Tesi Sambucini

Tesi Sambucini
Sustainable Development
needs Energy Efficiency
New approaches to international partnership
and governance in Europe
Gianluca Sambucini
March 2007
Executive Summary……………………………………………….………………………...5
I. Introduction………………………………………………………………………..……....8
II. Environment, Prosperity and Social Progress: Opposing Forces or Complementary
III. Energy Challenge to Sustainable Development…………………….………….................16
IV. Climate Change mitigation: the United Nations Framework Convention on Climate
Change (UNFCCC) and the Kyoto Protocol………………………….……..………...…..24
V. A Call to Action: Johannesburg, 2002…………………..……….……………..…………38
VI. The UN's Focal Point on Sustainable Development: Commission on Sustainable
Development (CSD)… …………………………….………………………..…………..…42
VII. Focusing on the Human Element: United Nations Development Programme (UNDP)…...50
VIII. Looking Out for the Planet: United Nations Environmental Programme (UNEP)………..56
IX. Management of Natural Resources for Environmental Protection:
Food and Agriculture Organization (FAO) ………………………………………………..60
X. Broadening Trade and Market Access for the Poor: United Nations Conference on
Trade and Development (UNCTAD)….………...………………………………………....64
XI. Making Trade Work Towards Sustainble Development: World Trade Organization
XII. Future Governance on Sustainable Development……..………….……………..................74
XIII. A Regional Approach: United Nations Economic Commssion for Europe (UNECE)……77
XIV. A New Actor on Energy in Europe: the European Union……………....….………..…….93
XV. Conclusions..……….…………..………………………………………...…...……….…127
Bibliography ……………………………………………..…………………...……………129
The views expressed herein are those of the author and do not necessarily reflect the views of the United
Executive Summary
Since the United Nations Conference on Sustainable Development, or “Earth Summit”
(Rio de Janeiro) in 1992, through the eight Millennium Development Goals (MDGs) of
the United Nations Millennium Summit (New York) in 2000 and the more recent
World Summit on Sustainable Development (WSSD - Johannesburg) in 2002, efforts in
the process have been made to achieve sustainable development by the UN system and
other actors although results have not been very successful. It is clear that the UN
system has been providing an excellent framework for initiating, understanding and
making progress in this process for sustainable development but the level of results are
still far from being “sustainable”.
However, key developments and recent trends for concrete changes towards sustainable
development can be identified in the on-going process for new governance at global
level. The New Governance at UN level on Sustainable Development is under
discussion and definition within 2007, in particular to provide oversight for the UN at
the country level, in line with a specified country programme.
As second innovative trend and considering a regional perspective in the European
region, the United Nations Economic Commission for Europe (UNECE) is also
providing an interesting contribution, mainly focusing on a perspective focused on
environment protection and sustainable energy development, and in concrete terms
through a special attention to energy security and energy efficiency. The experience of
the UNECE is particular relevant to promote sustainable development and, more
specifically, sustainable energy through specific activities. Among those efforts, the
Energy Efficiency 21 Project (EE21) promotes market formation in many countries of
the region. As annex to this paper, general characteristics and trends of the energy
sector in Bulgaria are presented as example of one of the participating countries in the
new phase of the EE21 Project, also in view of assessing the potentiality for energy
efficiency improvements.
The third but the most important and increasing trend is played by the European
Union in achieving sustainable development and in recognizing in all energy efficiency
efforts an essential vehicle in this process and new European perspective.
Looking at climate change and energy related issues, while the process related to the
Kyoto protocol to achieve a reduction of green-house gas emissions and in favour of
climate change mitigation seems to have shown its limits and difficulties in reaching
the targets and getting a world-wide commitment, the European Union is showing a
strong commitment for action. The Commission put forward plans for a 'unilateral' 20%
reduction in greenhouse gas emissions, 20% increase in energy efficiency and 20%
share of renewable energy by 2020 in a bid to reduce the EU' s dependency on imported
fuels and trigger a new 'industrial revolution'. This has been endorsed by EU leaders at
a summit on 8-9 March 2007 in Brussels. This EU move was prompted by mounting
concerns regarding high oil and gas prices and worries about Europe's increasing
dependency on a few external suppliers, as well as the global-warming crisis.
Sustainable Development seems to become a strategy for generating a new momentum
for Europe. This ongoing trend offers a unique opportunity to drastically reduce the
material character and impact of the European economy and increase the use of human
resources. It could create the basis for new ways of production, new ways of
transportation and energy use, and the development of new technologies that provide
Over next decades, the main challenge for the European region will be to produce more
welfare using less natural resources and more human resources. Decoupling economic
growth from resource use and pollution is absolutely essential for global sustainable
development, and Europe can and should take the lead in this area.
This research has been briefly presenting the overall sustainable development process,
with an overview to the history and main actors, and trying to identify new trends that
recognize in the increase of energy efficiency a key factor.
I. Introduction
This first Part seeks to describe the process and the role of the UN and related institutions
most actively involved in the Johannesburg process by chronicling their preparations for,
contribution to and activities since the WSSD. Nearly five years have passed since
Johannesburg, and these organizations have made steady progress towards reshaping their
traditional institutional roles in the light of sustainable development and towards employing
their traditional institutional capacities to carve out a niche in the post-Johannesburg process.
This has largely involved formulating plans of implementation at an institutional level, and,
as such, little concrete, empirical progress can have been expected.
In analyzing the activities of the UN and major related organizations since the WSSD, the
following chapters are organized by institution, starting with the core of the UN’s sustainable
development apparatus, the Commission on Sustainable Development, and proceeding to
consider other relevant bodies and related organizations: the Economic Commission for
Europe, the UN Development Programme, the UN Environment Programme, the UN Food
and Agriculture Organization, the UN Conference on Trade and Development and the World
Trade Organization. In brief, this is a survey of the major sustainable development initiatives
and accomplishments of the United Nations and its partners in the post-Johannesburg process
– without hoping, and not claiming, to cover all UN sustainable development activities.
The United Nations has led the international quest to harmonize economic growth with social
development and environmental protection for more than three decades. In June 1972 the
United Nations Conference on the Human Environment (Stockholm) recognized the
vulnerability of the “human environment” in an era of unprecedented technological
advancement and the consequent need to harness “man’s capability to transform his
surroundings” to ensure that the benefits of this progress are reaped in an equitable and
sustainable manner. 2
“Declaration on the United Nations Conference on the Human Environment” at
Sustainable Development:
Economic and social development that meets
the needs of the current generation
without undermining the ability of future generations
to meet their own needs.
Brundtland Commission, 1987
Several years later, the UN Conference on Environment and Development, or “Earth
Summit” (Rio de Janeiro, 1992), refined policies and developed strategies for “sustainable
development”. These policies and strategies were incorporated into Agenda 21, a blueprint
for achieving sustainable development in the twenty-first century.
Agenda 21, the Earth Summit+5 (1997) and more recent commitments set forth sustainable
development goals and accelerated the sustainable development process, raising international
awareness and attracting attention at the highest levels. The turn of the millennium afforded
the occasion for the most highly regarded of these more recent commitments. In September
2000, the leaders of the world assembled at the United Nations Millennium Summit in New
York to reaffirm their commitment to working towards peace and prosperity through the
United Nations. The Summit produced eight measurable, time-bound Millennium
Development Goals (MDGs). One and a half years later, in March 2002, another high-level
summit was convened in Monterrey, Mexico to address the challenge of financing
development (International Conference on Financing for Development). By the Monterrey
Consensus, the international community had accumulated an impressive set of normative
conclusions. The task then became to develop strategies to turn this list of normative
statements into a realizable plan to achieve sustainable development.
At the World Summit on Sustainable Development (WSSD) (Johannesburg, AugustSeptember 2002), world leaders, international organizations and civil society reinvigorated
the sustainable development discourse by raising the issue to the forefront of the international
policy agenda. The Summit was approached with great expectations. Although not all of
these were met – indeed perhaps some could not have been met – the WSSD generated
consensus on concrete commitments and spawned partnerships for future cooperation. It was
intended to provide the tools to implement the vision of Stockholm and Rio – a vision of
economic development that complements, rather than derails, social and environmental
progress. The participants at Johannesburg realized that the sustainable development process
had languished since Rio and sought ways to implement outstanding commitments rather
than to merely propound new ones. Johannesburg was always more about action than
rhetoric, an approach reflected in the title of the Summit’s product, the Plan of
Implementation. 3 The Plan of Implementation recognized that, in order for sustainable
development to work, action must be pursued at all levels: local, national, regional and
international. The United Nations system is uniquely capable to coordinate the sustainable
development process at all of these levels – by working with NGOs “on the ground” to
support local involvement, by developing coordinated strategies that can be adopted by
national governments, by addressing regional challenges within the regional commissions
and by perceiving the global impacts of more localized decisions.
In the years since Johannesburg, the United Nations system has worked closely with the
European Commission and the World Trade Organization (WTO) towards synchronizing the
mutually supportive processes of sustainable development and trade liberalization. Recent
breakthroughs in the current round of WTO negotiations mark a significant step toward
implementing the Doha Development Agenda and integrating developing countries into the
international trading regime in a socially and environmentally responsive and responsible
The 2005 World Summit (New York, 14-16 September), which brought together more than
170 Heads of State and Government, reaffirmed and strengthened the commitment to achieve
the goals of sustainable development. To this end, governments firmly committed themselves
to undertake concrete actions and measures towards poverty eradication, changing
unsustainable patterns of production and consumption, and protecting and managing the
natural resource base.
The Report of the World Summit on Sustainable Development can be found at
Environment, Prosperity and Social Progress: Opposing Forces
or Complementary Goals? 4
The origins of the concept of sustainable development can be traced as far back as the late
eighteenth century, when Malthus predicted that population growth would outpace
agricultural production and precipitate an epidemic of starvation.
The modern idea entered the international consciousness in the early 1970s, when the
relationship between economic development and the environment began to be explored.
Early attempts to define the term “sustainable development” emphasized the imperative of
the consideration of social and environmental variables in the development formula.
Development must weigh the costs to the environment and to society – and to future
generations in general – as well as more immediate, short-term benefits. Only such an
holistic approach to development could secure sustained prosperity.
The definition produced in 1987 by the World Commission on Environment and
Development (WCED) is the most widely adopted: “Economic and social development that
meets the needs of the current generation without undermining the ability of future
generations to meet their own needs.” Barry Dalal-Clayton, the Director for Strategies,
Planning and Assessment at the International Institute for Environment and Development, 5 in
his paper “What is Sustainable Development?”, expands on this definition. By “needs of the
current generation”, he explains, the Brundtland Commission (as the WCED is more
commonly referred to) had three broad “needs” in mind: economic needs; social, cultural and
health needs; and political needs. Economic needs refers to access to an adequate livelihood
or productive assets, as well as to welfare; social, cultural and health needs, to access to
adequate housing, education and health care; and political needs to access to the decisionmaking system, especially at a local level. Dalal-Clayton compares such needs to those of
future generations. Specifically, “without compromising the ability of future generations to
meet their own needs” refers to a parallel troika of concepts: minimizing the use or waste of
The material in this chapter is largely drawn from Barry Dalal-Clayton, 1987, “What is Sustainable
Development?” (International Institute for Environmental Development) at http://www.nssd.net/
non-renewable resources, the sustainable use of renewable resources and keeping within the
absorptive capacity of local and global sinks for wastes.
Needs of the current generation:
o Economic needs
Access to an adequate livelihood or productive assets
Economic security when unable to secure a livelihood
o Social, cultural and health needs
Healthy, safe, affordable and secure shelter
Neighbourhoods with access to water, transport, health care
and education
Services that meet the specific needs of children
More equitable distribution of income between and within
o Political needs
Freedom of political participation, particularly in local
Respect for civil and political rights
Without compromising the ability of future generations to meet their own
o Minimizing the use or waste of non-renewable resources
o Sustainable use of renewable resources
o Keeping within the absorptive capacity of local and global sinks for
(From Barry Dalal-Clayton, 1987, “What is Sustainable Development?”)
Definition, however, sheds scant light on implementation. The Rio Earth Summit sought to
develop a workable approach to achieving sustainable development. It proceeded from the
premise that meeting basic human needs is the cornerstone of sustainable development. Thus,
according to the World Health Organisation, “the most immediate environmental problems in
the world are the ill-health and premature death caused by biological agents in the human
environment in water, food, air or soil”.
Two failures are responsible for the prevailing un-sustainability that the Johannesburg
process seeks to address, and hence suggest principles for guiding the sustainable
development process in the future: market failures and political failures. Market failures lead
to unsustainable outcomes where social and environmental costs are external to the market
calculus. To the extent that such costs can be accurately captured by economic transactions,
the market will self-regulate and sustainable development should result. An example of this
is “internalizing” the “externality” of pollution through an emissions trading scheme.
Political failures cause unsustainable development when governments interfere with the
market to bring about outcomes that harm the environment or social or economic
development. Subsidies account for much of the problem here – the worst offenders are
subsidies that protect energy producers or consumers and those that artificially lower the
price of agricultural products from the developed world.
Sustainable development is often conceived of as reconciling intrinsically conflicting
interests. The received wisdom, for example, holds economic growth and technological
advancement incompatible with environmental protection and natural resource conservation.
After all, the industrial revolutions in the now-developed countries exacted a great price from
the environment. To the extent that these trade-offs continue to govern the relationship
between economic prosperity, social progress and environmental preservation, sustainable
development must strive to maximize the economic, social and environmental vectors.
However, more than this, sustainable development demands innovative thinking. Social and
environmental goals can be mutually reinforcing: just as poverty leads to environmental
degradation, economic prosperity can serve environmental objectives.
At least two principal themes underlie the strategies, policy and theory behind the sustainable
development process in the twenty-first century: the broadest possible participation in
decision-making and decision-making at the most localized level at which it can be effective.
The programme established at Rio and given fresh impetus at Johannesburg is infused with
these themes. Effectiveness and legitimacy, as well as the lack of an empirical response to
policy stimuli, demand inclusiveness – they demand democracy. For it is only in such a
system – a system embracing free speech and participation – that the dialogue, debate and
negotiation requisite to developing workable sustainable development solutions are possible.
The UN, as the embodiment of a post-Westphalian international order in which states no
longer enjoy a monopoly on sovereignty, is ideally situated to take advantage of the multistakeholder approach to decision-making. It must welcome and listen to all voices, from
wherever they may emanate – from industry, NGOs, women, youth, minorities and
indigenous peoples – and not just from capital-city establishments. Indeed, in an era when the
United Nations is increasingly seen as ineffective or powerless, sustainable development
constitutes an issue of immediacy and unparalleled consequence on which the UN is well
positioned to act and on which the world needs the UN.
The second theme that characterizes the discourse on sustainable development is localism. If
participation is to be broad and inclusive, it must therefore also be local. That is, government
should take place as close to the ground as possible. The shapers of the post-Johannesburg
sustainable development process believe that sustainable development projects must start at
the level of the community, and they must actively involve the community. Only then can
global sustainable development work.
At least three other themes follow from these principles. First, good governance colours the
sustainable development discourse. “Governance” refers to increased transparency and
accountability in national governments, intergovernmental organizations (including the UN,
and particularly the WTO) as well as corporations. The Asian financial crises of the late
1990s raised the issue of governance to prominence, and the fraud and corruption
surrounding the collapse of several major American corporations early in the following
decade has only sharpened the saliency of good corporate governance. Second, many of the
institutions discussed in the following chapters have recognized the importance of capacity
building in the sustainable development process. This concept generally refers to the need to
enable developing countries to pursue sustainable development, through increasing human
capital (education) as well as scientific and technological capacity. Third, the summiteers at
Johannesburg emphasized so-called “Type-II” partnerships as a complement to traditional
binding intergovernmental commitments. Such partnerships would include stakeholders from
governments, IGOs, civil society groups and businesses. The slow progress since Rio can
partly be attributed to the fact that government regulation without the support of the private
sector is largely ineffective, and corporate or NGO initiatives in the absence of a conducive
policy environment are equally ill-fated. The Type-II partnership has emerged as another
instance of trade-off and compromise in the sustainable development process – strategies and
projects that maximize both profit and public interest have a healthier chance of success.
Finally, sustainable development, largely neglected for so long in favour of the seemingly
“higher” political problems of international security, has a direct bearing on the prospect for
international peace in the future. In the twenty-first century, wars will be much more likely to
be sparked by poverty and scarce natural resources than by colonial rivalries or rival
ideologies. Sustainable development is not only imperative for the developing populations of
the world – it holds the potential to determine the fate of developed peoples as well.
Energy challenge to sustainable development
1. The role of Energy in the achievement of the MDGs
Access to reliable and affordable energy as well as an efficient use of energy resources are
essential conditions for fostering and sustaining economic growth. Although energy is not
explicitly mentioned in the Millennium Declaration, it plays a crucial role both in the
achievement of the United Nations Millennium Development Goals (MDGs) and towards a
path of sustainable development.
As it was recognized during the World Summit on Sustainable Development (Johannesburg,
2002), there is an explicit link between energy, in particular access to energy services, and
poverty reduction. The MDGs emphasize poverty reduction in terms of income and highlight
the importance of improved health, universal primary education, women’s empowerment,
gender equality and environmental sustainability. The contribution of energy services to
meeting the MDGs consists both of the direct impact of energy on raising incomes and the
indirect effects on education, health, environment and gender issues.
On the one hand, energy services are essential means to support overall development: as
history demonstrates no country has substantially reduced poverty without massively
increasing its use of energy. Empirical data show how commercial energy consumption
(expressed in log normal terms) and national income are strongly correlated: countries with
higher income are also those with higher energy consumption.
Correlation between Energy Consumption per Capita and National Income
Source: World Bank, World Development Indicators Database.
Such a strong relationship implies that access to modern fuels and electricity can favour and
sustain the eradication of poverty by enhancing food security, increasing labour productivity,
creating employment and thus, finally, improving social welfare.
On the other hand, energy is also a precious and valuable tool in the achievement of all the
other development goals. As empirical data demonstrate, there is a strong positive correlation
between energy consumption and the Human Development Index (an index composed by
variables such as life expectancy, educational achievement, income measured in purchasing
power parity terms). Given such a correlation, it follows that, for the poor, access to modern
fuels and electricity helps improving health (reducing child and maternal mortality and
reducing disease), frees time for education, and brings benefits to women and girls.
Correlation between Energy Consumption per capita and Human Development Index
Source: UNDP Human Development Report 2004 Databse.
Finally, energy plays a fundamental role in ensuring environmental sustainability. The
environmental damage and its harmful effects can, in fact, be reduced by increasing energy
efficiency, introducing modern technologies for energy production and use, substituting
cleaner fuels for polluting ones and introducing renewable energy sources 6 .
2. Energy for development
In both developing countries and transition economies, access to energy services and
investments in energy efficiency are central issues and necessary pre-requisites for fostering
economic growth, promoting productivity and attracting foreign direct investments.
Nonetheless, these countries face an array of difficulties in the provision of energy, as energy
markets often do not function efficiently. Particularly, poor organisational structures, a lack
of sound institutional and legal frameworks, huge electrical grid losses impair the provision
of efficient, reliable and affordable energy and hamper the flow of domestic and foreign
capital investments required to expand production and meet the growing energy demand.
UN-Energy, The energy Challenge for Achieving the Millennium Development Goals, 2005.
As a matter of fact, investments and reforms appear to be fundamental for maintaining
economic growth, while guaranteeing the respect of social and environmental needs. Energy
efficiency improvements as well as renewable energy investments are badly needed. At the
macro-level, efficiency improvements in industry as well as in the service sector can foster
economic growth and deeply reduce energy costs, generating greater budget savings. Such
investments are also important from an environmental and climate change point of view, as
they can reduce air-borne trans-boundary pollutants of Sox, Nox and greenhouse gas
emissions. As it was stated during the Energy and Sustainable Development Conference
(Netherlands, December 2004), countries are called to face four major challenges in the
energy sector:
Ensuring sound sector management and good governance: these are, in fact,
necessary conditions for a well functioning energy sector. In many countries the
development of the energy industry is hampered as commercial markets are
constrained by a low demand density, low household incomes, and in many cases, by
large transportation distances. Breaking such a vicious circle of poverty and
underdevelopment is clearly a public sector responsibility: urgent reforms and sector
restructuring are needed.
Widening access to energy services to the poor: in developing economies there is a
deep inequality in energy provision in both rural and urban areas. The poorest areas,
in fact, receive the worst services. As a matter of fact, widening the access to modern
fuels and electricity can sharply improve the living standards of the poor. The tools
through which such an improvement could be achieved may encompass: state
financial support to the utility to subsidise the connection costs of the poor, crosssubsidy within the utility customer-base, mandatory extension of concession areas.
Enhancing environmental performance: existing energy supply systems cause many
environmental and health problems worldwide. Particularly, as countries develop,
these negative effects become increasingly related to fossil fuels whose use augments
because of the steep increase in demand by industry, power generation and transport.
So, to ensure a path of sustainable development, countries should adopt preventive
measures such as: sustainable management of natural biomass resources, rapid
transfer and deployment of clean fossil fuel technologies, improvements in energy
efficiency, introduction of cleaner transport fuels.
Mobilising financial resources for energy investments: many energy investments in
developing countries could generate competitive returns on investment and so they
could represent an important factor to economic growth. In the coming decades,
internal cash generation, domestic savings and external finance are considered the
main financial sources for energy investments. But it is to emphasize that the actual
capital flow will heavily depend on the quality of the financial markets, domestic
banking system and on the overall investment climate. This implies that capital
mobilisation will be stimulated if and only if countries will create a stable and
transparent macroeconomic, fiscal and legislative framework 7 .
3. Energy Scenarios
Current systems of energy supply and use are clearly not sustainable from an economical,
environmental and social point of view. Recently, the International Energy Agency
undertook an analysis in order to assess quantitatively the prospects to 2030 for global energy
markets and their implications for the environment. The projections were achieved
considering the level, for example, of energy demand or the level of carbon emissions under
different scenarios. The report outlines important results and gives an indication of the
magnitude of the task countries and governments should face in making energy production
and use more sustainable.
The so-called Reference Scenario provides a picture of what the world will look like if
governments will not undertake any reforms to change current trends.
The scenario
demonstrates that without new governments policies and commitments, short-term security
risks will increase, climate-destabilising carbon-dioxide emissions will continue to rise, and
many of the world’s poorest people will remain deprived of those modern energy services,
upon which their economic and human development depends.
Particularly, considering a time period between 2002 and 2030, world primary energy
demand is projected to expand and the use of fossil fuels will continue to dominate global
Conference Paper, Energy for Development, 2004, www.energyfordevelopment.org.
energy use. Just under two-thirds of the primary energy demand will come from developing
countries, given their more rapid economic and population growth.
Under this scenario, the projected trends in energy use imply that the energy-related carbondioxide emissions will increase over 2002-2030, and more than two-thirds of this augment
will come from developing countries.
Reference Scenario: Increase in World Primary Energy Production by Region
Transition economies
Developing countries
Source: International Energy Agency, Energy and Sustainable Development (2005)
Reference Scenario: Average Annual Growth in World Primary Energy Demand and EnergyRelated CO2 Emission
Energy demand
CO2 emissions
Source: International Energy Agency, Energy and Sustainable Development (2005)
Nonetheless, the analysis demonstrates that these trends are not unalterable. As the
Alternative Policy Scenario shows, more vigorous government actions could steer the world
onto a markedly different energy path. A set of environmental and energy security policies,
which would assess investments in cleaner technologies, in energy efficiency and renewable
resources, could have a significant positive impact on global energy markets and overall
carbon emissions.
Under such an assumption, projected trends show that the level of global primary energy
demand in 2030 is lower than the level in the Reference Scenario and, most importantly, the
reduction in the use of fossil fuels is even bigger, thanks to the use of more efficient
technologies and switching to carbon-free fuels.
Primary Energy Demand in the Reference and Alternative Policy Scenarios
17 000
16 000
15 000
Reference Scenario
14 000
13 000
12 000
Alternative Policy Scenario
11 000
10 000
9 000
8 000
7 000
Source: International Energy Agency, Energy and Sustainable Development (2005)
Data show that government’s actions towards a more sustainable pattern of consumption
would have a positive impact, especially in developing countries and transition economies.
This is because of the larger potential, in these regions, for energy-efficiency improvements
in end-use sectors and in power generation.
Finally, comparing the level of predicted CO2 emissions in the Alternative Scenario to the
level in the Reference one, it is possible to assess the importance of policies and measures in
reducing carbon emissions and developing more efficient energy systems 8 .
Global Energy Related CO2 Emissions in the Reference and Alternative Policy Scenarios
40 000
Mt of CO 2
35 000
30 000
25 000
20 000
Reference Scenario
Alternative Scenario
Source: International Energy Agency, Energy and Sustainable Development (2005)
Concluding, the work undertook by the International Energy Agency demonstrates the
importance and need of strong countries commitments to the achievement of truly sustainable
energy systems. In order to reach a sustainable development process, where economic needs
meet social and environmental ones, it is fundamental to sustain and provides incentives to
countries to invest in the energy sectors. As it was stated above, in order to reap all the
positive effects that access to energy services and energy efficiency investments can provide,
developing countries and transition economies are called to adopt and implement a series of
reforms. Particularly, governments need to act decisively, on the one hand, to accelerate the
transition to modern fuels and cleaner technologies, and on the other, to break the vicious
circle of energy poverty and human underdevelopment in the world’s poorest countries.
International Energy Agency, Energy and Sustainable Development, 2005.
Climate Change Mitigation: the United Nations Framework
Convention on Climate Change (UNFCCC) and the Kyoto
1. UN Framework Convention on Climate Change (UNFCCC)
As it was outlined in the previous chapters, pollution and climate change are major threats for
future generations and for reaching a pattern of sustainable development. Countries and
international organizations are actively trying to assess such serious issues.
The first commitment concerning climate change mitigation was made at the Rio de Janeiro
United Nations Conference on Environment and Development, the so-called Earth Summit,
in 1992. During that summit, the United Nations Framework Convention on Climate Change
(UNFCCC) was signed and two years later, on 21 March 1994, it entered into force.
Signatories governments committed themselves to a voluntary “non-binding” aim to reduce
atmosphere concentrations of greenhouse gases with the goal of “preventing dangerous
anthropogenic interference with the climate system”. As of 2005, the Convention was ratified
by 189 countries 9 . The actions undertaken were aimed primarily at industrialized countries,
with the intention of stabilizing GHG emissions at 1990 levels by the year 2000 10 . The
parties, in fact, agreed in general that they would recognize “common but differentiated
responsibilities”, with greater commitment for reducing emissions in the near term on the
part of developed and industrialized countries.
Since the UNFCCC entered into force on 24th March 1994, signatories countries have been
meeting annually in the so-called Conferences of the Parties (COPs) to assess and monitor
progress in dealing with climate change 11 . Particularly, one of the most important outcomes
of the Conference (COP-3) was the elaboration of the Kyoto Protocol, in December 1997 12 .
“The Convention and the Kyoto Protocol”, available at http://unfccc.int/resource/convkp.html
UNFCCC, 2003. “Caring for Climate”, 5.
Ibda, 7.
United Nations Framework Conference on Climate Change, UNFCCC, available at
2. The Kyoto Protocol
The Kyoto Protocol is an international and legally binding agreement whose main objective
is to reduce greenhouse gases emissions worldwide. As it was mentioned above, it was
signed in December 1997 during the third Conference of the parties (CPO-3) and entered into
force on 16 February 2005.
According to the Protocol, countries are divided into three groups:
1. Annex I contains all the countries that were members of the OECD in 1992 plus
several countries with economies in transition (mostly Central and Eastern European
2. Annex II consists of the OECD members of Annex I only;
3. Non-Annex I includes almost developing countries. 13
For the entry into force of the Protocol, 55 Parties were required to ratify it, including Annex
I parties accounting for at least 55 per cent of that group’s 1992 total carbon dioxide
emissions 14 . As of 19 September 2005, 156 countries have ratified the Protocol. Particularly,
one of the most important accession to the Protocol was that of the Russian Federation on 18
November 2004. As of 13 December 2006, 169 parties have ratified the Protocol, the most
recent accession country being Gabon. Nevertheless, only Annex I countries representing
44.2 % of this group’s emissions have approved the Protocol, USA being among those not
having ratified the Protocol and clearly stated that they do not intend to accede to the it. To
achieve a worldwide reduction of GHG emissions in a cost-effective way, the Protocol
establishes three different measures, the so-called ‘Flexible Mechanisms’. These
mechanisms, in fact, are based on the assumption that costs for reducing emissions vary
greatly between countries, while the impact on the atmosphere is the same regardless of
where GHG emissions accrue.
The first mechanism is an ‘emission trading system’ which enables Annex I countries to sell
and buy emission credits among themselves. The second one is the so-called ‘Joint
Implementation’ (JI) mechanism, through which Annex I countries will be able to acquire
UNFCCC, 2003, “Caring for Climate”, 5-6
Kyoto Protocol, article 25, available at http://unfccc.int/resource/docs/convkp/kpeng.pdf
‘Emission Reduction Units’ (ERUs) by financing climate change mitigation projects in other
Annex I countries. This implies that the host part’s assigned amount of emissions is reduced
by the same amount that the investing party is now allowed to emit additionally. Joint
Implementation mechanisms are expected to most frequently take place in countries with
economies in transition because of the relatively low cost for cutting emissions.
Finally, the third mechanism is the ‘Clean Development Mechanism’ (CDM), according to
which Annex I States will be allowed to implement sustainable development projects in NonAnnex I countries. This mechanism is similar to the Joint Implementation one. Annex I
countries can, in fact, obtain certified emission reductions (CERs) from CDM projects and
use them to meet their specific emission targets. Moreover, it is to emphasize that such a
mechanism will help developing countries on their way towards a path of sustainable
The COPs following up the adoption of the Kyoto Protocol were decided to serve as MOPs
(Meetings of the Parties to the Kyoto Protocol) and focussed on specifying the procedures
and the Protocol’s rulebook. Particular importance is attributed to COP-7 held in Marrakech
in November 2001. Rules and Modalities were decided that allowed for the CDM to start
immediately while JI projects and international emissions trading can be undertaken from
2008 on. 15
Another important issue was negotiation about the rules for counting emission reductions
from carbon sinks, meaning processes that remove greenhouse gases from the atmosphere,
such as forests. 16 In particular, large concessions were made to Russia that threatened not to
ratify the Protocol. 17
As it was stated above, 2005 marked the entry into force of the Protocol and its effective
implementation. Parties to the United Nations Climate Change Conference met in Montreal
from the 28th of November to the 8th of December 2005, to discuss about the Protocol’s
implementation and future commitments. The conference, in fact, host the 1st Meeting of the
Parties to the Kyoto Protocol in conjunction with the 11th session of the Conference to the
Party to the Climate Change Conference (COP-11). It provided an opportunity for the Parties
to define the regulatory framework needed to implement the first commitment period (2008-
‘COP-7 Marrakech – Final Report’, 4-5. Available at
UNFCCC Information Kit, sheet 17.2. Available at http://unfccc.int/resource/iuckit/infokit.pdf
‘COP-7 Marrakech – Final Report’, 6.
