Stuck in the Past

Energy, Environment and Poverty in Serbia and Montenegro

Copyright © 2004 by the Country Office in Serbia and Montenegro of the United Nations Development Programme Internacionalnih brigada 69, 11000, Belgrade, Serbia and Montenegro

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior consent of the UNDP Country Office in Serbia and Montenegro.

The views expressed in this publication are those of the authors and do not necessarily represent those of the United Nations or UNDP. The analysis and policy recommendations of this Report do not necessarily reflect the views of the United Nations Development Programme, its Executive Board or its Member States. The report is an independent publication commissioned by UNDP. It is the fruit of a collaborative effort by a team of eminent consultants and advisers.

Cover:

Cover photographs, right to left: Belgrade suburb, traditional Petrovaradin house, apartment building in Podgorica and apartment block in New Belgrade, Aleksandar Kovacevic. Background photograph, of the Zlatibor Mountains, near the village of Gostilje, is courtesy of Predrag Jaksic. Copyright © 2003 by UNDP Serbia and Montenegro.

Layout, desktop and production management:

CICERO Printing Company, Jovana Zujovica 8, 11040, Belgrade, Serbia and Montenegro Printed in Belgrade.

ISBN 86-905231-0-3

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Foreword

Researchers often regard the poor as a statistical category that is to be identified, investigated and eventually reduced in size rather than an active participant in poverty reduction or human development processes. Some development processes aimed at reducing poverty often leave the poor disempowered and inactive, sometimes even imposing economic costs on them.

This report, intended to open debate, stimulate thinking and identify challenges, shows that reform that empowers the poor is possible and potentially fruitful under certain circumstances. It builds on Amartya Sen’s concept of human capabilities, arguing that improving the capabilities of the poor is an investment in human development rather than a cost attached to a development process that originates elsewhere.

The report takes us into the poor household to understand how the poor respond to external circumstances. It suggests that if the poor were able to heat more living space with less energy (within the framework of available energy sources, infrastructure and technologies), more energy could be diverted to productive use, creating jobs, providing goods and services, empowering local communities, reducing poverty and facilitating development. With more living space and higher levels of consumption, the poor would encounter less illness and be able to deploy more time and skills to productive purposes.

People have a right to governance that facilitates their human development. They have every reason to expect their government to work to protect and enhance their civil, social and economic rights, including their rights to property, dignity, health and housing as well as to provide them with the education and knowledge required to improve their living conditions. Poverty reduction means adopting major reforms, which have to start with political will and legitimacy.

This UNDP report exemplifies the application of global knowledge and experience to local conditions by a team of local authors. Although it is written by specialists for specialists, the hope is that its findings will be translated into simple guidelines for reform and modernization in Serbia and Montenegro.

Francis M. O’Donnell UNDP Resident Representative, Serbia and Montenegro

Belgrade

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Acknowledgements This report was written and prepared by a core team engaged by the United Nations Development Programme (UNDP) Office in Serbia and Montenegro led by Aleksandar Kovacevic, principal author. The members included Biljana Curcic, Tanja Jakobi, Zoran Kokic, Miladin Kovacevic, Maja Loncar, Srecko Mihajlovic, Ana Misurovic, Ksenija Petovar, Dragana Vujanovic, Miodrag Vujosevic, Krsto Vukovic and Milos Zlatic. Milijana Ceranic and Steva Niklanovic collected much of the data while Milena Radanov Radicev contributed to cluster analyses. Thomas Burke and Elsebeth Hansen evaluated the research tools and participated in several brainstorming sessions with the core team. Radomir Buric contributed valuable comments and provided substantial support. Sanja Bojanic, of the UNDP Podgorica office, supported the project in Montenegro and provided valuable comments. The Economics Institute, the Strategic Marketing Media Research Institute (SMMRI) and MASMI Research Group conducted surveys and focus groups, working with the authors to select samples, and prepare questionnaires. Saba Nordstrom, of the Global Environmental Facility (GEF) provided continuous support, comments and some of the photographs. Jonathan Healy, of Dublin University, was kind enough to contribute his analyses. Predrag Jaksic, of the Institute for Environmental Protection, made his experience, knowledge and photo archives available to the team. Sian Green edited an earlier draft of the text and provided valuable comments. Meta de Coquereaumont and Barbara Karni of Communications Development contributed additional structural and substantive editing of the report. Maja Loncar and Aleksandar Macura, together with administrative staff members from the UNDP country office, patiently served as project assistants, providing continuous administrative support to team members. Many others—energy professionals, journalists, internally displaced people and ordinary people throughout the country—gave their support to the project, providing valuable assistance, information and experience. CPA /CPS was civil society partner in this endeavour. I would like to thank in particular Milutin Drazic, Branislav Adjanski, Eduard Kotri and Rade Milojevic, who contributed the knowledge and insight they gathered during decades of experience. The International Energy Agency provided valuable data, methodologies, insights and comments. Information, expertise and data were also provided by the World Bank, the U.S. Agency for International Development, the Alliance to Save Energy, NEXANT, Poverty Reduction Strategy Process teams from Serbia and Montenegro, the World Health Organization, the Food and Agricultural Organization, the United Nations High Commissioner for Human Rights, the European Bank for Reconstruction and Development, the Electric Power System (EPS) of Serbia, the federal Chamber of Commerce, the Chambers of Commerce of Serbia and Montenegro, district heating companies throughout the country, workers unions, technical and professional associations, consumer associations and non-governmental organizations, the Forestry Institute of Belgrade, the Mining Institute, the Agricultural Faculty, the Soil Institute, the Institute Nikola Tesla and various companies. The project management units established with government institutions and the civil sector in Serbia and Montenegro followed up the project process. The government of the Netherlands and the UNDP Thematic Trust Fund provided funding for this work. Francis O’Donnell, the UNDP Resident Representative in Serbia and Montenegro, provided support during difficult periods. His encouragement made completion of this work possible.

Aleksandar Kovacevic

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Contents

Executive Summary ........................................................................................................................................... 1

Chapter 1 Why Is More Efficient Energy Provision Critical for Serbia and Montenegro?...... 5 Removing the Energy Constraints to Growth and Poverty Reduction ............................. 5

Methodology of the Study................................................................................................ 6

Chapter 2 Energy and Poverty...................................................................................................... 13 Defining Poverty ............................................................................................................ 13 Family Income and Consumption .................................................................................. 16 Vulnerability and Exposure to External Risk................................................................. 16 Risks Posed by Living Conditions ................................................................................. 17 Energy Services as a Dimension of Poverty................................................................... 17 The Living Environment as a Dimension of Poverty ..................................................... 18 The Energy-Environment-Poverty Framework.............................................................. 18

Chapter 3 Energy and Economy: In Search of Good Policy ...................................................... 21 Serbia and Montenegro’s Inefficient and Costly Energy System................................... 21 The Cost of Poor Energy Policies .................................................................................. 27

Chapter 4 Provision of Energy Services ....................................................................................... 29 Why Is Household Energy Consumption So High? ....................................................... 29 The Cost of Energy Services .......................................................................................... 40 What Kind of Housing Do Households Occupy? .......................................................... 47 What Kind of Fuel Do Households Use? ....................................................................... 49

Chapter 5 Inefficient Energy Provision and the Indoor and Outdoor Environment............... 51 The Indoor Environment: Inadequate Heat and Unhealthy Air .................................... 51 Outdoor Environment: Pollution of the Air, Water, and Soil......................................... 57

Chapter 6 The Distribution of Welfare Benefits towards the Better Off ...................................73The Rich Get Richer: Who Pays for District Heating Systems? .................................... 76 Distribution of Benefits among Different Groups of the Poor ...................................... 79

Chapter 7 Coping Strategies ......................................................................................................... 81 Reduction of the Heated Area ........................................................................................ 81 Other Risk Strategies for Coping with Risk ................................................................... 86

Chapter 8 Promoting Change and Improving Sustainability .................................................... 91Can Inefficient Patterns of Domestic Energy Use Be Sustained? .................................. 91

The Capacity for Change................................................................................................ 93

Chapter 9 Recommendations ........................................................................................................ 95

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Annex A Cluster Analysis and Survey Results ........................................................................ 101

Annex B Useful Websites.......................................................................................................... 123

Bibliography .........................................................................................................................................125

Tables1.1 Meeting the Millennium Development Goals by Improving Governance in the Energy Sector ............... 8 2.1 The Multi-Dimensional Nature of Poverty............................................................................................... 15 3.1 Human Development Index and Energy Indicators in Selected Countries, 2001 .................................... 204.1 Complaints about the Quality of Homes in Serbia and Montenegro, 2002.............................................. 30 4.2 Number of Registered Passenger Cars in Serbia and Montengero, 1999–2002....................................... 354.3.1 Average 24-Hour and Maximum 30-Minute Harmful Emissions from Vehicle Exhaust Gases in

Podgorica, 2002........................................................................................................................................ 35 4.3.2 Average Annual Concentrations and Pollution Factors for Harmful Emissions from Vehicle Exhaust

Gases in Belgrade, 2002........................................................................................................................... 36 5.1 Actual and Recommended Maximum Emissions from Fuel Wood, 2001/02 ......................................... 535.2 Area Heated and Number of Sick Household Members, 2003 ................................................................ 54 5.3 Average Number of Deaths, by Region and Season, 1999–2001............................................................. 55 5.4 Air Quality Indices in Selected Cities in Serbia, 2000 ............................................................................ 60 5.5 Operation of Obrenovac Area Thermal Power Plants, 2002 .................................................................... 64 5.6 Content of Pollutants in Gases Emitted by Thermal Power Plants in Greece and Serbia, 2002 .............. 65 5.7 Quality of Surface Water in Obrenovac, 1992 .........................................................................................665.8 Heavy Metal Content in Soil Samples Taken in Drmno, irikovac and Klenovnik, 1991–94 ................675.9 Heavy Metal Content in Plants in Drmno, irikovac and Klenovnik, 1992– 94 .................................... 69 6.1 Socioeconomic Differences between Households with without District Heating, 2003...........................746.2 GDP, Employment and Productivity in Serbia, 1953–90..........................................................................756.3 Relationship of Employment by Sector to Awards of Apartments, Selected Years, 1974–86..................757.1 Most Frequently Used Coping Strategy ................................................................................................... 82 7.2 Proportion of Households that Reduce Heated Space During 2002/2003 Heating Season...................... 82 7.3 Reduction of Heated Space in Apartments, by Type of Fuel ................................................................... 82 7.4 Socioeconomic Indicators, by Heated Space and Type of Fuel ............................................................... 83A.1 Cluster 1 Characteristics......................................................................................................................... 104 A.2 Cluster 2 Characteristics......................................................................................................................... 105A.3 Cluster 3 Characteristics ........................................................................................................................ 106 A.4 Cluster 4 Characteristics ........................................................................................................................ 107 A.5 Distribution of Agricultural Land .......................................................................................................... 109 A.6 Perceptions of Safety of Various Heating Systems ................................................................................ 112A.7 Area Heated, by Income per Household Member ................................................................................. 113 A.8 Area Heated, by Perception of Economic Status ................................................................................... 113 A.9 Area Heated, by Perception of Household Purchasing Power ............................................................... 113A.10 Area Heated, by Level of Education ..................................................................................................... 114 A.11 Area Heated, by Age of Respondent ..................................................................................................... 114

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Boxes

2.1 What Is Poverty? ...................................................................................................................................... 14 3.1 Dealing with Customers Who Don’t Pay Their Bills ............................................................................... 24 4.1 What Is a District Heating System?.......................................................................................................... 31 4.2 The Role of Women in Conserving Energy ............................................................................................. 40 4.3 Connecting More Households to the District Heating System................................................................. 41 4.4 How Does Inefficient Energy Use Affect Women? ................................................................................. 46 5.1 Bad Management of Energy Resources in Vreoci.................................................................................... 57 5.2 Why Is Air Pollution So Severe in Pljevlja? ............................................................................................ 61 6.1 The Political Economy of Energy Subsidies ............................................................................................ 77 7.1 What Constitutes Appropriate Housing?.................................................................................................. 85 7.2 How Do Serbia’s Roma Communities Fare? ........................................................................................... 89 9.1 What Is National Ownership? .................................................................................................................. 99

Photos

Photo 3.1: City of Belgrade, Its Power Plant and Air............................................................................................ 26 Photo 4.1: Fuel Wood Market Cycle: From National Park to Apartment ............................................................. 28 Photo 4.2: Panel-Block Buildings ......................................................................................................................... 32 Photo 4.3: Contemporary Construction: Dash to Completion, Neglect of Efficiency ......................................... 44 Photo 5.1: Mission to Vreoci Village .................................................................................................................... 56 Photo 5.2: Aluminium Smelter in Zeta Plain ........................................................................................................ 62 Photo 5.3: Water Pollution Near Kostolac ............................................................................................................ 68 Photo 6.1: State-Owned and Solidarity Apartments.............................................................................................. 72 Photo 6.2: Kaludjerica—Unregistered Housing.................................................................................................... 80 Photo 7.1: Old Woman Coping with Cold ............................................................................................................ 84 Photo 7.2: Roma Community Everyday Life ........................................................................................................ 90 Photo 8.1: Soil Devastation ................................................................................................................................... 92 Photo 9.1: Housing Energy Efficiency ............................................................................................................... 100

Figures

3.1 GDP and Energy Consumption in Serbia and Montenegro, 1990–2001.................................................. 20 A.1. Distribution of Households, by Cluster and Stratum.............................................................................. 102

Maps

Map 5.1 Population Density per Settlement Area ................................................................................................70 Map 5.2 Density of Population that Use Solid Fuels as Main Source of Space Heating per

Settlement Area .....................................................................................................................................71 Map A1 Stratums: Area, Number of Municipalities, Population, Housholds and Housholds

that Own Passenger Car.........................................................................................................................103 Map A2 Percentage of Forest Covered Area......................................................................................................108 Map A3 Population Density per Total Area ........................................................................................................120 Map A4 Elderly Population (65 Years and Over) Share in Total Population ....................................................121

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Executive Summary

Unsustainable energy use is retarding growth, poverty reduction and

human development in Serbia and Montenegro

Energy use in Serbia and Montenegro is unsustainable. Unless changes are made, the country will not be able to grow rapidly enough to reduce poverty. Living standards, livelihoods and well-being will continue to deteriorate if immediate steps are not taken to address critical issues. Foremost among them are the use of fuel-inefficient ovens, heaters and stoves in poorly insulated and substandard houses; the growing problem of vehicular pollution; subsidization of industry by taxpayers, through the provision of low-cost energy; the impact of external economic shocks, such as fluctuations in global oil and regional electricity prices; the widening gap between the technologies used in Serbia and Montenegro and the more fuel-efficient technologies available abroad; and the ageing of the population.

Considering the size and economic and social importance of the energy sector and the complex relationships between energy, the environment and poverty, reform of energy and environmental policy will be critical if Serbia and Montenegro is to achieve and surpass the Millennium Development Goals.

Reducing energy consumption could dramatically increase growth

To increase living standards, Serbia and Montenegro needs to increase growth. But the high cost of energy means that energy-intensive growth is not an option. And the country’s ageing population and low levels of investment in education mean that it cannot count on demographic changes to lead to an increase in growth. Improving human development requires changes in energy policy that will facilitate both faster growth and deeper poverty reduction.

Serbia and Montenegro continues to consume energy in the way that countries did in the 1960s. Energy consumption for space heating per square metre of heated living space is very high, particularly among poor households. Freeing up some of the resources households spend on energy could increase disposable income for other goods and services, stimulating the economy and creating additional jobs. Increased household energy efficiency would enable the industrial sector, especially agriculture, to better utilize scarce energy resources. As a result, industrial capacity would likely increase. Implementing energy efficiency measures could immediately contribute to a boost in the GDP growth rate to 5%–7% a year. No other measure could secure this kind of increase in growth as quickly.

Households are suffering from lack of heat and from high levels of indoor

air pollution

Average energy consumption per square metre of living space is about 2.5 times greater in Serbia and Montenegro than in Northern Europe, where the climate is much more severe. About half of all households in Serbia and

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Montenegro, many of them poor, consume 340 kilowatt-hours per square metre—about four times the average for Western Europe.

During the winter many poor households heat only half of their living space in order to save on energy costs. More than one in four households heats less than 10 square metres per person, considered to be the necessary minimum. As a result, mortality in Serbia and Montenegro during the winter months can be more than 30% higher than monthly average mortality rate, with poor households disproportionately affected.

About 60% of the population uses wood and lignite coal—the worst polluters—as their major source of energy for heating, domestic hot water and cooking. Indoor air pollution is considerable and is correlated with chronic illnesses, including respiratory disease.

Pollution is affecting the air, land, and water—and hitting poor people

particularly hard

Substandard household heating devices as well as emissions from thermal power plants, district heating plants and industrial energy use are exposing poor people to severe pollution, including carbon dioxide emissions per unit of GDP that are more than twice the world average.

About 1 million hectares of agricultural land—more than 25% of all privately owned land in Serbia—is exposed to acidification. Air, soil and water pollution resulting from energy production and use have harmed a large share of the country’s forest resources. The costs of such damage are borne by the poorest, whose livelihoods often depend on agricultural land and forests.

Better governance and more comprehensive policy are needed

Improved governance within the energy sector is urgently required. Policymakers need to establish an enforceable concept of property rights and public goods, build capacity, improve institutional and corporate governance, develop better policies, improve information flows and structures and enhance international cooperation. The international community will likely need to play a role in shaping these policies and reforms (through advocacy and education), since civil society lacks sufficient social capital to raise awareness and advocate for the reversal of current trends.

A partial governance framework for the sector has been developed, but it does not improve living conditions for the poorest. A new policy that helps remedy the uneven distribution of welfare benefits in Serbia is needed. A policy that reverses the sizeable cross-subsidy from poor to rich—which occurs through the connection of better-off households to the subsidized energy provided by district heating systems, for example—would do much to improve energy efficiency and reduce poverty.

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Broad scope of the survey underlying the study

Three surveys and a series of focus groups were conducted to understand the structure of energy services in Serbia and Montenegro. Two surveys examined households. The first examined actual usage (consumption, appliances) patterns; the second explored perceptions about energy processes and services. A third survey looked at energy providers and auxiliary services. A series of focus groups was conducted with energy users to gain a deeper understanding of the complex processes examined in the surveys.

Four distinct population clusters emerged from the research. The first two clusters, which together represent about half of the population, constitute those most marginalized by the energy-poverty nexus. The third cluster, which represents less than 20% of the population, is made up of people who are relatively secure socially. The fourth cluster, which represents about a fourth of the population, can be classified as socially secure because of the energy-related subsidies they enjoy.

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1. Why Is More Efficient Energy Provision Critical for

Serbia and Montenegro?

Lack of an efficient energy policy is constraining economic development. To

increase growth, raise living standards and reduce poverty, Serbia and

Montenegro needs to adopt modern energy technologies and put in place better

governance structures. The consumption and provision of energy need to be

understood before reform of the sector can proceed.

Removing the Energy Constraints to Growth and Poverty

ReductionThe capacity of poor people to change their energy consumption patterns, reduce energy expenditures and increase energy efficiency could be critical for Serbia and Montenegro’s development.1 Reducing expenditures on energy could allow the poor to increase their purchases of other goods, such as food, clothing and consumer goods, that would make their lives easier.

By increasing consumption and improving living conditions (by reducing indoor and outdoor pollution and allowing households to heat more space in the winter), greater energy efficiency also reduces illness and death. Increasing energy efficiency also reduces poverty, improves the environment and strengthens the macro-economy, as poor families spend their energy savings on food and other locally produced goods, spurring local employment and economic growth.

Modern energy technologies and governance patterns have made it possible to support a high standard of living with relatively low energy consumption. But Serbia and Montenegro continues to consume energy in the way that countries did in the 1960s.

Energy technologies are not socially neutral. In addition to providing energy and affecting the environment, energy systems affect governance and development capacity. Serbia and Montenegro has not yet adopted energy technologies that are appropriate for a modern, democratic state. New energy use patterns and technologies need to be adopted if the economy is to grow and poverty is to be reduced.

1 The term Serbia and Montenegro refers to Serbia and Montenegro excluding Kosovo. Serbia

refers to the Republic of Serbia excluding Kosovo; Montenegro refers to the Republic of Montenegro. Serbia and Montenegro are considered one entity in energy terms, since Montenegro’s population and energy consumption are very small relative to those of Serbia and most of the energy patterns appear to be similar. Separate considerations on Montenegro are provided where appropriate. The Belgrade metropolitan area is exceptionally important, as it accounts for a disproportionate volume of energy services relative to its population and contribution to GDP.

Energy is essential for development.… We need to make clean energy supplies accessible and affordable. We need to increase renewable energy sources and improve energy efficiency. —Kofi Annan, Secretary-General, United Nations, 2002

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To increase living standards, Serbia and Montenegro needs to increase growth. But the high cost of energy means that energy-intensive growth is not an option. And the country’s ageing population and low levels of investment in education mean that it cannot count on demographic changes to increase growth. Increasing human development requires a different solution.

The current energy system in Serbia and Montenegro is not sustainable. Even with outside assistance, social and economic development are likely to be constrained, and Serbia and Montenegro will have difficulty meeting the Millennium Development Goals (table 1.1). A variety of policies could be adopted to ease these energy constraints and help Serbia and Montenegro meet the goals (DFID 2002).

Despite the support of international donors and creditors, the capacity and quality of Serbia and Montenegro’s energy infrastructure is likely to decline unless GDP rises quickly. Growth is likely to require a different structure of energy services. The existing infrastructure may well become obsolete from a development perspective and have to be abandoned. A kind of Schumpeterian “creative destruction” seems inevitable, which will require an enabling institutional framework, governance and human capacity.

This report examines the use of energy in Serbia and Montenegro and makes recommendations on possible ways of transforming the current system—a transformation that is a crucial step in the transition process. It examines the complex relations between energy, poverty and the environment.

Methodology of the Study Three surveys and a series of focus groups were conducted to understand the structure of energy services in Serbia and Montenegro. Two surveys examined households. The first examined actual usage (consumption, appliances) patterns; the second explored perceptions about energy processes and services. A third survey looked at energy providers and auxiliary services. A series of focus groups was conducted with energy users to gain a deeper understanding of the complex processes examined in the surveys.

The first household survey was administered to a random sample of 1,720 households. Municipalities, neighbourhoods, streets and house and apartments were randomly selected. The perception survey was conducted on a separate sample of 1,650 households randomly selected from the 2002 census in Serbia and voting lists in Montenegro. Data on energy consumption, the number of connections and territorial distribution were gathered from energy providers, including electricity distribution companies, district heating companies, gas distributors and coal and wood retailers.

After the survey data were collected, the results were extended to the entire population and compared with data on district heating system connections, energy consumption by district heating systems, electricity consumption,

Lack of modern, affordable energy services limits job opportunities, farm efficiency, business and industrial development and access to education, health care and other basic social services. This maintains the structures of underdevelopment and poverty that hold back people, communities and countries from reaching their full potential. —Zéphirin Diabré, Associate Administrator, United Nations Development Programme 2002

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connections to the electrical grid, connections to the natural gas network, fuel wood consumption and coal consumption. A panel of forestry experts assessed the supply of fuel wood. The data collected from suppliers and the survey data collected from users yielded remarkably similar results.

Total household energy consumption was calculated using an algorithm based on International Energy Agency comparisons and the best available estimates of wood and coal energy content. Findings on the quality of housing were compared with the results of a survey on the energy efficiency of buildings performed independently by NEXANT. All findings were compared with the results of the Living Standards Measurement Study survey conducted as part of Serbia and Montenegro’s Poverty Reduction Strategy Process, which sampled more than 6,500 households, and the household consumption survey conducted by the Federal Statistical Office.

The results of the household survey were used for the cluster analysis described in annex A.

Qualitative research with focus groups was performed based on results from the first two surveys. Participants were selected through a random survey process, structured so that the composition of the focus groups mirrored the composition of energy supply across households. Focus groups with real estate agents, visits to Roma communities and interviews with technicians from electricity distribution companies were also conducted. All of these inputs were used to create the theoretical framework presented in chapter 4. Parameters were calculated for each cluster (the results are presented in annex A).

First—and most important—we were finally able to overcome the debate over whether the world’s focus should be on poverty or the environment, agreeing once and for all on the inseparable link between the two. Second, through the broad endorsement of UN Secretary-General Kofi Annan’s WEHAB [water and sanitation, energy, health, agriculture and biodiversity] priorities, we were able to prioritize key sustainable development issues and show how they can be linked clearly to the Millennium Development Goals, which were explicitly placed at the heart of the intergovernmental agreements reached in Johannesburg. Third, the World Summit on Sustainable Development was about implementation rather than simply agenda-setting. In contrast to Rio, which was the Earth Summit, Johannesburg was the “down to earth” summit, turning our attention towards making things happen over the next 10 years. And fourth, the World Summit on Sustainable Development marked the acknowledgement by the global community that these goals and targets are only achievable if we draw on a much wider circle of partners than in the past. —Mark Malloch Brown, Administrator, United Nations Development Programme, 2002

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Table 1.1. Meeting the Millennium Development Goals by Improving Governance in the Energy

Sector

Goals and Targets Indicators Direct energy-related constraints

Enabling policies in the energy sector

Goal 1: Eradicate extreme poverty and hunger

Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day

1. Proportion of population below $1 per day (PPP-values)

2. Poverty gap ratio [incidence x depth of poverty]

3. Share of poorest quintile in national consumption

Prices of energy services and energy efficiency are major contributors to the real purchasing power parity of one dollar. Low energy efficiency and un- competitive energy costs impede economic growth, suppressing demand and job creation.

Improve energy efficiency in households and increase habitable space per capita while decreasing overall energy consumption in households by 5% a year until 2015. Double amount of energy available for economic activity. Implement a well-targeted system of energy assistance to poor households

Target 2: Halve, between 1990 and 2015, the proportion of people who suffer from hunger

4. Prevalence of underweightchildren (under-five years of age)

5. Proportion of population below minimum level of dietary energy consumption

Most food requires cooking and hot water for preparation. Small scale refrigeration contributes to food security by enhancing the capacity to deal with seasonal fluctuations in food prices and external shocks.

Implement a well-targeted system of energy assistance to poor households coupled with various enabling / empowering activities.

