Estonian Environmental Investment Centre

ROLE OF ENVIRONMENTAL INVESTMENT CENTRE IN FINANCING WATER PROJECTS

IN ESTONIA

MOLDOVAJuly 2007

Rävala bvld 8, TALLINNESTONIA

Phone: +372 627 4171Fax: +372 627 4170E-mail: info@kik.ee

http://www.kik.ee

Presentation about:

• Steps taken concerning water investment projects in Estonia supported by foreign aid

• Environmental Charges Act - current financing source for Estonian Environmental Investment Centre (EIC)

• Overview of role and tasks of EIC, water investment projects and EIC in future

Steps taken (I)

In 1992 EBRD and NEFCO initiated SMEP I (Small Municipalities Environmental Program) – water projects in 13 towns (implementation 1995-2000)

• Project selection criteria was: internationally known hot-spots, most urgent action needed settlement sites known on State level and based on activity from local level and from local governments

• Project Implementation Unit - joint stock company, among owners incl. local municipalities with EBRD and NEFCO loan assistance

• Finances “separate sub-projects” from different bilateral agreements (Finland, Sweden, Denmark), PHARE, Estonian State Budget, Local Budgets (incl. Waterworks) loans from EBRD & NEFCO

Steps taken (II)

In 1997 DEPA (Danish Environmental Protection Agency) initiated SMEP II - water projects in 17 towns (implementation 1998-2006)

• Project selection criteria was: based on DEPA pre-feasibility study concerning 64 sites in Estonia under WFD

• Project implementation Unit - private consulting company found as a result of public tender.

• Finances: “packages” for each town from different bilateral agreements (Finland, Sweden, Denmark), PHARE,Estonian State Budget / Environmental Fund, Local Budgets (incl. Waterworks) and loans from NEFCO, EBRD

Planned 17-town investment programme in mil EUR

Total 30 mil EUR

6,0

4,3

4,07,5

8,2

Loans: 20%

Estonian State Budget and Environmental Fund: 14%

Local Municipalities / Waterworks:13%

European Union:25%

Bilateral (Sweden, Finland, Denmark):27%

Steps taken (III)

Preparations for ISPA/CF started at end of 90ties. ISPA was transferred to Cohesion Fund (CF) after Estonia joined the EU in 2004

• Project selection criteria: outcome from previous and ongoing water investment programmes and National Environmental Action Plan and Strategy, incl. EU accession activities and relevant Directives

• EIC was accredited as implementing body for ISPA/CF, also for ERDF

• Finances major finances from ISPA/CF for large water investment projects towns, later “packages” for number of smaller settlement sites. Component of co-financing from EIC and local budgets (incl. Waterworks)

Finalized and ongoing ISPA/CF investment projects in mil EUR*

•Cost according to Financing Memorandum/ Financing Decision, that is ISPA/CF from EU and includes +co-financing from Estonia

Total 268 mil EUR

31,63

236,27

4 waste projects 13 water projects

Environmental Charges Act - Financing source for Estonian

Environmental Investment Centre (EIC)

• entered into force 1 January 2006

This Act provides the bases for:• determination of the natural resource charges; • the rates of pollution charge;• the procedure for calculation and payment

thereof; • and the bases and specific purposes for using

the proceeds from environmental exploitation paid into the state budget.

Environmental Charges Act - Financing source for EIC (II)

• The environmental charge is divided into the natural resource charge and the pollution charge.

• 1) regeneration cutting of forest stand;• 2) extraction of mineral resources;• 3) water abstraction;• 4) fishing;• 5) hunting;• 6) emission of pollutants into ambient air, water

bodies, groundwater or soil;• 7) waste disposal by deposit in landfills or other

activities which result in the release of waste into the environment (hereinafter waste disposal).

Environmental Charges Act - Financing source for EIC (III)

Distribution of natural resource charge

Mineral resources

• 100 % to the state budget if the mineral resources are extracted from boundary bodies of water, territorial sea, inland sea or other water body

which has not been divided between local governments;• 2) 50 % to the state budget and 50 % to the

budget of the local government of the location of the extraction site, if the mineral resources are extracted from a deposit of national importance located in an area not specified

• 100 % to the budget of the local government of the location of the extraction site, if the mineral resources are extracted from a deposit of local importance.

Environmental Charges Act - Financing source for EIC (IV)

Water abstraction charges • 100 % to the state budget if the water is abstracted, pursuant

to the procedure for water abstraction, from boundary bodies of water;

• 50 % to the state budget and 50 % to the budget of the local government of the location of water abstraction, if the water is abstracted, pursuant to the procedure for water abstraction, from internal water bodies or aquifers.

• If a water intake is located in the territory of more than one local governments, the Minister of the Environment shall establish the distribution of the water abstraction charges

Fishing charges shall be transferred to the state budget.

