Chapter 4: Lithuania
(continued)
The most critical environmental problems are related to the treatment of wastewater, wastewater minimization and water supply. The majority of domestic wastewater in cities is discharged into rivers after mechanical treatment following insufficient biological treatment. In 1996, approximately 252 million cubic meters of wastewater was discharged to surface water bodies. Of this amount, 39.5 percent was treated to match the requirements of discharge standards, 43.8 percent was insufficiently treated and 16.7 percent was discharged completely untreated. Therefore, construction of wastewater treatment facilities remains the highest priority for investment.
The major air pollution sources in Lithuania are transport, energy and industry. Energy instruments, oil refineries, and chemical and fertilizer companies are among the significant polluters, but transport remains the major source (approximately 70 percent in recent years and rising since 1992). Since 1995, pollution from stationary sources has been increasing, consistent with production growth.
There are also growing problems with regard to waste disposal and management. Domestic waste is increasing due to rising use and disposal of food and household product packaging. Domestic waste is virtually unsorted, thus most of it is dumped. A specific waste management problem exists with the disposal of pesticides. Today 954 storage facilities contain some 4,000 tons of pesticides; nearly 2,200 tons of these are prohibited, old or unidentified. Incidentally, between 1989 and 1995, 26 pesticide storage facilities caught fire.
Environmental policy coordination and integration, the reorganization of environmental legislation, and the creation of an effective Environment Impact Assessment Program are key issues for the future in Lithuania. To prevent the growth of new pollution sources, education and institutional strengthening, as well as enforcement of environmental legislation, is required.
| TABLE 4.2: TOTAL MATERIAL INVESTMENT IN ENVIRONMENTAL PROTECTION (AT CURRENT PRICES, USD MLN) | |||
|---|---|---|---|
| Category | 1994 | 1995 | 1996 |
| Water resources protection | 28.4 | 35.5 | 29.0 |
| Air protection | 0.5 | 0.8 | 1.8 |
| Protection of earth, forest, and fish resources | 1.2 | 0.4 | 0.4 |
| Total | 30.1 | 36.7 | 31.2 |
| GDP | 4,245.2 | 5,957.3 | 7,778.8 |
| Share of GDP (%) | 0.7 | 0.6 | 0.4 |
| Source: /111/ Statistical Yearbook of Lithuania, 1997 | |||
Detailed statistical information outlining annual environmental expenditures is not available because it is not presented in any publication of the Ministry of Environmental Protection or of the Department of Statistics. Information is collected by different institutions (i.e. the Ministry of Environmental Protection, the Ministry of Finance, the Ministry of the Economy, and the Department of Statistics), each with different goals and needs. Consequently, data from different sources are difficult to analyze and compare, and it is often inconsistent. A second problem is that information on environmental expenditure is not collected in a systematic way, sometimes even within the same institution.
Accurate information was only available for environmental expenditures of municipalities. Table 4.3 shows the breakdown of environmental investments by sector and source of finance within Lithuanian municipalities in 1996. The large share of water protection and waste management in the environmental expenditures of municipalities coincides with the identified major environmental priorities. The state budget covered 41 percent of investments, while municipal budgets accounted for 22 percent. Foreign finance amounted to USD 3.2 million, or 18 percent of total expenditures. Almost all foreign aid was allocated to water protection. The share of enterprise investment was very low, approximately 0.2 percent.
