1 IntroductionBy itself, Estonia does not possess the technical or financial wherewithal to remediateits many pollution-prone factories, its antiquated municipal sewerage systems, and thekerosene-soaked and jet-fuel-soaked soils and aquifers left by the Soviet army. Basedon the results of an official inventory initiated at the end of 1992, the estimated cost forremediating damage caused by the Soviet Army to the environment in Estonia isapproximately 4800 million (Ratas and Raukas, 1997). From 1992 to 1998, theEstonian government invested approximately 2.5 million in a partial clean-up ofmore than fifty ex-military sites (Ministry of Environment of Estonia, 1999). Clean-upof contaminated industrial sites entails several thousand million euro of additionalcosts. At the current rate of remediation, and holding constant the process of naturalself-remediation, comprehensive clean-up of badly polluted military and industrial siteswould require several hundred years were Estonia limited to using only domestic publicfunds. In fact, over the past decade, Estonia has made considerable progress inremediating damaged sites because the central government has leveraged clean-upmonies from foreign governments (and in particular from Nordic governments), inter-national financial institutions (IFIs), and European, American, and Asian privateinvestors. In some cases, all three of these sources of external financing contributesimultaneously to the clean-up of particular sites, especially the clean-up of municipaland industrial sites.

We examined `before' and `after' environmental conditions at twelve, largeex-military, industrial, and municipal hot spots of pollution in Estonia. During the1990s, all of these sites received external financial or technical assistance, or both, topromote clean-up. But the types of external actors who participated and the extent oftheir largesse varied across sites.

Determinants of environmental clean-up in Estonia

Matthew R AuerSchool of Public and Environmental Affairs, Indiana University, 1315 East Tenth Street,Bloomington, IN 47405, USA; e-mail: mauer@indiana.edu

Anto RaukasInstitute of Geology, Tallinn Technical University, 7 Estonia Avenue, 10143 Tallinn, Estonia;e-mail: raukas@gi.eeReceived 23 November 2000; in revised form 17 January 2002

Environment and Planning C: Government and Policy 2002, volume 20, pages 679 ^ 698

Abstract. In the early 1990s, the government of Estonia determined that it possessed neither thetechnical nor the financial resources to clean up Estonia's Soviet-era pollution satisfactorily. Yet datareveal that, during the 1990s, Estonia was relatively adept at cleaning up old contamination. In thispaper we identify the key determinants of Estonia's relatively high level of success at environmentalremediation. Content analyses of clean-up experiences were performed for three main categories ofcontaminated sites: ex-military, industrial, and municipal. All analyzed sites were identified by thegovernment of Estonia as priority environmental hot spots in the early 1990s. The most successfullyremediated sites were recipients of foreign direct investment or foreign aid, or both, and particularlyaid from international financial institutions (IFIs). IFIs and foreign private actors were persuaded toact because of their confidence in the income-generating potential of the projects. In light of thisfinding, revisions must be made to an oft-cited model of `institutions for international environmentalcooperation'. In its current form, this model downplays external actors' market-oriented motives.

DOI:10.1068/c0011j

Almost without exception, the speediest and most thorough environmentalclean-up occurred at sites receiving either foreign direct investment or credit fromIFIs, or both. In contrast, clean-up lagged behind at sites receiving assistance solelyfrom bilateral aid agencies and the Estonian government. The least expeditiously andleast thoroughly cleaned sites were ex-military installations. These sites also receivedrelatively less attention from external actors.

Several authors purport to identify key conditions for successful environmentalcooperation between governments, and between governments and nonstate actors(see, for example, Benedick, 1991; Stokke, 1997; Young, 1989). Among the best-knownexplanatory frameworks are Keohane et al's (1993) `institutions for environmentalprotection' and Keohane's (1996) `institutions for environmental aid'. In the latterframework, Keohane proposes that, for foreign environmental assistance to proveeffective, participants in the transaction must maintain a high level of concern aboutthe problem in question; they must create a contractual environment that facilitatesjoint rule-making and efficient monitoring; and parties must have sufficient capacityto design and implement rules and procedures for environmental management.These `three Cs'öconcern, contractual environment, and capacityöconstitute c̀ausalpathways' for effective international institutions for environmental protection.

We tested Keohane's three Cs concept in an effort to explain the relatively moreand relatively less successful clean-up outcomes at the twelve environmentally damagedEstonian sites. To varying degrees, Keohane's variables are helpful for understandinginternational actors' interest or lack of interest in environmental clean-up opportunitiesin Estonia. However, the three Cs make no room for the most important determinantsof clean-up outcomes, namely external actors' concerns about investment payback andrevenue generation.

2 Estonian environmental hot spots as regional concernsBeginning shortly before the collapse of the Soviet Union, environmental authoritiesand foreign advisers conducted environmental risk assessments of Estonian hot spotsdeemed the most contaminated and, where possible, estimated the clean-up costs.In early 1991, the Finnish Ministry of Environment collaborated with counterparts inthe Estonian Soviet Socialist Republic to inventory priority environmental problemsand to design clean-up strategies. The Finnish government's technical assistance toEstonia was part of a larger Finnish foreign-aid program called the `̀ East EuropeProject'' which endeavored to `̀ protect the environment in neighboring regions ofEastern Europe'' (Ministry of Environment of Finland, 1992, page 1) but was especiallynoteworthy in its geographical focus, namely, its emphasis on former Soviet territorieslying immediately adjacent to Finland. Finnish Ministry of Environment officials inconjunction with Soviet authorities developed a list of priority projects that wassubsequently added to a larger, multilateral plan to clean up major pollution `hot spots'in the Baltic Sea drainage basin, and thereby ameliorate environmental pressures onthe Baltic Sea. The latter effort is known as the Joint Comprehensive EnvironmentalAction Programme (JCP) and was approved by contracting parties to the 1992Convention on the Protection of the Marine Environment of the Baltic Sea Area,a collection of multilateral development banks, and various intergovernmental organi-zations and international nongovernmental organizations. Parties to the JCP identified132 hot spots for clean-up. Hot spots were ``those point source locations which have thegreatest impact on the Baltic Sea and/or in environmentally critical areas of partici-pating countries in the Programme'' (Helsinki Commission, 1992, page 5.11). A handfulof non-point-source hot spots were also included in the program, as were plans torehabilitate five coastal lagoons and wetlands.

680 M R Auer, A Raukas

Besides environmental concern, the clean-up program was influenced by financialconsiderations. The parties concluded that clean-up projects should be formulated onthe basis of a `̀ least cost approach'' and that `̀ ... funding for projects which have beenpartially completed or involve the rehabilitation of existing facilities will be givenpriority where the incremental investment can be shown to be economically viable''(Helsinki Commission, 1992, page 5.13).

With the exception of a specialized program for remediating agricultural run-off,Estonian hot spots were either municipal or industrial sites or combined municipal andindustrial sites. These sites posed environmental risks to neighboring countries, to theGulf of Finland, or to the Baltic Sea proper. Also, contracting parties to the JCPbelieved that most of these sites were promising candidates for privatization or, inthe case of a wastewater-treatment facility in the capital city of Tallinn, could betransformed into a public entity wholly sustained by user fees.

