Conference on Financing Growth and Cohesion in the Enlarged
EU, 24.11.05
Session on “Financing transport, environment and other
infrastructures-development of successful public-private
partnerships”
Presentation of George Kremlis on “Environmental infrastructure
in the enlarged EU and public-private partnerships (PPP)”
Definition: What is environmental infrastructure? The definition
of environmental infrastructure could be very broad, for example
covering renewable energy facilities or sustainable transport.
However,
I
will
focus
my
comments
to
environmental
infrastructure in the strict sense, so referring to urban
wastewater, water supply, and waste management, in other words
the investment heavy environmental acquis communautaire.
The challenge: With the enlargement, the challenge of investing in
environmental infrastructures is high. DG ENV estimates are for
a bottom-line of total investment needed of €68 billion to
implement the investment heavy environmental acquis in the new
Member States (including RO and BG) where transition periods
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have been granted in the Act of Accession for several of those
directives, with an innovative approach through intermediate
targets to be met during the transition period which require
environmental infrastructures to be put in place. Of course, there
is still unfinished business in EU15 countries as regards waste
infrastructures and UWWTP. Member States know already too
well the implications of not complying with the acquis in terms of
continuing
environmental
degradation,
not
to
mention
infringements and even fines that have been imposed by the ECJ.
Past experience: The environmental sector can potentially benefit
enormously from the public-private partnerships. Although the
private sector has been involved in terms of winning construction
contracts
and
for
providing
technical
expertise
in
the
EU15/Cohesion countries (e.g. IRL, ESP), examples of where
private money has been injected for environmental infrastructure
projects through the Cohesion Policy have not been very frequent.
In the EU15/Cohesion countries this is because of the tradition to
provide
such
services
of
general
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economic
interest
(i.e.
environment, energy, transport, post) exclusively through the
public administration.
A very successful Private Public Partnership is the one carried out
by the company TIRME in Mallorca, Spain, where an integrated
waste management scheme approach (from A to Z) is being
followed (incineration, landfill, biogas generation and biomass
and recycling).
Current situation: The newly acceded Member States do not
necessarily have the “luxury” of relying mainly on the public
sector. Their public budgets are under severe pressure. Moreover
they have gaps in expertise and know-how. The level of economic
development is on average less that that of the EU15/Cohesion
countries (ESP, PT, GR, IRL until 2003). Therefore many of the
new Member States are looking for alternative means of financing
such traditional public infrastructures.
However, we are still lacking an extensive practical experience of
how to apply public-private partnerships to the environmental
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sector. Why is this? I suspect that it is related to the historic
reasons I mentioned already, a lack of capacity and practice of
public utilities to deal with the negotiations required with industry
and business and perhaps a failure to fully understand the
potential advantages of private involvement. Of course this is a
generalisation, as there are a wide range of structures existing in
the EU for the provision of environmental services, from the
purely private (e.g. UK water sector) to purely public (e.g. most
infrastructure in the EU15/Cohesion countries).
In the environmental sector, we cannot talk about public-private
partnerships without thinking of the other “PPP”, the Polluter
Pays Principle. The Polluter Pays Principle is a central tenet of
environmental policy and is enshrined in the Treaty. The
application of the Polluter Pays Principle leads to the generation
of revenues.
Such revenues should not be seen as something
negative. The charges provide a direct incentive to consumers to
modulate consumption, control demand and cover operational
costs, and contribute directly to replacement of infrastructure.
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Such revenues also provide a direct opportunity for a leverage
effect, particularly when combined with EU assistance.
There is a certain logic that private companies should and could
become involved in environment infrastructure construction in
such a context.
The design, construction, management and
operation of waste infrastructures can benefit from the technical
and management expertise of private enterprise. Moreover, the
application of the Polluter Pays Principle would attract private
businesses interested in recouping their investments by ensuring
equitable revenue. This should require monitoring from the
public authorities and value for money mechanisms.
Future prognosis: Potentially such partnerships, when well
conceived and implemented, will be economically more efficient
and lead to higher environmental quality standards and a lower
cost price. There is the possibility to create a virtuous circle.
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What is crucial is that a clear and transparent regime needs to be
put into place. The public sector must be involved in ensuring
public procurement principles and rules are followed, and in
regulating
the
performance
and
resulting
environmental
impacts/quality. With an effective charging regime, using the
Polluter Pays Principle (taking affordability into account), and as
the case may be the User Pays Principle, a more competitive
economy can result. The future programming period 2007-13
offers new opportunities for the environment sector, in particular
through the use of JASPERS technical assistance (presented to
you this morning), and I would see this as a particular
opportunity for the new Member States leading, in the medium
term, to a faster construction of the infrastructure required.
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