The Regional Environmental Center for Central and Eastern Europe
Results Empowerment Change
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Environmental Funds in Central and Eastern Europe

Implementation period:
1998–2004

Environmental Funds in Central and Eastern Europe

This project met the challenge of identifying strategies to build on effective experience accrued during the transition process and to capitalise on the opportunities offered by the EU accession process.

Background
Environmental funds have played a significant role in recent decades in financing environmental investments in the CEE region. In the framework of the activities of the Environmental Action Programme (EAP) Task Force, the St. Petersburg Guidelines on Environmental Funds in the Transition to a Market Economy were developed in 1995. While these guidelines offered an appropriate benchmark for proper project cycle management, the role of environmental funds became increasingly under review in terms of their role in leveraging and effectively translating EU-related investments into environmental improvements.

The EU Phare Project Preparation Fund (PPF) and the Organisation for Economic Co-operation and Development (OECD) jointly developed and implemented a technical assistance project from 1997 to 1999 to strengthen and improve the capacity of funds to adhere to the principles and criteria elaborated in the St. Petersburg guidelines. In order to assist environmental funds further in facing the challenges related to their potential role in financing accession-related investments, the REC took on the role of secretariat of the Network of CEE Environmental Funds. This role also includes assisting in achieving compliance with the procedures of external funding agencies and with guidelines for public institution expenditures under EU law.

During the implementation of this project, a work programme for the Network of Environmental Funds in CEE was developed. Different models for environmental funds were reviewed and comparisons were drawn with selected EU member states. A forum for the exchange of experiences and expertise on the development and implementation of environmental investment strategies was also established. Topics of interest included the involvement of the private sector in implementing selected EU directives, and the use of consultants in project preparation.

Achievements
The primary outcome of the project was Environmental Funds in the Candidate Countries, a report published in December 2001 that analysed and reviewed the policies of candidate countries. Post-accession needs for environmental financing were also examined, and the possible role of environmental funds was studied. The report also provided recommendations for fund policy changes.

Environmental Funds in the Candidate Countries provided several recommendations. Among them, it stressed the importance of:

  • clearly specifying the goals of the fund and presenting them in the form of a log frame;
  • training selected experts from the fund staff in the principles of EU regional policy and the related programming skills, including the setting of priorities;
  • differentiating between environmental infrastructure projects and those aimed at addressing environmental hotspots;
  • developing and implementing a strategy for cooperation with international financing institutions, based on the fund’s goals;
  • developing and implementing a strategy for cooperation with commercial banks;
  • supporting soft (non-investment) projects tailored to increase the capacity of the respective country to absorb and use EU financial assistance effectively;
  • implementing quality assurance systems, such as ISO 9000, in order to increase and maintain fund credibility;
  • applying for an international financial rating in order to increase and maintain the credibility of the fund; and
  • incorporating the principles of EU regional policy into the assistance programmes of the fund.

Impacts
This project met the challenge of identifying strategies to build on effective experience accrued during the transition process and to capitalise on the opportunities offered by the EU accession process. Environmental funds, with the experience of having successfully leveraged other sources of environmental investments, now have the opportunity to adjust their operations so that project selection is carried out in a way that fully realises the benefits offered through EU assistance programmes.

The results of project activities added substantial value to environmental funds in the region. The level of participation in the Network of CEE Environmental Funds showed the project’s relevance for countries preparing for EU accession. Especially encouraging was the level of interest on the part of stakeholders external to the network, including national authorities responsible for the implementation of the environmental acquis — particularly ministries of environment.

Experience and knowledge gained through the CEE Environmental Funds project were later transferred to the countries of South Eastern Europe (SEE). Within the framework of the Regional Environmental Reconstruction Programme for South-East Europe (REReP 1.5.1), environmental finance specialists from the SEE region visited several environmental funds in Poland and the Czech Republic.

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