Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Portugal Environmental Export Market Plan

Chapter 2-The Environmental Scene

Portuguese Prime Minister António Guterres has indicated that improvement of the environment is one of his government's primary goals. The people of Portugal are joining campaigns to clean up, and enthusiastic environmental groups are becoming more aggressive in their demands to recover the natural beauty of the country. Without a doubt, the environmental market in Portugal offers important business opportunities for American companies interested in participating in a program that has strong government and public support. Portugal's relative underdevelopment compared with other EU countries should be viewed as an important market opportunity for American companies. Millions of dollars in development assistance are pouring into Portugal, particularly in the transportation and environmental infrastructure sectors.
In line with EU directives, specific environmental plans have been formulated and legislation has been enacted. The EU has helped Portugal implement new standards by providing substantial grants and loans for environmental projects. However, a balance between the need to reduce government spending and implementing new environmental policies is yet to be defined. The market for environmental equipment and services could be affected by these factors in the future. Capital investment required to develop environmentally friendly practices may not be available in the required amounts from government sources, international institutions, or the private sector. Imposition of stricter management controls may not be implemented at the expected or required speed. It is very difficult and costly to turn around many generations of neglect of the environment. These factors make it a challenge to define the size of the environmental market with absolute precision. Perhaps the systematic use of the polluter pays principle and the user pays principle could be the key to overcoming the challenges associated with limited public capital investment. The EU and the Organization for Economic Cooperation and Development (OECD) favor the creation of green taxes to force polluters and consumers to pay for the cost of recovering and maintaining the environment at a level of sustainable development.

Portugal and the European Union

The Portuguese market for environmental technologies should be viewed in the context of Portugal's membership in the European Union, which the country joined in 1986. By joining the EU, Portugal agreed to meet EU environmental standards and has received considerable assistance in the development of new infrastructure to correct past practices and introduce environmentally friendly technologies (table 5). Portugal will continue to receive financial assistance from the EU for major projects in the environmental sector. An important source of EU funds is the Cohesion Fund, which was designed to help four member countries (Spain, Portugal, Greece, and Ireland) come up to the average EU per capita standard of living. The funding from this program is provided as grants, which do not have to be repaid, although they do require matching funds from the recipient countries. Money from the EU Cohesion Fund has been invested in environmental and transportation infrastructure projects since the program was created in 1992. Additionally, the EU divides structural funds to assist with economic development (see box on page 8) among its member countries.
The EU is providing approximately $6.2 billion for environmental projects in Portugal between 1994 and 1999. However, if the EU accepts new members from Central and Eastern Europe, it is feared that funds that have been available to assist the lesser developed present members may flow to those new members, where there are very serious environmental challenges that can affect other European countries. Portugal is expected to receive between 16 and 20 percent of EU Cohesion Fund grants between 1997 and 1999. It is estimated that Portugal received about $486 million in 1997. Portugal should receive $495.72 million in 1998 and about $505 million in 1999. At the current exchange rate of 1 US dollar to 1.08 ECU, Portugal will receive in this three-year period approximately $1.487 billion.
Section 1.2 on the general state of the Portuguese economy, noted its convergence with the other members of the EU toward the EMU. A parallel convergence toward environmental standards is also under way, in most cases with the financial assistance of the EU. One important aspect of the trend in the past 12 years is the heavy reliance on EU subsidies and grants for capital projects in the environmental field.

Table 5: Public Transfers between Portugal and the EU
(in billions of escudos)

	1994	1995	1996
A. From the EU to Portugal	507.9	715.1	688.0
(in percent of GDP)	2.7	4.6	4.2
Structural Fund	326.9	464.7	495.2
(in percent of GDP)	2.3	3.0	3.0
(in percent of total investment)	9.0	12.1	11.9
Cohesion Fund	33.7	82.5	37.6
EAGGF-Guarantee	139.7	138.5	126.4
Other	2.0	29.4	16.9
B. From Portugal to the EU	247.3	196.1	182.2
(In percent of GDP)	1.7	1.3	1.1
C. Net transfers (A-B)	260.6	519.0	505.8
(in percent of GDP)	1.8	3.4	3.1