2012), strengthen the operation of the Clean Development Mechanism and adopt the Joint
Implementation strategy 18 .
4. The EU’s strategy in pursuit of its Kyoto targets
The European Union has consistently been one of the major supporters of the Kyoto
Protocol; it ratified the agreement in May 2002, committing itself to reduce its GHG
emissions by 8% by the period of 2008-2012 19 . This overall aim is split up into reduction
targets for each Member State on the base of The Burden Sharing Agreement 20 that set
different targets for each country. Emissions reduction levels, in fact, vary between states, as
in some countries, such as Austria, Denmark and Finland, where much has already been done
in the past, reducing emissions countries entail relatively higher costs than in other European
The targets set for each member State are those collected in the table below:
1. Kyoto gas emission reduction objectives (to fulfil by 2008-2012 in comparison with the 1990’s
Developed Countries –5%
European Union–8%
Austria –13%
Italy –6,5%
Belgium –7,5
Luxembourg –28%
Denmark –21%
Finland 0%
Portugal +27%
France 0%
Spain +15%
Germany –21%
Sweden +4%
Grecia +25%
Regno Unito –12,5
Irlanda +13%
Source: UN Kyoto Protocol and EU objectives set by the Environment Council, 16 june 1998.
Spain, Portugal, Greece, and Ireland were allowed to exceed their 1990 emission level target
to avoid hindering their economic development.
UNFCCC, Cop-11 and Mop-1, available at http://unfccc.int/meetings/cop_11/items/3394.php
‘The Kyoto Protocol – A brief Summary’, available at
Agreed in June 2004 on the basis of art. 4 of the Kyoto protocol.
After the ratification of the Protocol, due to the observation that the Community was facing
large difficulties in achieving its Kyoto targets, the European Commission launched the
European Climate Change Programme (ECCP) in March 2000 21 , accompanied by the
publication of the ‘Green Paper on Greenhouse Gas Emissions Trading’ 22 .
This paper proposed the start of a limited emissions trading scheme enabling a “learning-bydoing” phase focused on CO2 emissions and limited to the most heavy emitters of this gas
prior to the international emissions trading within the Kyoto protocol scheduled to start in
2008. 23 The ECCP was supposed to identify and develop the necessary elements of a EU
strategy to implement the Protocol.
Of particular importance to this document is the establishment of Working Group 1 that dealt
with the Kyoto “Flexible Mechanisms”. Its final report advocates measures facilitating
participation in CDM and JI, but states that ‘JI and the CDM should primarily be driven by
the private sector.’ 24 According to the report this facilitation could consist of recognizing JI
and CDM credits towards fulfilment of domestic obligations.25 Further analyses of financial
mechanisms at Community level are recommended but it seems that the EC intends to firstly
establish an adequate regulatory framework reducing investors’ risks in order to boost
demand for JI/CDM credits. 26 The Commission’s website lists several programmes not
directly addressed to JI/CDM but that ‘can be utilised in the context of Joint Implementation
and the Clean Development Mechanism.’ 27 For example, ALTENER II, THERMIE,
INTERREG III, Tacis, SYNERGY and Phare are mentioned. Concerning the EU’s overall
efforts to honour its commitments, the first ECCP phase concluded in October 2001, that the
EU would have to introduce additional policies and measures in order to achieve the Kyoto
target. Despite the huge effort to make, the report identified measures leading to a reduction
by an amount almost twice as high as necessary for compliance with the Kyoto Protocol. 28
Communication from the Commission, COMM (2000) 88, Press Release. Available at
Available at http://europa.eu.int/eur-lex/en/com/gpr/2000/com2000_0087en01.pdf
Short Summary of the green paper available at
ECCP Working Group on JI/CDM – Conclusions, 15 November 2002, 1. Available at
Ibda, 2.
Background document n° 3 to the ECCP Working Group on JI/CDM (2nd phase), 1. Available at
‘Overview of existing EC programmes relevant in the context of JI/CDM’, available at
ECCP Report 2001, Executive Summary. Available at:
As a reaction to this, the Commission brought forward three measures relating to climate
change mitigation:
An Action Plan, outlining the priority actions the Commission has set itself to
implement in 2002 and 2003
The Proposal for ratification of the Kyoto Protocol
A Proposal for a Directive on Greenhouse Gas Emissions Trading
4.1 Directive on Greenhouse Gas Emissions Trading
As the Directive 2003/87/EC is the most important legislative measure in terms of
implementing the Kyoto “Flexible Mechanisms”, this document concentrates on this one of
the three above-mentioned measures. The Directive entered into force on October 25, 2003,
chiefly prepared and influenced by the ECCP Working Groups and the Green Paper.
According to the Directive, starting from 2005, a trading scheme on CO2 emissions is
The European Scheme is a so called cap-and trade scheme, divided up in phases: 2005-2007,
2008-12, 2012-2016. In the first phase (2005-08), 12,000 industrial sites 29 are included in the
trading scheme, representing 45% of all the industrial CO2 emissions, and 28% of total EU
GHG emissions. The cap is defined by the reduction objective agreed on by all Member
States under the Burden Sharing Agreement.
In the framework of the Scheme, Member States have to prepare National Allocation Plans
‘outlining the number of CO2 allowances that they intend to allocate to energy-intensive
industrial plants’ 30 . The National Allocation Plans are the cornerstone of the System. The
Naps are assessed by the Commission on the basis of the criteria of Annex III 31 (article 9),
and must be submitted at least 18 months before the start of the next phase. Within three
months of notification of a Nap by a Member State, the Commission can reject the plan,
notifying the reasons for its decision. The Member States then have to take in account the
changes requested by the Commission in a subsequent version of this Nap.
Quotas are imposed in six key industries: energy, steel, glass, brick making, and paper/cardboard.
Press Release IP/04/862 of 7 July 2004, available at:
Coherence with the national reduction objectives, the emissions trends forecasts, the potential reduction and
the preservation of the competitiveness principles.
According to such a Trading Scheme, all the industrial sites under the directive have the
same obligations. The first condition to operate is that the competent authority shall issue a
greenhouse gas emissions permit granting authorization to emit greenhouse gases ( article 6).
In addition, the operator has the obligation to surrender allowances equal to the total
emissions of the installation in each calendar year (article 6 e).
Before conceding the authorization, the competent authority shall verify if the operator is
capable of monitoring and reporting the emissions.
Nor later than on 30 April of each year, the industrial operators realise that they will not be
able to conform to the cap represented by the initial amount of allowances allocated, two
solutions remain available to them:
1) Pay a penalty of 40 euro (100 euro from 2008 onwards) per tonne of CO2 emitted for
which the operator has not given allowances;
2) Let the emissions exceed the initial amount of allowances, and buy the needed
number of allowances on the new trading market.
Firms curbing their emissions below the level fixed by the NAP, and selling the surplus to
the industrial sites in need will constitute the supply side on this market.
The responsible of the functioning of the scheme are at the end the Member States: they
enforce the National Plan, they monitor the emissions, and they use the penalties.
They have to set up a registry to keep track of the transfer and cancellation of allowances,
whereas a hub at European level must automatically verify the conformity of these
movements with the directive.
4.2 Effectiveness and competitiveness of the EU ETS scheme
It is clear that the overall system’s goal is to ensure that emissions are cut at the least cost to
the economy. As of 7 July 2004 32 , the Commission has received and accepted eight national
allocation plans, accounting for over 40% of the allowances expected to be put into
circulation for the 2005-2007 training period.33
Nevertheless, the Commission is worried about a possible ‘over-allocation of allowances
which [it] is seeing in different plans’. 34 This could have a negative impact on the trading
scheme which, as a market-based instrument, requires scarcity to be effective.
One of the underlying principles of the European Climate Change Programme has
consistently been to identify the most cost-effective measures to achieve the Kyoto targets.
Recent Commission studies conclude that the targets can be achieved at an annual cost of €
2.9 to € 3.7 billion, which is less than 0.1 % of GDP in the EU. One of these studies
concluded that without the Emissions Trading Scheme costs could reach € 6.8 billion. So
emission trading allows the costs of Kyoto to be reduced even further.
On 7 July 2004, the Commission concluded the assessment of a first set of eight plans. It accepted five plans
unconditionally (Denmark, Ireland, the Netherlands, Slovenia, Sweden), and partially rejected the other three those of Austria, Germany and the UK.
On 20 October 2004, the Commission concluded the assessment of a second set of eight plans. It accepted six
plans unconditionally (Belgium, Estonia, Latvia, Luxembourg the Slovak Republic and Portugal), and
conditionally approved the other two - those of Finland and France.
In late December 2004, the Commission concluded the assessment of a third set of five plans. It accepted four
plans unconditionally (Cyprus, Hungary, Lithuania and Malta), and conditionally approved the Spanish plan.
On 8 March 2005, the Commission conditionally approved the Polish plan, and on 12 April 2005, it accepted
the plan of the Czech Republic without conditions. On 25 May 2005, the Italian plan was conditionally
accepted, and on 20 June 2005, the Commission concluded the assessment of the last plan, from Greece,
approving it without conditions.( DG Environment, EUROPA - Rapid - Press Releases).
Speech by Catherine DAY on ‘EU Climate Change policy: recent progress and outlook’ on 11 May 2004,
page 3. Available at http://www.europa.eu.int/comm/environment/climat/pdf/040511speech.pdf
The EU Commission demonstrated the high effectiveness of the trading scheme as a market
based instrument by a simple simulation. 35
Two companies, A and B, emit both 100,000 tonnes of CO2 per year. The government gives
each of them 95,000 emission allowances. One allowance represents the right to emit 1 tonne
of CO2. So, neither company is fully covered for its emissions. At the end of each year, the
companies have to surrender a number of allowances corresponding to their emissions
during the year, whatever the emissions of the individual company are. Both Companies have
to cover 5,000 tonnes of CO2. They have two ways of doing this. They can either reduce their
emissions by 5,000 tonnes, or purchase 5,000 allowances in the market. In order to decide
which option to pursue, they will compare the costs of reducing their emissions by 5,000
tonnes with the market price for allowances.
For the sake of the example, let’s say that the allowance market price is € 10 per tonne of
CO2. Company A’s reduction costs are € 5 (i.e. lower than the market price). Company A will
reduce its emissions, because it is cheaper than buying allowances. Company A may even
reduce its emissions by more than 5,000 tonnes, say 10,000 tonnes. For Company B, the
situation may be the opposite: its reduction costs are € 15 (i.e. higher than the market price)
so it will prefer to buy allowances instead of reducing emissions.
Company A spends € 50,000 on reducing 10,000 tonnes at a cost of € 5 per tonne and
receives € 50,000 from selling 5,000 tonnes at a price of € 10. So Company A fully offsets its
emission reduction costs by selling allowances, whereas without the Emissions Trading
Scheme it would have had a net cost of € 25,000 to bear. Company B spends € 50,000 on
buying 5,000 tonnes at a price of € 10. In the absence of the flexibility provided by the
Emissions Trading Scheme, company B would have had to spend € 75,000.
Since only a company that has low reduction costs and therefore has chosen to reduce its
emissions, like Company A, is able to sell, the allowances that Company B buys represent a
reduction of emissions, even if Company B did not itself reduce emissions. It is this flexibility
in the system which makes emissions trading the most cost-effective manner of achieving a
given environmental target. The overall cost to industry would have been higher if Company
B had been forced to reduce emissions at its own plant at a higher cost.
Europe Press Release, DG environment of the European Commission, questions and answers on emissions
trading and national allocation plans, ( 26 October 2006).
The minimisation of compliance costs constitutes a most significant opportunity of the EU
scheme, the following graph illustrate this point.
The company in question has an initial allocation of emissions permits equal to EP. Its
original emissions are E0. At the end of the compliance period, e.g. at the end of one year, the
firm must hold emissions permits equal to its actual emissions in order to be in compliance.
For the first emissions reduction units, it is cheaper to abate internally than to buy emissions
permits at price P. Consequently, the firm reduces emissions internally up to that amount
where marginal abatement costs equal the market price of emissions permits (E1). In order to
be in compliance, the firm could continue to reduce emissions internally or just buy
emissions permits on national or international markets, the latter through the Emission
Trading Mechanism. Since any further internal reduction would be more expensive than
purchasing emissions permits at price P, a cost minimising firm would buy emissions permits
in a quantity equal to the difference (E1 - EP). If no trading were allowed, it had to reduce
emissions internally up to EP. Cost savings achieved through emissions trading amount to the
area (ABC).
4.3 The EU Emission Trading Scheme and the Kyoto Protocol
The Directive furthermore links the Kyoto project-based mechanisms Joint Implementation
and Clean Development Mechanism to the EU Emission Trading Scheme. This means that
credits obtained through one of the two mechanisms are recognized equivalent to allowances;
ensuring, additionally to cost effectiveness, the promotion of transfer of environmentally
sound technologies to developing countries. All the companies that have emission reduction
projects outside the EU through JI or CDM could convert the credits obtained by these
projects in allowances to spend in the European Market through the emission trading system.
Furthermore this link provides investors in green technology with the necessary certainty. 36
Not eligible are nuclear projects as well as “carbon sink” projects (storage of carbon in
forests) as their impact is only temporary. In order to ensure that a significant part of the
GHG emissions reductions takes place within the EU, companies are only allowed to use
such credits up to a percentage of their allowed emissions. 37 According to the Kyoto
Protocol’s provisions, CDM credits can be issued from 2000 onward while reductions from
JI projects will be credited from 2008 onward. By adopting the acquis communautaire 38 , the
10 Member States that acceded to the EU in mid 2004, are embracing the EU’s climate
policies right from the start, paving the way for a realising the opportunities to reducing
emissions in these countries. It remains to be seen whether these policies suffice to bring the
EU back on track of complying with its Kyoto targets.
It is of fundamental importance that the majority of third party countries adopt an emission
trading scheme connected with the EU ETS, to preserve a high level of competitiveness.
The EU ETS is not a system created to work in isolation. Article 25 of the 2003/87/EC
directive reads mutual recognition between the emission trading system of the European
Union and other systems for the exchange of the emission allowances. Norway, Switzerland,
Canada and Japan have already started formal discussions with the EU regarding the
possibility to link their different trading systems. A cap and trade system limited to Europe
will be totally inefficient with a very low benefit for the world. The best scenario would
Press Release IP/04/505 of 20 April 2004, available at
Acquis communautaire is the term used to describe all the principles, policies, laws and objectives that have
been agreed by the European Union.
require full cooperation among the European Union, China, USA, Australia and Russia. The
worse scenario would see an active but isolated European Union, which would give the other
actors, such as China, the possibility to increase their emission levels without producing
negative effects in the world system. The European Union must launch a positive signal to
make the other partners cooperate in an active manner.
4.4 Practical experience
In order to illustrate the actual state of implementation of the Kyoto mechanisms JI and
CDM, a short overview about different actors’ actions will be given in the following.
a) The Netherlands’ activities
The Netherlands were the first country to provide public funding for the purchase of CERs
(Certified Emission Reductions) through CDM projects. This extra funding helps realizing
formerly not feasible projects. The Ministry of Housing, Spatial Planning and the
Environment (VROM) is the implementing agency for CDM and is supposed to use its funds
to purchase CERs in a cost-effective manner. 39 For this purpose it has contracted several
Agencies, such as Rabobank, the IBRD and Senter, an agency under the Dutch Ministry for
Economic Affairs. These select projects and purchase the resulting CERs for the VROM.
Memoranda of Understanding (MoUs) are signed with the most important partner countries.
These MoUs facilitate implementation of CDM projects, as they contain procedures and
prepare the grounds for CDM projects. 40 For instance, the obligatory letters of approval can
be more easily obtained by JI project investors.
Senter, one of the contracted agencies, focuses on buying ERUs (Emission Reduction Units
obtained in the framework of JI projects) through its procurement programme, named
ERUPT. On behalf of the Dutch government, by order of the Ministry of Economic Affairs
of the Netherlands, Senter buys the credits that an investor realised for an approximate price
of € 3-5 per carbon unit. The choice of projects is based on a tender. As the JI mechanism
only starts in 2008, solely the ERUs a project achieves in the period from 2008-2012 are
‘CDM – The Dutch contribution to mitigate climate change’, available at
The different MoUs are available for download at http://www2.vrom.nl/pagina.html?id=7478
bought by Senter. 41 ERUPT has so far bought credits in 19 projects, leading to an emission
reduction of 12.3 million tons of CO2 equivalents for a total amount of € 65.2 million. 42
b) The World Bank’s Prototype Carbon Fund (PCF)
The PCF, launched in early 2000, is a pilot activity financing emission reductions realised in
JI and CDM projects. Its financing sources are governments and companies that are expected
to make contributions and who will, in return, receive a share of the achieved emission
reductions. The fund aims at
Demonstrating how JI and CDM projects can contribute to sustainable
development and lower the cost of compliance with the Kyoto Protocol
Disseminating good practice about how to operate in the carbon market.
The fund is scheduled to terminate in 2012. 43
c) Support by the European Union
As already mentioned, it is rather difficult to outline the EU’s support with reference to JI
and CDM projects, as no specific fund is yet available. As of mid 2004, the emphasis seems
to be put on the smooth start of the EU Emission Trading Scheme (ETS). A background
document to the ECCP Working Group on JI/CDM 44 puts forward a few ideas of means how
the European Union could financially support the Kyoto project mechanisms. Among these
are the establishment of a Carbon Purchase Fund, an investment fund and a technical
assistance fund. In light of the workload caused to the Commission by the national allocation
plans, it seems likely that this subject will be put off until the ETS works smoothly.
Nevertheless, current EC programmes like Phare and ISPA touch issues relevant to JI/CDM
as they support capacity building activities in Eastern European Countries prior to their
accession to the community. 45 Other programmes focus on investment-related capacity
building, including all bilateral geographic programmes and the SYNERGY and TACIS
initiatives. A couple of programmes also provide direct investment, e.g. INTERREG III,
‘Carboncredits.nl’, available at http://www.senter.nl/asp/page.asp?id=i001003&alias=erupt
‘Carboncredits.nl’, Presentation held on September 8, 2004 by Adriaan Korthuis, SenterNovem. Available at
‘About PCF’ at http://carbonfinance.org/pcf/router.cfm?Page=About
Available at http://www.europa.eu.int/comm/environment/climat/pdf/020913backgroundoc.pdf
‘Community Financial Support and JI/CDM’, Part I. Presentation available at
SAPARD and ALTENER. 46 The possibility to achieve emission reductions through CDM or
JI projects can benefit a lot the projects already supported by the Community because it adds
an additional value to them. Due to this link the existing EU programmes already provide
incentives and, through capacity building, prepare the grounds for a successful
implementation of JI and CDM projects.
4.5 Conclusion
The EU has, after perceiving the risk of not complying with its Kyoto Protocol commitments,
taken immediate action to improve its performance. The established Emissions Trading
Scheme, including its linkage to the Kyoto Project Mechanisms Joint Implementation and
Clean Development Mechanism, will forward the Community on its way to achieve the
Kyoto targets. Nevertheless, in the context of a possible over-allocation of allowances, it is
important to ensure the effective functioning of the Trading Scheme. It also remains to be
seen, whether the incentives provided for JI and CDM projects will be sufficient. Perhaps,
recognizing its advantages and necessity, more countries will follow the Netherlands and
establish funds financing climate change action abroad. Despite all constraints, the EU
clearly plays the leading role in undertaking action to mitigate climate change. The
introduction of an Emissions Trading Scheme has aroused interest among other countries and
could prepare the grounds for a successful start of the international emission trading in 2008.
A Call to Action: Johannesburg, 2002
For ten days in late summer 2002 – late winter in South Africa – the problem of sustainable
development captured the world’s attention. From 26 August to 4 September government
delegates and, towards the end of the Summit, heads of state gathered at the Sandton
Convention Centre near Johannesburg to assess the progress made in the decade since Rio
and to commit to future goals. The Summit was organized by the Tenth Session of the UN
Commission on Sustainable Development acting as Preparatory Commission (PrepCom).
Sustainable development touches all strata of society. Therefore, the process demands
democratic decision-making and broad participation. The Summit recognized this imperative
and welcomed corporations, non-governmental organizations and other major groups to take
part in the discourse. Indeed, the forging of public-private partnerships counts as a principal
achievement of the WSSD.
This paper seeks to address the three fundamental sustainable development issues that are
most amenable to UNECE contribution: energy, environment and trade. The representatives
at Johannesburg recognized the central role that energy plays in development and the
consequent need to deliver energy resources to the developing world while ensuring energy
access to future generations. To this end, the WSSD’s Plan of Implementation calls for the
accelerated development of renewable energy sources and of efficient energy use. This
problem is particularly salient in countries in transition (CITs), such as the countries of
Eastern Europe and the CIS, where existing patterns of energy consumption and production
are the largely inefficient relics of centrally planned economies. While no concrete targets
were set regarding renewable energy and energy efficiency, the WSSD took the important
first step of eliciting the support of major governments and relevant players in the business
Pillars of Sustainable Development
Main Relevant UNECE Work Sectors
Social Development
Economic Prosperity
Environment is one of the three pillars of sustainable development. The WSSD infused the
Plan of Implementation throughout with a consideration of environmental consequences. In
addition, the Summit offered an opportunity to advocate the ratification of the Kyoto
The WSSD recognized that trade can be harnessed in the service of sustainable development.
Market access will enable developing countries and CITs to share in technological
advancements that promise to improve standards of living and to reconcile economic growth
with environmental sustainability. Freer trade will also have the desired effect of levelling the
playing field. The dismantlement of subsidies and other trade-distorting mechanisms will
open the markets of developed countries to the South. The Plan of Implementation calls for
removing energy subsidies to clarify market signals that reflect environmental effects.
The Plan of Implementation’s most concrete commitment, the halving of poverty by 2015,
encompasses the goal of rural development. The salience of rural development to sustainable
development stems from the fact that the world’s poor live mostly in rural areas. Rural
development confronts us with a vicious cycle: poor conditions in rural areas cause migration
– particularly of rural youth – to urban areas, which increases pressure on the sustainability
of both urban and rural environments, as the former struggles to cope with a population
influx, and the latter with a loss in human capital. The challenges posed by rural development
implicate multiple dimensions of sustainable development: poverty, subsidies, sustainable
agricultural practices, education and women’s and minority rights.
After poverty “eradication” – as the drafters of the Plan refer to the commitment to halve
poverty – the terms of consensus reached in the Plan of Implementation fall under several
broad themes: changing unsustainable patterns of consumption and production, protecting
and managing the natural resource base of economic and social development, sustainable
development in a globalising world, health and sustainable development, sustainable
development of small island developing states, and sustainable development for Africa. The
Plan also sketches an institutional framework for achieving its goals, assigning general
mandates to the relevant UN and other institutions. The WSSD mapped out the course of the
sustainable development process for the coming years. It delegated the responsibilities of
micromanagement to the UN bodies that specialize in the various sustainable developmentrelated aspects. Some argue that the WSSD should be the last of its kind – at least until action
by international organizations, regional commissions, national governments and local groups
has proved talk worthy again 47 .
Plan of Implementation – Commitments/Themes
Poverty eradication
Changing unsustainable patterns of consumption and production
Protecting and managing the natural resource base of economic and
social development
Sustainable development in a globalizing world
Health and sustainable development
Sustainable development of small island developing States
Sustainable development for Africa
See Anders Rasmussen, Prime Minister of Denmark, in “The bubble-and-squeak summit”, Economist, Sep. 5,
The UN’s Focal Point on Sustainable Development: Commission
on Sustainable Development (CSD)48
1. Introduction
The United Nations Commission on Sustainable Development (CSD) was established in the
wake of the 1992 Rio Earth Summit as a functional commission of the UN Economic and
Social Council. Its mandate is threefold: to ensure effective follow-up to the Earth Summit,
to enhance international cooperation and the intergovernmental decision-making capacity for
the integration of environment and development issues and to examine the progress of the
implementation of Agenda 21 at the national, regional and international levels. 49 The CSD
facilitates and monitors the implementation of sustainable development commitments and
serves as a focal point for the UN’s sustainable development activities. The WSSD Plan of
Implementation calls for the strengthening of the CSD as the high level commission on
sustainable development within the United Nations system and envisions the enhanced role
of the Commission to include “reviewing and monitoring progress in the implementation of
Agenda 21 and fostering coherence of implementation, initiatives and partnerships.” 50
2. Summary of Activities
The General Assembly met in special session in 1997 to review the progress made in the
implementation of Agenda 21 in the five years since Rio. The CSD prepared a
comprehensive assessment and realignment of the sustainable development process in the
Programme for the Further Implementation of Agenda 21, which the General Assembly
adopted. The Assembly also approved a programme of work for the CSD covering the five
years leading up to the WSSD.
Resolution Adopted by the General Assembly 47/191: Institutional arrangements to follow up the United
Nations Conference on Environment and Development (A/RES/47/191).
Plan of Implementation, para. 145.
In 2001, the tenth session of the CSD (CSD-10) donned the hat of Preparatory Committee
(PrepCom) for the ten-year review process of Agenda 21. The PrepCom convened at a global
level four times, the last at a ministerial level in Bali, and paved the way for the WSSD.
The WSSD reaffirmed the CSD’s role in the UN system as a high-level platform for dialogue
on sustainable development and sought to endow the CSD with the institutional capacity to
respond to the new priorities set at Johannesburg and to lead the sustainable development
process in the years ahead. The Plan of Implementation calls for a strengthened CSD to
function as a forum for discussion to foster partnerships and exchange experiences in order to
identify challenges and develop solutions. It also directs the CSD to encourage diversity in
the sustainable development discourse by engaging international organizations, major
groups, the scientific community and educators.
For its eleventh session in April-May 2003, the CSD sketched out its proposed postJohannesburg orientation. Responding to the WSSD’s call for institutional reform, the
Commission identified three broad avenues for change: a narrowing of focus to exact
maximum value from the CSD’s resources, the enhancement of the CSD’s role as a forum for
information exchange and the building of partnerships.
The CSD intends to refine its focus to devote its resources to a more detailed approach to
analyzing compliance with Johannesburg goals and targets. Towards this end, the CSD
reorganized its future work programme as a series of two-year “Implementation Cycles”: in
the first year (“Review Year”) the Commission reviews progress with a view to generating
input for the second year (“Policy Year”), which formulates policy. CSD-11 adopted a
fifteen-year programme of work that assigns “thematic clusters” to each of the two-year
cycles while considering broader, cross-cutting issues over the duration of the programme.
From 14-20 April 2004, CSD-12 completed the first review session on the theme of water,
sanitation and human settlements. Because these issues are particularly relevant to small
island nations, CSD-12 has organized a conference on implementing JOIP and Agenda 21 in
small island nations and less developed, land-locked countries.
In addition, CSD-12
identified the lack of coherent information as a major obstacle for implementing sustainable
development. The Committee called for a more effective national reporting framework, one
that is less burdensome on countries and uses appropriate indicators according to national
conditions and priorities. The suggestion was made to create an inventory and timetable of
national-level efforts in the development and implementation of indicators. Further, CSD-12
noted the need for more effort to collect gender-disaggregated data. 51
Some commentators have viewed Johannesburg as a failure because of its paucity of new
concrete commitments, and it is true that on this score the Summit did not advance the
process far. However, the main contribution of the WSSD to sustainable development was
never supposed to be the setting of new goals so much as the identification of the obstacles
that hindered progress since Rio and the development of strategies for achieving outstanding
commitments. The Plan of Implementation casts the CSD in a uniquely important role in this
effort, in recognizing the importance of information exchange in the sustainable development
process. As such, the CSD seeks to broaden its institutional role by developing an
information exchange capacity to supplement its traditional functions of negotiated decisionmaking and the recommendation of policy. As a dynamic forum for the exchange of
information, the CSD will advance the democratic vision of sustainable development through
a policy of inclusiveness: the exchange of knowledge, opinions and operational experience
will not be limited to governments and international institutions, but will extend to all
stakeholders. The post-Johannesburg CSD will thus serve as a vehicle for the WSSD’s
insistence on the importance of information in achieving concrete progress.
The Plan of Implementation carved out a third role for the CSD: a focal point for discussion
on partnerships as a vehicle for achieving sustainable development goals. Partnerships, as
conceived in this context, are voluntary, multi-stakeholder initiatives that supplement, rather
than supplant, intergovernmental commitments. They are the concrete manifestation of the
idea that a democratic, open and transparent approach is essential to the sustainable
development process.
CSD-11 enumerated criteria and guidelines for partnerships, stressing the values of
voluntariness and transparency, as well as the supplemental nature of partnerships. The
implementation track drafted by the Commission’s eleventh session outlines the partnership
CSD “Report of the Twelfth Session” available at http://www.un.org/esa/sustdev/csd/csd12/csd12.htm
aspect of the CSD’s new character: it is to manage the evolution of the partnership concept to
ensure that partnerships add value to the sustainable development process and conform with
intergovernmental arrangements. At CSD-12, the Commission held a partnership fair to give
an opportunity for partnerships registered with the commission to showcases progress,
network, identify new partners and learn from each other’s experiences. The Committee has
also launched a online partnership database with information on hundreds of CSD registered
partnerships. 52 In addition, CSD-12 identified problems currently affecting partnerships.
Namely, the committee noted the need for more private sector involvement, as well as more
“demand-driven” partnerships as opposed to “donor-driven” partnerships. 53
The importance of partnerships, particularly public/private ones, was also stressed during the
thirteenth session of the Commission. CSD-13 emphasised how the active participation of
private/public partnerships is essential to the achievement of the agreed international
development goals 54 .
3. Environment
As indicated in the preceding section, CSD spent much of the year following the WSSD
recasting its institutional identity and developing a programme of work to meet the
expectations set for it in the Plan of Implementation. CSD-12 marked the completion of the
commissions first review year on the theme of water, sanitation, and human settlements, all
crucial environmental factors in sustainable development. At CSD-12 delegates supported
integrating water, sanitation and human settlements into national sustainable development
strategies, including poverty reduction strategy papers.
