and eco-innovation outputs as well as environmental outcomes and socio-economic outcomes.

Figure 2.1 EU28 Eco-innovation scoreboard 2013, composite index

Source: EIO, 2013

According to the 2012 Eco-innovation scoreboard Hungary’s eco-innovation performance has weakened, with the same trend evidenced from 2011 to 2012. As Figure 2.1 shows Hungary is ranked 23rd among the 28 European countries scored. This is a decisive step backwards from previous years, when Hungary was ranked 16th in 2011 and 17th in 2010. The composite index was 70 in 2010 and 83 in 2011, but reaches only 60 in 2013. With this score Hungary is ahead of only 5 countries, namely, Bulgaria, Poland, Cyprus, Slovakia and Latvia. This means that eco-innovation development, despite efforts made by the government in terms of setting targets and publishing policies, has not achieved any perceptible, measurable result, but has in fact had the opposite effect. There are delays within the policy-making process and execution, such as completing the White Paper on Strategic Sectorial Research Development and Innovation which was expected for the end of 2012 or putting into practice the provisions of the National Environmental Technology Innovation Strategy in the form of an Implementation Programme which would set out concrete measures. Despite the poor level of eco-innovation inputs, Hungary performed well in terms of exporting eco-industry products.


Eco-innovation inputs:

The eco-innovation input index is based on three indicators: government environmental and energy R&D appropriations and outlays, the total R&D personnel and researchers, and the total value of green early stage investments. Hungary’s eco-innovation index stands at 60%, significantly below the EU average.

The eco-innovation input index showed the highest performance in 2010 (49.79) and hardly altered in 2011 (48.54). A substantial reduction was evidenced in 2012 (33.89) before recovering in 2013 (38). The government environmental and energy R&D appropriations and outlays indicator is almost 80% below the EU average. According to HCSO data, investments in the R&D sector almost doubled between 2011 and 2012. The number of R&D sites in Hungary has also demonstrated a slow growth since 2010. A legislative modification led to a significant reduction in the number of R&D institutions with the number falling by 50 from 2011 to 2012, while the number of entrepreneurial R&D sites increased by 150 during the same period. The value of governmental investment in the Hungarian economy decreased between 2011 and 2012 (HCSO).

Figure 2.2 Components of the eco-innovation composite index for Hungary, 2013

Source: EIO, 2013

Eco-innovation activities:

Compared to the modest level of eco-innovation inputs in Hungary, the index showing the activities themselves is relatively high. Although still below the EU average, the variance is only 25% in this index. This indicator in previous years consisted of 3 elements, two of which were not updated for the 2013 report. The number of ISO 14001 registered organisations has been updated (172.98) and is higher than the 2011 figure of 165.39. This gives Hungary a relatively high activity index (75%).

The index comprises three elements. Firms who have implemented innovation activities aimed at reducing material input per unit output, firms who have implemented innovation activities aimed at reducing energy input per unit output and the ISO 14001 registered organisations mentioned above.

Due to the product fee applied to packaging waste in Hungary, consumers have experienced a major improvement in packaging design aimed at reducing material use.

In 2012 this index level stood at 80.42% but shows a slight regression to 75% in 2013.


Eco-innovation outputs:

The eco-innovation output index includes three indicators: eco-innovation related patents (Patstat database of European Patent Office), eco-innovation related academic publications (Scopus) and eco-innovation related media coverage (Meltwater News online media monitoring). Hungary was scored at 47% which is one of the lowest in the EU with Czech Republic (22%), Slovakia (26%), Malta (43%), and Bulgaria (46%). The number of eco-innovation related patents in the EU (average) shows 8.6 compared to a figure of 3.32 in Hungary. Eco-innovation related publications Hungary suffered a spectacular drop. The 2011 indicator stood at 90% (100 is the EU average) while scoring a mere 43% in 2012. According to HCSO data the number of books increased by 248 from 2011 to 2012, but the number of articles suffered a considerable decline from 15,040 in 2011 to 13,008 in 2012. Among the three indicators Hungary performs best in media coverage, which is 55% compared to the EU average index 100.

The overall index in 2012 was 51.55 compared to 47 in 2013.

Environmental outcomes:

The environmental outcomes or resource efficiency outcomes index consists of the material productivity indicator, ratio of GDP/Domestic Material Consumption, secondly the energy productivity indicator (GDP/gross inland energy consumption) and thirdly of the GHG emissions intensity indicator (CO2e/GDP). Among the indicators comprising the environmental outcomes index, the water productivity indicator was not updated for 2013. It should be noted that the indicators are based on 2011 data. This index shows a performance below the EU average, but places Hungary ahead of 10 other countries and sharing the same rank with Finland (77% compared to the EU average 100%). Hungary performed best in material productivity, which is slightly below the EU average (94/100), such as the intensity of GHG emissions (89/100). The weakest component is the water productivity indicator, which remained the same (36/100) and has a strong influence on the final score. As previously mentioned though, data for this component was not updated. Hungary could perform better with regard to this indicator than last year, demonstrating a slight increase of 1.96% from 2012 to 2013.

