EAP Task Force
Trends in Environmental Finance in EECCA
Carla Bertuzzi, Xavier Leflaive
Paris, 22 February 2007
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
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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
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A reminder on method
Environmental expenditure

Environmental Protection
Expenditure

Abater principle vs financing principle

Sectors
– Protection of ambient air and
climate
–
Public sector
–
Business sector
– Wastewater management
–
Specialised Producers of Environmental
Services
–
Household sector
– Waste management
– Protection and remediation of soil,
groundwater and surface water

Type of expenditure
– Noise and vibration abatement
–
Investment Expenditure
– Protection of biodiversity and
landscape
–
Current Expenditure
–
Receipts from by-products
– Protection against radiation
–
Subsidies/Transfers
– Research and development
–
Revenues
– Other environmental protection
activities
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A reminder on method
Project 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)
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A reminder on method
The 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
–
–
–
–
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enhancement of the register
specification on sectors coverage
distinction between financing and spending
estimation of investments for integrated technologies and
cleaner products
6
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
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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
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Key messages - EPE
Three 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
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Key messages - EPE
Three groups of countries

Environmental protection
expenditure, 2000-05, million 2003
USD
6 000
120
60
Russian Federation
5 800
Environmental protection
expenditure per capita, 2000-05

5 200
5 000
1 000
Ukraine
800
600
Belarus
400
Kazakhstan
40
Russia
Kazakhstan
30
20
Ukraine
10
Moldova
Azerbaijan
Kyrgyz R.
Armenia
200
Kyrgyz Republic
Moldova
0
Azerbaijan
Armenia
2000
2001
2002
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2003
2004
2005
Poland
Belarus
50
0
2000
2001
2002
2003
2004
2005
constant 2003 USD per capita
5 400
constant 2003 USD per capita
million 2003 USD
5 600
100
Portug.
80
60
Slovak
Rep.
40
20
0
2003
10
2004
Key messages - EPE
Uneven benefits from GDP growth

Environmental protection expenditure as a share of GDP
3.0
3
2.5
2.5
Belarus
2
Ukraine
1.5
Kazakhstan
Russia
1.0
Moldova
% GDP
% GDP
2.0
1
Kyrgyz Rep.
0.5
Azerbaijan
Poland
1.5
0.5
Slovak
Rep.
Portug.
Armenia
0.0
2000
2001
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2002
2003
2004
2005
0
2003
2004
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Key messages - EPE
Concentration 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%)
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Key messages - EPE
Contrasted performances for
investments
Environmental protection investments as share of GFCF and GDP per
capita, average 2000-2005
10 000
Russian
Federation
9 000
GDP per capita, PPPs

8 000
7 000
Kazakhstan
6 000
Ukraine
5 000
4 000
Belarus
Azerbaijan
Armenia
Kyrgyz Rep.
3 000
2 000
Moldova
1 000
0
0.0
EAP Task Force
1.0
2.0
3.0
environmental investments % GFCF
4.0
5.0
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Key messages - EPE
Contrasted 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
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Key messages - EPE
Towards a measurement of transfers

Azerbaijan
–

Belarus
–
–

–
–
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
–
–
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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
–

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
–

only marginal transfers between sectors
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
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Key messages – IEA
A structural change
Environmental assistance to the EECCA countries, 2001-05, million USD
600
500
million USD

400
300
200
100
0
2001
2002
2003
bilateral donors
EAP Task Force
2004
IFIs
2005
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Key messages – IEA
The attraction of large, oil-rich countries

Donors’ and IFIs’ environmental assistance to EECCA countries, total 20012005
Bilateral donors
Uzbekistan
7%
Ukraine
5%
Turkmenista
n
0.1%
Tajikistan
3%
Russian Fed.
21%
EECCA
region
12%
IFIs
Azerbaijan
6%
Armenia
7%
Belarus
0.3%
Tajikistan
3%
Georgia
5%
Moldova
2%
Kyrgyz Rep.
5%
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Kazakhstan
27%
Russia
63%
Uzbekistan
7%
Ukraine
EECCA Reg.
6%
1%
Armenia
3%
Azerbaijan
4%
Belarus
0.5%
Georgia
2%
Kazakhstan
10%
Moldova
1%
Kyrgyzstan
0.4%
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Key messages – IEA
A 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
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Key messages – IEA
Different priorities, by domain

Donors’ and multilateral environmental assistance by domain, total
2001-05
Bilateral donors
Other
Renewable
environment
Energy
al aid
5% Land
Solid Waste
4%
2%
Management
3%
IFIs
Environment
al Policy
28%
Biodiversity
2%
Environment
Other
environmenta al policy
Biodiversity
2%
l aid
2%
4%
Pollution
Renewable Land
control
3%
Energy
2%
24%
Water
Resources
Management
12%
Water
Supply and
Sanitation
41%
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Pollution
control
3%
Solid Waste
Management
0.2%
Water
Resources
Management
31%
Water Supply
and
Sanitation
32%
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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
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