The committee particularly
emphasized the need for developing integrated water resource management and improving
water management to protected health and the environment. 55
The topics of water, sanitation and human settlements were also the main focus of the
thirteenth session of the Commission (30 April 2004 and 11-22 April 2005). CSD-13
emphasized the importance of investments in water, sanitation and human settlements for the
To access the database go to http://webapps01.un.org/dsd/partnerships/search/browse.do
See “Partnerships for Sustainable Development: Report of the Secretary General” available at http://ods-ddsny.un.org/doc/UNDOC/GEN/N04/237/63/PDF/N0423763.pdf?OpenElement
CSD “Report of the Thirteenth Session” available at
See CSD-12 “Review of thematic issues: Chair’s Summary Part II” (final unedited version)
achievement of all the internationally agreed development goals. According to the
Commission, efforts to reach the Millennium Development Goals targets on such issues
represent an investment that would pay off in a significant reduction in extreme poverty,
water-borne diseases and environmental degradation. Nonetheless, the lack of financial
resources may represent a serious threat towards the achievement of the agreed objectives.
As a matter of fact, the Committee called for a stronger and more active participation of
public/private sector partnerships, communities, non-governmental organizations and local
authorities. With this regard it was also reaffirmed the primary and essential role of the
Commission in promoting and monitoring sustainable development within the United
Nations system 56 .
At Marrakech, Morocco, in June 2003, a strategy (the “Marrakech Process”) was mapped out
in cooperation with UNEP for realizing the Johannesburg agreements on sustainable
consumption and production. The theme of sustainable consumption and production cuts
across many sectors, but its implications for the environment in particular imbue it with
moment. The consumption and production patterns that prevail in the developed world today
place unsustainable pressure on the natural resource base and on the environment more
generally. The Marrakech Process Discussion Paper 57 divides the issue into four categories:
urban management and transportation, including waste management and construction;
general policy measures and analytical tools that address both consumption and production;
tools for changing consumer behaviour; and tools for changing production patterns. For each
category, the Paper identifies initial, as well as medium- and long-term priorities, assigning
immediacy to those priorities that promise the most benefit for the most countries. It suggests
that the Expert Group consider market incentives to encourage sustainable production, such
as, for example, shifting responsibility for disposal and recycling to the producer, a policy
that motivates producers to design longer-lived and more reusable and recyclable products. It
also recommends using market mechanisms to internalize externalities, such as taxes for
resource depletion or credit trading for carbon emissions. Initial priorities for changing
consumer behaviour include standards, labelling schemes and the setting of an example for
CSD “Report of the Thirteenth Session” available at
“International Expert Meeting on a 10-Year Framework of Programmes for Sustainable Consumption and
Production”: Discussion Paper at http://www.un.org/esa/sustdev/sdissues/consumption/cpp_discussion.pdf
private businesses and consumers by public procurement of sustainable goods and services.
Finally, the Discussion Paper proposes the facilitation of information exchange – for
example, best practices – as an initial priority for changing production patterns.
The 14th session of the CSD concluded on 12 May 2006. As the first year of the second
implementation cycle, CSD-14 focused on progress in the following areas: Energy for
Sustainable Development; Industrial Development; Air pollution/ Atmosphere; and Climate
Change 58 .
4. Trade
The CSD has not focussed on the intersection of trade and sustainable development since the
World Summit, except to the extent that the Commission advocates a more liberal trading
system as a means to achieve its other goals. The most recent explicit trade activity of the
Commission was a Report of the Secretary-General (2001) issued as part of the Johannesburg
preparatory process on the relationship between trade and finance, on one hand, and trade
and the environment on the other. It tracks the evolution in thinking about trade and
environment since the Rio Summit – how trade and environment have increasingly been
perceived as inextricably intertwined as components of sustainable development, rather than
ends in themselves. The Report thus set the parameters of discussion going into the WSSD.
5. Energy
The Marrakech Process Discussion Paper intentionally excludes energy, in general, from its
discussion on sustainable consumption and production, 59 but includes the energy-related
issues integral to achieving sustainable consumption and production – namely, energy
efficiency and the development of markets for renewable energy. Examples of the
intersection of energy with the four sustainable consumption and production areas mentioned
above include improving energy efficiency in transportation (urban management and
transportation), the internalization of environmental and social benefits through the
subsidization or favourable tax treatment of renewable or clean energy production and
practices (general policy instruments and analytical tools), standards and labelling for
energy-efficient products (changing consumer behaviour), and the sharing of best practices in
clean production and energy efficiency (changing patterns of production).
Other than the energy-related activities of the Marrakech Process, the CSD has not been
extensively involved in this sector since the WSSD. As mentioned above, the Commission’s
resources in the year following Johannesburg have been directed primarily at procedural,
rather than substantive, work, designing a long-term work programme to fulfil the mandate
conferred on it by the Plan of Implementation. The Commission focussed on energy in 2001,
at its Ninth Session (CSD-9).
At its fourteenth session in 2006, the Commission on Sustainable Development (CSD)
undertook a review focusing on identifying constraints and obstacles with respect to
implementation in the area of energy, which forms part of a thematic cluster with industrial
development, atmosphere/air pollution and climate change. The fifteenth session of the
Commission in 2007, will take policy decisions on practical measures and options to expedite
implementation in the selected cluster of issues 60 .
Ibid. at 5.
6. Rural Development
Rural development plays an integral role in sustainable development: the challenges facing
rural areas – migration, inadequate water, hygiene and sanitation, disease – are the challenges
of sustainable development. These forces degrade social, environmental and economic
conditions by overwhelming capacities in urban as well as rural areas and by aggravating
poverty and inequity. As life in rural areas worsens, people – particularly young people –
flock to cities, draining the countryside of human capital and exacerbating the pressures on
urban resources. The post-Johannesburg process must find ways to break this cycle of unsustainability.
On the margins of the ECOSOC High-Level Segment (Geneva, June-July 2003), the
Conference of Non-Governmental Organizations in Consultative Status with the United
Nations (CONGO) organized a forum on rural development entitled “Promoting an
integrated approach to rural development in developing countries for poverty eradication and
sustainable development”. The forum identified the main principles and themes of rural
development. It also defined the roles of the UN and NGOs in the rural development process:
the UN, together with national governments, needs to meet the challenge of bridging the
traditional “gap”, or disconnect, between policymaking and the experience of NGOs “on the
ground”. The principles that should guide the rural development process include good
governance – particularly accountability of the international civil service – democracy and
local decision-making and participation. The forum also emphasized that the rural
development effort should focus on empowering the rural poor to help themselves – through
education and employment – rather than more patronizing approaches. As well, rural
development must take advantage of information and communications technologies (ICTs)
and account for gender, aboriginal and minority perspectives.
Focusing on the Human Element: United Nations Development
Programme (UNDP)
1. Introduction 61
The United Nations Development Programme (UNDP) is the UN’s global network for
sustainable development. 62 As such, it plays an integral role in the sustainable development
process: it advances the UN agenda on development, in part by assisting countries to
implement sustainable development principles. It achieves this by drawing on its extensive
resources to build the capacity of countries to meet the challenges of sustainable
development. Because of its broad network of country offices and contacts, special
knowledge of development issues, thematic expertise and country-specific experience,
UNDP is ideally situated for capacity building.
2. Summary of Activities 63
The UNDP’s activities leading up to, at, and in the follow-up to the WSSD largely follow the
same pattern of its sustainable development activities established at the 1992 Rio
Conference. There, Agenda 21 specifically nominated the UNDP to lead capacity building
activities, which have continued to constitute the focus of the institution’s contribution.
In the preparations for the WSSD, UNDP participated in the CSD PrepComs and led “side
events” at PrepCom 2 (January/February 2002) and PrepCom 3 (March/April 2002). The
PrepCom 2 side event discussed how to approach sustainable development opportunities and
challenges from the national perspective. At PrepCom 3, UNDP sponsored a series of side
Unless otherwise specified, all information is from the United Nations Development Programme’s official
web site, http://www.undp.org/.
Statement submitted by Mark Malloch Brown, Administrator, United Nations Development Programme,
PrepCom 4, Bali, Indonesia, 5 June 2002
See generally UNDP’s WSSD web site at http://www.undp.org/wssd/
events on energy, the Equator Initiative, poverty and environment, and water. At the
ministerial-level preparatory conference (PrepCom 4, Bali), the UNDP Administrator
outlined the UNDP’s strategy for supporting the WSSD process, which included its
traditional role of assisting countries to achieve sustainable development goals at a national
level, as well as an emphasis on meeting the Millennium Development Goals and on “TypeII” partnerships. 64
UNDP, in cooperation with other relevant UN institutions, developed the WEHAB initiative,
in response to the Secretary General’s proposal to conceptually prepare for the WSSD, by
constructing a framework of five categories for action: Water, Energy, Health, Agriculture
and Biodiversity. Such a structured approach should ensure that the principle of integration
continues to guide the sustainable development process. At the Summit, UNDP organized
nearly 30 side events, centred around the theme of capacity development.
The Plan of Implementation recognized UNDP’s experience and success in capacity building
and called for the strengthening of its initiatives in that area. In particular, UNDP’s Capacity
21 and Capacity 2015 programmes are devoted to this goal. With regard to the issues of
interest to ECE, several other UNDP programmes work toward implementing WSSD
outcomes: for environment, the Poverty and Environment Initiative and Global Environment
Facility, and for energy, the Energy for Sustainable Development programme. Through these
programmes, the organization has undertaken significant work in water governance,
sustainable land management, the conservation and sustainable use of biodiversity and the
reduction of greenhouse gases. It has mobilized over US$ 7 billion through more than 10.000
large and small-scale projects, in partnership with other UN organizations, governments,
NGOs, civil society organizations and the private sector. Regarding the UNECE member
countries, UNDP’s efforts aim at supporting East European countries and the CIS to integrate
energy and environment issues into their national development plans and strategies through
capacity development, policy advisory services and trust fund management 65 .
“World Summit on Sustainable Development (WSSD): Address by Mark Malloch Brown, UNDP
Administrator” at http://www.undp.org/dpa/statements/administ/2002/august/30aug02.html
Energy & Environement Bureau for Development Policy, “The Sustainable Difference: Energy and
Environment to achieve the MDGs” at http://www.undp.org/energyandenvironment/sustainabledifference/
UNDP does not pursue significant trade activities within its sustainable development
The UNDP’s 2003 Annual Report 66 includes a chapter on sustainable development that
focuses on two of the aspects of sustainable development to which the Programme’s
resources are most amenable: water and energy.
In 2006 Annual Report, UNDP remains committed to doing its part to translate the ambitious
new partnership for development launched in 2000 into better policies, stronger institutions
and greater resources more effectively deployed, all with the aim of achieving concrete
improvements in the lives of those who need and deserve our strong support.
3. Environment
The UNDP’s environment activities include two programmes directed at realizing the
commitments of Agenda 21 and Johannesburg: the Poverty and Environment Initiative and
the Global Environment Facility. The Programme’s overarching concern is development;
therefore, both approach environment issues in terms of reducing poverty.
The Poverty and Environment Initiative (PEI),67 a joint venture of UNDP and national and
intergovernmental institutions, strives to expose the fallacies inherent in the traditional
assumptions that poverty should outrank environment on the international agenda, or that the
two core sustainable development issues are incompatible, rather than mutually enforcing.
The mission of PEI is to build capacity and nourish learning and information exchange in
order to enable developing countries and CITs to integrate environmental management and
poverty reduction. In its early phase (1998-2000) PEI concentrated on developing a broad set
of policy options based on analyses of case studies. The Initiative is now working on helping
countries design and effect policy to manage the environment so as to eliminate poverty. In
fact, UNDP and UNEP recently formed a global partnership on poverty and environment to
“UNDP Annual Report 2003: People and Our Planet: The Road to Sustainable Development” at
And Annual Report 2006: “Global partnership for development” at
“UNDP-EC Poverty and Environment Initiative” at http://www.undp.org/seed/pei/
carry out joint activities at country, regional and global levels. The main goal of such a
partnership is to facilitate and promote stakeholder dialogue, coalition-building and actions
on policy options for mainstreaming environment in poverty reduction policy, planning and
implementation frameworks.
proposes to carry out these activities within the framework of the sustainable
development principles of broad participation – particularly the involvement of the poor
themselves. PEI contributed to the Johannesburg preparatory process by issuing “Linking
Poverty Reduction and Environmental Management”, 68 a paper elaborating on the Initiative’s
mission. The paper proffered three lessons learned from experience in the decade since Rio.
First, environment management and poverty reduction policies must reflect the priorities of
the poor, enable the poor to invest in environment solutions that have the potential of
bettering their livelihoods and seek to change the destructive behaviour of the non-poor.
Second, policymakers must take into consideration the relationship between environment and
development; that is, they must realize the costs of environmental degradation on the poor
and not merely pursue economic prosperity at the expense of the environment. This is
another example of how market mechanisms can work for sustainable development goals if
externalities are internalized. Third, PEI reminded the WSSD that environment policies or
poverty policies cannot be pursued in a vacuum; rather, they must be integrated into the
tripartite sustainable development framework.
UNDP collaborates with two other institutions to implement the Global Environment Facility
(GEF), 69 the designated “financial mechanism” that helps developing countries meet the
terms of the Rio agreements on climate change and biodiversity. UNDP manages GEF
projects in more than 90% of the countries in which the Facility is active.
Since 1991, UNDP has administered the GEF Small Grants for Sustainable Development
Programme. To date, GEF has committed $117.35 million U.S. to national NGOs and
community groups directly involved in addressing global environmental problems. In all,
UNDP has disbursed more than 3,00 small grants of up to $50,00 each. For projects that
reconcile global environmental benefits with sustainable livelihoods for local people. Its
priority areas are biodiversity conservation, climate change mitigation and protection of
international waters, as well as land degradation and desertification. In Kazakhstan, for
example, funds from the Small Grants Programme were used to support a project that
successfully protected twenty bird nests, including those of Golden Eagles.
A similar
program in Poland was aimed at protecting the white stork. Also in Poland, the Small Grants
Program supported the Barka Foundation, which helped local villagers near Pozan convert
from Coal to waste-wood for heating.70
4. Trade
Recognising the potential of liberalised trade and private investment for growth, UNDP helps
countries to develop strong institutions, laws and regulatory structures to manage
globalisation at a national level. To this end, the Programme works with UNCTAD to build
capacity in developing countries to participate in trade negotiations and dispute procedures
through such initiatives as the Integrated Framework for Technical Assistance to LDCs and
the Globalization, Liberalization and Sustainable Human Development Programme. 71
5. Energy
UNDP fuelled the consideration of the role of energy in sustainable development in the years
between the Millennium Summit and the WSSD by contributing to two reports deliberating
past experience in sustainable energy and proposing sustainable energy solutions for the
future. The first, the World Energy Assessment, 72 was prepared as the substantive input for
CSD-9 (2001), which focused on energy. The second was issued as a follow-up to the first
document and in preparation for the World Summit. 73 Both emphasized that social and
economic development and equity are predicated on access to energy and that energy
solutions in developing countries must be pursued consistently with environment policies.
“Hands-on Action for Sustainable Development 1992-2002: The GEF Small Grants Program”
“Achievements: Trade and Private Investment” at http://www.undp.org/wssd/achieve_trade.htm
“World Energy Assessment” at http://www.undp.org/seed/eap/activities/wea/
“Energy for Sustainable Development: A Policy Agenda” at
The UNDP Initiative for Sustainable Energy (UNISE) 74 has identified three priorities of
sustainable energy: efficiency, renewables and new technologies.
Access to greater quality and quantity of energy services is an essential prerequisite to
improve living standards and human welfare and to guarantee economic growth. As a matter
of fact, UNDP is financing projects to promote access to energy services to support
household and productive activities in rural areas as well as access to clean energy
technologies. UNDP’s main priority is to strengthen developing countries’ national policies
by incorporating sustainable energy considerations in poverty reduction strategies,
macroeconomic reform, energy sector reform, and sustainable development planning 75 .
Particularly, it is to emphasize the active role of the organization in several UNECE member
states, such as: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Kazakhstan,
Macedonia, Moldova, Romania, Russian Federation, Serbia and Montenegro, Ukraine. Many
projects have been undertaken in the energy efficiency area in order to enhance national
capacities and to ensure countries energy availability.
“UNDP Initiative for Sustainable Energy” at http://www.undp.org/seed/energy/unise/
Energy & Environement Bureau for Development Policy, “The Sustainable Difference: Energy and
Environment to achieve the MDGs” at http://www.undp.org/energyandenvironment/sustainabledifference/
Looking Out for the Planet: United Nations Environment
Programme (UNEP)
1. Introduction
The United Nations Environment Programme (UNEP) is another of the UN institutions
whose mandate and experience make it a major player in the sustainable development
process. Indeed, its establishment was a product of the Stockholm Conference (1972), the
genesis of the sustainable development process within the United Nations system. 76 UNEP’s
mission statement rings remarkably similar to the definition of sustainable development
itself: “To provide leadership and encourage partnership in caring for the environment by
inspiring, informing, and enabling nations and peoples to improve their quality of life
without compromising that of future generations.” 77 Its history and mission therefore ensure
that UNEP will have an important part to play in the implementation of the Johannesburg
2. Summary of activities
In May 2000, two and a half years prior to the WSSD, UNEP convened the first Global
Ministerial Environment Forum in Malmö, Sweden. The consensus reached at Malmö
provided the basis for UNEP’s vision going into the WSSD process. 78 The UNEP Division of
Technology, Industry, and Economics (DTIE) was particularly active at the Summit, with a
focus on energy, and prepared a follow-up agenda. At the regional level, UNEP regional
offices coordinated with the regional commissions to prepare for the Summit. For example,
UNEP’s Regional Office for Europe (ROE) cooperated with ECE to develop regional
environmental strategies in the lead-up to Johannesburg. 79
“Summit Characteristics” at http://www.unep.org/wssd/wssdpagevision.asp
“About UNEP: The Organization” at http://www.unep.org/Documents/Default.asp?DocumentID=43
“UNEP Vision” at http://www.unep.org/wssd/Vision.asp
“Report of the UNECE Regional Ministerial Meeting for the World Summit on Sustainable Development” at
At the Seventh special session of the Governing Council (February 2002), UNEP recognized
that its role in the revitalization of the sustainable development process lay in strengthening
international environmental governance. 80 No longer could the international community
address environmental issues in isolation; the concept of sustainable development exposes
the relationships between environment, society and economy. The Plan of Implementation
calls for the full implementation of the decision on international environmental governance
adopted by the Governing Council.
The Plan of Implementation further defines UNEP’s role in the institutional framework for
sustainable development by calling for the strengthening of cooperation between UNEP and
the other institutional players in the sustainable development process as well as for the
strengthening of UNEP’s contribution to sustainable development programmes, particularly
in the area of capacity-building.
The Twenty-second session of the Governing Council/Global Ministerial Environment
Forum (February 2003) reconsidered the proposals for reforming and strengthening the
institutional architecture supporting global environmental governance in the light of the
WSSD and reached a set of conclusions for the further implementation of a new model of
governance. 81 It also outlined a plan to implement the Johannesburg outcomes, adopting the
theme of “environment for development” to guide the Programme’s future activities. 82
The 8th Special Session of the UNEP Governing Council was held on 29 March 2004 at Jeju
S. Korea. Dubbed the “Jeju Initiative,” the Council focused on water sanitation and human
settlement. Their work at Jeju constituted UNEP’s contribution to CSD-12. 83
“Report of the Governing Council on the Work of Its Seventh Special Session/Global Ministerial
Environment Forum” at
“Implementing the Outcomes of the World Summit on Sustainable Development: International
Environmental Governance” at http://www.unep.org/GoverningBodies/GC22/Document/k0263573.pdf
“Actions of the UNEP to Implement the Plan of Implementation of the WSSD” at
“President’s summary of the ministerial segment of the eighth special session of the United
Nations Environment Programme Governing Council/Global Ministerial Environment
Forum” available at http://www.regeringen.se/content/1/c6/02/19/13/de4fc6f7.pdf
In addition, the UNEP/SETAC “Life-Cycle Initiative” was launched by Mr. Klaus Toepfer,
UNEP's Executive Director, and Ms. Lorraine Maltby, President of SETAC Global on April
28 at the opening of UNEP's Seventh High Level Seminar on Cleaner Production. The
initiative takes cleaner production further by looking at the whole life cycle both in a
strategic as well as from a practical point of view. Moreover, the initiative links to key
themes of the World Summit for Sustainable Development (WSSD), such as good
governance, protecting consumer interests, disseminating best practice, identifying business
opportunities (alleviating poverty), globalisation, developing multi-stakeholder partnerships,
Global Reporting Initiative (GRI) and Global Compact. 84
3. Environment
It is redundant to say that all of the activities of the UN Environment Programme strive to
protect the environment. Therefore, this paper will consider UNEP’s contributions in the
environment sector in the context of the other themes.
4. Trade
The UNEP office most directly concerned with the relationship between trade and
environment is the Economics and Trade Branch (ETB) of the Division of Technology,
Industry, and Economics. The UNEP ETB cooperates with the UN Conference on Trade and
Development (UNCTAD) in the Capacity Building Task Force on Trade, Environment and
Development (CBTF). The WSSD Plan of Implementation recognizes capacity building as
one of the guiding principles of the implementation of sustainable development. Explained in
greater detail above, capacity building aims to arm developing countries with the resources –
technical, financial and institutional – necessary to embark upon the path to achieving
sustainable development.
“Sustainable Consupmtion Events” at www.uneptie.org/pc/sustain/events/events.htm
5. Energy
Although energy appears to play a minor role in UNEP’s strategy for implementing the
Johannesburg agreements, the Programme is active in a number of initiatives that look at the
energy aspect of sustainable development. First among these is the Energy Programme,
whose mission is to address “the environmental consequences of energy production and use,
such as global climate change and local air pollution”. 85 Activities within this programme
respond to the Plan of Implementation. Among these one of the initiatives most directly
addressing energy and sustainable development is the Global Network on Energy for
Sustainable Development, a “Type II” partnership involving energy centres in the
industrialized as well as developing worlds. 86 The Global Network works towards delivering
green and cleaner energy technologies to developing countries. UNEP is further engaged on
energy issues in the sustainable development process in the Collaborating Centre on Energy
and Environment, the African and Brazil Rural Energy Enterprise Development Initiatives
and the Offshore Oil and Gas Environment Forum.
UNEP has also recently undertaken a project on “promoting industrial energy efficiency
trough cleaner production” in countries such as China, India, Hungary, Czech Republic,
Slovakia. The primary goal of the project is to promote energy efficiency, helping countries
in reducing emissions of greenhouse gases 87 .
Also energy related, UNEP, OECD and the Austrian government have collaborated to create
a website dedicated to improving passenger and freight mobility in Central and Eastern
Europe while protecting human health and respecting natural resource limits and the
environment. Dubbed the “EST goes East Clearing House” the project in its pilot phase. It
is designed to disseminate information on best practices and exchange environment-related
transport information, and promote new projects. 88
UNEP-DTIE Energy and OzonAction Branch – Energy Unit at http://www.uneptie.org/energy/
See http://www.gnesd.org/
See http://www.unep.org/
“About EST goes East Clearing-House” at http://www.unep.ch/est-east/aboute.schtml
Management of Natural Resources and Environmental
Protection: Food and Agriculture Organization (FAO)
1. Introduction
Leaders gathered at the World Food Summit in 1996 committed their countries to cutting
hunger in half by the year 2015. A series of international conferences and summits during the
1990s identified other major goals and quantified targets with the same time horizon. These
were brought together in the Declaration adopted by the UN Millennium Summit in
September 2000 and later restated in the form of eight Millennium Development Goals.
The Food and Agriculture Organization (FAO) is a key partner in the implementation of the
United Nations Framework Convention on Climate Change (UNFCCC). In this respect, FAO
deals mostly with normative activities (such as policy and technical guidelines and
databases), but it also includes information on field programmes. Selected technical and
institutional links to many other partners that support these conventions are also included
under this theme.
2. Energy
The Food and Agriculture Organization (FAO) helps integrate energy as a tool for food
security and sustainability, develop renewable energy sources adapted to the needs of rural
populations, and foster efficient use of conventional energy sources.
Assessment and planning. FAO has promoted national frameworks for sustainable energy in
Asia, helped establish a Latin American and Caribbean Working Group on Energization for
Sustainable Rural Development (GLAERS), and published a study on energy needs in
African agricultural in the year 2010.
Regional wood energy networks in Latin America and Asia are promoting more efficient end
use of wood as a modern energy carrier. FAO's biofuels programme covers such technologies
as anaerobic digestion of organic wastes and residues, organic recycling, pyrolisis and
briquetting. Solar energy applications include solar drying and solar cooking, heating, water
pumping, communications, lighting, greenhouses and refrigeration. FAO promotes
introduction of machinery, tools and alternative technologies to rural areas, taking into
account specific farming systems and agro-industrial activities. FAO supports the draught
animal equipment components of agricultural mechanization projects and the improvement
of animal systems for food production and other farm uses.
Activities for the integration of energy sources include integration of alcohol production from
sorghum with biogas, pyrolysis, solar and wind systems and energy conservation; and
assessment of the potential of various renewable sources of energy in specific farm activities.
3. Sustainable Development
The responsible management of natural resources is the key to attaining sustainable
agricultural and rural development. FAO has long been at the forefront of promoting natural
resources management and environmental protection in its work, but, as of 1 January 2007,
this commitment has been strengthened by the creation of the new Natural Resources
Management and Environment Department. The new Department replaces the former
Sustainable Development Department, although its former work in the areas of gender,
equity and rural employment will continue to be carried out by FAO’s Economic and Social
Development Department. The new Natural Resources Management and Environment
Department’s main functions are to support environmental services, to promote the
sustainable management and use of land, water, and genetic resources, and to strengthen
agricultural research and extension systems. The Department will take the lead in the areas of
bioenergy, climate change issues, land and water management, land tenure issues,
biodiversity for food and agriculture, and research and extension.
The new Natural Resources Management and Environment Department consists of three
Environment, Climate Change and Bioenergy Division
Land and Water Division
Research and Extension Division
The new Environment, Climate Change and Bioenergy Division builds upon the work of the
former Environment and Natural Resources Service, with particular attention focused upon
the role of rural institutions in addressing local development issues. This reflects the greater
interest expressed by member countries in Climate change issues related to agriculture,
forestry and fisheries. Member countries are assisted both in the mitigation of climate change
and in the development of adaptive capacities of agriculture, fisheries and forestry to the
effects of climate change. This assistance is made available through a variety of approaches,
including technical support, policy tools, institutional strengthening, guidelines and best
4. Bionergy
While FAO has been involved with Bioenergy for the past three decades, the structure of the
new Department places a greater emphasis on FAO’s work in Bioenergy for poverty
alleviation, food security and climate change mitigation and increases opportunities for
cooperation with member countries, other organizations and private-public partnerships. The
Division continues to serve as a focal point for organizing and facilitating a multidisciplinary
and global approach to bioenergy through the mechanisms of the International Bioenergy
Platform (IBEP) and the Global Bioenergy Partnership (GBEP). IBEP is expected to provide
analysis and information for policy and decision-making support; to build and strengthen
institutional capacity at all levels; to enhance access to energy services from sustainable
bioenergy systems; and to facilitate opportunities for effective international exchange and
collaboration. GBEP’s Secretariat is located at FAO’s Headquarters and is supported by the
Italian Ministry for the Environment. The GBEP Secretariat acts as the principal coordinator
of Partnership communications and activities and assists international exchanges of know-
how and technology, promote supportive policy frameworks and identify ways of fostering
investments and removing barriers to the development and implementation of joint projects.
Bioenergy: Access to clean and affordable energy is a key factor to increase agricultural
productivity and to achieve food security and improve rural livelihoods. Providing multiple
energy services for cooking and heating as well as power for electricity, industry and
transportation, bioenergy (and other renewable energies such as solar, wind and geothermal)
can contribute strongly to increased labour productivity and diversification of economic
activities in rural areas. The specific functions of agriculture as an energy producer,
agroecosystem regenerator and environmental service provider (e.g. climate change
mitigation, biodiversity protection, rehabilitation of marginal land, etc.) are essential
components of sustainability.
Environmental technologies in agriculture are the technological means for ecosystem
management that aim at improving agricultural production and post-production while
conserving the regenerative and reproductive capacity of the natural resource base. They
combine traditional and scientific knowledge of natural processes and are based on the
utilization and recycling of renewable resources, including energy.
Broadening Trade and Market Access for the Poor: United
Nations Conference on Trade and Development (UNCTAD)
1. Introduction
The United Nations Conference on Trade and Development (UNCTAD) facilitates
intergovernmental discourse on trade, development and related issues by contributing
substantive input, and assists developing countries to build the capacity required to meet the
demands of sustainable development. 89 UNCTAD’s contribution to the WSSD process
focuses on its institutional strengths: technical assistance and capacity building, biotrade,
climate change, commodities, investment, technology, and enterprise development. The
Conference’s sustainable development work also involves follow-up on Doha trade and
development issues. Its post-Johannesburg activities focus on addressing the effects of
sustainable development environmental policy on market access for developing countries.
The sustainable development activities of UNCTAD thus focus on the environment and trade
sectors; energy is not a significant aspect of its work.
2. Summary of Activities
While it is true that some of UNCTAD’s raisons d’être and the principles of sustainable
development coincide, such as the effort to employ trade to broaden market access for
developing countries in such a way as to protect the environment, UNCTAD’s activities are
largely outside the scope of this paper. However, it has played and continues to play a
significant role in the mutually supporting processes parallel to the WSSD – particularly the
Doha Development Agenda. At the Summit, the UNCTAD Secretary General delivered a
speech on the topic of migration – in particular, on how UNCTAD’s resources can be most
effectively employed to address migration problems. 90 In addition, as discussed in the
“What is UNCTAD?” at http://www.unctad.org/Templates/Page.asp?intItemID=1530&lang=1
Migration, however, is beyond the scope of this paper.
previous chapter, UNCTAD and UNEP used the occasion of the Summit to reinvigorate their
joint venture, the Capacity Building Task Force on Trade and Environment (CBTF).
UNCTAD proposes to follow-up Johannesburg with a programme aimed at reconciling the
environmental regulation called for in the Plan of Implementation with the trade needs of
developing countries. 91
On the occasion of the Seventh session of UNCTAD’s Commission on Trade in Goods and
Services, and Commodities (February 2003), the Conference summarized its commitments to
implementing Johannesburg. 92 UNCTAD proposes to fulfil its sustainable development
responsibilities through enhancing technical assistance cooperation with the secretariats of
the other institutional players and implementing “Type II” partnerships, particularly in
connection with CBTF.
