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CZECH ENVIRONMENTAL INFORMATION AGENCY The Economy and the Environment in the Czech Republic after 1989 The Economy and the Environment in the Czech Republic after 1989 This publication was prepared with the assistance of the State Environmental Fund and Pražské služby, a.s. © CENIA, Czech Environmental Information Agency, 2008 2 | 3 Contents Foreword 5 1 Transformation of the Economy and Macroeconomic Development 7 2 Energy Sector 27 3 Mineral Extraction 41 4 Manufacturing Industry 53 5 Construction 69 6 Transportation 79 7 Agriculture 95 8 Forest Management 107 9 Water Management 119 10 Waste 131 11 Trade 151 12 Science, Education and the Information Society 153 List of references 185 The Economy and the Environment in the Czech Republic after 1989 4 | 5 Foreword This publication offers a comprehensive report on the development of the Czech economy and environmental impacts from the Velvet Revolution in 1989 to the pre- sent. During the turbulent 1990s, the quality of water and air gradually improved and the rehabilitation of old contaminated sites began. This trend was possible due to the extensive social and economic changes. Increasing production and consumption, more migration by the population, goods and services and increasing availability of idle capital resulted in new en- vironmental pressures. Most of the measures that brought about positive effects on society and the environment were implemented in the previous decade. Today’s complicated relationship between the economy, society and the environment re- quire data and foresight when planning new measures. CENIA, the Czech Environmental Information Agency, focuses its activities on horizontal environmental themes and their impacts on the economy and society. The data that CENIA has collected during the four years of its existence has made it possible to publish a second book covering different sectors. After the publication entitled The Environment in the Czech Republic 1989–2004, we focused more closely on the relationships between economic activities and their environmental impacts between1990 and 2007. The large team of authors has striven to provide unbiased information that is open to debate by any reasonable group. I would like to thank both the authors and the critics. It is up to the readers to draw their own conclusions from the information presen- ted in the book. Jiří Hradec Director of CENIA The Economy and the Environment in the Czech Republic after 1989 Dear Readers, The book you are reading is a sequel to The Environment in the Czech Republic 1989–2004 by CENIA, which covered the development of the state of the environment from the ‘Velvet Revolu- tion’ to the beginning of the 21st century. The purpose of the second part is to provide you with an overview of the trends and relationship between the economy and the environment over the same period, extended through 2006. Knowing this development will help us better understand the current state of the environment and its topical problems even though the data base is not quite complete and methodically homogenous. It is needless to emphasise that both the economic and social development during this period in question were very dramatic and in many respects full of crucial turns. The structural changes of the economy, represented on the one hand by strangling traditional ‘heavy’ industries and on the other hand by growing less energy-intensive industries and services, the fast development of passenger and freight road transport and life style changes of the Czech population caused by generally improved societal conditions and integration into the European area were the ba- sic factors affecting the development of the environment in the Czech Republic. Major positive changes were brought about by the Czech Republic’s accession to the European Union and the re- lated transposition and implementation of European law. This was largely because the European Community places heavy emphasis on the environmental aspects of policy. This development was also related to the changing nature of environmental problems. While 15 years ago, people had hardly any chance to infl uence the catastrophic state of the environment since most pollution was caused by large industrial enterprises and raw material extraction, to- day, each of us can signifi cantly affect these issues. Technological development has resulted in a decrease of certain kinds of pollution (per production unit). However, the current make-up of our GDP has a counter-effect since the material and energy demands of the population have risen. Energy intensity has dropped by more than 50 % over this period; the largest decrease has been reported over the last 3 years, at more than 5 % per year. Regardless, the energy intensity is still much higher than the EU average. Road transportation has become one of the most impor- tant factors impacting the environment. The number of passenger cars has nearly doubled over the period in question and reached over 4 million in 2007; the volume of freight has more than tripled. On the one hand, the trends shown above have meant lower industrial pollution (e. g. sulphur dioxide emissions have dropped to approximately one-tenth of the 1989 value) with related air and water quality improvement. On the other hand, new problems have emerged. These include: growth in ecological burdens from transportation, namely air pollution and noise; stagnant and recently even increasing greenhouse gas emissions that bring about the risk of global climate changes; modifi cation of the landscape structure, caused by extensive residential and commer- cial development; and related transportation infrastructure. This book will guide you through the sector by sector trends, offering a comprehensive view of ever more painful environmental issues. We believe that we have succeeded in what we set out to do and we look forward to your reactions. Various CENIA authors 1 Transformation of the Economy and Macroeconomic Development Chapter 1: Transformation of the Economy and Macroeconomic Development n1989, the Czechoslovak economy was one of the centrally planned economies with a high level of monopolisa- tion. All economic processes were controlled through a central plan. For all practical purposes, there was no real market and this situation resulted in an ever deepening economic and technological lag. Since 1989 to the present Ithe economy transformed successfully to a relatively developed market economy. The institutional transforma- tion required a change of the legal system to that of a democratic society. Several forms of privatisation were used to create a functioning private sector, which presently accounts for gener- ating approximately 90 % of the gross domestic product (GDP). Between 1990 and 2005, the GDP increased by 30 % at constant prices and, after a one-off leap at the beginning of the 1990s, infl ation was successfully kept at a low level. Following the decreases and the sluggish growth of the 1990s, macroeconomic development since 2000 has been characterised by high GDP and industrial growth rates and a strengthening currency and external stability but, on the other hand, also by a relatively high (8 %) unemployment rate and a growing public fi nance defi cit during most of the period. These unfavourable conditions were kept under control up until 2005. The problem of public fi nance stability (including pension reform) remains the most pressing issue and will be for the foreseeable future. The condition of the environment has corresponded with the economic level. Before 1989, Czechoslovakia was amongst the most devastated European countries. After a substantial improvement between 1990 and 2000, the con- dition of the environment has stabilised, showing both positive and negative year to year deviations. However, some indicators, especially those relating to air quality, may be indicative of the beginning of new adverse trends. Also, the high energy and material intensity of the economy, which partly results from the high proportion of industry in the national economy and the transportation boom, remains a problem. 1.1 The transformation and privatisation of the economy In 1989, our country had an economic system that was fundamentally different from the system After the end of the 1950s, there were existing in developed countries. Formally, the economy was controlled through a central multiple- repeated efforts aimed at improving the year plan and its directive indicators. It was a closed system and there was an ideological require- functioning of the economy through a num- ment demanding reliance on self-suffi ciency. Our international relations were closely interconnect- ber of reforms, especially with respect to ed with the economies of other communist countries. This resulted in a shortage economy, in which planning. However, these reforms met with ideological and political restrictions and products and raw materials were either lacking or abundant (i.e. if they were useless). failed. The only attempt at a conceptual re- After the revolution of November 1989, the economic stagnation and lag behind the West form occurred at the end of the 1960s. It ex- provided an impulse that necessitated fundamental changes in the economy. In the autumn of panded began in the economic sphere and 1990, the new Czechoslovak government, in cooperation with the national governments of the expanded to political life, but was stopped Czech and the Slovak republics, prepared a programme of radical economic reform that was in- by a Soviet-led military intervention. tended to ensure a swift transition from a centrally planned economy to a market economy. As of 1 January 1991, 85% of all prices had been liberalised (Žídek, pp 57). Those prices that had not In September 1990, the Federal Assembly been liberalised, e.g. prices of electricity, gas and rent, underwent gradual liberalisation and approved the “Economic Reform Scenario” as the basic programming document. deregulation. In 1998, the consumer price liberalisation level reached a level that was standard This was based on a restrictive monetary in EU countries.

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