Goal 2: Achieve universal primary education

Target 3: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling

6. Net enrolment ratio in primary education

7. Proportion of pupils starting grade 1 who reach grade 5

8. Literacy rate of 15-24 year olds

Reduction of available living space in homes during winter / schooling months affects learning capacity. Increased energy costs affect family capacity to provide learning options for the young. Energy costs divert scarce budget resources and limit capacity of institutions (schools, hospitals) to perform services.

Improve energy efficiency in households and increase habitable space per capita while decreasing overall energy consumption in households by 5% a year by 2015. Improve energy efficiency of institutions.

Goal 3: Promote gender equality and empower women

Target 4: Eliminate genderdisparity in primary and secondary educationpreferably by 2005 and to

9. Ratio of girls to boys in primary, secondary and tertiary education

10. Ratio of literate females to males of 15-24 year olds

11. Share of women in

In households that use solid fuels women are responsible for fuel provision and cooking that involves maintenance of fire and exposure to indoor pollution.

Implement a well-targeted system of energy assistance to poor households coupled with various enabling / empowering activities.

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all levels of education no later than 2015

wage employment in the non-agricultural sector

12. Proportion of seats held by women in national parliament

Goal 4: Reduce child mortality

Target 5: Reduce by two-thirds,between 1990 and 2015, the under-fivemortality rate

13. Under-five mortality rate

14. Infant mortality rate 15. Proportion of 1 year

old children immunized against measles

Indoor air pollution is recognized as a risk factor for child mortality. More than 40 % of households are exposed to excess indoor pollution. Child mortality rate is traditionally associated with available living (habitable, heated) space per person.

Increase available heated living space per capita and improve housing standards.

Goal 5: Improve maternal health

Target 6: Reduce by three-quarters,between 1990 and 2015, the maternalmortality ratio

16. Maternal mortality ratio

17. Proportion of births attended by skilled health personnel

Available habitable space is a major determinant of maternal health.

Increase available heated living space per capita and improve housing standards.

Goal 6: Combat HIV/AIDS, malaria and other diseases

Target 7: Have halted by 2015, and begun to reverse, the spread of HIV/AIDS

18. HIV prevalence among 15-24 year old pregnant women

19. Contraceptive prevalence rate

20. Number of children orphaned by HIV/AIDS

Target 8: Have halted by 2015, and begun to reverse, the incidence of malaria and other major diseases

21. Prevalence and death rates associated with malaria

22. Proportion of population in malaria risk areas using effective malaria prevention and treatment measures

23. Prevalence and death rates associated with tuberculosis

24. Proportion of TB cases detected and cured under DOTS (Directly Observed Treatment Short Course)

Population density is an enabling factors for the spread of epidemics. Ten percent of households have less than 5 square metres per person of heated space during the winter because of the lack of appropriate and affordable energy services.

Cardiovascular disease, asthma and epidemics such as influenza are linked to insufficient heating and housing, contributing to much higher rate of mortality in the winter.

Increase available heated living space per capita and improve housing standards.

Eliminate indoor pollution that affects human health. Empower woman to minimize indoor pollution.

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Goal 7: Ensure environmental sustainability

Target 9: Integrate the principles of sustainable developmentinto country policies and programmesand reverse the loss of environmental resources

25. Proportion of land area covered by forest

26. Land area protected to maintain biological diversity

27. GDP per unit of energy use (as proxy for energy efficiency)

28. Carbon dioxide emissions (per capita) [Plus two figures of global atmospheric pollution: ozone depletion and the accumulation of global warming gases]

Excessive use of wood for heating without adequate replanting, minimal use of wood residues and low wood combustion efficiency are major causes of deforestation.As the area covered by forests shrinks, biodiversity potential becomes endangered. Energy efficiency declines(GDP per unit of energy), while carbon dioxide emissions per capita grow.

Develop appropriate energy policies, in particular a Clean DevelopmentMechanism (CDM) national strategy.

Target 10: Halve, by 2015, the proportion of peoplewithoutsustainable access to safe drinkingwater

29. Proportion of population with sustainable access to an improved water source

The energy sector is the largest user of surface water in the country and a major pollutant of surface and underground waters.

Enforce appropriate standards for energy / water resource interrelations.

Goal 8: Develop a Global Partnership for Development

Target 12: Develop further an open, rule-based,predictable,non-discriminatory trading and financialsystem

Includes a commitment to good governance,development,and poverty reduction—bothnationally andinternationally

Target 13: Address the Special Needs of the Least

Official Development

Assistance

30. Net official developmentassistance as percent of age of DAC (targets of 0.7% in total and 0.15% for the least developed countries)

31. Proportion of official development assistance to basic social services (basic education, primary health care, nutrition, safe water and sanitation)

32. Proportion of official development assistance that is untied

33. Proportion of official development assistance for environment in small island developing states

State capture related to the energy sector remain major discrimination / market distortions factors in the domestic market. Official development assistance directed to the transport sector failed to improve energy transport capabilities. From an energy point of view Serbia and Montenegro is effectively a land locked county. Insufficient international energy cooperation and integration into international energy markets cause the energy inflow transport price to exceed that in comparable countries. Insufficient water transport limits

Prevent the perpetuation of state capture by promoting civil society involvement, informationdissemination and improvedaccountability. Establish a national energy strategy through transparent and inclusive public mechanisms.

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Developed Countries

Includes: tariff and quota free access for least developed country exports;enhancedprogrammeof debt relief for HIPC and cancellation of official bilateral debt; and more generousofficialdevelopmentassistance for countriescommitted to poverty reduction

Target 14: Address the Special Needs of landlocked countries and small island developing states

(through BarbadosProgrammeand 22nd GeneralAssembly provisions)

Target 15: Deal comprehensively with the debtproblems of developing countriesthroughnational and international measures in order to make debtsustainable in the long term

34. Proportion of official development assistance for transport sector in land-locked countries

Market Access

35. Proportion of exports (by value and excluding arms) admitted free of duties and quotas

36. Average tariffs and quotas on agricultural products and textiles and clothing

37. Domestic and export agricultural subsidies in OECD countries

38. Proportion of official development assistance provided to help build trade capacity

Debt Sustainability

39. Proportion of official bilateral HIPC debt cancelled

40. Debt service as a percentage of exports of goods and services

41. Proportion of official development assistance provided as debt relief

42. Number of countries reaching HIPC decision and completion points

agriculture export options and viability of production. Not only is the energy sector one of the most heavily indebted sectors, but its low efficiency limits the creditworthiness of the rest of economy. Low energy efficiency contributes to insufficient export competitiveness and growing foreign trade deficits.Expensive energy imports are a major share of import inflows.Energy sector and energy import inefficiency contribute to declining terms of trade. The poor state of the energy sector is a major contributor to the lack of debt sustainability.

12

Target 16: In co-operationwithdeveloping countries,develop and implement strategies for decent and productive work for youth

43. Unemployment rate among 15- to 24 year-olds

Energy efficiency and energy conversion efficiency as well as the centralized structure of the energy sector limit employment opportunities.

Improve energy efficiency in industry, agriculture and services.

Target 17: In co-operationwithpharmaceutical companies, provideaccess to affordable,essential drugs in developing countries

44. Proportion of population with access to affordable essential drugs on a sustainable basis

Target 18: In co-operationwith the privatesector, make available the benefits of newtechnologies, especially informationandcommunications

45. Telephone lines per 1000 people

46. Personal computers per 1000 people

Other indicators to be determined

Investment capacity and investment opportunities are constrained by energy sector inefficiencies.

Institue a national policy to direct the gains of improved energy efficiency into high productivity/high job creation rates.

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2 Energy and Poverty

Poverty can be defined as the lack of sufficient household capital to provide

adequate living conditions for household members. Measuring poverty involves

measuring the types of capital needed and identifying the factors that constrain

them. This study provides tools for developing a set of strategies—physical,

economic, governance, education and advocacy measures—to help eradicate

poverty by improving targeting, results and the cost-benefit ratio of

interventions. The theoretical energy-environment-poverty framework

developed here views poverty as embedded in the very nature of the household,

its capital and its human capacity. Interventions that increase the amount or

improve the utilization of capital by households are likely to cost less and

provide greater and longer-lasting benefits than simple transfers of financial

resources to poor people.

Defining Poverty Poverty reflects the lack of household capital. Households are poor if they possess inadequate physical, human or social capital and are not able to secure returns on available capital to meet their basic needs or secure a healthy lifestyle (box 2.1). Conventional measures of poverty are correlated with all three types of capital.

Attempts have been made to combine components of the household’s capital account into a current revenues and expenditures framework. Such analyses are based on assumptions and generalizations that need to reflect the living conditions of the majority of the poor, using physical and financial indicators to describe those living conditions. Both the assets themselves—including natural assets, physical capital, social capital, human capital and financial assets—and the performance achieved with those assets need to be considered.

Recent work on poverty also recognizes the effect of the geographical location of the poor on the return to their assets and consequently on poverty levels (Ravallion and Wodon 1997). Geography, weather, seasonality and culture can all affect the returns to equivalent assets.

Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not being able to go to school and not knowing how to read. Poverty is not having a job, it is fear for the future, living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation and freedom. The curse of poverty has no justification in our age. It is socially as cruel and blind as the practice of cannibalism at the dawn of civilization, when men ate each other because they had not yet learned to take food from the soil or to consume the abundant animal life around them. The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty. —Martin Luther King, Jr., U.S. civil rights leader

14

Box 2.1 What Is Poverty?

Poverty can be viewed from three different perspectives: the income perspective, the basic needs perspective, and the capability perspective. A United Nations Development Programme publication distinguishes the three perspective as follows (UNDP 2003):

Income perspective: A person is poor if and only if her income level is below the defined poverty line. Many countries have adopted income poverty lines to monitor progress in reducing poverty incidence. Often the cut-off poverty line is defined in terms of having enough income for a specified amount of food.

Basic needs perspective: Poverty is the deprivation of material requirements for the minimally acceptable fulfilment of human needs, including food. This concept of deprivation goes well beyond the lack of private income: it includes the need for basic health and education and essential services that have to be provided by the community to prevent people from falling into poverty. It recognizes the need for employment and participation.

Capability perspective: Poverty represents the absence of some basic capabilities to function: a person lacking the opportunity to achieve some minimally acceptable levels of functioning is considered poor. The functions relevant to this analysis can vary from such physical ones as being well nourished, being adequately clothed and sheltered and avoiding preventable morbidity to more complex social achievements, such as partaking in the life of the community. The capability approach reconciles the notions of absolute and relative poverty, since relative deprivation in incomes and commodities can lead to an absolute deprivation in minimum capabilities.

In the standard poverty literature, several different indicators are used to assess poverty (including two Human Poverty Indexes, HPI-1 and HPI-2). The poverty line is now the subject of detailed mathematical modelling. These tools are used for advocacy, analysis of the spatial distribution of poverty, research and comparisons.

15

The stock of assets results from the investments of several generations within the same household. The use of the stock of assets normally reflects tradition, culture, the technology mix and historical patterns. None of these components is neutral or insulated from social processes. The decision to purchase a heating or cooking device, for example, is affected by cultural and social surroundings.

The available mix of assets is affected by the law of diminishing returns. Assets need to be well balanced to maximize the return from each component. But investment decisions are made under conditions of uncertainty—uncertainty about future returns as well as insufficient information about future externalities.

Some investments are likely to be made in order to mitigate current or expected risks. By definition the resulting stock of assets will be suboptimal and inefficient relative to the technology frontier. From this perspective poverty can be defined as returns from the available mix of assets that are insufficient to ensure healthy living and achievement of potential life expectancy at birth. The available mix of assets refers to a sustainable mix of assets that is not likely to diminish in quantity or quality if the current pattern of use continues indefinitely in the future.

The five components of the capital mix can be considered from five different aspects: trends, seasons, shocks, location and density (table 2.1). The actual indicators may vary, since most dimensions indicated in the table are covered by at least one indicator or appropriate proxy.

Table 2.1. The Multi-Dimensional Nature of Poverty

Aspect

Natural

assets

Social

capital

Human

capital

Physical

capital

Financial

assets

Trends Productivity Ownership rights

Demographic trends

Utilization rates

Discounted revenues

Seasons Winter temperatures

Restrictedinteraction

Excess mortality

Utilization per season

Seasonalpatterns

Shocks Availability Deprivation Strikes Age of physical assets

Number of wage earners in household

Location Weather Share of middle class

Access to health and education

Externalservices

Employment opportunities

Density Density of resources

Population density

Education levels

Living space per person

n.a.

n.a. Not applicable. Source: Based on Barnett 2001.

The most appropriate statistical methodology for capturing the multi-dimensional nature of poverty is cluster analysis. Applied to a detailed household survey database, cluster analysis can define three, four, or five distinctive groups of households clustered around certain distinctive

In the distinction between functionings and capabilities, emphasis was placed on the importance of having the freedom to choose one kind of life rather than another. This is an emphasis that distinguishes the capability approach from any accounting of only realized achievements. However, the ability to exercise freedom may, to a considerable extent, be directly dependent on the education we have received, and thus the development of the educational sector may have a foundational connection with the capability-based approach. —Amartya Sen, Nobel Laureate, 1989

16

characteristics. One or more of these groups is likely to have characteristics related to insufficient energy services or inadequate living conditions. (For the results of the cluster analysis, see annex A.)

Conventional poverty reduction strategies are based on common governance and macroeconomic principles. Poverty reduction is a process of trial and error: intervention, measurement, adjusted intervention, measurement.

This study provides tools for developing a set of strategies for interventions that help eradicate poverty. These strategies include physical, economic, governance, education and advocacy measures that improve targeting, results and the cost-benefit ratio of interventions. The methods and theoretical framework presented here complement standard measures of poverty and human development, which are used where appropriate.

Family Income and Consumption Three basic dimensions of household income and consumption affect the energy services available to a household. First, household income should be sufficient to procure the fuel and external energy-related services needed to provide adequate energy services in the home; a suitable indicator might be fuel expenses as a proportion of total household consumption or income.

Second, household income should be sufficient to cover depreciation and replacement of available capital; suitable indicators might be the average age of the energy devices available to the household and indicators of basic knowledge and human capacity in the household.

Third, household income and consumption include components related to the use of natural resources accessible to household members; access to forests and harvesting of fuel wood are a basic indicator of this component. In addition, households should be capable of upgrading their capital to cope with risks (see chapter 7), and household members should be able to upgrade and apply their human capital.

Vulnerability and Exposure to External Risk A household is exposed to various risks. From the energy and environment perspective, the most important of these risks include:

• Fuel shortages, the disruption of externally supplied fuels or services, or both.

• Price shocks in externally supplied fuels or services. • Weather shocks (exceptionally cold or windy winters). • Disruption or diminishing access to natural resources, such as fuel

wood.• Social turmoil, forced evictions, and other social risks.

The perspective of human development incorporates the need to remove the hindrances that people face through the efforts and initiatives of people themselves. —Amartya Sen, Nobel Laureate

17

The capacity of the household to cope with external risks depends partly on its capital. Insufficient capital is likely to contribute to household poverty. Keeping capital idle to ensure that it will be available for cold winter days further contributes to poverty. Good-quality physical assets (homes that are properly winterized, for example) reduce vulnerability.

People are entitled to the peaceful enjoyment of their property and protection of their property rights. It is the responsibility of government to define a set of property rights for all people, regardless of their status or the nature of the property.

Risks Posed by Living ConditionsLiving condition risks that may endanger the human capital of the household are correlated with the sufficiency and quality of energy services. Lack of heated space and indoor pollution are likely to affect the quality and length of life.

People accept risky living conditions either because they are inadequately informed of their magnitude or because they understand them but cannot afford to mitigate or avoid them (see chapter 7). The two factors combine to create a decision-making environment that facilitates the adoption of risky behaviour. The fact that people with low investment capacity are also badly informed means that they not only make harmful choices today but also face limited choices in the future. Thus poverty can be considered a situation of limited options or choices. In societies with insufficient property rights, where indirect taxes are a dominant fiscal instrument, transaction costs may become so high that they prevent people from moving to healthier environments or investing in capital that would make their environment safer.

People are entitled to healthy living conditions and to be informed about relevant environmental or health-threatening conditions in their neighbourhoods. They have the right to expect their government to protect their lives and their living environment. These rights belong to people regardless of their income status, employment options, occupation, gender or age. Governments have a unique responsibility in this respect. In a society with limited employment or housing options or high transaction costs associated with obtaining work or housing, governments must carry out these responsibilities particularly rigorously, especially at the local level.

Energy Services as a Dimension of Poverty Energy services—such as providing heat, light and refrigeration—result from the interaction of fuels and capital. Such services must maintain appropriate living standards, including standards for housing, nutrition and mobility. They must allow everyone the opportunity to live a long and healthy life. They must provide people with a quality of life that permits each individual to contribute to the overall development of society.

In many instances, the primary sources of land and resource misuse are the non-poor— commercial interests and the state. And while there are, to be sure, instances where poor people and their environment have become locked in a downward spiral, this situation is neither inevitable nor irreversible. Rather, experience has shown that it is often the direct result of failures in governance and policy. —Mark Malloch Brown, Administrator, United Nations Development Programme, 2000

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The ultimate producers of energy services are the members of the household. They may procure certain services from fuel suppliers or service providers, but the ultimate capacity to generate suitable energy services lies with them.

Fuel consumption and the utilization rates of energy devices available to the household are indicators of the provision of energy services. Living space per person supplied with space heating, ventilation, domestic hot water and cooking is a measure of the sufficiency of energy services.

The Living Environment as a Dimension of Poverty The living environment can be considered another dimension of poverty. Household members are exposed to indoor and outdoor environmental conditions (see chapter 5). Depending on the quality of housing and the efficiency of its ventilation, indoor air conditions reflect outdoor air conditions. Domestic heating devices also create pollution. The magnitude of the problem depends on the quality of governance, the density of the population, the type of housing and the quality of urban sanitation systems.

Energy facilities pollute the soil and water (both surface water and aquifers), contaminating the food people eat, the water they drink and the natural resources they use. In a country like Serbia and Montenegro with limited industrial and agricultural activity, energy facilities or processes are likely to generate most of the pollution.

The Energy-Environment-Poverty Framework The energy-environment-poverty framework requires more than household survey data. Supplemental indicators from statistical, demographic and energy utility company data are needed. Application of the energy-environment-poverty framework also requires adjustments to these data sets as well as the regular collection of environmental and medical data. Despite problems with quality, quantity and comparability, the data on Serbia and Montenegro are sufficient to give a reasonable sense of how households and energy systems function.

A household’s income should be sufficient to maintain its capital over time. These needs change over the lifespan. An elderly couple does not have the same capital needs as a young couple. The time horizon affects the character of investment decisions; a household’s capital position should be maintained or improved over time.

The energy-environment-poverty framework views poverty as embedded in the very nature of the household, its capital and its human capacity. Efforts to eradicate poverty in a sustainable manner must persist over time. This does not mean that poverty eradication programmes that focus on increasing the capital of the poor necessarily cost more than conventional programmes. In fact, interventions that increase the amount or improve the utilization of capital by

The United Nations Development Programme has long recognized this critical relationship between energy and sustainable human development. And it has long understood that the debate has all too often been skewed in favor of the demands of privileged energy consumers of the rich world rather than the poor who disproportionately suffer the effects of energy related environmental degradation and the lack of access to clean, affordable power. Rather we must rely on political debate and consequent good public policy. This will take place in the committee rooms and corridors of parliaments and ministries, but it also must take place in the fields and slums of the poor. And that means we need smart energy policies now as their use starts to increase. Because [the poor] are the primary victims of the 3,000 pollution-related premature deaths a year triggered by dirty, inefficient energy use. They—particularly women—are the people locked into long, back-breaking and unhealthy daily lives driven by the search for traditional fuels like firewood. They are the people most in need of newer, cheaper, more efficient and less destructive forms of energy that can provide affordable cooking, shelter and light. And, I might add, modern communications. Not just highways but fiber optic and wireless capable of exploiting the enormous potential of information and communication technologies in everything from health to education to business development. And that, of course, also requires reliable energy.

—Mark Malloch Brown, Administrator, United Nations Development Programme, 2000

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households are likely to cost less and provide greater and longer-lasting benefits than simple transfers of financial resources to poor people.

Some poor households that are nominally well supplied by energy services may lack adequate food or sanitation. Inadequate food means that households are cooking, refrigerating and freezing food less than they would if their food needs were being met, implying that the current level of energy services will be inadequate once households are able to feed themselves better. Other poor households that are exposed to energy poverty are not able to secure basic necessities. Identifying such households is beyond the scope of this study.

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Figure 3.1. GDP and Energy Consumption in Serbia and Montenegro,

1990–2001

0

20

40

60

80

100

120

90 91 92 93 94 95 96 97 98 99 00 2001

%

Source: Chamber of Commerce of FR Yugoslavia.

Table 3.1 Human Development Index and Energy Indicators in Selected

Countries, 2001

HDI

TPES per

capita(toe)

TPES / GDP

(toe/000 95 US$)

TPES/ GDP(PPP)

(toe/000 95 US$

PPP)

Electricity. consumption

per capita (kWh)

Carbon dioxide/ TPES (t CO2 /

toe)

Carbon dioxide

per capita(tons)

Carbon dioxide/ GDP

(kg CO2 /

95US$)

Carbon dioxide/ GDP (PPP)(kg

CO2 / 95 US$

PPP)World 0.722 1.64 0.29 0.24 2,326 2.36 3.88 0.69 0.56 OECD 0.905 4.68 0.19 0.22 7,879 2.35 10.99 0.45 0.50 Argentina 0.849 1.54 0.21 0.15 2,126 2.04 3.14 0.42 0.30 Ireland 0.930 3.89 0.13 0.14 5,917 2.88 11.20 0.38 0.39 Hungary 0.837 2.49 0.45 0.22 3,427 2.22 5.53 1.00 0.48 Costa Rica 0.832 0.90 0.23 0.10 1,598 1.38 1.24 0.32 0.14 Latvia 0.811 1.82 0.65 0.26 2,193 1.68 3.06 1.09 0.43 RussianFederation

0.779 4.29 1.65 0.67 5,319 2.45 10.50 4.02 1.63

Bulgaria 0.795 2.43 1.49 0.38 3,854 2.30 5.59 3.43 0.87 Macedonia 0.784 1.28 0.53 0.23 2,799 3.29 4.21 1.74 0.75 Georgia 0.746 0.46 0.92 0.18 1,204 1.55 0.71 1.42 0.29 Azerbaijan 0.744 1.43 3.10 0.53 2,105 2.26 3.22 7.00 1.20 Iran 0.719 1.86 1.08 0.34 1,689 2.69 5.01 2.92 0.91 Tajikistan 0.677 0.49 1.16 0.44 2,172 1.59 0.77 1.85 0.70 China 0.721 0.90 1.02 0.24 1,069 2.70 2.42 2.75 0.65 Serbia and

Montenegro

0.68 –

0.74

1.5 –

1.8

0.96 0.40 2,869 2.94 4.43 2.83 1.16

Note: HDI is the Human Development Index, TPES is total primary energy supply, toe is tonnes oil equivalent; ppp is purchasing power parity; and kWh is kilowatt-hours. Source: UNDP 2003; IEA 2003.

GDP

ENERGY CONSUMPTION

21

3 Energy and the Economy: In Search of Good Policy

Serbia and Montenegro’s energy system is inefficient and costly. Contracts are

not strictly enforced. Customers who fail to pay their bills are rarely cut off

from the grid. And bad policy means that an energy-poor country is exporting

energy-intensive goods, costing it hundreds of millions of dollars a year. Bad

energy policy has other deleterious consequences in Serbia and Montenegro as

well.

Serbia and Montenegro’s Inefficient and Costly Energy System Energy intensity in Serbia and Montenegro has increased since the 1980s (figure 3.1), and energy efficiency has fallen, as a result of the large increase in consumption of liquid fuels and in the number and use of motor vehicles. As measured by both the Human Development Index (HDI) and total primary energy supply (TPES) per capita, Serbia and Montenegro is about average for the world as a whole, but it ranks lower than comparable economies in transition, such as Bulgaria and Hungary (table 3.1).

Energy consumption per unit of gross domestic product (GDP) in Serbia and Montenegro was three times the world average in 2001, while energy supply per unit of GDP measured in purchasing power parity was less than twice the world average. Carbon dioxide emissions per unit of primary energy supply and per capita were considerably higher than the world average, while carbon dioxide emissions per unit of GDP were at least twice the world average. These figures suggest the scope and costs for reducing carbon dioxide emissions.

Energy Prices Fail to Incorporate Total Costs

Large differences between nominal and purchasing power parity prices reflect the fact that energy prices do not incorporate the total costs of energy supply. This means that current levels of GDP will not be able to sustain the inevitable growth in energy end-prices. Substantial reform is required to prevent declines in both GDP and HDI, as well as further increases in energy intensity, which are likely to occur once society starts to cover all the current and stranded costs of energy supply.

The retail prices of electricity and liquid fuels do not cover actual costs, and the institutional energy sector has become a major provider of budget revenues and liquidity.2 The retail price index for electricity and fuels reached 227 in 2001 and 153 in 2002 (2000 = 100), a growth rate faster than that of any other product or service (Statistical Yearbook 2003). The liquid fuel price index was 167 in 2001 and 112 in 2002, while the overall price index reached 189 in 2001

2 Retail prices for electricity and liquid fuels are lower in nominal terms than comparable prices in neighbouring countries that have much more favourable natural resources and import and transport capabilities.

“Only when elasticity of supply is small will the industry prefer cash to controls over entry or output”

“When an industry receives a grant of power from the state the benefit to the industry will fall short of the damage to the rest of the community”

George Stigler, Nobel Prize Laureate, 1969

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and 119 in 2002.3 Rents and energy and fuels prices showed the highest growth rates among all consumer prices.

Rapid price increases like these should have been accompanied by high returns on capital—and by increases in investment and employment and ultimately improvements in energy efficiency, energy intensity or both.4 In fact, non-productive or value-losing capital investments continue to be made, while Serbia and Montenegro remains saddled with an inefficient and costly energy system that relies on district heating systems (box 3.1) and poorly utilized energy infrastructure.

The lack of energy efficiency is not tied to a lack of international assistance: the energy sector receives more international assistance than any other sector in Serbia and Montenegro.5 The $630 million in assistance it received in 2002/03 represented 27% of all grants and 1% of all soft credits. (In contrast, total foreign assistance for the environment was just $18.2 million in 2002/03.)

