Environment in emerging and transition economies

Improving Performance of Public Environmental Funds


The St. Petersburg Guidelines on Environmental Funds in the Transition to a Market Economy, developed by the EAP Task Force in 1995, were used as a benchmark for conducing performance reviews of several environmental funds. Performance reviews helped identify where the major governance problems lay and how to design institutional reform and strengthening measures for these funds. The main goal of these reviews is to conduct an independent and objective evaluation of various aspects of operations of a Fund (legal, institutional, organisational, technical and financial) and identify necessary reforms that would help improve the Fund effectiveness and efficiency. Recommendations, developed during the review process, are often further implemented through in-country donors’ technical assistance programmes (e.g. in Moldova).

Public, comprehensive environmental funds, once common in EECCA and still common in CEE, have attracted a lot of attention of environmental policy makers, notwithstanding their generally modest role compared to other sources for financing environmental projects in EECCA. Such funds are typically governmental, or quasi-governmental institutions, capitalised by a variety of earmarked public revenue sources, including environmental charges and fines. The funds provide financing usually in the form of grants or soft loans, to a wide range of environmental protection activities for both the public and private sectors.

While encouraging alternative, innovative organisational forms for managing public environmental expenditures, the EAP Task Force and its EECCA Environmental Finance Network have also facilitated improvements of performance and governance of environmental funds. The performance review methodology is based on the criteria set forth in the St. Petersburg Guidelines on Environmental Funds in the Transition to a Market Economy (OECD, 1995) and in the Good Practices of Public Environmental Expenditure Management (OECD, 2003). The Figure attached illustrates the results of the evaluation of the performance of the Moldovan National Environmental Fund.

Performance reviews are voluntary audits requested by countries themselves and implemented with support by donors under the supervision of the EAP Task Force. A number of environmental funds in both CEE and EECCA regions have been reviewed so far, using the EAP Task Force methodology. Among those - four funds from CEE (the Polish EcoFund, the Estonian Environmental Protection Fund, the Czech State Environmental Protection Fund, the Slovenian Environmental Development Fund) and three funds from the EECCA region (the Kazakh State Environmental Protection Fund, the Moldovan National and Chisinau Municipal Environmental Funds and the Volgograd Oblast Environmental Fund (Russian Federation) have undergone such in-depth reviews over the past years.  Most recently, in March 2006, the State Environmental Protection Fund of Ukraine was also reviewed in accordance with the OECD methodology.

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