THEME #5:    ECONOMIC DEVELOPMENT AND OWNERSHIP ISSUES 

Moderator: István Tókés

Secretary: Dr.Gyula Bándi

1    Goals

Above general environmental enforcement problems, some especially important and difficult problems of the Central and Eastern European countries have been selected. Among these problems probably the most comprehensive is the question how to harmonize environmental protection with economic development in a sustainable way in a situation where the economic structure itself is constantly changing and the ownership situation also has not been clarified yet. The same problems also arise in market economies and developing countries, but in both cases a bit different way. Anyhow, everywhere the basic supporting condition of a better enforcement situation is the harmonization of environmental and economic interests into one coherent and unified structure. This topics covers among others the approaches of government owned and operated installations, the approaches of enforcement problems when facing economic hardships and also the questions how to address the enforcement issues in a privatization situation.

2    Presentations

M.Vassilopoulos, working in the Permanent Representation of Greece to the European Communities began his presentation with a reference to one ancient legislative piece of Greece in the year 845 B.C. underlying the importance of the polluter pay regulations. The main reason of environmental problems is the contradiction of environmental policy on the one side and socio-economic policy on the other side. The two should be balanced with a set of institutions, among others with economic incentives and market measures with a priority given to environmental requirements.

 

The Director of Office of Enforcement, Environment Canada, P.Cuillerier focused on the necessity to apply environmental enforcement programs also to federal and government facilities in Canada. The compliance with environmental regulations is always and everywhere mandatory with an emphasis on prevention. According to the speaker a sound environmental management involves the prevention of violation before they occur, the reporting of violations and last but not least the reducing of the harm and correcting any damage caused by violations. In the last years, he underlined, the Government of Canada is serous in going green.

 

Dr.A.Homonnay, Director of ENVIMARK Ltd. Hungary expressed his view that the environmental legislation in Hungary is more or less acceptable, but the enforcement is not satisfactory. One of the present problems is the necessity of an appropriate economic environment, which imposes a number of questions, among others the quantity of state property, the privatization movement, the conflicting interests of different economic sectors, the conflicting interests of economic development or unemployment and environmental protection, the very vague specifications of state - community - and individual responsibilities in environmental protection.

 

The Director of Office of Waste Programs Enforcement, U.S. EPA, B.M.Diamond did speak about the enforcement problems concerning the activities of federal agencies and their relationship with the EPA. Among others the EPA may comment on the budget submissions of other agencies if the budget is for environmental purposes, comment on major actions taken by agencies in environmental issues. In case when these agencies fail to meet the environmental requirements or affect the environmental interests, states and citizens may bring action against them.

 

C.J.Goetz, Enforcement Division Administrator of the Allegheny County Bureau of Air Pollution Control presented a case study of an economically depressed area, concerning a polluting heavy industry. The most effective solution in that field proved to be to use the method of making agreements with industry on issues like research studies, designing the ways of improving the techniques, setting up inexpensive interim control measures, stressing environmental reports etc. All these measures led to a phased in approach in solving environmental pollution problems, where the local NGOs did play an important role as a partner.

 

Braams, a lawyers representing the Ministry of Housing, Physical Planning and Environment, The Netherlands in cleaning up cases presented the issues of civil enforcement, as an answer how to make polluters pay for the past damages. Here the soil pollution means a focal point which have a large impact on the groundwater quality. The essence of government policy reflects the polluter pays principle, meaning a cost-recovery policy in case of necessary cleaning up. The first case is dated back to 1983 and since than more and more cases are filed against the polluters on the basis of an Interim Act on Soil Clean-Up. The possible next stage of legal development would end up in strict liability.

 

Dr.P.Syryczynski, State Inspectorate of Environmental Protection, Poland analyzed in details the different means of ownership changes. The major difficulty of this kind of changes is that not all the traditional enforcement tools can be applied in the process of economic transition. The ownership changes may occur in fourteen different ways and therefore the obstacles begin with the point how to identify the present economic entity. There are a number of possible enforcement tools in case of privatization, like charges an taxation, administrative interaction, environmental auditing, compliance schedules and some indirect methods, which may have the form of economic measures.

 

The Director of Worldwide Environmental Programs, Allied Signal Inc., J.Plaut as an answer to the previous presentation emphasized the importance of ownership or control in identifying environmental concerns. In case of privatization some companies of the CEE countries can be improved but some are not improvable from environmental point of view. In making business of an ownership change kind it is an interest of the buyer to assess environmental and health problems. This kind of auditing can also serve as an incentive. An other type of incentive is to set aside a fund form the purchase prices of companies for environmental purposes. When formulating a view of further compliance, the EEC standards represent the most reliable model.

