Environmental Reconstruction in Central Europe by Hilary F

Environmental Reconstruction in Central Europe by Hilary F. French

When the Iron Curtain opened in 1989, it revealed a land laid to waste by industrial pollution and a citizenry up in arms over the damage. Indeed, environmental outrage ran so high that it contributed measurably to the political revolutions in several countries. But now that the initial euphoria of freedom has passed, the region's new leaders must grapple with the legacy of past neglect.1

The task is daunting. Industrial pollution in Central Europe is among the worst in the world. To cite just a few statistics, 65 percent of Poland's river water is so polluted that it is unfit for industrial use, let alone drinking. A quarter of Poland's soil is too contaminated with heavy metals to be safe for farming. In just one year, a single power plant in eastern Germany emits as much sulfur dioxide - the principal component in acid rain - as the countries of Norway and Denmark combined.2

Life expectancies in the dirtiest parts of Central Europe arc as much as five years shorter, and rates of cancer, reproductive problems, and other ailments far higher than in relatively clean areas. Under the assault of air pollution and acid deposition, Central Europe's medieval cities are blackened and crumbling, hillsides are deforested, and crop yields are reduced.3

The health and environmental costs of pollution are a drain on the region's struggling economies: Workers cannot be fully productive if they are made ill by the air they breathe and the water they drink; the timber industry can't flourish when over 70 percent of a country's forests show signs of air pollution-related damage. Czechoslovakian economists estimate that environmental degradation costs their country the equivalent of 7 percent of its annual economic output. In eastern Germany, fear of being held liable for past environmental damages has discouraged western investment in environmentally problematic industries such as chemicals. As a result, the German government has exempted investors from liability for old waste sites and assumed the burden itself.4

Though cleaning up is essential to restoring the region's economic health, finding the needed capital in the current economic climate will be difficult. The sums required are enormous: Bringing the former East Germany up to the unified Germany's environmental standards will cost hundreds of billions of dollars. Poland and Czechoslovakia each estimate they will need to spend about $20 billion on environmental investments over the next few decades.5

Given the other economic and social challenges the region faces, focusing on the environment will not be easy. However, the gravity of the situation leaves the region with little choice. Says Hungarian environmental leader Janos Vargha, "We believe that environmental concerns and economic development now go hand in hand. Without one, we cannot achieve the other."6

The Roots of the Problem

Central Europe's ecological disaster has several roots. The first problem is that much of the region is burdened by a reliance on abundant deposits of lignite, also known as brown or soft coal, to drive its economies. Lignite is low in energy content, and the variety burned in Eastern Europe is high in sulfur. Bulgaria, Czechoslovakia, the former East Germany, and Poland each emit at least five times as much sulfur dioxide per unit of economic output as does the United States, and 20 times as much as the former West Germany. The result is air pollution and acid rain that blackens buildings, kills trees, and shortens lives.7

Second, Central Europe must cope with the legacy of over four decades of inefficient, profligate use of resources in the centrally planned economies of the communist era. High government subsidies and lack of competition left industries and individuals with little incentive to conserve energy, water, or materials. The inefficient use of energy is a particular problem - the more energy burned, the worse the air pollution and carbon dioxide emissions. The Soviet Union and Central European countries generally use 50 to 100 percent more energy than the United States to produce a dollar of gross national product, and 100 to 300 percent more than Japan.8

Third, the region suffers environmentally from the heavy-industry orientation of its economies. Chemicals, metallurgy, and other polluting industries were built at breakneck speed in the postwar period, but the region has since failed to modernize its equipment or follow the West in the shift toward a less-polluting service economy. Industry comprises more than half of the economic base in Central Europe; services make up less than a quarter. In Sweden, by contrast, industry makes up only 32 percent of the total, and services 65 percent.9

Fourth, pollution control in the region is in its infancy. In many cases, pollution-control equipment such as smokestack scrubbers and sewage-treatment devices are nonexistent. Those domestically produced technologies that are employed are inferior to Western versions, and hard-currency shortages make Western imports of pollution-control technology an untenable proposition at present Without pollution controls, the region's aging factories produce prodigious quantities of air and water pollution and toxic waste. For example, before it was closed last year, a chemical plant in Halle, eastern Germany, discharged as much mercury in one day into nearby rivers as a comparable plant in the western part of the country spewed in a year.10

Finally, political repression took an environmental toll. Lack of public accountability shielded governments from scrutiny and criticism as they polluted at will. Until dissent began to crack the strongholds of the old regimes, independent organizing was strictly illegal throughout the region and environmental information remained top secret.