3. Environment
In the lead up to the WSSD, UNCTAD’s sustainable development activities in the
environment sector were influenced by UNCTAD’s significant involvement in the
implementation of the Doha work programme. For example, in July 2002, only about three
months before the Johannesburg Summit, UNCTAD held a workshop to deliberate trade and
environment issues, particularly as they affect Latin American countries, and to identify
practical approaches to achieve the Doha objectives. 93 At the Summit, UNCTAD and UNEP
launched the second phase of the Capacity Building Task Force on Trade and the
Environment (discussed above), but this institution has yet to engage in sustainable
development activities touching the ECE region.
Several environment priorities were included in the document issued by UNCTAD in
preparation for Johannesburg, “Promoting Trade for Sustainable Development: UNCTAD’s
Contribution to the World Summit on Sustainable Development”. 94 First, in addition to the
See generally “Trade, Environment and Development” at http://www.unctad.org/en/docs//c1d52_en.pdf
“Report of the Commission on Trade in Goods and Services, and Commodities on its seventh session” at
“UNCTAD Workshop on Post-Doha Trade & Environment Issues” at
“Promoting Trade for Sustainable Development: UNCTAD’s Contribution to the World Summit on
Sustainable Development” at http://www.unctad.org/en/docs//poedmm216.en.pdf
CBTF, UNCTAD is active in a number of other technical assistance and capacity building
programmes. Again, however, UNCTAD directs most of its energies towards the least
developed countries of Latin America and Africa, and its programmes have little impact on
ECE members. Second, UNCTAD’s Biotrade Initiative seeks to promote the sustainable use
of biodiversity through helping developing countries to take advantage of biodiversity to
produce value-added products and services. Third, UNCTAD is very involved with
initiatives addressing the problems associated with climate change. It works on greenhouse
gas emission trading and counsels developing countries on the implementation of the Kyoto
Protocol, with particular emphasis on how developing countries can benefit from Kyoto.
Fourth, UNCTAD contributes to the environmental accounting aspect of enterprise
development by promoting standards to ensure that the market accurately accounts for
environmental costs and liabilities. And finally, the organisation analyses the relationship
between foreign direct investment (FDI) and environment.
4. Trade
Along with environment and development, trade is one of the troika of themes addressed by
UNCTAD. This grouping is hardly surprising: the concept of sustainable development itself
recognizes that these three forces are locked in a system where progress or regress by one can
influence the others directly. As such, the challenge of sustainable development is to
comprehend the interrelationships among the factors. One of the principles of sustainable
development is that trade, particularly in the sense of greater market access for developing
countries, can facilitate environment and development ends. This principle defines
UNCTAD’s institutional outlook.
Trade is an important factor in many of the initiatives highlighted in UNCTAD’s WSSD
report. Of course, the Task Force for Trade, Environment and Development and the
Conference’s other technical assistance and capacity building activities seek to enable
developing countries to manage the mutual influence exercised by trade and environment. As
well, as mentioned above, UNCTAD is a major partner of the WTO, and plays a significant
part in the follow-up to the Doha Ministerial Conference. Trade constitutes an integral aspect
of UNCTAD’s Biotrade Initiative, which employs international trade as a vehicle for the
sustainability of biodiversity. Export commodities, in developing countries as well as
economies in transition, supply the focus for a third trade-related activity pursued by
UNCTAD as part of the WSSD process. UNCTAD recognizes that nearly half the world –
and particularly the developing world – relies on commodity production for employment, as
well as livelihood in general. The challenge here lies in the current pattern of trade distorting
mechanisms, for which developed countries bear most of the responsibility: agricultural
products, one of the commodities most relied on by the South, are subject to the sharpest
trade practices, infamously in the form of subsidies. While the removal of such measures is
more the province of the WTO than UNCTAD, UNCTAD works to better the lot of
developing countries from the supply side, engaging in projects to fight the current plague of
low commodity prices with diversification and to promote the sustainable production and
export of commodities.
The background note by the UNCTAD secretariat in preparation for the Seventh session of
the Commission on Trade in Goods and Services, and Commodities focused on the challenge
of reconciling “environmental requirements” with trade and development – that is, of
encouraging the consideration of the effects on trade and development of public and private
environmental regulation. The note emphasizes “the need to ensure that this does not have
unnecessary adverse effects on developing countries’ exports and that environmental
standards are not used as a disguised form of protectionism”. 95 The paper also proposed
several issues to be addressed by the Commission, including building capacity to enable
developing countries to respond to environmental requirements and the creation of markets
and trading opportunities for environmentally preferable products (EPPs).
In her statement to a special meeting of UNCTAD in July 2003, German Federal Minister for
Economic Co-operation and Development Heidemarie Wieczorek-Zeul chastised developed
countries for not taking their sustainable development commitments seriously enough. 96 She
accused the economically advanced countries – the leaders of the globalization and trade
liberalization movement – of practicing what they preach only when it serves their interests:
“It is not right to preach free trade whilst at the same time barring developing countries from
engaging in it as soon as it is no longer convenient.” The most telling example, of course, is
“Trade, Environment and Development” at 3.
Heidemarie Wieczorek-Zeul, “Trade and development: Making the development round a reality in Cancun”,
Statement to UNCTAD special meeting, Geneva, 22 July 2003.
agricultural subsidies. The international trading system as it now stands, however, is biased
against developing countries and LDCs in other sectors as well: Ms. Wieczorek-Zeul noted
that while the value of shoe imports (generally from developing countries) in the United
States amounts to only about one-sixth the value of automobile imports (generally from
developed countries), customs revenues from shoe imports exceed those from automobiles.
She further emphasized the imperative of integrating developing countries into the
globalization process for reducing poverty and enabling sustainable environment policies.
Only then will the “Doha Development Agenda” live up to its name.
UNCTAD XI was held in Sao Paulo, Brazil, on 13-18 June. The theme of the eleventh
quadrennial session of the United Nations Conference on Trade and Development was
“coherence,” namely, achieving coherence between national development strategies and
global economic processes in trade and development. Towards that end, the conference
called upon all countries to word towards the multilateral trading system advanced by the
Millenium Development Goals, one that is ”open, equitable, rule-based, predictable and nondiscriminatory”
The conference also devoted attention to trade and gender issues, the
development of creative industries in developing countries, and improving the supply
capacity of developing countries. 97
In addition, UNCTAD convened a Roundtable on Promoting Trade for Sustainable
Development, as a parallel event with UNCTAD XI. The discussion focused on the positive
contribution trade can make to the sustainable development process in developing countries
in particular. 98
5. Energy
UNCTAD’s sustainable development activities in the energy sector are negligible.
Secretary General’s statement at www.unctadxi.org.
TD/(XI)/BP/10, May 24 2004
Making Trade Work Towards Sustainable Development: World
Trade Organization (WTO)
1. Introduction
The World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade
(GATT) in 1995. GATT was intended to supplement the post-war international economic
arrangements at Bretton Woods that established the World Bank and the International
Monetary Fund. The post-war world leaders remembered the economic chaos of the 1930s,
which was caused in part by the lack of coordinated international economic policy and which
created an environment conducive to the extreme political movements that eventually
precipitated the Second World War. In the 1940s, it was hoped that a coherent international
trading regime would contribute to peace and prosperity. At the turn of the twenty-first
century, as GATT was transformed from a “general agreement” into a proper “organization”
– the World Trade Organization – its raison d’être remains that of liberalizing trade.
However, free trade is still only the means to an end, and today that end includes sustainable
2. Summary of Activities
The signatories to the Marrakesh Agreement, which established the WTO in 1995,
recognized the imperative of sustainable development in the first substantive paragraph of the
preamble. 99 This reflected the priority assigned to environment and development concerns at
Rio in 1992. The WTO has worked towards this objective in two major ways. First, the WTO
Secretariat participates in the annual CSD sessions, reporting to the CSD on the WTO’s
progress with regard to trade, environment and sustainable development. Second, the
GATT/WTO contributed to the Rio follow-up process by establishing a Committee on Trade
and Environment (CTE) to recommend development-enhancing trade policy.
“Uruguay Round Agreement: Marrakesh Agreement establishing the World Trade Organization” at
In 2001 at the Fourth Ministerial Conference in Doha, Qatar, the WTO embraced sustainable
development as the motivation behind future trade negotiations in the “Doha Development
Agenda”. The WSSD Plan of Implementation recognized the WTO’s role as the leading
institution in the campaign to realize the potential of international trade in the sustainable
development process and called upon the members of the WTO to fulfil their Doha
On July 31, 2004, negotiators on all sides made a breakthrough on the latest round of talks,
which were launched at Doha, broke down at Seattle and stalled at Cancun. The General
Council adopted four “frameworks” on agriculture, market access for non-agricultural
products, trade in services and trade facilitation. 100
Though promising, the agreement
remains very general and more difficult negotiations lay ahead, particularly on cotton
subsidies and drug patents.
3. Environment
The WTO has developed a set of parameters to guide its work on environment based on both
its institutional competence as well as the challenge of reconciling environment and
development concerns. 101 First, as it itself frankly admits, the WTO is not an environmental
protection agency; its environment activities are therefore limited to matters touching trade.
This delimitation of its role focuses on the complementarity between the twin goals of trade
and environment: “Environmental protection preserves the natural resource base on which
economic growth is premised, and trade liberalization leads to the economic growth needed
for adequate environmental protection.” 102 Second, the WTO rules already afford the
requisite scope for national environmental protection policies. Only the principle of nondiscrimination – which calls for equal treatment for domestic and imported products or for
products imported from different trading partners – shapes the capacity of governments to
pursue environmental protection. Third, that developing countries need access to markets in
order to protect the environment follows from the first guideline. Simply put, trade
“Draft General Council Decision of 31 July 2004.” WT/GC/W/353.
“Parameters of the discussion in the WTO” at http://www.wto.org/english/tratop_e/envir_e/issu2_e.htm
liberalization alleviates poverty in developing countries, the most obstructive hurdle to
environmental protection. Finally, the WTO believes that many environmental problems can
best be addressed at the national level through better intragovernmental coordination and at
the regional and global levels through multilateral environmental agreements (MEAs), which
avoid the pitfalls of unilateralism and extraterritoriality.
The Doha Ministerial Declaration, adopted less than a year before the WSSD, spells out the
WTO’s agenda, coloured throughout by the theme of development. The ministers agreed to
carry out the Doha Work Programme through two institutional mechanisms: new
negotiations and committee work.
Under the trade and environment heading, the Doha Declaration sets forth five subjects for
new negotiations: MEAs, information exchange, observer status, trade barriers on
environmental goods and services and fisheries subsidies. 103 The negotiations on multilateral
environmental agreements 104 are intended to examine the applicability of existing WTO rules
to trade provisions incorporated in MEAs. The information exchange negotiations are
supposed to expand the scope of existing cooperation between the WTO and MEA
secretariats by broadening discussions on dispute settlement mechanisms and the impact of
the agreements on trade. On observer status in the WTO to other international governmental
organisations, an issue currently at the mercy of politics, the ministers resolved to develop
criteria for observership. Finally, negotiations shall deliberate the reduction or elimination of
trade barriers on environmental goods and services, such as air filters or consultancy services
on wastewater management, as well as the potential for environmental harm posed by
fisheries subsidies.
The Doha Declaration instructs the Committee on Trade and Environment to devote
particular attention to several priorities. First, it urges policymakers to strike a balance
between environmental objectives and market access for developing countries. Second, it
encourages policymakers to find “win-win-win” situations where the removal of trade
See “The Doha Declaration explained” at
E.g., the Montreal Protocol for the protection of the ozone layer, which applies restrictions on the
production, consumption and export of aerosols containing chlorofluorocarbons (CFCs).
restrictions and distortions benefits the environment and development as well as the
multilateral trading system. Third, the ministers called on the Committee to use the WTO
intellectual property regime to improve access for developing countries to green technologies
and products. Fourth, the Declaration instructs the Committee to analyse the effects of ecolabelling on trade and look at whether existing WTO rules obstruct progress in eco-labelling.
At the 8th meeting of the Committee on Trade and Environment Special Session held on 9
April 2004, delegates stressed the importance of reconciling WTO rules and multilateral
environmental agreements (MEAs).
In addition, participants supported
work on a
development oriented list of environmental goods and various avenues for greater
information exchange and cooperation between WTO and UNEP. Further, the Secretariat, in
cooperation with UNEP, UNCTAD and a number of MEAs, organized regional seminars for
government officials on trade, the environment and sustainable development. 105
4. Trade
As explained in the preceding section, the WTO’s mandate focuses its sustainable
development activities almost exclusively on trade issues. Therefore, this paper will consider
the WTO’s involvement in trade and sustainable development in the context of the other
5. Energy
The WTO only directly confronts the nexus between energy and sustainable development to
the extent that it pushes for the removal of environmentally damaging energy subsidies
within its broader trade liberalization and sustainable development programmes.
example, prompted by bi-lateral WTO-ascention negotiations with the EU, Russia struck a
deal in June 2004 with the EU in which it agreed to raise domestic gas prices in line with its
own energy strategy and promised to give private companies access to state-run gas
pipelines. 106
2004 Report of the WTO
Wall Street Journal May 24, 2004, page A2
Governance on Sustainable Development
UN Sustainable Development Board
A new governance mechanism is required to provide oversight for the One UN at the country
level. There is also a need to provide operational guidance and direction to the separate
organizations for the coherence and effectiveness of the UN system at the country level. The
report of the Secretary-General’s High-Level Panel recommends the establishment of a UN
Sustainable Development Board (responsible for operational coherence and coordination,
system-wide implementation of policies, for allocations of voluntary funding and for
performance of the One UN at the country level), reporting to the Economic and Social
The UN Sustainable Development Board will also review the consolidated One Country
Programme, which will include components developed by individual organizations,
reflecting the policies and directives of their respective boards.
1. Role and mandate of the UN Sustainable Development Board
Endorse “One” Country Programme and approve related allocations of voluntary
donor finance from the Millennium Development Goal funding mechanism. Following an
inclusive planning process by the UN country team, in line with the principle of country
ownership, and approval of the programme by the country, the Sustainable Development
Board will endorse unified country programme and approve the allocation of voluntary
funds. It would ensure agency alignment with jointly agreed UN priorities.
Maintain a strategic overview of the system to drive coordination and joint planning
between all Funds, Programmes and Agencies to monitor overlaps and gaps.
Review the implementation of global analytical and normative work of the UN in
relation to the One UN at country level, to progresss towards the internationally agreed
development goals and to provide strategic guidance on the policy and analytical work of UN
sustainable development activities.
Oversee the management of the MDG funding mechanism, which will coordinate
donors resources and consolidate allocations. The Board’s decisions, particularly on
allocations, will be informed by strategic policy and operational advice provided by the UN
Development Policy and Operations Group, under the leadership of the Development
Coordinator. To fulfil this role the Group requires an internal Development Finance and
Performance Unit to manage voluntary donor finance and monitor system-wide performance.
Review the performance of the UN Resident Coordinator system, taking all necessary
steps to strengthen coherence and delivery. This will include monitoring the implementation
and delivery of efficiencies, results-based management and the harmonisation of business
practices. It will also cover the provision of common services to all funds, programmes and
specialized agencies in the field.
Consider and comment on the implementation of the strategic plans of funds,
programmes and specialized agencies with a role in delivering the MDGs, the other
internationally agreed goals and normative activities relating to sustainable development,
particularly in the context of the One Country Programme. The board would assess and
strengthen system-wide operational and normative coherence, performance and effectiveness
of UN system-wide sustainable development activities. There should be additional
discretionary funding available to the Board to provide incentives for good performance of
Headquarters of Funds, Programmes and Specialized Agencies and to fund programmatic
gaps and priorities.
Commission periodic strategic reviews of One Country Programmes. The Board will
ensure that the One Country Programmes are aligned with national development plans, have
full country ownership established through inclusive consultative processes and are focused
on internationally agreed development goals. Strategic review will be prepared for the
Board’s consideration under the direction of the UN Development Coordinator. The Board
should provide clear guidance and directions to relevant stakeholders to implement the
recommendations of such reviews.
Consider and act on independent evaluation, risk and audit findings, submitted by the
new Independent Evaluation Unit, established by the Secretary-General and reporting to the
Board. This Unit will strengthen evaluation across the development system and provide
timely, independent performance information to improve the system and its processes.
2. Membership and reporting
The Economic and Social Council should establish the Board and determine membership in
line with experience gained from the composition of the executive boards of the funds,
programmes and specialized agencies. The Board will comprise a subset of member states on
the basis of equitable geographic representation. Senior staff from development, planning,
finance and foreign ministries, with the appropriate skills and competencies, should represent
member states, the Board should convene at ministerial level when required. It should enable
major non-UN inter-governmental organizations with a key role in the international
development architecture to fully participate in its meetings. The Boards decisions should be
communicated to all relevant UN inter-governmental bodies. Executive heads of UN
agencies, or their deputies, with significant operational and normative programmes should
take part as ex-officio members.
When allocating funding for One Country Programme, a high-level representative from that
country should be invited. The Board should invite independent experts, senior official of the
Bretton Woods Institutions and NGOs to participate in discussions and to inform the Board’s
decision-making, when necessary 107 .
“Delivering as One”, Report of the Secretary-General’s High-Level Panel, 9 November 2006.
A Regional Approach in Europe: United Nations Economic
Commission for Europe (UNECE) 108
1. Introduction
The United Nations Economic Commission for Europe (UNECE) is one of the five
Economic and Social Council (ECOSOC) regional commissions. Its membership is
composed of the countries of Europe and the CIS, as well as the United States and Canada.
During the Cold War, UNECE was the only permanent platform for dialogue between East
and West, and since the fall of communism, it has redirected its energies towards guiding
structural transformation in the Countries in Transition (CITs) and promoting greater
economic integration and harmonization among its constituency. Its areas of specialization
include environment and human settlements, sustainable energy, trade, industry and
enterprise development, timber, and transport. The UNECE’s experience and expertise in
these sectors provide the resources necessary to lead the implementation of Agenda 21 and
the Johannesburg agreements at regional and sub-regional levels. Indeed, the European
Union, in its first meeting on the follow-up to the Johannesburg Summit, nominated the ECE
for the role of leader of the region’s sustainable development programme. 109
2. Summary of activities
The importance of integrating sustainable development into ECE’s work has been repeatedly
emphasized by member States. The 1997 Plan of Action stressed the importance of
introducing the outlook for sustainable development in all relevant ECE activities, noting that
it was “particularly relevant for ECE work” and should “permeate all its activities”.
“Proposed Follow-up for the ECE Region of the World Summit on Sustainable Development” at
The UNECE preparatory process culminated one year before the WSSD with a Regional
Ministerial Meeting (24-25 September 2001). 110 The Ministerial Statement adopted by the
Meeting outlined the region’s perspective on the sustainable development process by setting
priorities and developing strategies for meeting regional challenges and by defining the
region’s responsibilities and role in addressing global problems. 111 The ministers identified
six priority actions on global challenges: poverty eradication; sustainable management and
conservation of the natural resource base; making globalisation work for sustainable
development; improving governance and democratic processes at all levels; financing
sustainable development; and education, science and technology for decision-making.
The Ministerial Statement also considered the current state of regional sustainable
development activities and courses for future action – programmes and strategies recognized
and approved in the Johannesburg Plan of Implementation. The ECE is extensively involved
in all three of the major issue areas on which this paper focuses. The Commission’s
environment activities include the Environment for Europe process, and its Energy
Efficiency 21 initiative exemplifies a sustainable development approach to energy. The
ministers resolved to employ trade liberalization to achieve sustainable development ends. As
well, they committed themselves to promoting good governance, particularly corporate
In 2002, the Plan of Implementation of the World Summit for Sustainable Development
stated that the “implementation of Agenda 21 and the outcomes of the Summit should be
effectively pursued at the regional and sub-regional levels, through the regional commissions
and other regional and sub-regional institutions and bodies". The Summit also called on the
regional commissions to promote the integration of the three dimensions of sustainable
development into their work in a balanced way and to facilitate and promote such integration
into the work of regional, sub-regional and other bodies “for example by facilitating and
strengthening the exchange of experiences, including national experience, best practices, case
studies and partnership experience related to the implementation of Agenda 21”.
The Ministerial Meeting was a joint venture with the UN Environment Programme (UNEP).
“Ministerial Statement to the World Summit on Sustainable Development” at
http://www.unece.org/env/documents/2001/ece/ac22/ece.ac.22.2001.2.e.pdf at 8.
In this connection, the Commission for Sustainable Development, at its session in May 2003
also invited the Regional Commissions to consider organizing regional implementation
meetings in collaboration with other regional and sub-regional organizations.
The fifth Ministerial Conference “Environment for Europe” requested the UNECE, in
cooperation with other relevant organizations and institutions to assist in “assessing progress
in the implementation of environmental commitments of this region emanating from the
Johannesburg Declaration on Sustainable Development and the Plan of Implementation as
well as the UNECE Regional Preparatory Meeting for WSSD.” The Declaration went on to
state that the results of this work “should feed into regional implementation meetings
organized in preparation for the UNCSD meetings as recommended by UNCSD at its 11th
UNECE activities related to Sustainable Development
Given the above, the “mainstreaming” of sustainable development in all ECE activities has
been actively pursued within ECE. One indicator of achievement for Executive Direction and
Management is the extent to which sustainable development is incorporated into the relevant
ECEs areas of work.
ECE already has a significant number of ongoing activities related to sustainable
development. Among the recurrent ones:
- The development of standards and recommendations in transport that aim at reducing the
negative impact of transport on the environment e.g. in the areas of vehicle construction,
transport of dangerous goods, combined transport
- The development and implementation of the five ECE environmental conventions and
related protocols
- The environmental performance reviews
- Activities relating to the "Environment for Europe" Process
- Working with cities and local authorities to improve urban environmental performance and
promote the integration of land use and local transport policies.
- Promotion of the use of energy efficient technology and energy efficiency investment
- Promotion of clean coal technology and the role of coal in sustainable development
- Promotion of sustainable forest management
In addition to the above continuing recurrent activities, a number of new sustainable
development issues are being taken up. These include, for example, statistical indicators for
assessing progress in sustainable development; analytical studies covering progress made in
achieving sustainable development in the region; promotion of renewable energy; and trade
and environment. Some of these issues have been further discussed and specified at the first
meeting of the ECE senior management group on sustainable development, established by
the Executive Secretary, which took place in May 2003.
ECE’s role in the regional follow-up to WSSD
The Johannesburg plan of implementation and the CSD-11 resolution highlight the specific
role of the Regional Commissions in the monitoring and implementation of WSSD, and
request them to cooperate with the other regional and subregional organizations for this
purpose. This is a long-standing practice of ECE and number of the organizations, groupings
and initiatives have been involved in the two most recently held high-level meetings
convened by the ECE: the Ministerial Preparatory Meeting for WSSD (Geneva, September
2001) and the "Environment for Europe" Ministerial Conference (Kiev, May 2003).
At the substantive level, these meetings will focus, during the implementation year of each
cycle, on the three thematic clusters as identified in the multi-year programme of work
decided by the CSD, namely, in 2004-2005, water, human settlements and sanitation.
The First Regional Implementation Forum on Sustainable Develpment
Following the decisions of the eleventh session of the Commission on Sustainable
Development (CSD-11), the Economic Commission for Europe at its Ad Hoc Informal
meeting on 2 September 2003, decided to hold the First Regional Implementation Forum on
15-16 January 2004 in Geneva. This meeting evaluated progress made in implementing
sustainable development goals and identified obstacles and constraints in the areas of water,
human settlements and sanitation. The outcomes of the meeting provided substantial inputs
to the Review Year of the "Implementation Cycles" and contributed to CSD-12.
At the Summit itself, the UNECE identified the main sustainable development concerns for
the two categories of countries that comprise the ECE region: developed countries and
countries in transition (CITs).112 The challenges for the economically advanced countries,
she remarked, consist mainly in decoupling economic growth from resource use and moving
towards more sustainable patterns of production and consumption. CITs, meanwhile, must
strive to promote environmentally sound technologies, invest in less energy-intensive
equipment for industrial activities and public utilities, change energy consumption behaviour
and address the question of waste. She also drew attention to the need for capacity building
in less developed countries to reach the Johannesburg goals. The Executive Secretary
concluded her statement with the two ways in which UNECE could contribute to the
sustainable development process: by “further develop[ing] its support to the implementation
of its legal agreements” and by “adopt[ing] an integrative approach to policy debate,
exchange of experiences, assessment and monitoring, placing these activities in a truly
sustainable development perspective.”
At the Fifty-eighth session of the UNECE in March 2003, the Commission prepared a
Proposed Follow-Up for the ECE Region of the WSSD, 113 which served as the basis for
consideration of its institutional role in the sustainable development process. It recommends
the establishment of a Senior Management Group for Sustainable Development to coordinate
the institution’s sustainable development activities. It also directs each of the UNECE subprogrammes to mainstream the commitment to sustainable development in their daily work;
the Environment sub-programme will work towards the implementation of the WSSD
commitments. The Proposed Follow-Up calls for region-wide forums to exchange
information and to coordinate national sustainable development programmes.
The first meeting of the ECE senior management group on sustainable development took
place in May 2003. 114 In late June 2003, UNECE prepared a note on its sustainable
development activities in implementing WSSD outcomes. This document recognized the
ECE’s role in coordinating regional and sub-regional responses to Johannesburg and
Statement by UNECE Executive Secretary, World Summit on Sustainable Development (Johannesburg, 29
August 2002) at http://www.unece.org/press/execsec/2002/bs020829.htm
See “Proposed Follow-up”.
“Note on the ECE Role in the Regional Follow-up to WSSD” at
affirmed the ECE’s commitment to convening regional implementation meetings coincident
with implementation years in the CSD’s programme of two-year work cycles. At the first
Regional Implementation Forum on Sustainable Development, held in January 2004,
UNECE assessed the progress achieved since Johannesburg and reviewed the development
of sustainable development partnerships. In coordination with CSD’s thematic cycles, the
forum focused on water, sanitation and human settlements. 115 To complement the forum,
UNECE has prepared two regional meetings on Education for Sustainable Development.
The goal of these meetings is to raise awareness about sustainable development to help
overcome the political and financial barriers that often hamper initiatives. 116 .
UNECE is also active in facilitating public-private partnerships (PPPs) for sustainable
development. It encourages cooperation between public institutions and private companies to
provide access to basic needs. The success of such partnerships, however, depends on taking
into account social and environmental factors as well as economic viability, including
political acceptability and good governance. UNECE strives to show that these principles
have important implications for the “bottom line”: financial institutions are much more
willing to support projects that embrace transparency and accountability.
3. Environment
The intergovernmental initiative that most facilitates regional coordination on environment
policy is the Environment for Europe (EfE) process 117 , a series of ministerial-level meetings.
Part of the broader political agenda in this process was the goal of supporting and
strengthening the democratisation processes taking place in the post-communist countries.
Information, participation and access to justice were seen as essential elements of a true
participatory democracy. These themes therefore became central elements in the EfE process,
resulting in the endorsement of the Sofia Guidelines in 1995 and the adoption of the
Convention on Access to Information, Public Participation in Decision-making and Access to
Report of the UNECE Regional Implementation Forum on Sustainable Development (ECE/AC.25/2004/2).
Report of Second regional meeting on education for sustainable development
Rome, 15-16 July 2004 (CEP/AC.13/2004/8)
“Environment for Europe” Process at http://www.unece.org/env/wgso/
Justice in Environmental Matters at the Aarhus “Environment for Europe” Ministerial
Conference in 1998. The strengthening of citizens’ environmental rights were already clearly
reflected in principle 10 of the 1992 Rio Declaration.
The Declaration of the most recent EfE ministerial conference (Kiev, May 2003) 118 was a
collective response to the decisions of Johannesburg as well as of the preparatory regional
Ministerial Statement. 119 It outlines responses across the sectors to make regional
environmental progress happen. The list of responses includes a discussion of the regional
process and potential for contribution to global challenges as well as regional strategies. One
of these strategies is an interesting approach to the principle of internalizing externalities: the
civil liability regime as a supplement to market incentives. The Declaration adopted an
environmental strategy for the countries of Eastern Europe, the Caucasus and Central Asia
(EECCA) calling for the building of partnerships at sub-regional level and for implementing
the results of the WSSD. The strategy is a comprehensive plan to confront problems across
the sustainable development spectrum through cooperation within the EECCA region and
with other ECE countries.
Progress in the UNECE region is also made directly through NGOs. Countries with a
thriving NGO sector find that public participation is enhanced and that the public is better
informed. NGOs are frontrunners in awareness-raising campaigns through which the public
is educated in sustainable development issues.
On Regional Conventions, there is no doubt that the UNECE has assumed a place at
the centre of harmonizing and developing environmental law and policy developments on the
pan-European level, through the Environment for Europe Process as well as through the
UNECE Committee on Environmental Policy. Particularly, during the Kiev Conference, it
was stressed the essential role of the Committee on Environmental Policy, in cooperation
with other relevant organizations and institutions, in monitoring the outcome of the Kiev
The sixth ministerial conference of “Environment for Europe” is scheduled to take place in Belgrade in the
fall of 2007
“Environment for Europe: Declaration by the Environment Ministers of the region of the United Nations
Economic Commission for Europe (UNECE)” at
Declaration120 and in developing a communication strategy to raise awareness of the
“Environment for Europe” process. The Committee was also invited to assist Ministers in
assessing progress in the implementation of environmental commitments in the region,
stemming from the Johannesburg Declaration on Sustainable Development121. During the
Kiev Conference, three Protocols to Conventions of the United Nations Economic
Commission for Europe were adopted and opened for signature.
To date, five environment and sustainable development conventions have been adopted under
the auspices of the UNECE: the Convention on Long-range Transboundary Air Pollution
(1979) and its 8 protocols; the Convention on Environmental Impact Assessment in a
Transboundary Context (1991); the Convention on the Protection and Use of Transboundary
Watercourses and International Lakes (1992) and its protocol; the Convention on the
Transboundary Effects of Industrial Accidents (1992); the Convention on Access to
Information, Public Participation in Decision-making and Access to Justice in Environmental
Matters (1998) 122 .
Within the “Conference for Europe” Process, the Sixth Ministerial Conference is planned to
take place in Belgrade, in Serbia from 10 to 12 October 2007. The Conference is prepared by
the Working Group of Senior Officials (WGSO) which is an intergovernmental group created
for the express purpose of preparing for upcoming Ministerial Conferences "Environment for
Europe" and for coordinating the follow-up response. Each Working Group of Senior
Officials is established by the UNECE Committee on Environmental Policy upon the
recommendations of the Ministerial Conferences. The Working Group of Senior Officials is
open to participation of all member States of the United Nations Economic Commission for
The Kiev Declaration was the fifth ministerial conference held as part of the “ Environment for Europe
Process” on 21-23 May 2003, in Kiev. During the Conference, countries reaffirmed their commitment to
cooperation on environmental protection and sustainable development.
