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ENVIRONMENTAL action commands considerable popular support in East Europe.
One of the first things that its people demanded with their new-found voices,
once they had gained political freedom, was a clean-up. They have had enough
of the pollution that spews out continuously from their local factories
and grimes their lives. Voters in the West also want the factories in the
Eastern bloc to be cleaner: they suffer too when Eastern pollution wafts
westward.

There are, of course, economic as well as political pressures for the
East to go green. For Western manufacturers of antipollution devices and
other clean technology, the appearance of new consumers and environmentally
conscious governments provides a huge, new market for their goods and know-how.

On the other hand, the new, open market also presents an opportunity
for Western industries that produce, or even profit from, pollution. Some
may decide to build production facilities in the East because the low wages
of workers will reduce their costs. Other firms may take advantage of weak
or non-existent environmental laws to sell plant or products that are no
longer acceptable in the West. There are further openings for companies
wishing to dispose of wastes on the cheap: in the West, the costs are soaring
as standards become more rigorous.

The motor industry has so far attracted the most Western investment
in the drive to clean up the East. Eastern Europe doesn’t have many cars
on its roads now. As economies open, it is hoped, and consumers become more
prosperous, there will be more demand for cars, and with them, more pollution.

The emissions from Eastern models are notorious: the best-known culprit
is the East German Trabant, whose two-stroke engine churns out masses of
blue smoke. The evil, though, could be less if Western companies, and in
particular Western standards, dominate.

Volkswagen and Renault are talking to Skoda of Czechoslovakia about
joint ventures. Japan’s Suzuki is negotiating to build cars in Hungary.
Opel has a deal with East Germany to make 150,000 cars per year by 1993.
These cars, which will meet the pollution standards of the EEC, will replace
the heavily polluting Wartburg car.

Last November, Italy’s Fiat became the first foreign company to sign
a large joint venture with the Soviets under new legislation that allows
such cooperation. The project is to build 300,000 cars a year able to meet
Western pollution norms. Fiat announced that it would invest more than $4
billion to make cars in the Soviet Union, including construction of one
of the world’s most advanced, automated assembly plants and production of
a fuel-efficient engine.

The venture agreed in January between Volkswagen and IFA-Kombinat, which
makes the Trabant, illustrates what could be an emerging pattern of step-by-step,
environmentally sound industrial expansion in the East. Ortwin Witzel of
Volkswagen says the first step will be to fit Trabants with a Volkswagen
engine in the Trabant assembly plant near the town of Zwickau. Unfortunately
the cars cannot be equipped with catalytic converters to limit pollution.
The main reason, according to Witzel, is the design of the Trabant’s body
– there is no room to fit a converter except near the engine, where the
heat would melt it. The new engines will, however, produce far less pollution
than the Trabant.

Next, Volkswagen is investing DM60 million ($35 million) in building
a new plant at Zwickau for assembling bodies for the Polo model (welding
and painting will still be done in the West). The Zwickau plant, which will
be ready this year, will also fit engines, built in the nearby town of Karl-Marx-Stadt
under licence from Volkswagen. These cars will have catalytic converters,
and will meet Community standards so that they can be exported to Western
Europe.

Volkswagen will build a second plant in 1992, to weld and paint as well
as assemble cars. The pollution aspect – the enamel sludge and other residues
left after the painting – will not be so easily dealt with in the East,
not yet equipped to cope with the streams of waste from modern industry.
Wetzel expects that independent handlers will seize the opportunity to step
in and deal with the problem, without Volkswagen having to build any new
pollution facilities.

This leads to the question of how quickly businesses which handle wastes
or offer antipollution technology are moving into the East. This sector
more than any other runs into the biggest limitation to all development:
the East’s indebtedness, and general lack of hard currency.

Much is needed. Alexei Yablokov, a Soviet environmental activist, estimates
that just stopping the rampant pollution in the Soviet Union from worsening
will cost more than $350 billion in the next three years. Studies by the
Polish environment ministry and the World Bank estimate that it would cost
more than $20 billion to start bringing Polish industry up to Western environmental
standards. Poland, already $40 billion in debt, has an environmental budget
this year of $80 million. Some help is forthcoming, however. Finland, recipient
of large amounts of Polish air pollution, has pledged $20 million in equipment,
chiefly desulphurisation scrubbers for smokestacks.

The situation in East Germany diverges dramatically from most countries
in Eastern Europe. It will soon be part of a reunited Germany, and subject
to the environmental rules and legal liabilities of the European Community.
West German companies are investing heavily in pollution control technology
for the East, with government help.

Some 17 joint projects to clean up East Germany’s environment have been
planned, at a total cost to each side of a billion marks. For example, the
West German environment ministry has promised to make the nuclear reactors
at Greifswald in East Germany safe. That could cost a total of DM500 million
($300 million). The minister of environment in West Germany, Klaus Topfer,
says that his ministry currently has a budget of DM15 million per year for
nuclear safety in East Germany, and he hopes the rest of the DM500 million
would be forthcoming from industry.

The West German government is also lending a hand in the effort to clean
up electricity production in East Germany. The West German Association of
Electrical Utilities estimates that the total cost of modernising power
plants over the next five years to be DM35 billion. This would include replacing
the 19,000 megawatts of coal-fired generating capacity that would be uneconomical
to modernise because it is now far too old and polluting. In March, the
West German government agreed to pay 20 per cent of a DM500 million investment
by West German utilities in flue-gas desulphurisation for the biggest East
German coal-fired power plant, at Thierbach.

