Randy M Mott

One of the major issues in the debate surrounding Poland's accession to the European Union has always been - and continues to be - the adoption of the environmental acquis (the key provisions of EU environmental law). The issue is typically simply referred to as a major undertaking which will require several years and billions of Euros. But there are some critical implications of this process that are also worth considering.

Since 1991, Poland has spent an increasing amount of its gross domestic product on environmental protection. About half of these expenditures have been on air pollution control, amounting to over USD 3 billion estimated through 1999.[1] Total costs for achieving compliance with the EU environmental acquis have been estimated to exceed 34 billion ECU for Poland alone, including 13.9 billion ECU for air pollution control. Total environmental expenditures required for the first Central European EU candidates have been projected to exceed 122 billion ECU.[2]

Even if spread out over several years and with EU economic assistance, these expenditures will reflect an enormous increase in the financial implications of environmental protection. The impact will affect foreign investment, privatization, the labor force and most economic aspects of Polish life. Poland's adoption of the EU power plant standards is already reflected in the fact that two-thirds of annual air pollution expenditures are now going to Polish power plants.[3]

Best available technology

The adoption of the EU's Integrated Pollution Prevention Directive [4], mandating "Best Available Control Technology" for other types of industries will require that plants use specific commercially available technology to control emissions, regardless of the current ambient conditions. The so-called BAT is generally referred to as a technology-forcing process, which is intended to reduce future emissions to prevent unnecessary pollution. BAT will probably result in a higher portion of these expenditures going to non-power industries, which still operate under traditional Polish air standards. Through the adoption of BAT requirements, higher expenditures for pollution control are inevitable in the power industry as well as other sectors, but BAT will also mean a far more simplified process for determining compliance, which will increase the likelihood of catching violators.[5]

While EU sources consistently refer to the magnitude of this change, the Polish government seems to take a much more "up-beat" view of its environmental compliance status. The 1999 "State of the Environment Report" done by the Environmental Ministry reflects a different tone than earlier years and provides no serious discussion of these issues.

The BAT standard is perhaps the most significant shift needed in Poland's laws to achieve EU approximation. Historically, EU nations have defined "Best Available Technology" on an industry-by-industry basis within each national jurisdiction. There are British, French, German, and other national BAT documents, which act as the legally active instruments for permitting and compliance in their respective countries. The UK's BAT documents are set out on the Internet at http://www.environment-agency.gov.uk/epns/ipchome.html. In addition to national BAT guidance, the EU has undertaken to create a collective EU technical guidance document on "Best Available Technology" for each major industry sector. The European Integrated Pollution Prevention Bureau is preparing BAT documents for most industrial categories. These can be viewed and downloaded on their web site at http://eippcb.jrc.es/exe/FActivities.htm. Individual EU member country BAT documents are not available online and must be obtained locally.

Implications of BAT for Poland

While eco-labelling and other somewhat esoteric topics are part of the acquis, the BAT standard is the major law that will affect Polish industry. Although everyone assumes some transition period will be needed for compliance with BAT, several EU members and the European Commission have publicly faulted Poland for not already adopting the BAT rule (for example, introducing the "Integrated Pollution Prevention Directive"). Yet without a negotiated schedule for the transition period, how can Poland adopt the law? This type of intellectual discontinuity leads one to wonder just how much energy on either side has been put into seriously dealing with these issues.

On the other hand, the EU has been generous with PHARE money, and new financial assistance programs have started with the objective of aiding in this transition. Without schedules on when laws will take effect and what transition periods will be involved, it is also hard to imagine how use of these funds can be optimized.[6]

Discussion of these issues in Poland has been almost non-existent. The huge expenditures and their impact on the quality of life do not seem to have registered on the Polish body politic. Nor has the government's consideration of these issues been done in a manner calculated to arouse any public support or input. The EU has recently sponsored a seminar of Central and East European NGOs (non-governmental organizations) to discuss how to improve public debate and input on these issues. Since environmental businesses and environmental groups in Central Europe have not traditionally worked on issues as a coalition, one source of traditionally American-style political muscle seems absent in the region.

In any event, the need for more transparency and public involvement in the EU environmental accession process is obvious. Representatives of the European Union are absolutely clear in their public statements and private demands that environmental approximation will be required. They have been actively reassuring their own constituencies that future competition with Polish firms, for instance, will be based on all sides playing by the same environmental rules. The Polish side, however, has been remarkably silent with its constituencies on what this will mean.