Unlike the severely contaminated Estonian industrial and municipal sites, the JCPaccorded military installations in Estonia (and elsewhere in the Baltic Sea drainagebasin) a relatively low status in the clean-up program. Former military installationsappear last among a list of `̀ key elements of the investment'' program (HelsinkiCommission, 1992) and, at the time of the inauguration of the program, many of thesites had not been surveyed. In part, neighboring states and the donor community werereluctant to deal with military sites because, at the outset of the program in 1992, somesites remained under Russian control, including properties beyond Russian borders.Also, compared with industrial and municipal sites, the commercial viability of manyex-military sites was relatively low. However, according to the Baltic Marine Environ-ment Protection Commission (Helsinki Commission), the most important reason forthe absence of former military sites on the JCP list was that ex-military sites in Estoniaand elsewhere in the Baltic Sea drainage basin posed relatively minor threats to theenvironmental quality of the Baltic Sea (personal communication, Ulrich Kremser,Helsinki Commission, 2 August 1999).

3 Determinants of environmental hot spot clean-up in EstoniaFor the better part of a decade, more than one dozen major point sources of pollutionin Estonia have been the focus of sustained clean-up efforts. Among those sites are thefive severely contaminated hot spots identified in the JCP. But the government ofEstonia has also invested large material and human resources in the clean-up of formermilitary sites, none of which are JCP sites. Table 1 (see over) exhibits the environmentalstatuses of severely polluted municipal and industrial sites in Estonia. The environ-mental statuses of severely contaminated ex-military sites are shown in table 2(see over). Geographical locations of these twelve sites are exhibited in figure 1 (over).

The first five objects in table 1 are JCP hot spots. Kunda cement, sixth in the list intable 1, was identified as a top-priority project in the Finnish Ministry of Environ-ment's East Europe Project (Ministry of Environment of Finland, 1991a) but this sitewas not included in the JCP hot-spot list. The Silmet rare-metals factory, a facility thatprocessed uranium as well as rare metals during the Soviet era, is deemed a priorityenvironmental problem by the government of Estonia (Ministry of Environment ofEstonia, 1997a) but it is not a JCP hot spot.

Table 2 summarizes details of clean-up experiences at ex-military sites. None is aJCP hot spot but, with the exception of Ømari, all are identified by the governmentof Estonia as sites necessitating immediate clean-up (Ministry of Environment ofEstonia, 1997a). We include Ømari because of the extent of groundwater contamina-tion there [the second largest contaminated groundwater body in Estonia, measuredby contaminated surface area (Metsur, 1996)].

Determinants of environmental clean-up in Estonia 681

Table 1. Major contaminated municipal and industrial sites in Estonia

Site name and Main environmental Actions taken and environmentalestimated clean-up problems in 1991 status as of 1998 ± 99costs (million euros)

Tallinn sewerage(45.8)

Major emitter of BOD7

(100 mg lÿ1), Ntot (27 mg lÿ1),and Ptot (2.1 mg lÿ1), and highlytoxic industrial wasteto Gulf of Finland.

Biological treatment unit enlarged,sludge storage and digestersinstalled. BOD7 reduced to4.0 mg lÿ1, Ntot to 4.0 mg lÿ1, andPtot to 1.2 mg lÿ1.

Tallinn pulp andpaper mill (2.9)

Major emitter of BOD7

(8000 t yÿ1) and suspended solids(4700 t yÿ1).

Plant closed in 1993.

Kehra pulp andpaper mill (5.9)

Major emitter of SO2

(2500 t yÿ1) and dust(1500 t yÿ1).

Old, heavy-oil boilers replaced bynatural-gas boilers; SO2 reduced bymore than 90% over 1991 levels.

Narva electricalpower stations(1071.4)

Narva's Baltic and EstonianPower Stations are the largestpoint-source emitters of dust(178 600 t yÿ1), and SO2

(252 000 t yÿ1) in Baltic region.Also, major NOx emitters(14 570 t yÿ1).

Experimental fluidized bed boilersinstalled. Plans were postponed formajor environmental overhaul whensale of power plants was cancelled(2002). Power stations emitted73 300 t yÿ1 of dust, 78 300 t yÿ1 ofSO2, and 10 300 t yÿ1 of NOx in1996.

Kiviter chemicalworks (75.0 ± 100.0)

Giant oil-shale ash piles (100mhigh) near facility pollutesground-water with phenols,sulfurous compounds, andmetals. Kiviter emits approx.4000 t yÿ1 of BOD5, 6500 t yÿ1

of CODcr, 400 t yÿ1 of phenols,and 5600 t yÿ1 of SO2.

Phenol in wastewater has decreasedfrom 0.3 g lÿ1 to 0.2 ± 0.25 g lÿ1.Cogeneration steam turbineinstalled. Giant ash piles remain.

Kunda cement factor(6.0)

Major emitter of dust(129 000 t yÿ1) and oxidesof nitrogen and sulphur.

Flue gas, fabric filters, ventilator,and cooling systems installed;operation of boilers modified;oil-shale preparation (especiallygrinding) improved. Dust emissionsreduced by more than 99% over1992 levels. Each year, several tensof thousands of tonnes of captureddust are spread on acidifiedagricultural soils.

Silmet rare metalsplant (300.0)

Temporary gravel dam separatesopen, partially inundated wastetailing (33 ha) from Gulf ofFinland. Tailing contains8 million t of thorium, and7.8 kg of radium.

Nitrates were seeping throughbottom layers of tailing pond; graveldam separating pond from Gulf ofFinland was shifting. New multi-national clean-up plan, with majorityfinancing by EU PHARE programcommenced in 2000. Clean-up willbe completed by 2006.

Note: tÐtonnes.Sources, by hot spot: Tallin sewerage: Ministry of Environment of Finland (1999), Susiluoto(1998); Talling pulp and paper: Ministry of Environment of Finland (1991b); Kehra pulp andpaper: Ministry of Environment of Finland (1991b; 1991c), Robinson (1998); Narva powerstations: Ministry of Environment of Estonia (1996a; 1997b), Ministry of Environment ofFinland (1991b; 1991d), Roots (1996); Kiviter chemical works: Ministry of Environmentof Estonia (1996a), Ministry of Environment of Finland (1991b), Roots (1996); Kunda cement:Karmokolias (1996), Ministry of Environment of Estonia (1996a), Ministry of Environment ofFinland (1991a; 1991b; 1999), Roots (1996); Silmet rare metals: Ministry of Environmentof Estonia (1997b), UNECE (2001).

682 M R Auer, A Raukas

Table 2. Major contaminated ex-military sites in Estonia.

Site name and Main environmental Actions taken and environmentalestimated clean-up problems in 1991 status as of 1998 ± 99costs (million euros)

Raadi airfield(no estimateavailable)

Part of the airfield houses severalhundred tonnes of melange(containing HNO3, N2O2, HF,and heavy metals in iron barrels),750 m3 of soil are contaminatedwith toxic constituents of saminerocket fuel, including, xylidene[(CH3)2C6H3NH2] andtriethylamine [(C2H5)3N]. 90.4 tof oil products contaminate soil,surface water, and groundwater.