Sources: IMF, Ministry of Finance, and INE

Without EU funding, many of the important advances in the environmental area in the recent past may not have taken place. The capital requirements for implementing modern environmentally friendly methods of providing basic public services-such as solid waste collection, treatment, and disposal-would not have been available. The high costs of remedial action to correct years of neglect and mishandling of waste disposal make it hard to envision solutions without outside financial assistance.
District and municipal governments depend on the national government, as well as EU funding, for major projects in the environmental field. Several billion dollars would have to be invested to meet current EU environmental standards within the timetables that have been set by the EU over the next 10 years. These estimates include both public and private investments to meet EU requirements.
In 1996, the EU Council announced a new directive as part of a major initiative to create an Integrated Pollution Prevention and Control (IPPC) regulatory framework for all the member states. It calls for the implementation within a three-year period of a plan that will impose environmental protection mechanisms in the energy, chemical, and metal/mineral processing sectors. The Environmental Export Council of America has been looking at the implementation of this EU directive and monitoring its implementation to quickly identify any instance in which the regulation may become a discriminatory trade restriction. Among other things, the IPPC calls for the creation of “competent authority” in each of the member states, including Portugal, that will prequalify European and international prospective suppliers of environmental technologies within the EU concept of best available technology (BAT).
The BAT concept is not conceived as limited to the best European technology but could also include technologies from outside the EU. Each of the 15 member states of the EU is to cooperate in the creation of lists of best available technologies to control emissions harmful to the environment, to assist in the formulation of new EU-wide emissions limit values (ELVs), and to develop standards for the IPPC. So far, there has not been a link between BAT lists and public or private sector procurement of equipment or between BAT lists and import restrictions. However, the potential is there for possible restrictions in the introduction of technology imported from outside the EU. Nevertheless, the IPPC could also be used to limit the marketing and installation of European technologies that do not adhere to the best technology available in the world.
To sum up, the role of the EU in promoting environmental programs in Portugal is critical to understand the dynamics of the market. The EU sets standards and provides direction, as well as needed financing for environmental projects in Portugal. However, national economic and political realities still cast a strong influence over environmental programs.

European Union Structural Funds

The European Union (EU) uses three funding mechanisms to assist in European economic development. These funds are the European Social Fund, the European Regional Development Fund, and the Financial Instrument of Fisheries Guidance, the European Agricultural Guidance and Guarantee Fund, and Community Initiatives. A primary objective of the EU structural funds is to promote economic development in areas that have a gross domestic product (GDP) that is below 75 percent of the EU average per capita GDP.
The structural funds also aim at assisting in the modernization of European agriculture, fisheries, and industry, as well as protection of the environment. The EU funds several programs to accomplish these goals in Portugal.
The Environmental program, which runs until 1999, includes four principal activities: conservation of natural resources and improvements to the environment, technical assistance, improvements in the environmental impact of productive activities, and increasing public awareness and support for environmental programs. This program is managed in Portugal by the Gabinete do Gestor do Programa Ambiente, Rua de O Século #51, 1200 Lisboa. Telephone: (351-1) 3462751; Fax: (351-1) 3463730.
The so-called Interregis II program has as its goal the development of national parks to protect the environment, particularly fragile zones; the building of water treatment plants and pipelines to distribute potable water to the population; the development of renewable energy sources; prevention and elimination of pollution; and the development of administrative procedures for proper planning to protect the environment, particularly in border areas. This program is managed by the Direcçâo-Geral do Desenvolvimento Regional (DGDR). Rua de S. Juliâo # 63, 1100 Lisbon. Telephone: (351-1) 8814000; Fax: (351-1) 8881111.
The Life program, funded until 1999, has as its principal objective the support of innovative ways of reaching sustainable economic development without damaging the environment. It also funds projects to protect endangered species and protect natural habitats of endangered species. This program operates in Portugal under the management of the Direcçâo-Geral do Ambiente (DGA), R. da Murgeira, Zambujal, Apartado 7585; 2720 Alfragide, Portugal. Telephone: (351-1) 4728200; Fax: (351-1) 4719074.
The EU guarantees fair bidding in structural funds projects, according to the EU public procurement principles. Projects funded by the structural funds are usually below EU procurement rule thresholds. Notices are advertised locally and nationally. Structural funds projects need to be matched by national contributions to the project.
For additional information, contact the Commercial Service, U. S. Mission to the EU, PSC 82, Box 002, APO AE 09724 USA.

