Priority Environmental Investment Programme (PEIP) –

1. Priority Environmental Investment Programme (PEIP) – CARDS RegionalRegional Meeting for Senior Officials from SEE and Donors’ Community 28th November 2008 Brussels Progress in Environmental Investments in SEE Ruslan Zhechkov, Senior Expert Environmental Financing

2. Contents Project dynamics past year Progress since November 2007 Country overview: Albania, BiH, Croatia, FYR of Macedonia, Kosovo (under 1244), Montenegro, Serbia General challenges to the environmental investments in SEE – national level General challenges to the environmental investments in SEE – local level Other relevant REC work Possible directions of future work

3. Project Dynamics Since June

4. Progress since June 2008

5. Albania Holistic reform on water and waste water sector launched in 2007: based on regionalisation and commercialisation The progress in the wastewater sector are significant. A EUR 114 million loan has been approved for the construction of the wastewater treatment plant for Tirana and surroundings, signed in July 2008 with JICA A new wastewater collection system for Pogradec City has been established (will result in better protection for Lake Ohrid) Five water and waste water projects submitted to IPA 2009. One is the ‘Improvement of the waste water system and construction of a WWTP in Vlora’ included in the PEIP list .  Developments in the waste sector Top priority: increase of budgetary funds for waste 1 inter-municipal association established (6 mun) working on common Regional WMP; Projects removed from the list: 2 projects removed since June 08 due to lack of progress. One projects has since Nov 07 been fully funded. . The progress on financing projects on the PEIP list is slow Projects stuck in negotiation processes Projects no longer considered as projects, i.e. no longer in the plans of the Ministry A few project removed will be merged into regional projects Development of the strategic framework Intersectoral Strategy on Environment Adopted 2007 Water supply and Waste Water sector strategy (drafting, 2008) Updates the 2003 one. Strategy for Solid Waste Management (drafting, 2008). Establishment of Environmental Fund possible in the near future.

6. BiH 13 new projects in water sector added to the list (projects are approved by both entities and are based on the Public Investment Programme of BiH which is a strategic three-year rolling document of priority projects Federal Stategy for Protection of Environment (FBiH) completed Nature Protection Strategy under preparation (RS) Challenge for the coming period: adoption of State Environmental Law (end 2008) and establishment of Environmental Agency Adoption of Public Investment Programme 2008-2010 Solid waste – government priority 16 regional landfills recognized 1st phase of construction of 6 regional landfills (WB) + cleaning of 145 dumpsites (10%)

7. Croatia 30 projects on the list (14 WT, 15 WS). No projects added or removed from the list since June. The PEIP List corresponds to EPOP List (excl. remediation projects) 11 projects with progress (7 - project documentation and financing; 4 will receive CW assistance for FS and IPA application) Waste: regional approach, 299 dumpsites in process of remediation (pre-condition for establishment of regional landfills) Water: Water Financing Strategy in the process of drafting;

8. FYR of Macedonia National Environmental Investment Strategy 2009 – 2013 (NEIS) in process of adoption; PIP lacks prioritization; NEIS corrects that; Present PEIP list 13 projects – 1 air, 6 water and 6 waste. List will undergo changes with the adoption of NEIS. Progress noted in document preparation (4 projects). Intensive bylaw drafting in the waste sector Adoption of Law on Water Main obstacle to environmental investments – weak capacity of utilities to implement polluter pays principle. Political will needed to reform utilities. Waste top priority: budget goes up, interministerial WG under Boost in MSW sector – Ordinance on Landfill of Waste, regional cooperation through strategy. Work on several FSs. Adopted bylaws in HZW – possibilities for projects Development of remediation plans with financial requirements for elimination of industrial hotspots, 2008 Medical Waste Master Plan, 2008

9. Kosovo UNSCR 1244 (1) The PEIP priority list consists of 13 projects: 2 air; 8 water, 3 waste. 3 new projects suggested: Rehabilitation of the bottom of the River Lepenc for reduction of pollution from asbestos waste. Further support to water and environment sector in Kosovo. Expansion of the infrastructure for rural household waste collection Legislative developments (drafting): Law on Environmental Protection IPPC EIA Sustainable Development Strategy – under development; Strategy on Waste is in the process of drafting Draft Development strategy – revisions to wastewater projects;

10. Kosovo UNSCR 1244 (2) Donors currently focus on industrial pollution abatement and construction of regional sanitary landfills – work to be done on adding waste projects to the list! Donor Conference on Kosovo was held in July 2008. The majority of the PEIP projects have been presented. None of the projects has been supported in the first phase. Kosovo investigates possibilities for establishing an Environmental Fund Restructuring of utility stalled. Some municipalities not supportive to consolidation.