UNECE, 2003, Provisional Agenda for the tenth session, Geneva 20-22 October, Committee on
Environmental Policy (ECE/CEP/115/Add.1).
For more information see: http://www.unece.org/env/welcome.html.
4. Trade
The UNECE’s preparation for the WSSD, as embodied in the Ministerial Statement,
emphasized the importance of making globalization work for developing countries and CITs.
It called for the opening of markets to such countries and the expansion of foreign direct
investment (FDI) in them in a socially and environmentally responsible way. The support of
economic integration through the removal of barriers to trade has been an integral function of
the UNECE throughout its institutional history. It is, therefore, natural that the Commission
should capitalize on its experience and strength in this area to advance global and regional
sustainable development. The Ministerial Statement also recognises the role of trade in
financing sustainable development. A liberalized international trade regime should
supplement FDI and official development assistance (ODA) by providing access to markets
for developing countries. In this regard, the ministers echoed the call for eliminating or
reducing environmentally adverse subsidies. 123
The ECE Follow-Up document filters the work of the Commission’s Trade Development
sub-programme through the sustainable development prism. The sub-programme will support
the Plan of Implementation primarily through its activities in certification, conformity
assessment, technical harmonization and trade in biomass. It will also continue its efforts in
trade development in environmentally sensitive areas, such as its work in timber certification.
For example, in July 2003, ECE in cooperation with FAO held a roundtable "Trade,
Environment and Forests - Working together for Sustainable Development", where a number
of important international governmental and non-governmental organizations, together with
governmental representatives discussed such crucial issues, as forest certification in relation
to the sustainable forest management.
The division will continue its efforts in trade facilitation with an eye to making trade serve
sustainable development goals. In particular, ECE is planning to use some of its current
programmes to achieve a more sustainable trade.
For instance, the Multiplier Points
Programme, whose purpose is to provide the public and private sectors in the countries in
transition with information on UNECE activities through a network of regional informational
centres, will be used in the future to disseminate information about sustainable trade related
See “Ministerial Statement”.
In response to decisions made on the Commission’s major policy directions at the fiftyeighth session of the UNECE, the Committee for Trade, Industry and Enterprise
Development (CTIED), on the occasion of its seventh session (May 2003), evaluated the
extent of its cross-sectoral activities, including sustainable development activities, and
determined prospective new areas for cross-sectoral development.124 It highlighted CTIED
initiatives that exemplify the integration of sustainable development goals in trade
development and facilitation work. For example, CTIED and the UNECE committees on
timber and environmental policy are collaborating to promote trade in sustainability managed
forest products.
During its 8th session, CTID reviewed its progress on sustainable development issues. In
particular, the Committee noted its project, “Improved Trade Logistics for the Sustainable
Use of Biomass” and the development of new international standards in the timer industry for
“green” (environmentally friendly) products. CTID also cited its progress on implementing
the “International Model for Technical Harminization” as a practical tool for integrating
environmental concerns into international standards and regulations.125
5. Energy
The Sustainable Energy Division (SED) conducts the UNECE’s energy activities.
The UNECE contributed to the preparations and lead-up to the process of the Commission on
Sustainable Development as well as its eventual follow up. This Contribution, entitled “One
more step on path to a sustainable energy future”, summarizes the results and conclusions of
deliberations by delegates to the tenth annual session of the Committee on Sustainable
Energy (31 October - 2 November 2000) and to the High-level Forum on Sustainable Energy
in a Competitive Market; Forging Partnerships (1 November 2000). It represents the views of
“Cross-Sectoral Activities in Sustainable Development, Gender Mainstreaming and ICT for Development
and the World Summit on the Information Society (WSIS)” at http://www.unece.org/trade/tips/docs/ctied7/trd03-015e.pdf
“Cross-Sectoral Activities in Sustainable Development, Gender Mainstreaming and ICT for Development
and the World Summit on the Information Society.”TRADE/2004/212 March 2004
delegates from governments, the private sector and non-government organizations from the
ECE region on a range of issues pertaining to the sustainable production and use of energy.
The Contribution restates the sustainable energy policy objectives of ECE member countries,
identifies the key energy issues confronting the region, outlines in broad terms the energy
policy responses required to meet the challenges, and identifies two areas of particular
importance to the region for follow up by the UNECE: (1) energy intensity and efficiency;
and (2) energy pricing, subsidization and the internalization of externalities.
In addition, five energy policy issues were identified as priorities that needed to be addressed,
to varying degrees, by ECE countries in order to promote and facilitate the transition to a
more sustainable energy future. These are:
energy availability and security of supply;
energy intensity reductions and efficiency improvements;
energy pricing, subsidization and internalization of externalities;
cleaner fossil fuels, renewable energy, and research & development;
market opening, liberalization and economic efficiency.
The UNECE WSSD follow-up document carved out a niche for its Sustainable Energy subprogramme in the post-Johannesburg process. Specifically, the UNECE will direct its energy
activities at the improvement of energy efficiency (through capacity building, support for
energy efficiency investment projects and the sharing of environmentally sound
technologies), the promotion of the use of natural gas, the fostering of technical cooperation
in clean coal technologies and the removal of unsustainable energy subsidies. The UNECE
also proposes to introduce a programme on new and renewable energy. These proposals build
off of the existing work of the Sustainable Energy sub-programme. The sub-programme is
designed to take account of WSSD goals and works in five areas: promoting convergence in
the overall legal, regulatory and policy framework; promoting energy efficiency and
conservation, particularly in CITs; encouraging the greater use of natural gas as a
“transitional” fuel to bridge the gap until “new” environmentally benign energy sources are
developed and commercialised; greening the coal-to-energy process; and addressing issues
related to electric power network system interconnections. 126 At UNECE’s fifty-ninth
“Introduction: Sustainable Energy” at http://www.unece.org/ie/se/intro.html
session, on 24-26 February, 2004 UNECE re-affirmed its commitment to this subprogramme by endorsing the United Nations Framework Classification for Fossil Energy and
Mineral Resources and recommending it be applied worldwide. Further, it decided to focus
it sixtieth annual session to follow-up to the International conference on finance for
development. 127
The Committee on Sustainable Energy discussed in its 2006 session the significant potential
for energy efficiency improvements in the UNECE region as well as the importance of
The Committee was briefed on the current status of EE21 Project, which has evolved as a
project initially focusing on capacity building, normative frameworks and development of
policy reforms to one addressing market formation, project development and promotion of
investment. The new phase of the EE21 Project (2006-2009) has been recognized by the
Committee as responding to the existing obstacles encountered in financing energy efficiency
projects by facilitating the creation of a dedicated energy efficiency investment fund based
on a public-private partnership and supported by the EE21 Project.
UNECE Annual Report 7 March 2003- 26 Feb 2004, E/ECE/1416
The Energy Efficiency 21 Project (EE21)
The Energy Efficiency 21 Project is an example of a Sustainable Energy programme devoted
to achieving sustainable development in the energy sector at a regional level. The Project
aims to enhance trade and cooperation in energy efficient, environmentally sound techniques
and management practices towards the end of bridging the energy efficiency gap between
actual practice and best technologies as well as between market developed countries and
CITs within the ECE region. 128 EE21 focuses on developing the skills of private and public sector
experts at the local level for energy efficiency and renewable energy investments.
Since 1991, EE21 is devoted to achieving sustainable development in the energy sector at a
regional level. EE21’s main objective is to assist south-eastern European, eastern European,
and Commonwealth of Independent States (CIS) countries to enhance their energy efficiency,
diminish fuel poverty, and meet international environmental treaty obligations under the
The specific Energy Efficiency Investment Project for Climate Change Mitigation achieved
in the period 2000-2005 the following main objectives to: (i) develop communications and
skills in 15 locations in the private and public sectors at the local level; (ii) strengthen energy
efficiency policies in the five participating countries; (iii) promote opportunities for
commercial banks and companies to invest in energy efficiency projects. Project proposals
for a total value of US$ 60 million have been identified and of these 18 projects for
approximately US$ 15 million have been financed, contributing to an estimated annual CO2
reduction of 136,000 tonnes that could be compared to eliminating CO2 emissions of 68,000
cars. Financial institutions such as the World Bank, the EBRD and the Nordic Investment
Bank (NIB) have played a key role in that respect. But they have also shown that this is a
time consuming and labour intensive process that needs to become much more fluid or
business-as-usual in order to succeed on any meaningful scale.
In this period EE21 worked towards enhancing information exchange, improving
institutional networking, building capacity, promoting energy efficiency legislation and
“Sustainable Energy: Energy Efficiency” at http://www.unece.org/ie/se/eneffic.html
identifying energy efficiency investment projects and potential sources of financing. It
focused on developing carbon emissions trading standards, promoting energy policy reform
and encouraging sound business practices. 129 Besides, new project’ objectives were defined
during the Sixteenth Session of the Steering Committee. These goals aim at assisting SouthEast European, East European and CIS countries to enhance their energy efficiency, diminish
fuel poverty arising from economic transition and meet international environmental treaty
obligations under UNFCCC and the UNECE. Particularly, after the ratification of the Kyoto
Protocol by the Russian Federation, the intention of the project was to promote sound
business environment and corporate governance to introduce the needed economic and
institutional reforms and policies and to favour the implementation of the Kyoto Protocol
mechanisms 130 .
In order to understand how the EE21 Project can support East European UNECE member
states in boosting energy efficiency investments and in developing adequate energy policies,
the Committee on Sustainable Energy and the EE21 Steering Committee jointly organised a
special session on the “Implementation of the Kyoto Protocol, Energy Efficiency and
Climate Change Mitigation” (29th June 2005). The special session stressed out how the lack
of energy efficiency investments in Eastern Europe is mainly due to policy barriers,
inadequate financial engineering skills and the lack of proper financing mechanisms. As a
matter of fact, the Commission, with the EE21 Project, was called to provide for the
establishment of a public-private partnership dedicated to fund energy efficiency investments
in transition economies.
In its Programme of Work for 2006-2009, endorsed by the Committee on Sustainable
Energy, the promotion of the development and implementation of strategies and policies to
facilitate the transition to a more sustainable energy future and the contribution of a regional
perspective to global events related to energy sustainability are addressed and listed as key
priorities. Such work would address, inter alia, the reforms needed in energy pricing and the
removal of consumption subsidies in order to employ market mechanisms in the service of
sustainable energy and, therefore, of sustainable development.
The general objective of the new phase is to enhance regional cooperation on energy
efficiency market formation and investment project development to reduce greenhouse gas
emissions in economies in transition. The EE21 Project will implement different activities in
order to: (i) accelerate regional networking between national participating institutions and
international partners by enhanced internet communications; (ii) promote municipal level
projects to enable local energy efficiency development also through the development of a
new public-private partnership Investment Fund; and (iii) develop and harmonize regional
policies and standards to introduce the economic, institutional and regulatory reforms
needed. The structure of the Energy Efficiency 21 Project provides for cross-cutting
objectives and activities that are largely implemented through sub-projects in which the
UNECE serves as the Executing Agency, Associated Agency or provides direct value-added
information dissemination services.
The Sub-Regional and Country-Oriented Projects of the Energy Efficiency 21 can be listed
as follows: (i) Financing Energy Efficiency and Renewable Energy Investments for Climate
Change Mitigation; (ii) The Regional Network for Efficient Use of Energy and Water
Resources in Southeast Europe (RENEUER; (iii) Removing Barriers to Energy Efficiency
Improvements in the State Sector in Belarus; (iv) Biomass Energy for Heating and Hot Water
Supply in Belarus; (v) Green Labels Purchase – making a greener procurement with energy
labels; (vi) Development of Coal Mine Methane Projects in Central and Eastern Europe and
the Commonwealth of Independent States.
A new EE21 project on Financing Energy Efficiency Investments for Climate Change
Mitigation will provide for the establishment of a public-private partnership dedicated fund
to finance energy efficiency investments in UNECE transition economies. This new phase of
the EE21 Project is supported by the Global Environmental Facility (GEF), the United
Nations Foundation (UNF), the Fonds Français pour l’Environnement Mondial (FFEM) and
the European Business Congress (EBC) with an approved amount of US$ 7.750 million.
Therefore, this project is to promote the formation of an energy efficiency market in Eastern
Europe and the CIS so that cost-effective investments can provide a self-financing method of
reducing global greenhouse gas (GHG) emissions. It will complement other initiatives and
assist participating countries to address the financial, technical and policy barriers to energy
efficiency and renewable energy investments. The project will (a) establish a dedicated
source of equity and quasi-equity finance –an Investment Fund- with the participation of
public and private sector investors; (b) enhance the skills of the private and public sector
experts at the local level to identify, develop and submit bankable projects for financing to
the fund and/or other sources of finance; (c) provide assistance to municipal authorities and
national administrations to introduce economic, institutional and regulatory reforms needed
to support these investment projects.
The project is designed to go largely beyond what has been done previously in the form of
demonstration investments financed under special conditions in selected Eastern European
locations. Its objective is the establishment of a dedicated financial facility, managed by a
private experienced Fund Management company, linked to a pipeline of projects that can
provide for the large scale participation of private sector investors in partnership with public
entities. Based on the lessons learned from earlier financing mechanisms, the project will
help leading private and public financial institutions to create a US$ 250 million publicprivate equity Fund that can complement other financing schemes. As a result, the project is
expected to leverage an investment volume of up to US$ 2 billion for energy efficiency and
renewable energy projects.
The outcome of the project will be solid investments that could represent a reduction of GHG
emissions of 10 million tonnes of CO2 per year, enhanced skills of local experts and policy
reforms in participating countries. Hence direct CO2 emissions reduction for this project
stands at 200 million tonnes if we consider a 20-year period, according to GEF standards.
Taking into account the possibility the Fund is replicated after a demonstrating success,
direct post project CO2 emissions reduction can be estimated again at a 200 million tonnes
level over a 20-year period. Finally, in terms of indirect emissions reduction, a conservative
estimate based on the volume of most cost-effective energy efficiency investments, leads to a
CO2 reduction figure of 600 million tonnes over 20 years.
A New Actor on Energy in Europe: the European Union
1. Introduction
For most of its existence, the European Community has limited its efforts to promoting
economic growth and integration. The 1957 Treaty of Rome did not mention the
environment. Not until 1973 did the EC adopt its first community wide environmental
policy, the “Environmental Action Program” (EAP), which adopted a vertical and sectorial
approach to the environmental problems. Though it led to little immediate, concrete action,
the adoption of the 1973 EAP was the first time the Council formally accepted that
environmental measures should be carried out at the Community level. The first EAP was
followed by two more in 1977 and 1983. The 1977 version added little substance to the first
EAP, requiring that its measures be continued and updated 131 . In this moment we cannot talk
about a Community Policy but just of “a policy patchwork” 132.
The Community, at this stage, does not have a systematic policy, but just a form of subpolicy in the context of the internal market, which is evaluated on the basis of the advantages
and disadvantages of the market.
In the 1983 EAP, the Council committed itself to reducing pollution at its source, supporting
the “polluter pays” principle, and integrating environmental considerations into all policy
areas. The legal basis for measures to implement these principles at the community level was
still limited by the Community’s unchanged economic purpose. EC environmental measures
had to be based on either article 235 (now 308), which gave the EC power to address
The fifth and the sixth Action Plans are particularly relevant. As far as the 5th Action Plan is concerned, titled
“For a lasting and sustainable development”, it established the principles of a European strategy on a voluntary
basis for the 1992-2000 period, starting a horizontal action that takes all the pollutant factors into account
(industry, energy, tourism, transports, agriculture). In 2001 the European Union adopted the 6th programme of
Action for the environment (2001-2010), titled “Environment 2010: our future, our choice” that set four sectors
which needed urgent intervention: climate change, protection of nature and biodiversity, health, quality of life,
management of natural resources and waste.
Lenshow Andrea (1997) Transforming in European Environmental Governance, European University
Institute, Working Paper RSC 97/61
unforeseen circumstances that would impede broader Community goals, or article 100 (now
94) on eliminating trade distorting national policies.
Explicit legal basis for environmental measures came in 1987 when the EC ratified the Single
European Act (SEA). Though it did not use the phrase “sustainable development,” the SEA
amended the EC Treaty in art. 130r (now 174) to explicitly allow for environmental
protection to be integrated into other Community policies. In 1993 133 , the EC took another
step away from its history as being mainly an economic union by formally changing its
environment…” as well as social security and “raising the standard of living and quality of
life.” (art. 2)
The phrase “sustainable development” was intentionally avoided due to
opposition from the conference on Monetary Union, which advocated the phrase “sustained
non-inflationary growth.” 134
The Treaty of the European Union brought the concept of “sustainable energy with respect
for the environment” and the principle of environmental caution 135 into the EU system. For
the first time the environment acquired the status of European policy.
In 1999, the phrase “sustainable development,” entered EC treaty-law with the ratification of
the Treaty of Amsterdam. The treaty raised the prominence of environmental issues at the
EU level and also marked the community’s recognition of the internationally accepted
concept of sustainable development (however fluid it may be).
Article 2 declared that one
of the tasks of the EC is to promote “harmonious, balanced and sustainable development of
economic activities….” Article 6 required that all EU activities take account of the need for
sustainable development. In addition, the treaty extended co-decision to environmental
measures, giving the generally more pro-environment European Parliament a greater impact
on shaping EU environmental policy.
The European Council of Cardiff went further in June 1998. It created the basis for a
coordinated community action to incorporate environmental issues in the European policies.
This is known as the Cardiff Process that invited the Agriculture, Transports and Energy
Council to define their strategies of integration. A strategy of integration implies that all the
The Treaty of European Union, signed in Maastricht in February 1992.
David Wilkinson, Steps Towards Integrating the Environment Into Other EU Policy Sectors, in The
Transition to Sustainability: The Politics of Agenda 21 In Europe. Page 113 - 14
According to this principle, although an environmental threat is not 100% proven, it is necessary to act in
order to prevent it. The aim is to guarantee a high level of environmental protection and human, animal or
agricultural security when the scientific data doesn’t consent to evaluate the risk.
European policies should be planned in advance to evaluate their future impact on the
environment, positive or negative they be.
No changes to the EC Treaty’s environmental provisions have been made since the Treaty of
Amsterdam. A “Protocol on Sustainable Development” has been proposed for inclusion in
the EU’ s new constitution. 136
2. Current Strategy
The European Union is playing a very active role in promoting the assessment of
environmental and energy issues both within the region and at a world-wide level. As it was
mentioned in chapter IV, the Union was one of the most active parties, for example, in
promoting the ratification and implementation of the UNFCCC and the Kyoto Protocol.
The EU strategy on sustainable development is divided into internal and external
components, as defined in two documents adopted by the Council. The internal component
was adopted by the Göteborg council in 2001 137 . Called “A sustainable Europe for a Better
World- A European Strategy for Sustainable Development,” the document defining the EU’s
internal policy consists of three parts: 1) a set of cross-cutting proposals to better integrate
sustainable development into future EU policy; 2) a set of sustainable development priority
issues, identified as climate, public health, natural resources, traffic, and land-use; and 3)
steps to implement the strategy and monitor progress, which includes comprehensive reviews
at the start of each Commission’s term of office and every two years by a stakeholder forum.
The Council recognized that economic growth, social cohesion and environmental protection
should be implemented all together. Economic, social and environmental interests should all
be equally considered and public policies should pursue the same objectives. Sustainable
Development is now the main key of the Political Economy. At Göteborg the environment
dimension completed the Lisbon Strategy. The Strategy for Sustainable Energy now includes
three goals: economic, social and environmental progress.
Smith, Don C. ‘The European Union’s Commitment to Sustainable Development: Is the Commitment
Symbolic or Substantive in the Context of Transport Policy?’ Colorodo Journal of International Environmental
Law, 2002.
Communication from the Commission, “ A sustainable Europe for a better world: a European Union Strategy
for Sustainable Development” COM (2001) 264 final
In July 2004, the Commission began a twelve-week consultation to review and revise the
current strategy. The report of the review is due to be completed by 2005.
The EU’s external policy was finalized by the Commission in 2002. Called “Towards a
Global Partnership for Sustainable Development,” the document defining the EU’s external
policy sets priority objectives and includes concrete actions to further sustainable
development around the world. Those priority objectives and actions to achieve them focus
on six issues: 1) trade 2) poverty 3) natural resource management 4) the coherence of EU
policies 5) governance and 6) finance.
3. Environment
The EU’s external environmental policy includes accession to the Convention to Combat
Desertification, the Convention on Persistent Organic Pollutants, the Montreal and Kyoto
Protocols and the Auhrus treaty on access to environmental information.
In addition, the EU has six external assistance programmes for Central and Eastern Europe,
which each includes environmental components.
The Phare Programme is designed to assist applicant countries of Central and Eastern Europe
in their preparations for joining the EU Phare began in 1989 to assist Poland and Hungary
and now covers 10 countries: the eight new member states as well as Bulgaria and Romania.
Because only Bulgaria and Romania remain candidate countries, the programme is currently
being restructured. 2003 was the final year for new programs in those countries that have
already joined the EU, although payments on existing programs will be made until 2006.
One of Phare’ s objectives is to promote economic and social cohesion, which provides for
various environmental projects.
Phare consists of three types of programmes:
National Programmes, Multi-Country &
Horizontal Programmes, and Cross-Border Co-operation. National Programmes take up
most of the Phare budget. Of its total budget of 1,703 million Euros, 1,223 million were
allocated as part of national programs. Those programmes are based on each individual
country’s National Development Programme, which they develop in co-operation with the
EU. The environmental component of each national program thus varies according the
countries level of compliance with EU environmental accession requirements. Phare’s MultiCountry & Horizontal Programme includes a sub-programme called LIFE II (the Financial
Instrument for the Environment), which co-finances environmental initiatives.
It has two
sub-parts: LIFE Nature aims to contribute to the implementation of Community nature
protection legislation, and LIFE Environment aimsat developing innovative financial
structures through demonstration projects.
The third type of Phare programme, Cross-
Border Co-operation, does not include the environment among its main objectives.
CARDS (Community Assistance for Reconstruction, Development and Stabilisation) is an
EU assistance program for the Western Balkans. Among its four main objectives, CARDS
includes promoting sustainable economic and social development. 138
The participating
countries are Albania, Bosnia and Herzegovina, Croatia, Serbia, Montenegro and the former
Yugoslav Republic of Macedonia. The programme’s overall objective is to promote stability
within the region and develop closer ties with the EU For 2000- 2006, 4.6 billion Euros will
be provided for the CARDS budget.
TACIS (Technical Assistance Programme for the Commonwealth of Independent states)
started in 1991 and gives grants for technical assistance to thirteen countries in Eastern
Europe and Central Asia. Those countries are: Armenia, Azerbaijan, Belarus, Georgia,
Kazakhstan, Kyrgyzstan, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine,
and Uzbekistan.
It supports projects that work on institutional reforms, private sector
development, environmental protection, rural economic reform and nuclear safety. Over 851
million Euros have thus far been allocated from TACIS for environmental projects. 139
For example, in Russia, the EU’ s TACIS programme funded a project to establish “Eastern
Energy Centres,” which develop policy recommendations and energy savings strategies.
TACIS also funded a project to upgrade energy efficiency in housing by installing modern
heat control systems. The EU established the Russian-European Centre of Energy Research
in St. Petersburg and funded courses on energy savings technologies, energy audits and
consulting through two specialized programs called THERMIE and SNERGY. 140 In
Kazakhstan, a 1998 programme set up a demonstration project to improve the energy
efficiency of a hospital in Almaty, and in Ukraine, the EU supported the Fuel Gap
Programme and the Chernobyl Shelter Fund.
EU “About CARDS” available at http://europa.eu.int/comm/europeaid/projects/cards/foreword_en.htm
EU “About Tacis” available at http://europa.eu.int/comm/europeaid/projects/tacis/foreword_en.htm
Assenza, Gaudenz B., and Emila Istrate, 2004. ‘International Organizations and Energy Efficiency: Lessons
of Experience in Russia’ In: United Nations, Experience of International Organizations in Promoting Energy
Efficiency: Russia’. Geneva Switzerland: United Nations Economic Commission for Europe.
ISPA (Instrument for Structural Policies for Pre-Accession) is an aid program for EU
candidate countries that exclusively focuses on environmental and transport infrastructure
measures. ISPA funds go towards financing large-scale environmental projects. IPSA’s
2004 budget for the two remaining candidate countries, Bulgaria and Romania, was 452
million. 141
Finally, SAPARD (the Special Accession Programme for Agriculture and Rural
Development) includes funding for projects that promote environmentally sustainable
agricultural. The programme currently has a budget of over 225.2 million Euros for Bulgaria
and Romania.
4. Trade
The EU committed to promoting sustainable development through trade in their external
strategy, “Global Partnership for Sustainable Development.” In the paper it planned to do the
Work through WTO to integrate developing countries into the world economy;
Help developing countries benefit from the global trading system
Change the generalized system of preferences (GSP) to take account of
sustainable development;
Include sustainable development in its bilateral and regional agreements;
Increase transparency in the international financial system;
Encourage European businesses to be socially responsible;
Promote cooperation between the WTO and NGOs 142 .
Perhaps the most significant step toward implementing the EU’s trade and sustainable
development plans was made this summer at the WTO. In July 2004, the EU agreed in
principle to significant cuts in its massive agricultural subsidies, which currently dwarf even
those of the United States. Also at WTO, the Commission has launched ‘sustainability
impact assessments’ on individual Doha Development. 143
EU “Pre-Accession Assistance” available at http://europa.eu.int/comm/enlargement/pas/ispa.htm
“Global partnership for sustainable development” available at
“Environment and Sustainable Development” available at http://europa-euun.org/articles/lt/article_1004_lt.htm
In addition, the EU’ s Common Agricultural Policy mid-term review gave more support for
the organic sector and other environmentally-friendly farming methods and rural
development, and the Common Fisheries Policy mid-term review gave additional support to
the sustainable management of fish stocks internationally and in the EU. Further, the EU has
included environmental considerations into its public procurement rules, and has co-financed
several awareness campaigns on fair trade products.
Also trade related, labour standards were integrated into the trade and development
provisions of the EU’ s Corporate Social Responsibility Policy Papers adopted in 2001 and
2002. The EU has been a major contributor to the ILO International Programme on
Elimination of Child Labour and has been working toward getting ILO an observers status in
the WTO 144 .
5. Energy
The Treaty on European Union (TEU) confirmed that the Community’s sphere of activity
covers the energy sector. Though it did not include a separate chapter on energy, the TEU
referred to it in the list of objectives (Article 3u) and in the Environmental title (Title XIX,
article 175(2).
Today, the EU is committing to reach sustainable energy production and sustainable
consumption patterns. There is, in fact, a common understanding between EU Member States
that the adoption of energy efficiency measures and the use of renewable resources may lead
to positive effects on environmental impacts and on economic growth.
The entry into force of the Kyoto Protocol, global warming, sustainable development and
intelligent energy are all topical concerns which prompt a move towards renewable energy
sources, but which also encourage the drawing-up of major strategies for rationalising not
only the consumption but also the production of energy. Furthermore, the European Union
consider the energy as an essential factor for competitiveness and economic development for
the all Europe.
“Trade and Social Conditions” available at
It has set since the beginning these goals:
1. Security of Supply
2. European Markets Integration
3. Research and technological development
One of the first obstacles the European Union has to face is its dependence of energy
production from fuels (oil, gas and coal) that actually represents about the 80% of the
European productive mix for getting energy. The introduction of internal markets in
electricity and gas and the dramatic rise in oil prices in 2005 have given renewed impetus to
finding an energy policy which reconciles economic and environmental objectives and the
security of energy supplies. In this scenario, the European strategy tries to guarantee cleaner
energy, at limited costs and at sufficient amounts, in order to realise an efficient and
competitive and safe market. These objectives are strictly correlated and they require unitary
measures at community level both on the supply and demand side. The Commission
following these guidelines has implemented different Programmes in order to promote
energy efficiency policies based on a more rationale use of energy through the diffusion of
EU environment ministers are expected to endorse a Commission agreement, approved on 10
January 2007, to reduce the EU' s greenhouse-gas emissions "unilaterally" by 20% by 2020
compared with 1990 levels, the reference year under the Kyoto Protocol.
But the ministers' conclusions, which are traditionally adopted unanimously among the 27
nation-bloc, are leaving some members unhappy. "Hungary and Poland are worried by the
binding nature of the targets," a EU official said on 19 February.
However, the last-minute squabble is likely to be tempered due to support from other
member states. In similar conclusions adopted unanimously on 15 February, energy ministers
said that the Council "supports ambitious overall EU targets for reducing greenhouse gas
emissions for 2020 as a key component of the global action" to mitigate global warming
(EurActiv 16/02/07).
EU heads of states and governments meeting in Brussels on 8-9 March 2007 have made a
“firm independent commitment to achieve at least a 20% reduction of greenhouse gas
emissions by 2020” compared with 1990 levels.
The 27-nation bloc agreed to go even further and slash its emissions by an overall 30%
“provided that other developed countries” such as the US “commit themselves to comparable
emissions reductions”.
The new targets are significantly higher than the 8% overall target the EU agreed to reach by
year 2012 under the Kyoto Protocol – an objective that Europe is currently struggling to
meet. They will then be followed up by a formal legislative proposal later in the year.
5.1 Energy Green Papers
In November 2000, it has drawn up the Green Paper “Towards a European
Strategy for the Security of Energy Supply”, whose objectives were to ensure security of
supply, lessen the environmental impact of energy use and production and reduce energy
demand through the introduction and take-up of energy –saving techniques and tools. The
main strategy is based for the first time on measures, on the demand side, as the energy
policy is up to Member States, and we can’t talk yet of a community policy, that limits the
possibility of interventions on the supply side. The green book promotes a control strategy on
the demand increase, encouraging real changes in the consumer behaviours, for example
through fiscal actions.
In June 2005, the Commission adopted a Green Paper on Energy Efficiency, “Doing more
with less” 145 , in order to explore ways through which improving energy efficiency.
The aim of this approach, which is wide-ranging in terms both of its target audience
(national, regional and local decision-makers, international institutions, banks and private
individuals) and of its scope (production and end use of energy, industry and services,
households, building and transports), is to reverse by 2020 the trend towards ever-increasing
energy consumption by achieving a 20% saving in energy146. The Commission points out in
particular that half of the target could be achieved if the Member States transposed and
implemented the legislation already adopted. The European Union has to make a strong push
towards a re-invigorated programme promoting energy efficiency at all levels of European
Society taking into account:
European Commission, Doing More with less, Green Paper on Energy Efficency.