Pollution Prevention and ISO 14001

With the EU emphasis on reducing waste at the source, the importance of an international standard for environmental management system, of ISO 14001, is self-evident. This program is intended to encourage companies worldwide to voluntarily implement environmental management systems, along with their quality control management standards (ISO 9001).
The voluntary adoption of ISO 14001 is very slowly becoming a competitive advantage for the private sector. However, there is a wide gap in the speed of implementation. In Great Britain about 62 percent of the companies have adopted the ISO 14001 standard, and in Germany about 20 percent of the companies have done so. In Spain, on the other hand, only about 2 percent of the companies have adopted the standard. Some Portuguese companies and subsidiaries of large international companies operating in Portugal are adopting this standard, but as in Spain, this only accounts for a very small percentage of the companies overall.

Size of the Environmental Market

The Portuguese market for environmental technology is growing. However, it is difficult to calculate the size of the market. Many figures are mentioned to describe projected investment in the environmental field. It is a challenge to ascertain how much is actually being spent on environmental projects. It was already mentioned in the previous chapter that since 1992 there are no records of imports of any kind arriving in Portugal from other EU member countries. Thus, it is impossible to define the size of the environmental import market. The figures on direct imports from non-EU member countries do not do justice to the market size.
The second challenge is to translate the figures on investment from Portuguese currency or EMUs to American dollars, since exchange rates can fluctuate considerably. Any figure mentioned to describe investment in the environmental sector has to be placed in the historical context of the exchange rate at the time the figures were made public, and then it has to be updated. Estimates can fluctuate considerably from month to month. This exercise would also fail to provide an accurate picture of the market.
One could also analyze the level of investment in environmental projects as a percentage of gross national product (GNP), but one runs into the problem of defining a base price level. For all of these reasons, the most realistic message that one can receive from all the data is that without a doubt, investment in the environmental sector has grown and will continue to increase in the next few years.
During the course of this study, the most reliable figures on investment in the environmental area are the funds that the EU allocates for environmental projects in Portugal for 1997-99, which were mentioned earlier: $1.487 billion plus the Portuguese counterpart, which would bring the total to about $6 billion through the year 2000.
The U.S. and Foreign Commercial Service, in its FY 98 Country Commercial Guide for Portugal, estimated that the Portuguese market for American environmental technologies is experiencing an average growth rate of between 4 and 5 percent annually. Since many of the products used by the environmental sector-such as filters, membranes, pumps, valves, and compressors have other uses-it may not be possible to determine accurately the exact size of the market in some areas.
Official U.S. Government trade data do not cover the eight-digit harmonized code needed to identify the level of exports of these items. In addition, U.S. official trade data register only direct exports from the United States to Portugal but do not cover products sent to other European ports of entry, such as Rotterdam and Antwerp, and then redirected to Portugal. Because of the unknown and potentially considerable quantities of American goods entering Portugal through other EU countries, the 4 to 5 percent market growth estimate could be conservative. (Since 1992, when all internal customs offices at the borders between EU members were shut down, trade statistics do not capture imports that enter Portugal through other EU member states.)
One of the challenges in assessing the size of the market is defining what is the environmental industry and what is included in the definition of the market. For the purpose of this export market plan, the environmental sector has been defined along the traditional lines of such municipal services as water treatment and delivery to users, sewage infrastructure, waste collection, recycling, and treatment for final disposition. Traditional lines have been expanded to include air pollution control technologies, environmental engineering and consulting services, hazardous waste management, and remediation and cleanup services.
Based on this definition, the market analysis concentrates on the following areas:

