Addressing Historical Environmental Damages in Privatization

Addressing Historical Environmental Damages in Privatization

Bulgaria’s Road Towards Improved Environmental Management

Adriana Damianova

Environment and Socially Sustainable Development

Europe and Central Asia , World Bank

Managing for Development Results

Second International Roundtable, Marrakech,

February 4-5, 2004

Addressing Historical Environmental

Damages in Privatization Addressing Historical Environmental

Damages in Privatization

World Bank assistanceEnvironment Remediation Pilot

Project: WB Loan US$16 Million (Copper smelter /UM Belgium, privatization 1998)

Environment and Privatization Support Adjustment Loan: WB Loan US$50 Million (Oil Refinery, Steel Mill, Open Copper Mine, Fertilizer Plant, and

Pharmaceutical Plant privatized in 1999-2000)

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in Privatization

Managing the desired outcomes by Timely response to key inter-sector priorities and investment

needs Applying innovative approaches and involving key

stakeholders Managing implementation (define responsibilities, commitment

to design outcomes, continuity, flexibility to evolving needs) Define and agree on measures for sustaining project outcomes

Addressing Historical Environmental Damage in PrivatizationAddressing Historical Environmental Damage in Privatization

Issues and challenges Inherited pollution problems posing significant

risks to human health in industrial hot spots (Pirdop-Zlatiza)

Increasing awareness of social and environmental risks and public pressure

Weak governance structures and regulatory framework to deal with environmental uncertainties in the privatization

Resistance of reputable investors (e.g. UM) to commit to environmental compliance unless stock pollution issues are resolved

Addressing Historical Environmental Damage in PrivatizationAddressing Historical Environmental Damage in Privatization

The privatization and support of the WB provided a “window of opportunity” for the Government to:

Eliminate policy and regulatory roadblocks and reach agreement on corporate compliance with environmental standards;

Improve investment climate, re-capitalize enterprise assets and contribute to economic growth.

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in Privatization

Key design and implementation principles of ERPP: Accountability and transparent use of public

resources allocated for clean up of historical pollution Environmental damages assessed based on risk

assessment methodology (EIA , Environmental Remediation and Compliance plans); public involvement

Cost effective remediation techniques based on elimination of environmental risk

Clear implementation procedures, institutional responsibilities, transparent procurement, accountability, monitoring environmental performance

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in PrivatizationImplementation documents Sales Purchase Agreements include environmental

plan for compliance based on standards acceptable to regulator and regulated entity

Implementation Agreement with agreed performance indicators to show implementation progress

Agreement on inter – agency implementation and post- privatization oversight (structure,functions responsibilities, reporting etc.)

“After-care program” for sustainability of project measures agreed prior to completion

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in PrivatizationEnabling legal and regulatory framework in place: Privatization Act and by-laws Environmental Protection Act Water Act EIA Regulation Regulation on Principles and Procedures for

Determining State Liabilities for Historical Pollution

Methodology and Guidance on Past Environmental Pollution

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in Privatization Build partnership between stakeholders/

beneficiaries: Ministry of Environment and Waters and Regional

Environmental Inspectorates Ministry of Finance Privatization Agency Municipalities Enterprises Investors (UM) Local population

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in PrivatizationLessons learned from ERPP Identification of environmental problems must be

done at the outset of privatization process Implementation responsibility handed over to private

owner Information on enterprise environmental

performance is key (environment audits/ EIA) and should be included in privatization documents

Involvement of all stakeholders and public at large is critical for sustaining project outcomes

Negotiations on environmental conditions should be included in the negotiations of individual sales

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in PrivatizationLessons learned from ERPP Implementation of clean up programs requires

continuous post-privatization oversight Bank support facilitates effective collaboration

and public-private partnership for environmental management

Corporate businesses act in more responsible manner to social and environment issues in a transparent environment

The project model enhanced transparency and public access to information on corporate environmental performance

Addressing Historical Environmental Damage in PrivatizationAddressing Historical Environmental Damage in PrivatizationPolicy Outcomes: Integrating environmental issues in structural

reforms (accompanying operations FESALI and II, follow up operation PALI)

Policy improvements and instruments for addressing environmental issues in privatization

Institutional capacity and enhanced public-private partnership in environmental management

Enhanced role of environmental agencies and improve institutional coordination

Better collaboration with donors

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in PrivatizationEconomic benefits Increased interest from reputable FDI in

privatization of large industries Increased environment investments from private

sector and contribution to clean up cost in a cash strapped economy

Higher budgetary revenues and economic growth boosted by more viable private sector

Improved corporate governance Cost saving by linking environmental compliance

and industrial restructuring

Addressing Historical Environmental Damages in PrivatizationAddressing Historical Environmental Damages in PrivatizationSocial and environmental benefits Protection of human health and sensitive

ecosystems from excessive pollution Mitigation of risks posed by past pollution Environmental monitoring and compliance with

environmental standards of industries improved Partial offset of adverse social impact of

privatization by prolonged demand for new jobs and new employment opportunities for local population

Old Slag Dump Rehabilitation Contaminated waste excavated and sites cleaned up

November 1999

September 2002

Clean-up of Old Sulfuric Acid Plant

Old sulfuric acid plant demolished and site decontaminated

November 1999

October 1997

June 1999

December 2002

Closure of the “Blue Lagoon”“Blue lagoon” encapsulated and re-vegetated