Melange treatment finished in 1998.Samine treatment commenced in1999. Xylidene (constituent ofsamine) in contaminated soilsreduced from 200 ± 300 mg kgÿ1 in1991 to 5.2 ± 7.6 mg kgÿ1 in 1999.Heavy-metal and jet-fuel pollutionin soils, surface water, andgroundwater remain unremediated.

Aë mari airfield(no estimateavailable)

Soil and surface water arecontaminated with 29.3 t of oilproducts; over 10.2 km2 of landarea polluted by dissolved oilproducts with contaminantsextending to a depth of 1.5 min some areas. Groundwatercontaminated with oil through-out whole territory of airfield.

Impoundments installed to trappetrol infiltration in groundwater;contaminated aquifer and soilsremain unremedied. New environ-mental assessments performed in1998. Government of Estonia hopesto convert airfield to dual military/civilian use.

Tapa airfield(no estimateavailable)

16 km2 of land areacontaminated with dissolvedoil products; karst limestonetopography transportscontaminants quickly to watertable; deep aquifers arecontaminated.

Between 1993 and 1998, over105 200 l of free petrol andover 681 798 m3 of contaminatedwater pumped out of aquifer.Thousands of m3 of fuel andoil remain in aquifer.

Keila-Joa missile base(no estimateavailable)

10 ± 15 t of samine rocket fuelcontaminate soil andgroundwater over an area of580 m2; several tonnes ofmelange contaminate an areaof 410 m2. Oil productscontaminate 1200 m3 of soil.

Most of the samine and waste oilwas pumped out of groundwaterbetween 1997 and 1999. Xylidene(constituent of samine) reducedfrom 940 mg kgÿ1 in 1991 to lessthan 5 mg kgÿ1 at end of 1998.Content of oil products in soildecreased from 2500 mg kgÿ1 in1991 to less than 100 mg kgÿ1 in1999. Presence of artificial hillocksand vast ruins of military buildingsprevent conversion and reuse ofmissile base.

Paldiski nuclearfacility andcentral boilerhouse(60.0 ± 100.0)

Two sarcophagi contain radio-active remnants of reactors usedin nuclear-powered scale modelsubmarines. Radioactive wastesreside in other rooms and wastestorage areas in main facility andin other buildings at the base.Nearby boiler house and railroadtanks leaked several thousandtonnes of black oil and heavymetals into surface waters andstorm drainage leading to Gulfof Finland.

Spent fuel rods removed from build-ing housing reactors; temporaryradioactive solid and liquid wasteimpoundment areas constructed;some liquid radioactive wasteremoved from site. Oil impound-ments constructed at boilerhouse.Several hundred tonnes of black oilpumped out of boilerhouse, pools,and ditches. At least 20 t of oilleading from boilerhouse reachedGulf of Finland. At least 40 t of oilremain in soil.

Note: tÐtonnes.Sources, by hot spot: Raadi airfield: Jauhiainen (1997), Mander (1996), Ministry of Environmentof Estonia (1999); Aë mari airfield: Metsur (1996), Ministry of the Environment of Estonia (1996a;1999), Tapa airfield: Metsur (1996), Ministry of Environment of Estonia (1999); Keila-Joa missilebase: Metsur (1996), Ministry of Environment of Estonia (1999); Paldiski hot spots: Karise et al(1997), Ministry of Environment of Estonia (1999), Svensson (1998).

Direct comparison of the clean-up efforts at these sites is complicated in partbecause, as a set, the sites differ greatly across four key factors: environmental risksposed by each site; temporal aspects of risks across sites; costs entailed in cleaning upsites; and the relative complexity of clean-up across sites.

With regard to environmental risks, at one end of the scale are pollutants with littleor no ecotoxicity or risk to human health, for example, ordinary paper rubbish foundat some military sites. At the other end are highly toxic or carcinogenic compounds,for example, radioactive wastes found in soils and water resources near the Silmet rare-metals factory or at the Paldiski nuclear facility.

With regard to differences in temporal dimensions, most of the environmentalproblems at ex-military sites are in the form of past pollution. Most municipal andindustrial sites harbor past pollution but also generate new emissions from currentoperations.

Clean-up costs across the sites vary greatly. Cost estimates for clean-up were madeby Estonian environmental authorities and the Helsinki Commission in the early1990s. Among the twelve priority clean-up projects in tables 1 and 2, the least expen-sive project was thought to be the retrofitting of the Tallinn pulp and paper plant, atless than 2.9 million. Retrofitting the oil-shale-fired power plants near Narvaentailed the highest costsöaround 1000 million. Authorities never attempted tomake reliable cost estimates for cleaning up ex-military objects (table 2) in part

1. Tallinn sewerage2. Tallinn pulp and paper mill3. Kehra pulp and paper mill4. Narva electrical power stations5. Kiviter chemical works6. Kunda cement factory7. Silmet rare metals plant8. Raadi airfield9. Aë mari airfield

10. Tapa airfield11. Keila-Joa rocket base12. Paldiski nuclear facility and central boilerhouse

Figure 1. Major contaminated sites in Estonia. In 1992, contracting parties to the Joint Com-prehensive Environmental Action Programme (JCP) identified sites 1 ^ 5 as JCP hot spots. Thatsame year, these sites as well as sites 6 ^ 12 were identified as priority national hot spots by theEstonian government.

684 M R Auer, A Raukas

because of uncertainty about the scope and extent of damages to these properties. Theabsence of even rough estimates of environmental remediation costs for ex-militaryobjects indicates the novel challenge of site clean-up for the post-Soviet government inTallinn. Through the late 1990s, estimates of clean-up costs at some sites continued toelude Estonian authorities and their contractors (Ministry of Environment of Estonia,1998a).

Also, comparing the process and outcome of remediation efforts at the sites ismade difficult by the different technical requirements for site clean-up as well as thescope of clean-up at the different sites. For example, large-scale groundwater pollutionproblems in geologically complex aquifers at ex-military sites, like the karst limestonegroundwater contamination plume at Tapa, are more complex (and more expensive) toremedy than the equipment modernization task at the Tallinn pulp and paper plant orthe retrofitting of Kunda cement.

Devising a single metric for c̀lean-up success' across sites is impractical owing tolarge site-to-site differences across these four variables (that is, differences betweensites in environmental risks; temporal risks; clean-up costs; and technical aspects ofclean-up). Rather than compare clean-up outcomes at the different sites with a singlemeasure, we compared outcomes in terms of the relative mitigation of the mostsignificant environmental risks at each site. We also examined to what extent therelative completeness of site clean-up was influenced by costs and by the technicalcomplexities of the remediation tasks. We expected very complex and expensive sitesto be cleaned up less thoroughly or less quickly than sites with relatively inexpensiveand relatively uncomplicated clean-up requirements.

Another key concern of this project, and a central query in this paper, is whetherthe relative completeness of prescribed clean-up efforts varied relative to the types ofstakeholders who participated in the clean-up effort. Key clean-up stakeholders includedomestic and foreign actors. Domestic actors include Estonian governmental agencies,Estonian private investors, and Estonian professional contractors. Foreign actorsinclude bilateral and multilateral aid agencies, foreign professional contractors, andprivate investors. We expected that sites attracting private investors (whether domesticor foreign) would be cleaned up more thoroughly than sites lacking private capitalresources for clean-up.