Water pollution control, equipment, and services;
Wastewater treatment equipment and services;
Pumps, pipes, valves, chemicals, and other items needed for water delivery and discharge equipment;
Management and operation of potable water and wastewater treatment plants;
Solid waste management;
Equipment for collecting, recycling, handling, incinerating, or otherwise disposing of municipal solid waste;
Management of landfill sites, technology for the operation of landfills, and biological, thermal, and other treatments of waste; and
Air pollution control equipment and services.

Government Investment in Environmental Programs

Portugal has been privatizing state-owned companies at a fairly fast rate since 1989. As other EU member countries, Portugal is moving toward a greater role for the private sector in economic development. Traditionally, the basic environmental services-such as waste collection, drinking water, and sewage-have been provided by municipal governments. However, new modalities are developing, resulting from the need to find cost-effective ways of dealing with environmental concerns. One way is for several municipalities to form a regional authority to handle waste collection and treatment, as well as water treatment and sewage disposal, to achieve economies of scale. The EU has actively promoted these types of associations and rewarded them with economic assistance.
Many of the old waste dumps and landfill sites, which are highly contaminated with hazardous wastes, are not undergoing treatment. The large sums of money needed to take remedial action are simply not available. While inventories have been prepared for the larger sites, the task of inventorying the thousands of small sites throughout the country and estimating the cost of recovery is indeed a formidable one.

Financing for Environmental Projects

In 1992, the EU established the Cohesion Fund with the purpose of strengthening economic and social cohesion by reducing differences in standard of living in the member countries. This special fund is available to member countries that have less than 90 percent of the GNP average for the EU. Spain, Ireland, Greece, and Portugal qualify for this program.
The primary use of this fund is for investment in public infrastructure. Municipal and regional governments coordinate their proposals with their national government and then apply for assistance from the EU for funding from this program. Among the environmental projects that have received funding are water quality, water supply, sewage treatment, and waste management infrastructure projects. Funding received by Portugal from the Cohesion Fund has been invested generally in environmental and transportation infrastructure projects.
The original amount set aside for this program by the EU in 1992 was roughly equivalent to $19.54 billion. The figure has been revised upward to compensate for inflation. From 1992 to 1996, an estimated $9.73 billion was spent. As was already mentioned, Portugal is expected to receive between 16 and 20 percent of the EU Cohesion Fund grants between 1997 and 1999.
According to the European Union report on the use of grants from the Cohesion Fund in 1996, Portugal received financial assistance for the purpose of improving water quality, treatment of waste water, and the management of urban solid wastes. These projects were designed to improve environmental standards in the areas of the country with the highest population density. Another important goal of the program in 1996 was to promote the creation of joint ventures by adjacent municipalities with the purpose of improving environmental services and reducing costs through economies of scale.
During 1996, Portugal submitted 23 new projects, valued at $548.64 million, to the EU for funding. After adding the Portuguese Government counterpart to the financing of these projects, the total investment increased to approximately $645 million. During 1996, the EU approved 21 projects, of which 10 had been presented for funding in 1995. The total amount of EU investments approved during 1996 was approximately $1.24 billion. Of all the assistance provided to Portugal by the EU through the Cohesion Fund, almost 50 percent was allocated to environmental infrastructure development.
Projects presented to the EU for funding through the Cohesion Fund were grouped in 1996 into the following categories:

Potable water projects submitted by the national government;
Water and sewage treatment projects, submitted by local authorities, but within the parameters of the national government's hydrology plan; and
Regional projects for urban waste treatment, submitted by municipal governments.