| TABLE 4.3: ENVIRONMENTAL EXPENDITURES OF MUNICIPALITIES BY SECTOR AND SOURCES OF FINANCE, 1996 (USD MLN) | ||||||
|---|---|---|---|---|---|---|
| Sector | S O U R C E S O F F I N A N C I N G |
TOTAL | ||||
| State Budget | Municipal Budget | Enterprise Investment | Foreign Aid | Other | ||
| Air | - | 0.003 | - | - | 0.09 | 0.09 |
| Water | 7.2 | 3.42 | 0.02 | 3.09 | 1.75 | 15.5 |
| Waste | 0.001 | 0.38 | 0.007 | 0.08 | 0.47 | 0.94 |
| Soil | - | 0.002 | - | - | 0.14 | 0.14 |
| Noise | - | - | 0.006 | - | 0.06 | 0.06 |
| Landscape | - | 0.004 | 0.002 | - | 0.53 | 0.53 |
| Other | - | 0.09 | - | - | 0.17 | 0.26 |
| TOTAL | 7.20 | 3.9 | 0.04 | 3.17 | 3.21 | 17.52 |
| Source: Ministry of Environmental Protection | ||||||
The implementation of environmental protection measures depends greatly on the availability of financial resources. state budget, loans, aid from foreign countries and international donors, environmental taxes and other sources vary from year to year. State and municipal budgets have been the main financial resources in Lithuania in recent years. The State Fund for Nature Protection and 56 municipal Nature Protection Funds have been additional sources. /106, 108/
Taxes for the use of natural resources and pollution charges are two of the main economic instruments applied that support the implementation of the environmental protection strategy. The revenue from environmental taxes, charges and fines, in comparison with the total revenue of the Lithuanian National Budget is presented in Table 4.4. Environmental revenues have been increasing in real terms and accounted for between 1.0-1.3 percent of the total national budget during 1994-1996. The largest sources are pollution charges and natural resource taxes. For example, revenue from the taxes charged for the use of natural resources makes up 0.4 percent of the state budget.
| TABLE 4.4: REVENUE FROM ENVIRONMENTAL TAXES, CHARGES AND FINES (USD MLN) | |||
|---|---|---|---|
| Revenue | 1994 | 1995 | 1996 |
| State budget revenue from taxes on the use of natural resources | 4.6 | 4.7 | 7.2 |
| State budget revenue from pollution charges and fines | 1.5 | 2.3 | 4.4 |
| Municipal nature protection funds (with revenue based on pollution charges) | 3.4 | 5.8 | 9.0 |
| State Fund for Nature Protection (with revenue collected from fines for the violation of environmental protection laws) | 0.8 | 1.1 | 0.9 |
| Total environmental revenue | 10.3 | 13.9 | 21.5 |
| Total revenue of the Lithuanian National Budget | 1010.6 | 1439.5 | 1680.0 |
| Environmental revenue as a percentage of the Lithuanian National Budget | 1% | 1% | 1.3% |
| Source: /108, 109, 110/ Environmental Protection in Lithuania. Annual Report. 1994, 1995, 1996; /111/ Statistical Yearbook of Lithuania 1997 | |||
Meanwhile, 1.2 percent of the total state budget revenue was used for financing environmental investments. However, efforts should be made to change the existing system so all taxpayers pay into the state budget under the polluter-pays mechanism. The new laws that include such a polluter-pays principle were prepared and submitted to Parliament for consideration in order to improve the efficiency of environmental taxation.
The share of national financial resources funding environmental protection is presented in Table 4.5. The majority of environmental investments are allocated from the state budget. The State Fund for Nature Protection accounts for a very insignificant part of the overall total. The municipal nature protection funds' expenditures have been increasing in nominal terms in recent years; however, they have increased only slightly in real terms. There are 56 municipal nature protection funds in Lithuania. The revenue of these funds originates from pollution charges. According to the Law on Pollution Charges, 70 percent of the revenue collected is directed to the municipal funds and 30 percent to the state budget.
| TABLE 4.5: SOURCES OF FINANCE FOR ENVIRONMENTAL PROTECTION | ||
|---|---|---|
| Sources | Share of Total | |
| 1995 | 1996 | |
| State budget | 78% | 71% |
| State Fund for Nature Protection | 4% | 3% |
| Minucipal nature protection funds | 18% | 26% |
| Source: /108, 109/ Environmental Protection in Lithuania, Annual Report, 1995, 1996 | ||
To provide an incentive for waste and pollution minimization, and to accumulate additional funds, the Lithuanian Environmental Investment Fund (LEIF) was created in 1996. It is expected to become operational in 1998. LEIF was created to provide soft loans and limited grant financing to the private and public sectors. The procedure and responsibility for approving project financing is divided into two parts: the Fund evaluates the project proposal from an environmental point of view, while the Fund's partner bank evaluates the project from a financial point of view.