Socio-economic outcomes:

The socio-economic outcomes index is based on aggregated statistics on exports of eco-innovation products (as a percentage of total export), employment of eco-industries or circular economy (as a percentage of total employment, data provided by Thomson One from 2012) and revenue or turnover in eco-industries and circular economy services (as a percentage of total revenue across all companies). Hungary performs best in eco-industrial export (124%, which is above EU average). Hungary’s environmental industry’s sales amounted to 1,340 million Euros in 2012, of which environmental services represented 228 million Euros.

Other components within the index will serve to substantially lower the score compared to 2012. The 2012 figure of 125.04% was above the EU average, but could reach only 60% in 2013 due to the relatively low employment and turnover in the eco-industries.


3 | Selected eco-innovation areas and new trends

“Hungary is a country which strongly relies on energy and material imports, urges further measures aimed at higher resource efficiency” – states NETIS.

The allocation of Hungarian Green Investment Scheme (GIS) shows a primary focus on the building energy sector. Over 3/4 of quota revenues collected so far have been allocated to the funding of energy efficient buildings. This area is of particular importance as emissions related to buildings account for 30% of total national carbon dioxide emissions. This trend is very likely to continue with the Panel Programme III for the development period 2014-2020, which announced the energy modernisation for some 380,000 panel buildings possibly starting countrywide within the framework of the GIS. From the third quarter of 2014, funds from the Environment and Energy Efficiency Operational Programme (EEEOP) for energy tender purposes may also be made available for Panel III.

The desired environmental technology tools of interventions (NETIS) and country-specific examples given to some of those are:

• Technological innovations in pollution prevention – Example: “Instrument development for groundwater hydrocarbon contamination monitoring” a project of the Hungarian Academy of Sciences (http://www.mfa.kfki.hu/hu/node/764) aimed at inventing a system whereby groundwater pollution can be detected at an early stage.

• Environment-based innovation of products / eco-friendly product design. Environmental factors are at least as important as internal company factors in stimulating innovation. The economic crisis has put pressure on companies, which in part has resulted in environmentally conscious products and packaging design. Lighter packaging means fewer resources and fewer primary raw materials used and less waste generated. Big companies and SMEs show commitment, or feel the necessity to save resources given the beneficial economic, social and environmental impacts. (Example Unilever: http://www.unilever.hu/sustainable-living/wasteandpackaging/)

• Environmental innovation in services/greener services In Hungary greener services such as loan, common use, sharing, providing services with no environmental load are increasingly being implemented. Carpooling and cycle hire initiatives were started in 2013 but only in Budapest. (Budapest Bikes: http://www.bkk.hu/bubi/) Green services are mainly available in big cities, in many cases only in the capital. (e.g. food ordering service by bike courier, Kétker Étkem: http://ketkeretkem.sod.hu/about/)

• Technological innovation in pollution management. SMEs in the manufacturing sector are the focus group of a European project (PreSource) aimed at enabling SMEs to identify potential for increasing resource efficiency. The tool was launched at the end of 2013. (Project website: http://www.presource.eu/project/processes-and-products)

• Incorporation of environmental technologies in education and social awareness-raising programmes. Out of the 19 state universities in Hungary environmental studies are taught in 13 establishments. Social awareness-raising programmes are mostly realised by non-profit organisations, with a few campaigns are run by ministries (e.g.: Ministry of Rural Development: Pick it up! http://www.teszedd.hu/)

• Field specific innovations (e.g. processing of selectively collected waste, development of water saving agricultural technologies and sewage treatment procedures, innovation of low-waste technologies). In this field the implementation of the landfill tax has encouraged


companies to divert their waste from landfills, making them more willing to introduce field-specific innovations and resource-efficient solutions, thereby generating cost-efficiency.

Further to the statements of the 2011 eco-innovation report, in the field of renewables no new investments were made in 2013. Upcoming eco-innovation areas are promoted via social media, and are community building and volunteering initiatives, start-ups and young entrepreneurs who have a strong commitment to a sustainable lifestyle. Real change-makers are leaders of communities who are able to establish viable projects and activities, or realise business ideas.

The Environment and Energy Efficiency Operational Programme (EEEOP) clearly shows its priorities: over one third of the whole EEEOP budget is planned for energy efficiency and renewable energies, while waste water management and climate change adaptation areas obtain more than one quarter of the EEEOP budget. The field of climate change adaptation also contains water related issues, such as flood management and sustainable water management.


4 | Eco-innovation barriers and drivers in Hungary

Drivers for eco-innovation development:

The landfill tax must be mentioned as a key economic driver and economic incentive to encourage companies to reduce their environmental load. Financial support for climate change related actions is provided by a number of sources, one of which being the GIS mentioned above. The GIS operates on the basis of the Kyoto Protocol of the UN Framework Convention which has introduced international quota trade, i.e. the trade in greenhouse gas emission allowances. Hungary currently has a substantial quota surplus.

