ADVANCE UNEDITED COPY INTEGRATING PUBLIC ENVIRONMENTAL EXPENDITURE MANAGEMENT AND PUBLIC FINANCE IN TRANSITION ECONOMIES

In many countries with economies undergoing transition to a market economy, environmental expenditures seem to be less than optimal. The standard explanation by environmental economists and environmental policy analysts is that of government failures to provide environmental public goods or to correct market imperfections related to environmental externalities. These arguments often appear to hold, however,. part of the problem may also be that public institutions managing environmental expenditure may attract less resources if they do not corroborate with the acknowledged standards of sound public finance. The focus of the paper is on public, domestic institutions managing environmental investment expenditures in the transition economies of Central and Eastern Europe (CEE) and the New Independent States (NIS). Special attention is paid to autonomous, public environmental funds due to their distinctive role played in the management of public environmental expenditures in these countries. Despite acknowledged problems, environmental funds have usually been recognised as useful tools for countries coping with problems of transition, on the condition that they meet minimum performance standards outlined in the 1995 OECD guidelines on Environmental Funds. A few environmental funds that made the greatest progress in implementing OECD guidelines ar