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Environmental Protection as an Element of International Economic Cooperation in Poland STANLEY J. KABALA University of Pittsburgh GROWTH: REDOUBLING EFFORT OR RETHINKING DIRECTION? Economist Herman Daly pointed out a condition of far-reaching impli- cations for world economic development when he wrote that as the world economy "grows beyond its present physical scale, it may increase costs faster than benefits and initiate an era of uneconomic growth which impov- erishes rather than enriches" (Daly, 1986~. While Daly's remarks refer to global levels of industrial activity, resource use, and economic momentum, they could also apply to Poland, a country where a massive thirty-year drive to create an industrial economy has left it with energy-intensive, resource-inefficient industry and severe water, air, and soil pollution. In the 1980s, Poland reached the threshold where economic effort of the prior three decades no longer generated authentic welfare for its populace, and where the marginal gains of increased economic activity began to dwindle. The intensive use of energy and material resources that are characteristic of the Polish economy produce disproportionately small gains in material benefit and reduce opportunities for more benign development by consuming scarce economic resources (Kozlowski, 1986~. Events since the economic crisis of 1981 indicate that for Poland to restore its economic vitality and avoid social, political, and ecologicial strains catastrophic in scale, it must modify the ponderous structure of its economy (Ocena, 1987~. Poland is thus confronted by a dual crisis of economics and ecology: in short, a crisis of development. 60

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ENVIRONMENTAL MANAGEMENT CONCEPTS THE ROLE OF INTERNATIONAL INVESTMENT 61 This chapter explores the premise that new international lending to Poland can be structured in such a way as to link economic gain with environmental protection. Poland's recent accession to membership in the World Bank and the increasingly likely prospect of the Bank's making substantial loans there constitute perhaps the most positive feature of its current economic situation. Accompanying this major move are other new private international economic and ecological initiatives, including the Poland Ecological Foundation, the Fund for the Development of Polish Agriculture, and the Swedish-Polish Association for Environmental Protection (Polsko-Polonijna, 1988~. Each of these have as their objective the dual goal of supporting environmental improvement while stimulating economic development in the agricultural, food processing, export, and pollution engineering sectors of the Polish economy. Poland is a country in some ways outside the norm for World Bank lending. While the Bank invests in order to stimulate economic develop- ment, it does so most frequently in countries readily identifiable as "less developed" and considerably less often in such countries as Poland, which is of middle income in global terms and possesses a quite extensive industrial sector. Yet, as the Bank takes on an ever larger role among international organizations in managing loan repayment by the world's debtor nations, one element of its policies is to finance economic projects whose eventual profits will make possible the eventual retirement of debt. The opportunity presented by the Polish case to international financial institutions is that of supporting the reorientation of a developed industrial economy that has faltered in maintaining foreign trade, fulfilling domestic consumer demand, and efficiently using material resources. In framing a lending program with Polish government, the Bank has the opportunity to support increases in economic productivity and produc- tive output, activities which would address the immediate pragmatic goal of enabling Poland to redress its international debt condition. In Poland there is also the further possibility of such a lending program concomi- tantly making possible the relaxation of industrial pressure on the country's natural environment. International development assistance that takes into account the requirements of environmental protection holds the promise of improving economic performance as it enhances quality of life. The issue of the compatibility of regulatory measures and economic systems affects prospects for economic restructuring in Poland and Eastern Europe. 1b a great degree, command economies rely on administrative measures to gain compliance throughout the system, whereas in market economies where opportunities for effective administrative control are comparatively few financial instruments prevail. Thus, there is some