In the framework of the Hungarian GIS the following sub-programmes have been announced: GIS Heating Modernisation Sub-Programme in 2012 and GIS CNG Bus Programme in 2013 supporting the purchase of buses running on compressed natural gas.

Enterprise Europe Network (EEN) business development services are available for Hungarian companies interested in entering the international market. With such activities as delivering training programmes, organising business-to-business meetings and providing business consulting, EEN aims to promote the export of Hungarian companies’ knowledge, products and services (http://www.enterpriseeurope.hu/).

EU funds for 2014-20 will be allocated through Operational Programmes (OP); these are currently under finalisation and, as such, the information presented here is of a preliminary nature and does not relate to approved programmes. The public consultation process for the draft OPs closed in the middle of December 2013.

In transforming the taxation system in the medium- and long-term, priority will also have to be given to encouraging eco-innovation and to assisting the expansion of the market for ecological technologies, while at the same time providing help through banking and other financial means to launch eco-innovations quickly on the market and to invest in eco-technologies3

Social and cultural drivers are represented by a growing number of environmental awards: • Association of Environmental Enterprises: Environmental Protection Award

(http://www.kszgysz.hu/en/our-activities/) • Awards of Virtual Power Plant Programme (http://virtualiseromu.hu/) • Greennovation Awards (http://www.greennovacio.hu/2013/index.php) • Hungarian Association for Innovation: Innovation Grand Prize

(http://www.innovacio.hu/en_3b.htm) • Ökoindustria Award (http://okoindustria.hu/okoindustria-nagydij#)

Universities, researchers, research institutes and research mobility programmes help to foster eco-innovation activities in Hungary. Structural Funds were available in 2013 via the economy building operational programme (GOP) and the New Hungary Development Plan (ÚMFT). The public acceptance of eco-innovation (e.g. the spread of renewables) may also be considered a driver following a survey carried out in February 2013. The survey of 1012 households in Hungary showed that the public are open and willing to implement more renewable energy generating technologies such as wind farms, solar panels etc.

Different Hungarian research institutes were home to 138 Marie Curie (MC) projects with a total value amounting to 30 million Euros; some 221 researchers arrived in Hungary and 332 Hungarian

3%http://www.nfft.hu/dynamic/national_sustainable_development_strategy.pdf%


researchers had the opportunity to participate to a 1-2 year long MC project in the UK, Germany, France and Italy.

Following a survey conducted in conjunction with Hungarian companies the most important driver to eco-innovation is the expected rise in energy prices.

Strategies, policies and EU targets have been set for implementing a higher level of energy efficiency in buildings, less waste landfilling and greater resource efficiency in manufacturing.

In the interests of ensuring greater protection for intellectual property rights the government has approved the National Intellectual Property Strategy for 2013-2016 (Jedlik-terv).

During the Sustainable Energy Week in 2009 in Brussels, Budapest signed the Covenant of Mayors which means that Budapest contributes to the achievement of the European Union’s energy and climate objectives. Becoming a signatory to this covenant requires as a first step the development of a Baseline Emission Inventory and a Sustainable Energy Action Plan (SEAP). A SEAP is the key document in which the Covenant signatory outlines how it intends to reach its CO2 reduction target by 2020. The main areas of reduction are the building sector, the modernisation of district heating networks, renewable and waste-based energy production, street lighting and transport. The Hungarian Alliance of Climate-Friendly Cities, initiated by the Institute of Sociology of the Hungarian Academy of Sciences, is a partnership of local governments and NGOs which provides technical advice, tools, case studies and information to cities on climate change adaptation and mitigation.

Barriers to eco-innovation:

Returns on renewable energy investments are longer than expected and the absence of the feed-in tariff system does not encourage new investments.

The extent of the red tape faced by businesses in Hungary is a significant disadvantage for the country’s business and entrepreneurial sector. A reduction in administrative obligations is urgently needed and actively recommended by the EU. According to a study conducted by the EU to support its cost reduction programme, the average annual bureaucratic costs which a firm incurs in Hungary amount to approximately 10,000 Euros and on average some 65 hours are spent performing the variety of administrative tasks required. In the early 2000s, administrative costs amounted to 6.8% of GDP compared to the EU average of 3.8%. To tackle this issue the Government launched the “Simple State Programme” in 2011.

From the companies’ point of view the most important barrier to eco-innovation is the lack of financial resources within the enterprise.

Factors representing an obstacle to the broader expansion of eco-innovation are prices that do not reflect environmental costs and benefits, rigid economic structures, inflexibility within infrastructure and behavioural patterns, as well as harmful incentives and subsidies. Uncertainty and lack of knowledge with respect to markets are also factors that impact adversely on market access to eco-innovation.