The Lithuanian Ministry of Environmental Protection is in close cooperation with Ministries of Environmental Protection in other countries, especially those of the Baltic Sea region. Good communication exists with other institutions and international organizations, too. The financing mechanisms of foreign donors varies since each donor has specific requirements and procedures. The Ministry of Foreign Affairs in Lithuania coordinates efforts and activities with regard to grant finance. State guaranteed loans are usually coordinated by the Ministry of the Economy and the Ministry of European Affairs. The Ministry of Environmental Protection assists in coordination during the preparatory period.
Grants and state guaranteed loans from the World Bank, the EBRD and NEFCO (Nordic Environment Finance Corporation), as well as from various bilateral donors, most notably from Denmark, for example, were given to complete the construction of major wastewater treatment facilities. In many cases it is possible to form viable financial packages for the construction of wastewater treatment plants by combining grants and loans.
Donor activity in the Lithuanian environmental sector is presented in Table 4.6. The total amount of donor support for the period 1991-1996 was USD 126.5 million. This was received in the form of grants (USD 65 million) and loans (USD 61.5 million) for both investments (USD 101.6 million) and technical assistance (USD 24.9 million).
| TABLE 4.6: ANNUAL DONOR ACTIVITY IN THE LITHUANIAN ENVIRONMENTAL SECTOR (USD MLN) | |||
|---|---|---|---|
| Year | Investments | Technical Assisstance | Total |
| 1991 | - | 0.3 | 0.3 |
| 1992 | - | 2.9 | 2.9 |
| 1993 | 3.1 | 3.2 | 6.3 |
| 1994 | 18.0 | 4.4 | 22.4 |
| 1995 | 43.9 | 10.4 | 54.3 |
| 1996 | 36.6 | 3.7 | 40.3 |
| Total | 101.6 | 24.9 | 126.5 |
| Source: Ministry of Environmental Protection, General Strategy Department, Project Management Unit | |||
As outlined in Table 4.6, both foreign environmental assistance and technical assistance increased from 1991-1995, and have since decreased. The range of major donors supporting the environmental sector in Lithuania over the past five years is presented in Table 4.7. One can see that the Scandinavian countries, especially Denmark, have taken a keen interest in the Lithuanian environment. Scandinavia shares the Baltic Sea with Lithuania; therefore, it is necessary to cooperate on common environmental issues.
| TABLE 4.7: DONOR ACTIVITY BY COUNTRY/ORGANIZATION IN THE LITHUANIAN ENVIRONMENTAL SECTOR | |
|---|---|
| Donor | Percentage of Total 1991-1996 |
| Denmark | 41.1% |
| PHARE | 16.1% |
| EBRD | 14.8% |
| Sweden | 9.1% |
| World Bank | 7.0% |
| US AID | 5.8% |
| NEFCO | 3.0% |
| Finland | 2.9% |
| Norway | 0.2% |
| Source: Ministry of Environmental Protection, General Strategy Department, Project Management Unit | |
Support from bilateral and multilateral donors is expected to cover an estimated 57 percent of the total environmental investment program in 1997-1999.