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62 ECOLOGICAL RISKS question whether the economic mechanisms of environmental protection (i.e., use charges and penalties) which Polish regulators currently value so highly can really work without first making fundamental changes in the country's economic system. Economic reform in Eastern Europe regu- larly takes the form of increasing the role of the market in the region's economies. Once market forces are in place, then financial incentives for pollution control and production efficiency will operate as effective checks on economic behavior. Because Poland's environment is so greatly affected by its pattern of economic development, the question of how the reforms will affect environmental quality deserves brief mention here. Some Polish analysts have observed that the strong emphasis on prof- itability in the recently enacted "Second Phase of Economic Reform" bodes poorly for the environment, because firms concerned with profit will divert even less of their scarce financial resources from investment in production to pollution control, and will use whatever means at their disposal to avoid compliance with pollution regulations (Chapter 22, this volume; Kozlowski, 19864. Others point out that two fundamental factors have hindered ef- fective regulation of resource use and pollution control. The policy of pricing coal and other forms of energy below not only world prices but also domestic production costs has led to excessive use of this input by pro- ducers (Gomulka, 1988~. Simultaneously, the generally inadequate levels of pollution fines has made penalties little more than a symbolic gesture in regulatory policy. This school places great emphasis on new policies that will price raw materials and energy high enough so that firms will be encouraged to use these inputs more carefully, creating a new regulatory context that backs pollution standards with an increasingly costly system of fines for violation of pollution norms (Gorka and Poskrobko, 1987; Broda, 1988; Peszko, 1988~. A third position on reform efforts in Poland has been taken by those economists who argue that no pressure can be exerted on firms to act in favor of the environment in the conventional financial context of central planning without the introduction of two additional crucial elements of economic restructuring. Appropriate pricing of resources and stiffer fines for pollution violations are necessary but not sufficient to assure compli- ance with environmental regulations. Of these additional elements, first is elimination of the "soft budget constraint" that allows firms to cover increased production costs by requesting higher budgetary allocations in the next year (Rostowski and Gomulka, 1984~. Next is the establishment of authentic market conditions in the national economy as the only means of forcing firms to reduce wasteful and costly practices as they seek to bring production costs into line with revenues and enable them to turn a profit (Zylicz, 1987a, 1987b).

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ENVIRONMENTAL MANAGEMENT CONCEPTS INVESTMENT AND THE ENVIRONMENT 63 Investing in environmental protection does not always appear to make direct, immediate economic sense, as it often generates benefits not readily quantifiable in narrow financial or short-term calculations. This does not mean, of course, that there are not substantial, even at times massive, gains in social or cultural terms; they are merely hard to measure and relate to specific investments. Increasingly, this has become the case as environmental protection has moved from cleaning up offending point sources to managing very broad non-point source ambient quality questions, a practice in which most developed industrial countries have only limited experience. Accurately identifying and quantifying payback can be difficult for a number of reasons. Gains may be too diffuse, as in the case of improved health and longevity for large numbers of people as a result of breathing cleaner air. They also may be too indirect, as in the case of rivers and lakes being restored to use for recreation, fishing, or municipal water supply; or they may be non~uantifiable, as in the case of the preservation of species (Chapter 3, this volume). In many instances where quantification is possible, the economic problem arises from the difficulty of creating an institutional framework capable of gathering the return from the many people who benefit from a particular action. In the context of borrowing for environmental protection, the seem- ingly esoteric questions of future value and discount rates and gathering returns discussed in Chapter 3 take on a more substantial cast when il- luminated by the harsh light of repayment schedules. Investments that stand to yield even the most fortuitous environmental benefits do not nec- essarily produce the sort of clearly defined financial paybacks that justify hard lending for that purpose. An illustration of this point in the Polish context is borrowing for the construction of wastewater treatment plants at key municipal and industrial locations. The outcome would be a marked increase in the quality of the country's rivers, especially the Vistula, but the financial benefits would be extremely difficult to assess and tie back into repayment by borrowing institutions. In such a case, the collective good to be gained by the investment might be great enough to warrant financing it from general public revenues, but it could not be termed a profit-making investment. The World Bank regularly finances public sector infrastructure projects of this type whose purpose is the public good. This chapter poses a different issue by adding the variable of ecological gain to the decision framework of investing in economic restructuring. It suggests that new profit-making investments in Poland supported by inter- national financial institutions should be not only environmentally neutral, but environmentally beneficial as well. That is, it asserts that the possibility

