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Transition Economies' Development Crossroads: Opportunities and Challenges for Future Sustainability

This study at the crossroads of development in transition economies examines the challenges and opportunities faced by countries like Czech Republic, Hungary, Poland, Slovakia, and others. Analysis focuses on the investment climate, governance levels, and institutions' development, highlighting differences in Annex-I and EITs. The text considers the per capita FDI trends, historical entrepreneurship, and competitiveness for KP mechanisms. Special attention is given to heavy industry strategies and energy efficiencies in Russia and Ukraine, emphasizing the need for sustainable development and good governance to address rising energy and carbon intensities.

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Transition Economies' Development Crossroads: Opportunities and Challenges for Future Sustainability

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  1. Economies on Transition: At the Crossroads of Development Olga Gassan-zade Center for Clean Air Policy, Ukraine SB-18, Bonn, June 9

  2. New EU members Czech Republic Hungary Poland Slovakia Slovenia Latvia Lithuania Estonia FSU Russia Ukraine Candidate countries Romania Bulgaria Croatia EITs in the UNFCCC context Annex-I

  3. Differences in EITs • Regional affiliations • Political history • Level of governance and the rule of law • Development of institutions • Investment climate • Attractiveness for KP mechanisms

  4. Per Capita FDI, 2000

  5. New EU and Candidate Countries • Driven by accession • History of private entrepreneurship • Strong market and public institutions • Active foreign engagement • Diversification of GDP • Previous experience with JI/AIJ • Emissions trading as part of EU ETS

  6. Russia and Ukraine • Strategic focus in heavy industry • Competitive advantage in labor and energy-intensive industries • Driven by domestic rather than by foreign investment • Gross inefficiencies in energy and industrial sectors (Ukraine: $15-16 bln) • Lukewarm history with JI

  7. Energy and Carbon Intensity in EITs, 1998 Source: Frankhauser, S. and Lavric, L. The investment climate for climate investment: Joint Implementation in Transition countries, EBRD, 2003

  8. Industry Value Added in GDP

  9. Conclusions • The candidate countries appear best positioned to participate in JI • New EU countries will be part of EU ETS • Russia and Ukraine will not see the amounts of investment they need to change the situation in their industries, energy and carbon intensities are rising

  10. Thoughts for the Future • No reason to expect significant change in institutional development in Russia/Ukraine • Climate change is not a priority in Russia/Ukraine • If we fail to demonstrate that Kyoto can be a success this time there’ll be no case for the future. • Sustainable development • Good governance

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