When sites are compared on the basis of the extent of progress of prescribedclean-up efforts, remediation work at municipal and industrial sites in Estonia isfarther along than at ex-military sites. Substantial progress is notable, especiallyin the Tallinn sewerage project, the modernization of the Kunda cement plant, andthe revitalization of the Kehra pulp and paper mill. It is no coincidence that these sitesare also major beneficiaries of foreign aid or foreign direct investment. In fact, alltwelve sites have received some form of foreign assistance for clean-up efforts. How-ever, foreign participation in the clean-up of former military sites consists mostlyof technical assistance, including feasibility studies, mapping of pollution plumes,and technical advice on remediation methods and selection of equipment vendors.In contrast, the Tallinn sewerage project was a beneficiary of several hundreds ofmillions of euros in multilateral loans and bilateral (government-to-government) grantassistance, and both the Kunda cement factory and Kehra pulp and paper mill werepurchased by multinational companies that subsequently modernized each facility andoverhauled the factories' pollution-control equipment and operations. Among thetwelve sites, foreign participation in cleaning-up Kehra pulp and paper, Kunda cement,and Tallinn sewerage was especially intense in terms of bilateral aid, multilateralfinancing, and foreign direct investment, and the negative impacts of these sites onthe environment were reduced most dramatically.

Determinants of environmental clean-up in Estonia 685

In contrast, ex-military sites have attracted little or no multilateral financing orforeign direct investment, though several sites are recipients of bilateral foreign aid.Domestic public expenditures exceed bilateral assistance at some sites: through 1999,domestic public funds accounted for around 99% and 75% of clean-up spending atRaadi airfield and Keila-Joa missile base, respectively. Not coincidentally, ex-militarysites lag behind municipal and industrial hot spots in terms of clean-up outcomes.To its credit, the government of Estonia has invested substantial human, financial,and technological resources in the clean-up of priority ex-military objects. However,at all of these sites, much work remains to be done to restore the environment and,in particular, to clean up contaminated soils and groundwater.

4 External interest in environmental clean-upClean-up of the most gravely environmentally damaged sites in Estonia, whetherex-military, industrial, or municipal, has involved participation of foreign advisersand either foreign grant or loan assistance or the outright sale of contaminated proper-ties to foreign investors. Compared with municipal and industrial sites, during the1990s, ex-military sites received less attention from foreign actors.

Before demonstrating how foreign participants help hasten relatively successfulclean-up experiences at municipal and industrial sites versus the relatively less success-ful clean-up outcomes at ex-military sites, it is instructive to consider the values andpreferences of foreign participants explicitly. In recent years, scholars have identifiedsome of the most important values driving foreign actors to become patrons ofenvironmental aid, and some experts have attempted to specify ingredients forsuccessful aid outcomes.

We considered the applicability of Keohane's three Cs framework to the Estoniancase. Briefly, the author proposed that, for foreign environmental assistance to proveeffective, stakeholders must be sufficiently concerned about the problem in question; acontractual environment conducive to joint rule-making must be present; and partiesmust have the capacity to institute environmental protection measures. Applying thethree Cs framework to the Estonian case, the importance of regional concern is mostobvious. The Estonian sites that were added to the JCP list gained that distinctionbecause of the extent and severity of the risks that they posed to the Baltic Sea and tothe states that border it. Notably, four Estonian point sources of pollution in that list(Tallinn sewerage; Kehra pulp and paper; Kiviter chemical plant; and the Narva powerstations) were among sites that received substantial bilateral or multilateral assistancefor environmental clean-up during the 1990s.

Of these four sites, foreign direct investment allocated to environmental improve-ments was most efficacious in the case of Kehra. Clean-up at Tallinn sewerage was alargely public-sector-led activity. Meanwhile, financial problems at Kiviter sloweddown clean-up of that site during the 1990s, and remediation of Narva stalled as theEstonian government and foreign investors debated the terms of future ownershipof the power stations. A fifth site, Tallinn pulp and paper mill, was shut down in1993öthe first JCP hot spot in the eastern portion of the Baltic Sea drainage basinto be removed from the hot-spot list. Kunda cement was not included in the JCP list,but it was identified as a priority environmental concern by the Ministry of Finlandand by the government of Estonia. Environmental conditions at that latter siteimproved dramatically during the 1990s.

In contrast to these municipal and industrial sites, JCP parties decided that theex-military properties identified as priority hot spots by the Estonian government didnot pose grave threats to the Baltic Sea, and, hence, these sites were not included in theJCP hot-spot list. Not coincidentally, for most of the 1990s, these sites received no

686 M R Auer, A Raukas

multilateral aid or foreign direct investment for site clean-up and, in general, clean-upoutcomes at these sites lagged behind outcomes at municipal and industrial sites.Concern, then, goes some distance in explaining clean-up outcomes among the variousEstonian hot spots.

However, neither concern nor the other Cs are appropriate descriptors for themarket-oriented considerations that proved so important in the clean-up outcomes atTallinn sewerage, Kehra pulp and paper, Kunda cement, and, to a lesser extent,Kiviter chemical plant and the Narva power stations. In Estonia, where foreignfinancial resources are an especially important part of the clean-up effort, the will-ingness of foreign governments and private investors to participate in clean-up isstrongly influenced by economic aspects of clean-up, expectations about future usesof the property, commercial merits of the property, the clarity of ownership rights tosites, and obligations to clean-up contamination.

Below, we consider how concern, contractability, and capacity influenced foreignand domestic actors' efforts to remediate ex-military, industrial, and municipal hot spotsin Estonia.We propose that expected economic benefits to investors constitute a fourthdeterminant of the relative success or failure of clean-up outcomes in Estonia. Threeclean-up experiences are examined in detail, with each case representing one of themain site types: ex-military (Keila-Joa missile base); industrial (Kunda cement); andmunicipal (Tallinn sewerage). Other clean-up outcomes among these three site types arejuxtaposed against the clean-up experiences at Keila-Joa, Kunda, and Tallinn.

5 Remediating ex-military sitesThe small settlement of Keila-Joa, 3.5 miles west of Tallinn was one of the SovietUnion's most important missile-launching sites in the Baltic region. Shortly beforedeparting in August 1993, Russian soldiers dumped approximately 15 tonnes of arocket-fuel component called samine into the soil. Samine contains, among othertoxins, the strongly alkaline compounds xylidine and triethylamine. Subsoils at themissile base lack a Quaternary sedimentary layer and limestone beneath the soil isdeeply cracked, allowing contaminants to infiltrate the water table quickly. Samine andother pollutants permeated an area of 580 m2. Another 410 m2 was polluted by acomplex chemical called melange which contains concentrated nitric acid. Bilateralforeign aid agencies provided technical assistance for the clean-up of Keila-Joa.Between 1994 and 1998, Estonian contractors pumped out the samine from the ground-water and mixed it with peat granules and bark as recommended by German advisers.For several months, the Estonian contractors searched in vain for a factory that couldburn the peat and bark mixture as fuel, without emitting toxins. Eventually, anothersolution was devised whereby the toxins in the peat and bark mixture were neutralizedand the treated mixture was reinterred at the original site of extraction. With regard tosamine clean-up at Keila-Joa, a convoluted environmental remediation process even-tually yielded a successful outcome for Estonian stakeholders. Unfortunately, however,the Estonian government doubts whether the site will be reused for either military orcivilian purposes because of the presence of dozens of giant, partly concretized hillocks(created by empty missile silos) and the vast ruins of concrete, steel, and other bulkywastes on the site.