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64 ECOLOGICAL RISKS exists for investment in new productive facilities in Poland that serve the government's dual goals of restructuring the economy and stimulating eco- nomic growth while lessening the overall negative impact of the countIy's economy on its environment. THE COSTS OF ENVIRONMENTAL DEGRADATION Ecological degradation in Poland affects a significant segment of the country and places parts of its people in danger. In 1982, areas in 27 of the country's 49 voivodships (provinces) were identified as Areas of Ecological Hazard. Comprising 11.3% of the country's land area and 35.5% of its population, these areas account for 65% of the country's water consump- tion, generate 67% of its sewage and industrial discharge, and generate 82% of total particluate and 85% of total gaseous pollution (Chapter 12 and 22, this volume). Five of these areas- Upper Silesia, Krakow, Rybnik in the southwest, Legnica-Glogow in central Poland, and Gdansk in the north have been designated areas of "ecological disaster" because of the severity of pollution they experience (Kassenberg and Rolewicz, 1987~. In the heavily industrialized and polluted region of Upper Silesia, coal mines generate a vast volume of saline wastewater that begins the degra- dation of the Vistula River near its headwaters. This mine water combines with municipal sewage and industrial wastewater which are discharged di- rectly into the river and render it so polluted that over half of its 1,047 kilometers of length are unfit for any use. The tremendous outpouring of air pollutants in the Upper Silesian region is carried in high concentrations northeastward by prevailing winds, endangering large numbers of people in other voivodships as well as large areas of forest and national parks and the ancient city of Krakow (Grodzinski et al, 1984; Kabala, 1985~. The entire, physically intact Old Town of Krakow~esignated by UN- ESCO as part of the World Cultural Heritage lies at the center of another of the country's zones of ecological disaster. Pollutants from the nearby massive Nowa Huta steelworks and other industrial plants combine with coal-fired home and commercial heating emissions to corrode the historical, cultural, and architectural treasure of the buildings of Krakow and jeopar- dize the health of its citizens. The Nowa Hula steel mill employs 35,000 people, produces 6 million tons of steel per year, and is an important part of the national and regional economies. However, Polish environmentalists and Krakow city officials alike are pessimistic about the fate of the city unless emissions from the mill and other sources are significantly curbed. Research from a number of sources, including the Polish Ministry of Environmental Protection and Natural Resources and the National Planning Commission, places the value of economically induced environmental losses at between 800 billion and 1 trillion zloties per year, roughly equivalent

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ENY7RONMENTAL MANAGEMENT CONCEPTS 65 to 10% of the country's Net Material Product (NMP) (Chapter 22, this volume). This level of loss has come to be termed by Polish analysts nothing less than the "ecological barrier to the development of the country." TlIE ECONOMIC BIND Poland's acute problems of environmental degradation are paralleled and aggravated by the problems of its economy. With exports unable to generate sufficient hard currency to make full interest payments on its $42 billion foreign debt, during the years 1987-1989 Poland paid an average of only $2 billion per year of interest; that interest now exceeds $3 billion annually. Despite its standing as the world's eleventh-ranked industrial nation, Poland is a country in need of both economic growth and economic reorientation (Fallenbuchl, 1987), and is constrained by a history of four decades of intense economic transformation. Although it was primarily an agricultural nation before World War II, Poland transformed itself in the two decades after the war into one of Eastern Europe's industrial powers, along with the GDR and Czechoslovakia. When Poland undertook its development program in the early 1950s, it followed the model formulated in the USSR twenty years earlier. The so-called "extensive" pattern of development emphasized the creation of heavy industry and import substitution as key elements of the road to socialism. Under this model, growth depended on the quantity of inputs into the productive process, i.e., increases in the labor force and heavy direct investment at the expense of both consumption and social infrastructure (Fallenbuchl, 1965~. The resultant massive and concentrated investment in the steel, coal, metallurgical, chemical, and shipbuilding industries began a pattern of heavy emphasis on capital goods that remained a feature of Poland's economy for over twenty years. Consequently, through the 1970s the industrial and construction sectors continued to absorb 48% of gross investment twice as much as in most developed countries (Gorka and Poskrobko, 1987~. The high demand for energy required by this effort left Poland with one of the most intensive ratios of per capita energy use to per capital GNP in the world (Budnikowski et al., 1987; Haberstroh, 1977~. One object of Poland's investment strategy of the lY70s, which entailed borrowing from the West to purchase modern licenses and production technologies, was to reduce the extreme bias toward heavy industry in its economy and increase the share of other types of manufacturing. This strategy was intended to increase the efficiency of Polish industry and engage Poland in the vigorous export trade of high quality goods, thereby raising the country's standard of living and, at the same time, making the successful repayment of foreign debt possible. This policy failed for a number of reasons, both internal and external.