5 | Eco-innovation policy landscape

The principal organisation responsible for innovation policy development and implementation (public administration on research, development and innovation) is the National Innovation Office (NIH). The NIH, under the supervision of the Ministry for National Economy, supports the Government's economic policy decisions with innovative strategic techniques and by designating innovative themes. It is also responsible for supporting R&D&I processes and innovation management services for SMEs, and the research and development sector, and for attracting domestic and national investments to Hungarian R&D&I processes, in addition to implementing such. NIH has created and operates the R&D&I information database (“R&D&I Observatory”) and co-ordinates foreign relations in the field of science and research. Other relevant stakeholders in eco-innovation activities from the governmental sector are the Ministry of Rural Development (in particular the Department of Environmental Development Policy within the Environmental Technologies Unit), the Ministry of National Development and the Ministry for National Economy.

Several strategies address directly and indirectly eco-innovation development in Hungary.

The Hungarian Climate Change Act (Act LV 2007), based on the implementation framework for the UNFCCC and its Kyoto Protocol, created a framework for strengthening Hungary's ability to adapt to climate change. It prescribed the preparation of a national climate change strategy for Hungary and in 2008 a National Climate Change Strategy (NCCS) was accepted by Parliamentary Decree 29/2008 (III. 20.). The NCCS contains an extensive chapter on both mitigation and adaptation and identifies key objectives and actions to be implemented for the 2008-2025 period. The first revision of the NCCS mandated by the Climate Change Act 2007 took place in 2013 with expected approval from the Hungarian Parliament early in 2014. NCCS-2 includes the National Decarbonisation Roadmap and the National Adaptation Strategy.

The National Sustainable Development Strategy Framework4 (2012-2024) was adopted by Parliament in March 2013. The document contains a description of the quality of national resources, lists ongoing unsustainable processes and describes the appropriate directions to choose. Furthermore it expresses that scientific research and corporate innovation are recognised activities which constitute the basis for our economic growth. Among the national resources it highlights that for economic growth and the successful establishment of a sustainable economy there is a need for the knowledge to develop innovations. Hungary is lagging behind the leading countries in this field.

The National Environmental Technology Innovation Strategy5

NETIS is part of the Hungarian National Reform Programme's ‘18th measure’, which foresees the renewal and implementation of the country's research, development and innovation programme. The government's vision is to foster environmental industries and technology, to focus on environmental innovation, to reduce primary material use and encourage reuse and recycling, and to ensure a paradigm shift from an “end-of-pipe” approach to environmental issues to prevention of problems.

A targets-based approach will be used: Hungary has adopted no fewer than 17 targets to be achieved by 2020. These are expressed in percentage terms against current levels. For example, materials, energy and water intensity per unit of GDP will be reduced to 80% of current levels; the share of renewables in electricity generation will rise by 275%; municipal solid waste generation will fall by 30%; and employment in environmental industries will rise to twice the current level.

4http://www.stakeholderforum.org/fileadmin/files/National%20Framework%20Strategy%20on%20Sustainable%20Development.pdf%

5http://kornyezettechnologia.kormany.hu/download/b/4f/50000/NETIS_English.pdf%


To finance these measures, the Hungarian government is looking at a range of funding possibilities, for example, European Union research funds, agricultural, cohesion and structural funds, and the Norwegian Financial Mechanism, which is available through Norway's membership of the European Economic Area (EEA), and which includes increasing the uptake of environmentally friendly technologies among its priorities for Hungary.

NETIS has clustered its targets and development areas around the following eight topics: 1) Waste, 2) Water, 3) Air, 4) Noise and vibration, 5) Agriculture and soil protection, 6) Remediation, 7) Renewable energy and 8) Construction industry. The reason for selecting these priority groups is that they share a common feature, namely, in each area there is enormous scope for improving current states [level of environmental impact] by a number of different means. In each of the eight priority areas, considerable positive changes can be made.

Water strategy6

Measures to be taken to ensure more efficient water management are set within three timeframes according to their relative importance. The first time period until 2014 comprises the detailed formulation of strategy and policy, creation of the necessary conditions for implementation, preparation of the new EU financial planning period, in addition to immediate measures. The second timeframe will end in 2021 and focuses on mid-term measures to complete the tasks set out in the EU 2020 financial plans. Long-term measures for the period until 2027 are those determined by the need to stabilise the established water management system.

Within the framework of the Water Management Innovation Centre the water strategy sets as a target the strengthening of agricultural and water technological research related to irrigation in order to ensure outcomes are amply utilised in Hungarian agriculture and disseminated.

Energy Efficiency Action Plan for Hungary until 20167

Hungary’s second Energy Efficiency Action Plan (EEAP) presents an energy efficiency strategy until 2016 with twelve complex measures covering all key end-use sectors (residential, public, industrial and transport). In general, the second EEAP demonstrates a rather low level of ambition, focusing primarily on compliance with the absolute minimum requirements of the ESD (Energy Services Directive: Directive 2006/32/EC on energy end-use efficiency and energy services). Furthermore, the lack of concrete details, with particular regard to timeframe and extent of relevant information measures poses a barrier to assessing compliance with information provisions.