Environmental Reform

Just as the environmental problems of Central Europe arose out of economic and political structures, so must the solutions. The key to success in the clean-up effort will be to regard environmental reconstruction as part and parcel of the broader economic and political reforms underway, rather than as a sideshow to the main act

Some environmental improvements will follow from economic changes underway, such as the shift to market-oriented economies and the arrival of Western investment. Under the sway of these forces, new investment in less-polluting service and information companies will eventually lead to the replacement of heavy industry and its harsh environmental toll. The profit motive will help to encourage industries to use energy and materials more efficiently.11

These changes are already beginning to occur. Carbon dioxide emissions throughout the region in 1990 were 28 percent lower than in 1987, with the sharpest drops in Germany and Poland. Sulfur dioxide declines in many areas have also been reported. Some particularly noxious industrial facilities have been shut down, to the measurable gain of the environment. However, all too often these environmental gains have come at unacceptable human cost. They have largely arisen from economic chaos - the closing of antiquated and inefficient industrial facilities that simply could not compete under the new market pressures, and the decline in output resulting from the depression gripping the region.12

Though the profit motive improves efficiency, it can also push companies to neglect pollution control. One way to use the market effectively as a force for environmental progress is to introduce ecological taxes similar to those now under consideration in the West. These levies can then replace other taxes if the goal is to keep total revenue unchanged. As new tax systems are put in place in Central Europe in the coming years, "green" levies can be incorporated from the beginning. Both Poland and Hungary arc already considering instituting such taxes to encourage the use of low-emission cars.13

Strong regulations, such as efficiency standards and prohibitions on carcinogenic pesticides, are also essential for areas where market signals alone might encourage an environmentally undesirable outcome. These can help guide Western investment toward environmentally beneficial technologies. The adoption of environmental standards in the European Community - as many East European countries are heading towards - would help keep the region from becoming the dumping ground of Europe.14

As new investment gradually replaces Central Europe's antiquated industrial equipment, it might just as well be the environmental state of the art. In this way, the region could partially "leapfrog" the pollution control stage of environmental policy that has predominated in the West over the last few decades to a new era of energy efficiency and waste minimization.15

However, golden opportunities are being missed. For example, last year the U.S. Overseas Private Investment Corporation (OPIC) underwrote General Electric's $150-million project to refurbish 13 Hungarian incandescent light bulb factories. Had the lending gone to build factories that produce efficient compact-fluorescent bulbs instead, the energy savings associated with using the new bulbs would have reduced the need for new power plants. This would have saved Hungary $10 billion of power plant investments, and would have significantly reduced pollution as well. Similarly, despite doubts in the West about the environmental advisability of polystyrene packaging and disposable diapers, Dow Chemical Co. began producing polystyrene in Hungary in July and Procter & Gamble is planning a joint venture to introduce disposable diapers to Poland in the near future.16

In some cases, Central Europe would do best to maintain environmentally beneficial practices that already exist rather than trying to import or replicate harmful Western practices. For example, two decades of trying to combat automotive pollution and traffic congestion in the United States have led transportation planners to regret abandoning comprehensive public transportation systems. Central European countries still rely primarily on public transportation, but car ownership and travel is growing fast. In eastern Germany, the total number of automobiles is expected to rise from 3.6 to over 9 million in this decade. Unfortunately, public transportation subsidies in some countries may be cut under austerity plans.17

Similarly, the small amounts of "disposable" waste generated under the previous governments of Central Europe would be a Western city planner's or environmentalist's dream. Given material shortages, packaging was kept to a minimum and the reuse of scrap metal, glass, paper, and textiles often the norm. But there are already reports of dramatic growth in household waste generation as a consumer society begins to take hold in the region. In eastern Germany, the government subsidies that financed the collection of secondary materials have been cut.18

Political reform rivals economic reform in its importance to Central Europe's environmental reconstruction. Strong non-governmental environmental organizations, freedom of environmental information, and public access to environmental impact assessment procedures and the court system will all be crucial. Several environment ministries have produced detailed national environmental reports, a good first step. It is also promising that there is now a non-governmental environmental movement and a Green Party in each country of the region. However, recent reports suggest that the movement is losing some of its steam as those who were using environmental protest as another means of challenging the political hold of the old regimes fall by the wayside.19

Still, the importance of public participation and freedom of environmental information needs continuing emphasis. It is troubling and ironic to hear reports that draft strategy documents of the newly-formed European Bank for Reconstruction and Development (EBRD), part of whose mandate is to help foster democracy in the region, are weak in their provisions for citizen access to information about the Bank's projects. These drafts also fail to mandate consultation with affected communities in the preparation of environmental impact assessments. Central Europe's fledgling non-governmental environmental movements - important agents of both environmental and political change - merit continued support.20

The International Role

Besides economic and political reform, the third major transformation now underway in the region is East-West integration. As this process continues, international policies will have an increasingly important impact on environmental developments in the region. Western aid, trade, and debt policies will help to determine whether or not the "common European home" will be a clean one.

