National environmental funds have evolved over time in several countries. Traditional environmental funds were established in the late 1980s and funded by pollution charges and fines, but have increasingly been consolidated into national budgets. Newer specialized clean energy funds have been established since the 2000s to support specific sectors like renewable energy. These specialized funds tend to be better funded through initial equity investments and grants, and use financial instruments like loans and grants to leverage private sector funding for larger clean energy projects.

1. ROLE OF NATIONAL
ENVIRONMENTAL FUNDS IN
PROMOTING GREEN INVESTMENTS
GREEN Action Task Force Meeting
30 September – 1 October 2019, Paris
Nelly Petkova, OECD

2. 2
Late 1980s
System of pollution
charges and fines
Earmarked extra-
budgetary funds
2000 - 2014
Earmarked budgetary
funds
Full consolidation in the
budget and closure of
some Funds
2000 – Kazakhstan
2008 – Turkmenistan
2011 – Belarus
2014 – Ukraine
National Fund but not
local Funds
Mid-2000 and
ongoing
New types of
funds appeared
Sector specific
2
Evolution of National Environmental Funds

3. 3
Typology of Environmental Funds
Traditional Environmental Funds
fully consolidated into state budgets and
year of their closure
Traditional budgetary
Environmental Funds in operation
Specialised Clean Energy
Funds
Belarus: National and regional Nature
Protection Funds (closed in 2011)
Azerbaijan: State Fund for
Environmental Protection
Armenia: Renewable Resources
and Energy Efficiency Fund
(est. 2005)
Kazakhstan: State Environmental Protection
and regional Funds (closed in 2000)
Kyrgyz Republic: Republican and 4
local Environmental Protection and
Forestry Development Funds
Georgia: Georgian Energy
Development Fund (est. 2010)
Turkmenistan: State Environmental Fund
(closed in 2008)
Moldova: National Ecological Fund Ukraine: Energy Efficiency Fund
(est. 2018)
Ukraine: National (special budget)
Environmental Fund (closed in 2014) (but
local Environmental Funds continue to exist)
Uzbekistan: National Ecology,
Environmental Protection and Waste
Management Fund and 14 local Funds

4. 4
Main features of traditional Environmental Funds
Legal status and management
• Not independent legal entities but institutionally subordinated to the
environmental authority without its own staff and balance sheet
• Two-tier management structure – supervisory body and executive office?
Revenue sources
• Revenue from pollution charges, charges on natural resource use (water
consumption, mining), charges on env-harmful products (fuel, packaging)
• Resources not significant except in Moldova (levy on imported plastic and
packaging)
Spending programme
• Comprehensive, usually non-focused, municipal env infrastructure + a large part
goes to non-investment activities, incl. support for env administrations
• Main disbursement mechanism - grants

5. 5
Revenue of the National Ecological
Fund of Moldova, mln MDL
Types and share of env expenditure in the
Republican Env Protection and Forestry
Development Fund of Kyrgyzstan, 2016, %
8 8 11 16 24
42 50 57
144
192
203
235 236
248 251
233
268
381
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2018

6. 66
Main features of specialised Clean Energy Funds
Legal status and management
• Independent legal entities established through a legal act
• Two-tier management structure – supervisory body and executive office with own
professional staff and balance sheet
Revenue sources
• Capitalised through initial equity provided by the founder, the state
• Various revenue sources - budget allocations, grants from different institutions,
income from different services (energy audit, consulting), project implementation fees
• Donor support often significant, e.g. Multi-Donor Trust Fund in Ukraine (Euro 100 mln)
Spending programme
• Sector specific with targeted mandates – EE and RE mostly but also many other
related activities (scientific research, project design, search for financing, financial and
legal consulting) – create pipelines of projects
• Disbursement mechanism – grants, interest rate subsidies, soft loans, equity

7. • Diversity of institutional arrangements to manage public env expenditure
• Traditional Funds:
 consolidation into state budgets - an ongoing process
 seem not to be significant players in the market of environmental finance
 to perform better, existing Funds may need further improvements and reform
• Clean Energy Funds:
 innovative institutional arrangements
 better focused
 better capitalised, support bigger investments
 use more sophisticated financial instruments tailored to the needs of the market
 operational independence under strong accountability and transparency
 use resources to create demand and leverage private funds
 support by international partners is often crucial – the better the Fund performs
the more external support it attracts 7
Main observations

8. • St. Petersburg Guidelines on Environmental Funds in a Transition to a
Market Economy (1995)
• Recommendation of the OECD Council on Good Practices of Public
Environmental Expenditure Management (2006) – guidance on how to
design and implement env subsidy programmes and how to evaluate them
• Handbook for Appraisal of Environmental Projects Financed from Public
Funds
8
Past OECD work on public environmental expenditure
management and Environmental Funds

9. • Are Environmental Funds an indispensable tool of
environmental policy-making and achieving national
priority environmental objectives?
• What are the main challenges facing the governments in
managing public environmental expenditure programmes
and institutions such as Environmental Funds?
• How can the OECD, development partners and
Development Finance Institutions further support EECCA
governments in their efforts to improve their
environmental subsidy programmes?
9
Questions for discussion