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Investing in the environment
There are many good reasons to invest in environmental protection. Clean water is vital for everyone, and we need to protect ourselves against the harmful effects of various hazardous substances, since many types of pollution can affect our health and livelihoods. Inland waters and the sea, especially the coastal zone, are also very important in terms of their amenity value, and we have an additional ethical responsibility to protect wild plants and animals and their habitats.
HELCOM and environmental funding
Types of funding
Domestic resources
International financing institutions
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HELCOM and environmental funding
Since 1974 HELCOM has initiated considerable investments in environmental protection, including financing from private industrial investors as well as national, regional and local authorities.
During the past decade, environmental investment has increased dramatically, due to political changes and increasing public concern about the nvironment. Investment has mainly been directed towards reducing industrial pollution and improving municipal wastewater treatment, but measures to reduce pollution from transport and shipping and to protect habitats have also been funded.
The countries in transition have particularly benefited from co-financing, involving loans from international financing institutions (IFIs), and grants from the European Union and bilateral donors. Co-financed projects can have considerable impact at a relatively low effective cost for governments or investors. Costs that would otherwise be passed on to local populations with low incomes can also be kept down.
The implementation of HELCOM's Joint Comprehensive Environmental Action Programme (JCP) requires the long-term commitment of both public and private funds. International sources of funding - including the European Union, international financing institutions, bilateral donors, export credit agencies, commercial banks, and direct investment by foreign companies - should be used to complement the domestic resources allocated to priority projects in various sectors.
Types of funding
International funding in the form of loans, soft loans, grants and other assistance has been crucial in speeding up the implementation of environmental measures in the countries in transition.
Loans and soft loans
The IFIs provide loans, guarantees and other types of support to finance priority investments. Affordable, low-interest soft loans for environmental investments can encourage government action.
European Union programmes
The European Commission provides extensive grant-based financial support to help the transitional countries to prepare and implement the JCP, though external funding programmes such as Phare, Tacis, LIFE, ISPA, and SAPARD. After the 1st of May 2004 some of the programmes will be changed.
Bilateral donors
Grants for studies, training programmes and other investments from bilateral donors - notably Denmark, Finland, Germany, Norway and Sweden - have been vital in the preparation and implementation of the JCP and individual environmental projects.
International Financing Institutions (IFIs)
Six IFIs have been participating in the implementation of the JCP: the Council of Europe Development Bank (CEB), the European Bank for Reconstruction and Development (EBRD); the European Investment Bank (EIB); the Nordic Environment Finance Corporation (NEFCO); the Nordic Investment Bank (NIB); and the World Bank.
Domestic resources
National budgets
National and local budgets have been extensively used in the financing of major investments, especially for municipal water, wastewater and waste management projects.
Tariffs
The use of tariffs to cover investments or operational expenses is an option for any environmental infrastructure project. In the West, such tariff systems are well established, but in the transitional countries the idea of financing environmental services from user fees represents a new approach. Concerns have been raised about how access to such services can be preserved for everyone.
National and local environmental funds
Special environmental funds, based on environmental fees, fines, and charges for the utilisation of natural resources such as minerals, have been a major source of funding in several countries.
Contributions in land and labour
The HELCOM countries have contributed land for various water, wastewater and solid waste management projects. Labour and materials have also been provided for specific projects by local beneficiaries.
New types of support
As well as the various types of funding, the JCP involves many organisational solutions such as twinning arrangements with Nordic utilities that can provide practical help with development projects, in the field of human resources, for example. Many non-governmental organisations are also actively involved.
Private sector participation
Private sector investors and development finance institutions are of critical importance in the implementation of the JCP. Increased private sector project financing may reduce the present reliance on government subsidies and loans.
International financing institutions
The Council of Europe Development Bank (CEB)
The CEB is an autonomous multilateral development bank under the authority of the Council of Europe. The CEB grants loans to finance social projects or to respond to emergency situations, aiming to improve living conditions and social cohesion in less advantaged regions.Aid to refugees, migrants and victims of natural or ecological disasters is prioritised, but some 27% of the CEB's loans have been granted for social projects in the fields of environmental protection, rural modernisation, and the preservation of historic heritage.