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66 ECOLOGICAL RISKS The oil price shock and the worldwide recession of the 1970s were accom- panied by the inability of Poland's centrally planned economy to effectively and flexibly utilize Western credits to boost output in priority sectors, and by the outright misdirection in the use of borrowed capital. A 1986 study by the Polish Ministry of Foreign Made pointed out that only one-third of the $44.4 billion in loans obtained from 1971 to 1981 was spent on mod- ernizing industry, while two-thirds were spent on importing raw materials and consumer goods (U.S. House of Representatives, 1987~. The virtual collapse of output at the turn of the decade reduced the Net Material Product by 25% in four years, and left the country with production levels in 1986 that were still 8.5% lower than those in 1978 (Fallenbuchl, 1987~. In this context, the needs of environmental protection yielded to economic pressure to maintain production by whatever means possible, including re- taining obsolescent production lines inefficient in their use of energy and raw materials. What is the structure of the economy that generated Poland's dual crisis of ecological destruction and declining real wealth? Poland's economic pattern- which is common to the centrally planned economies of Eastern Europe and acutely inefficient in its use of raw materials and energy per unit of economic product lies at the root of the region's environmental problems. This pattern is manifested in the overall sectoral mix of the economy, the structure of the industrial sector within the economy, and the operating efficiency of processes within industry. In the process of industrialization, market economies in a certain range of GNP per capita reach a point at which industry's share of the economy ceases to grow. Change in industry then takes place within the slowly shrinking industrial sector of the economy as a progressively greater share is taken up by the service sector. Consistently in centrally planned economies, the share of the industrial sector continues to grow through and beyond this phase, leading observers to postulate that distortionaIy systemic factors are at work to cause this phenomenon (Winiecki, 1988~. Figures comparing energy and material intensity of the national prod- ucts of industrialized countries illuminate the Poland's situation in this context (liable 1~. Compared to those of West European countries, the economies of the European members of the Council for Mutual Economic Assistance (CMEA) use on average 18% more energy and 36% more steel per capita, while national income per capita in dollars is lower. Consump- tion of steel per dollar of national income hovers at three times the West European average. As a result, the energy intensity per dollar of national income of the CMEA economies is on the whole more than double that of even the more industrialized countries of Western Europe: 1.29 kg. coal equivalent versus .54 kg. Among European countries overall, Poland has a slightly higher than average primary energy consumption (5,590 kg. coal

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ENY]RONMENTAL MANAGEMENT CONCEPTS TABLE 1 Energy and material intensity of selected industrialized countries, 1980 (author's calculations). Gross energy Steel National Energy Steel consump. consump. income use use Country kg CE/cap kg/cap $/cap kg. CE/$ kg/$ CMEA AVG. 5,600 509 4,590 1.29 0.12 Bulgaria 5,678 320 4,150 1.37 0.08 Czecho. 6,482 706 5,820 1.11 0.12 Hungary 3,850 340 4,180 0.92 0.08 GDR 4,708 566 7,180 1.03 0.08 Poland 5,590 516 3,900 1.43 0.13 Romania 4,593 562 2,340 1.96 0.24 USSR 5,595 554 4,550 1.22 0.12 DEVELOPED - ALARKET AVG. 4,770 373 9,760 0.54 0.04 Austria 4,160 355 10,230 0.41 0.03 Denmark 5,225 356 12,950 0.40 0.03 France 4,351 422 11,730 0.37 0.04 ERG 5,727 609 13,590 0.42 0.04 Italy 3,318 412 6,480 0.51 0.06 Japan 3,690 512 9,890 0.37 0.04 Spain 5,727 244 5,400 1.06 0.05 U.K 4,835 237 7,920 0.61 0.03 U.S^. 10,410 490 11,360 0.92 0.04 SOURCE: Budnikowski et al., 1987; 67 equivalent per capita versus 5,000 kg. for Europe) and a notably higher relative consumption of new steel (516 kg. per capita versus 441 kg. for Europe). Consumption of steel and energy per dollar of national income are also quite high in Poland, at .13 kg. of steel and 1.43 kg coal equivalent per dollar. The disparity in economic structure between market and planned economies exists not only at the sectoral level but also within the industrial sector. In centrally planned economies, the extractive industries continue to display a much larger share of industrial output and employment in comparison with mature market economies at the same level of GNP per capita. The share of extractive industries in centrally planned economies is on average three times greater than in mature market economies, and almost twice that in semi-developed market economies. Poland exhibits one of the highest such ratios, with extractive industries constituting 10% of industrial employment (Table 2~. This pattern of concentration in certain forms of heavy industry in centrally planned economies also appears in data on the engineering industries, which shows this subsector to be 50% greater