The business sector contributes relatively little in terms of environmental expenditure. The total environmental expenditure of commercial enterprises in different sectors in 1995 is presented in Table 4.8. Detailed figures for 1994 and 1996 were not available.
| TABLE 4.8: ENVIRONMENTAL PROTECTION EXPENDITURES BY ENTERPRISES, 1995 (USD MLN) | |||||
|---|---|---|---|---|---|
| Activity of Enterprises | Investments in End-of-pipe Installations | Investments in Integrated Technologies | Current Expenditures | Contribution to Taxes for Environmental Pollution | Receipts |
| Agriculture, hunting | 0.04 | - | 0.29 | 0.21 | 0.007 |
| Forestry | 0.06 | 0.66 | 0.92 | 0.08 | 0.008 |
| Fishing | 0.001 | - | 0.006 | 0.02 | - |
| Mining and quarrying | - | - | 0.06 | 0.04 | 0.001 |
| Manufacturing | 2.85 | 3.74 | 19.40 | 2.75 | 2.57 |
| Electricity, gas, steam and hot water supply | 0.39 | 0.50 | 4.32 | 1.32 | 0.01 |
| Wastewater collection, purification and distribution | 9.99 | 0.003 | 18.13 | 1.92 | 0.14 |
| Construction | 0.04 | 0.05 | 0.24 | 0.21 | 0.10 |
| Transport and communications | 2.26 | - | 2.05 | 0.88 | 0.65 |
| Sewage and refuse disposal, sanitation | 1.25 | 0.002 | 8.34 | 0.24 | 0.03 |
| Other | 0.17 | - | 0.5 | 0.02 | - |
| Total | 17.05 | 4.95 | 54.25 | 7.69 | 3.52 |
| Source: /112/ Natural Resources and Environmental Protection, 1995. Department of Statistics report to the Government of the Republic of Lithuania. | |||||
Current expenditures include the protection of water resources, air protection, land protection from pollution by industrial waste and land cultivation. Taxes for environmental pollution include fees, charges and fines contributed to state and municipal environmental funds.
The largest investments within the manufacturing industry for end-of-pipe installations were made by manufacturers of food products and beverages (43 percent) and by manufactures of chemicals and chemical products (32 percent). The largest investments in integrated technologies were made by manufacturers of wood and wood products with the exception of furniture (44 percent), machinery and equipment (36 percent) and chemicals and chemical products (7.6 percent). The highest taxes for environmental pollution were paid by manufacturers of food products and beverages (48 percent), nonmetallic mineral products (15 percent) and refined petroleum products (9.5 percent).
Data on the environmental expenditures of enterprises in 1995 was prepared according to new data collection methods, and is presented by sector in Table 4.9.
| TABLE 4.9: ENVIRONMENTAL INVESTMENTS MADE BY ENTERPRISES BY SECTOR, 1995 (USD MLN) | |
|---|---|
| Sector | Investment |
| Wastewater | 13.7 |
| Waste | 1.6 |
| Air | 1.7 |
| Other | 0.1 |
| Total | 17.1 |
| Source: /112/ Natural Resources and Environmental Protection, 1995. Department of Statistics | |
The majority of investments are allocated to the wastewater sector. By comparing the corresponding data from the Department of Statistics and the Ministry of Environmental Protection, it can be concluded that investments in the water sector are decreasing while investments in waste management are increasing.
Applications for project financing must be sent to the Ministry of Environmental Protection. The applications are reviewed by the Fund's council, established by a Ministerial Order. Table 4.10 examines the revenues and expenditures of the State Fund for Nature Protection. Data concerning environmental expenditures by sector was not available.