The government has recently called for increasing assistance to the energy sector to $988 million in 2004/05 (MIER 2003), but proposed investments aim to increase capacity while preserving or even reducing efficiency—the same pattern of investments made in the 1970s and 1980s. In addition to foreign aid and budgetary assistance, other budgetary resources, such as domestic tax revenues, can be shifted to the energy sector or paid out as energy subsidies.

Evolution of Energy Services

Between the 1950s and the mid-1970s, electricity generation in Serbia and Montenegro was based on hydropower resources. Electricity was generated and distributed through a fragmented corporate structure.

Several small combined heat and power plants were also built during this period. Combined heat and power plants are the most efficient way of using imported, expensive or environmentally dangerous fuels, since the energy produced is supplied to consumers in the immediate neighbourhood without significant network losses, and waste heat from electricity generation is used in heating apartments or providing heat to industrial processes. Eighty percent or more of the power generated is used. These plants are more efficient than thermal plants built near coal mines located far from consumers, which have an electricity generation efficiency of only about 30% and network losses of some 20%. Such facilities are cooled using nearby rivers, wasting heat and polluting the water.

3 Fuel wood prices increased about 170% in 2001/02 over winter 2000/01 levels. 4 Recall the Stolper-Samuelson theorem that a rise in the price of the capital-intensive good causes a reduction in the nominal wage rate and an increase in the return on capital (Stolper and Samuelson 1941). 5 The sector includes the Electric Power System of Serbia and Montenegro (EPS), Electrical Power Company of Montenegro (EPCG), the Oil Industry of Serbia (NIS), the district heating companies, the billing and collection companies and Serbia Forestry, all public companies.

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Lignite-fired and hydropower plants built between 1975 and 1990 were suitable for energy-intensive industries with flat seasonal electricity needs. But industrial consumption dropped in the 1990s, while residential consumption rose during the winter. Utilization of large power plants decreased, as electricity consumption rapidly developed a seasonal structure, with winter consumption almost twice that during the summer. The low utilization rates that traditionally characterize district heating systems spread to the entire energy sector.

The shift towards heat-only boiler technology, very large district heating systems in Belgrade (begun in the 1970s) and vertically integrated local district heating companies was completed in the 1980s by the construction of large lignite-fired thermal power plants in Obrenovac (see Photo 3.1). At the same time, control over finances was shifted to a separate public entity, and the Belgrade metropolitan area was enlarged to cover the lignite deposits in the Lazarevac/Obrenovac area.

Massive investments in apartment blocks and the provision of electricity infrastructure to improve conditions in suburban settlements were made just as the Belgrade Danube Port and the river to sea–going fleet was being dismantled. The lucrative double-haul import-export opportunities, which traditionally linked the export of cereals to and the import of coal from the Black Sea area, came to an end. There are no signs that operations will restart anytime soon. Today coal imports to Serbia are minor, and exports of agro-products are considered uneconomical because of the high transport costs when ships have to return empty. The government thus created a new system of vertically integrated utilities that did not control their own liquidity.6

In 1992 Serbia and Montenegro was disconnected from the European electricity interconnection (UCTE), halting electricity flows between several hydropower plants in the Drina River area and the Alps.7 The incident led to underutilization of the most lucrative hydroelectric resources available, raising prices, and it created turmoil in the electricity supply system. Electricity became more expensive due to the underutilization of invested capital, which caused the fixed cost of deliveries to rise.

6Government ownership eliminates market-based costing of production as well as rational mixing mechanisms. If a complex technical system is to be technically rational, investment decisions have to result from a well-structured coordination system with multiple veto players who are as independent from each other as possible. Informed public or merit-based professional associations have an indispensable role to play in this process. As the number of options is limited, the technical culture of the population appears to be a very important determinant in the efficient use of available assets. The socialist regime built on strong traditions of professional engineers’ associations established in Serbia during the middle of the 19th century. Many organizations devoted to disseminating technical culture were established in the 1940s. Most of these organizations have shrunk in capacity or independence or even ceased to exist in recent years. The country has lost the organized informed public it once had in the energy sector. 7 “The strongest economic justification for collaboration between the countries … lies in the fact that the development and operating programmes of their power systems do not tally in time and will never lead to identical load characteristics. A profitable overlapping of the services strengthened by significant seasonal differences between the Alpine and Dinaric hydro power resources may considerably reduce the necessary initial investment and, at the same time, increase the efficiency of generation and transmission” (Han 1956, p. 6234).

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At the same time, the Adria crude oil pipeline became unavailable, and imports of coal decreased. Light heating oil and good-quality coal disappeared from retail outlets (as a consequence of international sanctions) and were replaced by lignite and fuel wood. The relatively modern decentralized energy market structure was replaced by three vertically integrated structures—an electricity utility, an oil and gas industry and a forest management company—a market structure that discourages investments in energy infrastructure.

Subsidized retail prices between 1992 and 2002 made electricity the fuel of choice for many households as a supplement to district heating services. Electricity consumption remains high, despite the increase of retail prices in 2002–04, because of “soft” collection procedures (box 3.1) as well as lack of alternatives.

Box 3.1 Dealing with Customers Who Don’t Pay Their Bills

Many households in Serbia and Montenegro do not pay their electricity bills on time. Although the electricity distribution companies have the legal right to disconnect non-paying households from the electricity grid, in practice disconnections are rare.

From time to time the electricity distribution companies clamp down on households in arrears. Before they disconnect service, they air media announcements warning people of what is about to happen, to encourage people to settle their bills and avoid disconnection and reconnection costs. These announcements are usually broadcast during the weeks following disbursement of salaries or pensions. Not all debtors are disconnected; the local electricity distribution companies determine which households will be disconnected, usually based on the amount they owe.

The field technicians disconnecting households from the electricity grid dislike this type of work, especially when they have to visit private houses to gain access to the electricity meter. According to a field technician for Electrical Distribution Company Belgrade, “We encounter threats and physical attacks. Some privileged consumers have connections within the distribution company which they use. Sometimes our people are stabbed, physically harassed or beaten up.”

Some owners of luxury homes refuse to give technicians access to their electrical meters and run up arrears with the Electrical Distribution Company Belgrade. A large portion of regular debtors prevent technicians from disconnecting them from the grid. Some households that are disconnected reconnect themselves to the grid, doing it themselves or hiring trained technicians—some of them employees of the distribution company.

During the second half of 2002 and the first half of 2003, large household consumers that had been frequently disconnected tried to switch from the household category to the industrial category, in order to take advantage of lower tariffs. Technicians were busy switching connections, leaving them little time to disconnect non-payers.

25

Failure of Contract Enforcement and Inadequate Knowledge Increase

Vulnerability

Households have access to energy services as a result of the interaction between externally procured services and fuels on the one hand and capital and human involvement on the other. Energy services must provide a reliable, contract-based supply of the required inputs (World Bank 2004). Failure to enforce supply contracts reduces the return on household assets, reducing the security of homeowners’ ownership rights.

Lack of contract enforcement is a major feature of the network-based energy services and fuel supplies in Serbia and Montenegro. Service disruptions are common and performance is poor, but consumers are rarely compensated for their losses. Most households are equipped with alternate heating devices, which allow them to use different fuels to cope with disruptions (see annex A and chapter 7).

Lack of adequate knowledge about energy use and available devices reduces the quality of energy services, especially among the poor. It results in households engaging in inefficient energy practices, such as using moist fuel wood.

Reliability and sufficiency of provision are basic indicators of the quality of energy services. The fact that many people in Serbia and Montenegro reduce the size of their living space in the winter, in many cases below the recommended health minimum (chapter 7); lack the energy to heat their homes sufficiently; and live in homes with high levels of indoor air pollution (chapter 5) attests to the inadequacy of energy services.

26

Belgrade view to TETO Obrenovac Photo: A. An|i}

Photo 3.1: City of Belgrade,

Its Power Plant and Air

27

The Cost of Poor Energy Policies The low subsidized prices of energy in Serbia and Montenegro have had a profound effect on exports, which are competitive largely because of their high (subsidized) energy content. Major exports include oil products, aluminium, copper, sugar and rubber—all of them energy intensive—as well as textiles and shoes, industries in which subsidized energy compensates for low productivity. Poor policies mean that Serbia and Montenegro, which imported $1.3 billion in fuel and electricity in 2002 and whose energy conversion technologies are obsolete, is exporting energy.

Fuel and electricity are the most important import items, accounting for more than 20% of imports of $6.3 billion in 2002. Consumer goods, which make up the bulk of imports, include passenger vehicles, food, clothes, pharmaceuticals and chemical products. 8

During 2000–03 a range of importers and financial service providers joined the institutionalized energy sector to create a well-established cluster of interests that captured the policymaking process. Most imports are destined for Belgrade. Subsidized energy services to better-off households facilitate the demand for imported products and consequently increase the trade deficit, which stood at $4 billion in 2002.

Although it has made major changes to the sector, the government has not published a formal energy policy or articulated a strategy.9 Certain policies stem implicitly from arrangements with foreign creditors, from the plans of public companies and from the Energy Law and various decrees. The energy laws recently passed in both Montenegro and Serbia, which provide more strategic freedom, underscore the critical need for a comprehensive energy policy. The laws provide new opportunities to private investors, permitting them to invest in energy facilities, which was previously banned. New laws also create new opportunities for large consumers, who are now allowed to purchase electricity from other suppliers. The laws have created new opportunities, but that is not a substitute for a comprehensive energy policy.

World Development Report 2004 (World Bank 2004) examines externally provided services and the poor. It focuses on the end of the energy services delivery process: the combination of externally provided services and fuels that, along with the devices and knowledge available in the household, create a useable set of services. The inefficient processes that generate energy services in Serbia and Montenegro are described in the flow charts on the front and back covers of this volume.

8 Foreign trade statistics classify fuels as intermediate goods. In fact, most fuels are intended for the retail market. Since households consume most of the energy supply, most energy is a consumer good. 9 The Ministry of Science drafted an industrial development strategy that contains a chapter on the energy industry, but this document cannot be considered a full-fledged energy policy document.

Tara Mountain

Belgrade Fuel Wood Shadow Market

Belgrade Suburb With DH

DNEVNIK, 24 October 2003,

“Those few hundred dinars

less that I have paid for the

wood at the local market mean a

lot to me, because they mean

that I will be able to buy a few

more kilograms of meat,” says

the retired Mile, on his way to

procure wood.

Sne`ana Nikoli}, Employee of

Ortoteks Company from

Kragujevac:

“Is there any reason why I

should not live in fear? For 6–7

years, I have not been receiving

a salary. I did not receive it even

while the company was fully

functioning, but especially not

now that it is broke. I am afraid

of the coming winter for I have

no resources to buy wood. So far

we have managed to collect

enough money to buy 3–4

square metres of wood, but that

amount is insufficient to cover

the whole winter period. When

we run out of wood, I will go to

the Sumarice park woods and

cut some wood on my own. So

what will be, will be.”

Photo 4.1: Fuel Wood

Market Cycle: From

National Park to

Apartment

28

29

4 The Provision of Energy Services

Households need energy to heat their living spaces and their water, to store and

prepare food and to provide illumination and transportation. These needs can

be supplied from various sources, each providing a different level of security of

supply, comfort and health, each at a different cost. The way energy is

delivered and the nature and condition of the appliances to which the energy is

supplied have major implications for the quality and adequacy of the energy

service provided.

Why Is Household Energy Consumption So High? Energy consumption for space heating per square metre of heated living space is very high in Serbia and Montenegro (see the cluster-specific sheets in annex A). And poor households have higher per square metre energy consumption than better-off households, which possess better housing, better knowledge about energy services and better heating devices.

For the population as a whole, energy consumption accounts for more than 10% of disposable income, including natural income/consumption, which is the internationally recommended maximum expenditure share. But poor households spend as much as 20% of their disposable income on energy-related services.

Energy consumption devices in Serbia and Montenegro are very old and of very low quality. Most date from the late 1970s, but the technology they reflect is probably even older, given the backward state of technology in Yugoslavia at that time. The lack of alternative energy sources and energy-using devices severely constrains household consumption patterns and their ability to save energy (see chapter 7).

Consumption of Fuel Wood

Fuel wood remains the most widespread energy source for households. The household survey indicates that about 11–12 million cubic metres of fuel wood are consumed in Serbia for heating during the winter—an amount about equivalent to the resources consumed to generate the electricity used by households (see Photo 4.1).

The decline in heated space—from an average of more than 80 square metres in 1990 to 45 square metres per rural household in 2004—reduced demand for fuel wood. But the virtual disappearance of other fuels (such as light heating oil and high-quality imported coal) has meant that fuel wood has had to fill the gap. Between 1990 and 2004 the quality of fuel wood consumed diminished, as seasoned fuel wood (wood harvested during the spring, dried during the summer and prepared for use during the subsequent winter) was replaced by wood procured during the same winter it was consumed. The high moisture

30

content of this wood results in incomplete combustion, causing indoor and outdoor pollution, including emissions of carbon monoxide.

Rural households tend to use fast-growing trees as a source of their own heating, since such resources are not suitable for transport or sale. The existence of these operations, coupled with limited reforestation during recent years, explains the erosion and degradation of forests that is visible throughout the country.10 The wood sold on the market is high-quality hard wood, which is more suitable for long-haul transport. Some of the fuel wood is provided officially from government-managed forests; the rest comes from other sources.11

Energy Consumption by Houses and Apartments

Houses and apartments are the largest source of household energy consumption. More than 80% of households in Serbia and Montenegro live in individual houses and exercise full control over the building in which they live. The remaining households share control over the building with other households. The average age of the housing stock is about 34 years.

Standards on the thermal characteristics of buildings have never been enforced, and residents complain about dampness, leaking roofs and inadequate walls, floors and wood fittings (table 4.1). Apartment buildings connected to the district heating grid (box 4.1) are considered better built than other buildings, since in many cases they were constructed by builders who were able to enforce technical standards. Such apartments were generally given to favoured members of society (see chapter 8).

Table 4.1. Complaints about the Quality of Homes in Serbia and Montenegro,

2002

Type of household Dampness Leaking roof

Walls and

floors in bad

condition

Wood fittings

in poor

condition

Households in urban areas

32.3 24.5 32.9 37.7

Households in non-urban areas

49.1 38.6 56.9 53.9

Households connected to district heating systems

13.9 16.6 20.5 26.6

Households that use wood and coal

48.2 36.5 52.7 51.1

Source: Living Standards Measurement Study survey 2002.

10 It also explains the economics of private trucks, official utilization of which is low. 11 Fuel wood comes from a variety of sources, including forests on which official statistics are maintained (and on which taxes are imposed on wood that is cut); small unregistered forests (forests smaller than 0.05 hectares, forests in which trees are very young, rows of trees along agricultural lands); orchards; vineyards; unused agricultural land; and yards (Nikolic 1992; FAO 2002). For details, see table A.1 in Annex A.

.... poor housing is always associated with high rates of morbidity and mortality, yet housing generally is not high on the list of societal needs and governmental priorities. —Robert E. Novick, Environmental Health in Rural and Urban Development, World Health Organization

31

Box 4.1 What Is a District Heating System?

A district heating system is a network of pipelines laid above and below the streets in an urban area. The pipes are filled with heated water, which is distributed to apartment and office buildings. Water is used to distribute heat energy.

District heating systems in industrial countries tend to be relatively small, usually covering the neighbourhood surrounding the heating source. They are widely used where no other means exists of distributing and using low-quality waste energy produced by an industrial process, such as power generation or production of other cheap or renewable sources, such as geothermal heat.

In Serbia a large primary source of energy (fuelled by natural gas, heavy fuel oil or coal) is used to fuel very large district heating systems. About 96% of these systems are based on heat-only boilers, which use high-quality fuels to produce hot water that is then pumped through kilometres of pipelines at significant cost and energy loss.

Serbia and Montenegro has about 6,600 MW of such boilers, connected to 1,600 kilometres of double-pipe networks. About 12,000 substations distribute heat from this network to about 400,000 apartments throughout the country.

District heating systems must be equipped to provide a given level of indoor heat in the winter to buildings that are poorly built. Given network losses, poor insulation and the weather sensitivity of apartments as well as low boiler efficiency, boiler plants need to have a reserve capacity that allows them to meet heating needs under the lowest possible outdoor temperatures. As a consequence, plants and pipelines are very large in comparison with average heat demand. Full capacity is used only about 10% of the time—far lower than in Western Europe, where district heating systems run at full capacity about 35%–60% of the time.

For the country as a whole, the capital cost of the district heating system is about $4 billion—more than 50 times the cost of a natural gas network capable of providing comparable service. System losses and maintenance costs are also far greater than those of a natural gas network.

Many families in Serbia and Montenegro live in houses that they or their families built themselves, with limited professional assistance but using traditional craftsmanship based on years of experience. The abandonment of traditional building practices since World War II has resulted in a decline in housing quality, with accompanying increases in energy inefficiency. In addition, newer houses are larger than older ones, are not positioned to take advantage of the energy-conserving characteristics of their natural surroundings and are less suitable for the efficient provision of energy services.

HOUSING

The housing environment is one of

the main settings that affect human

health. The quality of housing plays a

decisive role in the health status of the

residents, directly or indirectly. In the

CCEE and NIS [countries of Central

and Eastern Europe and the newly

independent countries of the former

Soviet Union], around 50-60% of the

housing stock consists of panel block

buildings constructed between the

1960s and the1980s to supply housing

in rapidly growing cities. It is estimated

that up to 50% of the populations in

these countries inhabit such

prefabricated buildings, with around

60% of newly constructed buildings in

large housing estates built according to

a fixed construction pattern. The poor

living conditions in these buildings,

caused by outdated construction

methods and a lack of maintenance,

pose major problems in many countries

and also represent an unevaluated health

risk. The need for modernization of the

housing in these countries was

identified long time ago, but the

privatization of the housing sector that

accompanied the transition only made

matters worse. The combination of high

private ownership rates, a lack of

coordination and governance, and

increasing poverty has turned out to be

a major obstacle to basic maintenance.

The CCEE and the Baltic countries

have the highest rates of privatization in

Europe (an average 70% compared with

61% in the EU), the highest increase in

housing costs in relation to total

household income, and a decrease in

construction rates by 70% since 1990.

There are currently almost no policies

by which housing investment is

„indexed“ to health gain. In addition,

there are significant gaps in knowledge

in the area of housing and health: (a)

only few countries carry out regular

studies or have a surveillance system;

(b) research has no focused on

integrated approaches that deal with

housing and health in a holistic way; (c)

the main problem with such research is

the lack of acceptable approaches for

risk assessment; and (d) in the field of

housing, the economic and

„engineering“ issues, rather than the

health aspects, have prevailed in the

decision-making process. The Regional

Office is working on a project on

housing and health in prefabricated

panel block buildings in the CCEE, to

identify the main issues from the

viewpoint of health and to recommend

ways of integrating health aspects into

plans for renovating these buildings.

WHO, Europe, 2002.

Photo 4.2: Panel-Block

Buildings

32

33

Following the 1973 international energy shock, the flow of international financing to Yugoslavia increased, spurring a boon in housing construction. Houses were built based on the promise of cheap energy. This pattern continued in the 1980s. The combination of relatively inexpensive energy and building materials (bricks, cement and concrete) and a lack of knowledge led to the construction of houses with poor thermal characteristics. Low-quality doors and windows were used, and ventilation or more sophisticated systems were often not incorporated at all.

Heating homes in Serbia and Montenegro that are not connected to the district heating system requires more than 200 kilowatt-hours (kWh) of energy per square metre per winter on average. Apartments require less energy per square metre than houses, since the area of outer walls and roof per dwelling is smaller. District heating companies are able to heat apartments using just 115 kWh per square metre during the winter—still much higher than the 50–80 kWh used to heat apartments in Northern Europe, where the winters are longer and more severe than in Serbia and Montenegro.

Home Appliances More than 60% of households in Serbia and Montenegro own a refrigerator and a freezer, and 9% own more than three such appliances. But these appliances tend to be old, small and inefficient. Their average age is more than 14 years; only 16% of refrigerators and freezers were purchased in the past five years. The total volume of refrigerators and freezers per household is about 340 litres per household.

The freezer is an important household appliance in Serbia and Montenegro.12

Households ensure food security by purchasing food, including subsidized food, when it is available, and by taking advantage of seasonal price fluctuations. A freezer is important in this strategy, as it provides affordable food storage when supplied with relatively cheap electricity.13 Both electricity price hikes and technical failures of ageing appliances make this strategy risky, however.

Changes in technology have increased the energy efficiency of refrigerators in recent years., but modern, energy-efficient refrigerators are not available in Serbia and Montenegro. The market consists of models built with older technology in developing countries, models produced domestically and second-hand models imported from Western Europe. Energy efficiency labels are not used, and there are no tax incentives for using more efficient models.

12People who heat with district heating rarely keep food in the freezer. Even if they own freezers, they do not use them or they do not use the total capacity of the freezer.13 Food kept for long periods in home-size deep freezers tends to lose its nutritional value and can be a source of illness. Use of freezers requires knowledge that most poor people do not possess.

34

About 80% of households are equipped with at least one electric cooking stove, with an average age of more than 16 years. Stoves powered by liquefied petroleum gas or a combination of liquefied petroleum gas and electricity are about 14 years old and are present in 14%–16% of households.

Space Heating Combined solid fuel heating and cooking devices are the most common and most trusted space heating sources in Serbia. More than half of all households—75% among the poor—use these devices, either alone or in combination with an electrical heating device, to heat their homes (and often their water) and cook. These old and inefficient systems require almost continuous attention. Almost all owners surveyed reported having used their solid fuel heating and cooking devices the previous winter.

Electrical thermal accumulation heaters are the second-most popular device. They are owned by about one-third of all households, although only one-fifth used the heaters the previous winter. Masonry stoves are in use in less than 10% of households. The remaining households (25%) are connected to a district heating or natural gas network. The perceived risk of service interruption is significantly lower in households connected to district heating systems.

Households in Serbia and Montenegro own more heating devices than they use or need. They do so because of the unreliability and price volatility of energy sources. As houses are of lower quality and more weather sensitive than apartments in Serbia and Montenegro, people who live in houses are more likely to own reserve heating devices.

Lighting Most households in Serbia and Montenegro use incandescent bulbs. There are no tax incentives for using more efficient but more expensive fluorescent bulbs.

Hot Water In more than 90% of households in Serbia water is heated by immersing an electrical heater (with an average age of 12 years) into a water tank with a capacity of less than 80 litres. Most of the tanks are domestically produced, with poor or damaged insulation and inadequate controls, and most cannot meet the hot water needs of households with more than three members. These tanks are exceptionally expensive to use and difficult to control, maintain and use. Basic maintenance is not carried out or even understood.

Energy Consumption by Vehicles

The number of registered passenger vehicles in Serbia and Montenegro has grown significantly in recent years (table 4.2).14 Although the majority of survey respondents identified themselves as being of average or below average

14 The growth in the number of registered passenger cars and fuel consumption between 2001 and 2003 exceeded GDP growth and contributed to the decline in energy efficiency. Fuel consumption and the number of registered vehicles have an elasticity of 4 to 1 with respect to GDP growth rate. Scarce public resources have been redirected away from important areas such as building or poverty reduction and used for urban vehicle traffic infrastructure (garages, streets, bridges) that subsidizes vehicle ownership and facilitates additional imports of passenger cars and fuel.

35

economic status, 48% of households in Serbia and 62% in Montenegro reported owning a car. Combined with increases in the number of kilometres covered a year per vehicle, fuel consumption and the emission of harmful products of combustion, growth in the number of motor vehicles has resulted in increased total emissions of harmful gases and air pollution, especially in large urban areas such as Podgorica (table 4.3) and Belgrade (table 4.4).

Table 4.2 Number of Registered Passenger Cars in Serbia and Montenegro, 1999–

2002Region 1999 2000 2001 2002

Serbia and Montenegro 1,690,695 1,392,611 1,481,416 —Serbia 1,572,601 1,273,746 1,382,396 1,501,347Central Serbia 1,212,656 920,769 1,015,072 1,095,675Vojvodina (Stratum 1) 359,945 352,977 367,324 405,672Belgrade area (Stratum 2) 529,023 358,895 401,729 429,495Central Serbia 1 (Stratum 3) 326,073 269,010 306,053 334,875Central Serbia 2 (Stratum 4) 357,560 292,864 307,290 331,305Montenegro (Stratum 5) 118,094 118,865 99,020 —Belgrade 331,471 317,208 353,762 378,034Niš 56,320 56,934 51,120 56,122Novi Sad 71,412 70,382 72,247 122,589

— Not available, Source: Federal Statistical Office.

Table 4.3 Average 24-Hour and Maximum 30-Minute Harmful Emissions

from Vehicle Exhaust Gases in Podgorica, 2002

Sulphur dioxide

Nitrogen

oxides

Carbon

monoxide

Floating

particles

Location24-hour(µg/m3)

30-minute(µg/m3)

24-hour(ppb)

30-minute(µg/m3)

24-hour(mg/m3)

30-minute (µg/m3)

24-hour(µg/m3)

30-minute (µg/m3)

Ceti 12.61 26.41 40.11 69.40 0.431 1.335 30.50 85.73 Tuški put 40.85 77.90 158.80a 359.00a 2.069 6.011 99.60 152.90 Zlatica 11.61 12.25 55.12 45.50 0.39 0.821 36.00 56.70 V.Osjek 13.50 34.58 68.20 149.00 0.717 1.462 26.20 127.60 KBC 10.98 48.94 41.50 159.60 0.74 1.872 25.20 79.30 AD Mljekara 29.49 349.30a 43.10 101.70 0.533 1.413 22.20 281.3 EI-Niš 54.55 190.70 229.00a 889.70a 3.354 11.50 47.20 180.3 Agrotransport 59.53 78.10 110.40 144.10 1.089 1.205 57.21 74.0 Narodna banka 61.80 54.04 287.00a 243.20 3.415 5.335 79.90 106.7 Blok V 18.31 11.21 58.30 27.55 0.91 0.322 50.90 56.24 GVZda 110 300 150 300 10 30 110 300 Note: µg/m3 is microgram per cubic meter; mg/ m3 is milligram per cubic meter; ppb is parts per billion. a. Exceeds daily maximum allowable concentration. Source: Misurovic 2002.

