1. 1 Mirjana Papafava, M. Econ. Head of Economic Incentives Department Ministry of Environmental Protection and Physical Planning Republic of Croatia Environmental Strategy & ENVIRONMENTAL FUND IN CROATIA ____________________________________ REAP Project No. 19 “Mini Workshop on the Future of Environmental Funds in CEE” Prague, September 10-12, 2001 PRESENTATION :

2. 2 TOPICS Figure 1. Environmental Strategy Figure 2 Priority Activities Plan (PAP) Figure 3 Priority Activities Plan (PAP) – Investment projects Figure 4. Assessment of 10-year implementation costs Figure 5. Fund for Environmental Protection and Energy Efficiency Figure 6. Legal grounds for Fund establishment, legal status, organisation Fund´s bodies and management and application of regulations Figure 7. Objectives and principles, Fund activities and funding methods and Fund resources users Figure 8. Earmarking of funds Figure 9. Funding mechanisms Figure 10. Funding sources and allocation Figure 11. Environmental Fund establishment benefits Figure 12. International support

3. 3 REPUBLIC OF CROATIA Environmental Strategy Draft National Environmental Strategy The Republic of Croatia has prepared the Draft National Environmental Strategy with Action Plan (Environmental Strategy) with Action Plan (Environmental Strategy) in order to:  Reassess and restate its objectives and priorities in environmental protection  Guide its: over the medium term, including assurance of long-term stable financing based on:  Attract the interest and support of external partners FIGURE 1 environmental policy formulation institutional development and investment planning sustainable development principles partnership and shared responsibility MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

4. 4 PRIORITY ACTIVITIES PLAN (PAP) the Environmental Strategy Action PlanPriority Activities Plan (PAP) Based on sustainable development principles and an assessment of environmental problems and priorities, the Environmental Strategy document includes strategic elements and an Action Plan in each area of concern, summarised in the Priority Activities Plan (PAP) for the highest priority actions that need to be started in the next two years. The PAP presents two sets of projects: 1) Legislative/institutional/organisational projects 2) Investment projects FIGURE 2 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

5. 5 PRIORITY ACTIVITIES PLAN (PAP) SectionPriorityInvestment Projects Section: Priority Investment Projects 1) WASTE MANAGEMENT  Remediation and reconstruction of existing sites  Construction of new disposal sites  Preparation of a pilot project for solid municipal waste management on islands and in coastal area on the model of one island 2) WATER MANAGEMENT  Construction of sewage systems  Construction of wastewater treatment facilities FIGURE 3 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

6. 6 ENVIRONMENTAL STRATEGY COST ASSESSMENT ENVIRONMENTAL STRATEGY Assessment of 10-year implementation costs for: (bio US$)  Solid waste management………...….……….………...2.20  Wastewater treatment………….…………….………...5.00  Air quality protection……………………………….….0.56  Total…………………………………...………...…….7.76 Annual average (estimate) * ……………………US $ 776.0 mio / 3.7% GDP / Costs per capita at 2000 level * ……………….US $..1.712,78 __________________ Note: 1999  total investments in fixed long term environmental assets amounted to US $ 35.0 mio /0.23% GDP / * *Statistical yearbook, 2000 FIGURE 4 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

7. 7 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department FIGURE 5 Ministry of Environmental Protection and Physical Planning ENVIRONMENTAL FUND Ministry of Economic Affairs ENERGY EFFICIENCY AND RENEWABLE SOURCES FUND FUND FOR ENVIRONMENTAL PROTECTION AND ENERGY EFFICIENCY

8. 8 ENVIRONMENTAL FUND /from the Draft Environmental Fund Bill, May 2001/ Legal grounds for Fund establishment  Law on Environmental Protection, Article 60, para 5 (Off. Gazette 82/94) Legal status, organisation, Fund's bodies and management  legal person - public and non-profit institution owned by the Republic of Croatia  established by the special law, regulating principal issues: - Fund set-up - Fund organisation and activities - Fund bodies and management - financial sources, etc.  Fund's Statutes regulate internal organisation, decision-making procedures, cooperation with external state and other bodies, and international institutions  Fund's bodies: Management Board and Managing Director,  Management Board: - Representatives of relevant ministries, Croatian Chamber of Commerce, scientific institutions, independent NGO experts - MB members are appointed and renounced by the Government of the Republic of Croatia upon proposal of the minister for the environment - Managing Director is elected through public procedure and appointed/renounced by the GRC Application of regulations Regulations on public institutions, the Environmental Fund Law, regulations on non-profit organisations and non-budgetary funds, the Croatian Code of Obligations. FIGURE 6 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