Hunting charges shall be transferred to the state budget.

Environmental Charges Act - Financing source for EIC (V)

Distribution of pollution charges:

Pollution charges shall be transferred into the state budget,

75% of the pollution charge for disposal of municipal waste shall be transferred to the budget of the local government of the place of origin of waste for the purpose of development of waste management, and 25% per cent of the charge shall be transferred to the state budget (some exceptions)

What is EIC? (www.kik.ee)

• natural resource charges and the pollution charges have been stipulated in different legislations since 1991, but from 14.01.1999 all were joined together under Act on Estonian Environmental Fund, institution itself was later re-organised to EIC

• EIC was established by the Estonian Government, Ministry of Finance on 11.05.2000

• A foundation, legal body under private law• Started with 4, now 50 employees• Decision making body is council (9 members: 2 from Ministry

of Environment, 2 from Ministry of Finance, 4 from Parliament • Head of the Council is Minister of Environment.

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EIC means:

• the assets transferred to the EIC upon establishment;• annual appropriations from state budget• allocations from rural municipalities and cities budgets;• loans (taken by the Government) for EIC on-lending• special allocations of governments, other legal and natural

persons of foreign countries, international organisations;• grants;• repayment of loans granted by the Foundation and related

interest receipts;• funds received in course of benefit events of the

Foundation;• other receivables

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Structure of the EIC

EIC “income” from Estonia and from EU

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

M EUR

EU INCOME 0,0 0,0 0,0 0,0 11,0 20,3 35,7

EE INCOME 16,2 18,0 18,1 33,8 28,4 33,9 49,7

2000 2001 2002 2003 2004 2005 2006

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

M EUR

13,5 17,5 20,9 25,2 26,9 28,4 38,1 18,5

2000 2001 2002 2003 2004 2005 20062007 I round

Allocations to National Environmental Programme in 2000 –

2007 (incl I round)

Implementation of National Environmental Programme

Investments for water management in 2006 in mil EUR

7,5

2,7

0,8

1,4

1,5

Waste water 45 projects

Drinking water 45 projects

Past pollution 53 projects

Non-technical works 31 projects

Restoring of water bodies 20 projects

Total 13,9 mil EUR

Implementation of ISPA/CF Investments in mil EUR

Total 267,90 mil EUR, incl. Estonian co-financing

47,25

15,24

173,78

31,63

Drinking water and sewage pipes: 4 projects

Wastewater treatment plants :2 projects

Water management (WWTP & pipes) : 7 projects

Waste management :4 projects

ERDF projects 2004-2006 in mil EUR

3,69

2,94

2,72

1,31

Water: 36 projects Waste: 27 projects

Renewable energy: 14 projects Biological diversity: 14 projects

Total 10,66 mil EUR as EU assistance, not incl. co-financing from Estonian side

EIC tasks as Cohesion Fund project implementing body – management

control (I)• Coordination of Project(s) implementation:

via planning and organisation of tendering via participation (and “watching over”) tendering

• Ex-ante control of tender doc’s, contract’s documents• Supervision over the performance of the beneficiary (as

delegated by the Government and fixed in PIA)• Monitoring of financial and physical progress • Projects financial management: (monthly, quarterly) payment

forecasts; check of contractors invoices and payments to the contractors - on behalf of Government, i.e.-Ministry of Finance (Treasury)

• Reporting of (if any) irregularities to the Ministry of Finance (Auditing Authority and Managing Authority)

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EIC tasks as Cohesion Fund project implementing body – management

assistance (II)• Assistance to the (Final) beneficiaries, via

guidance on CF requirements, procedures• Advice, expert opinion on CF application

documents• Financial support for CF application documents

and tender documents development• Comments on tender documents: (to secure

compliance to the law and Commission Decision: eligibility of planned activities, expenditures)

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EU financing period 2007-2013 for EIC

• From Structural Funds (SF) operational program, which includes investments to environment, is allocated 1 578 mil EUR as EU assistance

• For major water and waste CF projects (CF as part of SF) is allocated 626 mil EUR as EU assistance

• Most of SF finances related to environment is to be “channelled” via EIC.

• For the same period it is foreseen approximately 345 mil EUR from State budget (Environmental Charges Act and other funds to be established), which is to be allocated to co-finance SF as well as to continue to finance national environmental activities

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Cohesion Fund for EIC in 2007-2013

• EIC has to be accredited to be an implementing body for SF funds (CF, also ERDF)

• Most from the 626 mil EUR as EU assistance under the CF (water and waste) is to be allocated to water investment projects.

• For period 2007-2013 CF Application procedure & criteria (< 25 MEUR) are in drafting process

• In parallel to new CF applications and projects EIC continues implementing the projects from period 2004-

2006 up to 2010.24

THANK YOU AND QUESTIONS!

EIC