Environment in Focus: Editorial
Under the post-Communist governments, heavy industry has declined and environmental protection is moving into a more prominent position as EU accession looms nearer.
According to the U.S.-based Energy Information Administration (EIA), the results of the Polish government's initiatives are significant: "(Since 1989) industrial and agricultural discharges in Poland have been more than halved, and major air pollutant emissions have been significantly reduced."
Then and now
Let's test this statement by looking at the environmental reality that was Poland in the 1980s and early 1990s. Pre-Communist Poland was one of the most polluted countries in Europe, largely due to its dependence on coal. Coal was overwhelmingly dominant in the production of electricity in Poland, with approximately 95 percent of all electricity generated in the country coming from coal-fired plants. Energy consumption was abused because of old, poorly maintained factories where energy was wasted and mismanaged.
However, the 1990s brought major overhaul of how energy was produced and used in Poland, with old, energy-wasting factories being eliminated, while many others were equipped modern energy-saving technology. These combined efforts have resulted in Poland's levels of energy consumption decreasing by 30 percent in 15 years.
For more good news, I refer back to the EIA again: "Since 1989, energy-related carbon emissions in Poland have decreased sharply, to 78.6 million metric tons of carbon, compared to an average of approximately 110 million metric tons emitted annually during the 1980s... Germany's 2001 carbon emissions stood at 223.2 million metric tons." In other words, Poland may be a polluter in Europe - but it's far from being the worst offender.
Before you get all excited about this, however, bear in mind that although Poland's industrial sector is emitting less toxic substances now, the transportation sector is actually polluting more. This shouldn't come as a surprise to any of us, as we observe first-hand the dramatic increase in the number of cars on Polish roads - often from a stand-still position in the morning traffic jam.
Another sobering thought is that only 0.7 percent of all Poland's energy consumed in 2001 came from renewable sources. There is a large wind farm in the north of Poland, in Zagorze, and it has great potential. But as the Business Journal's Hilary Davies pointed out in her story, Investors going with the wind (WBJ, Feb.9-15, 2004), after the government's 2000-2001 national strategy for the environment, foreign investors were clamoring to bring their technology and know-how to Poland, but incomplete legislation, complicated procedures, non-transparency and poor infrastructure caused interest to fade away.
Finally, it must be remembered that water pollution is still a seriously neglected aspect of the environment, recycling, landfills, composting and the disposal of hazardous wastes are still in their infancy in Poland, and the level of individual responsibility taken by the average Pole is very low. Although pollution levels and emissions should continue to decrease as companies bring their facilities up to European Union standards, these changes will only be undertaken at a substantial cost to business, the government and the tax payer. And, as pointed out by Stanisław Popów, Managing Partner at Finacorp, companies in Poland often aren't sure what will happen next in terms of environmental law, and so several aren't doing anything at all.
In the dark
The problem is (unfortunately) a common one in Poland: a lack of clarity and consistency in policy, procedure and law. Environment policies and procedures are being discussed right now, and these talks will eventually result in a new environmental law. But since talk of a new law has been circulating for awhile, many companies have taken a 'wait and see' approach to changing their technologies, processes, and/or possibly investing in new equipment in order to meet the requirements.
As Mr Popów explains, "Companies have been saying for the past few years, 'Well, there are rules, but these rules can be waived, or they may change. There's a pre-accession vacuum, and so companies are completely in the dark at this point about how they're supposed to proceed."
So, what can companies and potential foreign investors count on happening in Poland's environmental sector? Well, first, the Integrated Pollution Prevention and Control (IPPC) directives will most definitely come into force, as they are a European, not Polish, initiative. The aim of these directives is to "prevent or minimize emissions to air, water and soil, as well as waste, from industrial and agricultural installations in the (European) Community, with a view to achieving a high level of environmental protection."
How strict are the IPPC directives, and what can non-complying companies expect to happen to them? Marzena Chodor, Structural Finance Director at Finacorp says, "The IPPC directives demand that any company that doesn't receive the integrated permit must be closed down." What are the chances of this happening? She says, "Some companies hope that even if they don't comply, they won't be closed down, since they think that the government may take the country's unemployment level and state of the economy into consideration." But in my view, if companies are permitted to pollute without penalty, deliberately flaunting the IPPC directives, then this would make the directives rules without teeth - and quite useless.