9. 9 Objectives and principles  Providing additional funds (i.e. not supplementary to the existing environmental fund sources) for drawing up and implementation of environmental programmes, projects and related activities  Financing the priority activities determined by the Environmental Strategy  Respecting principles of transparency and publicity, objectivity and responsibility in decision-making, and international standards of good practice  Through allocation of resources, respecting the principle of reaching the highest overall benefits to the environment with the available resources Fund activities and funding methods: Fund activities and funding methods: financial services of granting : - incentive loans - subsidies on interest - guarantees - grants (donations)  other activities: - maintaining a database of environmental projects - fostering cooperation with local and international financial institutions focused on project funding - rendering consultancy on specific programmes, etc. Fund resources users  Any legal or physical person which complies with the Fund's prescribed conditions and procedures, from the private sector (business) and public sector (units of local self-government, public companies, etc.) FIGURE 7 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department ENVIRONMENTAL FUND /from the Draft Environmental Fund Bill, May 2001/

10. 10 Earmarking of funds:  Protection, conservation and improvement of air, soil, water and sea quality, climate change mitigation and ozone layer protection  Protection and conservation of the biological and landscape diversity  Remediation, encouraging of waste generation avoidance and reduction, waste reuse and treatment  Environmental infrastructure improvement and construction  Improvement in environmental monitoring and assessment, and environmental management systems  Encouraging sustainable use of natural resources  Encouraging sustainable businesses and economic development  Encouraging research and development projects and activities FIGURE 8 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department ENVIRONMENTAL FUND /from the Draft Environmental Fund Bill, May 2001/

11. 11 ENVIRONMENTAL FUND Activities envisage Funding mechanisms:  Direct funding of projects not attractive for commercial financing, but being of public interest (local self-government units, public institutions, public companies)  Funding of commercial projects (developers) through commercial banks  Funding in collaboration with international organisations and financial institutions  Allocation of funds primarily through public tenders FIGURE 9 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department

12. 12 ENVIRONMENTAL FUND PERMANENT SOURCES  State Budget funds generated by redirecting portions of charges, excise taxes and fines  Extrabudgetary funds created by redirecting portions of the following charges: - Water charges in water management sector - Charge for multiple non-wood forest functions - Agricultural land conversion charge  Instalment loan payments with interest  New charges: - Environmental polluter charges - Environmental user charge PERIODICAL SOURCES  1% of revenues from privatisation  Funds based on international bilateral and multilateral cooperation  Grants  Other LOANS SUBSIDIES SUBSIDIES GUARANTEES GUARANTEES GRANTS BANKS ENVIRONMENTAL ENVIRONMENTAL INVESTORS INVESTORS FUNDING SOURCES ALLOCATION Funding Sources and Allocation Source: Draft Environmental Fund Bill, May 2001 PUBLIC SECTOR PRIVATE SECTOR FIGURE 12 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department ENVIRONMENTAL FUND /from the Draft Environmental Fund Bill, May 2001/

13. 13 Environmental Fund Establishment Benefits:  Permanent and steady source of additional (not substitute) environmental protection funding  Efficient use of total available funds for financing environmental protection in Croatia  Encouraging and promoting development of project background documentation  Focal point for prospective environmental investors and donors at national, regional and local levels  Supporting implementation of the Environmental Strategy, international environmental treaties, regulations and documents  Central database on projects, investments, funding sources for environmental protection  Creating capacity for approval of applications for the use of funds  Loan and subsidy granting and environmental evaluation criteria  Additional market-based environmental funding sources and mechanisms – Polluter Pays Principle  Systematic cross-linking of state authorities, financial institutions, businesses  Systematic collaboration with international institutions and organisations  Macroeconomic effects: - Direct contribution to permanent, systematic and efficient environmental protection and increased investment in sustainable development - Improved quality of total Croatian development and quality of life FIGURE 10 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department ENVIRONMENTAL FUND /from the Draft Environmental Fund Bill, May 2001/

14. 14 ENVIRONMENTAL FUND International Support  UNECE Committee on Environmental Policy in the 1999 Environmental Performance Review, supports establishment of the Environmental Fund as a step towards improved financing of environmental protection and efficient payments (revenues) and environmental expenditures during the transition towards the market economy  European Union, Stability Pact, the Regional Environmental Reconstruction Program for SE Europe (REReP) ­ German Government through German Technical Collaboration Society (Deutsche Gesellschaft für Zusammenarbeit, GTZ) FIGURE 11 MINISTRY OF ENVIRONMENTAL PROTECTION AND PHYSICAL PLANNING Economic Incentives Department