01 Nov 2002


Paying for the Green Acquis

Wolfgang Hager

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This study examines the economic and policy context for environmental investments in the candidate countries from Central and Eastern Europe. This context is created by macroeconomic constraints, the unfinished process of transition and the requirements of membership. The task of this paperback book is to identify these constraints and point to policy options for decision-makers on both sides of the enlargement process.
Experts originally estimated the investment cost for the CEECs to achieve compliance with the environmental acquis at around 3-4% of GDP over 20 years. The Commission now assumes they need to spend between 2 and 3% of GDP “in the coming years”. But, as Wolfgang Hager explains in detail in the book, these are largely crude investment costs and do not include operational and financial follow-on costs which may be borne by the public budget. Commonly accepted prudential limits on public spending for the CEEC economies suggest a maximum expenditure on the environment – investment, financial charges and operational costs added together – of around 2.5% of GDP per annum. This translates into a mathematical necessity for transition periods expressed in decades rather than years.
The study argues that there are policy options available to substantially reduce the gap between the desirable and the possible. The present impasse results in part from a planning and forecast exercise that is based on multiplying quantities, taken as given, with equipment and operating costs, taken as given. This study seeks to demonstrate that the main constraint is budgetary rather than macroeconomic and that the full scope for off-budget investments therefore needs to be exploited. The author also finds there is a large scope for policies directed at improving efficiency: achieving the greatest environmental benefit from a given amount of resources.

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