36

Table 4.4 Average Annual Concentrations and Pollution Factors for

Harmful Emissions from Vehicle Exhaust Gases in Belgrade, 2002 Carbon monoxide

(mg/m3)Nitrogen oxides

(µg/m3)Lead

(µg/m3)Hydrocarbons

(mg/m3)

Crossroad

Averageannual

concentrationPollution

factora

Averageannual

concentrationPollution

factora

Averageannual

concentrationPollution

factora

Averageannual

concentrationSlavija 4.07a 1.36 140.0a 2.33 1.24a 1.24 0.015 Vukov Sp. 6.99a 2.33 182.9a 3.05 1.96a 1.96 0.023 London Square

8.07a 2.69 194.3a 3.24 2.11a 2.11 0.029

Tunel 10.03a 3.34 224.7a 3.74 2.64a 2.64 0.035 Skupština 8.28a 2.76 203.8a 3.40 2.12a 2.12 0.081 Cviji eva 6.14a 2.05 152.7a 2.55 1.37a 1.37 0.020 Lion 2.51 0.84 90.8a 1.51 0.79 0.79 0.011 Zemun 4.48a 1.49 137.4a 2.29 1.38a 1.38 0.016 Novi Bgd. 3.40a 1.13 102.0a 1.70 0.86 0.86 0.013 Karaburma 2.24 0.75 100.3a 1.67 0.77 0.77 0.010

Note: mg/ m3 is milligram per cubic meter; µg/m3 is microgram per cubic meter. For carbon monoxide MACxann =3,00 mg/m3. For nitrogen oxides MACxann. For lead MACxann = 1,0 µg/m3.a. Exceeds annual maximum allowable concentration (MAC). Source: Institute for Health Protection of Serbia, Belgrade, 2002.

Average monthly fuel consumption in Serbia is about 80 litres per vehicle. Some 59% of respondents in the Belgrade area travel more than 5,000 kilometres a year, with 32% of respondents travelling more than 10,000 a year.15 On average people living in urban regions drive 33% more a year than people in rural regions. Montenegro has insufficient public transport and a poorly developed road network of some 13 kilometres per 100,000 square metres.

Inefficient engines, inadequate maintenance and the old age of vehicles (43% of respondents had vehicles that were 11–15 years old, and 44% owned cars that were at least 16 years old) all contribute to very high fuel consumption—some 20% higher than that indicated by vehicle manufacturers.16 Control of exhaust emissions in line with the European Union’s EURO III standards on emissions for passenger cars and light duty vehicles is not enforced. Other factors, such as traffic density and management, traffic infrastructure, local meteorological conditions and inferior fuel quality, all contribute to air pollution, at both the local and global level. Traffic density (and consequently noise and air pollution) affect real estate prices in Belgrade and other cities, and almost a quarter of people perceive the problem of noise and air pollution as a constant disadvantage, according to a Living Standards Measurement Study survey (2002).

15 Utilization of passenger cars is too low to make buying a car a good investment. Normal utilization should be close to 30,000 kilometres a year, facilitating regular depreciation and replacement and providing returns sufficient to cover necessary maintenance. 16

These factors also contribute to traffic accidents. A recently launched initiative by the Police and Auto Association revealed that one of the major causes of traffic accidents is the fact that less than half of vehicles are properly maintained. Of 10,440 vehicles inspected, 54% had some kind of failure. The most common failure was in the braking system (31%), followed by a problem with the lights or indicator signals (26%). Twelve percent of cars had steering problems and 10% had tire problems (Blic Daily, 24 November 2003).

It cannot be justified to offer large, long-term credits for cars, when there is increased demand. Demand for private cars arose because of the rise in the proportion of citizens who moved into socially owned apartments and did not have to invest money in housing or pay reasonable rent for the apartments they were occupying.… Instead of using citizens’ savings to enlarge the housing fund or to make rents economically efficient, it appears that the social apartments have subsidized the purchase and maintenance of cars. —Kosta Mihailovi ,Ekonomska stvarnost

Jugoslavije, 1982

37

Local oil refineries with obsolete technologies, low energy efficiency and detrimental environmental impacts (UNEP 2001) meet 80% of the demand for vehicle fuel, with the remainder met by imports; indications suggest that a black market may supply up to 15% of total retail demand, however. Fuel consumption in 2002 was about 1.2 million tons, 40% of it gasoline. Gasoline consumption rose 28% in 2001 as a result of the growth in registered vehicles. Consumption of gasoline varies seasonally, with January–February 2002 consumption 98% lower than June–October 2002 consumption, according to company reports and interviews with fuel retailers.

Up to 70% of marketed fuel does not meet the requirements prescribed by national standards (which are harmonized with EU standards). Neither the standard for lead and benzene content of unleaded gasoline nor the standard for sulphur and aromatic compounds for diesel fuel is being met. Phasing out lead from gasoline would reduce lead emissions in the air to less than 0.2 micrograms per cubic metre (the current average annual concentration in Belgrade in 2002 was 1.52 micrograms per cubic metre), and it would reduce the lead content of blood to less than 5 micrograms per decilitre. Introducing unleaded gasoline technologies would cost $0.01–$0.02 per litre, but it would eliminate the need for dual distribution and storage systems. Requiring catalytic converters on vehicles would reduce emissions of carbon dioxide, nitrogen oxides and hydrocarbons.

Regulations for monitoring vehicle emissions in Serbia are different from those in Montenegro, both in measurement methods and maximum permitted values. The two sets of figures are therefore not comparable. Measurement of emissions of air pollutants indicates that much air pollution originates from exhaust gases from motor vehicles, mostly in Belgrade but also in Podgorica, Novi Sad, Niš and other cities. Emissions sometimes exceed prescribed maximum allowed concentrations by a factor of two to three for carbon monoxide, two to four for nitrogen oxides, three for lead and two to three for total particulate matter.17

The quality of air in rural areas of Montenegro is very good. In contrast, urban areas are being polluted by vehicular emissions.

Household Energy Consumption for Business Activities

The majority of people surveyed perceive the household as a place of economic activity. This activity is either the principal source of income or a supplemental source of income for the household.

17 In 2002 the number of registered motor vehicles in Belgrade was 378,034; 80% of them were passenger vehicles. As many as 4,400 vehicles an hour pass through certain intersections in the centre, significantly increasing air pollution. The average pollution factors for Belgrade in 2002 for carbon dioxide, nitrogen oxides and lead indicated increased emission levels (see table 4.4). In Montenegro there are significant differences between annual 24-hour values and maximum 30-minute measurements on an annual level. For both nitrogen oxides and sulphur dioxide, emissions levels exceed maximum allowed concentration values (see table 4.3).

38

Three types of households can be distinguished. The largest category of households with economic activity within the household is farming households.18 Second are households that engage in small business activities. Most of these businesses are unregistered shops. Third are households in which members employed outside the home also engage in economic activities from the home, usually using a computer.

These households engaging in economic activities consume additional energy to run their businesses. In farming households expenditures on fuel and lighting represent 12.9% of household expenditures—a higher share than in mixed households (9.5%) or non-farming households (10.7%) (Institute for Statistics 2003). The household survey indicates that 15% of households possess a tractor or a motorized cultivator (34% in rural areas), 11% of households (24% in rural areas) have a small electric “hammer” mill (a mill used to produce flour) and 1.5% of households have an incubator (which consumes large quantities of electricity).19 Almost a quarter of households (23.5%) own a sewing machine, but only 1.3% own a knitting machine (Institute for Statistics 2003).

Consumption Patterns

Energy consumption patterns reflect the cost of energy and the capital required to secure a given mix of energy services. In Serbia and Montenegro cash plays the most significant role in the maintenance of liquidity and in capital formation. Households have little understanding of long-term trade-offs between consumption of capital and energy. Instead, they aim to minimize their immediate cash costs and maximize the returns to the lowest level of energy services.

Lack of information and human capital means that most households are not able to predict the longer-term consequences of their current energy consumption patterns. Information on health problems associated with different space heating modes is not widely available.

The surveys indicate that knowledge of electricity prices is very limited. Households seem to base their consumption patterns on historical trends, relying on social capital to maintain historical consumption patterns, using personal connections to procure fuel wood or coal on the grey market or avoid being disconnected from the electricity grid because of non-payment. Changes in patterns of energy consumption or in technology appear to be rare.

Not only does available household capital have to provide energy services as needed, it also has to provide security from fuel price fluctuations and limited choices in periods of shortages. Similar patterns are seen throughout the energy

18 Farming households represent 9% of all households, mixed households represent 18%, and non-farming households represent 73% (Institute for Statistics (2003). 19 Detailed data on land and forest ownership are not available. The latest data are from the 1991 census. Special attention should be paid to forest management, biomass production and the environmental consequences for biodiversity and sustainability.

Heating with wood is the healthiest and the most natural way of heating. Wood is a “natural” fuel, and therefore such heating is the healthiest.

Our ancestors heated in this way. The first man heated like this. and it is certainly the best way.

Coal and wood make a house dirty—it needs whitewashing every year.

—Focus group participants, 2003

39

system: district heating companies struggle to secure capacity reserves and dual fuel capability at low prices, the electrical utility maintains reserves to cope with technical failures and insufficient maintenance, while the oil industry maintains relatively high reserves of oil products to cope with inflexible supply patterns and seasonal fluctuations in demand.

Households generally mix fuels and use different space heating or cooking devices to meet their daily energy needs. Households connected to district heating systems tend to maintain lower reserves than other households: if they own thermal accumulation heaters or direct heaters, they use them to provide supplementary heat during service interruptions. Other households use a solid fuel stove for space heating and cooking during the winter and an electric stove during the summer. They have the capacity to shift from one fuel to another and to heat only as much space as they can afford.

Two contradictory patterns are evident in households’ procurement of energy devices. After choosing a source of energy and technology, consumers tend to procure the best device they can afford. After the initial purchase, however, poor maintenance and inefficient use patterns reduce effectiveness and efficiency as well as returns on the investment. Domestic hot water, for example, is not perceived as a daily requirement, so tank water heaters are not coupled with a reserve device. Some households use very cheap domestic products with low-quality insulation but easy to replace parts. Others use higher-quality tanks to mitigate the risk of failures by preventing hard water from leaving sediments in and oxidizing tanks and immersion heaters.20

Women have traditionally been responsible for food security strategies (box 4.2). In the face of price shocks, they are usually the only ones in the household who understand the relationship between income, food, energy and health. However, both the perception survey and the focus group discussions revealed their lack of knowledge of this basic relationship under technologically static conditions, which exposes women to stress and external shocks.

In urban areas women are almost as likely as men to be the head of the household (53% men, 47% women). In urban areas with central heating, women are the decision-maker in 53% of households. In Belgrade 58% of women are the decision-makers in their household. In Central Serbia men make up two-thirds of those surveyed. Vojvodina is much closer to Belgrade and areas with central heating, with 55% of respondents men. In 1998 women accounted for 43% of total employment, but 65% of employment in government institutions.

20 Water with a high mineral content leaves mineral deposits in the tank and on immersion heaters, increasing thermal mass and enhancing oxidation and causing tanks to leak.

40

Box 4.2 The Role of Women in Conserving Energy

In many households woman are responsible for cooking, cleaning, washing, preparing food for the winter and managing the household budget. They are also usually responsible for household savings and expenditures. “I only bring my salary to my wife,” reported one focus group participant. “Then it is at her disposal.”

Women in Serbia and Montenegro have developed various strategies for conserving energy. A woman from Pan evo turns on her water heater and washing machine only at night, when the lower tariff is in effect, and she does all of her ironing and cooking at night. She cooks for several days in advance and makes food for the winter during autumn, when the price of a particular foodstuff is at its lowest. A woman from Belgrade conserves energy by preparing dishes that require less energy. Several respondents use propane-butane for cooking because it is more economical.

The Cost of Energy Services The cost of energy services—a critical determinant of household energy use—is determined by the cost of the fuel, labour and physical capital required to create the services. For physical capital (most of it with a useful life of about 20 years), only depreciation and maintenance costs affect current costs. In the long-term there is an equalizing mechanism that affects the cost of physical capital and the cost of fuels.21 In the real world, such mechanisms are likely to be disrupted by monopoly power and government intervention, and behaviour is likely to be determined not by actual total costs but by marginal costs and the shape of the marginal cost curve.

Although the survey results reveal that households have insufficient knowledge of fuel prices, consumption patterns suggest that perceptions of risk, return and marginal costs are determining consumption patterns. These complex effects create a costing framework, while other social mechanisms create a complex system of actual costs.

The Costing Framework

Space heating during the winter costs households more than any other energy use (the second most costly use is heating water). Affordability of energy services is affected by various risks and varies over time. During the winter short periods of intense cold are followed by periods of relatively mild weather. Houses with few energy conservation mechanisms and insufficient insulation require flexible space heating services.

A possible solution for some urban households is connecting to the district heating network, which is obliged to maintain a certain temperature in homes regardless of weather conditions and the thermal characteristics of the home

21 In theory, over the long term prices of various fuels adjusted for technologically possible efficiency of their use tend to converge: one kWh from wood is likely to cost the same as one kWh of electricity or heat from district heating. This adjustment occurs, however, only if barriers and subsidies are removed and people have choices.

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(box 4.3). Households connected to district heating systems must deal only with the risk of service interruptions by the district heating service. They do so by using electrical heating devices when the district heating service fails to provide adequate service. Public pressure has helped persuade the authorities to spend public resources to improve and maintain district heating services.

Box 4.3 Connecting More Households to the District Heating System

In 2002 the Serbian Ministry of Energy and Mining introduced a programme forconnecting 21,000 households to district heating systems. The plan focused on urbanzones with developed networks, mainly in Belgrade, Novi Sad, Niš, Subotica and somesmaller communities. The main aims were to reduce electricity consumption, utilize existing capacities in heat-only boiler plants and provide more comfortable heating.

The ministry, provincial authorities, local municipalities and the state thermal and gas companies worked closely together, but each municipality found its own way oforganizing the financial and technical aspects of the works. The works were financedpartly by state budget funds earmarked for reducing electricity consumption, municipalbudgets and foreign donations for the purchase of heat exchangers. The state lifted retail taxes and taxes on services to lower costs to consumers. Following this move,several state and private banks offered loans to individuals. Some banks officially supported the project but approved few loans. The major burden of financing both the primary network (from the thermal network to the building or house) and the secondary network and installations (work inside buildings and homes) was thus borne by consumers, most of whom did not have access to bank loans and paid in cash.

Despite the high cost, many people showed interest in switching to district heating. (Interest in being connected to the natural gas network was much lower, due to the less developed gas network, which goes mainly through Vojvodina territory, and fear that gas is dangerous.) People perceived district heating as the cleanest, most comfortableand most secure form of heating, and they believed that it was also relativelyinexpensive.

Implementation of the programme was slow and sometimes inefficient. The initial deadline for primary works was 90 days, but works were extended for almost a year. In some places, including Belgrade, which accounts for half of the plan, neither the municipality nor the thermal plants were prepared. Smaller municipalities, such as Mladenovac, which offered extra financing for the poorest households, fared better. In some municipalities, such as Subotica, some households will not be connected until 2005, either because households were late in presenting project documentation or because the existing network is outdated and needs overhauling before new consumers can be connected. Despite these problems, by the beginning of the 2004 heatingseason, almost 11,000 households, with an area of 900,000 square metres, will be equipped with connections and base stations, according to Belgrade Thermal Plants.

Companies involved in construction point to numerous problems in connecting more homes to the system, especially in fulfilling administrative procedures. In Belgrade, for example, each project has to pass at least four phases of authorization, including independent revision, approval by the district heating company and municipality andspecial approval for electrical reliability and safety. Some other municipalities have

turn over

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shorter procedures. When all the works are completed, the district heating companyauthorities have to give final approval. In some cases plant employees asked for payment in order to give final approval, adding to costs.

Construction companies blamed homeowners for delays. Tenant committees, theyclaimed, were indecisive, unable to agree on which company to choose, determine how many households wanted to switch to central heating, identify whose basement wouldbe used for the base station or which way the vertical installation would go. Some tenants who gave permission for the installations to go through their apartmentschanged their minds and tried to blackmail other tenants by asking for cost-free installations.

The authorities in Subotica gave permission only for vertical installations, which go through staircases. Tenants who gave up central heating were easily removed from the network, which has separate connections for every apartment.

Newspapers reported that people often paid much more than the promised price. In the Belgrade suburb of Cerak, costs for primary works reached 2,500 dinars ($45)—morethan double what was promised. Thermal plant authorities explained that some buildings in Cerak were far away from the existing network, so people were forced to finance part of the new network, which should have been financed by the state thermalpower plant.

People felt blackmailed, especially in Belgrade, where they were forced to choose between a small number of authorized companies. In the absence of competition,prices for internal installations were 1150 – 2000 diners ($20–$35) per square metre.The average cost for an internal installation for a 36 square metre apartment was47,556 diners ($840, or $23 per square metre). Some licensed companies that were not selected by public tender claim that the average costs of internal apartment worksshould be half that price. The Belgrade Consumer Protection Movement claims thatgiven current market prices, costs should be one-fourth what they are.

Some people who have been repaying the loans for nearly a year and who have had all the installation work done still do not have access to district heating. During the last heating season they paid expensive bills for electricity. Most of them have thermalaccumulating electric heaters.

Both district heating and electricity services are billed after consumption, with considerable flexibility in fee collection (see box 3.1). The combination of district heating systems and electricity is considered a good package of energy services and costs. Households connected to district heating systems rarelyconsume large enough quantities of electricity to place them in the higher-price tariff tiers. Electricity consumption is likely to depend on the sufficiency—or lack thereof—of district heating service and to be inelastic with respect to theprice of electricity, since weather-related risks are essentially covered by the government—and paid for taxpayers.

Fuel wood is a product of land, time and labour. In an economic system with a negative rate of return on capital, wood resources provide a positive return evenwhen adjusted for drying, misuse and fire risk. Rents on land reflect the price of

continued from previous page

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fuel wood. Given the very small industrial demand for wood, the fuel wood market is likely to determine the price of wood. As supply is likely to be determined by the liquidity of suppliers—who harvest and sell more wood when they need cash—fuel wood prices are determined by the price of the closest substitutes, lignite and electricity, both of which are produced and supplied mainly by public utilities. While lignite prices are determined primarily by oligopolistic suppliers and primary buyers, the price of electricity is likely to be linked to the secondary market.22 Households that own forest resources are likely to be indifferent to the fluctuations of fuel wood market prices, while those that have to procure solid fuels are likely to be concerned. 23

The price of electricity, reduced to account for payment arrears (negative interest), is a key determinant of the price of fuel wood and lignite. Unlike the marginal cost of electricity-based heating services, the marginal cost of solid fuel–based heating services is likely to follow an uneven U-shaped curve as outside temperatures fall. The cost of fuel wood tends to increase when the weather is cold, making the stock of fuel wood more valuable. As the price of fuel wood rises, household are less inclined to use it. However, during the course of the winter, the stock of fuel wood loses its value; as the end of winter nears, people are more willing to consume their remaining stocks.

Since the stock of solid fuels provides basic energy security, households hesitate to increase consumption during periods of cold weather. Instead, they rely on electricity, whose price does not change with weather conditions, for supplementary heat.24 As electricity consumption provides households with virtual credit, it is used to cope with income fluctuations, as well as with various living mode risks. Consequently, the marginal costs of the technically feasible fuel mix are considered stable. This fact explains households’ indifference to detailed information on electricity prices. The difference between the shapes of the marginal cost curves for electricity and solid fuels on the one hand and district heating services and electricity on the other explains the sharp growth in electricity consumption when the weather is cold.25

22Coal mines, which are part of the Electrical Power System (EPS), sell most of their lignite to electricity generators; sales to the retail market are marginal and serve as a liquidity management tool. Lignite is likely to be traded according to liquid demand, influenced by the price of electricity. The price of electricity appears to be a key parameter in the pricing system. In both Serbia and Montenegro, the government sets electricity prices. Frequent changes in both nominal and real electricity prices in recent years have had a strategic impact on households, which respond by drawing on their social capital or reducing their living space and human development prospects. The process might be analysed as a co-ordination game with only two players in which the second player adjusts to the behaviour of the first. These adjustments are considered to be rational in the short run with a given knowledge base. 23 A small number of households have access to a sufficient volume of forest resources to be able to supply fuel wood to the open market. Their nominal revenues are likely to grow as electricity prices rise; the relation between electricity prices and retail prices could determine real revenues. Access to forest resources is a critical distinction between the first and second cluster (see annex A). 24 Taking into account fixed costs (depreciation and maintenance), the unit cost of heat from electricity declines with increasing use of electrical heating devices. Households using electricity for heating on a more regular basis tend to install more cost-effective accumulation heaters; less effective direct heaters are more suitable for occasional use. It seems that households make their choice based on experience. 25 The marginal utility of district heating services declines sharply for marginal consumers (top floor apartments, side apartments in apartment blocks) when the outside temperature drops below a certain point.

Top: Construction of new

apartments in the apartment

building complex in Belgrade.

Bottom: Luxury apartment

building in the Belgrade

residential area.

Photo 4.3: Contemporary

Construction: Dash to

Completion, Neglect of

Efficiency

44

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Actual Costs

Within a given cost framework, actual costs can vary considerably, depending on the social position of the household. In areas in which district heating subscribers are numerous and work at influential institutions, the local authorities are more likely to subsidize district heating services. In smaller industrial and agricultural municipalities, district heating prices will more closely reflect costs. The Living Standards Measurement Study survey (2002) indicates that households connected to district heating systems have much greater access to discounts than do poor households that are not connected to such systems.

Employees in the institutionalized energy sector are more likely to have access to fuel wood and lignite supplies at subsidized prices, as are members of the workers unions that negotiate these supplies. Personal connections with the local office of an electrical utility allow some people to avoid penalties or disconnections. Certain occupations or business groups (bakers, taxi drivers) may secure benefits in the form of extra energy supplies or reduced prices.

Employment appears to facilitate most of these advantages, by providing access to influential social groups and allowing people to barter one type of assistance for another. Employment also provides opportunities to participate in various co-ordination games (see box 6.1).26

The position of the household is thus determined by its social capital. Taking into account the very limited territorial mobility and the high transaction costs created by high indirect taxes in Serbia and Montenegro, the territorial position of the household may be used as a proxy for its social position. Within a given territory, employment status and ownership of (or access to) forests determine the actual costs of energy services of a particular household.

The Three-Tier Electricity Tariff

In 2001 Serbia’s electrical utility introduced a three-tier block tariff for household consumption. Its aim was to reduce winter electricity consumption and equalize daily demand. Public utility companies argued in favour of the three-tier tariff system, claiming that poor households that use solid fuels as the main source of heat are relatively small electricity consumers, while wealthier households that prefer comfort are more likely to consume more electricity regardless of the tariff.

The price elasticity of demand proved to be negligible: an increase in the average price of electricity did not result in a decrease in overall consumption. An analysis by the Electrical Power System (EPS), Serbia’s state-run electricity provider, showed that the decrease in consumption was more or less equal to the additional energy supplied through district heating systems. As the marginal

26 A recent example is the distribution of apartments by the city of Belgrade to employees of various government institutions.

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utility of district heating service improved, demand for supplementary heat from electricity decreased. Contrary to expectations, consumption by very large household consumers did not fall.27

Many households shift as much electricity consumption as possible to the evening in order to take advantage of overnight (after midnight) tariffs, which are one-fourth daily rates. The shift has reduced daily peak demand, but it has also reduced comfort, especially for women, who have to adjust their daily pattern of cooking, doing laundry and sleeping (box 4.4). Taking into account the low industrial consumption of electricity during the night, these price adjustments are a normal policy response by the utility.

Box 4.4 How Does Inefficient Energy Use Affect Women?

The lack of human capital, knowledge and reliable information on household energy has a disproportionately severe effect on women in Serbia and Montenegro. In households that use solid fuels, women are usually responsible for maintaining appliances and burning wood. Locally produced cooking stoves—which are used not only for cooking but also to heat homes and hot water—require almost constant feeding and attendance, duties that are traditionally performed by women. As a result, in more than 46% of households, women are exposed to more indoor pollution than men. Inadequate heating also disproportionately affects women’s health: circulatory system problems account for 60% of women’s deaths and 51% of deaths in men.

Serbia’s three-tier block tariff system sets a unit price of electricity as a function of total monthly consumption multiplied by the ad valorem sales tax. The unit costs of heating services from electricity are such that the average unit cost of electricity starts to increase as electricity consumption rises, creating a burden on household income and security. Electricity expenditures are unpredictable, because they depend on the weather. Households are forced to reduce living space and shift as much electricity consumption as possible to the night to reduce their expenses (see chapter 7). The actual and perceived relative prices of electricity are likely to have an impact on the current prices of solid fuels. Cold periods are likely to be accompanied by exceptionally high solid fuel prices, leaving vulnerable households without a viable alternative to electricity.

Households connected to district heating services are not exposed to the risk of unpredictable temperature fluctuations, which are borne by the district heating

27 Total consumed electrical energy in Serbia was 24,420 GWh a year in 2001 and 2002. Consumption of high- and medium-voltage electricity increased 2% in 2002, as a result of increased consumption by industrial consumers, which account for 28% of high- and medium-voltage consumption. Electricity consumption by low-voltage consumers increased 12% after households switched to this lower-cost category (Republic Development Bureau 2003; for the procedure for shifting to the new low-price category, see the EPS Web site [www.eps.co.yu]). The transaction costs and social capital required are such that only better-off households could afford to switch. Many smaller consumers added a second electricity meter and divide their consumption between the two meters, thereby preventing the application of the third tariff tier. As a consequence, EPS’ revenues were lower than projected. An analysis funded by the European Bank for Reconstruction and Development concluded, “If red zone (third-tier) customers become free to choose suppliers in the future, the source of cross-subsidy to ‘green zone’ (first-tier) consumers will disappear, leaving a financial hole in EPS revenues” (IPA Energy 2003).

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provider. They are in a position to make use of the lowest of the three-tier block tariff to maximize comfort. Average consumption of these households is about 600 kWh a month.

Montenegro has a different mix of production capabilities, including a larger proportion of hydro resources and relatively high continuous industrial demand. The Montenegrin electric utility maintains a modest price differential between day and night tariffs.

What Kind of Housing Do Households Occupy? Privately owned housing used by owners or relatives (owner occupied) is the dominant type of housing in Serbia and Montenegro. Some of this housing was built by the private sector (often illegally), some was built by the state.

