Theory and Policy in the Context of EU Enlargement and Economic Transition
The Fondazione Eni Enrico Mattei series on Economics, the Environment and Sustainable Development
Edited by John W. Maxwell and Rafael Reuveny
Chapter 9: External Actors and their Prospective Roles in Environmental Cleanup in Central and Eastern Europe
Matthew R. Auer and Rafael Reuveny INTRODUCTION For nearly 15 years, countries in Central and Eastern Europe (CEE) have struggled to clean up communist-era sources of industrial pollution. Auer et al. (2001) report on how CEE countries dealt with this problem during the 1990s.1 Communist-era governments perpetrated environmental crises in CEE that are well-known to scientists, scholars and ordinary people alike. Many contaminated sites and pollution-prone industries remain in CEE; a large fraction of these sites are located in economically troubled subregions of CEE. Authorities in the region have endeavored to clean up and revitalize these polluted and economically distressed areas. The record of accomplishment is mixed. Foreign investors are key, prospective actors in the cleanup and restoration of old, contaminated sites and in the rehabilitation of pollutionprone industries in CEE. Paradoxically, in the early 1990s, many observers warned that foreign direct investment (FDI) to CEE would be stymied by investors’ fears of liability for past environmental damages, and more broadly, investors’ ambivalence about the lack of clear rules governing environmental liability. Reacting to alleviate these fears, during the 1990s, CEE governments clariﬁed rules and procedures governing environmental liability. In many cases, governments also granted investors partial or total immunity from liability for past damages. Auer et al. (2001) found that the aggregate level of FDI in CEE was not gravely aﬀected by environmental liability problems. However, during the 1990s, foreign ﬁrms did steer investments away from pollution-prone and contaminated industries, investing in greenﬁeld projects and in...
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