In terms of the three Cs, and in the context of Keila-Joa, foreign actors' limitedparticipation in the clean-up partly explains problems with local capacity to deal withthe problem. Although consultants sponsored by foreign governments advised Estoniancounterparts about technical aspects of site remediation, Estonia's environmentalcommissioners received little advice from foreign actors about disposal of contaminatedwastes or about alternatives for converting the base to civilian use.

Determinants of environmental clean-up in Estonia 687

Keila-Joa is unusual in that it is one of only a few major Estonian ex-military siteswhere the main targeted remediation activities were completed before the end of the1990s. Notwithstanding this partly successful clean-up experience, reuse of the site inthe near future is precluded by the vast collection of ruined, concretized missile silosthat litter the landscape.

Clean-up continues at the other priority ex-military sites and, generally, the pace ofclean-up at these sites is slow. Foreign actors' concernöor rather, their relative lackof concernöcontributes to the limited success of remediation efforts at these sites.Donors determined that risks posed by environmental problems at Keila-Joa, Tapa,Raadi, and Ømari, though severe, did not extend beyond the territory of Estonia.

Also, contracting the clean-up of these ex-military sites was complicated by the lagtime between Estonia's independence in 1991 and the tardy withdrawal of Soviet forcesfrom these sites in 1994. JCP partners were reluctant to add Baltic ex-military sites tothe hot-spot list for fear of becoming entangled in negotiations between Russia and theBaltic states about terms for troop withdrawal (personal communication, UlrichKremser, Helsinki Commission, 2 August 1999).

Thus, Keohane et al's (1993) and Keohane's (1996) thesis is borne out in the caseof Estonian ex-military objects. Regarding these sites, neighboring states were rela-tively unenthusiastic about addressing environmental problems that posed small orno transboundary risks; donors steered away from potential contracting problems atex-military bases; and capacity problems set back remediation efforts at some sites.

Financial and property-rights-related aspects of the remediation challengeöfactorsthat are not explicitly invoked by the `three C's' frameworköalso are important inexplaining suboptimal clean-up experiences at Keila-Joa and other ex-military sites.The framers of the Joint Comprehensive Environmental Action Programme stated thatthe selection of hot spots was influenced not only by evaluating environmental risksbut also by understanding economic costs and benefits of site clean-up. Whereasa variety of industrial and municipal sites in the JCP list offered promising returnson investment, particularly sites that could be privatized or sustained by user fees, fewex-military sites demonstrated immediate, future commercial potential. The mostpromising site from a commercial standpoint was Ømari airfield because it is thelargest airfield in Estonia (930 ha), has a long, well-maintained main runway, and isin relatively close proximity to good harbors in Tallinn (40 km) and Paldiski (12 km),to railway stations, and to the international highway known as Via Baltica. Toward theend of the 1990s, the Estonian government, with advice from the US government,began marketing the commercial advantages of Ømari to outside investors (Ministryof Environment of Estonia, 1998b).

6 Remediating industrial sitesSome of the cement poured for the foundations of buildings at Keila-Joa missilebase was manufactured at Kunda cementöthe largest cement-producing facilityin the Baltic states. Kunda cement was also a leading candidate to accept thecontaminated peat from the clean-up of Keila-Joa missile base. Kunda rejectedthe peat, noting the factory's new, strict demands for `clean production'. Kunda'smodern pollution-control facilities and its managers' environmentally consciousattitude are products of large investments in technology and know-how and a changein the ownership of the factoryöchanges made possible by a consortium of foreignactors and also by Estonian government officials who hoped to ensure Kunda'seconomic survival during the transition period.

During the Soviet period, Kunda was Estonia's largest emitter of dust, and amajor contributor to the regional atmospheric sulfur flux. Weeks before the collapse

688 M R Auer, A Raukas

of the Soviet Union, the top Soviet official in Estonia signed an agreement with aconsortium of European and US investors to transform Kunda into a joint venture.Many months later, the investors secured a US $44 million loan from the InternationalFinance Corporationöthe private investment arm of the World Banköto modernizethe factory. Additional financing was provided by other international financial institu-tions. More than 15% of the loan was earmarked for environmental improvementsto the facility, including the installation of flue gas filters, changes to oil-shale feed-stock preparation, optimization of the boiler system, and other pollution-control andpollution-prevention technologies and strategies. As a condition of the World Bankloan, the Estonian government agreed to reduce its ownership stake in the company tobelow 50%. This condition was imposed in other major joint-venture agreements,including the prospective privatization of the Narva power plants. These arrangementsdid not evince universal praise from ordinary Estonians, some of whom worried thatthe government was surrendering control over the nation's most precious assets. Never-theless, in the case of Kunda, foreign participation in that factory's reconstruction hasresulted in measurable environmental gains. Emissions of dust from the facility havefallen precipitously since 1991, even as production has increased (figure 2).

The case of Kunda demonstrates the importance of foreign capital for industrialhot-spot clean-up in Estonia. Environmental hazards lingered longer at many otherindustrial sites, namely the Narva power stations, Kiviter oil-shale chemical plant,Silmet rare-metals factory, and Kehra pulp and paper, and, in all cases, these sitesattracted foreign suitors less quickly than did Kunda. The old pulp and paper mill inTallinn was deemed too small and antiquated ever to be profitable, and it was closedpermanently in 1993. The Kehra pulp and paper mill nearly met the same fate. In 1995,it closed after potential suitors from Nordic countries and the United States decidedthat Kehra, like the Tallinn mill, was too small to be commercially viable. Kehra millwas saved from the junk yard by an Asian investor (Robinson, 1998). With assistancefrom the World Bank, the investor replaced the old, heavy-oil boilers with new natural-gas boilers and the wastewater treatment plant at the mill was modernized. Sulfurdioxide emissions from the mill were cut by more than 90% between 1991 and 1996.

Evidence that foreign capital is instrumental to industrial hot-spot clean-up inEstonia are the less impressive clean-up outcomes at sites that failed to attract foreignbidders during most of the 1990s. In many instances, the positive results that have been

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Determinants of environmental clean-up in Estonia 689

achieved at these latter sites are the result of inputs of government-to-government aid.Foreign aid agencies that invested in clean-ups did so not only to reduce environmentalhazards, but also to improve the financial viability of these properties. In particular,the Estonian government hoped to transform Silmet, Kiviter, and Narva into partly orwholly owned private commercial enterprises. In all three cases, clean-up at these threesites has depended greatly on the largesse of bilateral aid agencies.