“Socially Owned” Housing

Public housing in Serbia differs from public housing in Western Europe, where apartments are provided to poor or moderate-income people. In Serbia some employees were granted the permanent right to live in apartments that were “socially owned.” Socially owned companies and institutions procured apartments from developers and managed the housing funds of their workers. Contributions to housing funds were mandatory.

Between the 1970s and the 1990s, managers, civil servants, employees of the public administration, members of the military and police, the industrial elite and the upper strata of enterprises received socially owned housing.28 Most of these well-situated, relatively well-constructed apartments, especially those built during the 1970s and 1980s, were connected to district heating systems. The monthly invoice for household services, including utilities (water, waste, district heating) was very low, averaging less than 5% of monthly household income. The fees charged for these services were insufficient to cover even the current maintenance costs of each building and the cost of utilities; the subsidy reduced the quality of the utilities’ funds. Households lucky enough to live in these apartments—which were better-off than other households even before the subsidy—used their surplus income on weekend houses, automobiles and other consumer goods, tourism and other luxuries.29

28 Employees of socially owned companies whose salaries were too low—and their housing funds thus insufficient—to cover their housing needs were sometimes provided with “solidarity” housing. Contributions to the municipal solidarity housing funds were normally covered by the employees’ company and by municipal budgets. To be eligible, workers had to prove not only that they worked for the company and were unable to secure housing but also that they were poor. Solidarity apartments were of much lower quality in terms of location and building quality (see photo 6.1).

29 Building weekend houses (on the Adriatic coast, in the mountains, on the outskirts of towns and cities and elsewhere) became a status symbol. Incentives were provided to purchase automobiles on credit, and some people did their shopping in Western European capitals, getting there by plane.

Older workers should, without discrimination by reason of their age, enjoy equality of opportunity and treatment with older workers as regards, in particular… access to housing, social services and health institutions, in particular when this access is related to occupational activity or employment.

—Article 5(g), ILO Recommendation No. 162, adopted by the General Conference of the International Labor Organization, 1980

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Illegal Housing

People who could not obtain socially owned apartments were forced to build their own homes, usually illegally, on the outskirts of cities and towns. From the point of view of the state housing policy, they were seen as a marginal group, event though they, like all employees, were required to contribute 4%–6% of their gross income to a housing fund.

The first reports of the illegal construction of houses date to the 1960s. These houses were built predominantly by workers who had almost no chance of receiving socially owned apartments or being able to build homes legally. These people faced two options: renting a home from a landlord who rented rooms or improvised apartments at high rates or illegally building a home. Renting was unregulated, and tenants had no protection; there were no contracts or established rents.

Legally building homes was difficult because of the limited supply of developed building lots with infrastructure, the high costs of the permits required and complicated, long and uncertain administrative procedures. Occasionally the government pulled down illegally built houses and imposed fines or imprisoned their builders, and from time to time it launched campaigns urging legalization of houses through payment of relevant taxes and permits. But it did nothing to deal with the cause of illegal construction: the need for housing. As a result of the lack of an affordable housing policy, Serbia now has an estimated 600,000–1 million illegally built housing units—of the 2.95 million units total housing stock.30

Rented Apartments

About 6%–8% of privately owned units are rented out at market rates, which, especially in Belgrade, are high relative to average income (monthly rent for a two-room apartment in the central part of a city was about $250–$360 in 2003 and had tendency to grow faster than other household expenditures, excluding the costs of district heating, water, electricity and other utility services). About half of rented units are connected to district heating systems. Renters are exposed to the greatest risks, as their rent can rise and they have no legal rights as tenants.

Protected Tenure

About 2%–3% of households are “protected tenants”—people who could not afford to purchase the apartment they had the right to live in. Most of these people live in privately owned apartments built before World War II that were nationalized after the war. Most of these apartments do not have access to district heating.

30 The estimate is based on data from the government’s on-going campaign to register unregistered properties. Although not all applications are for houses intended for habitation, these data provide a basis for estimating the size of the illegal housing stock.

According to the International Labour Organization, “The responsibilities of the central body should include formulating workers’ housing programmes, such programmes to include measures for slum clearance and the re-housing of occupiers of slum dwellings….As a general principle, the competent authority should, in order to ensure structural safety and reasonable levels of decent hygiene and comfort, establish minimum housing standards in the light of local conditions and take appropriate measures to enforce these standards.” —International Labor Organization Recommendation No. 115, adopted June 7, 1961

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Apartments with and without District Heating Services

Most apartments with district heating were built by the state sector. These units tend to be located in cities or towns, and they meet higher construction and design standards than other units. The average size of an apartment with district heating is 64 square metres.

Houses without district heating were built by the private sector. Most of these dwellings are on the outskirts of town, in small buildings. The units are larger than the older units (with an average size of 82 square metres), but the buildings’ infrastructure and construction standards are inferior.31

Apartments without district heating are considerably larger than those with district heating, but because households in these buildings are larger than households in buildings with district heating, the difference in average space per person is relatively small. The average living space per household member is smaller in apartments with district heating (24 square meters versus 28 square metres for apartments without district heating). Apartments without district heating have an average of 2.9 rooms, while apartments with district heating have an average of 2.4 rooms.

Buildings without district heating are somewhat older (35.8 years) than buildings with district heating (29.8 years). The difference is somewhat greater in towns and cities, where buildings without district heating are 38 years old on average and buildings with district heating are 29 years old.

Buildings connected to district heating are better equipped with other services. All buildings connected to district heating—but just 82% of buildings that are not—are connected to district water. Some 93% of apartments with district heating are connected to the district sewerage system, while only 7% are connected to the sewerage pit. Among apartments without district heating, just 60% are connected to the district sewerage system, 36% are connected to the individual sewage pit and 4% of apartments have only an outdoor septic pit.

What Kind of Fuel Do Households Use?The household survey reveals that during the 2002/2003 heating season, the most frequently used fuels were wood and coal (61% of households), district heating (including central heating) (22%) and electricity (12%). In urban settlements, almost equal numbers of households used wood and coal (40%) and district heating (38%), while 16% of households used electricity as the primary fuel for heating. In rural settlements, 87% of households used wood and coal and only 7% used electricity as the primary fuel for heating. Gas is used as a heating fuel mostly in Vojvodina (13% of households). In Belgrade almost half of households (47%) use district heating.

31 The perception survey reveals that the size of the average apartment in Serbia and Montenegro is 81 square metres. Apartments within towns average 73 square metres, while apartments in rural areas average 91 square metres.

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Similar results are confirmed by the Living Standards Measurement Study survey, which determined that two-thirds of households are heated with wood or coal, 18% use district heating, and about 20% use electricity (including accumulation electric convection heaters). The results of the Living Standards Measurement Study indicate that as many as 93% of households in non-urban areas burn wood or coal.32 The survey also indicates that households with at least five members were more likely to use wood or coal for heating (81% of such households).

Households that heat less than 10 square metres per member are most likely to burn wood or coal (81%); households heating more than 20 square metres per member use district heating (46%), coal and wood (38%), electricity (8%) and gas (5 %).

Households that perceive their economic power as above average are more likely to use gas (6%), electricity (22%) or district heating (26%), while poorer households are more likely to use wood and coal (80%).

People who live in apartments with district heating make up a disproportionately high percentage of people with university or college education and people working in trade, transport and communications, finance, public administration, police and military, education, health care and social welfare. Households that burn solid fuels represent a higher than average share of people working in agriculture, trade and crafts.

The permanently (officially) employed, who make up 25% of the population, constitute 33% of inhabitants of apartments with district heating and 21% of those using wood and coal for heating (Living Standards Measurement Study 2002). Pensioners, who make up 20% of the population, constitute 25% of inhabitants of apartments with district heating and 19% of those using wood and coal for heating. In contrast, farmers, who make up just 4.9% of the population, constitute 7.2% of people using wood and coal for heating and just 0.1% of people living in apartments with district heating. Housewives, who make up 9.3% of the population, represent 11.9% of those using wood and coal and 3.5% of those using district heating; people incapable of living independently, who make up 1.2% of the population, represent 1.7% of those using wood and coal and 0.5% of those using district heating.

32 The tables include households using several types of heating, so the total exceeds 100%. Therefore, 93% of households in villages that use wood and coal include also a portion of households having alternative types of heating. This percentage helps in understanding the degree of marginalisation of rural settlements and households.

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5 Inefficient Energy Provision and the Indoor and

Outdoor Environment

Households are affected by both indoor and outdoor environments. Both are

susceptible to degradation by energy services. Cooking and heating with wood

fuel can create indoor and outdoor pollution that can cause sickness and even

death. Households downwind of large, lignite-fuelled electricity generating

stations are likely to suffer from air pollution, and the water, soil, and forests

may be polluted as well.

The Indoor Environment: Inadequate Heat and Unhealthy AirMany households in Serbia and Montenegro lack sufficient heat and suffer from health problems related to indoor air pollution. The surveys reveal that:

• More than one-third of households ( 37%) assess their quality of heating as poor and insufficient. The percentage is higher (42%) among people over 60.

• Households that use electricity for heating, households with below average economic status and households that heat no more than 5 square meters per household member assess their quality of heating as poor and insufficient much more frequently than do other households.

• To cut energy expenses, 17% of hous eholds reduce the temperature in the rooms they heat, and 27% of households reduce the number of rooms they heat (see chapter 7). Households that use electricity for heating and households with below average economic status are much more likely than are other households to lower the temperature and reduce the number of rooms they heat.

• Households that assess their quality of heating as poor and insufficient, households that heat no more than 10 square metres per household member and households whose economic status is below average are more likely to experience health problems.

Most people are aware that outdoor air pollution can damage their health, but many do not realize that indoor air pollu tion also has harmful health effects. Studies of human exposure to air pollutants by the US Environmental Protection Agency indicate that indoor levels of pollutants may be 2–5 times—and occasionally more than 100 times—higher than outdoor levels. Indoor air pollution is a concern in industrial countries, where energy efficiency improvements make houses relatively airtight, reducing ventilation. The greatest threat of indoor pollution still occurs in developing countries, however, where some 3.5 billion people, most of them in rural areas, continue to rely on traditional fuels for cooking and heating. Burning such fuels produces large amounts of smoke and other air pollutants. Exposure to pollutants is often far higher indoors than outdoors.33 High levels of indoor air pollutants can be 33 The World Bank has designated indoor air pollution in developing countries as one of the four most critical global environmental problems. Their research estimates that as many as 2.8 million deaths a year—6% of all deaths—result from breathing elevated levels of indoor smoke from dirty fuels, making indoor air pollution one of the largest single

Far from being a burden, sustainable development is an exceptional opportunity—economically, to build markets and create jobs; socially, to bring people in from the margins; and politically, to give every man and woman a voice, and a choice, in deciding their own future.” —Kofi Annan, Secretary-General, United Nations

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particularly hazardous to the many people who spend most of their time indoors.

Indoor sources of air pollution include fuel combustion, smoking, biological sources, indoor volatile organic compounds, asbestos and radon.

The sources and contents of indoor pollution in developing and industrial countries differ. Factors accounting for the difference include the qualitative and quantitative content of outdoor pollutants, the energy ladder from dirty to clean fuel and the level of ventilation. Indoor air pollution may also be affected by ambient factors, such as temperature and humidity.

Outdoor contaminants include suspended particulate matter (small particulates that easily penetrate indoors), sulphur dioxide, nitric oxides, photo-oxidants, volatile organic compounds and carbon monoxide. Levels of these substances often far exceed those suggested by the World Health Organization (table 5.1). These contaminants affect not just the outdoor environment but the indoor environment as well, sometimes interacting with indoor substances to produce particularly harmful effects:

• In the absence of indoor sources, indoor levels of suspended particulate matter are typically 70%–80% of outdoor levels. Combined with indoor sources (cooking or tobacco smoke), suspended particulate matter from outdoors may produce indoor levels that are much higher than outdoor levels.

• In indoor environments without combustion sources, indoor levels of nitrogen dioxide are lower than outdoor levels. In homes with combustion devices, however, the level of nitrogen dioxide is higher inside during cooking than it is outdoors.

• Volatile organic compounds include alkanes, alkenes, alkynes, aromatics, aldehydes, ketones, alcohols, esters, benzene and some chlorinated hydrocarbons. The major source of these compounds is the burning of fossil fuels. Benzene, for example, is emitted from motor vehicle exhausts and evaporated gasoline. Yet indoor levels of volatile organic compounds are usually higher than outdoor levels, because these compounds are present in building materials, such as paints and adhesives. Volatile organic compounds are also released by laser printers and photocopiers. Indoor exposure of volatile organic compounds may result in headaches and irritation of the eyes and nose. Some volatile organic compounds have been shown to be carcinogenic.

• Carbon monoxide is produced by the incomplete combustion of fossil fuels. The concentration in urban areas depends on traffic density and weather conditions (cold temperatures trap carbon monoxide near the ground). In the absence of indoor combustion devices, indoor levels

risk factors for illness in the world. Epidemiological studies in developing countries have linked at least four major categories of illness to exposure to indoor air pollution from dirty fuels: acute respiratory infections in children, asthma and bronchitis, lung cancer, and stillbirths and other problems at birth (World Bank 1996; Folinsbee 1992).

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may be close to outdoor levels. Combustion devices may produce additional carbon monoxide indoors. An increase in carboxyhemoglobin (carbon monoxide mixed with hemoglobin) of 3.6% increases the risk of angina and leads to coronary artery disease (Allfred and others 1989).

• Indoor and outdoor levels of particulate matter that are less than 10 microns thick (PM10) and photo-oxidants are independently associated with hospital admissions for asthma (Chan-Teung 2000).

• Photo-oxidants and sulphur dioxide are highly reactive. As a result, indoor levels are usually lower than outdoor levels.

Table 5.1. Actual and Recommended Maximum Emissions from Fuel Wood,

2001/02(milligrams per cubic metre)

Substance

World Health Organization

guideline Actual emissions

Carbon dioxide 10 150 Total suspended particulates

0.1 3.3

Benzine 0.002 0.8 Formaldehyde 0.1 0.7

Note: Levels indicate emissions from 1 kilogram of wood per hour in a 40 square metre area. Source: Todd 2003.

External air pollution quickly leads to indoor pollution because of buildings’ poor air tightness (about half of all households using solid fuels report rot in windows and door frames) and excess airing (frequent opening of windows and doors) necessitated by the lack of control over heating systems. Controlled and especially heat recovery ventilation is virtually unknown in Serbia and Montenegro, even among technical specialists. Households connected to district heating systems use airing to regulate the temperature; households using solid fuels regulate temperatures by adjusting the amount and quality of fuel and by airing.

The household surveys shed light on the relation between health problems and energy use:

• People who live in homes with a heated area of up to 10 square metres per household member have a higher incidence of health problems (41%) than people who live in households with larger heated areas per member (30%).

• Households using wood for heating are significantly more likely to have health problems (40%) than those using electricity (27%).

• The incidence of health problems varies with the type of residential heating system. Among households using electricity to heat their homes, 12% report health problems. The figure is higher for users of air conditioners (18%), central heating (26%), gas heaters (42%), solid fuel light cooking stoves (42%) and naphtha-burning stoves (56%). The difference in the incidence of health problems and type of heating is most striking in the case of masonry stoves: almost 9% of users of

Many respondents believe that environmental pollution is a problem of money. They believe that industrial countries pay much more attention to environmental protection, because they are wealthier. People in Serbia and Montenegro do not have money for basic living needs. Environmental protection is a question of development. —Focus groups, 2003

54

electrical masonry stoves and 37% of masonry stoves that burn solid fuels have health problems.

• The incidence of health problems is significantly higher among very poor households (those that heat just one room) (50%) than among households that are “warm and comfortable” (28%). Households that are “warm but congested” also have a higher incidence of health problems (39%).

• Members of households that assess their quality of heating as poor and insufficient frequently experienced continuous breathing problems for periods of three months during the previous two years.

Table 5.2. Area Heated and Number of Sick Household Members, 2003

(percent of households)

Area heated

Two or more sick

household

members

One sick

household

member

No sick

household

members

All rooms (residential heating) 11 15 18 All rooms (district heating) 13 18 24 More than 20 square metres per household member

4 6 6

8.1–20 square metres per household member

37 39 29

Less than 8.1 square metres per household member

35 22 23

Source: Perception Survey.

The increased use of high-temperature heating devices in homes that are not properly heated and that have insufficient insulation can cause condensation, mould and other sources of indoor pollution. Some 50%–70% of the housing stock is exposed to some of these problems, creating unhealthy conditions that are exacerbated by overcrowding, smoking and inadequate nutrition, which increases vulnerability to pollution and the cold.

The heavy use of low-quality lignite, coal and wood by households; the use of polluting solid fuel burning devices; health and demographic statistics; survey evidence; mortality patterns; and anecdotal evidence together lead to a stark conclusion: indoor pollution is having deleterious effects on 1.5 million households in Serbia and Montenegro.

Energy-related factors are also increasing the mortality rate (table 5.3). Mortality in Serbia and Montenegro is much higher during the winter—and the seasonal difference is greater than that of Northern European countries exposed to more severe winter conditions:

• The average number of deaths was 10%–40% higher in December–February than in March–November.

55

• The seasonal variation in the number of deaths was highest during 2000, a year in which black-outs were frequent.

• Between 1993 and 2002 the January mortality rate in Belgrade exceeded the August rate by 7%–77%. The largest difference occurred in 2000.

• People over the age of 65 accounted for 69% of all deaths. • The most important cause of the increased mortality during the winter

was cardiovascular and respiratory disease.

Table 5.3. Average Number of Deaths, by Region and Season, 1999–2001 1999 2000 2001

Region December–

February

March–

November

December–

February

March–

November

December–

February

March–

November

Serbia and Montenegro 9,791 8,607 11,403 8,361 9,359 8,455 Vojvodina(Stratum 1) 2,679 2,359 3,113 2,304 2,572 2,311 Belgrade area (Stratum 2) 2,059 1,883 2,463 1,842 2,026 1,875 Central Serbia (Stratum 3) 2,152 1,821 2,455 1,774 2,022 1,797 Central Serbia (Stratum 4) 2,416 2,106 2,823 2022 2,264 2,056 Montenegro(Stratum 5) 484 438 549 418 475 445 Central Serbia 6,627 5,810 7,741 5638 6,311 5,729 Vojvodina 2,679 2,359 3,113 2,304 2,572 2,311 Central Serbia and Vojvodina 9,306

8,16910,854 10,854 8,883

8,040

Source: Federal Statistical Office.

Flu epidemics, weather conditions, inadequate clothing, insufficient physical activity, bad nutrition, and high-density housing explain part of the differential, but energy-related factors—increased indoor air pollution, inadequate home heating, low temperatures in bedrooms—also play a role, often interacting with other factors.34

More than 30% of buildings do not maintain sufficient average indoor temperatures in the winter, and many buildings are unable to cope with the thermal shock of several consecutive days of low temperatures. Building materials (brick, blocks and concrete) provide insufficient protection from the cold during extended periods. Some 14%–20% of households live in apartments that are protected from the outside largely by other apartments in the same building (see photo 9.1). Less than 3% of households have adequate roof insulation.

34 These results are based on reports of the federal Bureau of Statistics, the Belgrade Bureau of Statistics and the Serbian Institute of Public Health.

Vreoci

Lignite Drying

Facility

At the edge of open Pit

Vreoci Cemetery

Waste Water Dump

Vreoci, a village of 3,000

inhabitants at the edge of the

largest open pit lignite mine in

Serbia, is situated between a

lignite drying facility and the

Kolubara A thermal power plant.

Photo 5.1: Mission to

Vreoci Village

56

57

Outdoor Environment: Pollution of the Air, Water, and SoilThe energy sector is having harmful effects on the outdoor environment,causing air, water and soil pollution. In some places, such as Vreoci, badmanagement of energy resources has resulted in severe pollution (box 5.1).

Box 5.1 Bad Management of Energy Resources in VreociVreoci lies 50 kilometres south of Belgrade, between a huge opencast, partlyabandoned coalfield, the old Kolubara A thermal power plant, a heat-only boiler plant, and a huge coal dryer facility. The village is intersected by the Beograd-Bar railroadand the coal mine’s internal railroads and bordered by one of the state’s main roads, Ibarska magistrala (see Photo 5.1). Wagons are loaded with coal, adding to the concentration of coal dust. The high level of air pollution in Vreoci comes from the burning of solid fuels byhouseholds; nearby energy facilities; local industries (concrete block production, metalprocessing, rubber); and open coal pits. About 300 heavy trucks laden with coal, sand and grit cross the centre of the village regularly. Overhead power cables hang over the village. The majority of households have individual heating based on coal—Vreoci has no district heating system—which adds to pollution levels.Vreoci suffers from polluted water and the lack of water. Households in Vreoci used to have their own wells. Open pit coal mines dug below the natural water reservoir, however, allow water from the underground reservoir to flow into the open pit (see photo 8.1). As a result, all of the village’s private wells ran dry. Village residents mustpurchase their water from the limited public system, which is owned by the coal mines.Water that accumulates in private wells after it rains is highly polluted (see table).

Water Pollutants in Vreoci, 1994(milligrams per litre)Pollutant Groundwater Groundwater Public water Maximum

from well from well tap no. 26 allowableno. 14 no. 15 concentrations

PhenolsCyanidesLeadCadmiumNickelChromiumZincCopperIronMercuryArsenicDissolvedoxygen,ch. oxygendemand (COD)

Source: Stevanovi and others 1992, 1993, 1994.

In a 1982 case involvingthe long-term expropriation of property permits and theprohibition of constructionon the properties (Sporrongand Lönnroth v. Sweden),the European Court forHuman Rights held thatthere had been a violationof the EuropeanConvention on HumanRights and awardedcompensation to thepetitioners. In a 1994 caseinvolving the municipalgovernment’s failure toregulate a pollutingindustry, adverselyaffecting the health and safety of people livingnearby (López Ostra v. Spain), the court held thatthe government hadviolated Article 8 of theEuropean Convention onHuman Rights and awardedcompensation to thepetitioners.

0.03Traces000.010.050.720.071400

61

0.0Traces000.010.020.010.01500

13

0.01.3000.010.00.140.052600

10

0.0010.050.050.0050.050.055.00.10.30.0010.05

3

turn over

continued from previous page

59

Air Pollution

Poor air quality in towns and cities comes from five sources: traffic, residential use of solid fuels in inappropriate burning devices, oil refineries, thermal power plants and heat-only boiler plants of district and central heating systems. Together these sources elevate levels of sulphur dioxide, soot, air sediment, and concentrations of C95 and C98:

• In 2000 the mean annual value for sulphur dioxide was above the maximum allowable concentration in Kragujevac, Vranje, Kikinda and Leskovac and significantly above the maximum allowable concentration in Bor.

• The mean annual value for soot was above the maximum allowable concentration in Belgrade (57 micrograms or µg per cubic metre), Niš (41 µg per cubic metre), Šabac (45 µg per cubic metre) and Smederevo (58 µg per cubic metre) and significantly above the maximum allowable concentration in Užice (85 µg per cubic metre). Cities exceeded the daily emission limit values for soot on many days throughout the year (281 days in Užice, 171 days in Smederevo, 141 days in Belgrade and Šabac).

• The annual average concentrations of air sediment (or total deposited matter) exceeded the annual average emission limit value in 10 locations. The highest value recorded was for a ak, with 806 milligrams per square metres per day—four times the allowable limit of 200 milligrams.

• The high surface concentrations of sulphur dioxide (95% and 98% of maximum allowable concentrations) were within the allowable limits, except in Bor, where concentrations reached 1,999 µg per cubic metre—almost six times the allowable limit of 350.

The cumulative indices for air pollution for the three principal pollutants (sulphur dioxide, soot and nitrogen dioxide) reveal three distinct micro-regions. In Belgrade, Niš and Šabac, the air is unhealthy (table 5.4). In Zrenjanin, Kruševac and Kikinda the air ranges between healthy and unhealthy. In Subotica and Pan evo, air pollution is mild (industries were not operating in Pan evo at the time the measurements were taken) (table 5.4). Insufficient data are available on the overall air quality in Bor, a ak, Ivanjica, Kragujevac, Kraljevo, Leskovac, Smederevo, Vranje and Zrenjanin. The cumulative pollution index for sulphur dioxide plus soot is 3.4 in Kragujevac, 2.8 in Užice, 2.3 in Smederevo and 7.9 (very unhealthy) in Bor.

It is often said that protecting the environment would constrain or even undermine economic growth. In fact, the opposite is true: unless we protect resources and the Earth’s natural capital, we shall not be able to sustain economic growth. We should also remember that environmental costs—for example, the costs of cleaning up polluted areas or repairing damage—are rarely reflected in national accounts. Nor are harmful side effects, such as the health costs of air pollution from smokestack industries or from gas-guzzling vehicles.—Kofi Annan, Secretary-General, United Nations, keynote address Tufts University’s Fletcher School of Law and Diplomacy, 20 May 20 2001

60

Table 5.4 Air Quality Indices in Selected Cities in Serbia, 2000

City

Measuring

point

Sulphur

dioxide Soot

Nitrogen

oxides Total

Assessment of

air pollution

1 0.2 1.0 0.7 1.9 Unhealthy 2 0.1 0.5 0.6 1.6 Unhealthy Belgrade3 0.1 0.4 0.3 0.8 Moderate 1 0.4 0.1 0.1 0.6 Moderate 2 0.6 0.1 0.06 1.3 Medium Novi Sad 3 0.5 0.1 0.1 0.7 Moderate 1 0.1 0.1 0.2 0.6 Moderate

Niš2 0.2 0.8 0.5 1.5 Unhealthy 1 0.04 0.1 0.1 0.2 Acceptable

Subotica2 0.06 0.1 0.1 0.3 Acceptable1 0.3 0.9 0.4 1.6 Unhealthy

Šabac2 0.4 1.0 0.4 1.8 Unhealthy 1 0.3 0.5 0.3 1.1 Medium

Zrenjanin2 0.4 0.3 0.1 1.0 Medium 1 0.2 0.3 0.6 1.1 Medium

Kruševac2 0.2 0.4 0.2 0.8 Moderate 1 0.1 0.3 0.2 0.6 Moderate

Pan evo2 0.1 0.3 0.2 0.6 Moderate 1 0.3 0.1 0.1 0.5 Moderate

Kikinda2 1.0 0.1 — 1.1 Medium

— Not available. Source: Health Protection Institute 2000.