National Energy Strategy8

This document lays down efforts to be invested in five crucial areas, namely, increasing energy-savings and energy-efficiency, increasing the share of renewable energies, integrating the Central European grid network and constructing the required cross-border capacities, maintaining the existing nuclear capacities and utilising domestic coal and lignite resources in an eco-friendly manner for power generation.

With respect to the topic of innovation, the Communication (Priorities of the Energy 2020 Communication) envisages the launch of four new large-scale projects, of key importance in terms of the competitiveness of Europe. These projects will focus on smart grids, new technologies for electricity storage, research into second-generation biofuels and the partnership of ‘smart cities’ aimed at increasing the economy of energy consumption in urban areas.

The strategy highlights the need to foster viable green innovations and considers domestic R&D and innovation potential as the depositary of Hungary becoming a technology exporter.

National Rural Development Strategy9

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7http://zbr.kormany.hu/download/c/6c/40000/Magyarorsz%C3%A1g%20II%20Nemzeti%20Energiahat%C3%A9konys%C3%A1gi%20Csel

ekv%C3%A9si%20Terve.pdf%

8%http://www.kormany.hu/download/8/d7/70000/Hungarian%20Energy%20Strategy%202030.pdf%


This strategy principally targets increasing rural employment; ensuring balanced and varied agriculture and forestry that utilises resources in a sustainable manner; re-establishing a diverse production structure, local food production and markets; fostering rural-urban relations; exploiting export opportunities for high value-added food products; strengthening co-operative alliances, local energy production, rural local communities; improving the standard of living; reversing the decline in rural populations, and conserving ecosystems and biodiversity.

The strategy lists the research, development and innovation programme among strategic areas of “Rural economy and rural communities”. There is as yet no further information regarding budget, details or timeframes for implementing the programme.

Third National Environmental Action Programme 2009-1410 (Fourth to follow soon)

This document expresses the government’s intention to reintegrate taxes paid by fossil fuel energy producers into the system and use them to finance research into new technologies capable of replacing fossil-fuel energy production.

The Action Programme places great importance on the Budapest-based European Institute of Innovation and Technology (EIT), which is a new initiative, and complements existing Community and national policies. EIT has set up three communities: climate-change, energy and info-communication. These all serve to foster innovative activities within the programme hosting regions, one of which is Central Hungary.

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6 | Good practice examples

Innovative R&D investment at ALCUFER Ltd.

Alcufer Ltd.’s core activity is waste collection and the recycling of metals, end-of-life vehicles (ELVs) and large-size electronic and electric equipment (WEEE). 20-25% of non-metallic shredding residues and Shredder Light Fractions (SLF) used to be landfilled. The RECYTECH project (2009-2011) developed two technologies enabling shredding-residues, which had previously been landfilled, to be recycled. Based on Recytech findings the project, called “Realisation of complex waste-treatment systems for processing organic residues originating out of ELV’s and WEEE-wastes” established two prototypes: an experimental separation unit and an experimental thermo-catalytic converter unit. This technology achieves a 95% recovery-

ratio. Thermo-catalytic conversion starts with external PB-gas-supply, which automatically switches up into internal product-gas source when the procedure reaches its operating temperature. The process is designed to be self-supplying with no need for external energy sources except within the starting phase.

Barriers: The technology developed is not specified as renewable energy generation, although it generates electricity from waste. As such, no funding was available from the Energy and Environment Operational Programme (KEOP) for the 2009-2013 period.

Drivers: EU regulations and recycling targets set up in the Landfill directive 99/31/EC, End-of-Life Vehicles (ELV) Directive 2000/53/EC, Directive on Waste Electric and Electronic Equipment (WEEE) 2012/19/EU. The assistance of the European Union, with the co-financing of the European Regional Development Fund, was also a driver as funder of the project. All waste recovery activities provide opportunities to employ low-skilled workers. Avoiding landfill tax obligations and transport costs in transporting waste to landfill are also key drivers.

Economic performance: The expected payback time on a 2MW capacity electrical power plant, given the actual feed-in tariff, is 4-5 years. The payback time can be shortened by factoring in savings on transport and landfill fees. Environmental Impact: Beyond the production of green energy (2 MW) there is a 5000-tonne waste diversion capacity. This waste will provide matter for energetic recovery instead of emitting methane and CH during its decomposition on landfill. Landfill lifetimes can be extended.