EUROPEAN COMMISSION, 2005, ‘Sustainable Energy Europe’.
1. Competitiveness and the Lisbon agenda: Applying measures on energy efficiency
also means the creation of many new high-quality jobs in Europe. Furthermore, a
successful energy efficiency scheme means that some of the €60 billion not spent on
energy translates as a net saving, resulting in increased competitiveness and better
living conditions for EU citizens. In this way an average EU household could save
between €200 and €1,000 per year in a cost-effective manner, depending on its
energy consumption.
2. Environmental protection and the EU’ s Kyoto obligations: Energy saving is without
doubt the quickest, most effective and most cost-effective manner for reducing
greenhouse gas emissions, as well as improving air quality, in particular in densely
populated areas. It will therefore help Member States in meeting their Kyoto
3. Security of supply: By 2030, on the basis of present trends, the EU will be 90%
dependent on imports for its requirements of oil and 80% dependent regarding gas.
Making a real effort to at first cap EU energy demand at present levels and
subsequently reduce it, would represent an important contribution in developing a
coherent and balanced policy to promote the security of energy supplies for the
European Union.
On 8 March 2006 the European Commission published a Green Paper “A European Strategy
for Sustainable, Competitive and Secure Energy” 147 on developing a common, coherent
European Energy Policy. If the EU can take a common approach on energy, and articulate it
with a common voice, Europe can lead the global energy debate. The Green Paper will help
the European Union lay the foundations for secure, competitive and sustainable energy. This
green paper identifies six key areas where action is necessary to address the challenges. The
most fundamental question is whether there is an agreement on the need to develop a new,
common European strategy for energy, and whether sustainability, competitiveness and
security should be the core principles to underpin the strategy. The issues of the new
potential policy are:
1. Competitiveness and the internal energy market
2. Diversification of the energy mix
3. Solidarity
4. Sustainable development
5. Innovation and Technology
External policy
Commission of the European Communities, a European Strategy for Sustainable Competitive and Secure
Energy, Brussels 8.3.2006
Meanwhile, the six priority areas are:
1. An internal energy Market that guarantees security of supply: solidarity between
Member States. Concrete measures should include a review of the existing
community legislation on oil and gas stocks, an European energy supply observatory,
improved network security, improved transparency on energy stocks at the European
2. Energy for growth and jobs in Europe: completing the internal European electricity
and gas markets. Action could include the development of an European Grid, an
European Regulator and an European Centre for Energy Networks, improved
interconnections, creating the framework to stimulate new investment, more effective
unbundling, boosting competitiveness;
3. Tackling security and competitiveness of energy supply: towards a more sustainable,
efficient and diverse energy mix;
4. An integrated approach to tackling climate change by setting a clear goal to prioritise
energy efficiency, adopting a long-term road-map for renewable energy sources;
5. Encouraging innovation: a strategic European energy technology plan;
6. External energy policy, in order to react to the challenges of high and volatile energy
prices, increasing import dependency.
5.2 Programmes
Internally, the EU has committed to using renewable energy for 14 to 22 % of its power
needs by 2010. 148 It has plans to decrease its energy intensity by 28% by 2010. Towards
these goals, the Commission has established the following programmes:
1. ‘6th Framework Programme for Research and Technology Development’ (2002-2006)
- EU’s main instrument for funding research, including RES and EE with a total
budget for EE and RES research at 810 million Euros
2. ‘Campaign for Sustainable Energy (2004-2007)’- successor programme to ‘Campaign
for Take-off’ (ended 2003) and includes both energy efficiency and renewable energy
3. ‘Energy Intelligent Europe’ (2003-2006) - supports non-technological projects in
energy efficiency and RES. Projects are promotional and include information
“Glimmer of Hope” in The Bulletin, Winter 2004-2004, Regional Environmental Center
dissemination, training, policy and strategy recommendations, networking, data
collection, training and education.
4. ‘Sustainable Energy Europe 2005-2008 Campaign’ – the campaign will contribute to
the achievement of EU energy policy objectives and targets in the field of renewable
energy sources, energy efficiency, clean transport and alternative fuels.
5.3 Structural Funds
Besides the implementation of the above-cited programmes, the EU is also trying to achieve
sustainable energy production and consumption through the use of Structural Funds.
Particularly, sine 2004, these funds are available to the New Member States 149 . They
represent a clear opportunity for linking and integrating sustainable energy issues with urban
development policies. Nonetheless, it is to emphasize that during the past, Structural Funds
have not always been used in a proper way, as sometimes they financed infrastructures
projects without taking into account their impact on natural resources and climate issues. As
a matter of fact, to promote an efficient use of these financial resources, the Commission has
launched the so-called RUSE (Redirecting Urban development towards Sustainable Energy)
operation. The main objectives of this recent initiative are: improving the use of Structural
Funds and other financial resources, improving capacity building on energy issues in both
municipalities, agencies and city networks and finally influencing national decision makers
regarding the integration of energy issues in national policies.
5.4 Directives
In order to support better integration of energy efficiency measures into national legislation
the European Commission has proposed several directives which have been adopted and are
now in force. These concern broad areas where there is significant potential for energy
savings, such as:
1. End-use Efficiency & Energy Services: Estimates are that the Union’s energy
consumption is approximately 20% higher than can be justified on economic grounds. There
is a very large economic potential of unrealized energy savings. A part of this energy savings
can effectively be realized through energy services and other end-use efficiency measures.
For more details see www.ruse-europe.org
The Commission has proposed late 2003 a new proposal for a Directive on the promotion of
end-use efficiency and energy services to enhance the cost-effective and efficient end-use of
energy in Member States. Upon adoption, it provides the necessary targets, mechanisms,
incentives and institutional, financial and legal frameworks to remove existing market
barriers and imperfections for the efficient end use of energy. According to the Directive the
Member States shall adopt and aim to achieve an overall national indicative energy savings
target of 9 % for the ninth year of application of the Directive, to be reached by way of
energy services and other energy efficiency improvement measures. Member States shall
take cost-effective, practicable and reasonable measures designed to contribute towards
achieving this target.
2. Energy Efficiency in Buildings: The buildings sector accounts for 40% of the EU’ s
energy requirements. It offers the largest single potential for energy efficiency. Research
shows that more than one-fifth of the present energy consumption and up to 30-45 MT of
CO2/Y could be saved by 2010 by applying more ambitious standards to new and when
refurbishing buildings – which represents a considerable contribution to meeting the Kyoto
targets. The aim of improved energy efficiency has been set out in earlier existing legal
instruments. Among the main Community legislation for the sector are the Boiler Directive
(92/42/EEC), the Construction Products Directive (89/106/EEC) and the buildings provisions
in the SAVE Directive (93/76/EEC). The Directive on the energy performance of buildings
in force since January 2003 builds on those measures with the aim to provide for an
ambitious step-ahead to increase the energy performance of public, commercial and private
buildings in all Member States.
Eco-design of Energy-Using Products: Apart from the user's behaviour, there are two
complementary ways of reducing the energy consumed by products: labelling to raise
awareness of consumers on the real energy use in order to influence their buying decisions
(such as labelling schemes for domestic appliances), and energy efficiency requirements
imposed to products from the early stage on the design phase. The production, distribution,
use and end-of-life management of energy-using products (EuPs) is associated with a
considerable number of important impacts on the environment, namely the consequences of
energy consumption, consumption of other materials/resources, waste generation and release
of hazardous substances to the environment. It is estimated that over 80% of all productrelated environmental impacts are determined during the design phase of a product. Against
this background, Eco-design aims to improve the environmental performance of products
throughout the life cycle by systematic integration of environmental aspects at a very early
stage in the product design. The Council and the European Parliament therefore adopted a
Commission proposal for a Directive on establishing a framework for setting Eco-design
requirements (such as energy efficiency requirements) for all energy using products in the
residential, tertiary and industrial sectors. Coherent EU-wide rules for eco-design will ensure
that disparities among national regulations do not become obstacles to intra-EU trade. The
directive does not introduce directly binding requirements for specific products, but does
define conditions and criteria for setting requirements regarding environmentally relevant
product characteristics (such as energy consumption) and allows them to be improved
quickly and efficiently. It will be followed by implementing measures to establish the ecodesign requirements. In principle, the Directive applies to all energy using products (except
vehicles for transport) and covers all energy sources.
4. Energy Labelling of Domestic Appliances: The energy demand in household accounts for
25% of the final energy needs in the EU. Electricity used for domestic appliances in
households show the sharpest increase. Higher standards of living and comfort, multiple
purchases of electric appliances and the growing need for air-conditioning are main reasons
for this trend to prevail. Energy consumption by consumer electronics and new media as
Internet is also steadily growing. The response is to act in two complementary ways:
1. Energy Labelling of household appliances: Seen that the market of household
appliances such as washing machines, dishwasher, oven, air-conditioning systems etc.
are highly visible to the consumer, the intention is to increase consumer’s awareness
on the real energy use of household appliances through a liable and clear labelling in
their sales points.
Minimum Efficiency Requirements: Compulsory minimum efficiency requirements
will encourage producers of household appliances to improve the product design in
view to lower the energy consumption at their use.
5. Combined Heat and Power: The use of combined heat and power (CHP) presents a
substantial potential for increased energy efficiency and reduced environmental impacts. It is
considered to be a priority area for many Member States. The efficient use of fuel, in
simultaneous production of heat and power can offer energy savings and avoided CO2
emissions compared with separate production of heat and power and the development in the
use of fuels used in CHP applications show a trend towards cleaner fuels. Nearly 40% of the
electricity produced from cogeneration is produced for public supply purposes, often in
connection with district heating networks. 60% are generated by auto-producers, normally
for industrial processes. The Communities strategy outlined in the Commission’s
cogeneration strategy of 1997 sets an overall indicative target of doubling the share of
electricity production from cogeneration to 18% by 2010. This was endorsed by the Member
States in the form of a Council Resolution in December 1997. The indicative target was taken
up in the Communication on CHP (COM/97/514 final) providing for an analysis of the
barriers and strategies for its realisation. Projections show that meeting this target is expected
to lead to avoided CO2 emissions of over 65 Mt CO2/year by 2010. In terms of installed
capacity, the share of electricity produced by cogeneration processes has raised to 10% in the
EU in 2001. Large differences however are to be noted amongst the Member States with
variations of the shares between 2% and 60% of the electricity production. Hence, a new
Community legislative measure concentrates on providing a framework for the promotion of
this efficient technique in order to overcome still existing barriers, to advance its penetration
in the liberalised energy markets and to help mobilising un-used potentials. The Directive
defines high efficiency cogeneration as cogeneration providing at least 10% energy savings
compared to separate production. As the indicative target value from the 1997 strategy is outdated, the Directive does not include targets. Instead the Directive urges Member States to
carry out analyses of their potential for high efficiency cogeneration.
Although the several legislative measures that the EU has adopted, there is still a great scope
for further energy efficiency. Most energy directives and programmes are, in fact, specific to
sectors and techniques. For this reason, in December 2003, the European Commission has
proposed a global directive on energy end-use efficiency and energy services, which
presently is under discussion in the Parliament and the Council. The proposed Directive has
two main objectives: the first goal is the improvement of energy end-use efficiency, whereas
the second one is the creation of a self-sustaining, commercially viable market for energy
end-use efficiency services, under full competition. Developing such a market will allow
reaching a sufficient size for economies of scale to emerge as well as numerous positive
externalities such as employment and competitiveness 150 .
5.5 Voluntary Instruments
A number voluntary instruments were also adopted to foster better cooperation with industry.
In fact, in the context of “better governance” the Commission welcomes alternative courses
of actions such as self-regulation (voluntary agreements) by the industry where such actions
are likely to deliver the policy objectives faster or more cost-effectively than mandatory
requirements. Voluntary agreements can present advantages compared with regulation. They
can provide for quick progress due to rapid and cost-effective implementation. They allow
for flexible and adjusted adaptation to technological options and market sensitivities.
However self-regulation is not always a feasible option, in particular in sectors where the
market is very fragmented. There are also drawbacks: self-regulation is not binding on all
industry members (there is the possibility of having “free riders”) and cannot, like legislation,
be enforced in the courts; compliance consequently cannot be guaranteed. Voluntary
agreements can be particularly successful in the area of energy efficiency: three agreements,
the first one covering stand-by losses of Televisions and Videocassette Recorders, the second
covering domestic washing machines, and the third covering refrigerators and freezers have
been implemented successfully as unilateral commitments by industry. They have now been
upgraded for Televisions and DVD players, for refrigerators/freezers and for washing
machines. The Commission has started several initiates that aim at promoting energy
efficiency and serve as a forum for exchange of ideas of various stakeholders. The European
Commission, Directorate General for Energy and Transport is undertaking an active role in
the promotion of energy efficiency and sustainable energy through two initiatives in
particular: Managenergy Initiatives and Sustainable Energy Europe Campaign 2005-2008.
The first aims to support the work of actors working on energy efficiency and renewable
energies at the local and regional level. The main tools are training workshops and online
events. Additionally information is provided on case studies, good practice, European
legislation and programmes. The second
is a European Commission initiative in the
framework of the Intelligent Energy - Europe (2003-2006) programme, which will contribute
Laponche B., ‘Europe: On the Path of Sustainable Energy?’, 2005.
to achieve the European Union's energy policy targets within the fields of renewable energy
sources, energy efficiency, clean transport and alternative fuels.
5.6 Research and Demonstration programme
The European Commission’s efforts concentrate at the same time on removing barriers to a
efficiently functioning market. This is done with the help of Community technology research
and demonstration programmes, such as the RTD Framework Programmes and with proactive support programmes as Intelligent Energy – Europe Programme. On 6 April the
European Commission adopted a proposal for a new EU programme for Research. The
proposal provides new impetus to increase Europe's growth and competitiveness, recognising
that knowledge is Europe's greatest resource. The programme places greater emphasis than in
the past on research that is relevant to the needs of European industry, to help it compete
internationally, and develop its role as a world leader in certain sectors. The programme will
also for the first time provide support for the best in European investigator-driven research,
with the creation of the European Research Council. Focus will be on excellence throughout
the programme, a requirement if it is to play its role in developing Europe's global
competitiveness. Another priority will be to make participation in the programme simpler
and easier, through measures addressing the procedures, plus a rationalisation of instruments.
In spite of this new approach, there are many elements of continuity: in practice, for the
majority of participants, the programme itself will not change, but participation will become
• The Intelligent Energy - Europe Programme (2003-2006) was launched in 2003
following a Decision No 1230/2003/EC of the European Parliament and of the Council.
The programme supports sustainable development in the energy context, making a balanced
contribution to the achievement of the following general objectives: security of energy
supply, competitiveness, and environmental protection.
This programme also aims at economic and social cohesion and seeks to increase
transparency, coherence and the complimentarily of all the actions and other related
This programme is structured in four specific fields as follows:
5.5.1 SAVE, which concerns the improvement of energy efficiency and the rational use of
energy, in particular in the building and industry sectors, with the exception of actions under
STEER, including the preparation of legislative measures and their application; SAVE
projects exploit the immense potential for energy savings in four areas:
AUDITAC Field benchmarking and Market development for Audit methods in Air
Conditioning (2005)
BUDI Pilot actions to develop a functioning market for energy performance certificates
EEBD Development of an interactive vocational Web training tool for the take-off of the
Buildings Directive (2005)
EPA-NR Energy Performance Assessment for Existing Non Residential Buildings (2005)
BESTFACADE Best Practice For Double Skin Facades (2005)
DEEP Dissemination of Energy Efficiency Measures in the Public Buildings Sector
ENPER EXIST Applying the EPBD to improve the Energy Performance Requirements to
existing buildings (2005)
EPLABEL A programme to deliver energy certificates for display in public buildings
across Europe within a harmonising framework (2005)
E-Tool Energy-toolset for improving the energy performance of existing buildings (2005)
GREENBUILDING (2005), Intelligent Metering Energy Savings from Intelligent
Metering and Behavioural Change (2005)
EULEB European High Quality and Low Energy Architecture (2005)
IMPACT Improving energy Performance Assessments and Certification schemes by
Tests (2005)
Keep Cool Service Buildings Keep Cool – Promotion of "sustainable cooling" in the
service building sector (2005)
Passive-On Marketable Passive Homes for Winter and Summer Comfort (2005)
PEP Promotion of European Passive Houses (2005)
STABLE Securing The Take-off of Building Energy Certification: Improving Market
Attractiveness through Building Owner Involvement (2005)
TOWARDS CLASS A - Municipal Buildings As Shining Examples (2005)
Vent Dis.course Development of Distance Learning Vocational Training Material for the
Promotion of Best Practice Ventilation Energy Performance in Buildings (2005)
EI-Education Energy Intelligent Education for Retrofitting of Social Houses (2006)
EPI-SoHo Energy Performance Integration in Social Housing, a strategic approach for
portfolio management (2006)
E-RETROFIT-KIT Tool-Kit for "Passive House Retrofit" (2006)
ESAM Energy Strategic Asset Management in Social Housing Operators in Europe
FACTOR 4 Programme of actions Factor 4 in existing social housing in Europe (2006)
ISEES Improving the Social Dialogue for Energy Efficient Social Housing (2006)
INOFIN Innovative Financing of Social Housing Refurbishment in Enlarged Europe
NIRSEPES New Integrated Renovation Strategy to improve Energy performance of
Social housing (2006)
RESHAPE Retrofitting Social Housing and Active Preparation for EPBD (2006)
ROSH Development and marketing of integrated concepts for energy efficient and
sustainable retrofitting of social Housing (2006)
SHARE Social Housing Action to Reduce Energy Consumption (2006)
TREES Training for Renovated Energy Efficient Social housing (2006)
BESS Benchmarking and Energy Management Schemes in SMEs (2005)
COGEN CHALLENGE European Campaign for the Development and Documentation of
1000 Small-scale Cogeneration Projects in European Cities and Towns (2005)
DEXA-MCP Dissemination, Extension and Application of the Motor Challenge Program
EMS-TEXTILE Promotion of Energy Management Practices in the Textile Industries of
Greece, Portugal, Spain and Bulgaria (2005)
OPTIPOLYGEN OPTimum Integration of POLYGENeration in the Food Industry
RECIPE Reduced Energy Consumption in Plastics Engineering (2005)
4EM-MCP Energy Efficient Electric Motor Systems in New Member and Candidate
Countries (2006)
CEECAP Implementing EU Appliance Policy in Central and Eastern Europe (2006)
Eco n' Home Eco n' Home or how to reduce energy consumption in Household (2006)
EL-TERTIARY Monitoring Electricity Consumption in the Tertiary Sector (2006)
Energy+Pumps Technology procurement for very energy efficient circulation pumps
ENER in TOWN Monitoring and control of energy consumption in municipal public
buildings over the internet (2006)
ENERL In European Efficient Residential Lighting INitiative (2006)
E-Street Intelligent Road and Street lighting in Europe (2006)
EURO-TOPTEN Reducing energy consumption: making efficient products the normal
and best choice for consumers, retailers and manufacturers (2006)
GREEN-IT Green initiative for energy efficient eco-products in the construction industry
Green Labels Purchase - making a greener procurement with energy labels (2006)
New Green Light The European Green Light Programme in New Member States (2006)
REMODECE Residential Monitoring to Decrease Energy Use and Carbon Emissions in
Europe (2006)
SEEDT Strategies for development and diffusion of Energy Efficient Distribution
Transformers (2006)
5.5.2 ALTENER, which concerns the promotion of new and renewable energy sources for
centralised and decentralised production of electricity and heat and their integration into the
local environment and the energy systems, with the exception of actions under STEER,
including the preparation of legislative measures and their application; ALTENER projects
help increase the use of new and renewable energy sources. They concentrate on:
CLEAN-E Clean Energy Network for Europe -2005,
DG-GRID Enhancement of sustainable electricity supply through improvements of the
regulatory framework of the distribution network for DG (2005),
ELEP European Local Electricity Production (2005),
EurObserver - EurObserver Barometer (2005),
GreenNet-EU27 Guiding a Least Cost Grid Integration of RES-Electricity in an extended
Europe (2005),
RES Market-places Creating Renewable Energy Market-Places for Investors and
Regional Actors in Rural Areas (2005),
THERMALNET , An integrated network on thermal biomass conversion for power, heat
and transport fuels (2005),
E-TRACK A European Tracking System for Electricity (2005),
GREEN LODGES RES & micro CHP in Rural Lodges (2005),
OPTRES Assessment and optimisation of renewable support schemes in the European
electricity market (2005),
REALISE FORUM Renewable energy and liberalisation in selected electricity markets
Forum (2005),
RES-e Regions Boosting green electricity in 11 European regions (2005),
WINEUR Wind Energy Integration In The Urban Environment (2005).
5 EURES Five European RES-Heat Pilots (2005),
BioProm "Bioenergy-Promotion" - Overcoming the non-technical barriers of projectimplementation for bioenergy in condensed urban environments (2005),
Boosting Bio Boosting Bioenergy in Europe (2005),
ECOHEATCOOL European heating and cooling market study (2005),
EUBIONET II Efficient trading of biomass fuels and analysis of fuel supply chains and
business models for market actors by networking (2005),
K4RES-H Key Issues for Renewable Heat in Europe (2005),
PROPELLETS Promoting European pellet heating systems in the market (2005),
RURASU Rural Advice And Support Units For RES In Heat Systems And Integrated
Energy Management In Buildings (2005),
Biomass Partnerships Establishment of regional biomass markets through plant
partnerships (2005),
BIO-SOUTH Techno-economical assessment of the production and use of biofuels for
heating and cooling applications in South Europe (2005),
EARTH Extend Accredited Renewables Training for Heating (2005),
ELVA Establishing Local Value Chains for RES Heat in local communities (2005),
Green Energy Cluster Stimulation of regional RES HEAT markets through establishment
of regional SME clusters (Green Energy Clusters) (2005),
PROBIOGAS Promotion of Biogas for Electricity and Heat Production in EU Countries Economic and Environmental Benefits of Biogas from Centralised Co-digestion (2005),
QUOVADIS Quality Management Organisation, Validation of standards, Developments
and Inquiries for SRF (2005),
SOLARGE- Enlarging Solar Thermal Systems in Multi-Family Houses and Hotels in
Europe (2005);
BIODIESEL CHAINS Promoting favourable conditions to establish biodiesel market
actions (2006),
Bio-NETT Developing local supply chain networks, linking bio-fuel producers with
public sector users (2006),
Pro-Biodiesel Overcoming Non-Technological Barriers for full-scale use of Biodiesel in
Europe (2006),
STAR BUS Promoting sustainable energetic pathways for buses' fleet (2006),
BIOFUEL MARKETPLACE, Web-Based Biofuel Marketplace for supporting the eCommerce of biofuel products and technologies (2006),
REFUEL Renewable Fuels for Europe (2006),
PROCURA Green Fleet Procurement Models (2006),
SUGRE Sustainable Green Fleets (2006)
ACCESS Accelerated Penetration of Small-Scale Biomass and Solar Technologies
(2006), BEST RESULT Building and Energy Systems and Technologies in Renewable
Energy Sources Update and Linked Training (2006),
BioProFarm Promotion of Biomethanisation in Agricultural Environnement as a
Decentralised Renewable Energy Ressource for Europe (2006),
EAST-GSR Solar thermal applications in Eastern Europe with Guaranteed Solar Results
ICOSAW Promotion of the Intelligent Combination of Sun and Wood for Producing
Warm Water and Heating for Private Houses (2006),
PURE Promoting the use of photovoltaic systems in the urban environment through demo
relay nodes (2006),
RES-FC MARKET Regional markets of RES-fuel cell systems for households (2006),
SOLAR KEYMARK-II Large open EU market for solar thermal products (2006),
WASTE WATER HEAT WASTE WATER - renewable heat source for heat pumps
AGRIFORENERGY Promoting the use of biomass from agricultural and forestry sector
for heating, electricity and transport purposes (2006),
BIOHOUSING SUSTAINABLE, comfortable and competitive biomass based heating of
private houses (2006),
DESOLASOL Fotovoltaica para pequeños inversores en Alemania, España, Francia y
Portugal (2006), ground coupled heat pumps (GCHP) in the built environment (2006),
PREHEAT Policy reinforcement concerning heat storage technologies (2006),
PV-UP-SCALE PV in Urban Policies: a Strategic and Comprehensive Approach for
Long-term Expansion (2006),
RESINBUIL Introduction of Renewable Energies in Building Sector (2006),
SOLCAMP Solar energy for camping sites (2006)
GROUND-REACH Reaching the Kyoto targets by means of a wide introduction of
5.5.3 STEER, which concerns support for initiatives relating to all energy aspects of
transport, the diversification of fuels, such as through new developing and renewable energy
sources, and the promotion of renewable fuels and energy efficiency in transport, including
the preparation of legislative measures and their application. Ongoing STEER projects
promote sustainable energy use in transport by strengthening the knowledge of local
management agencies:
COMPETENCE Strengthening the knowledge of local management agencies in the
transport field (2005)
E-ATOMIUM Energy Agencies Training On Mobility In Union Member states (2005)
TREATISE Training programme for local energy agencies and actors in transport and
sustainable energy actions (2005)
E-TREAM e-learning for training Energy Agencies in mobility management and
alternative fuels (2006)
and by policy measures for more energy efficient transport:
ASTUTE Advancing Sustainable Transport in Urban areas To promote Energy efficiency
BYPAD-platform Further implementation and improvement of cycling audits in EU
cities and regions, training of certified auditors and continuous exchange of knowledge
on cycling policy (2006)
ECODRIVEN European Campaign On improving Driving behaviour, ENergy-efficiency
and traffic safety (2006)
MIDAS Measures to Influence transport Demand to Achieve Sustainability (2006)
MOVE International Cluster for Mobility Management Development and Research
Dissemination (2006)
SNOWBALL Demonstration, take-up and further dissemination of sustainable integrated
planning methods in European cities (2006)
SPICYCLES Sustainable Planning & Innovation for Bicycles (2006)
START Short Term Actions to Reorganize Transport of goods (2006)
5.5.4 COOPENER, which concerns support for initiatives relating to the promotion of
renewable energy sources and energy efficiency in the developing countries, in particular in
the framework of the Community cooperation with developing countries in Africa, Asia,
Latin America and the Pacific. COOPENER projects focus on sustainable energy services to
overcome poverty in developing countries. Contributing to the EU Energy Initiative for
Poverty Eradication and Sustainable Development, they enhance:
ANDENERGY Andean Energy Hub (2006),
DEA Development and Energy in Africa (2005),
MEPRED EUEI Partnership/Dialogue Facility Pilot Project: Mainstreaming Energy for
Poverty Reduction and Economic Development into EU Development Assistance (2005),
PEPSE Poverty Eradication and Planning of Sustainable Energy (2005),
SAFENERGY PERU Strengthening energy services legislation and market conditions for
enabling sustainability and poverty alleviation in Peru (2006),
CRECER CON ENERGIA Linking Income-Generating activities and Micro-enterprises
with Energy Services for the Poor in the Chaco Region (2006),
IE4SAHEL Energy for Poverty Alleviation in Sahel (2005),
MIRREIA Mitigating Risk and Strengthening Capacity for Rural Electricity Investment
in Africa (2005),
REEPASA Renewable and Efficient Energy for Poverty Alleviation in Southern Africa
TIE-ENERGIA Turning Information into Empowerment: Strengthening Gender and
Energy Networking in Africa (2005)
APPLES Alleviation of Poverty through the Provision of Local Energy Services (2005),
BEPITA Biomass Energy Platforms Implementation for Training in Africa (2005),
ENABLE Building capacity in renewables in the health, education and water sectors to
help meet poverty reduction targets in sub-Saharan Africa (2005),
[email protected] Renewable Energies and Energy Effiency on the Built Environment: Training,
Networking and Capacity-Building Actions. A dissemination activity in South America
INSABA Integrated Southern Africa Business Advisory (2005),
PREA Promoting Renewable Energy In Africa (2006),
RIAED Réseau International d'Accès aux Energies Durables (2006),
BEPINET Biomass Energy Platforms Implementation for Training in Latin America Network (2006), EETT Energy Efficiency Training of Trainers (2006),
ENEFIBIO Removal of non technological barriers to encourage SME energy efficiency
by the rational use of biomass (2005),
IMRPOVES-RE Improving the economic and social impact of rural electrification
MICROGRIDS Promotion of microgrids and res for electrification in developing
countries (2006),
PROVEN PROVEN in Rural Africa (2005),
SIE-Afrique II Appui à la mise en place de systèmes d’informations énergétiques
nationaux (2005).
There are also project defined as horizontal. These projects concentrate on the so-called
'Horizontal Key Actions' of the IEE Programme:
CF-SEP Commercial Finance for Sustainable Energy Projects (2006),
EUROCONTRACT European Platform for the Promotion of Energy Performance
Contracting (2005),
PU-BENEFS Regional Market Preparation for Energy Efficiency Services in Public
Buildings (2005),
ST-ESCOs Development of pilot Solar Thermal Energy Service Companies (ST-ESCOs)
with high replication potential (2005),
ENERGY 4 Cohesion Sustainable Energy Actions for Europe´s Cohesion (2006),
PRIME Private Investments Move Ecopower (2005),
SEIPLED Sustainable Energy Investment Projects for Local Economic Development
AID-EE Active Implementation of the European Directive on Energy Efficiency (2005),
DATAMINE Collecting DATA from energy certification to Monitor performance
Indicators for New and Existing buildings (2006),
EURO WHITE CERT STEPWISE Towards Effective European energy efficiency Policy
portfolios involving White Certificates (2005),
THERRA Thermal Energy from Renewables - References and Assessment (2006),
City Instruments Monitoring, Evaluating and Transferring Instruments to address Climate
Change in Metropolitan Regions (2006),
EEE-NMC Evaluation and Monitoring of Energy Efficiency in the New EU member
Countries and the EU25 (2006),
ODYSSEE-MURE Monitoring of energy efficiency in EU15 and Norway (2005)
Active Learning Integration of Active Learning and Energy Monitoring with School
Curriculum (2006),
FEEDU Persuasive force of children through education (2005),
KITH Realising the potential for small scale renewable energy sources in the home
BALANCE Balance globally, evaluate locally (2006),
FINANCE Financing Instruments trough National Association Networking in Countries
of Europe (2005),
SERENADE Sharing Expertise in Energy Advice across Europe (2006);
3-NITY 3-fold initiative for Energy planning and sustainable development at local level
EFFCOBUILD Energy Efficiency Communities - establishing pilot communities for the
building sector (2006),
NEC NEw Concept of local sustainable development in pilot communities (2006),
SEC-TOOLS Energy Service Communities in New Member States - Sustainable Energy
Development at Local Level Energy Planning & Financing Tools (2006),
WISE-PLANS Co-operation between communities for Energy Action Plans (2006),
BELIEF Building in Europe Local Intelligent Energy Forums (2006),
ENSRC Energy self supply in rural communities (2006),
RERINA Integration of renewable energy technologies in rural insular areas (2006),
SECURE Sustainable Energy Communities in Urban Areas in Europe (2006),
5.5.5 CONCERTO, supports local communities, as clearly defined geographical areas or
zones, in developing and demonstrating concrete strategies and actions that are both
sustainable and highly energy efficient. Interactions and relevant energy flows between
centralised and decentralised energy supplies and demands can be identified, measured and
The CONCERTO initiative has been only possible as a result of the strong commitment from
the relevant, local authorities and includes technical experts, academics, and private
companies from across Europe.