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68 ECOLOGICAL RISKS TABLE 2 Share of extractive industries in industrial employment, 1963-80 (% of total) 1963 1970 1980 Centrallv Planned Economies (CPE) Unweighted average 10.5 8.8 7.8 Bulgaria 10.5 10.6 8.0 Czechoslovakia 9.0 6.7 6.5 Hungary 11.1 8.7 7.8 Poland 13.1 11.2 10.2 USSR 8.7 6.8 6.2 Developed Market Economies (DME) Unweighted average 3.9 2.6 2.6 Belgium 7.5 4.0 3.0 France ~ ~ 2.6 FRG 6.7 4.0 3.0 Italy 2.3 3.3 3.3 Sweden 1.9 1.5 1.5 U.K 7.0 4.3 4.4 USA 2.9 2.3 2.8 CPEs/DMEs ratio 2.69 3.38 3.00 . SOURCE: Winiecki, 1988 (from United Nations statistical yearbooks). TABLE 3 Energy consumption in selected industries in MJ per ton of product. International Product Poland indicativelevel %difference Raw steel 15,632 13,400 17 Open hearth steel 6,231 4,600 35 Electric arc steel 3,192 5,900 ~5 Steel rolling 5,850 4,200 40 Aluminum smelting 16,237 13,500 21 (in kilowatthours) Cement manuf. 5,010 3,700 35 Ammonia prod. 41,120 40,000 0 . SOURCE: Rocznik Statystyczny, 1987; World Bank, 1987. than would have been expected compared to other countries with different economic systems but comparable levels of GNP per capita (Winiecki, 1988~. In Poland, the predominance of industry in the economy and the em- phasis within industry on heavy industries is accompanied by generally low energy efficiency in industrial processes. This parallels general patterns of

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ENVIRONMENTAL MANAGEMENT CONCEPTS 69 low labor and materials efficiency in the country's economy (Budnikowski et al., 1987~. Table 3 characterizes the efficiency of Poland's industrial sector according to energy use in selected heavy industries. Except for ammonia production where Poland's efficiency level is on a par with the international figure and electric arc steelmakingwhere its level is supe- rior to the international figure Poland's heavy industries trail attainable levels of energy efficiency by anywhere from 17% to 40%. These relatively low levels of energy efficiency mean greater consumption of coal-fired elec- tricity to fuel Polish industry. Poland's steel industry is energy intensive because of the nature of the technology currently in use. Of the 17 million tons of steel produced in 1986, roughly 37% was produced in open hearth furnaces, 16% in electric arc furnaces, and 47% in basic oxygen furnaces (Rocznik Statystyczny, 1987~. While the open hearth furnace accounts for some 55-60% of steel production in Eastern Europe and the Soviet Union, it is virtually out of use in Western Europe and accounts for only 8% of U.S. output (World Bank, 1984~. The overall effect of this pattern is that, compared to other economies of roughly similar size and level of development, Poland's economy is two to three times as intensive in its use of energy (Table 4~. This pattern has concomitant environmental outcomes when linked with inadequate pollu- tion control. Poland is a high emitter of sulfur dioxide and the only country in Europe whose emissions of this pollutant are projected to rise over the next decade (UNECE, 1987~. Comparisons of gross energy consumption to national emissions of sulfur dioxide show dramatic differences in overall levels of pollution control efficiency among European countries (Tables 5 and 6~. POLICY EXPLORATIONS At the end of the 196Qs, the sectoral bias of Poland's economy toward heavy industy was recognized as offering limited possibilities for economic growth. Changing this bias was the aim of the development strategy undertaken by the Gierek government at the beginning of the 1970s. In the subsequent two decades, the situation has become more acute as this pattern has, in addition, come to place great pressure on the country's environment. References in Poland to environmental degradation as a barrier to the country's development allude to the fact that only the types of economic reform that recognize the countIy's ecological limits can build sustainable economic growth. The following survey of options indicates that even though Poland finds itself in difficult economic and ecological straits, there are aspects of this situation that have positive elements within them.

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70 TABLE 4 Energy intensity in selected industrialized countries. ECOLOGICAL RISKS MARKET ECONOMIES: Belgium Spain FRG Units GDP 79,080 164,2S0 624,970 milt U.S.$ %industry 33 Not. 40 % Energy consumption Mtce -gross 60.82 10553 381.28 final 41.71 63.12 254.73 Energy intensity U.S.$ Mtce/bil. --gross 0.77 0.64 0.61 Final 0.53 0.38 0.41 PLANNED ECONOMIES: Yugoslavia Hungary Poland Units GDP 44,370 20,560 70,439 milt U.S.$ %industry 33 41 - 49 % Energy consumption Mtce gross 62.62 42.42 180.67 Final 31.86 28.97 109.44 Energy intensity Mtce/bil. U.S.$ -gross 1.41 2.06 2.56 Final 0.72 1.14 1.55 SOURCE: World Bank, 1988; from World Development Report, 1987 and UN ECE, 1986. TABLE 5 National emissions of sulfur diomde (1,000 tons per year) Country 1980 1985 1990 1995 Belgium 799 467 506 544 Spain 3,250 3,250 3,053 ERG 3,200 2,400 1,100 Hungary 1,633 1,420 1,400 1,140 Poland 4,100 4,300 4,900 Yugoslavia 1,175 1,800 ~- SOURCE: UN ECE, 1987. Energy Poland's economy, particularly the industrial sector, is adapted to domestic fuel sources. Thus, it is to a great extent free from reliance on imported energy and foreign exchange considerations. This is a fortunate circumstance given Poland's debt situation, and it can only take on greater significance as world energy prices start their temporarily deferred rise and