Through most of the 1990s, Silmet was the most poignant illustration of thenegative consequences for clean-up when foreign interest in environmental remedia-tion is low. During the Soviet era, the Silmet factory in Sillama« e processed enricheduranium ore from local sites and other metal ores imported from eastern Europeancountries and Russia. Over several decades, residual uranium, thorium, and radiumwere dumped in a holding pond near the factory. That pond resides some 30 m fromthe coastline of the Gulf of Finland. Through 1995, the Estonian privatization agencywas unable to identify a buyeröforeign or domesticöfor Silmet and the site wasrelegated to an official list of ``privatization residue'' (Baltic News Service, 1995).Only in the autumn of 1998 did a group of bilateral donors and the Nordic Invest-ment Bank announce a 300 million Estonian kroons (approximately 19.2 million)plan to treat and dispose permanently of wastes from that site (Baltic News Service,1998).

Like the Silmet site, much of the clean-up at Kiviter oil-shale chemical companyand the Narva power stations was underwritten by bilateral aid agencies. These fundswere supplemented by several million kroons (several hundred thousand euros) fromthe Estonian treasury. Neither site attracted a private suitor until the late 1990s. Inboth the cases of Kiviter and Narva, bilateral aid agencies invested in clean-up notonly to redress the environmental hazards at the facilities, but also to benefit privatecontractors in the donor countries who helped administer the donors' aid in Estonia.But donors also endeavored to improve the commercial advantages of the cleaned-upenterprises. For example, though the US government did not state explicitly that itsinvestment in Kiviter should directly benefit private-sector interests in Estonia,US corporations purchased Kiviter's products in the aftermath of the partial clean-upof that plant (Jackson, 1996).

In the case of badly contaminated Estonian factories, the most favorableenvironmental results are predicted by prospective owners' optimism about thecommercial prospects of the facilities. Kunda cement and Kehra pulp and paper,two of Estonia's most valuable state-owned industrial assets, found buyers whoupgraded the environmental-management systems of the plants as part of broaderoverall plant modernization schemes. In contrast, environmental hazards lingered atindustrial sites where the commercial potential was uncertain. Environmental clean-up progressed slowly at Narva, Kiviter, and Silmet as external actors hesitated toinvest in these properties.

Apart from foreign investors, other foreign actors were eager to witness theenvironmental transformation of industrial hot spots in Estonia. Their interest wasmotivated by one of Keohane et al's (1993) three Cs, namely, concern. Estonia'sindustrial hot spots, and its main municipal hot spotöthe Tallinn sewage treatmentplantöreside along or near Estonia's northern coast, separated from Finland by anarrow gulf.Virtually all of the Estonian hot spots are coastal or near shore (figure 1).But the risks to Finland from Estonia's industrial hot spots are substantially greaterthan from Estonia's ex-military sites. Soil contamination and groundwater pollutionare the main problems at the latterölargely localized hazards. Persistent contaminantsand acidic pollution from Estonia's industrial hot spots visit Finland by air and seacurrents. Beginning in 1992 with the installation of an experimental energy-efficient

690 M R Auer, A Raukas

boiler system at one of the Narva sites, through the late 1990s with Finnish investmentsin the Tallinn sewerage project, Finland donated generously, but selectively, toenvironmental clean-up in Estonia. Concern, then, partly explains the alacrity withwhich Finland invested in pollution remediation in Estonia.

7 Remediating municipal sitesThe complete overhaul and rehabilitation of Tallinn's sewage treatment plant inthe mid-1990s constitutes one of Estonia's greatest environmental achievements of thepost-Soviet era. Like the Kunda cement and Kehra and Tallinn pulp and paper hotspots, pollution from Tallinn's sewerage facility concerned neighboring Finland. Butconcern alone did not assure remediation of the treatment works. If it had, then wemight have expected a similar outcome for JCP projects in St Petersburg hot spotsgenerating far greater volumes of sewage and posing greater overall risks to Finland'scoastal environs than sewage from Tallinn harbor. An important difference betweenthe Tallinn and St Petersburg projects was the success of capacity-building efforts inTallinn. In particular, Helsinki's water authority strengthened the capacity of theirEstonian counterparts to undertake the many technical and business functions of apublic water and sewer company, including operation and maintenance of the treat-ment works, delivery of water and sewer services, metering, billing, marketing, andother operations. Finland sponsored training activities in St Petersburg, too. Buttraining in Tallinn advanced further and faster. Cultural and language affinitiesbetween Finns and Estonians may partly explain the relatively greater success ofcapacity-building efforts in Tallinn. Ethnic Estonian Tallinnites are especially profi-cient Finnish-speakers having watched Finnish television during the Soviet era.Communication and cultural barriers between Finns and Russians are considerablylarger. Moreover, Finnish water authorities established contacts with Estoniancounterparts relatively earlier and were more successful in inculcating Western-stylemanagement norms and practices in Tallinn than in St Petersburg. Concern andcapacity, then, offer some insights to the relative successes and shortcomings of theTallinn and St Petersburg wastewater projects.

But project financing and revenue generationöbusiness-oriented concerns notcovered in the three Cs frameworköare no less important in explaining positiveoutcomes in Tallinn. Tallinn's sewerage upgrade promised an excellent return oninvestment. The Finnish government expected the project to pay for itself withinless than ten years while significantly reducing the organic contamination load tothe Gulf of Finland. Hence, in the early 1990s, the Finnish Ministry of Environmentpledged 30% of a 5.5 million grant for sewage-treatment equipment and services(Susiluoto, 1998) and in 1994, the European Bank for Reconstruction and Develop-ment issued its first environment-related loan (approximately 23 million) for plantreconstruction and modernization (EBRD, 1994).

In 1993, after less than a year of project implementation, the BOD7 load from theTallinn wastewater treatment plant had declined by almost 70% compared to theex-ante BOD7 emission peak of over 30 000 kg dayÿ1 (in 1991) (figure 3, over).Continued re-engineering of the plant in the mid-1990s brought down BOD7 emis-sions further still, while also diminishing Ntot and Ptot emissions to 14.0 mg lÿ1 and1.2 mg lÿ1, respectively, by 1997 (Ministry of Environment of Finland, 1999). Theimpressive environmental performance of the first phase of Tallinn's project helpedsecure several million euros of financing for a second phase, with participation fromforeign governments and international financial institutions.

Determinants of environmental clean-up in Estonia 691

Compared with most other JCP projects in Estonia, the Tallinn sewerage upgradeconformed well to the JCP's environmental risk mitigation and least-cost financingrequirements. Regarding costs and benefits, the JCP's action plan stated:

`̀Funding for projects which have been partially completed or involve the rehabilitationof existing facilities will be given priority where the incremental investment can beshown to be economically viable. The rate of return on these investments is likely tobe high, especially after the design concept is reviewed for cost reducing improve-ments, where the sunk cost is a large part of the total overall investment cost''(Helsinki Commission, 1992, page 5.13).

The Tallinn sewerage facility adhered to these strictures: by the time multilateral andbilateral financing was approved for the project, the municipality of Tallinn hadalready completed the installation of a chemical treatment plant and constructionof a biological treatment plant had commenced. Indeed, one important trait that allretired JCP hot spots have in common is that, before the JCP was approved in 1992,investments had already been allocated for clean-up at these sites, or a decision hadbeen made to shut down the facility. The Tallinn pulp and paper mill (which was shutdown) and the Tallinn sewerage project were the first of the former Soviet bloc sitesto join the company of retired JCP hot spots; all other retirees from the list resided7in Nordic countries or in Germany.