Self-interest argues for some measure of Western aid for pollution control. For West Europeans, the connection is direct: Since a significant share of Eastern air and water pollution finds its way into Western Europe, investing in pollution control in Central European countries can be a cost-effective way for West European nations to clean up at home. Though the United States is not at the receiving end of transboundary air and water pollution from Central Europe, it is affected by the region's contribution to global environmental problems such as the buildup of greenhouse gases and the depletion of the ozone layer. Perhaps most importantly, environmental reconstruction merits Western support because it is integral to a broader economic and political reform process - something the whole world has a large stake in.

The last few years have seen the establishment of an impressive number of environmental aid programs. The United States, the European Community, and several West European nations fund sizable environmental programs in the region. At last count, the various bilateral programs added up to a total of $728 million in environmental investments. The Scandinavian countries have established a Nordic Environmental Financing Corporation that is putting up seed money for private-sector environmental investments. Both the World Bank and the EBRD are making environmental clean-up a priority of their multi-billion-dollar lending programs for the region. Among the EBRD's initial plans are projects to help clean up the Baltic Sea and the Danube River.21

Though this environmental aid will help, the funds set aside for the environment are small compared with both the magnitude of the problems and the total economic assistance and investment flowing eastward. In order to make significant inroads into the Central European pollution problem, environmental considerations need to be made integral to all economic involvements in the region.

To encourage industries investing in the region to choose the most energy-efficient, least-polluting technologies, western governments could require all projects they underwrite or fund to meet stringent environmental criteria. The European Community is planning to establish an environmental code of conduct for investment in Central Europe to encourage environmentally responsible business practices. The U.S. should consider adopting a similar code.22

One of the biggest impediments to cleaning up the environment is the huge debt burden carried by most Central European countries - hard currency spent on debt servicing is money unavailable for investments in environmental programs. One creative way Western countries could help Central Europe out of its morass involves "swaps" of debt for environmental protection, whereby debt is forgiven in exchange for a commitment to earmark the retained revenue for environmental programs.

This approach is already being used with Poland. In March 1991, the U.S. government agreed to forgive 10 percent of Poland's debt (on top of a 50-percent cut agreed to under the auspices of the "Paris Club" of Western creditors) in exchange for the establishment of an environmental foundation funded with the revenue saved. The Polish government is now trying to encourage other creditors to follow suit If it succeeds, a fund worth $3.1 billion will be created for investment in projects to reduce the emissions that cause acid rain and global warming, to protect the Baltic Sea, and to preserve biological diversity. Other countries in the region would benefit from similar swaps."

Funding projects that yield the greatest environmental return on a dollar of investment would be the best way to make scarce aid dollars go furthest. Relatively simple technologies that can be widely distributed should be emphasized, rather than concentrating limited resources on large demonstration projects. Strong indigenous environmental institutions merit encouragement. For example, facilitating joint ventures for the domestic manufacture of pollution control and prevention technologies would generally be more useful than simply exporting technologies manufactured in the U.S.24

In the last year, substantial progress has been made in launching an ambitious environmental restoration effort. The Central European countries have strengthened their domestic commitment to environmental protection, and the international community has launched a major assistance effort. But the challenges remain great Environmental reconstruction must remain a high international priority.