 

Dr.S.Wajda an expert from Poland presented his views upon the importance of environmental auditing in a situation where no one has a clear picture on the situation of environment. Although the environmental requirements, like auditing, would be essential, less has been done in respect of environmental priorities. Above auditing, the presentation did mention the problems of cleaning up contaminated areas, where the setting up of a fund from a part of the purchase price may serve as a source of financing.

 

Representing the State Property Agency as an officer in charge, Dr.I.Mándoki underlined the importance of connecting privatization process with environmental requirements. In Hungary, where 40 % of state property is under privatization process, this issues represent a special sphere of interests form environmental point of view. Environmental auditing is not a requirement today, but sometimes the foreign investor requires it. Under privatization process there is a good chance to give preferences to environmental friendly technologies. In the present legislative process at least auditing and the liability issues should be regulated, the sooner the better.

3    Plenary and open discussion session

The greatest number of presentation and the longest discussion in theme #5 do not allow to examine all the remarks and discussion point in details, therefore the best is to summarize those ideas and views which also represent a kind of majority opinion. The main topics covered by the workshop were:

3.1. The basic idea of enforcement in case of state facilities is that environmental laws are obligatory for everybody, so for government and agencies also. In that respect it may help to authorize the environmental ministry or a national council to harmonize the efforts of environmental kind of other government agencies. State agencies and facilities may receive support from environmental organs in training, with technical assistance and in many other ways. In most cases the environmental government body may not directly interfere in other agencies activities, but there are certain possibilities, like a control over budgetary movements. Also assigning enforcement to a different level of government can ensure independence. The role of public participation here is very important, but the effective information is a condition for this.

 

3.2. In the sphere of ownership changes there are a number of conflicting interests, where some harmonization should be done. One possible method is to use a kind of ability to pay principle in order to avoid major handicaps. There is a possibility to use two ways for timing - a strict liability standard for new businesses and a gradual compliance schedule for existing businesses to meet the same standards in a relatively longer period. In standardization a general acceptable goal is to reach EEC standards. From among ownership changes bankruptcy is particularly important in determining who pays for environmental obligations and what is the ranking of environmental interests. In systems where state ownership still represents a majority, the situation is much more difficult.

 

3.3. The privatization is a situation as characterized above is a massive process, which will change the playground for environmental requirements. Here a mandatory environmental auditing and sometimes an overall assessment should be done. This is the interest of the investor also in order to avoid further disputes and to learn whether the company is immovable or not. These investors need a level of certainty. As the liability for past environmental damages is particularly important, among the solutions one possible way is to create funds from purchase prices. However, privatization presents a unique opportunity to leverage foreign capital and know-how towards ensuring future operations in compliance with environmental concerns.

 

3.4. The past contamination is not only a problem of privatization, but here it is even more important to regulate who is liable for past damages. Polluter pays principle should serve as a basis of liability but it has a different meaning in case of old state owned businesses. Therefore the situation in former socialist countries is even more difficult. One version is to judge the past contamination on the basis of strict liability. A different version is to provide statutory protection for the new owner from liability, but a financial contribution for cleaning-up is also acceptable.

 

3.5. In economic or pollution point of view depressed areas special arrangement are needed to meet the requirement. This covers the gradual compliance, so to provide sufficient time, meaning a phased-in approach. Industry should provide reports on compliance. Special care must be taken for employment issues, which among other mean retraining. The best is to reach an agreement with industry and with the other interested parties.

 

3.6. The harmonization of economic and environmental requirement need to find the ways of managing conflict situations, which begins with a dialogue between government and polluters. The public should be involved in these dialogues. There must also be a better coordination between government agencies. In the following the original philosophy of enforcement and administration must be changed, first of all in CEE countries with a special care on cooperation between the different parties. For negotiations the best is to have legal authorization, but without this there is also a chance for negotiations.

4    Conclusions

In respect to the basic idea of enforcement that environmental laws are obligatory for everybody, so for government and agencies also, it may help to authorize the environmental ministry or a national council to harmonize the efforts of environment with those of other government agencies.

In the sphere of ownership changes there are  a number of conflicting interests (e.g., opportunities they present for enhanced compliance), where some hamonization should be done.  Different methods for harmonization are possible.

A major way of ownership change is privatization, which will change the playground for environmental requirements.  Here a mandatory environmental auditing and sometimes an overall assessment should be established.   The past contamination is not only a problem of privatization, but here it is even more important to regulate who is liable for past damages.  Polluter pays principle should serve as a basis of liability but it has a different meaning in the case of old state owned businesses.  Therefore the situation in former socialist countries is even more difficult.

To achieve compliance in economically depressed areas, special arrangements are needed.  The best is to reach an agreement with industry and with the other interested parties.

The harmonization of economic and environmental requirements needs to find the ways of managing conflict situations, which begins with a dialogue between government and polluters.  The public should be involved in these dialogues.  There must also be a better coordination among government agencies.