Financing Models for Soil Remediation Green Finance Approaches to Soil Remediation International examples Green Finance Approaches To Soil Remediation: International examples © 2018 Norwegian Institute for Water Research (NIVA) Published by the International Institute for Sustainable Development and the Norwegian Institute for Water Research. INTERNATIONAL INSTITUTE FOR SUSTAINABLE DEVELOPMENT The International Institute for Sustainable Development (IISD) is an IISD Head Office independent think tank championing sustainable solutions to 21st–century 111 Lombard Avenue problems. Our mission is to promote human development and environmental Suite 325 sustainability. We do this through research, analysis and knowledge products Winnipeg, Manitoba that support sound policymaking. 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Green Finance Approaches To Soil Remediation: International examples June 2018 Norwegian Institute for Water Research (NIVA) Ingvild Skumlien Furuseth, Karl Jakob Kammler, Wenting Chen, Froukje Maria Platjouw, Yan Lin, Morten Jartun, Thorjørn Larssen, Mathias Lund Larsen Cover design is based on soil symbols used in mapping soil types. ii Green Finance Approaches To Soil Remediation: International examples ABOUT THIS REPORT This is a part of a series of outputs of a four-year project, Financing Models for Soil Remediation, carried out by the International Institute for Sustainable Development (IISD), the Norwegian Institute for Water Research (NIVA) and the Chinese Academy of Environmental Planning (CAEP), in association with the Centre for International Climate and Environmental Research (CICERO) and the International Institute of Green Finance (IIGF) of China Central University of Finance and Economics (CUFE) with support from the Norwegian Ministry of Foreign Affairs. The project aims to support the implementation of China’s priorities and its policy development process through institutional partnerships; mutual learning and exchange; strengthening of capacity, especially in government institutions; and the effective demonstration of results on the ground in the implementation of China’s environmental priorities. The overall objective of the project is to harness the full range of green finance approaches and vehicles in the task of funding and managing the associated risks in the remediation of contaminated soils in China. This series of reports focuses on the financial vehicles available to attract investment to the environmental rehabilitation of degraded land and the financial reforms needed to make these vehicles a viable and desirable means of investing in land rehabilitation. We draw on best practices worldwide in funding environmental rehabilitation, with a special focus on the design and use of financial mechanisms to attract private investors, share the risks and offer a clear benefit for the rehabilitated land. This report was written by Ingvild Skumlien Furuseth, Karl Jakob Kammler, Wenting Chen, Froukje Maria Platjouw, Yan Lin, Morten Jartun and Thorjørn Larssen. This report was edited by Lisa Muirhead and Tom Penner. ACKNOWLEDGEMENT In addition to the authors highlighted above, we would like to acknowledge the guidance and insights of a number of people. The authors would like to thank all who shared information and insight about the cases: Terje Aamot from Flekkefjord municipality; Tor Øivind Solvik from Flekkefjord Motorbåtklubb; Erik Høygaard, Jeanette Bente Beckius and Harald Solberg from the Norwegian Environmental Agency (NEA); Chloé Annino from Ginkgo Advisor; Michael Mücke Jensen from the Danish Oil Industry Association (Energi- og olieforum); Preben Bruun from the Danish EPA (Miljøstyrelsen); and Jeff Hukill and Ronald Smedley from the Michigan Department of Environmental Quality. We are grateful to the representatives from IISD, CAEP, CICERO and IIGF whose input has been an important contribution to this report: Joe Zhang, Nathalie Bernasconi, Oshani Perera, Elka Parveva-Kern, David Uzsoki, Laurin Wuennenberg, Andrés Cuéllar Illera, Flavia Thomé, Mark Halle and Fida Rana from IISD; Aiyu Qu, Zhanfeng Dong, Yunting Duan and Wu Qiong from CAEP; Knut Halvor Alfsen and Taoyuan Wei from CICERO; and Yao Wang and Mathias Lund Larsen from IIGF. Findings and opinions expressed in this paper are not necessarily shared by those contributing to the work, and any errors and omissions are the responsibility of the authors and partner institutions. iii Green Finance Approaches To Soil Remediation: International examples Executive Summary The scale of ecological degradation requires ever-greater natural resources to be repaired. With much of the degradation being the result of historic and cumulative environmental pressures for which traditional liability rules cannot generally work, new financial instruments and sources must be harnessed to fund restoration and remediation projects. Often environmental degradation will have direct, negative impacts on human well-being, most evidently on local communities living near affected areas. When degraded ecosystems pose an immediate threat to people’s livelihoods and health, such as in the case of contaminated soil or sediments, the political imperative to undertake remediation will be particularly strong. A remediation strategy intended to ameliorate contamination in a specific area can have different costs and different results when applied to the same ecosystem type in a different geographic area due to variations in regional or country-specific cost structures, such as workers’ salaries and fuel costs. The size of the projects also is a material factor. This report documents and analyzes how different financing instruments have been used to support soil remediation projects. We have chosen seven different cases with different financial measures used: the Superfund (United States), Clean Michigan Initiative bond (United States), the Danish Oil Industry’s Remediation Fund (Denmark), the Ginkgo Fund 1 (France and Belgium), Bonfol Soil Remediation Project (Switzerland), and Flekkefjord and Hempel cases (Norway). The first four cases address programs for financing soil remediation projects, and the latter three cases address specific remediation projects. For the first four cases, we provide information on both the programs and chosen projects under each program. In each case, we look at the background of the remediation program or project, including the level of development in the region or the nation at the time, and the type of land the remediation projects focus on. Then we identify financial actors, financial instruments used, financial sources and financial recipients, costs and various risks the project faces. Two types of costs that affect project return are discussed: transaction costs and information costs. The risks include legal, regulatory, social, political, technical and physical, and market risk. For each case, both success factors and weaknesses are discussed. This report finds that the different financing approaches to soil remediation projects have different fields of application. In urban areas, it is easier to mobilize private funding, as remediation will increase possible revenue streams after remediation. Funds aimed for long-term soil remediation of a large quantity of sites rely on the continuity of funding. For instance, continuity may be ensured by a special tax on polluting industries or regular fixed grants from general fiscal revenue. As another example, the establishment of a remediation fund to provide loans, security and grants may ensure continuity and help mobilize private capital in the long term. Many countries have legislation that follows the polluter pays principle. However, the polluter notion for cost liability may differ greatly. It may be defined broadly by including, for instance, landowners and leaseholders, or a narrower definition