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ENVIRONMENTAL MANAGEMENT CONCEPTS TABLE 6 Emissions of sulfur dioxide in realtion to gross energy (tons per year SO2 per millions tons coal equivalent) Belgium FRG Spain Hungary Poland Yugoslavia 7,656 6,299 30,660 33,800 23,757 28,571 SOURCE: UN ECE, 1987. 71 the exportable share of Poland's coal production becomes more valuable on world energy markets. As noted previously, Poland's industrial sector is characterized by generally low levels of efficiency in the use of fuel and energy, which means, ironically, that relatively modest improvements in process efficiencies will generate notable marginal gains in fuel conservation and cost savings. Reduced energy use has the potential to simultaneously improve operating costs for firms, maintain the nation's balance of payments, and lessen the strain placed on the country's environment by reducing the quantities of air pollutants emitted from burning coal. The implementation of aggressive energy-efficient measures could allow for increased use of coal for domestic needs while maintaining coal exports at just half of the 1986 volume in the year 2000. Transportation Poland's transportation sector is significantly oriented toward relatively efficient modes (e.g., railroads and buses) as opposed to less efficient ones (e.g., private autos and airplanes). ~ the extent that a transportation system can be operated on electricity produced from domestic coal, this fundamental orientation is an inherent strength for a country whose import of oil is constrained by its balance of payments situation. However, while it is a boon for its environment that cars in Poland are fewer and smaller than in Western countries, the potential decrease of pollution this causes is offset by the fact that the general fuel efficiency of Polish-produced automobiles is poor by European standards. Therefore, improving the overall efficiency of motorized vehicles will both conserve imported fuel and limit emissions of air pollutants. Specifically, investing in upgrading the combustion efficiency of fleet vehicles such as urban diesel- fueled buses and trucks would be a step toward improving air quality in Poland's cities (Wharton, 1986~. Some 600,000 tons of liquid fuel could be saved annually by improving

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72 ECOLOGICAL RISKS the efficiency of the country's delivery transport system, which would virtu- ally maintain the balance between current liquid fuel supplies and projected growth of motorization (Skorkowska, 1986~. Capital might be made avail- able to assist the simultaneous conversion of Poland's automotive industry to lead-free and more efficient engines and its refining industry to lead-free gasoline. This would speed the removal of a serious environmental health threat as it abetted fuel conservation. Housing Poland's housing sector has not responded to the potential posed by energy-saving housing construction and heating regulation methods. Poland's buildings, new as well as old, are in desperate need of weatherizing and insulation due to prior efforts over decades to ease the country's housing shortage by the rapid construction of a huge number of units with negligible attention to energy efficiency (Dienes and Merkin, 19853. Energy use in heating is estimated to be twice the technically required level (Skorkowska, 1986~. Automatic regulation of district heating systems combined with weatherized buildings constitute a large and untapped "source" of energy which Poland's energy planners can utilize. Agriculture The country's agricultural system, though in some ways antiquated, is by West European and North American standards relatively free of depen- dence on imported fuels, fertilizers, and pesticides. Because 75% of the country's farms are in private hands and operate on a rather lean budget of purchased inputs, agriculture in Poland holds the potential to generate greater marginal gains in output in response to relatively modest inputs of fertilizer and technology than do more developed agricultural sectors of other industrialized countries. Poland's "low-tech" private farming should be examined as a case study of economically viable, labor-intensive, ecolog- ically sustainable, low-energy agriculture in an advanced economy (Cook, 1984; Chapter 15, this volume). At present, Poland's 2.8 million small farms rely on purchased energy from conventional sources, including coal; wood, and electricity, which contribute to the pollution of water in' the form of farm runoff. An estimate prepared for the World Banl: states that 20,000 of these farms under 50 hectares are suited to the production of biogas energy from farm wastes, a practice that would satisfy farmstead energy needs, reduce effluent runoff, and improve farm financial performance. Experimental activities along these lines are planned as part of the program sponsored by the Fund for the Development of Polish Agriculture.