NOTES

1. Janos Vargha, "Green Revolutions in East Europe." Panoscope, May 1990; Larry Òóå, "Rallies Against Pollution Paced Other Protests" Boston Globe. December 18.1989; Fred Pierce. "The Dam Before the Hood," New Scientist, December 16. 1989; Francine S. Kiefer, "Why People in Leipzig Protest," Christian Science Monitor, November 27, 1989.
2. Poland figure based on newly released government statistics cited in Larry Òoa, "Poland is Left Choking on its Wastes." Boston Globe, December 18. 1989; Jean Pierre LaSota, "Darkness at Noon." The Sciences. July/August 1987; Unpublished data supplied by Dr. Volker Beer. East German environmentalist. February 1990.
3. Josef Vavrouiek et al, The Environment in Czechoslovakia (Prague; Department of the Environment. State Commission for Science, Technology, and Investments, May 1990); Hilary F. French, Green Revolutions: Environmental Reconstruction in Eastern Europe and the Soviet Union, Worldwatch Paper 99 (Washington. D.C.: Worldwatch Institute. November 1990).
4. United Nations Economic Commission for Europe, "Air Pollution and Forest Damage in Europe: Still Critical but Some Improvements," press release. Geneva. August 29, 1990; J. Vavrouiek. B. Moldan. V. Ondroi, "Concept of Stale Ecological Policy," Federal Committee for the Environment, Prague. Ministry of Environment of the CzechRepublic, Prague. Slovak Commission for Environment, Bratislava, 1990; "Investment in Former East Germany Being Stymied by Pollution Problems," International Environment Reporter, February 27,1991; "Parliament to Exempt Investors in East from Environmental Liability at Waste Sites," International Environment Reporter, March 27, 1991; "Eastern Germany's Chemical Industry Called Outdated, Danger to Environment," International Environment Reporter, July 3, 1991.
5. Ulrich Petschow et al., Instituts fur okologische Wirtschaftsforschung, Umweltreport DDR (Frankfurt am Main: S. Fischer Verlag GmbH. 1990); Poland figures from Dr. Bronislaw Kaminski, Minister of the Environment, "Poland's Environmental Problems and Priorities." presented to International Environment Forum meeting, World Environment Center, New York, March 13, 1990; "Prague to Spend $23.7 Billion To Clean Up Devastated Economy," International Environment Reporter. July 1990.
6. Vargha quoted in Kent Gilges. "Days of Reckoning." Chemical Enfineerins. February 1991.
7. French, Green Revolutions.
8. Energy intensity data in French, Green Revolutions, based on data supplied by William U. Chandler and Stan Kolar, Battelle Pacific Northwest Laboratories, Washington, D.C.
9. Industrial base figures from The World Bank, World Development Report 1982 (New York: Oxford University Press, 1982). A similar breakdown has not been provided in subsequent reports.
10. Beer, unpublished data; "Eastern Germany's Chemical Industry."
11. French. Green Revolutions-, "Direct Pollution Control Aid Unnecessary, U.K. Analyst Argues," International Environment Reporter. December 5, 1990.
12. Carbon numbers from Christopher Flavin, Worldwatch Institute, private communication, October 8, 1991; Jonathan Kaufman, "Environment Gains an Edge After 45 Years." Boston Globe, November 12, 1990.
13. "Green Taxes," in tester R. Brown, Christopher Flavin, and Sandra Postel, Saving the Planet: How to Shape an Environmentally Sustainable Global Economy, The Worldwatch Environment"! Alert Series (New York: W.W. Norton & Co., 1991); private communications with Poland Environment Ministry officials, 1991;
14. Environmental Impact Assessment, Vehicle Emission Requirements Planned," International Environment Reporter, December 5, 1990.
15. French, Green Revolutions.
16. Michael Totten, International Institute for Energy Conservation, "Efficient Lighting Facts", unpublished data, 1990.
17. Erik Hagerman, "California's Drive to Mass Transit", World Watch, September-October, 1990. John Pucher, "Capitalism, Socialism, and Urban Transportation Policies and Travel Behavior in the East and West," Journal of American Planning Association, Summer, 1990.
18. "Recycling System of Former East Germany Collapses, Causing Rise in Household Waste," International Environment Reporter, December 5, 1990; Michel "German Reunification."
19. Jiri Pehe, "The Green Movements in Eastern Europe," Report on Eastern Europe, Radio Free Europe, March 16, 1990; French "Green Revolutions".
20. Alex Hittle, Friends of the Earth, "On Necessary Reforms at Multilateral Institutions," Testimony before the Subcommittee on Foreign Operations, Committee on Appropriations, U.S. House of Representatives, April 17, 1991.
21. Duncan Fisher, "Who Knows Where Money Goes? A Survey of Investments in Central and Eastern Europe," World Wide Fund for Nature-European Office, Brussels, March 1991.
22. David Thomas, "East and West to Co-operate on Environment," Financial Times, June 18, 1990.
23. Dan Balz and John M. Goshko, "Bush Wipes Out 70 Percent of Poland's Debt," Washington Post, March 21, 1991.
24. Helmut Schreiber, "The Continent's Conundrum," The Environmental Forum, October 1990.

Hilary F. French is a senior researcher with the Worldwalch Institute in Washington, D.C.