Moldova’s National Environmental Fund is a key instrument to allocate public finances for environmental protection and improve environmental outcomes in Moldova. However, reforms are needed to improve its overall effectiveness and transparency, update its legal basis, address its lack of financial resources and give it strategic focus. The EU4Environment Green Economy Programme has been supporting the Ministry of Environment of the Republic of Moldova in these four strategic areas.
Ineffectiveness and lack of transparency:
- The Fund faces challenges related to the effectiveness and transparency of its operations. This includes issues with fund allocation, project selection, and overall management efficiency.
Improving effectiveness and transparency of Fund operations:
- Work under EU4Environment developed an Operational Manual that sets out clear guidelines for Fund operations including project selection and evaluation criteria, procurement policies and financial and administrative procedures. It fed into the development of a new Operational Manual on the Ministry of Environment’s Project Implementation Unit’s website.
- Work under EU4Environment led to amendments to the “Regulation on the administration of the National Environmental Fund” approved by the Cabinet of Ministers on 19 October 2022. The document outlines the administration of the National Fund for the Environment, covering its establishment, organization, financial management, and operational procedures. It also defines the process for identifying, evaluating, selecting, approving, contracting, and monitoring environmental protection projects, along with conducting post-implementation assessments.
Outdated legal framework:
- The legal framework governing the National Environmental Fund is outdated and inadequate. Reforms are necessary to align the Fund’s operations with current environmental policy goals and EU and OECD best practices.
Updating the Fund’s legal framework:
- Work under EU4Environment provided analytical and legal inputs to help amend the “Regulation on the administration of the National Environmental Fund” and focuses the Fund exclusively on financing of projects in the fields of environmental protection, climate change and sustainable management of natural resources.
- Analytical inputs under EU4Environment on pollution taxation fed into amendments to the existing Law on pollution taxes (no. 1540/1998), which was approved by Parliament on 31 July 2023: .
Limited Financial Resources:
- Limited financial resources of the Fund hinder its ability to address the growing environmental challenges in Moldova adequately.
Addressing the Fund’s limited financial capacities:
- Work under EU4Environment provided analytical inputs to wider environmental tax reform efforts in Moldova. It developed recommendations to reform existing environmental tax and payment instruments in relation to current tax rates, tax base, improving tax collection and consider potential new pricing instruments. These fed into amendments to the existing Law on pollution taxes (no. 1540/1998), which was approved by Parliament on 31 July 2023.
- Improving the Fund’s operational effectiveness and efficiency (see Improving effectiveness and transparency of Fund operations) will also help ensure the Fund uses its resources efficiently.
Need for strategic focus:
- There is a lack of a clear strategic focus, with the fund needing to define specific environmental priorities and concentrate its resources on key areas that align with Moldova’s national environmental goals.
Helping strategic refocusing:
- Work under EU4Environment led to amendments to the “Regulation on the administration of the National Environmental” which focuses the Fund exclusively on financing of projects in the fields of environmental protection, climate change and sustainable management of natural resources. The new regulation was approved by the Cabinet of Ministers on 19 October 2022.