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ENY7RONMENTAL MANAGEMENT CONCEPTS 73 Food Processing Poland's food processing industry, though technologically obsolescent, produces products of good quality. Improvements in processing and mar- keting should be sufficient to facilitate the expanded export of the country's unique food products to the international market. Food production and processing is not an environmental measure per se, but, if properly car- ried out, can be ecologically benign, function on low energy inputs, and produce quite favorable value-added ratios all elements of the type of reorientation necessary for Poland's economy overall. As a component of national plans for investment in export products, it could constitute a tonic for the country's heavily industrial economic mid Poland ought to be internationally known, for example, for its fruit juices and fruit products. Both fruit production and processing are well established in Poland, and the technology and inputs this industry needs for modernization are only modestly sophisticated and relatively non-capital intensive. Pollution Control Technology Poland has a sophisticated engineering profession and a highly skilled manufacturing work force. However, in terms of environmental protection, it has an undeveloped sector for the manufacture of pollution control and waste treatment equipment which currently cannot supply the country's needs. This failing has been pointed out by Polish observers not only as a hindrance to pollution control policies, but also as a missed opporunity for both domestic industrial restructuring and export of manufactured goods. This prospect has recently received attention in Poland as well as abroad. Because of the acute load of transbounda~y air pollution it receives from Poland and other countries of Central-Europe, Sweden has indicated a willingness to make available certain advanced pollution control technologies and credits for their manufacture and installation in Poland in return for the long-term gains that will ensue. In a similar vein, two foreign firmsone British and one Swedish have joined with the Polonia Association to create the Polonia Ecological Foundation for the purpose of gathering foreign capital for investment in Polish firms engaged in the manufacture of pollution control and wastewater treatment devices. PROSPECTS lb free itself from its economic impasse and reduce the threat of ecological crisis, Poland must exploit the potential of investment with an eye not merely for profit but profit with environmental protection. What are the prospects for a policy of investment that takes into account the

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74 ECOLOGICAL RISKS demands and constraints of environmental protection? Polish authorities appear to be aware that the country is approaching a day of reckoning with regard to its environment which could be as politically disruptive as the country's economic problems have been. Continuing decline in Poland's standard of living and quality of life, due to acute ecological stress and leading to increased social discontent, is a prospect that was pointed out by the Committee on Man and the Environment of the Polish Academy of Sciences in a report on the effectiveness of environmental protection measures (Polish Academy of Sciences, 1987~. Events of recent years indicate that Poland's leaders are now willing to take a stance that places environmental issues on a par with the county's other serious problems. One of the first actions of the government of Prime Minister Miecyslaw Rakowski after it assumed power in mid-1988 was to announce that environmental protection was to be one of the three elements of its program of economic recovery, along with the development of agriculture and the expansion of the housing construction industry. The Solidarity labor union's proposal for the 1989 government-opposition "roundtable" talks placed environmental protection in a central position among its issues on the agenda (Protokol, 1989~. The non-communist Mazowiecki government which assumed power in mid-1989 retains concern for environmental protection, despite the fact that it is only one of a series of major problems the country must address. That environmental protection has figured prominently in the programs of two successive governments from opposite ends of the political spectrum is significant in Poland's current political context; Poland's leaders are now pressed to redeem the country's economy in the eyes of both the international financial system and their own people. By addressing the interwoven problems of economic stagnation, environmental havoc, and economic reorientation, Poland may be able to chart a course that progressively satisfies all of its real creditors its people, the banks, and the environment REFERENCES Broda, Z. 1988. DyskusyJne problemy gospodarki funduszami kologicznymi (Current issues in the management of the ecological funds) in Zastosowanie Instrumentow Eko- nomicznych i Prawnych w Ochronie Srodowiska Naturalnego (Ihe Application of Economic and Legal Instruments in the Protection of the Natural Environment), Gorka, K, ed. Krakow: Polish Economic Association. Budnikowski, A., MJ. Welfens, and S. Sitnicki. 1987. Rozwoj gospodarcy a ochrona srodowiska w krajach RWPG (Economic development and environmental protection in the countries of the CMEA). Warsaw National Economic Publishers.