Information: www.alcufer.hu

E-mail: [email protected]

Keywords: waste recycling, ELV and WEEE, green energy production out of waste


ÉMI Construction Knowledge Center in Szentendre

ÉMI and Ybl Miklós Faculty of Architecture have built a knowledge centre in the ÉMI Innovation and Industry Park. To supply the heating and cooling energy demand for the office building, ÉMI intends to use renewable energy sources available at site. The heating and cooling energy demand for the buildings can be covered using the treated wastewater produced at the Wastewater Treatment Plant of the Danube Regional Waterworks Co., next to the Industrial Park, as a heat source or heat-removal fluid for heating or cooling energy generation and by combined heat and

power production, using the biogas subsequently produced as a by-product of the wastewater treatment process. Main innovative features of the building:

• energy consumption: category A+ • increased insulation (25 cm), energy-efficient windows and doors • high thermal inertia • recycled insulating materials • geometric shading • green roof surfaces • seasonal canopy system • low-temperature heating/cooling system • building energy management system • remaining energy demand supplied by "green" power • biogas for co-generation, solar panels • heating and cooling heat pump system utilising heat from treated waste water

Barriers: The realisation of the project required time-intensive collaboration among a number of different stakeholders, which extended timeframes in the implementation phase. The current legal processes are designed to antecedent systems and not flexible for the integration of new procedures. Drivers: The town of Szentendre supports these efforts, and intends to invest profits from development income in further developments. Available EU funding is considered a further driver. Economic Performance: Return on investment may be expected within 10 years (usual expected payback time on renewable investments) Environmental Impact: self-supplying system, zero emission building, monitoring starts in 2014 Information: https://www.emi.hu/EMI/web.nsf/Pub/construction_knowledge_center.html E-mail: [email protected] Keywords: energy efficient building, renewables for building cooling, heating, green energy in buildings


HOLOFON Zrt. Plastic waste recycling process improvement

The research and development project started in 2013 aims to reduce the amount of waste produced in recycling plastic and to manufacture new products using outputs of the technology instead of landfilling them. The technology for recycling plastic waste which is currently in use generates two unwanted materials, namely, a dirty fraction of small plastic particles mixed with other waste and wastewater, which ends up in the drainage system. Holofon, established in 1995 and treating 12,000 tonnes of plastic annually, wanted to improve the technology they used to avoid generating such waste outcomes.

The new method not only enables the optimal treatment of the useless materials, but results in sanitised and recycled water. Thanks to the new treatment technology for the solid intermediate product, a number of products such as plastic fence posts, used in vineyards or special curbs can be produced and sold on the market. Plastic recycling is therefore carried out on a more environmentally-friendly manner. The company has a 20% market share in the field of plastic recycling and employs 56 people.

Barriers: Timeframe extension due to late funding allocation, less time to realise the project than planned.

Drivers: New Széchenyi Plan Funds, the increasing level of landfill tax and increasing fees for use of drainage systems.

Economic Performance: The investment cost 2million EUR, and based on the business plan an income of 670,000 EUR may be expected from product sales. There is also a predicted saving resulting from avoided landfill tax and drainage use.

Environmental Impact: less waste going to landfill and the waste can be used in the production process, thereby substituting primary raw materials. Less industrial water emitted into the drainage system.

Information: http://www.holofon.hu/

E-mail: [email protected]

Keywords: waste recycling, plastic waste, product of plastic waste


Industrial symbiosis projects at IFKA

Started in 2010, the National Industrial Symbiosis Programme links other industrial symbiosis focused projects and was the first to recruit industrial partners with the aim of sharing their resources, by-products and waste in Hungary.

Industrial symbiosis is considered an effective tool for improving energy and resource efficiency in the industrial sector. IFKA, a non-profit organisation, collaborated with ISL, the implementation company of the UK’s National Industrial Symbiosis Programme (NISP), to launch an “industrial dating” programme in Hungary. In 2013 a series of workshops were delivered for representatives of the industrial sector (mainly waste issuers and recyclers) and academia, to foster co-operation in generating innovative projects. As a result of this initiative (EUR-Is), partnerships involving

academia and business were created, extending to continuous dialogue, innovative projects and R&D activities. These collaborations exclusively target resource efficiency, saving energy and raw materials, and methods and technologies for effective and innovative waste recycling.

Barriers: the delivery of the programme required financial support, given that the precise outcomes of the innovation projects could not be established in the course of the needs assessment. Even though a lot of relevant and potential innovation projects were explored, the lack of financial background makes them difficult to realise. Drivers: The success of the previous programme (NISP) showed the need for continuous activity focusing on industrial symbiosis. The Climate-KIC selected the project proposal and funded its implementation in the Central Hungary region (together with the involvement of 3 other European regions). The industrial sector faced rising costs resulting from the landfill tax, in addition to the need to decrease energy expenditure. Economic Performance: Economic performance can be monitored at a later date when the outcomes of the collaboration projects are realised. Environmental Impact: The impact from landfill diversion and new products made from waste which have been launched on the market is tangible. Information: http://ifka.hu/ifka2/en/projects/environment_industrial_symbiosis/eur_is E-mail: [email protected]

Keywords: industrial symbiosis, waste as resource, waste recycling, NISP, industrial partnership


Ecological volunteer programme Gömörszőlős – Redneck-Wellness initiative

Eco-Pack Nonprofit Ltd. launched this voluntary work initiative with a view to introducing and encouraging people to re-evaluate the beauty of rural life, the sheer joy of interacting with nature, the pleasures of manual work and active optimism.