11. Montenegro National Programme for Integration of Montenegro into EU for 2008-2012 adopted in June 2008 Adoption of the new Law on Environment in July 2008 Commencement of activities of Environmental Protection Agency - September 2008 PIFs developed for 10 new projects which were added to the PEIP list (6 in WT and 4 - WS); all of them are included in strategic documents and are of high priority Overall progress with implementation of strategic master plans in waste and water sectors (preparation of technical documentation, securing of grant/loan financing) All relevant bodies for IPA coordination are established and operational; IPA list of projects for 2007-2008 was finalized

12. Serbia (1) 29 projects on the list (18 WT, 10 WS, 1 air) 1 project added: Hazardous Waste Management Facility. 1 project removed: Electrofilters Monitoring System in Energetika Kragujevac. 3 projects with improvements since June, 2008: Kragujevac Recycling Center: strategic valuation; PFS and Urban plan soon; 0.585 MEUR secured from NIP; gap 4.4 MEUR out of 5; Upgrade and extension of WWTP in Subotica: designs completed; FS in progress; financial construction almost closed; Regional Landfill in Valjevo - EIA and FS completed; gap 18.9 MEUR out of 19.5 MEUR

13. Serbia – Green Paper on the Transformation of PU Companies – Options for reform(2) Proposed by Municipal Infrastructure Support Programme (MISP) EU project Drivers: MoRD and SCTM initiatives “from above” the initiative spearheaded by the Ministry of Economy and Regional Development (MoRD) to formulate a reform strategy for PUC transformation “from below”, initiatives stemming from municipalities and coordinated through their association, the Standing Conference of Towns and Municipalities (SCTM). Recommendations: Empower PUCs and municipalities to increase tariffs Water: Establish national regulator Waste: National body but enough to perform just reporting and monitoring operational and financial performance

14. General Challenges to the Environmental Investments in SEE – National Level Weak institutions for financing the environment (ministry departments, environmental funds) Lack of national environmental investment strategies (scattered, overlapping investments) Strong political influence on the process of project selection Lack of coordination among line ministries

15. General Challenges to the Environmental Investments in SEE – Local Level Weak capacities of water/waste utilities Lack of utility independence - high political influence on utilities Water: high number of small and relatively weak utilities Waste: regionalization is a challenge. Very few positive examples in SEE. Change of mindset needed.

16. Other Relevant REC Work, examples • Cross-border Cooperation through Environmental Planning and Investments – 3 PFS and 4 FS in water supply and rehabilitation; waste water treatment and (funded by Dutch Ministry of Foreign Affairs); • Preparation of the National Environmental Investment Strategy (FYR of Macedonia) (funded by ADA) • Pre-feasibility studies for Strumica-Radovis and Polog regions on regional waste treatment solutions (FYR of Macedonia) (funded by Norwegian Ministry of Foreign Affairs) • Support to the Establishment of Regional Waste Management Centers in North-West Croatia and Eastern Slavonia (funded by NMFA)

17. Possible Directions of Future Work Based on identified challenges! • Information exchange on environmental investment issues - regional meetings • Support in establishing environmental financing institutions (i.e. environmental funds) • Strengthening institutions for environmental financing (i.e. environmental funds and environmental investment agencies) • Identification and prioritization of needs, e.g. investment strategies • Manuals, guidance materials for strengthening the capacities of project proponents in different sectors

18. Thank you for your attention Ruslan Zhechkov Environmental Financing Topic Area Regional Environmental Center for Central and Eastern Europe rzhechkov@rec.org