Gutner discussed how effective flows of money from rich to poor nations have been in terms of influencing environmental policies in recipient countries and improving the quality of the natural environment. There are few examples of unqualified successes. There are many cases in which funding is insufficient, donors and recipients have different priorities, organizational inertia abounds, and turf battles arise among institutions. Problems related to capacity building exist on the parts of both donors and recipients. Financial transfers rarely achieve donor goals when they conflict with recipient priorities. Even when priorities coincide, donors' own interests and operating practices can divert them from their goals. Donors must also work to build their organizational capacity so that they can do what they have promised to do. In addition, there are problems that result in translating from macro strategies to micro level impacts, and problems with turning environmental concern into action.
Gutner examined the problem of capacity building within donor institutions by discussing the impact of the largest donors providing environmental assistance to East Central Europe from 1989 to 1994. The institutions examined were the World Bank, the European Bank for Reconstruction and Development (EBRD), the European Union's PHARE program of grant-based assistance to Eastern Central Europe, and bilateral aid. The case of East Central Europe is an example of a region of the world facing serious environmental problems. However, the ways in which donors have selected distinctly different solutions to apply provides an illustration of how organizational inertia can thwart donor goals.
When the major donor agencies providing assistance to Eastern Europe were confronted with new or additional environmental problems, they tended to apply a familiar set of preferred solutions, constrained by institutional interests, organizational structure, and the financial tools available. Because institutions tend to do what they do best, they took old solutions and tried to make new problems fit them. This, of course, has consequences for how effectively aid is provided.
Organizational inertia results in:
As a result, the aggregate assistance is much less than the sum of its parts.
Certain priority areas are simply neglected. An example of this is particulate air pollution from low stack emissions from domestic heating and small and medium-sized enterprises. This is a major problem in terms of human health impacts, but it requires many small projects which often fall between the crack of what the multilaterals and bilaterals fund.
Donor priorities for cleaning up the environment of East Central Europe included: 1) the desire to reduce transboundary pollution, 2) humanitarian aid, 3) export benefits to donors, and 4) pressure from domestic environmental groups. While environmental policy reform and clean-up were initially a priority of recipients, these priorities shifted as the challenges of economic restructuring came to dominate the political agenda. Now, many recipients do not want loans, because they do not want to increase their public sector debt; instead, they seek grants. Overall, there is about $3 billion in assistance available for $20 billion in needs, but international agencies can be influential in keeping the environment on the agenda.
Early attempts at coordinating and prioritizing environmental assistance were overcome by organizational inertia. PHARE was supposed to coordinate all bilateral donor aid but that did not work, mainly because each country wanted to promote its own interests (the French wanted to promote nuclear power and water projects; Austria wanted to reduce transboundary air pollution in their direction, etc.). The lack of shared interests made for poor cooperation. Early aid projects in the region were characterized by a great deal of overlap and a shopping list approach.
The next initiative occurred in 1990-91, when the Czechoslovak federal environment minister, Josef Vavrosek lobbied for a permanent Council of European Environment Ministers. This initiative also failed, because donors were uninterested in setting up new institutions. However, it did result in what is now called the Environment for Europe process, which is a series of biannual meetings of Eastern and Western environmental ministers aimed at better prioritizing and coordinating environmental assistance to East Central Europe.
Perhaps the most important outcome of this initiative is the Regional Environmental Action Programme (EAP) for Central and Eastern Europe, an ambitious document written largely by the World Bank, that seeks to identify and prioritize the region's environmental problems and propose policy solutions for solving these problems. The EAP was endorsed by environmental ministers at their Lucerne meeting in 1993. The EAP contained the following basic themes:
In sum, the highest priority problems identified by the EAP and endorsed by the ministers are primarily local, not transboundary problems.
EAP policy recommendations include:
Pros and Cons of EAP
Pros
Cons
Gutner also examined the sources of organizational inertia within specific donor institutions. The multilateral development banks are hampered by difficulty in finding loans that are attractive to both banks and recipients. Recipients don't want to increase their debt especially for environmental projects. The banks, in turn, have had a difficult time finding "bankable" environmental projects that generate revenue streams, have a strong local contribution, and a sufficient guarantee that the borrower will be able to repay the loan.
In sum, very few stand alone environmental projects are being funded by either the World Bank or the EBRD. Instead, they do what they do best lending for large supply side energy projects with a lack of emphasis on demand side management or end-use efficiency. The banks - particularly the EBRD - are also starting to fund waste water treatment plants, although there is some question about the relative human health benefits of these projects.
There are, however, a few sources of innovation. Within the World Bank, geothermal heating projects are planned in Poland, Slovakia and Hungary. Integrated forest development projects are planned in Poland and Albania, but the jury is still out on whether these will happen or have the desired environmental benefits. A Polish $18 million environmental management project is viewed as a success, and is the basis for a similar $100 million Russian project. A $25 million environment project planned for Slovenia will focus on building and expanding district gas heating networks as a means of reducing ambient concentrations of particulates and sulfur dioxide. The EBRD, in turn, recently created a new Energy Efficiency Unit to help fund small energy efficiency projects.
PHARE and the bilaterals, in turn, rely more on small grants, meaning that they lack the financial tools to implement projects requiring significant capital. Instead, they tend to fund small technical assistance projects such as studies, training, technical expertise, legislative assistance, and small grants for equipment purchases. They have been criticized for spending money on expensive Western consultants who often write feasibility studies not linked to specific investments. Most bilaterals are also very self-interested in developing their own export markets.
Given these examples of organizational inertia, what are the positive and negative attributes of the Project Preparation Committee, which was set up to act as a matchmaker to bring together bilateral grant money and multilateral bank loans for projects consistent with the EAP?
Pros
Cons
In conclusion, the case of Eastern Europe highlights the ways in which donor institutions are constrained through their interests and mechanisms from pursuing an optimal strategy for tackling the regions environmental problems. The pattern is often one step forward, two steps back, Gutner says. Any environmental improvements will occur on the margin, but indeed, some of these are occurring.