Activities focus on promoting a sustainable lifestyle in rural areas and on providing information in this respect through education. Volunteers can gain an insight and practice in local food production in permaculture and livestock farming, as well as in reducing the amount of resources used and in using renewable energy. The aim is to introduce the idea of an independent system of big (global or international) supply chains, to reduce environmental impact and to learn about the production of local food and the use of traditional equipment. Volunteers acquire these alternative and innovative solutions by carrying

out practical, physical and mental work.

Barriers: With no foreseeable and calculable support from the business sector, the operation of the programme is based on the financial contribution from a non-profit organisation (Eco-Pack). Companies neither integrate sustainability into their activities, nor do they support value creation from other stakeholders. NGO operation is project-periodic, which is contrary to the long-term operation of an establishment and the sustainability of the projects. Drivers: The village is eager to attract young people as migration among the younger generation presents a substantial burden. A precedent operation undertaken by the Ecological Institute emphasised the need to protect this value-creating establishment. Economic Performance: The agricultural products produced replace those purchased from the market; it feeds visitors and volunteers alike. Eco-tourism attractions preserve their place on the market and provide, maintain and save jobs and activities. Environmental Impact: Ecological land cultivation, wellbeing of animals with the maintenance of an old orchard, energy efficient operation of the education centre with grey water filtering system, renewable energy heating system. Information: http://okopack.hu/en/redneck-wellness-in-gomorszolos E-mail: [email protected] Keywords: eco-volunteering, community building, development of rural areas


References Assessment of regional climate change impacts on Hungarian landscapes, 2013, Mezösi, G., Meyer, BC., Loibl, W., Aubrecht, C., Csorba, P., Bata T., published in: Regional Environmental Change 13(4): 797-811

Better policies to Support Eco-innovation: http://www.oecd.org/env/consumption-innovation/betterpoliciestosupporteco-innovation.htm

Central Statistical Office, 2013, Air pollutants and GHG emissions, available at: http://www.ksh.hu/docs/hun/xstadat/xstadat_eves/i_ua002d.html

Deputy Secretariat of State for Green Economy Development and Climate Policy for the Ministry of National Development, Republic of Hungary, National Renewable Energy Action Plan 2010-2020, available at: http://www.kormany.hu/download/5/b9/30000/Printable%20version_RENEWABLE%20ENERGY_REPUBLIC%20OF%20HUNGARY%20NATIONAL%20RENEWABLE%20ENERGY%20ACTION%20PLAN%202010_2020.pdf

EEA and Norway Grants, available at: http://eeagrants.org/Where-we-work/Hungary

Enterprise Europe Network, available at: http://www.enterpriseeurope.hu/

European Environment Agency (EEA), 2013, Air quality in Europe-2013 report, available at: http://www.eea.europa.eu/publications/air-quality-in-europe-2013

Hungary’s Renewable Energy Action Plan 2010-2020, available at: http://www.nih.gov.hu/strategiaalkotas/agazati-strategiai-feher/energetika

Hungarian Academy of Sciences (HAS), Renewable Energy Subcommittee

Interview, Beatrix Kiss, Ministry of Rural Development (2014)

Interview, Hilda Farkas, Association of Environmental Enterprises (2014)

Ministry of Rural Development, 2012, National Environmental Technology Innovation Strategy, available at: http://kornyezettechnologia.kormany.hu/download/b/4f/50000/NETIS_English.pdf

National Energy Strategy 2030, available at: http://www.nih.gov.hu/strategiaalkotas/agazati-strategiai-feher/energetika

National Environmental Institute, 2013, Environmental State of Hungary 2013, (Magyarország Környezeti Állapota 2013), available at: http://issuu.com/holndonnerpeter/docs/neki_konyv_web

National Innovation Office, KFI Observatory, 2013, Research and Development, Innovation in Hungary, available at: http://kaleidoszkop.nih.gov.hu/documents/15428/38972/Kutat%C3%A1s-fejleszt%C3%A9s%20%C3%A9s%20innov%C3%A1ci%C3%B3%20Magyarorsz%C3%A1gon

National Transport Strategy, Transport Energy Efficiency Improvement Action Plan 2013-2020, available at: http://www.3k.gov.hu/remos_downloads/NKS_Kozlekedesi_Energiahatekonysag-javitasi_Cselekvesi_Terv.32.pdf

Norway Grants, available at http://www.norvegalap.hu/altalanos-leiras#melyek-az-alapok

REN 21 Renewable Energy Policy Network for the 21st Century, 2013, Renewables 2013, Global Status Report, available at: http://fft.szie.hu/mnt/Renewables%202013%20GSR.pdf


ANNEX 1. Policy measures addressing eco-innovations in Hungary

Focus of policy measure (tick if relevant)