| TABLE 4.10: REVENUE AND EXPENDITURES OF THE STATE FUND FOR NATURE PROTECTION (USD MLN) | |||
|---|---|---|---|
| 1994 | 1995 | 1996 | |
| Total Fund Financial Resources | 0.78 | 1.26 | 1.23 |
| Income | 0.78* | 1.10* | 0.92* |
| Expenditures by area: | |||
| Investment expenditures | 0.20* | 0.31 | 0.43 |
| Current expenditures | 0.41* | 0.78 | 0.65 |
| Total Environmental Expenditures | 0.61 | 1.09 | 1.08 |
| * Figures are based on data collected during informal interviews with representatives of the Ministry of Environmental Protection. Note: Total Fund financial resources consist of annual incomes and any revenues carried over from the previous year. Investment expenditures include construction and supervision of environmental investments, elimination of pollution sources and improving levels of natural resources. Current expenditures include drafting of environmental protection programs and standards, ecological education, training, publishing, bonuses to environmental employees and public volunteers, etc. Source: /108, 109, 110/ Environmental Protection in Lithuania (Aplinkos apsauga Lietuvoje), Annual Report, 1994, 1995, 1996. |
|||
The Ministry of Environmental Protection receives an average of 50 applications for funding per year from the State Fund for Nature Protection. In 1995 for example, 16 projects were successfully financed, the same amount as in 1996. Once approved, funds are disbursed directly to the applicant by the Accounting Division of the Ministry. The State Fund for Nature Protection serves as an additional source of financing for environmental projects, constituting only 3-4 percent of the total financing offered for environmental protection in Lithuania (see Table 4.5). It is expected that the new Lithuanian Environmental Investment Fund will help finance environmental projects in both the private and public sectors.
The Law on Waste Management has been submitted to Parliament for review, and regulations for hazardous waste management are currently being prepared. Some of the former Soviet Union legislation on waste management is still valid in Lithuania; however, regulations for waste management planning and organization will be introduced once the Law on Waste Management has been passed.
The pollution prevention principle is embodied in the draft Law on Environmental Impact Assessment, which has been submitted to Parliament for consideration.
The main principle underlying the Law on Taxes on the State's Natural Resources (passed in March 1991) and the Law on Taxes Charged for Pollution (passed in April 1991) is the "polluter pays." These laws are gradually being modified in order to harmonize them with EU requirements.
The following instruments are applied in environmental protection policy:
In May 1995, an Order on the Eco-Labeling of Products was approved with the aim of reducing environmental impact during the whole life cycle of a product. The order is also consistent with the EU Directive on eco-labeling and waste management.
Permits for emissions and discharges as well as guidelines on the use of natural resources are among those management instruments applied. According to the Law on Environmental Protection, industrial enterprises are required to obtain permits issued by the Ministry of Environmental Protection. However, in the case of new sources, all possible environmental impacts must be assessed before project realization to decide whether a project is acceptable.
The Ministry of Environmental Protection ensures enforcement through its regional divisions. Fee collection is not comprehensive, however, and compliance is often difficult to ensure as the number of small and medium-sized companies continues to grow and monitoring becomes more difficult. All eight environmental protection departments have laboratories that render their services to environmental protection inspectors. Local authorities undertake a number of functions in ensuring the adoption of environmental legislation.
The system of integrated pollution prevention control is under consideration, with a unified permit system being discussed. The proposed permit would be valid for air and water pollution and for the use of natural resources. Regional departments of the Ministry of Environmental Protection would issue permits once the system has been approved.
The Ministry of Environmental Protection (MoEP) is the principle institution responsible for preparing the policies of environmental protection and use of natural resources. The Ministry drafts laws on environmental protection and the majority of proposals for environmental legislation. The MoEP supervises (through regional departments) the use of natural resources and ensures environmental protection. The Ministry coordinates environmental projects of national importance, collects environmental data based on its own observation networks, and coordinates environmental monitoring. Annual reports on the state of the environment and general overviews are issued by the MoEP.
The Ministry of Environmental Protection consists of a central body (head office), eight regional departments and a fisheries resource department, together with 44 regional and 11 urban state environmental protection agencies (inspectorates). These agencies ensure the enforcement and implementation of environmental protection requirements and measures. Officials within specialized institutions such as the directorates of protected areas are also authorized state environmental protection inspectors. Other institutions such as the Ministry of Forestry (for the protection of forest resources), the Ministry of the Economy (for the management of hazardous waste), the Ministry of Construction and Urban Development (for territorial planning) and the Geology Board (for the use of mineral resources) also aim to ensure environmental protection within the bounds of their competency.