Throughout the 9 participating CONCERTO projects the focus is primarily on demonstrating
the environmental, economic and social benefits of integrating renewable energy sources
(RES) together with energy efficiency (EE) techniques through a sustainable energymanagement system operated on a community level.
The CONCERTO initiative provides a platform for the exchange of ideas and experiences
between the 28 CONCERTO demonstration communities, and other cities that are committed
to introducing similar strategies. Communities participating will benefit from the shared
expertise of Europe's most advanced communities, active in the field of energy sustainability.
In addition, 'Key actions' which are initiatives combining several of the above mentioned
specific fields and/or relating to certain Community priorities, such as sustainable
development in the outermost regions as defined in Article 299(2) of the Treaty, may be
IEE supports European projects, one-off events and the setting up of local/regional energy
agencies with a total budget of €250 million, covering up to 50% of the costs. Events are a
powerful means of communication.
1. Supported events are international conferences and seminars supported financially by
the programme
2. Contractor's meetings facilitate exchange between project leaders, the IEEA, the
European Commission and other stakeholders
3. Info Days inform you of calls for proposals and help you apply for Intelligent Energy
- Europe funding
The programme currently supports more than 200 international projects, 30+ local/regional
energy management agencies, and almost 40 European events in the areas of
1. New and renewable energy sources
2. Energy efficiency, notably in buildings and industry
3. Energy aspects of transport
4. Co-operation with developing countries
A new call for proposals has been published in May 2006 - a great funding opportunity for
European projects, events and the creation of new local/regional energy agencies. The 2006
call for proposals - the last under the current IEE programme - has been published. European
organisations can apply for financial support for their projects before 31 October 2006.
Approximately € 50 million will be made available to co-finance up to 50% of the project
costs. Organisations from EU Member States, Romania, Bulgaria, Croatia, Iceland, Norway
and Liechtenstein can apply.
Since 2005, the programme is implemented by the new Intelligent Energy Executive Agency
(IEEA). The Intelligent Energy Executive Agency (IEEA) implements the Intelligent Energy
- Europe programme.
With more than 40 staff, the IEEA manages the different projects and events funded under
the IEE programme, and disseminates the know-how and best practices which result. This
gives the programme a sharper focus and greater visibility.
The IEEA is the first of a number of new Executive Agencies created by the European
Commission to put policies into action more efficiently and with improved results, helping
the Commission concentrate on its policy-making and institutional tasks. The parent
Directorate-General of the IEEA is DG TREN.
The decision to create the IEEA was taken at the end of 2003. Since 2006 it is fully
responsible for the operation of the IEE programme and for managing its own budget.
The 2007-2013 Intelligent Energy - Europe (IEE) Programme is part of the Competitiveness
and Innovation framework Programme (CIP). With a budget of €730 million, the IEE
programme aims to increase use of renewable energy and reduced energy consumption by
supporting energy efficiency, new and renewable energy sources, and technological solutions
to reduce greenhouse gas emissions caused by the transport sector. The Commission has
started several initiates that aim at promoting energy efficiency and serve as a forum for
exchange of ideas of various stakeholders. An annual Conference of local actors where
interested parties can meet is also organized. The conference entitled "Towards an EU
external energy policy to assure a high level of supply security" will take place in Brussels in
Brussels on the 20th and 21st November 2006. The objective of this Conference is to bring
together the key players in the field of energy to discuss the ways in which Europe can most
effectively address the issue of energy security. The Conference will focus on the external
aspects of European policies on energy matters and will concentrate mainly on oil and natural
gas security supplies’ issues. Panelists and participants to this Conference will include
Ministers of Foreign Affairs and Energy, industry representatives, international
organisations, the academic word and civil society. It should be noted that, for security
reasons, participation in this Conference will be strictly by invitation only.
6. Summaries of the EU legislation in the energy efficiency area
The European Commission indicated energy to be an essential element for Europe’s
competitiveness and economic development. The European Union is actually facing new
energy challenges for which it must have an appropriate energy strategy.
The signature of the Kyoto Protocol on Climate Change boosted the importance of the
environment dimension and sustainable development in Community energy policy.
As the EU’ s external energy dependence is continuing to grow (it currently meets 50% of its
energy requirements through imports).
In the Green Paper (a European strategy for sustainable, competitive and secure energy), the
Commission proposes a common European energy policy which will enable Europe to face
the energy supply challenges of the future and the effects these will have on growth and the
environment. The European Union (EU) must act quickly and effectively in six priority areas
to ensure that it has energy supply which is sustainable, competitive and secure. The internal
market, energy efficiency, research and an external policy will all contribute to making
Europe a strong player on the international stage.
As the Green Paper reports, the EU rate of dependence will grow by 70% by 2030 if nothing
is done, and that will put the EU in a weak position on the international energy market.
Vigilance with regard to diversification of energy sources and supplier areas is one of the
ways of ensuring security of supply.
One year after the Lisbon European Council the 23rd and 24th of March 2000, the
Commission adopted a set of measures to open the gas and electricity markets up fully by
July 2007.
The legislation on Community guidelines in the trans-European energy networks and on
measures to create an advantageous context for this area was adopted during 1996. Under
these guidelines, some 74 projects of common interest have been identified, representing a
total investment of EUR 18 000 million. In a number of cases, the EU's financial instruments,
composed essentially of European Investment Bank (EIB) loans and European Regional
Development Fund (ERDF), have been mobilised.
The introduction of trans-European energy networks also has an impact on relations with
third countries. Interconnections have been made with certain Mediterranean countries, the
countries of Central and Eastern Europe and Norway.
As a signatory to the European Energy Charter, which promotes East-West cooperation on
energy, the European Community plays an active role in taking initiatives in the Baltic Sea
region, and develops major links with other countries such as the Balkan States or China. It
also maintains its relationships with the OECD and the EEA partners.
Nowadays, the world faces climate change among others challenges. The campaign to
combat it is supported by the Energy from renewable energy sources (RES), which also play
an important role in the diversification and sustainability of energy sources.
The 1997 White Paper’s prime objective was to double the proportion of renewable energy
sources in the EU’s gross domestic energy consumption (from 6% in 1997 to 12% in 2010).
But we observe that there is no concrete result without a policy of firm management of
energy consumption.
The European Union established a strategy for sustainable development in May 2001 and
called the Commission to consider the Union’s contribution to global sustainable
development, and to improve global governance, to promote more efficient management of
interdependence. In order to contribute to this global sustainable development and to cover
economic, social, environmental and financial aspects, a series of actions have been added to
the May 2001 strategy. Those actions are: harnessing globalisation, by developing trade for
sustainable development, with the cooperation of the WTO; fighting poverty and promoting
social development to increase the quality, quantity, impact and sustainability of
development cooperation; sustainable management of natural and environmental resources,
to reverse the trend of the loss of environmental resources by 2015 as well as to develop
intermediate objectives in the sector of water, land and soil, energy and biodiversity;
improving the coherence of European Union policies, to integrate sustainable development
into all EU policies; better governance at all levels, with strengthening the participation of
civil society, and the legitimacy, coherence and effectiveness of global economic, social and
environmental governance.
The European Union is also establishing a set of measures for further integration of
environmental considerations in energy policy and is reviewing progress made so far.
The Community has taken several measures, which take into account the three main
objectives of Community energy policy: to promote energy efficiency/saving, to increase the
share of production, and use, of cleaner energy sources; to reduce the environmental impact
of the production and use of energy sources.
The Green Paper clarifies that efforts must be made in the transport, energy production and
building sectors in particular. It also calls public authorities to make citizens and businesses
more accountable by beneficial energy saving behaviour.
On the other hand, a Competitiveness and Innovation Framework Programme have been
proposed for the period 2007-2013, in order to meet the objectives fixed by the Lisbon
strategy, encouraging the use of information technologies, environmental technologies and
renewable energy sources. Some specific programmes of the framework are detailed as the
Entrepreneurship and Innovation Programme, the Objective of the ICT Policy Support
Programme and the “Intelligent Energy – Europe” Programme.
The Commission, the European Parliament, the Economic and Social Committee and the
Committee of Regions set up an Action Plan to reduce energy consumption by improving
energy efficiency in order to protect the environment, to increase security of supply and to
establish a more sustainable energy policy. The proposed actions are divided in three
categories: measures to integrate energy efficiency into other EU policies (in the areas of
Transport, Modern Enterprise policy, Regional and Urban policy, Research and
Development, Taxation and Tariff policy, International co-operation and pre-accession
activities); initiatives to strengthen and extend existing policies (in the areas of Transport,
Household appliances, commercial and other equipment, Industry (including electricity and
gas companies), Buildings and Horizontal Measures); and new policies and measures (in the
areas of the Promotion of energy-efficiency in public procurement, Co-operative technology
procurement, Energy audits in industry and the Tertiary sector).
XV. Conclusions
In the years since Johannesburg, the United Nations system has made much progress in
developing agendas and programmes to implement sustainable development outcomes. Since
then, each actor has begun to contribute its unique talents and experiences to make
development more sustainable. However, little measurable, concrete progress has been made,
but perhaps little could have been expected in so short a time. The institutions surveyed
above have designed individual plans of implementation, specific activities, and hopefully
will begin to realize the promise vested in them by the international community in the years
ahead. If not, Johannesburg, hailed as the end of rhetoric and the call to action, will not
confirm to the UN system its reputation.
Is any new indication or recent trend emerging?
At UN level, the New Governance on Sustainable Development is under discussion and
definition within 2007, in particular to provide oversight for the UN at the country level, in
line with a well identified country programme.
The United Nations Economic Commission for Europe (UNECE) is committed to lend its
wealth of experience in political and economic coalition-building to mobilize the countries of
Western and Eastern Europe to the task of implementing the Johannesburg Plan of
Implementation. To this end, it will continue to cooperate closely with other UN bodies and
international organizations in order to capitalize on institutional strengths and to most
effectively address the challenges of sustainable development. In particular, the ECE is
ideally suited to coordinate the flow of capacity-building resources from Western Europe and
North America to the countries in transition in Eastern Europe and the former Soviet Union
in the context of the “wider Europe” geopolitical trend.
The experience of the UNECE is particular relevant to promote sustainable development and,
more specifically, sustainable energy through specific activities. Among those efforts, the
Energy Efficiency 21 Project promotes market formation in many countries of the region. As
annex to this paper, general characteristics and trends of the energy sector in Bulgaria are
presented as example of one of the participating countries in the new phase of the EE21
Project, also in view of assessing the potentiality for energy efficiency improvements.
Recently, the European Union is showing a strong commitment for action. The Commission
put forward plans for a reduction in greenhouse-gas emissions, increase in energy efficiency
and renewable energy by 2020. There is no doubt that the EU is trying to reduce the
dependency on imported fuels, increase energy security and trigger a new 'industrial
revolution'. In few words, worries about Europe's increasing dependency on a few external
suppliers, concerns regarding high oil and gas prices as well as the global-warming crisis
seems to become a boosting input for a sustainable development in Europe: transforming a
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The Development of the National Energy Sector in Bulgaria 151
General characteristics of the energy sector
According to the World Bank’s 2004 GEF Project Brief on Bulgaria, the country has a vast
potential to achieve significant energy efficiency gains in a cost-effective manner due to its
current low efficiency base. The country requires 0.38 ton of oil per thousand US$ of GDP. This
proportion is more than twice the average for countries in the European Union. Electricity
demand is over-stimulated by households that have relied on under priced electricity for heating
and have developed wasteful consumption patterns. There is no low-pressure natural gas market
to provide an alternative for heating in this sector. District heating systems also require
modernization in order to make more efficient use of electricity. Saving potential is as high as 50
percent for the existing building stock, 40 percent for district heating, and 30 percent for
industry. 152
If the Government’s National Energy Saving Program to 2010, adopted in 2001, were carried
out, combined energy savings would amount 1.4 million tonnes of oil equivalent annually. This
represents about 15 percent of the country’s total energy consumption. The program also aims
at reducing CO2 emissions by 5.6 million tonnes per year. However, access to finance is difficult
and represents an important barrier for EE projects. Commercial banks give low credits at high
margins and perceive the risks involved in EE projects as too high. Although the projects that
showed more potential, required low-budget investments, and offered a payback time of three
years, were included in the Government’s medium-term plan for 2001-2003, few were carried
out. Commercially financed EE investments for this period amounted to US$13 million, 5
percent of what is annually required by the National Energy Saving Program to 2010. According to
the World Bank, Bulgaria’s EE market is still underdeveloped and fails to produce the capital
necessary for investment. 153
Bulgaria is dependent on energy resources mainly imported from Russia such as gas, oil,
nuclear fuel, and coal. Nevertheless, the country’s electricity generation capacities are enough to
satisfy its domestic needs and to export to neighbouring countries. Although EE is an area of
limited knowledge and application in Bulgaria, there is great potential for its development.
Nearly all official documents and regulations concerning energy development in Bulgaria include
EE considerations.
Energy resources: Bulgaria imports more than 70 percent of its primary energy resources. 154
Fuels such as oil, natural gas, high quality coal, and nuclear fuel that are used for energy
generation are imported primarily from Russia. The energy independence coefficient elaborated
by the Bulgarian National Statistical Institute (NSI) suggests 50.4 percent energy independence
From UNECE, 2005, “Financing Energy Efficiency and Climate Change Mitigation. A Guide for Investors
in Belarus, Bulgaria, Kazakhstan, the Russian Federation and Ukraine”, Energy Efficiency Series No. 28, New
York and Geneva
GEF Bulgaria, not dated.
GEF Bulgaria, not dated.
MEER 2002, 2.
of the country, of which 66.7 percent for coal, 0.8 percent for crude oil, and 0.8 percent for
natural gas. 155
Coal: According to the US Department of Energy, there are large deposits of low-quality
brown coal in Bulgaria. Estimated reserves include about 3 billion metric tonnes of lignite
and 200 million metric tonnes of subbituminous coal. The Maritza coalfield, located in
southern Bulgaria, is the largest deposit. Its reserves are estimated to last about 50 years.
Coal obtained from this coalfield has an average heating value of about 2,840 Btu per pound,
as well as a fairly high ash and sulphur content. In 2002, total coal production in Bulgaria
amounted to 28.4 million short tonnes, which included 28.25 million short tonnes of lignite,
0.015 million short tonnes of bituminous, and 0.01 million short tonnes of anthracite.
Domestic reserves of lignite are considered to be of poor quality because of their low
calorific value and high sulphur content. 156
Local lignite is used to fire one of the most significant Thermal Power Plants (TPPs) in
Bulgaria, the Maritza East Complex, and provides about three million metric tonnes for the
annual production of one million metric tonnes of briquettes. Coal from the Bobov Dol,
Stanyantsi, Beli Breg, and Chukurovo mines, which provide coal for the Bobov Dol TPP. In
total, there are 22 coalmine companies in the Bulgarian territory. Annual production and
consumption of coal in Bulgaria has been constant since 1991. Since a supply of higherquality hard coal is necessary for metallurgical industries, the US Department of Energy has
been suggested that the country will probably remain a net coal importer. This coal is
obtained from Ukraine and can come from as far away as Australia.157
Bulgaria has demonstrated that the country’s crude oil reserves are of
approximately 15 million barrels. However, the country depends on its imports. In 2002, total
oil production and consumption was of 2,000 b/d and 91,000 b/d, accordingly. Since
Bulgaria did not have the technology necessary to look and extract oil in its territory, the
Government signed agreements with foreign companies to explore the Black Sea and its
coast. The company Neftochim, situated in Burgas, operates the 134,000 b/d oil refinery on
the Balkan Peninsula that covers 85 percent of the Bulgarian refined product market. In
October 1999, the Russian Oil Company Lukoil bought 58 percent of Neftochim and made
the commitment to invest more than $400 million to upgrade the refinery to meet
environmental standards. 158 The country imported 0.3 MT and exported 1.5 Mt oil products
in 2001. 159
Bulgaria has depended entirely on Russian gas imports. However, the country has
demonstrated gas reserves that amount to 6 Gm3. 160 In 2001, Bulgaria signed a 25-year
concession accord with the British company Patreco for the exploration and extraction of
natural gas in Bulgaria’s segment of the Black sea, including the Galata deposit. The
company plans to extract 14 billion cubic feet (BcF) annually and sell them to Bulgargaz.
Melrose Resources of Scotland is another company exploring the Galata area. It recently
Oil and gas:
NSI 2000, 244.
United States Department of Energy 2005.
United States Department of Energy 2005.
United States Department of Energy 2005.
Austrian Energy Agency 2004.
Austrian Energy Agency 2004.
announced in June 2004 that this deposit has reserves of 90 Bcf and estimated reserves of
800 Bcf. 161
Electricity supply: In 2002, Bulgaria’s electricity exports and imports were estimated at 8
billion kWh and 1 billion kWh, respectively. Bulgaria exports electricity to Turkey, Greece,
Serbia & Montenegro, Macedonia, and Albania. Nuclear energy has been a main electricity
source for Bulgaria. However, in 2006 the Kozloduy Nuclear Power Plant (NPP) will only
operate two of its six units. In 2002, NPP supplied 48.1 percent of the total energy
production, in 2003 this participation diminished to 40.6 percent. Other important electricity
generators in Bulgaria are thermal and hydro power plants. The table below shows the
country’s structure of electricity generation capacity and its net generation in 2002. From the
43 TWh generated, 48 percent were produced by TPP, 47 percent by NPP, and about 5
percent by HPP. 162 According to the Austrian Energy Agency, the total electricity
consumption in 2002 was of 32.7 TWh. 163
Table 0.1
Structure of electricity generation capacity and net generation in Bulgaria
in 2002
Installed capacity (thousand
Net generation in 2002
(billion kWhr)
Thermal TPP
Nuclear- NPP
Source: DOE/EIA as cited by US Department of Energy 2005.
Kozloduy NPP is the most important nuclear power generation plant in
Bulgaria, providing around 45 percent of the country’s electricity in 2000. It consists of four
VVER 440/230 and two VVER 1000/320 power units, with a total capacity of 3,760 MWe. The
first four units were built in the 1970s and early 1980s. Units 5 and 6 were constructed in 1988
and 1993, correspondingly. 164 Bulgaria signed an understanding with the European Commission
in 1999, stating that due to safety precautions, the first four units of the NPP would be closed
and replaced with alternative energy sources. The first two units were closed in 2002 and units 3
and 4 will be closed in 2006. Modernisation programmes for the last two units are being carried
out with the support of the EU. 165 In 2003, the construction of the 600 MWe Belene NPP was
announced, which requires an investment of $2 to 3 billion. 166
Nuclear Energy:
Thermal power: The structure of fossil-fuel electricity generation in Bulgaria includes six
plants operating with lignite, brown coal, imported black coal, and imported black coal gas.
The Maritza East Complex, which consists of plants Maritza East one, two, and three, is the
United States Department of Energy 2005.
United States Department of Energy 2005.
Austrian Energy Agency 2004.
IEA 1999a, 143.
Austrian Energy Agency 2004.
United States Department of Energy 2005.
largest non-nuclear plant in the country. It accounts for about two-thirds of Bulgaria’s power
generation through TPP. The government is planning to increase its 12 billion kWh power
generation to 19.5 billion kWh in 2005 and 21 billion kWh in 2010. This means that the
Maritza East Mines that supply 25 million metric tonnes per year will have to increase their
output to 36 million metric tonnes in 2005 and 38 million metric tonnes in 2010. 167
The other three TPPs are the 1,260 MW Varna Power Station, the 400 MW Rousse, and the
630 MW Bobov Dol. In addition to these large plants, there are a few independent producers
that have 1,606 MW of thermal capacity for CHP and supply 14 percent of electricity. These
independent producers may be district-heating plants owned by municipalities or industrial
thermal stations. About 20 percent of public and residential heating is provided by small
HPPs built between 1970 and 1990, located in 21 Bulgarian districts. 168
Hydropower: There are 18 hydroelectric generating power stations located in six large
cascading dams in Bulgaria. These cascades are Belmeken-Sestrimo-Chiara, Vacha, Batak,
Arda, Iskar, Sandanska Bistritsa, and Piriniska Bistritsa, located in the Rodopi, Rila, and
Pirin mountains. 169 Hydro power plants and pumped storage hydropower are the most
significant renewable energy source in Bulgaria, representing 14 percent of installed
electricity capacity and nearly 5 percent of net electricity generation in 2002.
Bulgaria’s National Program on Renewable Energy Sources
plans on increasing the participation of renewable energy sources in electricity generation.
The most significant non-hydroelectric renewable source currently used is biomass-fuelled
thermal-electric power generation, representing about 0.1 percent of total electricity
generation in 2001. Attempts to generate electricity through solar energy were made between
1977 and 1990, but the solar collectors installed are no longer in use. Although there are no
operating wind energy and geothermal plants in Bulgaria, the Bulgarian Academy of
Sciences and the Geothermal Energy Association estimate that the country has a wind energy
potential of 2,2000 to 3,400 MWe and a geothermal power generation potential of about 200
MWe. 170
Renewable energy sources:
Electric power transmission infrastructure: Transmission of electric power in Bulgaria is the
responsibility of the National Electric Company (NEC), owner of the country’s high-voltage
power transmission network. NEC has 85 km of 750 kV overhead power lines, 2,266 km of 400
kV lines, 2,650 km of 200 kV lines, and 9,511 km of 110 kV lines. NEC also owns one stepdown substation of 750/400 kV with transformer capacity of 2,500 MVA, 28 substations of
400/220/110 kV, 400/110 kV, and 220/110 kV with total transformer capacity of 14,654 MVA,
248 step-down substations of 110/20/10/6 kV with total transformer capacity of 13,095 MVA,
and a 400 kV switching substation. 171
Technical policy, operation, repair, and network and facility development for power
transformation and transmission for HV customers and distribution companies are assigned
to the High-Voltage Networks Enterprise. It operates in all Bulgarian territory, divided into
United States Department of Energy 2005.
United States Department of Energy 2005.
United States Department of Energy 2005.
United States Department of Energy 2005.
NEC, not dated.
13 local power transmission regions (PTR). 172 Bulgaria’s grid is connected with all of its
neighbouring countries including Greece and Turkey, Bulgaria’s main electricity export
partners. The Bulgarian power system will also be interconnected with other countries in the
region, including Ukraine, Moldova, Romania, Turkey, Greece, and former Yugoslavia. 173
The gas pipeline network imports gas from Russia and provides transit delivery of Russian
natural gas through Romania to Turkey, Greece, and Macedonia. The owner and operator of
the whole natural gas network is the state company Bulgargaz. The company delivers gas to
Turkey since 1987. Delivery for Greece and Macedonia began in 1996 and 1997
respectively. 174 In order to participate in the transmission of Russian and Caspian gas to
Central and Western Europe, Bulgaria is willing to expand its network.
According to Bulgaria’s 2002 energy strategy, attaining long-term cooperation with Russia is
sought to increase the transit of Russian natural gas through Bulgaria. The country aims at
positioning itself as a reliable alternative for future oil, natural gas, and electricity transit, as
well as a possible dispatch and regional market centre. If gas pipelines were built from
Central Asia through Bulgaria to Central Europe, Bulgaria could become an alternative eastwest corridor, diversifying the dependence of Western Europe on imported natural gas. 175
The pipeline system forms a ring structure that runs from east to west with two main
branches. One runs through northern Bulgaria and the other through the central part of the
country. Other secondary connecting lines branch off from the main structure to major
industrial centres. 176 The high-pressure gas pipeline network has a total length of over 2,500
km. There are nine compressor stations with a total installed capacity of 170 MW. The
system also has sub-surface gas storage in Chiren and 70 gas distribution sectors. 177
However, there is no gas grid for low and medium pressure gas pipes for domestic users and
small industrial enterprises, limiting their access to gas. Although some programmes of
gasification have begun in several Bulgarian towns, the process is slow due to high costs and
low investments.
The Bulgarian oil pipeline network was built to transport oil from the Tyulenovo- Shabla
field on the northeastern coast to Pleven refinery. 178 There is a project to build a transit
pipeline to transport Caspian oil from the Bulgarian Black Sea port Burgas to the Greek port
Alexandroupolis. Bulgarian, Greek, and Russian companies have established a joint venture
for the construction of this $600 million pipeline and are currently negotiating the terms. 179
Bulgaria is also involved in a project to build a pipeline from Burgas through Macedonia to
the Albanian port of Vlore on the Adriatic Sea. This 750,000 b/d pipeline would have a
length of 560 miles and cost between $850 million and $1 billion. Bulgarian, Macedonian,
and Albanian governments have agreed on the project and set up the Albanian-MacedonianBulgarian Oil Pipeline Corporation (AMBO). 180
NEC, not dated.
IEA 1999a, 146.
MEER, not dated.
MEER 2002, 14.
Lynch 2001, 7-8.
MEER, not dated.
IEA 1999a, 135.
Nenova 2002.
Lynch 2001, 7-8.
Energy demand in Bulgaria decreased during the transition period last decade. According to
some estimates final energy consumption dropped by 42.2 percent in total, by 20 percent per
$1,000 GDP, by 63 percent in agriculture, 58 percent in transport, 36 percent in industry, and
22 percent in households. 181 The following table provided by the Bulgarian Energy Industry
shows the distribution of final energy consumption for 2002 and 2003. The table illustrates
the predominance of consumption in the economic and public sector and households. 182
Table 0.2
Distribution of final energy consumption 2002–2003 (%)
Economic and public
Own and technological
NEC- high voltage
Source: The Facts. Energy Policy, Bulgarian Energy Industry 2003.
Energy intensity is defined as the amount of primary energy resources consumed per unit of
GDP (kg oil equivalent/$1000). In 1998, this indicator was 1,628 kgoe/$1000, higher than all
other countries in Europe with the exception of Ukraine. This ratio is seven times the average of
OECD member countries. 183 Unlike other countries in transition, energy intensity has increased
in comparison with the beginning of the transition period, from 1,332 kgoe/$1000 in 1989 to
1,628 kgoe/$1000 in 1998. 184 A significant amount of energy is lost in transmission, where there
is strong potential for EE. A promising feature of the National Strategy for Energy Sector Development
is the search of new alternatives for transmission such as the construction of an efficient system
for gasification and heating that requires fewer resources.
Industry: One example of the remaining features of central economic planning in Bulgaria is the
large share of heavy industry with energy-intensive technologies. This includes ferrous and nonferrous metallurgy, mechanical engineering, chemical and oil processing, and electrical and
electronic engineering industries. This pattern of industrial development was applied because
Bulgaria had easy and inexpensive access to Soviet energy resources. Today, the high energyintensity of production, in addition to outdated machinery, is one of the main obstacles to
increase the competitiveness of the industrial sector. During the years of transition the total
consumption of primary energy diminished, reducing the ratio of the amount of energy needed
for GDP. However, this reduction was greater for the GDP than for industrial production,
where energy intensity remains high. 185
Novem and EnEffect 2000, 18.
MEER 2003.
MEER 2002, 10.
MEER 2002, 10-11.
MEER 2002, 10-11.
Households: Households account for 42 percent of electricity consumption,
a share higher
than that of other countries in the same region with a larger GDP per capita. 187 This pattern
of high-energy consumption within the household sector is explained by the households’
dependence on electricity for heating and its subsidised prices. Households lack other heating
alternatives such as household gasification. 188 Natural gas has been used mainly in the
industrial sector, with around 70 percent of all gas consumption. One of the priorities of the
National Energy Strategy is therefore, the expansion of residential gas supply and
consumption. Around 20 percent of the population use central heating, 30 percent use electric
heaters, and 50 percent use electric heaters, coal, and firewood. 189 Coal for heating in the
residential sector is predominantly in the form of briquettes, which account for nine percent
of Bulgaria's coal production. 190
Regulatory bodies: The Energy and Energy Efficiency Law (EEEL) enforced in 1999 and
amended in 2001 and 2004 set up two main bodies to regulate and control the energy sector ―
the Ministry of Energy and Energy Resources and the State Energy Regulatory Commission.
The Ministry of Energy and Energy Resources was created in 2001, emerging from the former
State Energy and Energy Resources Agency (SAEER). It is responsible for the development and
implementation of state energy policy. Article 4 of the EEEL states that its Minister shall
propose the prepared energy strategy to the Parliament for approval and carry out its
implementation with other state institutions and municipal authorities. The Minister is also
responsible for the planning of the country’s energy balance in terms of extraction, production,
import, and export of the necessary energy resources, restructure programmes, privatizations,
investments, and EE programmes. In the case of state owned energy enterprises of the
electricity, gas supply, and coal mining sectors, the Ministry fulfils the functions of an owner.
The State Energy Regulatory Commission (SERC) exercises authority as the main energy
regulatory body. It has seven members and is responsible for regulation of production,
transmission, and distribution of electricity, heat, and gas. This also includes the construction
of electric-power lines, gas pipelines, and production capacities for heat-transmission, gastransmission, and gas-distribution networks. The SERC issues, suspends, and keeps record of
permits and licenses for utilities. It also defines the general conditions to sell electricity, heat,
and natural gas. Since 2002 the SERC establishes the prices for these sectors by approving
the companies’ propositions, an obligation that previously corresponded to the Council of
Ministers. According to the 2002 Energy Strategy, institutional changes within SERC would
strengthen its position, autonomy, and influence. It would be given the right to apply new
rules for market pricing and for consumers’ access to the transmission net. Eligible
consumers would need to fulfil certain criteria and pay a fee to NEC. 191
The Committee on the Use of Atomic Energy for Peaceful Purposes (CUAEPP) was set up in
1985 to specialize in national policy and control on the safe use of atomic energy. 192 It was
renamed Nuclear Regulatory Agency (NRA) in 2002. It defines safety requirements for the
use, transportation, and storage of nuclear material. It also establishes the criteria for training,
qualifying, and licensing specialists to work in the atomic energy field. The NRA reports to
Austrian Energy Agency 2004.