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ENVIRONMENTAL ALANAGEMENT CONCEPTS 75 Cook, E. 1984. Agricultural reform in Poland: Background and prospects. Soviet Studies 36~3~. [For examples of U.S. research on low-energy, biologically sustainable and ecologically sound agriculture, see the work of the Land Institute of Salina, Ks., the Rodale Institute of Emmaus, Pa., or the Institute for Alternative Agriculture, of Greenbelt, Md.] Daly, H.E. 1986. Toward a new economic model. Bulletin of the Atomic Scientists 4. Dienes, L., and V. Merkin. 1985. Energy policy and conservation in Eastern Europe in East European Economies: Slow Growth in the 1980s. vol. 1. U.S. Congress Joint Economic Committee. Washington, D.C.: U.S. Government Printing Office. Fallenbuchl, Z.M. 1965. Some structural aspects of the soviet-type investment policy. Soviet Studies 16~4~. Fallenbuchl, AM. 1987. The Polish economy - in the year 2000: Need and outlook for systematic reforms, recovery, and growth strategies (the Western view). Paper presented at the conference "The Polish Economy in the Year 2000," February 5~, 1987. University of Pittsburgh, Pittsburgh, Pa. Gomulka, S. 1988. Reforms the IMP and the World Bank should promote in Poland in Creditworthiness and Reform in Poland: Western and Polish Perspectives, Marer, P. and W. Siwinski, eds. Bloomington, Ind.: Indiana University Press. Gorka, K, and B. Poskrobko. 1987. Ekonomika ochrony srodowiska (I~e economics of environmental protection). Warsaw National Economic Publishers. Grodzinski, W., J. Weiner, and P.F. Maycock. 1984. Forest ecosystems in industrial regions: Studies in the cycling of energy, nutrients, and pollutants in the Niepolomice Forest, southern Poland. Berlin: Springer-Verlag. Habe~troh, J.R. 1977. Eastern Europe: Growing energy problems. In East European Economies Post-Helsinki. U.S. Congress Joint Economic Committee,. Washington, D.C.: U.S. Government Printing Office. Kabala, SJ. 1985. Poland: Facing the hidden costs of development. Environment 11. Kassenberg, A., and C. Rolewicz. 1985. Przestrzenna diagnoza ochrony srodowiska w Polsce ~ e spatial diagnosis of environmental protection in Poland). Warsaw: National Scientific Publishers. Kozlowski, S. 1986. Kierunki zmian w srodowisku przyrodnicznym (I)irections of change in the natural environment). Kosmos 1~190~. Warsaw: National Scientific Publishers. Kramer, J.M. 1986. The environmental crisis in Poland. International Institute for Environ- ment and Society, Berlin. Peszko, Z 1988. Funkcjonowanie systemu instrumentow ekonomicznych ochrony srodowiska (The functioning of the system of economic instruments of environmental protection) in Gorka, K 1988. Polish Academy of Sciences. 1987. Ocena skutecznosci i kierunkow zialania w dziedzinie ksztaltowania i ochrony srodowiska (An evaluation of the effectiveness of measures in the field of the shaping and protection of the environment). Committee on Man and the Environment. Warsaw. Polsko-Polonijna Fundacja Ekologiczna. 1988. Statut Fundacja (Articles of Incorporation). Polonia Ecological Foundation, Wamaw. Unpublished. Protokol Podzespolu d/s Ekologii Okraglego Stolu (Report of the Roundtable Subcommittee on Ecology). 1989. Warsaw. Unpublished. Rocznik Statys~czny. (Statistical Yearbook). 1987. Main Statistical Office, Wa maw. Rostowski, J., and S. Gomulka. 1984. The Polish reformed economic system, 1982-83. Soviet Studies 36(3~. Skorkowska, B. 1986. Energy resources and the restructuring of the Polish economy in Energetyka, Srodowisko, i Planowania Rozwoju (Energy Polipy, the Environment, and Development Planning). Committee on Environmental Engineering and Institute for Basic Technical Problems. Wamaw: Polish Academy of Saences. United Nations Economic Commission for Europe. 1987. National strategies and policies for air pollution abatement. New York: United Nations. U.S. House of Representatives. 1987. Poland's renewal and U.S. options: A poli~ reconnaissance. Committee on Foreign Affairs. Washington, D.C.: U.S. Government Printing Office.

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76 ECOLOGICAL RISKS Wharton Centraltr Planned Economies Series. 1986. Analysis of Current Issues. 6~423. W'niecki, J. 1987. Ike distorted world of Scviet-type economies. Pittsburgh, Pa.: University of Pittsburgh Press. World Battle 1984. Energy Efflcienar in the Steel Industry. Washington, D.C.: World Bank, World Band 1987. Poland: Reform, adjustment, and growth. Washington, D.C.: World Bank. Zylicz, T. 1987a. Europejskie t~nsfery zanieczyszczen a problemy modernizacji gospodarki polskiej (European transfem of air pollution and problems of modernizing the Polish economy) EKO Series Paper #8713. Warsaw: University of Warsaw Department of Economics. lg87b. Will Poland pin the thirty percent club? EKO2 Series Paper #8707. Department of Economics. Warsaw: University of Warsaw.