The European Union publishes all procurement opportunities for major projects above approximately $4.5 million in the Supplement to the Official Journal of the European Communities, which is published nearly every day. It also publishes procurement notices for supplies when these purchases are expected to be above approximately $216,000. Procurement information is also published on a web site called Tenders Electronic Daily (TED). There is a subscription charge for both of these EU publications.
The Commercial Section of the American Mission to the European Union (USEU) in Brussels conducts a thorough review of these procurement notices, separates those that are open to American bids, and makes the information available to American companies. To obtain additional information on these services, see chapter 6, Positioning an American Company in the Market.
Cohesion Fund grants sooner or later will run out. It is hard to predict whether Portugal will continue to benefit from EU financing past the year 2001, but obviously the country will graduate from the Cohesion Fund grants sooner or later and local funds will have to be raised to address environmental concerns.

Plans for Treatment of Urban Solid Waste

There were 13 landfill sites operating in Portugal as of 1997. None meets technical standards needed to avoid environmental damage. Environmental groups feel that they are not up to attainable optimal technical operation to avoid environmental damage.

The Portuguese Government's Strategic Plan for Urban Solid Waste calls for building 40 sanitary landfills throughout the country for the purpose of long-term storage of about 40 percent of the waste produced in Portugal. EU Cohesion Fund grants will be used to help pay for the construction of these new facilities.

Private Sector Market

Portuguese industry is gradually modernizing its factories to reduce pollution. Smaller companies do not have resources to invest in the introduction of environmentally friendly technology; owners may not be inclined to increase capital investment in factories that only provide marginal returns. Others expect special government subsidies or economic incentives before they invest in introducing environmentally friendly technologies.
The pulp and paper industry, cement plants, electric utilities, and chemical factories are the largest polluters. Owners are expected to invest in upgrading the existing equipment in such recently privatized firms as:

Cimentos de Maceira e Pataias
SECIL
Portucel Industrial
Petrogal
Siderurgia Nacional—Planos
Siderurgia Nacional—Longos
Companhia Nacional Petroquímica
EDP

Agriculture and agro-industry have traditionally been important sectors of the Portuguese economy. In addition to being major water users (table 6), they are also among the greatest sources of pollution and other forms of environmental damage. Antiquated irrigation methods contribute to the problem. More efficient modern irrigation methods would be introduced if the farmers were forced to pay for the water they use. Runoff of agricultural chemicals pollutes the rivers and coastal waters. Environmentally friendly methods will be introduced over the next few years to meet EU targets by 2010. Nevertheless, it is very difficult to ascertain the speed of change and to project the level of investment needed or the financing that will be available to carry out the changes.

Table 6: Water Use in Portugal (percent)

Agriculture	22.9
Energy	22.9
Industry	10.7
Households	5.3
Aquaculture	4.3

Source: Anuário do Ambiente

Institutional Organization

The primary authority responsible for the environment in Portugal is the Ministry of the Environment. The basic organizational structure of the ministry divides responsibilities into the following areas:
Secretaria Geral (General Secretariat);
Direcção Geral do Ambiente: solid urban waste, noise pollution, industrial chemical substances, environmental impact assessments, EU and other cooperation programs, reassessments, environmental inspections and audits, nuclear/radiological safety, and environmental legislation;
Instituto da Agua: potable water, atmospheric control and information;
Instituto de Resíduos Sólidos (Institute for Solid Waste);
Instituto de Meteorologia: air quality and other atmospheric control and public information;
Instituto do Consumidor: consumer information and public relations;
Instituto da Promoção Ambiental: environmental education and public awareness; and
Instituto de Conservação da Natureza: nature conservation.

Each of the 18 district governments and 5 regional governments has its own authority in charge of coordinating environmental programs with the country's 305 municipal governments. Municipal governments handle environmental services. Groupings of municipalities have been formed in the past few years to deliver environmental services more efficiently, from clean water and wastewater treatment to solid waste collection, recycling, and disposal. The trend is for the creation of more of these service-oriented regional organizations.
Traditional municipal administrative structures were unable to efficiently provide environmental services. A new law (Decreto-Lei 379/93) was enacted on November 5, 1993, creating a legal framework for regionalization of environmental services. This law has been very controversial, with those opposed claiming that it usurps the power of local/municipal governments, forcing centralization of power.
The 1993 law established two types of management structures: one that allows for direct public management of environmental services and another that allows for the privatization of services by way of public tenders and awards of concessions to private sector companies. One peculiarity of the legislation is that it forces the total management of water treatment, wastewater treatment, and the collection and treatment of urban solid waste under one management structure.