The air quality in most of Montenegro is of a satisfactory to extremely good quality, although serious problems are evident in some areas. Except in Pljevlja (box 5.2), energy sources in households (fire boxes using liquid and solid fuels) do not represent an important source of air pollution. The main air polluters in cities are exhaust gases from motor vehicles, which at some times of the day are significantly above allowed concentrations, particularly for carbon dioxide, nitrous oxide, particles, ozone and hydrocarbons.35

35

Levels of sulphur dioxide, nitric dioxide, ground ozone, smoke and soot, floating and sedimentary particles and heavy metals are continuously monitored in permanent measuring sites in 12 cities in Montenegro. In Podgorica, Nikšiand Pljevlja, fluorides, ammonia and phenols are continuously measured. Specific pollutants—formaldehydes, ammonia, phenols and hydrogen sulphides—are measured in other areas once a month. The impact of motor vehicles on air quality in cities is measured with a movable monitoring vehicle at 10 city intersections in Podgorica, 3 in Pljevlja and Nikši , 2 in Bar and 1 in Budva, Herceg Novi, Berane and Bijelo Polje. Twelve pollutants and 5 meteorological parameters are monitored 24 hours a day with computer representation of pollution spreading and pollution levels. The quality of rainfall is measured at 12 stations, which analyse heavy metals and permanent organic pollutants.

61

Box 5.2 Why Is Air Pollution So Severe in Pljevlja?

The extreme pollution in apartments in Pljevlja, Montenegro, is caused by the city boiler house in the centre of the city. The 4 MW of installed boiler plants are more than 25 years old and have not been properly maintained. As a result, most of the gases caused by incomplete coal combustion do not exit the boiler house through the chimney. Because inadequate insulation separating apartments from the boiler room, apartments are polluted by smoke, sulphur and nitric dioxide, carbon monoxide and carbon dioxide, hydrogen sulphide, mercaptanes, phenols and polycyclic aromatic hydrocarbons (PAHs), which endanger human health. All parameters measured in the apartments above the boiler room— especially mercaptanes, hydrogen sulphide and sulphur oxides—were several times higher than the maximum allowed for living or working spaces. All of the furniture and clothes in these apartments smell of mercaptanes. Almost all boiler houses in Pljevlja suffer from the same problem.

The main cause of air pollution is heat-only boiler plants and solid fuel burning devices. Households in Pljevlja consume about 90,000 tons a year of fuel, emitting about 1,200 tons of sulphur dioxide, 750 tons of nitrous oxide, 780 tons of dust ash, 20 tons of carbon monoxide, 8 tons of hydrocarbons, 0.9 tons of polycyclic aromatic hydrocarbons and 0.2 tons of aldehydes a year. The effects of the thermal power plant cannot be felt in the city, because the chimney is 250 metres high.

The effects of pollution on health have been significant. The proportion of acute respiratory disease in total morbidity of children in the Pljevlja area rose from 23% in 1985 to 35% in 1995 and 50% in 2001. In 1985, 3% of children in the Pljevlja area were being treated for asthma; by 2001 the figure had risen to 11%, 79% of them living in cities. The increased morbidity is of a seasonal character and is linked to periods of fog and increased pollution. The percentage of premature births increased from 3.7% in 1983 to 8.2% in 1994, and the same trend is observed in psychosomatic diseases. The increase in the incidence in cancer is even sharper: between 1980 and 1984 about 28 cases a year were reported; in 2002, 211 cases were reported. Given this alarming trend in Pljevlja, statistics should be collected in other endangered areas.

Air quality is poor in Pljevlja, Nikši and Podgorica , particularly in the area around the aluminium complex. In some parts of Montenegro, serious health effects have been noted.36 High concentrations of fluorides, polycyclic aromatic hydrocarbons (PAHs) and nitrous oxide have been detected in Podgorica. Concentrations of particles, heavy metals, fluorides and phenols are sometimes above maximum allowed concentrations in Nikši . In Pljevlja the concentrations of particles, sulphur dioxide, some heavy metals and phenols are sometimes several times higher than allowed.

36 Montenegro does not monitor the effect of environmental quality on the health condition of the population. Monitoring is needed in Pljevlja, the Zeta plain, Nikši and Mojkovac. Some analyses and studies have been conducted as part of studies on vital environment quality. The hygienic-epidemiological department of the health centre in Pljevlja

has data on the prevalence of respiratory diseases, cancer, mortality and birth rate in children and adults since 1973.

Aluminum Smelter—Podgorica,

2003

To assess the impact of the

aluminium complex of

Podgorica, the study analyzed

samples from the Zeta Plain for

contamination: air, water from

wells, foodstuffs (milk, meat,

eggs, cheese, fruits and

vegetables), feeds (grass, hay)

and the milk of nursing mothers.

The results showed a high

degree of contamination with

fluorides, phenols,

polychlorinated biphenyls

(PCBs), polycyclic aromatic

hydrocarbons (PAHs),

aluminium, cadmium, iron,

manganese and other chemicals.

To protect the health of the

villagers in Botun, who were

most severely affected the

government took over the land

and moved the villagers to safer

locations. Some of the

inhabitants had already

developed illnesses from contact

with red dust and other

pollutants. New waterworks are

being constructed in areas

around the aluminium complex

where the groundwater is

polluted. The aluminium

complex is currently the subject

of research by international

organizations and the

government of Montenegro, but

a target epidemiological study of

this area had not yet been

conducted.

Photo 5.2: Aluminium

Smelter in Zeta Plain

62

63

High concentrations of fluorides, phenols, polychlorinated biphenyls (PCBs), PAHs, aluminium, cadmium, iron, manganese and other pollutants have also been found in Montenegro’s Zeta plain (see Photo 5.2). In the village of Botun the government expropriated the land and moved villagers to safer locations after diseases were identified in some inhabitants and red dust and other pollutants were found in the environment. New waterworks are being constructed for villagers from areas endangered by polluted underground waters around the aluminium complex. Water will be supplied from the main city well of Podgorica.

Data on the operation of thermal power plants in the Obrenovac area reveal that annual emissions exceed the maximum allowable concentrations permitted by the European Union (table 5.6). Two-thirds of thermal power plant operations occur during the winter, when conditions for increased emissions are favourable. Colder weather allows hot particulates to spread to agricultural land and forests without vegetation. Emissions from these plants are two to six times higher than those in comparable power plants in Greece (table 5.6).

Sm

oke/

gasa

Eff

icie

ncy

of e

lect

ric

filt

ers

%

Em

issi

ons

mg/

Nm

3

The

rmal

Pow

er

Pla

nt

Gen

erat

ion

Thr

esho

ld

GW

h (m

) t x

103

KJ/

kg

t K

J/kw

h %

O

n th

e ne

twor

kFu

ll

pow

erm

3 / h x

103

Des

igne

d A

ctua

l P

arti

cula

tes

Sul

phur

diox

ide

Nitr

ogen

oxi

des

A1

210

191

821

150

1,24

0 8,

156

4,81

4 12

,549

28

.7

5,44

6 4,

298

1,13

8 98

.5

A2

210

191

1,02

5 15

0 1,

548

8,15

6 4,

462

12,4

87

28.8

6,

475

5,36

5 1,

138

98.5

90

-96

200-

2,50

0 23

0-

520

A3

305

280

1,16

0 15

0 1,

749

8,15

6 5,

907

12,4

96

28.8

5,

455

4,14

2 1,

361

99A

430

8 28

0 1,

659

200

2,49

2 8,

156

6,33

4 12

,399

29

.0

7,17

6 5,

925

1,36

1 99

A5

308

280

1,40

2 20

0 2,

106

8,15

6 7,

896

12,4

72

28.9

6,

146

5,00

8 1,

361

99.3

5 A

630

8 28

0 1,

447

200

2,17

6 8,

156

8,51

3 12

,497

28

.8

6,19

5 5,

169

1,36

1 99

98.5

– 99

.5

80 –

300

900-

3,

100

(850

) 30

5-

600

620

580

3,88

2 27

8 5,

241

8,08

9 1,

4092

1,

106

32.5

5 7,

460

6,69

3 2,

700

99.8

3 B

1

B 2

62

0 58

0 3,

350

278

4,47

0 8,

089

1,11

54

10,9

22

32.9

6 6,

376

5,77

9 2,

700

99.8

3 99

-99

.9

30-

100

900-

3,

100

530

-750

KO

LU

BA

RA

1-5

271

245

496

100-

18

0

1,15

7 7,

206

2,46

6 17

,006

21

.2

3,69

9 2,

026

1,50

0 99

100-

50

0 _

200

TP

SV

RE

OC

I 14

0

10

0 30

Air

shed

b

52

44

14,6

20 x

103

m3pe

r ho

ur82

-568

m

g/N

m

3

900-

3,10

0 m

g/N

m3

364-

7,60

2 m

g/N

m3

Ann

ual

tota

l

77 x

109

m3

per

year

34

x103 t

190x

103 t

37x1

03

ta.

Cub

ic m

eter

of

exha

ust g

as a

t nor

mal

air

pre

ssur

e an

d av

erag

e dr

y w

eath

er.

b. T

he W

orld

Ban

k gu

idel

ines

for

pow

er p

lant

s w

ithi

n th

e sa

me

airs

hed.

. S

ou

rce:

Ele

ctri

c P

ower

Sys

tem

of

Ser

bia

(EP

S)

annu

al r

epor

ts, C

alcu

lati

on b

ased

on

EP

S te

chni

cal d

escr

ipti

ons.

Tab

le5.

5O

pera

tion

ofO

bren

ovac

Are

aT

herm

alP

ower

Pla

nts,

2002

Pow

er(M

W)

Gen

erat

ion

thre

shol

dC

him

ney

heig

htC

oal

Hea

vyfu

eloi

lSp

ecif

ic.

cons

umpt

ion

Eff

icie

ncy

Hou

rsof

wor

k

65

Table 5.6 Content of Pollutants in Gases Emitted by Thermal Power Plants

in Greece and Serbia, 2002

(milligrams per cubic meter)Pollutant Greece Serbia

Solid particulate <50 82–568 Sulphur dioxide 170–300 900–3100 Nitrous oxides. 190 – 200 364–602

Source: Public Power Corporation, Greece; Electric Power System of Serbia and Montenegro; EU EXTERNE.

Over the past 10 years, four of the six measuring points for monitoring air quality indicated sizeable differences in pollution between Obrenovac and other Belgrade municipalities. The incidence of sickness and death from lung diseases in Obrenovac does not differ significantly from the incidence elsewhere in Belgrade, but the number of children diagnosed with asthma is greater in Obrenovac.37 Use of coal by power plants in Obrenovac causes emissions of about 30 kilograms of mercury and 1,400 kilograms of arsenic a year. Increased levels of heavy metals have been identified in the soil; in the dust on roofs; in vegetables, root vegetables, and fodder; and in the water, especially water used for irrigation, groundwater and wells.38 As a result of this pollution, wells cannot be used in Obrenovac.

Water Pollution

The energy sector affects the quality of both underground and surface waters in most densely populated areas in Serbia. Soil acidification and loss of forest resources affect the availability of water and diminish the natural hygiene capacity of the water cycle.

The quality of surface water has been severely affected in Obrenovac (table 5.7). Samples failed to meet the criteria for class II (moderately polluted) rivers at all sampling locations except the Sava River in Belgrade, where just 6.7% of analyzed samples taken between 1986 and 1991 meet the standards.

37 Errors were noticed in the records of the Obrenovac Hospital and the annual report of the City Institute for Public Health. These data were therefore not used. 38 As assessments of the impact of emissions on soil (box 5.1), crops (table 5.10), and water and watercourses reflect partial research performed at different times and in different laboratories, they can be used for descriptive purposes only.

66

Table 5.7. Quality of Surface Water in Obrenovac, 1992

(milligrams per litre, except where otherwise indicated) Sampling location Level of pollutant exceeding maximum acceptable concentration for class II river

Sava River downstream of Nikola Tesla–B power plant

Dry residue: 5,347 Phenols: 0.002 Chemical oxygen demand (COD): 15.3 Mineral oil concentration: 1.58

Vuki evica River Suspended matter: 49 (129 downstream of ash landfill) Iron: 0.41 Phenols: 0.005 (downstream of ash landfill Mineral oils: 0.310 (downstream of ash landfill)

Channel near ash landfill of Nikola Tesla–B power plant

Suspended matter: 99Nickel: 0.3

Kupinac water stream Dissolved oxygen: 3.5 Oxygen saturation: 25% Biological oxygen demand (BOD): 11.2 Ammoniac nitrogen: 1.4 Iron: 0.4 Phenols: 0.006

Mislodjin lock Dissolved oxygen: 5.8 Oxygen hypo saturation: 45% Biological oxygen demand (BOD): 10.2 Suspended matter: 81 Dry residue: 1,615 Iron: 0.40 Phenols: 0.010

Kolubara River near Mislodjin lock

Iron: 1.15Ammoniac nitrogen: 1.4 Phenols: 0.023 Suspended matter: 50 Chemical oxygen demand (COD): 14.1

Sava River near Zabran D territory of Obrenovac community

Iron: 0.5–4.6 Suspended matter: 42–151 Dissolved oxygen: 4.9 Oxygen hypo saturation: 54%–73% Phenols: 0.002 Sample taken in July 1991 revealed 380,000 coliformic bacteria medium potential number per 100 ml of water.

Sava River intersection Duboko

Iron: 0.5–2.2 Suspended matter: 36–116 Dissolved oxygen: 52%–74% Nitrites: 0.06–0.08 Phenols: 0.002 Mineral oils: 0.3–1.2 Coli titration: 240,000–280,000 medium potential number per 100 ml of water

Sava River in Belgrade (1986–91)

Parameters indicating highest discrepancies include oxygen and nitrogen balance, suspended matter, iron, phenols, naphtha, cadmium, nickel, mercury and lead and polycyclic aromatic hydrocarbons. Samples did not meet criteria for II class rivers in terms of physico-chemical or bacteriological quality: 33.2% of samples did not meet either standard, 57.7% did not meet physico-chemical standards and 2.4% did not meet bacteriological standards.

Source: City Institute for Public Health Belgrade 1992.

67

Soil Pollution

The return on capital in agriculture is heavily affected by pollution from the energy sector. About 1 million hectares of agricultural land—about one-third of all agricultural land in private ownership—is exposed to acidification.39 Yields on these lands have fallen more than 20%, with the worst effects occurring on the most fertile land, traditionally used to grow high-value agricultural products, such as vegetables. The effect on land is cumulative: the more acid rain the soil absorbs, the more it becomes acidified, to the point where it cannot be improved without large investments of capital and time. In addition, acidified soil is more exposed to droughts and less resistant to various micro-organisms.40 The poor, who are most dependent on agricultural production from relatively small land holdings, are more affected by these problems than others.

Soil acidification and diminishing forest resources also affect the sustainability of trade in fuel wool, an important source of revenue for some people in Serbia and Montenegro. Further depletion of forest resources decreases water accumulation, increases the severity of droughts and winds and spreads erosion, which affects agricultural production.41 Losses of about $360 million a year are incurred in forest and agricultural investments due to environmental impacts, predominantly linked to the energy sector.

High concentrations of heavy metals have been found in soil samples and plants in the territory of Kostolac (tables 5.8 and 5.9). Levels in excess of maximum allowable concentrations have been found for mercury in the soil and for mercury, arsenic, lead and cadmium in plants.

Table 5.8 Heavy Metal Content in Soil Samples Taken in Drmno, irikovac and

Klenovnik, 1991–94

(milligrams per kilogram)

Heavy metal Drmno irikovac and Klenovnik

Maximum allowable

concentration (MAC)

Arsenic 1.9 3.8 25 Cadmium 0.14 0.19 3 Lead 12.6 15.7 100 Mercury 6.1 7.7 2

Source: Stojanovic 1996.

39 Acidification has been occurring throughout Europe over the past century, a consequence of the extensive use of fertilizers and of acid rain caused by emissions of sulphur dioxide and nitric oxide. The replacement of minerals by heavy metals in vegetables is a consequence of acidification. During the past 15 years, the availability of fertilizers in Serbia has been limited; fertilizer use is far below the European average. 40 All of Serbia is exposed to droughts. A severe drought in 2003 reduced annual agricultural production by almost 30%. The unpredictability of droughts affects the international competitiveness of Serbian agriculture, margins and employment opportunities. 41 Erosion is widespread in Serbia. The entire territory is exposed, with about 17 million tons of eroded material deposited annually into the Danube accumulation lake at the Iron Gates I Dam.

Top: Ash mud leaking.

Thermal Power Plant, Drmno,

Kostolac.

Bottom: Ash deposit.

Thermal Power Plant, Drmno,

Kostolac.

Photo 5.3: Water Pollution

Near Kostolac

68

69

Table 5.9 Heavy Metal Content in Plants in Drmno, irikovac and

Klenovnik, 1992–94(milligrams per kilogram)

Drmno irikovac Klenovnik

Plant Mercury Arsenic Lead Cadmium Mercury Arsenic Lead Cadmi

um

Alfalfa 1 0.95 — — 3.7 — 1.0 —

Beans — — 4.95 0.33 — — — —

Bets leaf — — — — 7.5 — 0.20 —

Cabbage — — 5.8 0.12 — — — —

Clover — — 1.85 1.15 — 1.2 — 0.1

Corn(kernel)

— — Not detect

ed

Not detected

— — — —

Corn(wholeplant)

3.0 0.75 — — 9.2 — 1.15 —

Corn leaf (green)

— — 1.85 0.15 — — — —

Cornstalks — — 5.00 0.15 — — — —

Grape leaf 3.1 0.35 3.1 0.30 16.3 2.45 0.40 0.50Grass 4.6 0.70 — — 15.1 — 1.00 —

Hay — — 2.45 0.40 — 2.50 — 0.2

Lettuce — — — — — 4.95 — 0.05

Oat — — — — 3.6 — 0.35 —

Onion — — 4.35 0.15 16.1 4.1 0.15 0.2

Plum leaf 1.9 0.30 — — — — — —

Wheat (aboveground)

2.5 0.45 — — 2.4 — 0.50 —

Wheat (grain)

— — 1.25 0.30 N/A 1.30 — 0.15

- Not available. Source: Stojanovi and others 1996.

As environmental pollution is directly proportional to household density, densely populated settlements are exposed to higher concentrations of air pollution, which leads to disabilities and associated costs, and to higher energy costs, which limit the share of household income available for other goods and services. In such areas employment opportunities are meagre, municipal budgets constrained and development opportunities diminished. The choices of local inhabitants are also limited because of exceptionally high transaction costs and transaction taxes involved in selling privatised dwelings. Consequently, the quality of life is likely to diminish with an increase in the density of households and the presence of external sources of environmental pollution. It is no surprise that such areas are also less well served with social infrastructure such as health care, education, and sanitation (maps 5.1 and 5.2).

POPULATION DENSITY PER SETTLEMENT

AREA

MAP 5.1

more than 10 001 per km

less than 1 000 per km

1 001 - 3 000 per km

3 001 - 5 000 per km

5 001 - 10 000 per km

2

2

2

2

2

data n/a

State Border

Republic Border

Stratum Border

Capital

0 50 100

HUNGARY

CROATIA

BU

LGA

RIA

FYRO MACEDONIA

ALBANIA

BOSNIA ANDHERZEGOVINA

ADRIATIC SEA

19E

BEOGRAD

BEOGRAD

SKOPJE

Kilometres

SARAJEVO

0

20E

0

21E0

45 E0

46 E0

44 E0

43 E0

42 E0

ROMANIA

KOSOVO&METOHIA, DATA N/A

The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries

Copyright © UNDP Serbia and Montenegro

@ITI[TE

BA^KIPETROVAC

BA^KAPALANKA

BA^KA TOPOLA

NOVACRNJA

MALI I\O[

NOVI SAD

KULANOVI

BE^EJ

BA^

APATIN

SOMBOR

SUBOTICAKANJI@A

SENTA

NOVIKNE@EVAC

VRBAS SRBOBRANOD@ACI

^OKA

ADA KIKINDA

TEMERIN

@ABALJ

TITELSREM.

KARLOVCI

IRIG

INDJIJA

ZRENJANIN

[IDSREMSKA

MITROVICA

RUMA

BEO^IN

SE^ANJ

PLANDI[TE

ALIBUNAR

KOVA^ICA

OPOVO

[ABAC

PE]INCI

VLADIMIRCI

LOZNICA

BOGATI]

MALIZVORNIK KRUPANJ

OSE^INA

KOCELJEVAUB

VALJEVO

LAJKOVAC

MIONICA LJIG

KOSJERI]

LJUBOVIJA

GORNJI MILANOVAC

BAJINA BA[TA

U@ICEPO@EGA

^AJETINA ARILJE

LU^ANI

^A^AK

ARAN \ELOVAC

TOPOLA

RA^A

KRAGUJEVAC

KNI]

KRALJEVO

SMEDEREVSKAPALANKA

LAPOVO

BATO^INA

SVILAJNAC

@ABARI

PETROVAC

MALOCRNI]E

PO@AREVAC

SMEDEREVO

KOVIN

PAN^EVO

BELACRKVA

VELIKOGRADI[TE

KU^EVO

GOLUBAC

@AGUBICA

DESPOTOVAC

BOR

MAJDANPEK

NEGOTIN

KLADOVO

VELIKAPLANA

VR[AC

ZAJE^AR

BOLJEVACPARA]IN

]UPRIJAJAGODINA

REKOVAC

VARVARIN

]I]EVAC

RA@ANJ

SOKOBANJA

TRSTENIK

KNJA@EVAC

ALEKSINACKRU[EVACALEKSANDROVAC

BRUSRAŠKA

BLACE

IVANJICA

PROKUPLJE

NI[

MERO[INA

SVRLJIG

BELAPALANKA

NI[KABANJA

DOLJEVAC@ITORA\A

KUR[UMLIJA

BOJNIKLESKOVAC

LEBANE

BABU[NICA

VLASOTINCE

MEDVE\APODUJEVO

KOSOVSKA MITROVICA

LEPOSAVI]

VRNJA^KABANJA

GAD@INHAN

PIROT

DIMITROVGRAD

CRNA TRAVA

SURDULICA

VLADI^IN HAN

BOSILEGRAD

VRANJE

TRGOVI[TE

BUJANOVAC

KOSOVSKAKAMENICA

PRE[EVO

GNJILANE

VITINA

KA^ANIK

URO[EVAC

[TRPCE

SUVA REKA

[TIMLJE

LIPLJAN

PRIZREN

GORA

KLINA

ORAHOVAC

PALILULA

NOVO BRDO

PRI[TINAOBILI]

K.POLJEGLOGOVAC

SRBICA

VU^ITRNISTOK

\AKOVICA

DE^ANE

PE]

RO@AJEBERANE

PLAV

ZUBIN POTOK

ZVE^AN

NOVI PAZAR

TUTIN

SJENICA

NOVA VARO[

PRIBOJ

PRIJEPOLJE

PLJEVLJA

@ABLJAK

BJELO POLJE

MOJKOVAC[AVNIK

KOLA[INNIK[I]

PLU@INE

DANILOVGRAD

PODGORICACETINJE

TIVAT

KOTORHERCEG

NOVI

BUDVA

BAR

ULCINJZEMUN

OBRENOVAC

BARAJEVO

LAZAREVAC

SOPOT

MLADENOVAC

GROCKA

VO@DOVAC^UKARICA

RAKOVICA

S.VENAC

N. BEOGRADSTARI GRAD

VRA^ARZVEZDARA

STARA PAZOVA

BE^EJ

BERANE

ANDRIJEVICA

0 50 100

HUNGARY

CROATIA

BU

LGA

RIA

FYRO MACEDONIA

ALBANIA

BOSNIA ANDHERZEGOVINA

ADRIATIC SEA

19E

BEOGRAD

BEOGRAD

SKOPJE

Kilometres

SARAJEVO

0

20E

0

21E0

45 E0

46 E0

44 E0

43 E0

42 E0

ROMANIA

KOSOVO&METOHIA, DATA N/A

The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries

Copyright © UNDP Serbia and Montenegro

@ITI[TE

BA^KIPETROVAC

BA^KAPALANKA

BA^KA TOPOLA

NOVACRNJA

MALI I\O[

NOVI SAD

KULANOVI

BE^EJ

BA^

APATIN

SOMBOR

SUBOTICAKANJI@A

SENTA

NOVIKNE@EVAC

VRBAS SRBOBRANOD@ACI

^OKA

ADA

KIKINDA

TEMERIN

@ABALJ

TITEL

SREM.KARLOVCI

IRIGINDJIJA

ZRENJANIN

[ID

SREMSKAMITROVICA

RUMA

BEO^IN

SE^ANJ

PLANDI[TE

ALIBUNAR

KOVA^ICA

OPOVO

[ABAC

PE]INCI

VLADIMIRCI

LOZNICA

BOGATI]

MALIZVORNIK KRUPANJ OSE^INA

KOCELJEVA UB

VALJEVO

LAJKOVAC

MIONICALJIG

KOSJERI]

LJUBOVIJA

GORNJI MILANOVAC

BAJINA BA[TA

U@ICEPO@EGA

^AJETINA ARILJE

LU^ANI

^A^AK

ARAN \ELOVAC

TOPOLA

RA^A

KRAGUJEVAC

KNI]

KRALJEVO

SMEDEREVSKAPALANKA

LAPOVO

BATO^INA

SVILAJNAC

@ABARIPETROVAC

MALOCRNI]E

PO@AREVAC

SMEDEREVO

KOVIN

PAN^EVO

BELACRKVA

VELIKOGRADI[TE

KU^EVO

GOLUBAC

@AGUBICA

DESPOTOVAC

BOR

MAJDANPEK

NEGOTIN

KLADOVO

VELIKAPLANA

VR[AC

ZAJE^AR

BOLJEVACPARA]IN

]UPRIJAJAGODINA

REKOVAC

VARVARIN

]I]EVAC

RA@ANJ

SOKOBANJA

TRSTENIK

KNJA@EVAC

ALEKSINACKRU[EVAC

ALEKSANDROVAC

BRUSRAŠKA

BLACE

IVANJICA

PROKUPLJE

NI[

MERO[INA

SVRLJIG

BELAPALANKA

NI[KABANJA

DOLJEVAC@ITORA\A

KUR[UMLIJA

BOJNIKLESKOVAC

LEBANE

BABU[NICA

VLASOTINCE

MEDVE\APODUJEVO

KOSOVSKA MITROVICA

LEPOSAVI]

VRNJA^KABANJA

GAD@INHAN

PIROT

DIMITROVGRAD

CRNA TRAVA

SURDULICA

VLADI^IN HAN

BOSILEGRAD

VRANJE

TRGOVI[TE

BUJANOVAC

KOSOVSKAKAMENICA

PRE[EVO

GNJILANE

VITINA

KA^ANIK

URO[EVAC

[TRPCE

SUVA REKA

[TIMLJE

LIPLJAN

PRIZREN

GORA

KLINA

ORAHOVAC

PALILULA

NOVO BRDO

PRI[TINAOBILI]

K.POLJEGLOGOVAC

SRBICA

VU^ITRNISTOK

\AKOVICA

DE^ANE

PE]

RO@AJEBERANE

PLAV

ZUBIN POTOK

ZVE^AN

NOVI PAZAR

TUTIN

SJENICA

NOVA VARO[

PRIBOJ

PRIJEPOLJE

PLJEVLJA

@ABLJAK

BJELO POLJE

MOJKOVAC[AVNIK

KOLA[INNIK[I]

PLU@INE

DANILOVGRAD

PODGORICACETINJE

TIVAT

KOTORHERCEG

NOVI

BUDVA

BAR

ULCINJZEMUN

OBRENOVAC

BARAJEVO

LAZAREVAC

SOPOT

MLADENOVAC

GROCKA

VO@DOVAC^UKARICA

RAKOVICA

S.VENAC

N. BEOGRAD

STARI GRAD

VRA^AR

ZVEZDARA

STARA PAZOVA

BE^EJ

BERANE

ANDRIJEVICA

2

2

2

2

2more than 10 001 per km

less than 1 000 per km

1 001 - 3 000 per km

3 001 - 5 000 per km

5 001 - 10 000 per km

data n/a

DENSITY OF POPULATION THAT USE SOLID FUELS

AS MAIN SOURCE OF SPACE HEATING PER SETTLEMENT AREA

MAP 5.2

LEGEND:

State Border

Republic Border

Stratum Border

Capital

VE^ERNJE NOVOSTI Daily, 16

August 1988.

