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Sewage plants for the Vistula river in Poland and a cleanup of coal-burning
industries in Silesia will be among the first projects financed by the European
Bank for Reconstruction and Development, inaugurated this week with 10 billion
Ecus (£7 billion) of credit.

The EBRD is the first of the intergovernmental banks to have environmental
awareness written into its constitution. Its president, Jacques Atalli,
says he wants to make the environment a priority. Yet officials at the bank
are worried that they will be hampered by a rule that the bank cannot lend
more than 40 per cent of its money to state projects.

The bank has been set up to finance the modernisation of Europe’s former
communist countries. But while most of the sources of pollution-power stations,
sewage disposal and heavy industry – remain in state hands, cleaning up
Eastern Europe will be slowed down by the 40-per-cent rule. The rule was
supposed to ensure that the bank encouraged market economies and did not
subsidise state industries.

‘There is a private sector factor,’ said an official in the bank’s environment
section. ‘We want to tackle the hot spots in each country and get more results
for less money. But an awful lot of these projects are public sector.’

To clean up the Baltic Sea, for example, the bank is spending £3
million identifying projects it might finance. But the quickest and most
effective ways to clean up the sea, such as building sewage plants along
the heavily polluted Vistula, inevitably fall to the public sector.

Poland has asked the bank to set up an international project in Silesia
to reduce the chronic air pollution caused by burning coal in power stations
and heavy industry. While the bank will eventually finance new, cleaner,
industries, the first step in cleaning up will be to fit equipment to reduce
emissions from state-owned power plants.

Rather than have a separate fund for environmental loans, Atalli has
decided that every project must undergo an environmental audit. ‘If something
is important, you do not put it in a ghetto,’ he says.

At its first meeting this week, the bank’s board is due to consider
proposals to encourage the growth of companies that will manufacture the
equipment needed to clean up the environment in Eastern Europe. Also proposed
are loans to strengthen impoverished national agencies which oversee environmental
matters. This ‘institution building’ would include money for new equipment
to monitor the environment and to enforce environmental legislation.

In the long run, officials are optimistic that almost any new industry
will help to make Eastern Europe cleaner. ‘What do you call an environmental
project?’ asked one. ‘If you restructure an industry and make it cleaner,
is that an environmental project?’