One possible approach to the transition period could provide for facility-specific compliance determinations. If the transition period is ten years, plants that are certified to be environmentally EU-compliant sooner would receive some break on tariffs to the EU earier than non-compliant plants. This policy would encourage early adoption of the BAT requirements, especially in new investment where the EU market is critical to the business planning of plant owners. This policy would undoubtedly push a significant number of plants into earlier compliance and also address the EU's fairness concerns. Thus far, no one has advocated this policy (to the author's knowledge), but various business people have privately responded favorably to the idea.

Benefits

Besides the huge costs, there are obvious benefits to Poland from the EU accession process. The health benefits of achieving cleaner air and water are apparent to anyone who has spent any time on each side of the current pollution control regimes. There is an abundant and growing body of empirical research of the adverse effects of current pollution levels on the Polish population. While some environmental improvements present difficult cost-benefit trade-offs, moving from current conditions in Central Europe to compliance with existing EU directives does not.

The other side of the costs of approximation is the impact on the Polish economy. There is apparently no published analysis of the long-term growth implications or other economic impacts of this process. Spread out over a period of eight to 12 years, it will undoubtedly have a more diluted effect. Many of the most common changes require the employment of more productive and efficient processes in production, which will have their own benefits. Similarly, the positive effects of the creation of a growing environmental industry in Poland should be considered in any model. If the bulk of the equipment needed is produced in Poland, the positive effects could be quite significant.[7] In the same vein, the maintenance of the equipment as well as inspection and compliance programs will undoubtedly create a significant number of jobs. These jobs will number in the thousands and will provide a significant offset to jobs lost in other sectors of the economy.

Many firms in Poland have been planning on the transition to the European Union. Foreign investment in manufacturing has invariably occurred with a view toward exports into the EU in the future. Foreign firms, in fact, are more likely to make environmental protection investments.[8] Major power plant investments have been made with very positive effects on air quality (See the "State of the Environment Report" at
http://nfp-pl.eionet.eu.int/SoE/wwwang/index.html). All these trends in investment and air quality can be expected to accelerate, particularly if the EU negotiators understand the need for a firm schedule for the transition. Most of the negative impacts can be mitigated if a predictable transition period along with a coherent program for using available financial assistance is created.[9]

EU negotiators have been putting off the environmental issue, which now appears to be one of the final issues to be addressed in the accession process. This delay has also been accompanied by a void in public discussion on the issue. It is time to start considering the implications of the process and how to assure an orderly transition that achieves lasting benefits.

Randy M Mott is president of a Polish company producing American air pollution control equipment.

1. This figure is based on the cumulative totals for each year through 1991 to 1999, contained in the US Government's Commercial Guide for Poland. "Compliance Cost for Approximation of EU Environmental Legislation: The CEE
2. ," prepared by EDC Ltd. (Dublin) and EPE asbl (Brussels), April 1997, Table 8.1, page 91.
3. "The Environmental Technology Market in Central and Eastern Europe," prepared by Regional Environmental Center, December 1997, page 91, citing 1995 figures.
4. "Directive 84/360/EEC on the combating of air pollution from industrial plants was the first 'framework' directive in the air sector. It requires the Member States to set up a permitting system for air emissions from certain industrial activities, establishes a procedure for the Council to adopt emission limits, and requires the Member States to take steps to identify and improve air quality in particularly polluted areas or those which need special protection. Its provisions also cover monitoring, exchange of information, public information, and gradual tightening of controls on industrial plants to bring the level of protection up from BATNEEC to BAT. This directive will be replaced by the Integrated Pollution Prevention and Control Directive." Compliance Cost for Approximation... , p. 55.
5. The need to train regional officials in compliance and enforcement is often mentioned as another huge cost of the approximation process; but once the transition is made, the EU approach is far more enforceable on relatively lower manpower and budget requirements.
6. Since the environmental acquis will seriously affect municipal waste water treatment, for instance, where private financial resources will generally be unavailable, it would make some sense to provide a more systematic financing authority for these projects. Poland does have a very substantial public funding system through the National Environmental Protection Fund (based on fees and fines) and institutions such as the Bank Ochrony Srodowiska and EcoFund.
7. This would require a reversal of the current trend of relatively flat Polish domestic pollution control manufacturing and growing imports. The growth in the market caused by the accession process, however, can reasonably be projected to cause more technology transfer and growth in domestic production.
8. See Jarosz, "Reality Meets Expectations: Foreign Capital in Privatization," August 1998.
9. The Polish Government and EU should beware of "the doctrine of unintended consequences," which holds that government action will most often produce an unintended negative impact. Requiring "Best Available Technology" on new plants while allowing older ones to remain exempt, for instance, will discourage new construction.