Group of policy measures Type of policy measure

Specific measure

Please provide reference to or brief summary of specific measures (national, regional)

add cells if necessary

Generic focus on

eco-innovation

Resource

efficiency

improvement

Energy efficienc

y improve

ment

Reduction of emissions incl. CO2

Other relevant

areas (e.g. renewable

energy, etc)

- SME Voucher 2012: Climate-KIC Central Hungary launched a climate-innovation business idea competition in 2012. Of 80 applications 7 were selected and granted (20,000 Euros to develop the idea and start the business)

× × × × ×

- Joint European Resources for Micro to Medium Enterprises, JEREMIE (initiative of the European Commission)

Venture capital funds - National Innovation Office launched the “Accredited Technological Incubator” call for incubators supporting start-ups http://palyazatihirek.eu/kutatas-fejlesztes/24-kutatas-fejlesztesi-palyazatok/2710-akkredtialt-technologiai-inkubator-palyazat The selected incubators do not receive a financial contribution but get the right to apply in the Research and Technology Innovation Fund’s “Technological start-up ecosystem building ((Start-up_13) I. subprogramme.

Equity/business support

Public guarantee funds

- EU Structural Funds (http://www.nih.gov.hu/strategiaalkotas/kfi-forrasai) × × × ×

- In the framework of the Economy Development Operational Programme (New Hungary Development Plan) there are special calls and funding available: Research-Development-Innovation corporate funds (GOP-2012-2.1.1/B; GOP-2011-2.1.1./M)

R&D funding

- Research and Technology Innovation Fund × × ×

Collaborative grants

SUPP

LY S

IDE

FOC

US

Support for R&D in public

sector and industry

R&D infrastructure National Innovation Agency launched a programme in 2008 called “Nekifut” to assess R&D infrastructures in Hungary (establishment of a


national register). The programme terminated in 2012.

- According to the amendment of the Act CXXXIV of 2004 on research, development and technological innovation, which came into effect on 1 January 2012, and contrary to previous legislation, the cost incurred through R&D activities may no longer be offset against the amount of innovation contribution payable. Direct costs incurred in the given year through R&D activities carried out within the scope of the company’s own activity are, however, deductible from pre-tax profits, ie. the company’s tax base.

Tax incentives for R&D and start-ups

- PhD employees incur less tax obligation for their employers due to the reduced “social contribution” and training levy payable.

Fiscal measures

Tax incentives for R&D personnel

- Social contribution and training levy are reduced for PhD employers.

Tailored training courses

for companies, entrepreneurs

- National Innovation Agency launched a mentor-programme in 2013. (http://www.nih.gov.hu/sajtoszoba/nyomtatott-sajto/2013/mentor-program)

Advice/consulting for start- ups, companies, entrepreneurs

- Corporate scholarship programmes launched on an individual basis

Placement schemes for students

- There is an incentive to foster PhD employment (mentioned above)

- Cluster Coop Project with the involvement of the Ministry of National Economy targeted the establishment of a transnational Cluster-cooperation in Central European Region. http://clustercoopproject.eu/about-the-project

Education, training and

mobility

Support for recruiting R&D workers

Networks and Competence centres, “Innovation Cluster” accreditation (Akkreditált Innovációs Klaszter cím ×


elnyerése AIK-2011) http://www.nih.gov.hu/strategiaalkotas/kfi-forrasai ×

clusters, science-technology parks

Technology platforms and innovation networks

Foresight and common vision building

- National Innovation Agency runs activities with this focus http://www.nih.gov.hu/english

partnerships

Market intelligence and other forms of information

sharing

Regulations, targets, cap & trade schemes

Hungarian National Ecolabel (http://www.kornyezetbarat-termek.hu/en/#.Ux10-IXo5kc)

Regulations and standards

Performance standards, labelling, certification

“Green“ public

procurement of goods and services

R&D procurement

DEM

AN

D S

IDE

FOC

US

Public procurement

Pre-commercial procurement


Advisory support for technology adopters

Technology Transfer Financial or fiscal support

for technology adopters

(e.g. grants for purchasing new technology)

Tax incentives for consumers (e.g. for

purchasing environmentally efficient

products)

Tax reductions for

products and services (e.g. VAT reductions)

Demand subsidies (e.g. eco-vouchers, consumer

subsidies)

Support of private demand

Awareness raising and information provision

About the Eco-Innovation Observatory (EIO)

The Eco-Innovation Observatory (EIO) is an initiative financed by the European Commission’s Directorate-General for the Environment. Since 2009 the Observatory has been developing an integrated information hub on eco-innovation addressed to business, policy makers, innovation service providers and researchers. The EIO supports the implementation of the European Eco-Innovation Action Plan of the European Commission.

Visit our website and get full, free access to the EIO’s reports and databases.

www.eco-innovation.eu

Documents

Eco-innovation in Hungary - European Commission in Hungary 1 Eco-Innovation Observatory T he Eco-Innovation Observatory functions as a platform for the structured collection and analysis