Such largesse, but also the imminent imposition of Western pollution
laws, is absent elsewhere in the East.

The biggest and fastest increases in investment in Eastern Europe are
expected in Hungary, which has a head start in privatising state-owned enterprises
and democratising the state itself. But Laszlo Antal, who is an economic
adviser to the government, admits that the country has ‘little choice but
to take in ecologically damaging industries’. Hungary, with a debt of about
$20 billion – the highest per capita in Comecon – and inflation at 23 per
cent and rising, is desperate for Western investment.

Last year, General Electric of the US paid $150 million to buy a controlling
stake in Tungsram, a Hungarian manufacturer of lightbulbs. It is the biggest
acquisition in the Eastern bloc so far: Tungsram accounts for a fifth of
the world market for lighting. GE plans to introduce large-scale automation
within Tungsram, and to build a lighting research centre, investing $50
million over the next four years. Central to its decision was labour costs,
which are 20 per cent below those in the West.

But as the labour force is cut back, and as changes in the Hungarian
economy force increases in wages, the investment will have to be justified
by other means than savings on labour costs. One could be scrimping on spending
for environmental protection.

The environmental movement in Hungary was strong enough to force the
cancellation of the Hungarian end of an agreement with Czechoslovakia to
build one of Europe’s biggest hydropower developments. Arguing with Tungsram,
whose success or failure will be a barometer for other Western companies
thinking of investing in Hungary, will be harder. If the company must cut
environmental costs to boost profits, environmentalists familiar with Hungary
suspect that little will stop it.

This is where the proposed European Bank for International Reconstruction
and Development, meant to provide credit for liberalising Eastern economies,
could do the most good. In April, representatives from most industrialised
countries met in Paris and signed a formal agreement to provide capital
for the new bank. Almost all other details remain to be negotiated, including
that of environmental guidelines for investment.

Vladimir Zalozieckyj, of Greenpeace International, believes it needs
someone to take an overview. He cites cases of Western firms selling environmentally
outdated technology to Eastern countries, such as the sale by Finland of
a pulp plant using chlorine bleach to Estonia. While this is better than
indigenous plants, he says, it represents a short-term improvement, as does
any ‘end-of-pipe’ technology that might be introduced to clean up the worst
of the East’s existing plant.

The Swedish company Svenska Flakt, which is supplying flue-gas scrubbers
to steel mills in southern Poland, is but one of many Western companies
selling pollution-control equipment to retrofit outdated Eastern factories.
In many instances, however, it might be more efficient to shut down polluting
factories and start afresh.

One impression is that in the chaotic, post-revolutionary East, Western
companies are taking every opportunity to enter the new open market, while
it is no one’s job to consider the overall impact on the environment.

Last year, Poland asked donors for $20 million worth of pesticides.
According to American environmentalists, the US government presented the
request to American chemical companies as a chance to obtain a share of
the potential Polish market. No one asked, in relation to the request, whether
Polish agriculture would be best served by expensive chemical inputs, or
whether low-input agriculture, now gaining favour in the US itself, might
be more beneficial in the long term.

The Germans are by far the largest Western presence in the East. But
the French petrochemical companies Elf and Total are considering investment
in petrochemicals in Romania. The huge Romanian industry is in dire need
of modernisation, not least because of the pollution it produces. It is
not clear what priority Romania, which even by Eastern European standards
is desperately poor, is likely to give to environmental matters. Much will
depend on what the French choose to provide.

Ferruzzi, the Italian chemicals giant, has signed three massive deals
to build chemicals plants in the Soviet Union. Ferruzzi’s president, Raul
Gardini, has tried to promote his company’s ‘green’ image in recent months.
One of the new plants will produce substitutes for CFCs that attack the
ozone layer, for export to East and West. One effect of glasnost, or openness,
in the Soviet Union may be to alert the rest of the world if products are
produced in dirty plants; for companies such as Ferruzzi this could be enough
incentive to build to high environmental standards.

The investment that could do the most good, says Gerald Leach of the
Swedish Environmental Institute, is in energy efficiency. In a recent study
of carbon dioxide emissions in Poland, he and Polish collaborators found
that investing $30 billion, at 1985 values, in improving efficiency would
save the equivalent of 80 million tonnes of coal, out of a total consumption
forecast to rise from 80 to 309 million tonnes of coal equivalent by the
year 2005.

‘There is an enormous potential for sales of energy-efficient technology’
and the plant to make it in Poland, says Leach. Such is the scope for relatively
inexpensive measures, he estimates, that cleaning up a given amount of pollution
can cost between three and five times less in the East than in the West.

What seems to be needed most is an agency to vet what is transferred
to the East, and why, as well as to evaluate needs. A good start may be
made this year by the US Environmental Protection Agency, which will spend
$5 million over the next three years on a centre to collect and disseminate
information on the incentives and barriers to the transfer of environmentally
sound technology to Eastern Europe.

Amy Evans of EPA says the Americans have found quarters for the centre
in Budapest, and hope funding will be forthcoming from other governments
in the region and from the European Community.

There remains the final big question. Will the liberalisation of Eastern
Europe have a positive or negative impact on the global environment? That
it will drastically affect the environment, East and West, is in no doubt.