Belgrade, October 11, 2007 - The transition to a market economy, which is happening in most of the Eastern Europe and Central Asia (EECA)1 sub-region, presents both a challenge and an opportunity to put in place policies and incentives that would minimize the environmental impact of increased development while ensuring the sustainable management of natural resources and the environment.

Integrating environment in key sectors – energy, agriculture, forestry, extractive industries and transportation - is central to the long-term sustainability of economic development in EECA countries. These are the main messages coming out of two World Bank reports – “Integrating Environment in Key Economic Sectors in Europe and Central Asia”, and “Integrating Environment into Agriculture and Forestry: Progress and Prospects in Eastern Europe and Central Asia” - prepared as part of its contribution to the “Environment for Europe” conference, to be held in Belgrade, October 10-12, 2007.

Making environmental sustainability an integral part of economic development can mean changing the objectives and definitions of development itself, the reports point out. For example, sustainable water management institutions are moving beyond the objective of simply delivering drinking water and irrigation to managing vital but scarce water supplies on a watershed and ecosystem basis. Achieving such benefits means that policy makers are dealing with difficult trade-offs—for example, between short-term benefits and long-term sustainability.
Progress towards EU accession is a strong driver for integrating environment into all economic sectors for those countries on an EU accession track, as the reports highlight. Pre-accession funds from the EU provide valuable support to complement national funds, and the prospect of EU membership creates powerful incentives for improved sectoral and cross-sectoral policies. , Since Hungary and Poland joined the EU in 2004, for example, both countries have made substantial progress. In Poland, about half of obsolete pesticides stored under very precarious conditions have been removed and disposed safely. A program of subsidies to farmers in Hungary encouraged them to change from a reliance on chemical pesticides to Integrated Pest Management techniques that encourage a more sustainable approach. Nevertheless, more needs to be done in the countries of South East Europe to implement strategies for integrating environment into economic sectors. Even for the new EU member states, challenges to integration remain.
The reports note the even greater challenges faced by non-accession countries in parts of EECA where the drivers towards integration of environment in economic development are much weaker, and external support less generous. These countries need to do more with less. The contributions of international donors and the private sector are even more critical in those cases.
Energy production is a major source of stress on environmental resources around the world. The economies of the EECA sub-region are on relatively energy-intensive and, where old technologies exist, can produce high emissions of pollutants on a facility basis. The key element of strategies to mainstream environment in the energy sector is shifting to more “environmentally friendly” fuel sources and technologies. This can be achieved through policies which promote energy efficiency and alternative energy. There are successful lessons to be learned from the World Bank-financed energy efficiency projects in Croatia, Romania, Bulgaria and Serbia, and from projects developing geothermal energy sources in Lithuania and Poland. The World Bank Group and Global Environmental Facility established the Geothermal Development Fund for the ECA region and it became operational in 2006. The Turkey Renewable Energy Project aims to increase production of privately owned and distributed energy from renewable sources. In Latvia, Lithuania, Moldova, Romania, Bulgaria, Czech Republic, Poland, Ukraine and Hungary, carbon finance projects are under implementation. Increasingly these are becoming “greener” whereby the revenues support projects with positive environmental benefits.
Failure to integrate environment into agriculture and forestry will have major economic and human health implications. For example, soil salinity in Uzbekistan is estimated to cost that country over €700 million per year, nutrient contamination of the Baltic Sea primarily from agriculture and forestry is estimated to have caused up to €4.5 billion in damages, and soil erosion is estimated to cost Moldova at least €30 million per year. Agriculture and forestry are also highly sensitive to climate change and it is critical for the countries in the sub-region to build awareness and capacity for the proactive integration of climate change adaptation into agriculture and forestry sector policies, programs and investments. These sectors contribute about 15 percent of the sub-region’s GDP and help support the 35 percent of the population in rural areas of. They can also provide important environmental services, such as carbon sequestration, sustainable management of watersheds and rural landscapes, and preservation of biodiversity. But farmers and foresters must be remunerated for provision of these services. The report presents 10 recommendations for local and international stakeholders. Among them are: the need to advance to full-scale implementation of strategies successfully demonstrated at the pilot basis, the importance of cost-benefit analysis as a tool for decision making, the need to improve economic incentives for environmental integration, and development and implementation of climate change risk management and adaptation plans.
The economic collapse and transition of the early 1990s led to dramatic changes in the extractive industries sector.  The shift to greater private investment resulted in closing down of many mines and industries which were not economically viable. This created the need and the opportunity for environmental investment in extractive industries to reduce damage to environment and public health. The World Bank has partnered with countries to meet both the social and environmental challenges of sector restructuring. Privatization also raises more complex issues, such as where to assign responsibilities for clean-up and future environmental liabilities. The World Bank authors suggest that environmental protection and planning for site restoration should be undertaken from the beginning and throughout the entire operating period. Setting aside revenues to develop alternative economic activities for local communities (including environmental improvements) is another good example of cross-sector benefits.
One important aspect of integrating environment in the transport sector is improving construction practices and planning of routes, according to the authors of the report. Countries need comprehensive strategies to mitigate the impact of growth of private vehicles ownership in the region. It is important to counterbalance this trend with incentives and support for public transportation. Other priorities include improving individuals’ incentives for fuel efficiency, vehicle maintenance and for shifting from lead-based fuel. Tourism development can be environmentally and socially positive or damaging. One strategy to reduce negative impacts is to link expansion and upgrading of transportation infrastructure in tourist areas with parallel investment to improve the protection of natural areas.
To access the two World Bank reports, please visit: http://www.worldbank.org/eca/environmentintegration

1 EECA in this case represents all countries of the former Soviet Union that are now members of the Commonwealth of Independent States, ex-communist countries in South East Europe, and Turkey.

Integrating Environment into Key Economic Sectors: A Prerequisite for Sustainable Development
Press Release #:2007/450/ECA Contacts
Vesna Kostic (+381) 30 23 723
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Mirjana Popovic (+381) 30 23 747
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