Just 1 square metre of any of

the 42 flats to be built in

Kopitareva gradina, an attractive

location at the corner of

Cetinjska and 29 November, will

cost 3.16 million dinars, or 10

times the average salary. “The

buyers were not chosen by us,

but by the housing fund; and the

only thing we are sure of is, that

among the buyers, there are no

manufacturing firms,” says Rade

Petrovic, Chief of Sales at

Komgrap Company, the civil

engineering firm building and

selling the apartments. As

reported by Ve~ernje Novosti,

those holding contracts for the

apartments include the Federal

and Republic Ministries of the

Interior, the Central Committee,

Town League of World War II

Veterans Associations and

several other politically influen-

tial institutions.

POLITIKA, 12 July 1988.

“The City syndicate made a

decision to fund 42 flats in

Borca Greda out of the

Solidarity Fund. The average

price per square metre should

come to about 1.17 million

dinars, which is considerably

lower than the price currently

found at Belgrade building sites,

of about 1.5 million on the

average.”

Kopitareva gradina

Bor~a Greda Bor~a Greda

Photo 6.1: State-Owned

and Solidarity Apartments

72

73

6 The Distribution of Welfare Benefits towards the

Better Off

Changes in institutions and ownership in recent years have resulted in the

perpetuation and intensification of an uneven distribution of welfare benefits in

Serbia and Montenegro. In Serbia, winners include the owners and occupiers of

apartments formerly owned by the state, who continue to receive unlimited

subsidized district heating and electricity. In Montenegro, which has no district

heating systems, the system did not perpetuate inequality in the same way,

although there may have been some inequalities in the initial distribution of

apartments. Throughout the country, losers include villagers who live next to

opencast lignite mines, among others. Cross-subsidies from poorer to richer

households and communities are sizeable.

In the early 1970s Serbia began a massive programme of construction of new apartment blocks. From 1971 to 1984 the share of apartments in the legally built housing stock increased from 42% to 50%, and the average apartment increased in size from 49 square metres to almost 62 square metres. The share of apartments connected to district heating systems doubled, from 10% to more than 20%.

Most of this unprecedented growth took place in the cities. Belgrade increased its share of the population of central Serbia from 20% in 1971 to 26% in 1981, 28% in 1991 and 29% in 2002, while Podgorica increased its share of the Montenegrin population from 10% in 1971 to 19% in 1991. These patterns are more characteristic of developing countries than of transition economies. The pattern is even more pronounced if the stagnating natural population growth rate is taken into account.

Government-built apartment blocks and unlicensed private building facilitated this concentration. The two patterns were connected, as apartment blocks were built by construction crews and community workers who built illegal housing for themselves. More than 30,000 unlicensed houses were built in the peri-urban areas of Belgrade in the mid-1980s, many of them in Kaludjerica.42

During this period Belgrade’s contribution to Serbia’s real GDP fell below its share of the population.43

Before the massive privatization of the housing stock in the 1990s, all employees in Serbia were required to contribute to a housing fund and all were entitled to receive an apartment “from society”(see Chapter 4). In fact, only favoured employees—generally high school or university graduates employed by the government or by political organizations and public services—actually 42 During the registration campaign in 2003, 150,000 applications to register unregistered building were submitted in Belgrade.43 The contribution excludes output from the energy complexes in Obrenovac/Lazarevac, which comes from lignite deposits. The municipalities of Lazarevac and Obrenovac were attached to the Belgrade metropolitan area at the beginning of the 1970s.

Where food, housing and other essential supplies and services form part of remuneration, all practicable steps shall be taken by the competent authority to ensure that they are adequate and their cash value properly assessed.—Article 4, International Labour Organization Convention No. 82 (1947)

74

received apartments. A high school or university graduate employed by the government or the political sector was four times as likely to receive an apartment as a high-level engineer employed in industry.44 People with apartments connected to district heating services were twice as likely to have university degree (table 6.1), and their average earnings were more than a third higher than those of people living in apartments without district heating.

Table 6.1. Socioeconomic Differences between Households with and without

District Heating, 2003

Item

Households without

district

heating

Households

with district

heating Total

Education of head of household University degree (percent) 17.1 35.5 21.7 Family size and composition Average number of members per household 3.6 3.2 3.5 Proportion of households with five or more members (percent)

27.7 13.8 24.2

Proportion of households with 2 or more children under the age of 15 (percent)

18.5 14.4 17.5

Average number of household members under the age of 15

0.60 0.45 0.56

Average number of household members over the age of 60

0.77 0.64 0.74

Employment status Proportion of employed household members (percent)

30.1 37.1 31.5

Average number of employed household members

1.13 1.25 1.16

Average number of supported household members

1.56 1.14 1.45

Income Total average income ($) 242 330 264 Income per household member ($) 78 113 87 Income per income-generating household member ($)

127 167 137

Health status Average number of household members with health problems

0.40 0.26 0.36

Proportion of households with members with health problems (percent)

15.5 10.4 14.3

Average number of smokers in household 0.99 1.06 1.01 Proportion of households with smokers (percent)

27.8 35.1 29.6

Source: Household Survey.

If an apartment is considered compensation for services performed, one would expect that recipients would contribute a disproportionate share to national GDP growth In fact, the economic system favoured political position and

44 The number of employed graduates increased from 140,000 in 1978 to 230,000 in 1988. Less than 45% were employed in industry.

75

influence, not performance (tables 6.2). Many of the real creators of value-added services—especially outside Belgrade—were deprived of such compensation while still required to pay for (other people’s) apartments. Employees working in government institutions were more successful in getting an apartment not only from their own institutions but also from solidarity housing funds (table 6.3). Married couples both of whom were employed by a government institution had double the chance of getting an apartment. Most well educated government employees were awarded apartments during the 1970s to the 1990s, accounting for nearly all the apartments with district heating covered by the surveys.

Table 6.2 GDP, Employment and Productivity in Serbia , 1953–90

(percent)

Item 1953–65 1966–70 1971–80 1981–90

GDP growth 10.0 5.8 6.6 -0.3 Employment contribution to GDP growth rate

52.0 22.4 64.1 700.0

Productivity contribution to GDP growth rate

48.0 77.6 35.9 -800.0

Source: Federal Government of SFR Yugoslavia 1994.

Table 6.3 Relationship of Employment by Sector to Awards of Apartments,

Selected Years, 1974–86

YearEmployment sector

Number of

employees

Share of

employees

per sector

(%)

Share of

employees

working for

the

institution

that

distributed

apartments

within the

sector (%)

Share of

employees

awarded

the

apartment

from the

housing

fund (%)

Share of

employees

awarded

the

apartment

from the

solidarity

fund (%)

Industry 1,375,893 80 na na na Government 341,208 20 na na na 1974 Total 1,717,101 100 — — — Industry 1,646,618 81 70.8 0.62 0.11 Government 388,887 19 88.5 1.05 0.17 1978 Total 2,035,505 100 — — — Industry 1,900,270 81 67.3 0.49 0.07 Government 443,923 19 86.2 1.06 0.10 1983 Total 2,344,193 100 — — — Industry 2,054,308 82 65.5 0.49 0.06 Government 455,010 18 82.3 0.55 0.08 1986 Total 2,509,318 100 — — —

Na is not available. Note: The data refer to final physical occupation of the apartment rather than initiation of the process of awarding an apartment, which could take years. Source: Databases, publications, statements and bulletins and 1986 census of employees by Federal Statistical Bureau of former SFR Yugoslavia and authors’ calculation.

The poor have to build their own living space, while the better-off get it from society. The [problem] is a threat that will create class differences. —Vladimir Bakaric, high-ranking Communist Party official, quoted in Borba

July 15, 1979

[The government] gives them apartments, and then they heat them for free. Who would give something like that to us? Nobody cares about us.—Focus group participants, 2003

76

Government-provided apartments were normally supplied with infrastructure (district heating, sewage, water supply, telephone and electricity connections).45

In contrast, private builders had to pay extraordinarily high prices for such connections and were rarely able to connect apartments to the district heating system.46

State-owned apartments were sold to their tenants during the 1990s, as part of the wider programme of privatization. Tenants with high social capital in the 1970s and 1980s became the owners of their apartments on a freehold basis.47

Ownership of these apartments can be considered a kind of life insurance and the district heating services and maintenance as rent on accumulated social capital. Apartments connected to district heating systems have a 30% higher market value per square metre than otherwise similar or higher-quality apartments at comparable locations. People who did not receive apartments paid for the apartments and infrastructure of those who did.

The situation was slightly different in Montenegro, where apartment blocks were built and cheap, relatively low-quality housing was also provided to some residents. Montenegro does not have district heating systems, and utilities are not as extensively subsidized. Although there may have been some inequalities in the initial distribution of apartments, the system did not perpetuate inequality.

The Rich Get Richer: Who Pays for District Heating Systems? Over the years district heating services in Serbia have been exposed to various external shocks. Electricity shortages disrupted heat supplies, since pumps are powered by electricity. Shocks in natural gas and crude oil supply reduced the quality of service.

In response, consumers could weatherize buildings or secure larger supplies of heat by enlarging their radiators or pumps at the expense of other tenants. Many households adopted the second strategy, because it is cost-effective for them to do so, even though the strategy hurts the system as a whole. Lack of regulation and enforcement of rules provides the opportunity for some households to save at the expense of others and of the sustainability of the system in general. Households that enlarged their radiators or pumps had improved heating during periods of supply shortages and excess heat during normal periods. Other

45 Between 1972 and 1982, 1,400–2,400 substations were built each year in the Socialist Federal Republic of Yugoslavia. Construction was financed through direct contributions from local communities and then transferred to the asset stock of public companies. 46 District heating companies realized that they were not in a position to bill full price for their services. They therefore set barriers for new connections as high as possible in order to limit losses. Even the current administration has not been able to reduce connection fees. Instead, the administration provides credit to households that apply to be connected to district heating systems to help them meet the high connection fee. The administration’s aim to satisfy its clients with new “social capital” clashed with the aims of companies to prevent access to the grid. It remains to be seen how and when public institutions with heat-only boilers will be connected to district heating grids. 47 Privatization transactions were free of tax and transaction costs; sales of privatized apartments are subject to very large transaction taxes and expenses. These costs prevent the reallocation or sale of apartments, reducing the value of their ownership rights

Social apartments in Serbia have access to district heating 15 times more often (54.8 percent) than other apartments owned by individuals (3.6 percent). This implies that differences in living standards between members of different social classes are extremely large. A great number of socio-professional categories at lower social levels are deprived of basic facilities, such as bathroom and toilet premises, not to mention district heating.

—Vujovi , 1991, p. 290

In order to gain more heat over the winter period, citizens have become accustomed to enlarging their existing radiators…. Most often the only damage is made to the neighbours living in the building, who get less heat than they are supposed to.

—Politika, October 13, 1979

77

households, with their comfort thus declining, are forced to apply the samestrategy. This unregulated competitive behaviour can be understood as a kind of co-ordination game.

Box 6.1. The Political Economy of Energy Subsidies

The political economy of subsidies stretches far beyond the fiscal sphere, affectingother aspects of development capacity as well. Energy subsidies differ from other welfare benefits in that they are tied to particular territories, types of energy, and typesof housing.

Socialist economies tend to create cities without land markets (Bertaud 1999). Whentransport and energy supply are subsidized, location loses importance as a factordetermining the market value of properties. Instead, access to subsidized servicesemerges as an important factor. Obtaining an apartment provides entitlement to a certain set of energy subsidies. These subsidies are a type of property—a type of private property after massive privatization of state-owned apartments. But an energysubsidy is not registerable property, and entitlement to it can be removed by government decision.

In socialist societies obtaining an apartment was a form of a repeatedly played co-ordination game with multiple equilibria and decentralized matching. Aspirants first had to win the chance to receive appropriate formal education, which they did by usingtheir skills and drawing on the social capital of their families. Influential families hadto compete with one another for the limited number of places in educational institutions. Membership in the right party cell and employment in the right institutionhelped ensure the award of a socially owned apartment. The process involved careful co-ordination, bartering, alliances and fights for positions.

Under this kind of system, no “invisible hand” of the well-regulated free marketawards apartments to those who contribute more to society. The process is a co-ordination game played simultaneously in many different institutions that are fairlyinsulated from one another. Since only employees at a particular institution can compete within that institution, the game is one of decentralized matching. The processmoves from a temporary equilibrium as soon as one participant aspires to a better apartment and someone else aspires to that participant’s current apartment. Taking into account the nature of the reward (a better apartment, greater comfort, rent not a profitable investment or opportunity), the entire game is essentially rent seeking.

The share of the class of energy subsidy recipients was limited by the rate of infrastructure development, which was tied to the amount of resources diverted fromcommercial uses. The government minimized interclass mobility by creating significant transaction costs, including the absence of the rule of law and transfer taxes.

Hoff and Stiglitz (2002) claim that insecure property rights are a precondition for asset-stripping patterns that prevent the emergence of the rule of law. Although their analysiswas limited to a group of (wealthy) individuals actively involved in asset-stripping in transition economies, the argument could be made that the same mechanism applies to a wider segment of the population that is entitled to subsidies (unsecured property

The majority of cases that went before the Court ofAssociated Labor dealt with irregularities in theprocedures for assigningapartments. Even when thesame court ruled in favour ofthe plaintiff, firms failed toimplement court’ decisions in a timely manner. —Borba, July 12, 1983

turn over

78

rights) as long as the entitlement results from a repeatedly played co-ordination gamewith multiple equilibria.

Maintaining entitlement and its returns requires maintaining the no rule of law condition. The emergence of rent-seeking middle classes from the repeated-co-ordination game strengthens Hoff and Stiglitz’s conclusions that such middle classeswill support the same choices as active asset-strippers. As long as the middle class is relatively limited in size and share of GDP, it is likely to prevent investments in humancapital—that is, the chance for vertical inclusion that is an obvious consequence of the rule of law condition (see Easterly 2000).

Keefer and Knack (2002) argue that the “ratio of public investment either to nationalincome or to private investment is dramatically higher in countries with insecure property rights”(p. 1). As long as rent-seeking takes the form of unproductive public investment, observed public investment can rise. If rent-seeking by a larger proportion of the population is widespread and occurs in more than one dimension, then Linderand Strulik’s (1999) findings are applicable, and the indefinite number of rent-seekers is likely to generate a Nash equilibrium that is accompanied by declining and potentially negative growth rates. Consequently, inherently insecure property rights jeopardize national growth capacity and limit the vertical flexibility of society.

For these analyses to hold, there should be a limited middle class entitled to a certain level of subsidies; entitlement should be obtained through a co-ordination game withmultiple equilibria; security of entitlement should be a matter of discrete decision bythe government; the share of such middle classes in the population and the incomes should be limited; and such middle classes should be divided into a number of competing groups (decentralized matching) involved in the same co-ordination game.

As a result of this process public investment (from domestic sources and donors) is high relative to private investment and GDP, non-productive public investments(including investments in the energy sector as long as energy prices do not cover thecosts of energy conversion) dominate, and education expenses (a proxy for insufficientvertical social mobility) are small as a percent of GDP. All of these features areobservable in Serbia and Montenegro. The social costs of energy subsidies thus go far beyond cash costs, diminishing the development capacity of the nation as well as the probability that the rule of law prevails.

The government and municipalities subsidize district heating systems. The first tier of the electricity block tariff is designed so that households connected to the district heating system can cover all of their consumption needs at the lowest prices. The average consumption of apartments connected to district heatingservices is almost 600 kWh per month—the limit of the first tier of Serbia’s electricity tariff. All citizens pay for the budgetary transfers and international loans to the electricity sector, so that less well-off households subsidize the better-off households that are connected to district heating services.

Taxation in Serbia and Montenegro is based on indirect multiphaseconsumption taxes paid by all people in proportion to their consumption.

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79

District heating services and fuels for district heating plants are excluded from consumption taxes, although municipal budgets include contributions based on maintenance expenses of local district heating companies. Households not receiving district heating pay consumption taxes on their fuel and energy purchases.

Distribution of Benefits among Different Groups of the Poor Areas where poor people live are a playing field for many different sorts of co-ordination games. Harvesting (somebody else’s) fuel wood is a widespread co-ordination game. Settlements in which ownership rights are based on tradition from before World War II are less vulnerable to such behaviour, while unregistered housing outside of cities is more vulnerable. In settlements in Vojvodina (where ownership rights are traditional and better enforced) that consist of elderly rural households, ownership rights are more durable.

Delivery of environmental pollution, manipulation of land, tenure and access to natural resources and the distribution of external assistance are all areas in which co-ordination games dominate the everyday lives of poor households. Understanding this is important because if government assistance is delivered to an area in which property rights are insecure, it may be redistributed to the well-off rather than to the poor.

The nature of multiple equilibria co-ordination games suggests that the pure redistribution of wealth and poverty and involvement in the redistribution rather than in the creation of wealth provide fertile ground for persistent poverty.48

However, from a purely consumption point of view, some households are better off than others in poor areas, even if they are located in poor areas. Even within some of Belgrade’s suburban slums, some houses are luxurious in comparison with other houses, even though their owners are still poor by national standards. Slum areas also include some truly luxurious homes, built by people who are well-off financially but unable to buy or build homes in the urbanized part of the city because of their lack of social capital. These homes are likely to decline in value as a result of environmental impacts, lack of security and vulnerability to risks.

48 Inadequate environmental regulations and enforcement of property rights facilitate co-ordination games in poor areas.

Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care and necessary social services and right to security in the event of unemployment, sickness, disability widowhood, old age or other lack of livelihood in circumstances beyond his control.

—Article 25(1), Universal Declaration on Human Rights (1948)

“This is just like New Belgrade-a

dormitory, but without basic hygienic

conditions.” „When we were able to

build these kind of houses, and should

the Municipality has submitted us with

the plan, we could have become a

another Dedinje.”

Respondents to a 1989 survey [No his

meaning was that if they get plans and

infrastructure (sewage, proper streets,

waste management etc.) with work and

money they invested into their (poor)

houses the entire settlement will look

like the luxurious residential area. Still

not quite sure what you mean. Do you

mean: “If they follow the construction

plans, including the infrastructure plans,

this development could be another

Dedinje.” Or “If they had followed the

construction plans, including the

infrastructure plans, this development

would have been another Dedinje.”

After several centuries of tranquil and

balanced development, the village of

Kaludjerica experienced an urban and

demographic explosion over a period of

two decades (1967–1986). It became an

infamous example of an “illegal

settlement”, one of the largest of all—

and only 7 miles from Belgrade. Unlike

in other areas, where workers account for

90% of illegal housing, in Kaludjerica

they account for 57% (43% skilled

workers and 14% unskilled). At 39%, the

number of illegal builders with a

secondary or higher education is higher

than in most unauthorized settlements.

Over one-third of illegal builders in

Kaludjerica had attempted to get a flat or

housing subsidy from the firm in which

they worked, 31% had received some

form of assistance from their company

and 33% had not even attempted to do

so, believing that they did not have even

a remote chance of success.

Most of the illegal houses have been

connected to the electricity grid (73%),

most using three-phase electricity and

only a few using mono-phase. Most of

those questioned use wood and coal for

heating (55%), 22.5% use electricity,

5.5% have district heating and 4.5% use

oil. Some 8% of those questioned had no

heating at all.

“Everything is horrible, the garbage

smells, there is no water, infectious

hepatitis is spread. For a week, there has

not been a single drop of water coming

out of the only available tap. Now we

have trucks with water. I would be ready

to go and live even in a village just to

have decent living conditions.”

“A worker cannot get a flat, and this

is the only way.”

Savelji} Branislava, Beogradska

Favela, 1989

Photo 6.2: Kaludjerica-

Unregistered Housing

80

81

7 Coping Strategies

Households’ strategies for coping with their inability to obtain energy services

often have unwelcome consequences. Reducing the heated area of a household,

for example, can lead to tensions and dysfunctional relationships between

household members. Switching from one form of energy to another can have

consequences for health and quality of life. Coping strategies are particularly

limited for poor households, whose lack of capital often forces them to adopt

dangerous and inefficient strategies.

Reduction in Heated Area The main strategy households in Serbia and Montenegro use to cope with fluctuations in the price and availability of energy services is reducing the heated area of their home during the winter (tables 7.1–7.4). People living in apartments heated with wood and coal heat an average of only 14.4 square metres per household member in the winter (see cluster specifications in annex A).

This severe reduction in space disrupts the normal dynamics through which household members meet multiple needs, it affects household members’ personalities and it makes it more difficult to maintain personal habits, including hygiene habits, since the bathroom is frequently one of the first rooms to go without heat. The reduction in daily living space reduces the quality of family life and jeopardizes many basic social and cultural needs, including the need for privacy, rest and space to work in and socialize.49 Very tight living space makes it almost impossible to organize conflict-free domestic life (Rogi1980). 50

The reduction of heated space should also be analyzed in the context of social and cultural rights. Decent housing is a fundamental human right, included in the European Social Charter (box 7.1). Indicators are needed to assess the quality of housing (space per member, number of rooms, household members, installations and bathrooms) and changes in usable living space due to seasonal conditions.

49During the 1950s the French sociologist Paul Chombart de Lauwe identified the effects of lack of living space on daily living. According to de Lauwe, a living space of 8–10 square meters per household member is associated with pathological changes in personality, family life and relations. A living space of 12–14 metres per household member is associated with a high probability of serious tensions and dysfunctions of personality, family relations and daily living. At the time of Lauwe’s research, housing standards in France were much more modest than they are today, suggesting that these thresholds are now higher (Chombart de Lauwe, 1959, p. 121). 50 Psychiatric assessments would provide additional insights into the evaluation of the quality of daily life and psychological health in very tight quarters.

In a four-member family, the 19-year-old son and the 20-year-old daughter share a room during the winter. Having to do so causes frequent conflicts in the family. “They always object to it, but I cannot heat the other room. What can I do? This is really terrible, but what can I do?”

—Focus group participant, 2003

82

Table 7.1. Most Frequently Used Coping Strategy

(percent of all households)

Coping strategy

Without district

heating

With district

heating Total

Reduce heating and temperature 31.2 5.7 24.8

Reduce number of heated rooms in an apartment

45.7 10.7 36.9

Switch energy use to the night, to take advantage of lower tariff

62.0 3.7 47.4

Source: Household Survey.

Table 7.2. Proportion of Households that Reduced Heated Space During

2002/2003 Heating Season

Item Total

Without

district

heating

With district

heating

Average available space of apartment (square metres)

77.7 82.2 63.5

Average available space of apartment per household member (square metres)

26.9 27.8 24.3

Number of rooms in apartment 2.8 2.9 2.4 Average number of rooms per household member 0.96 0.99 0.90 Proportion of households that heated all rooms during 2002/2003 heating season

40.5 25.3 85.9

Proportion of households that did not heat all rooms during 2002/2003 heating season

59.5 74.7 14.1

Average daily heated space of the apartment (square metres)

47.1 44.0 56.3

Proportion of apartment heated 65.1 56.3 91.5 Average heated space per household member (square metres)

16.2 14.4 21.6

Table 7.3. Reduction of Heated Space in Apartments, by Type of Fuel

(percent, except where otherwise indicated) Space per household

member Electricity

District

heating

Wood and

coal Other Total

Total space of up to 10 square metres

6.6 2.9 6.6 2.6 5.5

Heated space of up to 10 square metres

38.9 4.2 51.9 28.0 38.5

Heated space of 10- 20 square metres

43.5 44.7 32.4 43.0 37.0

Heated space more than 20 square metres

17.7 51.0 15.7 28.9 24.5

All rooms heated 26.7 95.6 19.2 29.1 37.6 Some rooms heated 73.3 4.4 80.8 70.9 62.4 Average apartment space (square metres)

72.8 61.9 86.9 109.3a 80.7

n.a. Not applicable. a. Figure reflects effect of one housing unit of more 900 square metres which increased the average. Source: Perception Survey.