The European Bank for Reconstruction and Development (EBRD)
The European Bank for Reconstruction and Development (EBRD) aims to promote an open market-based economic system in the transitional countries. The EBRD provides direct financing for private sector activities, restructuring, privatisation and infrastructure projects.The EBRD usually requires a sovereign guarantee for public sector loans, but also aims to promote private sector involvement in public sector operations. The focus is shifting from sovereign loans to private sector transactions, and finding ways to enhance the creditworthiness of borrowers is increasingly important. The EBRD have co-financed several water and wastewater projects, some of which are priority pollution hot spots in the JCP.
The European Investment Bank (EIB)
The European Investment Bank (EIB) is the European Union's financing institution. The EIB supports financially viable public and private sector projects in infrastructure, industry, agro-industry, energy, environment, tourism and services beneficial to the private sector.
The EIB is a major shareholder in the European Investment Fund (EIF), which was created in 1994 as a public-private partnership focusing on extending guarantees for Trans-European Network infrastructure projects and development of small and medium scale enterprises. The EIB and EIF operate within the European Union and in selected transitional countries.
The EIB is a major financier of water and wastewater investments and has provided extensive support to several countries, including the partial financing of projects that have enabled pollution hot spots to be removed from HELCOM's list. The EIB has also co-financed with the World Bank several major investments to reduce air pollution through improved energy efficiency and the rehabilitation of district heating systems.
The Nordic Investment Bank (NIB)
The Nordic Investment Bank (NIB) is a multilateral financial institution owned by the five Nordic Countries. The NIB finances projects that promote Nordic co-operation, with high priority given to projects improving the environment in the Nordic Countries and neighbouring regions. The NIB has financed successful municipal and industrial environmental projects that have enabled several industrial hot spots to be deleted from the list.
In 1996, a new ECU 100 million environmental loan facility was established at the NIB to support the financing of environmental projects in the Baltic Sea region and northwestern Russia. These loans are guaranteed by a special fund set up by NIB shareholders, and are intended for wastewater treatment, solid and hazardous waste management and district heating projects. Projects involving Nordic suppliers and co-financing from other Nordic and multilateral financing institutions will be given priority.
The Nordic Environment Finance Corporation (NEFCO)
The Nordic Environment Finance Corporation (NEFCO) is a multilateral risk capital institution that finances environmental projects in Central and Eastern European countries. NEFCO aims to improve environmental conditions in the partner country and the Nordic region, with the emphasis on air and water pollution. NEFCO can take part in projects through equity investments, and by offering loans and guarantees. A Nordic partner should be involved in all NEFCO projects.
NEFCO has so far financed more than 30 projects that have impacts on the Baltic Sea, including support for municipal water and wastewater projects at pollution hot spots, in co-operation with the EBRD and the World Bank. NEFCO has also financed three types of smaller-scale projects: modernisation schemes at industrial plants and energy utilities; improvements in municipal environmental services; and the manufacture of environmental equipment or the provision of environmental and energy consulting services. Since 1996, NEFCO has also been administering a new grant financing facility on a trial basis, providing concessional financing for priority environmental projects in Central and Eastern Europe.
The World Bank Group
The World Bank Group operates in the Baltic Sea region through the following organisations: the International Bank for Reconstruction and Development (IBRD), which supports public and private sector investments; the International Finance Corporation (IFC), a private sector lending affiliate which works with local, foreign and joint venture investors; and the Multilateral Investment Guarantee Agency (MIGA), which provides investment guarantees against political risk to foreign investors. The World Bank has supported policy, institutional and investment activities related to environmental management in the Baltic Sea region. Projects have focused on water, wastewater and solid waste management services, with examples including support for the demonstration of small-scale wastewater treatment alternatives, the management of pig farm wastes, and agricultural non-point source pollution. The World Bank has also supported significant projects in coastal zone management, coastal lagoon and wetland management, the development of protected areas, and eco-tourism. Projects supported by the World Bank have included co-financing from the EU (Phare), the Nordic Countries and NEFCO.