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Polish EcoFund offers template for eco-innovation funding

05/11/2008

The EcoFund Foundation has provided highly effective funding to eco-innovation and environmental protection projects since 1992. It offers an ideal template for environmental project funding.

The foundation was established to manage funds allocated from Government-secured debt for the purpose of environmental protection, a fund provided by six donor countries that amounts to €384 million. It began in 1991, when the ‘Paris Club’ united Poland's international creditors and decided to reduce the Eastern European nation's debt by 50%, with up to 10% of the remaining debt devoted to environmental investment, with the understanding that the outstanding debt would be repaid by 2010. Such an initiative was the first of its kind, but met with positive responses from many of Poland's creditors.

The USA was the first nation to allocate a portion of the Polish debt to the debt-for-environment-swap scheme, assigning €370 million to the initiative. This prompted the Polish Ministry of Finance, in April 1992, to establish the EcoFund as an independent non-profit foundation to oversee the allocation of the funds. In the same year the first President of the Foundation, Professor Maciej Nowick, was appointed.

Over the next few years other donor countries followed suite and began to assign portions to the fund. France, Italy, Norway, Sweden and Switzerland all contributed, taking the total funds to €384 million, payable in yearly annuities from 1992 to 2010, and to be administrated by the EcoFund Foundation.

Three entities

The infrastructure of the EcoFund is divided into three entities:

  • The EcoFund Council, which formulates Foundations policies, approves financial plans, and appoints board members. It consists of both representatives from Poland and the six donor countries, and is chaired by Professor Tomasz Zylicz;
  • The EcoFund Board, which primarily represents the external interests of the Foundation; and
  • The EcoFund Office, which provides both technical and financial services to the organisation.

EcoFund support is limited to investment projects at the implementation stage, and provides financing in the form of non-returnable grants, whose share may range between 15 and 60% of project costs. Apart from receipts from the debt-for-environment-swap scheme, EcoFund also benefits from banking operations and donations. An important element of the Foundation's strategy is its thorough inspection of grant-awarded project spending. In addition to this, the EcoFund's co-operation with investors results in efficient implementation of projects.

Between 1992 and 2007, grants were awarded to 1 500 projects in five key environmental protection areas: air, water, nature pollution, climate protection and waste management. Taking 2007 as an example, the majority of grants awarded were to projects in the biodiversity – nature protection – sector, with average grants of €235 000. In terms of air protection, the average was €870 000, waste management €720 000, water protection €370 000 and climate protection €330 000.

In addition to the financial value of such grants, the EcoFund's decision to finance a project is also an influencing factor in providing projects with access to further private loans and credit.

The Foundation has a variety of methods to find the best projects to fund. Successive national competitions have been held in:

  • Energy savings in municipal heating systems;
  • Nature protection in landscape parks;
  • Protection of flora and fauna;
  • Protection of water and marsh lands; and
  • Avian protection in the EU Nature Conservation Network.

Another method for unearthing the best projects has been EcoFund's regional and sectoral multi-annual programmes aimed at solving eco-problems. Such public demonstration programmes, coupled with the advertising of financial assistance, act as strong incentives for investors to develop the best projects.

Equipment and technology transfer

A key element of the EcoFund’s work has been the promotion of technology transfer from donor countries. This has enabled the transfer of technology expertise and equipment in a wide variety of areas. In the climate-protection sector, equipment necessary for combustion of biomass as well for power and heat co-generation was made available, while in the field of water protection, equipment was provided for the selective collection and disposal of municipal and healthcare wastes and sewage sludge-processing equipment.

Funding from the foundation has enabled the purchase of equipment from US company General Electric for a turbine installed at the heat and power plant at Starachowice. Equally French COMPTE boilers were installed in plants at Kisielice and Rozanystok. The Foundation has also enabled technology transfers in the sectors of sewage treatment, biomass, wind, and solar power, as well as equipment for harvesting fuel from rape seed oil esters.

The model of the EcoFund provides an example of efficient use of public funding at a national level, while also actively disseminating environmental technologies nationwide. However, the effectiveness of the Fund is not without question. A survey in the journal Environment and Development Economics, published by Cambridge Press, suggests that the Fund's assistance was not essential for many of the projects to be implemented. After surveying applicants rejected by the EcoFund, it was discovered that the majority succeeded in gaining the funds they needed regardless.

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Myriad successes

A number of exceptional initiatives have thrived thanks to the EcoFund Foundation, such as: elimination of combustion coal in the old town of Krakow; preservation of the white stork, endangered eagles and other birds of prey, the European pound turtle, forest gallinaceans and native migrating fish; restoration of water cleanliness in the Narew and Biebrza rivers, Puck Bay, the Gdansk Gul, and the Great Mazurian Lakes; elimination of pollutant emissions in the Klodzko Valley; modernisation of city buses from diesel to compressed natural gas (CNG) systems; and the replacement and updating of electric drive systems of above 200-kW capacity.