8 External financing and clean-up outcomesNo doubt, drivers of the success of the Tallinn sewerage project included Estonia'srelatively high capacity to manage the project as well as auspicious conditions forcontract-making between the Estonian government and bilateral and multilateral aidagencies. Transparent contracting mechanisms and the confidence of external invest-ors in Estonian administrative and technical capacities also partly explain the successof industrial clean-up projects in Estonia, such as at Kunda and Kehra. Moreover,neighboring governments' concern about Kunda, Kehra, and Tallinn expedited exter-nal resource flows. In contrast, wealthy countries near Estonia were less concernedabout risks posed by Estonia's ex-military sites, and many of these sites languishedduring the 1990s for lack of environmental financing.

Even as the concept of the three Cs illuminates actors' motivations for cleaning up(or, alternatively, ignoring) contaminated sites in Estonia, it is, at best, an incomplete

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692 M R Auer, A Raukas

explanatory framework and, at worst, overlooks the key determinant of environmentalclean-up.

Hot spots with the most impressive clean-up outcomes during the 1990s were siteswith multiple types of foreign benefactors, and the very best outcomes were realized atsites that received some combination of bilateral concessional aid, multilateral loans,and foreign direct investment. Two of the strongest performers were the industrialfacilities Kunda cement and Kehra pulp and paper millömajor recipients of foreignpublic and especially private investment. Kunda and Kehra also received clean-upfunds from the Estonian government and technical assistance from the Finnish govern-ment. However, domestic public investment and bilateral aid represented relativelysmall portions of the total investment in clean-up at these sites.

In contrast, a relatively large number of projects received bilateral aid. Foreigngovernment aid for Estonian hot spots mostly paid for technical assistance, training,and small grants for project accessories. This aid is concessional and the projectssponsored are not selected with the same profit-oriented criteria adopted by multilateraland private investors. Hence, without exception, the only foreign assistance renderedfor ex-military environmental projects in Estonia was foreign public assistance fromEuropean and US bilateral aid agencies.

Connolly writes that `̀ external aid never covers more than a small fraction ofenvironmental expenditures in the recipient country...'' (Connolly, 1996, page 338), and,with reference to Eastern Europe, she notes that foreign aid amounts to a `̀ drop in thebucket'' when viewed against the tens of billions of dollars that must be spent toclean-up that region (Connolly et al, 1996, page 287). In the case of Estonia, thiscontention is true only if it refers to official government-to-government aid, that is,bilateral aid provided by individual, sovereign governments to Estonia. Domesticpublic funding for environmental protection in Estonia, including grants for specificclean-up activities, new taxes and levies that simultaneously discourage pollution andgenerate revenue for clean-up, and initiatives of domestic private actors are probablymore important determinants of Estonia's environmental recovery than is officialbilateral assistance.

However, our review of clean-up efforts at Estonia's most severely contaminatedhot spots suggests that external sources of aid and credit are vital to the remediation ofthose sites. That conclusion is strengthened when foreign direct investment is includedin the category of external financial resources used for clean-up.(1) Hot spots thatattracted combinations of foreign aid (especially multilateral aid) and foreign directinvestment were remediated most thoroughly and most quickly. Sites where the onlysource of external financing was bilateral aid were also sites that relied mostly ondomestic sources of clean-up funds. By and large, these sites were ex-military objects.Ex-military objects were not included in the JCP's hot-spot list, and it is the JCP sitesthat have enjoyed the most attention from foreign actors.

9 European Union enlargement, Estonian hot spots, and the three CsSince progress in cleaning up Estonian hot spots of pollution is greatly enabled bycapital assistance from external actors, the Estonian government might contemplatehow to sustain these investment flows once it joins the European Union. Resourcesfrom the European Union's PHARE, TACIS, and ISPA programs are suspended once

(1) Connolly (1996) and Connolly et al (1996) consider the functions of bilateral and multilateral aidin environmental clean-up, but do not deal explicitly with the contributions and consequences offoreign direct investment for clean-up.

Determinants of environmental clean-up in Estonia 693

candidate states join the EU.(2) To date, these programs have provided several tens ofmillions of euros for environment-related and transport-related projects in Estonia(Ministry of Foreign Affairs of Estonia, 2000). However, depending on the terms ofEstonia's ultimate accession agreement, it may become eligible for the EU's ObjectiveOne funds which, among other activities, pay for the clean-up and restoration of old,contaminated properties in member states.

Estonia may enjoy access to these funds before other Baltic states because it isfurther along the path to accession. As of June 2001, Estonia was one of only threecandidate states to have its environmental law chapter provisionally closed by the EU(European Report, 2001) indicating Estonia's successful transposition of EU environ-mental legislation into national legislation. Furthermore, the EU granted Estonia aperiod of transition for meeting EU water pollution and wildlife protection standards(personal communication, Mari Lahtmets, Ministry of Environment of Estonia,1 August 2001).

The three Cs can be invoked to explain Estonia's success in transposing EUenvironmental legislation and in earning the confidence of EU environmental negotia-tors. In 1999, the Estonian Ministry of Environment added ten highly specializedenvironmental law staff to reconcile national legislation with various EU directives;the legal specialists' work and the pre-accession activities of other ministry staffreceived high marks from independent auditors in 2001 (UNECE, 2001, pages 19,21, and 23). Moreover, EU authorities have been impressed with the performance ofEstonian environmental monitoring institutions. In 2001, the European EnvironmentAgency (EEA) declared Estonia to be the `̀ best performer'' among Central and EasternEuropean countries in reporting timely and complete environmental data sets to theEEA (Cryan and Pfeifer, 2001, page 1).

The strong reputation it earns for successfully adapting its environmental laws andcollecting and sharing environmental data indicate Estonia's increasing capacity forenvironmental protection. Moreover, the closing of its environmental chapter demon-strates productive contract-making with the EU. One might surmise that concernmotivates the EU's interest in environmental reforms in Estonia, too. In particular, theoil-shale-fired power stations near Narva account for more than two thirds of Estonia'sdust and SO2 emissions (Ministry of Environment of Estonia, 2001, page 17) and affectair quality and forest health in some EU countries. In fact, concern is not helpful fordescribing recent clean-up plans for the power stations. Anticipated environmentalimprovements at the plants are more precisely a result of investors' expectations aboutthe power stations' revenue-generating potential. In the late 1990s, a US energycompany sought to acquire the Narva plants and laid out ambitious modernizationplans, including replacing the boiler system in each facility (Power Engineering Inter-national, 2001). Ultimately, the deal collapsed when the American firm failed to obtainloans to purchase the plants (Behr, 2002). In this case, prospective creditors were notpersuaded by the commercial potential of the project nor the creditworthiness of theloan applicant.

(2) PHARE stands for `Poland and Hungary: Action for the Restructuring of the Economy'.TACIS is `Technical Assistance to the Commonwealth of Independent States'. ISPA is the`Instrument for Structural Policies for Pre-Accession'. All three EU programs were establishedto foster economic and political transition in the countries of Central and Eastern Europeand the former Soviet Union. Environmental projects are eligible for funding from all threeinstruments.

