EU accession will bring unprecedented development opportunities to the new member states,and also costly obligations,especially in the field of environmental protection. The EU has promised the 10 new members nearly EUR 30 billion in development assistance, but some say all this money will skew planning toward costly solutions rather than effective ones. By Jennifer McGuinn Photo: MTI IN-FLOW: Wastewater problems in the western part of Hungary were solved with a new treatment plant that was funded with EU Phare funds. Most of the discussion about environmental financing in Central and Eastern Europe (CEE)in recent years has revolved around the costs of compliance with EU law. This is not surpris- ing, considering that in 1997, the European Commission (EC)estimated the costs of total compliance with the environmental acquis at EUR 120 billion for the 12 candi- date countries. The figure has recently been revised down to EUR 80-100 billion, which means that the countries will still need to spend an average of 2-3 percent of GDP annually on environmental protection over the next several years. This assumes that the countries will be able to identify, prepare, and implement the required number of projects during this time — complex and difficult process. These high figures are based upon the need to implement 13 "investment-heavy" directives that deal with costly issues like water supply and wastewater treatment, municipal and industrial waste management, and air-pollution control. In addition to these mainly infrastructural needs, the candidate countries must also find funds to implement the administrative aspects of legislation like the Water Framework Directive, and social-based activities such as environmental education and training; research and development; local planning and public participation;and support for environmental non-profits. In response to both the financial and technical capacity needs, the EU has been providing development assistance to the CEE region since 1989, primarily through the Phare programme. In 2000 EU financial assistance to the candidate countries was reformed to correspond more directly to the accession process, under the term "pre-accession funds." These funds are meant to prepare prospective members for implementation of EU regional policy, thereby narrowing the social and economic disparities between current and future EU states. Specific pre-accession funding programmes correspond to specific instruments of EU regional policy — the Structural Funds and the Cohesion Fund (See table on the next page). These funds, through co-financing of eligible projects, will help the new EU members meet their new environmental commitments. In most cases the EU grant financing is limited to 75 percent of total eligible project costs, meaning that the countries will have to secure co-financing for the remaining 25 percent — primarily from state and local budgets, and domestic and international financing institutions. The key to determining how EU funds— both pre-accession and regional policy instruments — are spent is the planning process. EC Regulation No. 1260/1999, which governs the use of Structural Funds from 2000 to 2006, establishes a detailed procedure for disbursement of the funds. A similar process governs the pre-accession funds, referred to as ISPA funds. These ISPA and Cohesion Fund finance individual investment projects or project components, rather than complete programmes, but these projects are based upon national strategies. Next page »

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