Chapter 3: Latvia

3.1 Summary of Findings

In 1996, environmental expenditures in Latvia amounted to USD 27.6 million, or 0.5 percent of the country's GDP. The priority areas of current environmental policy include water management projects, which account for 83 percent of environmental expenditures, followed by air pollution control projects, which account for 9 percent, and finally waste management projects, accounting for 5 percent of total environmental spending. The major sources of project financing in 1996 were the state budget (24 percent), private investments (37 percent) and foreign grants (39 percent).

Water supply, wastewater treatment and waste management are the main environmental priorities in Latvia. In order to ensure the necessary measures are implemented to deal with these issues, the Ministry of Environmental Protection and Regional Development (hereafter MoE) has developed two key strategic programs. The "800+ Program" concentrates on water management while the "500- Program" focuses on landfill waste management. Both programs will have a significant impact on the demand for environmental technologies in these sectors over the next few years.

Water management projects are the largest in size and importance. The 800+ Program is complex, aiming to reduce health risks, improve water quality and prevent further degradation of water ecosystems. The inventory and case study analysis of Latvian towns conducted to identify the current problems and propose necessary response measures was performed as the first step in the program. Projects on the construction of wastewater treatment plants in four towns and projects in 10 other towns are currently being implemented.

Projects regarding solid waste management will be initiated alongside an improvement in the legal and institutional framework concerning municipal solid waste, the closure and remediation of existing dumps, the establishment of safe regional landfills and the introduction of a new waste management system. The proposed new system will incorporate recycling measures, an improved collection system and alternative disposal options. It is expected to be implemented before the end of the year 2000.

According to the National Environment Policy Plan (NEPP), air pollution control is described as one of the top priorities, especially with regard to the emissions created by mobile sources (transport). The fulfillment of international agreements, particularly in the area of transboundary pollution control and climate change, is a high priority for Latvian State Environment Policy. Air pollution from stationary sources is a large problem though not as serious as the emissions from mobile sources. The largest concentrations of air pollution are obviously in the major cities.

Personal and professional contacts, information from regional environmental boards and state environmental agencies and inspectorates, participation in environmental fairs, and business and environmental publications are primary sources of information for project opportunities and on the availability of environmental technologies in Latvia. There are no effective formal information channels in place.

In general, the demand for environmental technologies was found to be between moderate and high. Technologies for waste management and the energy sector were ranked among the most needed, followed by water and wastewater treatment, and air.

Within the air sector, demand for pollution control technologies is moderate. The highest demand among these technologies is for air pollution control/flue gas purification equipment (e.g. filters, scrubbers). Growing demand is expected for instrumentation and process control equipment, and air sampling/laboratory analysis technologies.

In the water supply sector, overall demand was moderate. High demand was identified for treatment processes. Technologies where demand is expected to rise include monitoring/sampling/laboratory analysis, and equipment for inspection and reconditioning of existing supply networks.

The demand for wastewater technologies is also moderate. High demand for wastewater technologies is shown for physical, chemical and biological treatment processes; sampling/laboratory analysis, and pollution prevention/waste minimization technologies. Technologies in increasing demand include monitoring (of municipal wastewater), spill control and containment, and sludge treatment and disposal (in particular for municipal wastewater).

Among the technologies available for waste management, high demand was identified for waste collection, transportation and storage equipment, and technologies for pollution prevention/waste minimization, and landfill disposal (of municipal waste). Increasing demand is expected for composting/biomass conversion (of municipal waste) and recycling/resource recovery technologies.

Overall, the demand for energy related environmental technologies is high, particularly for the power generation sub-sector, while moderate for the industry sub-sector. High demand was identified for heat recovery and energy saving technologies; new/efficient energy and heat generation systems; retrofitting/rehabilitation of existing systems; and process management and control technologies. These technologies were all found to be in high demand for the power generation sector, while in other industrial sectors demand is expected to increase in the same technology areas.

It is important to mention that the uptake of environmental technologies within should be somewhat higher; however, the incomplete privatization of companies, shortcomings in environmental legislation leading to low environmental penalties, insufficient environmental competence and a less than favorable economic situation within enterprises has brought about a significant delay.

Municipalities tend to be the main end-users of environmental technologies in almost all sectors. The energy sector and the chemical industry are other major end-users.

In general, local environmental technologies meet the current Latvian regulations, although not all of these are able to meet the stricter EU requirements. Many local environmental technologies (including equipment and devices) require further development.

Some local environmental businesses have experienced success in the local market as well as in the foreign market. Approximately one quarter of those local companies interviewed stated their income share from foreign business to be more than 10 percent.

Generally speaking, environmental technology buyers gave preference to local products and producers. The reason for this is the lower price and the opportunity to maintain close contact with product providers, partly thanks to an already well-established network of business relationships.

Higher prices, import restrictions and difficulties in obtaining after-sales service are among the issues recognized as disadvantages of foreign suppliers.

Most of the local environmental technologies available in Latvia are in the field of water management. The supply of technologies relating to waste and energy can be considered moderate. The weakest share of domestic environmental technologies is in the air sector, where only pollution control and detection equipment is produced. The main reason for the slow development of the air sector is the shortcomings in the penalty system, whereby companies are not pressured to comply with regulations.

The water technology market is considerably more developed. Several local companies operate in water supply, the construction of water and wastewater treatment facilities, consultancy, geological evaluation, measurement of water quality and pollution, and remediation services.

Local companies established in the waste sector tend to specialize in municipal waste management, waste recycling, consulting, waste management planning, and the production of waste containers. Within the past two years, the demand for environmental technologies and services in the area of waste management has significantly increased.

Companies working in the energy sector are concentrated in the area of energy generation optimization, construction of boiler houses, conversion to local fuels, consulting and innovative energy technology.

Only a small number of foreign environmental technology suppliers are active in Latvia. Among those known to respondents are ABB, Carl Bro and Sweco.

The majority of local environmental businesses are privately owned (73 percent), while 7 percent are of mixed ownership, and 11 percent are state owned. Approximately 45 percent of the surveyed companies are small (up to 10 staff members), 50 percent are medium-sized (with 10-60 staff members), and 5 percent have more than 60 staff members. Most environmental businesses interviewed were established after 1990. Approximately half of them have only been operational for 2-3 years, 25 percent for 4-5 years, and the remaining 25 percent for more than 6 years.

Virtually all of the surveyed environmental technology providers indicated their need for information, especially on the following topics: domestic environmental regulations, sources of project financing, new environmental technologies, environmental quality standards for industries, and domestic tenders for projects.