694 M R Auer, A Raukas

10 Conclusion: weighing the usefulness of the three CsLooking back at more than ten years of environmental assistance to Estonia, andmore broadly at environmental-aid flows to Central and Eastern Europe, donors,investors, and recipients alike might contemplate how useful the three Cs concept isfor learning and discovery. Those seeking to test the three Cs should note Keohane's(1996, page 9) disclaimer that concern, capacity, and contracting arrangements ...

`̀ ... are less causal factors then reflections of social forces, economic resources, andestablished institutional arrangements. Rather, we view the three C's as causalpathways, identifying clusters of factors that must change for international envi-ronmental institutions to become effective: `any effective action of internationalinstitutions with respect to the global environment is likely to follow a path thatincreases concern or capacity, or improves the contractual environment' (Haas,Keohane, et al, 1993, page 21).''This careful construction of the purposes of the three Cs is also conspicuously

noncommittal. First, according to the author, the three Cs are not explanatory varia-bles but are c̀ausal pathways' and hence they are not intended for hypothesis testing.Second, Keohane indicates that effective international environmental institutions are`̀ likely'' to follow at least one (though not necessarily all) of the pathways. Thisformulation creates a validity test with a low hurdle. Success does not require institu-tional actors to travel down all three pathways nor indeed any of the pathways; andthresholds of concern, contractibility, and capacity-building necessary for institutionaleffectiveness are undefined.

As a guide for explaining the clean-up of Soviet era contamination in Estonia, thethree Cs framework is less useful in clarifying circumstances for successful institutionaloutcomes than in illuminating instances of institutional failure.

Many ex-military sites in Estonia were remediated relatively slowly owing, in part,to donors' insufficient concern or contractual problems, or both. Contamination onmost ex-military properties posed minor hazards to neighboring countries, and theslow withdrawal of Soviet military forces from these sites complicated prospectivecontractual arrangements for clean-up.

However, the exception to this pattern underscores the weakness of the three Cs inexplaining fruitful international environmental cooperation. Ømari airfield, like otherex-military objects in Estonia, is a contaminated site posing few or no risks toneighboring states. Moreover, for many months, Moscow refused to relinquish controlof the airfield, complicating the Estonian authorities' clean-up plans for the site. Yet,despite donors' lack of environmental concern and seemingly poor prospects for con-tract-making, international cooperation to redevelop Ømari is keen and the airfield'sfuture is brighter than that of other ex-military sites. The United States and variousEuropean governments have tentatively agreed to help participate in the re-developmentof Ømari as a combined civil, commercial, and military airport (Tumarkin, 2000).Because of its commercial potential and its proximity to major transportation routes inEstonia and beyond, Ømari is more likely to attract foreign investment than are otherex-military objects in Estonia.

It is not the case that proponents of the three Cs are unaware of the importance ofmarket-oriented variables and profit motives in driving international environmentalcooperation. Connolly et al (1996, pages 291 ^ 292) note that resource commitmentsfrom bilateral donors for environmental projects in Central and Eastern Europedepend on the demands of political constituents in the donor country. Elsewhere,they suggest that donors' willingness to invest in the former Soviet bloc hingeson project `bankability' (1996, pages 295 ^ 296). But rather than devising a fourthc̀ausal pathway' for successful international environmental cooperation, Connolly et al

Determinants of environmental clean-up in Estonia 695

suborn the economic concerns of donors to the c̀apacity' category of the three Cs. Theauthors suggest that donors' concerns about loan recovery, foreign currency repay-ments, and project financing are facets of the institutional reform challenge in therecipient country (1996, pages 293 ^ 296). More plainly, these are market-orientedconcerns. In the Estonian case, but presumably also in other cases where foreignaid and investment are key ingredients in international environmental cooperation,external actors' economic considerations will constitute their own c̀ausal pathway''.

The limited usefulness of the three Cs for elucidating the Estonian case does notwarrant discarding it as an analytical tool, because we find that concern, contracting,and capacity do influence the forms and functions of international institutions forenvironmental cooperation. However, we urge prospective users of the three Cs tobear in mind Keohane's provisos about the concept and its intended uses, for example,that the three Cs are causal pathways rather than causes per se, and that they areappropriate for identifying `̀ clusters of factors'' that affect international environmentalinstitutions though they may not distinguish the actual factors, themselves. The threeCs concept, then, is less a diagnostic tool than a prediagnostic or provisional mappingtool. Moreover, it is an incomplete framework for analysis, even for the purposes ofprediagnosis, because it does not describe all the important, generic conditions pertinentto the formation and function of international environmental institutions.

11 Closing remarksForeign governments' and investors' expectations about payback periods, returns-on-investments, and the long-term commercial viability of projects were importantdeterminants of hot-spot clean-up outcomes in Estonia. But these factors do notclearly resonate with any of Keohane's (1996) or Keohane et al's (1993) three Cs. Onemight counter that these authors' thesis pertains only to the activities of governmentsand multilateral aid agencies and not to private investors. But it would be na|« ve toassume that bilateral and multilateral aid agencies are indifferent as to whether foreignaid attracts additional foreign and domestic investments. There are few concerns ofgreater import to donors than whether or not their investments are `sustainable'.To illustrate, for most of their projects and programs, the World Bank and the USAgency for International Development must abide by internal guidelines calling forterminal financial commitments. Projects are intended to be self-sustaining, secured bythe income-generating activities of local actors or by donations or investments madeby others.

Of course, there is more to sustainability than whether or not recipient countrieshave secured reliable sources of investment to keep projects running. Some environ-mentalists might question whether the ecoefficient remedies instituted at sites likeKunda, Kehra, and Tallinn are promoting genuine environmental sustainability orare merely creating the illusion of change. It has been argued that pollution preventionand pollution controlöconventional environmental management schemes adoptedin Estonia and elsewhereöretard the rates of resource consumption and environ-mental degradation but do not stop them. Instead, ecoefficiency lets `̀ industry finishoff everything quietly, persistently, and completely'' (McDonough and Braungart, 1998,pages 85 ^ 86). A more environmentally friendly solution calls for reinventing the indus-trial economy. In this alternative economy, customers lease the services of manufacturedgoods (instead of buying said goods) and at the end of their useful life, the complexmaterials from these products are recovered, broken down and reused for an infiniteseries of product lives (McDonough and Braungart, 1998, pages 88 ^ 92). This `̀ nextindustrial revolution'' may be well worth striving for. Perhaps the Kunda, Kehra, andTallinn retrofits are transitional steps to a more environmentally sustainable future.

696 M R Auer, A Raukas

But, unquestionably, the environmental investments at these and other municipal andindustrial sites have sharply reduced stress levels on Estonia's air, water, and soilresources. Moreover, major facilitators of the success of the Kunda, Kehra, and Tallinnretrofits were large capital inputs from foreign public and private investorsöcriticalinvestments that were lacking for most Estonian ex-military sites. If Estonia is to over-come lagging environmental performance at the latter sites, generous foreign aid andforeign direct investment would appear to be de rigueur.

Acknowledgements. This project was sponsored by a grant from the US National ResearchCouncil's Office for Central Europe and Eurasia. The authors received helpful comments on earlierdrafts of this article from Barbara Jancar-Webster, Ron Mitchell, Tamar Gutner, and fouranonymous readers. Laura Wee and Eve Nilenders provided helpful assistance with graphics.

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