I also believe that although nobody knows what the final result will be, this isn't an excuse to do nothing at all now. Any company that subscribes to logic will realize that a quick look at EU standards - widely available - may be something that a proactive company can do now. And instead of waiting for the Polish government a company can take the initiative to move towards EU standards on its own. As for foreign companies investing in Poland, many of them are international and have operations in other countries; why not just bring global standards to Poland? If the company is active in Germany or Canada or Australia, and meets these countries' environmental standards, then why should they behave any differently in Poland?
Well, some may say that one of the reasons to come to Poland is that labor is cheaper and it's easier to exploit the environment, and that the EU's insistence on better wages and more environmental protection will make Poland less attractive and ultimately hurt Poland's FDI. Some may take this view, but are these really the kind of companies that Poland wants? What Poland needs are companies which will be here for the long-term, instead of exploiting the environment for five years and then leaving, resulting in people losing their jobs anyway.
As Mr Popów says, there are two kinds of companies in Poland: those who are here for the 'cheaper' means of production and those who see Poland as a land of untapped potential with an enviable geographical location. Companies that are here for the first reason are probably already in the Ukraine or China. Those that are keen to be here for the long-term are worrying about the roads and the taxes and non-transparency. They are also concerned about what environmental standards the government will hand down, and when. It's Poland's indecision and corruption that really puts potential investors off - not the focus on environmental protection.
Another worrying thing for companies is explained by Ms Chodor this way: "The money that can realistically be expected to be forthcoming to help fund necessary changes - such as implementing new technology or buying new equipment - will not be anything like enough to cover the costs of those changes." She mentions the Second Ecological Policy of Poland, which covers environmental investment from 2002 to 2010. This document plans that investment in environment protection should be zł.150 billion, which is zł.16.5 billion per year. Of that, zł.56.6 billion is earmarked for wastewater management and water protection, air protection gets zł.40 billion and waste zł.41.4 billion. But she adds that between 2004 and 2006, private enterprises can expect only zł.800 million from the European Regional Development Fund, which falls far short of what is needed.
So, while it can't be denied that Poland has made impressive progress, the country cannot afford to rest on its laurels. Poland must be open to the know-how that is being offered; the best example is that of CNG technology - firmly in place in many western European countries and the Czech Republic - which is still unheard of here (for a detailed discussion of CNG, please see page 4). Poland must explore new environmental options, pass an enforceable environmental law, hand down stiff penalties for non-complying companies and educate people about individual responsibility for recycling and energy usage - or else it runs the risk of losing all its hard-won gains.
According to the U.S.-based Energy Information Administration (EIA), the results of the Polish government's initiatives are significant: "(Since 1989) industrial and agricultural discharges in Poland have been more than halved, and major air pollutant emissions have been significantly reduced."
Then and now
Let's test this statement by looking at the environmental reality that was Poland in the 1980s and early 1990s. Pre-Communist Poland was one of the most polluted countries in Europe, largely due to its dependence on coal. Coal was overwhelmingly dominant in the production of electricity in Poland, with approximately 95 percent of all electricity generated in the country coming from coal-fired plants. Energy consumption was abused because of old, poorly maintained factories where energy was wasted and mismanaged.
However, the 1990s brought major overhaul of how energy was produced and used in Poland, with old, energy-wasting factories being eliminated, while many others were equipped modern energy-saving technology. These combined efforts have resulted in Poland's levels of energy consumption decreasing by 30 percent in 15 years.
For more good news, I refer back to the EIA again: "Since 1989, energy-related carbon emissions in Poland have decreased sharply, to 78.6 million metric tons of carbon, compared to an average of approximately 110 million metric tons emitted annually during the 1980s... Germany's 2001 carbon emissions stood at 223.2 million metric tons." In other words, Poland may be a polluter in Europe - but it's far from being the worst offender.
Before you get all excited about this, however, bear in mind that although Poland's industrial sector is emitting less toxic substances now, the transportation sector is actually polluting more. This shouldn't come as a surprise to any of us, as we observe first-hand the dramatic increase in the number of cars on Polish roads - often from a stand-still position in the morning traffic jam.
Another sobering thought is that only 0.7 percent of all Poland's energy consumed in 2001 came from renewable sources. There is a large wind farm in the north of Poland, in Zagorze, and it has great potential. But as the Business Journal's Hilary Davies pointed out in her story, Investors going with the wind (WBJ, Feb.9-15, 2004), after the government's 2000-2001 national strategy for the environment, foreign investors were clamoring to bring their technology and know-how to Poland, but incomplete legislation, complicated procedures, non-transparency and poor infrastructure caused interest to fade away.
