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Trade and Environment

Theory and Policy in the Context of EU Enlargement and Economic Transition

Edited by John W. Maxwell and Rafael Reuveny

The debate about how best to manage the interplay between trade, industrialization and the impacts of both on the global environment continues to rage, particularly in the context of the introduction and ratification of the Kyoto Protocol. This book deals with a number of important issues surrounding the debate about trade and the environment, but places particular emphasis on the process of EU enlargement.
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Chapter 9: External Actors and their Prospective Roles in Environmental Cleanup in Central and Eastern Europe

Matthew R. Auer and Rafael Reuveny


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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