EXTRA-BUDGETARY FUNDS AS AN INSTRUMENT OF ENVIRONMENTAL-POLICY

In postcommunist countries extra-budgetary funds have a significant fu nction. They collect means for quick solutions to the most urgent prob lems of the environment arising from the transformation of the system of public finance and the not yet fully developed capital market. Thei r revenues came mainly from fines levied for pollution. In 1991 the St ate Environmental Fund was established in the Czech Republic to handle these revenues. The authors discuss some problems for the future exis tence of these funds as instruments of the state environmental policy. These are documented in data from the State Environmental Fund of the Czech Republic. The revenue from charges for environmental pollution is decreasing as improvements are made in the environmental situation in the Czech Republic. Funds represent the atomization of public budge ts, along with the fact that redistribution is under limited control o f Parliament. The continuing supply of subsidies might cause an alloca tive distortion of the market function and favor certain economic subj ects. End-of-pipe technologies are mainly subsidised instead of innova tive solutions and thus redistribution of funds between environmental components and the regions is made on the basis of decisions by admini strative bodies and pressure from interest groups. The experience of d eveloped countries shows that it is useful to diversify the support fo r environmental improvement into more sources with different ties to p ublic budgets.