MEER 2002, 10-11.
Lynch 2001.
IEA 1999a, 140.
Lynch 2001.
MEER 2002, 6.
NRA 2003.
the Council of Ministers of the Republic of Bulgaria. Licences are issued by one of its
entities, the Inspectorate on the Safe Use of Atomic Energy, which also establishes the
requirements and processes the applications for them. This entity also provides on-site
inspectors, some of which are at the NPP Kozloduy. The NRA grants annual operating
licenses for the Kozloduy units after inspection. 193
Table 0.3
Electricity prices per categories of end-users ($BGL/kWh)
Mode of
With three tariff levels
With two tariff levels
Peak tariff
Daily tariff
Night tariff
Daily tariff
Night tariff
With one tariff level
Source: SERC, 2005.
Tariff system: The tariff of natural gas in 2002, based on production and operating costs of
Bulgargaz, was 300 BGL per thousand nm3 including VAT. 194 Heat and electricity tariffs are
differentiated by consumer type and liberalized only for industrial consumers. These latter may
be billed with day and night tariffs like households or on the basis of three zones. Tariff prices
for high, medium, and low voltage electricity currently in force are shown inTable 2.5. Since 1
January 2002, the price of household heat has been 40 BGL per Gcal. 195 Further increase in
energy prices is expected, particularly for district heating and household electricity, since the
government is aiming at market-based tariffs.
Subsidies: Although Bulgaria has carried out reforms aimed at liberalizing the energy sector
and market mechanisms are currently applied for pricing liquid fuels, coal, and natural gas,
some prices remain subsidised. This practice is carried out in the form of cross-subsidies
between different categories of consumers. Household heating and electricity for example,
are cross-subsidised by industrial and commercial customers. 196
The State Regulatory Commission on Energy is the entity responsible for the regulation of
tariffs since 1 January 2002. The Law on the State Budget for 2001 determined that
subsidising district heating companies with resources from the state budget would be done
through the Ministry of Finance. Subsidies were allocated to the district heating companies
based on a calculation of the losses they would suffer from selling heat to households at a
fixed price. However, the Energy Strategy of Bulgaria aims at gradually cutting off state
subsidies for producers and shifting them to low-income consumers by means of targeted
support. It is envisaged that subsidies for heating energy will be distributed directly to the
IEA 1999a, 147-148.
SERC 2002.
MEER, not dated.
World Bank 2001b, 161.
low-income households jointly by the regional social assistance centres and local
authorities. 197
Direct taxation: Personal income and corporate income taxes were reduced in 2002. It was
decided that an income of 110 BGL would not pay taxes and those over 1,000 BGL would be
charged up to 29 percent. Corporate income tax rate was uniformed as 15 percent. Prior to
2002, profit tax for enterprises was 15 percent for those with profits under 50,000 BGL and
20 percent for those above this amount. 198 The Corporate Income Tax Law states that all
companies and partnerships, including non-corporate partnerships, are liable to corporate
income tax and a 10 percent municipal tax. This latter is deductible from the annual taxable
base for the corporate income tax. The aggregated tax rate, including corporate and
municipal tax, for the annual taxable income amounts to 23.5 percent. 199
Indirect taxation is represented by value added tax (VAT), excise duties, and custom duties.
The VAT in force since 1 January 1999 is 20 percent. Any legal, physical, resident, or nonresident person who has a taxable turnover exceeding BGN 75,000 in a year is obliged to
register for VAT purposes. Voluntary registration is possible for those with a taxable
turnover between BGN 50,000 and BGN 75,000. 200 Under the VAT Act a rate of twenty
percent applies for import of goods and services. Exports and processing of import goods that
are further re-exported have a VAT rate of zero. The VAT on electricity and heating energy
prices was initially introduced for business entities only, but in 1994 it was expanded to
cover the population and the budgetary sphere too.
Excise duties: Eighty percent of excise tax revenues on fuels, vehicles, and road
transportation are destined for the Road Network Fund. The remaining 20 percent is
designated to the National Environment Protection Fund. The Law on Liquid Fuels Taxation
for these funds was adopted in 1996 and updated in 1998. It states the taxes levied on the
production and import of gasoline, diesel, and residual with sulphur content. Cars are
annually taxed according to their engine horsepower. This contribution goes directly to the
Road Network Fund. A highway charge that would be applied depending on the vehicle’s
horsepower is being considered. 201
The Customs Act, effective since 1 January 1999, provides different
customs arrangements on warehousing, inward processing, and placing of goods in free
zones and warehouses. Import goods are subject to customs duty, which is a percentage of
the customs value plus the VAT of 20 percent. Customs duties on products were significantly
reduced in 1999 due to the application of Free Trade Agreements with EU, EFTA, CEFTA,
Macedonia Turkey, Croatia, Israel, and Estonia. 202 Customs Tariffs in 2002 for some energy
sources, raw material, and other commodity groups were rated zero. These include
electricity, natural gas, and most types of coal, including charcoal. However, briquettes and
Customs duties:
EnEffect 2001, 20-21.
Ministry of Finance of the Republic of Bulgaria 2002.
Bulgarian Foreign Investment Agency 2002, 35-36.
Bulgarian Foreign Investment Agency 2001, 43.
La Rovere et al 2000, 15.
Bulgarian Foreign Investment Agency 2002, 41.
lignite have a 3.8 percent and fuel oils a 4.7 percent due rate. The highest rate applied on
energy carriers for petrol and different types of oils is 22 percent. 203
Advisory services: Consultants that provide expertise on energy related technological,
economical, and financial issues are limited. According to the World Bank, the absence of
the financial and technical skills required for the preparation of solid EE business plans is
one of the main obstacles to obtain commercial EE Finance. A poorly constructed business
plan is a frequent cause for rejection by financial institutions. 204 Main advisory bodies
The State Energy Efficiency Agency, the main body under the EEEL, has the status of an
Executive Agency to the Ministry of Energy and Energy Resources. It implements the state
EE policy defined by the Minister. The Agency also cooperates with local administration and
bodies on implementing EE projects and programmes. One of its main functions is to provide
consultation services on rational energy use, utilisation of RES, as well as energy audits and
technical expertise.
Energy Centre Sofia is the successor of the European Community Energy Centre Sofia
established in June 1992 in the framework of THERMIE programme. One of the main
objectives of the Centre is the promotion of efficient and environmental friendly energy
technologies. The Centre is also responsible for the coordination and support of measures
executed under the EU energy programmes in Bulgaria. It has been involved in different
PHARE, SYNERGY, THERMIE, and SAVE projects and activities. Since 1997 the centre is
registered as an independent energy consultant that collaborates with European, regional,
national, and municipal authorities with focus on EE and RES. Since 1998 Sofia Energy
Centre, in consortium with Energoprojekt, has been working as FEMOPET Bulgaria, as
Fellow Member of the Organisations for Promotion of Energy Technologies Network.
Energoprojekt is a company specialised in construction and maintenance services in the
energy sector. It is also involved in the implementation of engineering projects, consultancy,
and studies. Its activities at present are broadly connected with the rehabilitation of the
Bulgarian energy sector. Energoprojekt also participates in several programmes supported by
foreign institutions such as the EU PHARE programme.
EnEffect Center for Energy Efficiency is a NGO actively involved in EE activities. It aims at
supporting central and local authorities and fulfilling the knowledge gap among municipal
official bodies. The NGO works in the elaboration of municipal EE programmes and
implements demonstration projects aiming at sustainable development. It also provides
investigation on the EE potential in various sectors of the national economy and the
environmental impact of energy conservation, training in this field, and rational use of
energy. The projects developed and implemented by EnEffect are funded by the US Agency
for International Development, the Commission of the European Communities, the United
Nations, and the Global Environmental Facility, among others.
The Association of Energy Engineers is a NGO that acts as a Chapter of the Association of
Energy Engineers in Atlanta. It was established in 1992 and has up to 40 regular and 10
corporate members. 205 Its main activities include providing policy advice, seminars,
demonstration projects, studies, and training. The NGO supports the development of private
Ministry of Finance of the Republic of Bulgaria 2002.
GEF Bulgaria, not dated.
Novem & EnEffect 2000, 42.
EE consulting services and assists its members in promoting their activities in the private
consultancy market.
JICA EE Centre was established in 1995 with the cooperation of the Japanese International
Cooperation Agency (JICA) and is affiliated to the Ministry of Economy. Its present
activities are focused on the industrial sector and include consultations on rational energy
consumption and control, optimization of energy management, improvement of production
processes, and modernization of production facilities in Bulgarian industrial enterprises. The
Centre has performed audits in some of the largest Bulgarian private enterprises with
resources for and interest in energy conservation issues.
Techenergo, Sofia is a state joint-stock company specialised in activities of the energy sector.
It imports and exports energy equipment. The company also provides engineering services
and consultancy, performs energy audits, controls energy combustion processes in the energy
sector, and serves different energy utilities.
Fields of competition: There has been significant delay in structural reforms in the Bulgarian
infrastructure and energy sector. With the exception of some HPPs, all energy utilities are stateowned. 206 Privatization is a slow process that has not reached large generators and utilities yet.
The Energy and Energy Efficiency Law (EEEL) adopted in 1999 and amended in 2001 began
the restructure and liberalization of the energy sector and created an energy market. It aimed at
separating electric power generation, transmission, and distribution in order to eliminate NEC’s
monopoly. The Law hoped to create the conditions for market competition by establishing new
and independent market participants.
The National Power Transmission Company (NEC) was formerly called the National
Electricity Company. It was the main actor on the electricity market, running the entire
electricity supply. It owned the NPP Kozloduy, HPPs, TPPs, and the whole transmission and
distribution system. Hence, NEC managed the whole electricity production, transmission,
and distribution sector. It was the only agent responsible for electricity trade, import, and
In accordance with the 1999 National Energy Strategy and EU requirements, restructuring
and de-monopolisation of the energy sector started in 2000. Electricity production and
distribution were separated from NEC. The latter was renamed Transmission Company for it
retained the transmission system, some large HPPs, the pumped-storage hydropower plant,
and the Maritza East 3 TPP. The remaining generation capacities were excluded from the
NEC structure and acquired a status of independent power producers to be privatized. 207
According to the adopted Single Buyer Model, all independent power producers sell
electricity to NEC. Being the country’s only power transmission company, NEC is the only
agent eligible to buy electricity from independent producers. It then sells it directly to highvoltage customers and to the seven newly established power distribution companies. These
latter then sell power by retail to medium and low voltage clients. Thus, NEC continues to be
the main actor on the Bulgarian electricity market, carrying out electricity generation,
transmission, import, and export. The company will not be offered for privatization.
As a result of the NEC restructuring, the output of independent power producers increased
from 11.4 percent of the total in 1999 to more than 50 percent in 2000. 208 However, it is still
Bulgarian Government 2000.
This includes TPP Maritza East 1, TPP Maritza East 2, TPP Rousse, TPP Varna, TPP Bobov Dol, TPP
Maritza 3, 63 small HPPs, DH plants, and industrial Plants. NPP Kozloduy has also become an independent
producer but will not be privatised because of its strategic importance.
NEC 2000, 6.
arguable whether this approach of centralised purchase and sale does not retain the state
monopoly in the sector. It has been claimed that a restructuring of this kind introduces
organisational separation only but no real commercial relations. Following this argument,
amendments to the EEEL allow a partial market opening to take place. This is achieved by
authorising electricity generators free access to transmission and distribution networks and
direct contracting with eligible consumers without NEC’s interference. The latter is obliged
to ensure transmission in return of a fee. This is expected to encourage competition among
generators, where large industrial enterprises will be the first to benefit. By including power
distribution companies in the category of eligible customers, a wholesale market in electricity
will be created. The creation of a retail electricity market where customers will choose their
supplier is the long-term goal of the domestic market development. 209
Full market liberalization, understood as free determination of electricity prices, is unlikely to
take place. With the establishment of a wholesale market in electricity, medium and lowvoltage customers will buy electricity from power distribution companies. These latter have
the recognised monopoly right to serve an assigned territory and will continue to be subject
to regulation. NEC defines the transmission fee charged in exchange for the transmission net.
Thus, even when customers will have the right to choose between alternative electricity
providers, the electricity price will contain a regulated component. 210
The Single buyer model preserves state control and planning over the energy sector,
especially with regards to investments. Although the Law intended to promote
commercialisation and competition in the energy sector, the energy strategy argues that it
supported a ‘non-market business model’ 211 by maintaining full government control over
electricity generation, transmission, and distribution companies. 212
The new energy strategy calls for market structures and rules. These include the introduction
of a permissive regime to build new capacities without the State’s issue of construction
permits and purchase obligation. The discontinuation of long-term power purchase
agreements is also desired in order to allow investors to take independent market decisions
and assume market risks. Under the previous Single Buyer model, private investors did not
have direct access to end consumers and required government-supported long-term power
purchase agreements to be concluded. This practice transfers risks to the Single buyer instead
of placing it on those making the investment and entry decisions. 213
The government programme announced in 2001 envisaged privatization in the energy sector
to be completed in the period 2003-2005, with the exception of NEC and the NPP.
Privatization in the energy sector was set up as one of the main priorities of the 2002-2003
strategy and is to begin with the power distribution companies. The power plants
privatization will start with key electricity and heat generating plants. In the period 20032004 Bobov Dol, Rousse, and Varna TPPs will be privatized. This will take place after the
establishment of market rules, since their absence has prevented investors from participating
in the privatization of the energy sector. 214 Further measures are necessary in order to allow
foreign producers to have access to import and export deals.
MEER 2002, 16-17.
MEER 2002, 16-17.
MEER 2002, 3.
MEER 2002, 4.
World Bank 2001b, 162
World Bank 2001b, 19.
Mining: The restructuring in the mining sector closed unprofitable mines and called for the
improvement of the more viable ones in order to make them more attractive for investors.
The mining sector has been preparing for privatization by separating or merging mining and
district heating companies, such as the Pernik mines and Pernik DHC. 215 Imported coal is
bought at market prices and domestic coal has partially liberalised prices. Six state
companies and the briquette factory sell at state regulated price levels and the rest apply
contractual prices. 216
Gas market: The state-owned Bulgargaz, the only owner and operator of the national gas
transmission system, controls the natural gas market in Bulgaria. It also owns the natural gas
storage ‘Chiren’ with a capacity of over one billion m³. Bulgargaz controls gas import,
transmission, storage, distribution, and trade. The establishment of regional gas distribution
companies to supply households was the initial and most significant step towards breaking up
the Bulgargaz monopoly. Deregulation of the internal and external energy markets for natural
gas and privatization are the next steps, according to the energy strategy. Allowing large
users to contract domestic or foreign supply directly could accelerate the opening of the gas
market. However, the transmission fee is yet to be defined. 217 Bulgargaz is likely to retain
ownership of the gas transmission system and the right to direct contracting of natural gas
supplies. The company can also give third parties access to eligible consumers.
Privatization of Bulgargaz is envisaged in stages. Shares of the company will be sold but the
state will retain control over the major share. Privatization of Bulgargaz is to be completed in
2010 and the Bulgarian gas market will be fully integrated with the rest of Europe. 218 At the
moment, Bulgargaz is only expected to contribute its network assets as minority stakes in
future joint venture companies with foreign and domestic partners. 219
Market prices: Liberalization of the energy sector has been partial. Electricity, indigenous
coal, and household heat prices continue to be fixed below their costs. Bulgaria and the IMF
have agreed on a programme for the liberalization of energy prices. However, due to the high
social costs involved, its implementation has been significantly delayed. As an example, in
1999 electricity prices were increased by 14 percent instead of the 30 percent rise that was
agreed on with the World Bank and the IMF. 220
The government declared in its programme the development of a competitive energy market
as a top priority for the energy sector. It emphasized the normalisation of energy prices in
conformity with their full economical costs and the cessation of subsidies for producers.
Further increase in electricity prices for households is envisaged in order to level prices for
domestic and industrial consumers. In the beginning of 2002, household tariffs were about
16.2 percent lower than industrial ones. In practice, firms still subsidise households.221
According to the strategy, new market prices will create energy saving incentives and proper
patterns of energy consumption. The price of electricity for the population will be twice as
Bulgarian Government 2000.
MOEW and Energoprojekt PLC 1998, II-12.
Dnevnik 2002a.
Lynch 2001, 13-14.
IEA 1999a, 124.
IEA 1999a, 130.
Nenova 2002.
high as heat and natural gas tariffs. 222 This measure will be complemented with new forms of
social aid, in order to make energy prices affordable for all citizens.
Gas and electricity tariffs are presently lower for households than for industrial consumers.
Energy policy calls for household tariffs to rise faster than industrial ones. Household gas
prices are based on import costs and cover Bulgargaz’s transmission and operation costs.
Gasoline prices were freed on July 1999. 223 The amendments to the EEEL allowed large
industrial gas consumers and gas distributors to negotiate directly with suppliers of imported
gas since January 2002, although it will not be in practice until transmission fees are defined.
Heat prices are established according to different consumer types. Heat prices for companies
are liberalised and cover the full production cost of the generation plant and a certain rate of
profit, which is why prices can differ among suppliers. 224 Heat prices for households are
limited and still subsidised although they should have been eliminated in 2000. 225 The budget
subsidises the difference between the full production cost and the limited price,
approximately 40 percent of the total cost. 226 The population’s low income prevents the
liberalization of a significant number of consumers who, unable to pay their bills, have
chosen to disconnect from the grid. This was practiced by more than 30 percent of the
consumers since 1998. 227 Nevertheless, further increase in heat prices for households is
expected in order to eliminate subsidies from the budget.
Coal: Some state-owned mines sell coal at state-regulated prices. The briquette factory at
Maritza East also sells briquettes to consumers at state-regulated prices. The present price of
briquettes is 80 BGN/ton net of VAT. 228 Although at present coal and briquette prices are
subsidised, the Bulgarian energy strategy calls for phasing out these subsidies. In addition to
the state-owned mines there are some coalmines that sell their products at contracted prices.
Description of sub-sectors
Street lighting systems were considered as part of the national power-engineering
infrastructure until 1999, when the Energy and Energy Efficiency Law was amended. This law
established that energy infrastructure networks and equipment became municipal property. 229
This change was well accepted since street lighting serves the resident population. The change in
ownership is a tool to encourage investments and improve the system’s operation. At present
almost 90 percent of lighting fittings for street lighting use high-pressure mercury-vapour lamps,
which predetermine their low energy efficiency. The remaining 10 percent of lighting fittings are
high-pressure sodium-vapour lamps and compact luminescent lamps. 230
However, there is ambiguity over the municipal ownership of street lighting systems, since
they have also been included in regional power distribution companies. Thus, it is a question
as to the ownership of the street lighting systems. Some argue that including street lighting in
the power distribution companies’ capital does not mean that they have lost their status as
MEER 2002, 12.
IEA 1999a, 124.
EnEffect 2001, 20.
Alexandrova and Mihailova 2001.
IEA 1999a, 154.
World Bank 2001b, 152.
MEER, not dated.
EnEffect 2001, 11.
MOEW 1998, 25.
municipal property. 231 In some cities, street lighting systems are not included as assets of
power distribution companies or are only partially considered. In this case they are property
of the municipality and this latter should cover the costs of operation and maintenance.
However, no money for maintenance and repair has been provided to municipal budgets.
It has been suggested that the draft-law prepared in 2001 to amend the Energy and Energy
Efficiency Act contained texts that explicitly defined municipalities as owners of street
lighting systems. It was envisaged that power distribution companies would transfer their
ownership rights to municipalities free of charge. However, until the transfer of ownership of
networks and equipment is completed, the power distribution companies will be on charge of
their operation and maintenance with municipal funds. 232 If street light ownership were
transferred to municipalities, their administrations would require the expertise to manage the
system. In case this transfer was made free of charge, an arrangement would be needed for
the municipalities’ overdue debts to power distribution companies.
On 31 March 2001 the Law on Organisation of the Territory replaced the former Law on
Spatial and Settlements Organisation. Under the latter, municipalities constructed street
lighting systems with their own funds and then transferred them free of charge to power
distribution companies for operation and maintenance. Presently, municipalities have neither
the right to invest in the development of street lighting systems, nor their ownership
according to the Energy and Energy Efficiency Act. 233
In 1991, hospitals and dispensaries were state-established and had different
municipal, regional, or state scopes. All health care establishments were transformed into public
entities in order to distinguish them from the emerging private ones. There was no state and
municipal divisions for public hospitals. This practice was introduced with the new Law of
Health Care Establishments in Bulgaria. 234 The health care reform found hospitals with 20-yearold equipment and buildings lacking repair. Large state hospitals liquidated themselves. 235
In order to improve the health care system, a considerable change in the structure of
ownership of hospitals and health establishments was made through the Law on Health Care
Establishments enforced in 1999. Changes also aimed at improving financing and operational
modes through a new registration regime. It was established that health establishments would
be founded according to the Commercial Law or the Law for Cooperatives. 236 The deadline
for their registration was 1 September 2000. It was stated that public health establishments
that were not transformed would be closed down and liquidated by the Council of Ministers.
Changes in the status of health care establishments took place and a majority of them were
registered under the Law on Commerce and the Law on Cooperatives. In compliance with
these Laws, the majority of them were transferred to municipalities. However, municipalities
had difficulties to finance the hospitals adequately and problems with liabilities and provision
of basic medical and sanitary equipment appeared. This complications lead to considerable
problems in the planning and spending of municipal budgets. Health establishments are: 237
• District when treating citizens from neighbouring municipalities;
MOEW 1998, 25.
MOEW 1998, 11-13.
MOEW 1998, 13.
Bulgarian Ministry of Health 2000.
Kultura News 2001.
Republic of Bulgaria National Assembly 2000.
Republic of Bulgaria National Assembly 2000.
• Regional when treating citizens from municipalities of one region;
• Inter-municipal when treating citizens from different regions;
• National, when carrying out country diagnosis, scientific research work, implementing
modern medical technologies, or developing and implementing national health policy.
According to Art 37 (3) the state and the municipalities shall found health establishments for
hospital care and dispensaries as limited liability companies or joint stock companies. The
owner could be the municipality, state, or other joint form of state and municipal
management of the capital. The majority of transformed hospitals became municipal. Health
care establishments with specific or strategic roles for the national health care system are
subject to joint management by the state and the respective municipality. Under this
provision, the Law lists 26 regional hospitals. They are transformed into joint stock
companies with 51 percent state-share, managed by the Minister of Health, and 49 percent
municipal share. Only a small part of the transformed health care establishments was
envisaged for entire state-ownership. These include nine pulmonary hospitals, national
medical centres, and university hospitals.
After the registration period for the healthcare establishments as commercial companies, the
Ministry of Health started keeping record of healthcare establishments with permission for
medical activity. According to the Ministry, there are a total of 245 establishments with this
permission. From this total, municipalities have the jurisdiction of 118 municipal hospitals,
50 dispensaries, and 26 untied regional hospitals. The state has jurisdiction over 29 national
diagnostic and treatment structures affiliated to the high medical schools. 238
Financing of health care establishments is specified in Article 96 of Chapter XII of the Law.
It is stated that the National Health Insurance Fund, state and municipal budgets, voluntary
health insurance funds, and local and foreign corporate bodies and individuals can finance
health establishments. Health services for Bulgarians and insured foreign individuals is free
of charge if compliant with the regional division of health care and if financed by the state
budget. The revenue of health establishments is formed by:
• Direct payments under contracts for provided medical care by individuals and
corporate bodies out of the ordinary practice;
• Reimbursement of expenses made by a third party;
• Expedient subsidies from the republican budget when stipulated by the Law for the
state budget;
• Expedient subsidies from the municipal budgets when provided by them;
• Rentals of equipment, premises, and offices according to the acting legislation;
• Donations, wills, among others.
Hence, the state and the municipalities finance the state or municipal health establishments
through expedient subsidies approved by the law for the state budget and by municipal
budgets. It was stated that public health care establishments that used to be financed by
municipal budgets until 2000, would be financed from the same source during 2001. The
financing mechanism of hospitals for 2001, the first year after their transformation, was
defined with the Law for State Budget. It imposed funding to be distributed from the
Bulgarian Government 2000.
municipalities and the Health Ministry after approval by the Ministry of Finance. The
governing bodies of each hospital conclude financing contracts with the respective
municipality that allocates the subsidies. It is envisaged that the state National Health
Insurance Fund will distribute the budget funding for hospitals.
Registered under commercial terms, hospitals are formally independent commercial
companies and should therefore make independent decisions on investment. However, the
municipality is the owner of the capital of these medical establishments and must provide
them with subsidies and investments. The restructuring of the health care system and the new
modes of ownership raised ambiguities concerning investment.
District heating: There are 21 district heating companies (DHC) in Bulgaria. They are
formed at a regional basis and report to the Ministry of Energy and Energy Resources. Some
work as combined heat and power generation plants (CHP) that supply electricity to NEC.
District heating is provided in most Bulgarian cities and heating is supplied to 18 percent of
the Bulgarian population. 239 They are state-owned, with the exception of Sofia DHC that
accounts for 60 percent of the DH industry. 240 Transfer of ownership to municipalities and
privatization of the economically viable DH companies is being considered. 241 The process
of gasification in residential sector in the biggest cities like Sofia and Varna stared in 2004.
Previously natural gas was offered to the population in smaller cities and the share of
residential customers is still not sufficient.
District heating systems in Bulgaria were built between 1970 and 1990 and are still in poor
technical condition with negative financial results. Lack of resources is linked with low fixed
prices for household heat that do not cover production and delivery costs. When cessation of
subsidisation was postponed, instead of establishing commercially operating business
companies, DHCs came near to financial collapse. 242 The failure to pay heat and electricity
bills is notorious in Bulgaria, not only among citizens but also with budget-financed
organisations and big state owned enterprises. Moreover, a considerable number of
consumers chose to disconnect from the system. In the current system the producers get
subsidies considerably lower than their needs. ‘In that way the DHCs subsidise the
consumers on the account of their own decapitalization’. 243
The outdated equipment and facilities cause transmission losses of 16 percent.244 Lack of
appropriate metering and regulating equipment leads to bills that are based on heated area
and not on measured consumption. Consumers also lack measures to control their own
consumption, a prerequisite for the rationalisation of heat consumption. According to the
Energy Strategy, metering devices are to be installed in all district heating companies.
Metering devices in the Sofia DHC are now in use. 245 Later, the government introduced the
concept of household-level metering by creating a legal requirement for households to install
HCAs (for heat metering) by September 2002. All newly constructed buildings foreseen to be
MOEW 1998, IV-13.
IEA 1999a, 154.
Novem & EnEffect 2000, 41.
MEER 2002, 4.
MEER 2002, 24.
Novem & EnEffect 2000, 14.
MEER 2002, 22.
connected to DH are implemented with horizontal floor distribution of the building heating
systems and equipped with apartment heat meters.
An action plan for restructuring commercial DHCs has been approved and since then Joint
stock municipal DHCs have been gradually privatized. It aimed at establishing joint stock
companies with municipal participation, considering that it is convenient that DHCs remain
within municipal scope. Privatization of district heating systems in Bulgaria was recently set
in motion, but the sector for the most part remains under the control of municipal or state
ownership. The price of district heat in Bulgaria is moderately high, and is not subsidized.
Electricity appears to be a major competitor to district energy, even though its actual cost is
twice as great. Refurbishment and regeneration of district energy systems in the big cities is
proceeding under sovereign financing arrangements provided by the government of Bulgaria.
The World Bank and the European Bank for Reconstruction and Development service this
arrangement under mutually beneficial terms.
District heating sector is in a process of privatization since 2004 and process is still not
completed. Till the end of 2005 a total number of 10 out of 21 DH companies were
transferred to 100% private property 246 . The first DH company with private participation was
build in 2002 in the city of Stambolivski. Later a few more small-scale DH companies
received licenses for heat production and distribution.
Tariff reform in DH sector continued almost a decade. In the beginning there was a unified
tariff for all DH companies, which was not sufficient to cover the real production and
transportation costs. On a later stage separate prices for different DH companies were
introduced. Tariff increases were introduced periodically, however they did not at all lead to
diminishing of the level of subsidies since the enterprises continued to make losses for a
number of factors, such as lack of investments for improvement of the efficiency of the
systems, poor accounting and collection practises, disconnection of growing number of
subscribers because of the price increases. In 2002, started the pricing reform focusing on the
phase-out of subsidies, which practically happened in 2005, when all the prices were
liberalized. After removal of subsidies only the low-income people remain receiving
financial support for energy needs by the social safety net program. Since 2002 the State
Energy Regulation Commission (SERC) is responsible for electricity, natural gas and district
heating tariff setting and regulation.
Alliance to Save Energy, Regional Urban Heating, Policy Assessment, 2007
Addressing the problems
Major barriers for investments in energy efficiency signalled in Bulgaria include:
Currency board restrictions limit the capital available for decentralised public-owned
entities. Aiming at financial stabilisation, the currency board imposes a rigid public
expenditure policy and limits options for financing of the budget deficit. It limits the
state initiative for investing in different undertakings, including EE. The only EE fund
available in Bulgaria was dismantled namely because of the currency board
Delay in privatization and insufficient market based legal framework: Privatization practice
in Bulgaria has been delayed because of political reasons. Restructuring of large stateowned energy-intensive industries is still taking place. The absence of well-defined
regulatory framework and market rules hinders the attraction of EE investment.
Persistent subsidizing of energy prices continues, distorting market signal and avoiding
incentives for conservation measures. There is low awareness of energy saving
measures to increase competitiveness of the national production.
Formation of municipalities’ budgets and non-payment: The government approves
municipalities’ budgets according to the expenses made during the previous year.
Resources allocated are usually insufficient and savings are deducted from the amount
of subsidies allocated for the next year, including energy. Delay or non-payment of
energy bills is tolerated, preventing energy enterprises from receiving the operating
revenues needed for their operation. 247
Lack of incentives for end users to save energy derived from low energy prices in
comparison to their production costs, as well as unresolved ownership issues
concerning municipal and public property.
Lack of knowledge and institutional capacity to prepare and implement EE programmes.
EE is a new field of knowledge in Bulgaria and its development has been rather slow.
Municipalities have the jurisdiction of the majority of public buildings such as
hospitals, kindergartens, and schools. These authorities lack both the financial
resources and the expertise to implement EE projects. Cooperation with other
institutions providing technical advice is inefficient and unpopular.
EnEffect 2001, 2.
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