ENVIRONMENT: Environmental Policy Restricts Investments

The government’s proposed environmental protection legislation is presently in the first reading within the Croatian Sabor and is already under criticism for being too restrictive.  The legislation is aimed at aligning with the European ecological network – “Natura 2000”.  Natura 2000 regulates the management of environmentally sensitive regions (e.g. national parks).

The present legislation defines 36.92% of Croatia’s continental territory and 16.60% of coastal territory as areas that will fall under the Natura 2000 regime, which significantly restricts the types of investment and project opportunities in these areas.  The Croatian Engineers Association has publicly criticised this legislation, especially the restriction on continental territory, which places Croatia at the top of the list of EU member states with the largest percentage of its territory categorised as environmentally protected areas.

As a comparison, the UK and Denmark have less than 10% of its continental territory categorised as environmentally protected areas.  The majority of EU member states (17) have up to 20% categorised, including France, Belgium, Germany, Italy, Austria and Sweden.  The countries with the highest levels include Hungary (20%), Bulgaria (33%), and Slovenia (35%).

After the final ratification of the legislation, the legislation will be reviewed and verified by the European Commission (EC) with final implementation expected by mid-2016.  As presently drafted, the legislation will significantly impact the realisation of strategic power plant projects, including the power plants Ombla, Molva, Kosinj, Senj, and the Sava River projects, valued at up to €3.2 million.  The Engineers Association considers the legislation to be detrimental to the realisation of investments in infrastructure, energy, industry and tourism.

The Environment Ministry explained that the proposed legislation is a result of Croatia’s rich biological diversity and disagree that it will hinder investments.  However, the EU member state examples counter this position and show that they depend on a high level of regulatory control to supervise investments and not limit project development.

In Croatia, it appears that individual national and nature parks (19) have maximised their areas of protection, which led to the high percentage of territory under protection (36.92%), due to the lack of confidence that the Croatian regulatory and supervisory system would succeed in controlling private and state investments; this is due to poor historical experience and has, subsequently, led to the use of legislation restrictions to control investment development…

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