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The Warsaw Voice » Business » March 1, 2013
Innovative Poland
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Eco-Friendly Financing
March 1, 2013   
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Małgorzata Skucha, president of the National Fund for Environmental Protection and Water Management, talks to Elżbieta Wrzecionkowska about the institution’s new strategy, its priorities and how it makes use of EU funds.

The National Fund for environmental Protection and Water management was established under a law in 1989, to financially support environmental protection and water management in Poland with funds originally from environmental fees and fines. Later funds also came from EU programs and the sale of carbon dioxide emissions rights. Once every four years, a new strategy that sets priorities for the Fund is adopted. What does the strategy for 2013-2016 look like?
We have set our environmental priorities for the next four years. Some of them are a follow-up to our existing activities, but most of them are new challenges. We are primarily focusing on the protection and sustainable management of water resources. This means that we are still going to support activities related to upgrading sewerage systems—including sewage treatment plants and sewer systems—and investment projects involving the management of municipal sewage sludge. We will continue to press ahead with programs to support the construction of individual sewage treatment systems. Considering our experience from previous years, we will try to support investment projects involving flood control using new energy generation facilities. Rational waste management and ground surface protection is another of our priorities. As part of these activities, we will primarily carry out projects based on a gradual transition from waste storage to recycling, recovery of materials and their use for energy generation purposes. The law on maintaining cleanliness and order requires huge educational support as well; we are going to carry out such activities. When it comes to climate protection and reducing emissions of harmful substances into the atmosphere, we will strive to eliminate inefficient heating equipment, increase the efficiency of energy consumption, and increase production of energy from renewable sources. It is also worth keeping in mind that we are making efforts to slow down the degradation of the environment and to protect a number of endangered plant and animal species and natural habitats. As the country develops economically and tourist traffic increases, we will be working to reduce human pressure on the most valuable protected areas in the coming years.

Generally, the strategy of the National Fund for Environmental Protection and Water Management in the years ahead will be based on consolidating and clearly identifying our goals as well as on reducing the number of priorities. We want to allocate funds and direct the largest stream of funding to activities related to a low-emission economy, climate protection and prevention of climate change, as well as eco-innovations designed to help improve the competitiveness of businesses operating in Poland—in addition to a reduced use of natural resources and creation of green jobs.

In 2014, a new option for co-financing projects from EU funds should appear. Is Poland ready to absorb these funds?
When the new strategy of the National Fund for Environmental Protection and Water Management was being approved, there were no final decisions when it comes to the method of financing environmental investment projects from EU funds for 2014-2020; neither did we know what institutions would take part in the system for carrying out individual projects. Our previous experiences show that national regulations, for instance, the Renewable Energy Sources Act, may be not ready by early 2014. We are aware that our strategy may have to be updated so the funds at our disposal could be used in accordance with the applicable national regulations and EU law. But one should realize that our budget consists not only of EU funds but also national funds from environmental fees and fines as well as funds from Norway (non-repayable financial assistance for Poland in the form of two instruments, the EEA Financial Mechanism and the Norwegian Financial Mechanism—both commonly referred to as Norwegian funds—comes from three EFTA countries: Norway, Iceland and Liechtenstein) and funds from the sale of carbon dioxide emissions rights (a country with surplus carbon dioxide emissions rights can sell them to another country under the Kyoto Protocol, provided the funds obtained from such sales are used for protecting the climate and further reducing greenhouse gas emissions).

The planned budget for 2013 is zl.7 billion, which is almost zl.2 billion more than last year. We are not sitting on our hands waiting for the next tranche of EU funds. Some programs are in progress and a dozen or so are being prepared.

Who do you plan to support with your funds?
This year, financing will be mainly directed to local governments, businesses and households under a program of subsidies for the construction of eco-friendly housing as well as co-financing available to those installing solar panels. While considering applications, the ecological effect will be the crucial criterion.

In December last year, after the sale of carbon dioxide emissions rights to Spain, you launched two new programs targeted at local governments, Sowa (Owl) and Gazela (Gazelle). What kind of revenue can be generated from the sale of emissions rights?
The agreement with the Spanish government was the 10th Polish transaction for the sale of emissions rights and allowed us to spend zl.356 million on replacing old and energy-intensive street lightning system in local areas with an efficient one. A further zl.80 million was allocated for a program for supporting low-emission urban transport. This program covers the purchase and modernization of vehicle fleets as well as infrastructure, training courses and transportation management systems. Both programs are targeted at local governments, and we can see that they have drummed up a lot of interest. The application process is in progress.

It is worth noting that so far Poland has generated zl.780 million in revenue from the sale of emissions rights. As part of our strategy, we will try to expand this method of getting funds. The environment ministry is in talks with more countries interested in buying emissions rights, while we are taking part in these talks.

You plan to modernize the financial instruments used by the Fund in order to move away from subsidies. What will the new activities consist of?
Considering the ever-changing situation and, above all, the growing needs and challenges, we indeed want to change the financial instruments and the structure of financing. We plan to develop our instruments through the involvement of third parties as part of public-private partnerships and concessions. Thanks to this, local governments will be able to accomplish their tasks and meet the needs of residents without increasing their own debt. We’re going to work to considerably increase the role of repayable financing in relation to non-repayable financing from our own funds. In 2016, the proportion should be 65 to 35, whereas the target level in 2020 should be 80 to 20. At the same time, we assume that non-repayable assistance will be provided as targeted support for obtaining external sources of funding such as subsidies to interest rates on bank loans and issues of municipal bonds or redemption of bonds, or else as an incentive to undertake eco-friendly investment projects through various write-off arrangements. As a fund of funds, or a financial intermediary implementing innovative financial instruments based on EU funds, we plan to introduce refundable instruments such as loans, acquisition and purchase of stock and bonds and the use of guarantees.

Is the National Fund for Environmental Protection and Water Management ready for that?
In order to meet the challenges, we need to continually change and modernize our operations—even though a lot has already been done in this area. We are determined and result-oriented. We want to be a competent and transparent ecological institution with flexible financing. We could define our goals by 2020 as 3x20. This means, first, 20 percent faster service—at the moment, an application takes 150 days to process; we plan to reduce this time to 90 days by 2016 and 72 by 2020; second, a reduction in our own costs by 20 percent from 1.6 percent in 2016 to 1.3 percent in 2020; and, third, in what is our most important goal, an increase in payments by 20 percent from around zl.5 billion to over zl.6 billion. The Fund will apply the Balanced Scorecard method, so that environmental protection projects are financed effectively, increasing satisfaction for recipients.
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