Second Environmental Performance Review of Albania

Chapter 5: Economic instruments and expenditure for environmental protection71inability to collect fines, however, it is surprising thatthe amount of imposed fines almost tripled between2007 and 2009.Revenue from economic instrumentsDuring this period, used vehicle taxes accounted foralmost three quarters of total revenue (Table 5.4).This percentage increases to 85 per cent when fueltaxes are added. There is no evidence that revenuegenerated for the central budget is used forenvironmental purposes. Furthermore, the tax onimported vehicles was abolished in 2011, furtherweakening the potential impact of economicinstruments.Water managementEconomic instruments in the water sector includetaxes on the abstraction and use of water, usercharges for municipal services and fines for noncompliance.Water user charges are administered by54 water utilities. The current level of tariffs is lowand collection rates are estimated at around 18 percent. There is no water metering and there is a lack ofenforcement toward non-paying customers.As a result, the water sector does not achieve costrecovery, let alone the creation of adequate marginsto secure medium- and long-term investments, and istherefore subsidised from the national budget.EnergyDue to the country’s endowment with ample waterresources and their use for energy generation,Albania scores very well in the energy intensity of itsGDP. In 2009, the country’s GDP per kg of oilequivalent in 2005 constant US$ was 13.8, whichfares very well compared, for example, with theOECD countries’ average which was 6.8. In the sameyear, the energy use measured in kg of oil equivalentper capita was only 537.8 in Albania compared with4,801 in the OECD countries.Electricity tariffs are set by the Energy RegulatoryEntity (ERE). As in the water sector, tariffs are lowand do not achieve cost recovery. Low electricityprices have discouraged investments and are notencouraging energy efficiency. Although ERE isexpected to increase electricity tariffs, attaining costrecovery remains a challenge and therefore anobstacle for investments in the field.Non-payment in the energy sector is widespread andthe government needs to address the issue throughensuring effective metering of used electricity andsubsequent payment for used electricity. Thisobjective is clearly not only technical in nature and itmay require various measures, including informationcampaigns and meter installation in some cases, butalso strengthening law enforcement due to thewidespread occurrence of illegal connections to thenetwork.Only if these problems are addressed can appropriatelevels of pricing be introduced in order to encourageefficiency while raising resources for necessaryinvestments in infrastructure maintenance andrenewal. In this way, it will eventually be possible forthe country to simultaneously promote economicdevelopment and address environmental needs, twogoals often not easily reconciledCommunal servicesLGUs generate income from cleaning and sanitationfees. This source of revenue accounts for about 7-10per cent of the total income for LGU budgets (Table5.4). For example, 2007 revenue accounted for 9.2per cent of LGU income and 2008 revenue for 9.4per cent. LGU officials (i.e. municipality andcommune councils) set fees for households,businesses and State institutions.Urban waste collection and transportation services inmost cities are provided by private companiescontracted by the municipalities. Waste managementservices are not yet provided in rural areas. Thelevied waste management tariffs include wastecollection and transportation to landfills (Chapter 7).5.4 Environmental expenditure andinvestmentThe picture remains mixed. On the one hand,MoEFWA has maintained a healthy position in theGovernment, since it has not seen its budget declinein recent years, despite the economic downturn. Itcurrently employs 1,360 staff members, according to2011 data from the Ministry of Finance (Table 5.5).However, environmental protection still remains lowin the Government’s priorities, despite significantenvironmental challenges for the country.Environmental protection is at the bottom of theGovernment’s 2011 budget broken down by function(Table 5.6).