Key Portuguese Public Sector-Environmental Institutions

	% of funding received in 1997
Ministério do Ambiente (Ministry of the Environment) Minister's Cabinet General Secretariat	NA 3.2 2.4
Direcção—Geral do Ambiente (Directorate General for the Environment)	12.1
Direcções Regionais do Ambiente (Regional Directorates of Environment ) (DRARN) DRARN - Norte DRARN - Centro DRARN - Lisboa e Vale do Tajo DRARN - Algarve	2.9
Instituto da Agua (Water Institute)	63.3
Instituto de Meteorologia (Meteorology Institute)	3.9
Instituto de Conservação da Natureza (Institute for Nature Conservation)	9.8
Instituto de Promoção Ambiental (Institute for Promoting Environmental Protection) (INAMB)	1.6
Instituto do Consumidor (Consumer Institute)	0.8
Gabinete de Protecção e Segurança Nuclear (GPSN ) (Nuclear Safety and Protection Bureau)	NA

Note: In 1997, the Ministry of the Environment operated with a national investment of $114.8 million from the national government and $103 million from the EU, for a total budget of $218.37 million. The water sector has been given primary importance by the ministry.
(See appendix A at the end of this report for addresses and phone numbers.)

Those opposed to the 1993 law point out that the legislation gives a clear preference to a system of concessions to private companies, to the detriment of public management structures in the hands of municipal governments or regional governments. The justification for the legislation was that the EU, through the Cohesion Fund grants, provides preferential treatment to regional government structures and to privatization of services.
The 1993 law was reinforced by another law in 1996, Decreto-Lei 162/96, which regulates the management of concessions of sanitation services to private firms. It places the Ministry of the Environment as a supervisor of the delivery of basic environmental services and as an overseer of municipal and multimunicipal operations.
Enforcement of environmental laws on industry is the jurisdiction of the national Ministry of the Environment. Ministry officials carry out inspections and assessments of polluting actions by industry and have the power to impose penalties on violators. Ministry officials also provide technical assistance to companies in the introduction of new technology to reduce pollution.

Environmental Organizations

Portuguese environmental organizations and Portuguese chapters or branches of international environmental organizations are active in educating the public and frequently take legal action to stop construction of major projects such as highways, airports, and factories if they feel that these projects will damage the environment. They have been successful in lobbying for environmental impact studies before major projects are approved.

Portuguese Environmental Organizations*

QUERCUS (National Association for the Conservation of Nature)
Association Portuguesa de tecnologías Ambientais (APEMETA) (Portuguese Association of Environmental Technology)
Associação Portuguesa de Engenheiros do Ambiente (APEA) (Portuguese Association of Environmental Engineers)
Liga para a Protecção da Natureza (LPN) (League for the Protection of the Environment)
Associação Portuguesa para Estudos de Saneamento Básico (APESB) (Portuguese Association for Basic Sanitation Studies)
Associaçâo Portuguesa dos Recursos Hídricos (APRH) (Portuguese Water Resources Association)
Sociedade Portuguesa de Ciencias do Solo (SPCS) (Portuguese Soil Sciences Society)
Instituto Lusiada para a Qualidade da Agua (ILAQUA) (Lusiada Water Quality Institute)
* Partial list. See appendix B for addresses.

In 1995, QUERCUS, the National Association for the Conservation of Nature, conducted the first comprehensive study of the challenges faced by Portugal in the disposal of urban solid waste. The Portuguese Government followed suit in 1996 with an in-depth survey of conditions in Portugal.
The Portuguese Strategic Plan for Solid Urban Waste, published in 1996, is based on the findings of these two important surveys of the Portuguese environmental sector.

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