Finally, it must be remembered that water pollution is still a seriously neglected aspect of the environment, recycling, landfills, composting and the disposal of hazardous wastes are still in their infancy in Poland, and the level of individual responsibility taken by the average Pole is very low. Although pollution levels and emissions should continue to decrease as companies bring their facilities up to European Union standards, these changes will only be undertaken at a substantial cost to business, the government and the tax payer. And, as pointed out by Stanisław Popów, Managing Partner at Finacorp, companies in Poland often aren't sure what will happen next in terms of environmental law, and so several aren't doing anything at all.
In the dark
The problem is (unfortunately) a common one in Poland: a lack of clarity and consistency in policy, procedure and law. Environment policies and procedures are being discussed right now, and these talks will eventually result in a new environmental law. But since talk of a new law has been circulating for awhile, many companies have taken a 'wait and see' approach to changing their technologies, processes, and/or possibly investing in new equipment in order to meet the requirements.
As Mr Popów explains, "Companies have been saying for the past few years, 'Well, there are rules, but these rules can be waived, or they may change. There's a pre-accession vacuum, and so companies are completely in the dark at this point about how they're supposed to proceed."
So, what can companies and potential foreign investors count on happening in Poland's environmental sector? Well, first, the Integrated Pollution Prevention and Control (IPPC) directives will most definitely come into force, as they are a European, not Polish, initiative. The aim of these directives is to "prevent or minimize emissions to air, water and soil, as well as waste, from industrial and agricultural installations in the (European) Community, with a view to achieving a high level of environmental protection."
How strict are the IPPC directives, and what can non-complying companies expect to happen to them? Marzena Chodor, Structural Finance Director at Finacorp says, "The IPPC directives demand that any company that doesn't receive the integrated permit must be closed down." What are the chances of this happening? She says, "Some companies hope that even if they don't comply, they won't be closed down, since they think that the government may take the country's unemployment level and state of the economy into consideration." But in my view, if companies are permitted to pollute without penalty, deliberately flaunting the IPPC directives, then this would make the directives rules without teeth - and quite useless.
I also believe that although nobody knows what the final result will be, this isn't an excuse to do nothing at all now. Any company that subscribes to logic will realize that a quick look at EU standards - widely available - may be something that a proactive company can do now. And instead of waiting for the Polish government a company can take the initiative to move towards EU standards on its own. As for foreign companies investing in Poland, many of them are international and have operations in other countries; why not just bring global standards to Poland? If the company is active in Germany or Canada or Australia, and meets these countries' environmental standards, then why should they behave any differently in Poland?
Well, some may say that one of the reasons to come to Poland is that labor is cheaper and it's easier to exploit the environment, and that the EU's insistence on better wages and more environmental protection will make Poland less attractive and ultimately hurt Poland's FDI. Some may take this view, but are these really the kind of companies that Poland wants? What Poland needs are companies which will be here for the long-term, instead of exploiting the environment for five years and then leaving, resulting in people losing their jobs anyway.
As Mr Popów says, there are two kinds of companies in Poland: those who are here for the 'cheaper' means of production and those who see Poland as a land of untapped potential with an enviable geographical location. Companies that are here for the first reason are probably already in the Ukraine or China. Those that are keen to be here for the long-term are worrying about the roads and the taxes and non-transparency. They are also concerned about what environmental standards the government will hand down, and when. It's Poland's indecision and corruption that really puts potential investors off - not the focus on environmental protection.
Another worrying thing for companies is explained by Ms Chodor this way: "The money that can realistically be expected to be forthcoming to help fund necessary changes - such as implementing new technology or buying new equipment - will not be anything like enough to cover the costs of those changes." She mentions the Second Ecological Policy of Poland, which covers environmental investment from 2002 to 2010. This document plans that investment in environment protection should be zł.150 billion, which is zł.16.5 billion per year. Of that, zł.56.6 billion is earmarked for wastewater management and water protection, air protection gets zł.40 billion and waste zł.41.4 billion. But she adds that between 2004 and 2006, private enterprises can expect only zł.800 million from the European Regional Development Fund, which falls far short of what is needed.
So, while it can't be denied that Poland has made impressive progress, the country cannot afford to rest on its laurels. Poland must be open to the know-how that is being offered; the best example is that of CNG technology - firmly in place in many western European countries and the Czech Republic - which is still unheard of here (for a detailed discussion of CNG, please see page 4). Poland must explore new environmental options, pass an enforceable environmental law, hand down stiff penalties for non-complying companies and educate people about individual responsibility for recycling and energy usage - or else it runs the risk of losing all its hard-won gains.
