Addressing Historical Environmental Damages in Privatization

1. Addressing Historical Environmental Damages in Privatization Bulgaria’s Road Towards Improved Environmental Management Adriana Damianova Environment and Socially Sustainable Development Europe and Central Asia , World Bank Managing for Development Results Second International Roundtable, Marrakech, February 4-5, 2004

2. Addressing Historical Environmental Damages in Privatization World Bank assistance • Environment Remediation Pilot Project: WB Loan US$16 Million (Copper smelter /UM Belgium, privatization 1998) • Environment and Privatization Support Adjustment Loan: WB Loan US$50 Million (Oil Refinery, Steel Mill, Open Copper Mine, Fertilizer Plant, and Pharmaceutical Plant privatized in 1999-2000)

3. Addressing Historical Environmental Damages in Privatization Managing the desired outcomes by • Timely response to key inter-sector priorities and investment needs • Applying innovative approaches and involving key stakeholders • Managing implementation (define responsibilities, commitment to design outcomes, continuity, flexibility to evolving needs) • Define and agree on measures for sustaining project outcomes

4. Addressing Historical Environmental Damage in Privatization Issues and challenges • Inherited pollution problems posing significant risks to human health in industrial hot spots (Pirdop-Zlatiza) • Increasing awareness of social and environmental risks and public pressure • Weak governance structures and regulatory framework to deal with environmental uncertainties in the privatization • Resistance of reputable investors (e.g. UM) to commit to environmental compliance unless stock pollution issues are resolved

5. Addressing Historical Environmental Damage in Privatization The privatization and support of the WB provided a “window of opportunity” for the Government to: • Eliminate policy and regulatory roadblocks and reach agreement on corporate compliance with environmental standards; • Improve investment climate, re-capitalize enterprise assets and contribute to economic growth.

6. Addressing Historical Environmental Damages in Privatization Key design and implementation principles of ERPP: • Accountability and transparent use of public resources allocated for clean up of historical pollution • Environmental damages assessed based on risk assessment methodology (EIA , Environmental Remediation and Compliance plans); public involvement • Cost effective remediation techniques based on elimination of environmental risk • Clear implementation procedures, institutional responsibilities, transparent procurement, accountability, monitoring environmental performance

7. Addressing Historical Environmental Damages in Privatization Implementation documents • Sales Purchase Agreements include environmental plan for compliance based on standards acceptable to regulator and regulated entity • Implementation Agreement with agreed performance indicators to show implementation progress • Agreement on inter – agency implementation and post- privatization oversight (structure,functions responsibilities, reporting etc.) • “After-care program” for sustainability of project measures agreed prior to completion

8. Addressing Historical Environmental Damages in Privatization Enabling legal and regulatory frameworkin place: • Privatization Act and by-laws • Environmental Protection Act • Water Act • EIA Regulation • Regulation on Principles and Procedures for Determining State Liabilities for HistoricalPollution • Methodology and Guidance on Past Environmental Pollution

9. Addressing Historical Environmental Damages in Privatization Build partnership betweenstakeholders/ beneficiaries: • Ministry of Environment and Waters and Regional Environmental Inspectorates • Ministry of Finance • Privatization Agency • Municipalities • Enterprises • Investors (UM) • Local population

10. Addressing Historical Environmental Damages in Privatization Lessons learned from ERPP • Identification of environmental problems must be done at the outset of privatization process • Implementation responsibility handed over to private owner • Information on enterprise environmental performance is key (environment audits/ EIA) and should be included in privatization documents • Involvement of all stakeholders and public at large is critical for sustaining project outcomes • Negotiations on environmental conditions should be included in the negotiations of individual sales

11. Addressing Historical Environmental Damages in Privatization Lessons learned from ERPP • Implementation of clean up programs requires continuous post-privatization oversight • Bank support facilitates effective collaboration and public-private partnership for environmental management • Corporate businesses act in more responsible manner to social and environment issues in a transparent environment • The project model enhanced transparency and public access to information on corporate environmental performance

12. Addressing Historical Environmental Damage in Privatization Policy Outcomes: • Integrating environmental issues in structural reforms (accompanying operations FESALI and II, follow up operation PALI) • Policy improvements and instruments for addressing environmental issues in privatization • Institutional capacity and enhanced public-private partnership in environmental management • Enhanced role of environmental agencies and improve institutional coordination • Better collaboration with donors

13. Addressing Historical Environmental Damages in Privatization Economic benefits • Increased interest from reputable FDI in privatization of large industries • Increased environment investments from private sector and contribution to clean up cost in a cash strapped economy • Higher budgetary revenues and economic growth boosted by more viable private sector • Improved corporate governance • Cost saving by linking environmental compliance and industrial restructuring

14. Addressing Historical Environmental Damages in Privatization Social and environmental benefits • Protection of human health and sensitive ecosystems from excessive pollution • Mitigation of risks posed by past pollution • Environmental monitoring and compliance with environmental standards of industries improved • Partial offset of adverse social impact of privatization by prolonged demand for new jobs and new employment opportunities for local population

15. Old Slag Dump Rehabilitation Contaminated waste excavated and sites cleaned up November 1999 September 2002

16. Clean-up of Old Sulfuric Acid Plant Old sulfuric acid plant demolished and site decontaminated October 1997 November 1999

17. Closure of the “Blue Lagoon” “Blue lagoon” encapsulated and re-vegetated June 1999 December 2002