83

Table 7.4. Socioeconomic Indicators, by Heated Space and Type of Fuel

(percent, except where otherwise indicated) Heated space Type of fuel

Indicator

No more

than 10

square

metres of

heated

space per

household

member

More than

20 square

metres of

heated

space per

household

member Electricity

District

heating

Wood

and

coal Other

All

households

Highest educational level attained

Primary school 38.2 15.4 12.1 8.1 36.3 19.1 26.2 University or college degree

7.0 22.8 19.2 25.9 8.3 14.3 13.8

Household size and composition

Five or more members

33.7 9.0 18.9 10.4 26.7 23.8 22.0

Two or more children under the age of 18

24.1 9.1 18.0 9.9 18.6 21.0 16.8

Three-generationhousehold

33.5 12.9 16.7 9.4 30.9 26.0 24.1

Health status

Proportion of householdswithout health problems

59.0 69.9 69.2 73.2 60.4 66.5 64.7

Proportion of householdswithoutsmokers

33.8 41.6 38.2 34.4 37.8 36.6 37.1

Income

Up to 2,500 dinars ($42) per householdmember in June 2003

33.3 8.4 13.0 4.4 27.3 19.2 20.0

More than 9,000 dinars ($150) per householdmember in June 2003

0.7 21.8 12.3 20.6 2.0 13.7 8

Average total householdincome per member (US$)

46 102 81 103 54 83 69

Note: The differences are even more significant for heated space per member of up to 5 square metres. About 47% of households with at least five members and 34% of households with at least two children heat no more than 5 square metres per member. Forty percent of these households are three-generation households. About 59% of households that heat no more than 5 square metres had income per household member of less than 2,500 dinars ($42) in June, while none had income per household member of more than 9,000 dinars ($150). Source: Perception Survey.

A one bedroom apartment

(52 square metres) on the first

floor of an apartment building in

Sremski Karlovci, where an

86-year-old woman lives alone.

The apartment has a heated area

of less than 10.5 square metres

and occasional spot heating in

front of the TV set.

Legend:

1. Electrical Cooking Stove

2. Solid Fuels Cooking /

Heating Stove

3. Thermal Accumulation

Electrical Heater

4. Window

5. Bed

6. Refrigerator

7. TV Set

8. Direct Electrical Heater

9. Massonry Stove, electricity

10. Massonry Stove, solid fuel

1.

2.3.

3.

2. 2.

4.

4.

4.

3.

5.6.

7.

9.8.

9.

10.

4.

3.

1.

2.5.

6.

7.

8.

BEDROOM

LIVINGROOM

KITCHEN

BATHROOMHALL

STORAGEROOM

DHW electricalheater

10.

Photo 7.1: Old Woman

Coping with Cold

84

85

Box 7.1 What Constitutes Appropriate Housing?

Most people in the world live in some form of dwelling, but roughly half of theworld’s population does not enjoy the full spectrum of entitlements necessary for housing to be considered adequate. According to international human rights law, in order for housing to be adequate it must provide more than just four walls and a roof over one’s head; at a minimum, it must include the following elements:- Security of tenure. Security of tenure is the cornerstone of the right to adequate housing. Secure tenure protects people against arbitrary forced eviction, harassment and other threats. Most informal settlements and communities lack legal security of tenure. Hundreds of millions of people live in homes that lack secure tenure protection. Security of tenure is a key issue for all dwellers, particularly women. It is particularlyimportant for women who are victims of domestic violence, who may have to flee their homes to save their lives, and for women who do not have title to their homes or lands and thus can be easily removed, especially upon the dissolution of their marriage or the death of their husband.- Availability of services, materials, facilities and infrastructure. Adequate housingrequires access to potable drinking water; energy for cooking, heating, lighting andrefrigeration; sanitation and washing facilities; refuse disposal; site drainage; and emergency services. When one or more of these attributes is lacking, the right to adequate housing is not fully in place.- Affordability. The housing affordability principle stipulates that the amount paid for housing must not be so high that it threatens or compromises the attainment and satisfaction of other basic needs. Affordability is an acute problem throughout the world and a major reason why so many people are forced to live in informalsettlements. Lack of affordable housing is also a major problem in affluent countries, where poor people find it increasingly difficult to find adequate housing they canafford. In many industrial countries unaffordable rental housing threatens the securityof tenure of tenants, who often can be legally evicted for failure to pay their rent.- Habitability. For housing to be considered adequate, it must be habitable. Inhabitantsmust be ensured adequate space and protection against the cold, damp, heat, rain, wind or other threats to health or structural hazards. - Accessibility. Housing must be accessible to everyone. Discrimination against disadvantaged groups, including the elderly, people with HIV or physical or mental disabilities, victims of natural disasters, children and other groups, is common and poses a significant barrier to housing access. Laws and policies in many parts of the world do little to address the housing needs of the disadvantaged. These groups should be ensured priority consideration in housing, and both housing law and policy mustensure that their housing needs are met.- Location. For housing to be adequate it must allow access to employment, health care services, schools, childcare centres and other social facilities, and it must not be located in polluted areas. When communities are evicted, they are often relocated to remote locations that lack facilities or are located near garbage dumps or other sources of pollution.- Culturally adequate. The right to adequate housing includes the right to reside inhousing that is considered culturally adequate. This means that housing programmes and policies must take full account of the cultural attributes of housing, allowing for

We reaffirm our commitmentto the full and progressiverealization of the right toadequate housing, asprovided for in internationalinstruments. In this context,we recognize an obligation bygovernments to enable peopleto obtain shelter and toprotect and improvedwellings andneighbourhoods. We commitourselves to the goal of improving living and workingconditions on an equitableand sustainable basis, so that everyone will have adequateshelter that is healthy, safe, secure, accessible and affordable and that includes basic services, facilities andamenities and will enjoyfreedom from discriminationin housing and legal security of tenure. We shallimplement and promote thisobjective in a manner fullyconsistent with human rightsstandards.—Article 39, HabitatAgenda, adopted by theSecond United NationsConference on HumanSettlements, 1996

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86

the expression of cultural identity and recognizing the cultural diversity of the world’spopulation.

According to Article 2(1) of the International Covenant on Economic, Social and Cultural Rights, “each State party to the present Covenant undertakes to take steps,individually and through international assistance and co-operation, especiallyeconomic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means, including particularly the adoption of legislativemeasures.” According to the UN Committee on Economic, Social and Cultural Rights, “in order for a State party to be able to attribute its failure to meet at least its minimumcore obligations to a lack of available resources it must demonstrate that every efforthas been made to use all resources that are at its disposition in an effort to satisfy, as a matter of priority, those minimum obligations.”

Source: UNHCR, Centre on Housing Rights and Evictions, UN HABITAT.

Other Strategies for Coping with RiskEnergy consumers in Serbia and Montenegro face a chaotic energy market,characterized by constant changes in fuel prices, insufficient supplies of certainfuels, changes in fuel accessibility, the inability to meet heating needs with a single type of fuel and different payment conditions for different fuels. Consumers who are better supplied with assets are better able to develop strategies for coping with the chaos of the energy market. The poorest are the worst off in this respect, primarily because they cannot switch from one type ofheating source to another. Improving efficiency could help households cope with their energy needs, but doing so requires capital that most households lack.

The average household has 1.81 heating options, 1.44 of which it used during the previous heating season. The number of heating options is related to the household’s economic status. Households that describe themselves as having above-average economic power have 2.07 options on average, those with average economic power have 1.92 options, those below average have 1.47 options and the poor have 1.43 options. The utilization of options also declines with economic status.

Investing in heating facilitiesTo be able to respond to fluctuations in energy conditions, households invest in heating facilities. Better-off households are better prepared; poorer households have less financial flexibility, leaving them most vulnerable to unexpected changes in energy prices and supplies.

Investments in new heating facilities are significant. Among the 15% of households that possess supplemental residential heating devices, only 16% used them the previous heating season. A supplemental system that lies idle is a luxury for all but the best-off households.

continued from previous page

87

Using risky saving methods

Often the poor practice a risky form of saving to reduce energy costs. Risky saving methods include using cheap and low-quality fuels, reducing the use of certain appliances, reducing the number of heated rooms and using fuels, such as unseasoned wood, that produce indoor pollution. Risk-free saving methods include turning off lights; switching more electricity consumption to the night, when tariffs are lower; insulating doors, windows and exterior walls; and purchasing appliances with low energy consumption.

Among households that heat all the rooms in their homes, 20% use risky saving methods (these figures exclude households connected to district heating systems). Thirty-five percent of households that heat less than 8 square metres per member (most of them using light wood cooking stoves) use risky energy saving methods. Among households with district heating, which have on average 1.7 forms of saving, 66% use risk-free methods. Households that do not have district heating have on average 3.1 forms of saving, of which just 38% are risk free. Better-off people in Serbia and Montenegro have better heating systems (district heating) and engage in fewer savings strategies. When they do save, however, they do so using less risky methods.

Poor people are more likely to engage in risky practices. In response to the failure of a washing machine, 42% of all respondents but 56% of those who heat less than 8 square metres per household member engage in risky actions (repairing the machine themselves, asking relatives to do so, or leaving the washing machine broken). Wealthier people are more likely to call a technician or buy a new machine: while 72% of those who perceive their economic power as average would call a technician, just 23% of the poor would do so.

People worry about using different kinds of fuel. On a scale of 1–4, with 4 representing the highest level of fear, use of fuels ranks 3.0. The greatest fear is the fear of fire (3.4 in Serbia, 3.3 in Montenegro), followed by the fears of explosion of butane vessels and leakage of gas (3.2 in Serbia, 2.9 in Montenegro); electrical appliance failure and bad electrical installation (3.0 in Serbia, 3.1 in Montenegro); power failure or electrical appliance failure lasting longer than 12 hours (2.9 in Serbia, 3.2 in Montenegro); and a drop in voltage levels (2.6 in Serbia, 2.9 in Montenegro). These fears reflect the large number of household appliances and household electrical installations and the fact that many people in Serbia and Montenegro keep freezers full of food as a coping device, buying food when it is cheaper and freezing it for later use.

Everyone is afraid of electrical risks, but fear is greater among the poor. This is true for a variety of risks, including changes in voltage (2.3 for the poor versus 2.8 for the rich), inadequate electrical installations (2.6 versus 3.2), non-working electrical appliances (2.5 versus 3.1) and electrical appliance failures (2.6 versus 3.0).

People living in new settlements heat their apartments through the district heating system, but they nevertheless [sometimes endure temperatures of less than] 18°C, the minimum temperature promised by the federal government. People living in old settlements have even more serious concerns—they cannot reach 18°C. The market supply of light fuel oil is irregular, so it is very common to see people running from one pump station to another looking for fuel, most of the time returning to their houses empty-handed.

—Politika, 12 October 1979

88

Insufficient supply of electricity and fear of long power failures seem to diminish the fear of nuclear power plants. The fear of power failure is lower in Serbia (2.9) than in Montenegro (3.2); 1 out of 11 people in Serbia and 1 in 3 in Montenegro is in favour of building nuclear power plants (Centre for the Study of Alternatives 2003)

Willingness and ability to pay for better service

About half of respondents indicate that they would be willing to pay more to ensure that the energy they consume is less risky. On a 1–5 scale (on which 5 represents the greatest willingness to pay), the average ranking for Serbia is 3.2 (3.4 in Montenegro). The average ranking among people in Serbia and Montenegro who perceive their economic power as average is 3.4; people who describe themselves as poor have an average ranking of 2.4. Respondents ranked the statement “It is better to pay more for electricity and avoid possible power cuts” at 2.9 in both Serbia and Montenegro. Wealthier people gave the statement a ranking of 3.1, while poorer people ranked it at 2.1

The high level of outstanding electricity payments indicates that irregular payment is common in Serbia and Montenegro. It is therefore surprising that 93% of people in Serbia and 98% of people in Montenegro think that it pays to settle electricity bills promptly, and only 7% of people in Serbia and 2% in Montenegro believe it pays to be late settling electricity bills. None of those who think that paying late is a good idea indicates that the reason for doing so is financial. Of those who believe that late payment pays off, two-thirds state that the public power company provides favourable conditions for late payment; one-quarter state that they expect their income to increase in the future. Some people thus derive benefits from not paying on time. The poor take least advantage of this possibility, as they pay their bills more regularly than others (excluding the poorest of the poor) (box 7.2).

89

Box 7.2 How Do Serbia’s Roma Communities Fare?

Illegal status; insufficient infrastructure; overcrowded, substandard housing; and polluted environments characterize most Roma settlements in Serbia. These communities have been exposed to the vicious circle of poverty—a mixture of insufficient education, unemployment, food insecurity, indoor and outdoor pollution and inadequate housing.

Eighty percent of the Roma live in poorly built houses that lack adequate communal infrastructure—or any infrastructure at all (UN Office for the Coordination of Human Affairs 2001). More than 60% of Roma houses are no more than 40 square metres in size and are made of adobe, cardboard, metal and plastic sheets—materials that do little to protect against the cold. The majority of Roma houses have just one or two rooms; only 12% have a separate room used strictly for cooking and dining.

Many Roma use wood stoves, often been improperly installed, for cooking throughout the year. Indoor air pollution is therefore common, with deleterious effects on the entire household, especially children. The average Roma household, which includes three generations and at least five members, is permanently exposed to toxic substances. As most Roma lack the resources to buy wood and coal, women collect wood from nearby woods and other combustible material (clothes, shoes, plastic materials, paper) from open garbage dumps. Burning these materials releases toxic gases into the household.

It is not surprising, then, that most Roma suffer from lung and intestinal diseases, as interviews with them conducted during the mission revealed. These problems are combined with malnutrition, inadequate indoor plumbing and insulation and a lack of sewerage systems. At least 80% of Roma children under the age of 12 in the Belgrade area are estimated to have a diagnosed respiratory system problem, and almost half of all Roma children are hungry (FAO 2002).

While most Roma have access to the electricity grid, which they use for lighting, 9% of Roma settlements lack access to electricity (Jaksic and Basic 2002). Many Roma households are registered electricity consumers, but some illegally drag electrical cables from nearby factories, state companies, or their registered neighbours. Few Roma homes are equipped with electrical appliances such as refrigerators, freezers or boilers, due largely to their lack of financial resources and the absence of a constant voltage level. Roma households have either an electricity metre or “jumpers” that allow several houses to be hooked up to one electricity metre. The average monthly electricity bill does not exceed $30.

Although not well informed about energy prices and tariffs, the Roma do recognize the benefits of using appliances at night. They express a need for lower daytime tariffs, so that they do not have to stay up at night to use electricity.

Inhabitants are aware of the fact that they are exposed to harmful pollution, but they lack knowledge of its consequences. None of the Roma interviewed could say whether pollution was worse in the winter or the summer.

Roma settlement in greater

Belgrade.

Photo 7.2: Roma

Community Everyday Life

90

91

8 Promoting Change and Improving Sustainability

Serbia and Montenegro’s current pattern of domestic energy use is

unsustainable. The continuing deterioration of the housing stock will increase

demand for energy, which is likely to become more expensive and consequently

less affordable. Change is needed if households are to adopt a sustainable

pattern of energy use and the country is to shift towards sustainable

development.

Can Inefficient Patterns of Domestic Energy Use Be Sustained? Systems based on an insecure set of property rights (such as entitlement to energy subsidies) are sustainable as long as the economic system can be fuelled by external resources and the government sector continues to control its overall liquidity. As long as resources from outside the energy sector—including budgetary support and investments to mitigate major technical risks and maintain the system—are available, there will be neither the incentive nor the need to make major changes to Serbia and Montenegro’s energy sector. But poverty, vulnerability, risk, unemployment and insecurity are likely to spread unless energy efficiency increases.

Energy demand will continue to grow as a consequence of the deterioration of the housing stock, the worsening of conversion efficiency, the decline in overall energy efficiency, the retirement of people with appropriate technical skills and the ageing of energy devices. At the same time, the cost of energy is likely to increase, due to the internalization of the externalities associated with energy services, the diminishing domestic resource base, lower conversion efficiency, a widening technological gap, international competition for global resources and external supply shocks.51

The environmental impacts of energy activities—soil acidification, loss of forests, deterioration of public health—are cumulative. The social costs are likely to grow unless the environmental externalities are incorporated into the costs paid by users and a pro-active policy to reduce environmental damage is adopted and implemented. As energy efficiency declines and the cost of energy rises, productive activities will diminish, together with employment opportunities and financial sustainability.

51Exploiting forests that are not located next to roads is more expensive than harvesting forests near transport infrastructure. The need to harvest these resources is likely to increase the price of fuel wood, reducing the efficiency of energy supply. The domestic production of natural gas and oil is already diminishing, due to the exhaustion of existing deposits. Open-pit lignite coal mining has spread to more densely populated areas, where the overburden (soil and sediment covering the coal) to lignite ratio is less favourable, increasing the area of land devastated by the mining. Even with significant investments in major power plants and electricity networks, without regular and preventive maintenance, energy conversion efficiency is likely to continue to decline.

Photo 8.1: Soil Devastation

Top: Soil Acidity in Serbia,

Source: Institute of Soil Science,

2001

Bottom: Open Pit Lignite Mine

in Kolubara

92

93

In the past 30 years the most fertile 20% of agricultural land in Serbia became acidified (see photo 8.1); another 40% is located in areas with less than 5% forest coverage, where wind and water erosion are problems and most of the inhabited area is exposed to harmful air pollution. About two-thirds of houses require serious renovations to become suitable for healthy living.

During the same period both GDP and productivity declined. GDP is still below the level needed to secure adequate human development in the longer term. As agriculture becomes more vulnerable to weather and other shocks, industrial competitiveness remains based on nominally cheap energy, and health and social expenses continue to grow, the current level of human development will become less sustainable.52 Wealth may continue to be redistributed towards foreign trading partners (by lowering the terms of trade) and the rich within Serbia and Montenegro (by providing even more generous energy subsidies and allowing asset stripping).

Poor governance lies at the nexus of these processes and allows existing rules to perpetuate indefinitely into the future. These trends will increase poverty and deprive future generations of opportunities, and result in a lower quality of natural resources and a smaller capital stock.

Improving sustainability requires increasing employment and productivity so that households are better able to afford energy supplies. The energy sector is not able to provide affordable and competitive energy supplies to industry, agriculture or the population. The energy sector allows multiple equilibria economic games to be played that redistribute wealth towards social groups whose contribution to wealth creation is below average or even negative (see box 6.1).

The extra costs of providing consumers with energy incurred as a result of the sector’s inefficiency include high direct costs, environmental costs and the costs of lost or postponed economic development. Each of these costs is estimated to absorb about 7% of current GDP.

The Capacity for Change Because of a variety of factors, including the existence of a rent-seeking middle class that is entitled to a set of subsidies, public investments in Serbia and Montenegro are very large compared with private investment and GDP.53

Public investments are oriented to non-productive projects, and they neglect

52The human development index (HDI) might even improve temporarily in nominal terms if nominal GDP (supported by foreign aid) remains constant while the population shrinks as a result of falling lifespan and life expectancy rates. This rise in nominal HDI does not, however, reflect an improvement in the quality of life under these special conditions prevailing in “newly undeveloped” countries like Serbia and Montenegro. 53Public investment includes international assistance directed by the government, reinvestment of privatization revenues, budget investments and investments at the municipal level. The exceptionally high level of non-productive public investment in Belgrade is consistent with the fact that most of the favoured class lives there.

94

important sectors, such as education, which receives an insufficient share of budgetary allocations.54

This spending pattern reflects the lax enforcement of property rights throughout the energy sector, inadequate regulation of access to public goods and natural resources, lack of information and coherent policy, clientelism of the ruling elite and capture of the state by groups involved in the energy sector (public companies, their exclusive trading partners, unions and financial services providers).55 Corporate players are either well-established public companies with considerable influence or new companies that secured their position through lobbying and rent seeking. These companies, which exercise substantial market power, have enjoyed above-average growth and investment since 2001.

Because the enormous social costs of these activities are unevenly distributed geographically, people have to be aware of the problems at the local level—and to resolve them at that level as well. But passage of appropriate legislation requires geographical representation in legislative institutions, which Serbia and Montenegro does not have.56

In systems where representatives have geographically defined responsibility, they are likely to have similar interests and are more likely to reach agreements about subsidies and property rights. When geographically based representatives fail to do so, they are replaced. Such a system increases the probability of rational decisions, dramatically reducing the possibility of massive state capture. In systems where political representatives lack geographically defined responsibility, as in Serbia and Montenegro, representatives simply compete for positions within a given set of rules; they cannot define common interests, such as modernizing the economy, improving productivity, and increasing energy efficiency or environmental sustainability. In Serbia and Montenegro the wide scale lack of information further impedes understanding of the need for change and development of the will to modernize.

54 Investment in district heating networks and the energy sector in general may be considered non-productive as long as prices are set below actual costs. 55 Unions include those that operate like companies and have the opportunity to become agents in the redistribution of fuels. The concept of clientelism is understood here in accordance with the World Development Report 2004 (World Bank 2004). 56 When legislators represent political parties rather than regions, they have only to secure a sufficient number of party votes to prevent changes in the rules. According to the Arrow impossibility theorem, the rules of the game cannot be changed when the number of decision-makers with competing interests is large.

Access to energy requires not only national policy changes but also initiatives at the local level to ensure that community voices are heard and that the right energy solutions are found to improve peoples’ lives.… Active engagement with the business sector and decentralized energy systems [are needed] to meet the needs of rural people, especially women. —Susan McDade, Manager, Sustainable Energy Programme, United Nations Development Programme

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9 Recommendations

New technology and methods of governance make it possible to improve the

standard of living at a given level of national production. To realize the

substantial development opportunities that eventually could be created by

increased energy efficiency and higher productivity, Serbia and Montenegro

needs a development vision.

Energy use can be improved in Serbia and Montenegro by severing the nexus between the government and the energy companies that have captured it, unbundling services performed by vertically and horizontally integrated energy utilities and lowering barriers to entry. The main new entrants should come from the civil sector: consumer associations, professional organizations and environmental and public interest groups. People have to be concerned about their living conditions and empowered and encouraged to participate in development processes.

Decision-makers in Serbia and Montenegro must realize that major turnarounds are needed not only in the administrative structure or organization of various entities but in the core activities of energy companies and the government and in energy consumption patterns. Improvements in energy efficiency and in the productivity of energy use are not likely to occur without the involvement of individuals, professional societies and the government (box 9.1).

The magnitude of the problem of inefficient energy use in Serbia and Montenegro should not be underestimated. Major reforms are needed to modernize the sector if prosperity is to be achieved. The energy–poverty nexus, which is key to real reform, is where reforms should begin.

Improving Governance To improve the prospects for growth and poverty reduction, the government could take the following steps:• Develop and implement an accountability framework that covers public

goods, public capital and human rights. • Develop iterative processes, an energy policy and strategy and the Poverty

Reduction Strategy Paper, in cooperation with the civil sector. • Publicly disseminate information on energy balances, the public capital

portfolio, natural and mineral resources portfolios and environment- and health-related issues.

• Increase the elasticity of demand in the energy sector, for energy and for trading and financial services—by making various types of fuel available, lowering administrative and legal barriers to entry and creating a social welfare system that is independent of the energy companies, for example.

• Sever the links between the government and energy companies. • Establish geographical representation in legislative and policy development

processes and institutions.

[Nobel laureate] Amartya Sen and I and others have argued with increasing conviction that only when poor people can participate in the political decisions of their country is their economic and social status adequately addressed. So we at UNDP have become—in a way that is perhaps a little surprising for a UN development institution—an agency of democracy and its promotion, believing that it is critical to the achievement of human development. —Mark Malloch Brown, Administrator, United Nations Development Programme, 2004

96

• Join major international conventions on energy, the environment, public participation, housing, human rights and accountability.

• Introduce the concept of public goods throughout the legal framework, including in national and sub-national constitutions. • Refrain from conducting privatization within the energy sector until

access of public companies to natural resources and mineral wealth becomes well defined, accountable and transparent.57 No privatization should take place until a planning framework is adopted, environmental impacts and costs are identified and made public, the performance of public investments is made measurable and comparable through a regular accountability framework and the corporativization of public companies is complete. Enhance the capacities of new entrants in the development process. Donors should recognize the needs of a society in transition from a non-participatory towards a participatory regime and consequently redirect a substantial proportion of their aid towards people in need, to consumer associations and to professional organizations that are not influenced by the government. Recognize professional associations as key players in the capacity-building process that increase the supply of professional services. Establish and maintain an independent public assessment mechanism on investment processes in the energy sector, based on a concerned and informed public.

Improving Human Health To improve human health, the government could take the following steps:

• Conduct an environmental health risk assessment and develop a sustainable National Environmental Health Action Plan and Local Environmental Health Action Plans for municipalities identified as environmental hot spots.

• Identify essential environmental health indicators that need to be monitored and reported regularly in order to support information-based policy-making. (Doing so would ensure that environmental health considerations are taken into account in the development of legislation, policies, programmes and plans.)

• Develop an environmental health information system that will ensure collection and analysis of data and facilitate their interpretation.

• Establish partnerships between the public and private sectors in order to conduct joint environmental health studies that identify the negative health effects of environmental pollution and the impact of local pollution on human health.

• Address indoor pollution and indoor living conditions of families, including the availability of habitable heated living space.

• Put information and best practices on healthy housing in the public domain, and disseminate both through education and public awareness campaigns.

57 Privatization can mean privatizing influence over the government and providing unlimited access to natural resources. Responsible public control over these companies allows private influence to be minimized.

97

• Make public resources, including public budget funding, available to people in need through practical programmes, including education on living practices in environmentally hazardous areas.

Reducing PovertyThe government could improve efforts to reduce poverty by taking the following steps:

• Inform the Poverty Reduction Strategy Paper process with energy-, health- and habitation-related information.

• Develop countrywide and local poverty reduction strategies that incorporate education, training and investments on cooking, heating appliances, use of seasoned fuel wood and basic energy efficiency improvement measures.

Increasing Energy Efficiency To increase energy efficiency, the government could take the following steps:

• Empower the Energy Efficiency Agency to facilitate intersectoral coordination on energy efficiency, including legislation, institutions and practices.

• Encourage a variety of institutions (companies, NGOs, professional organizations, government-owned institutions, financial institutions) to enter the energy efficiency field by providing innovative services and investments. Level the playing field and lower barriers to entry for a variety of players.

Improving PolicyTo improve policy, the government could take the following steps:

• Develop a comprehensive energy policy as part of an inclusive and well-informed public process that provides opportunities for participation, innovation and engagement, and present the policy to parliament in both Serbia and Montenegro as soon as possible.

• Develop sub-sector policies as well as commercial strategies for publicly owned companies.

• Establish a comprehensive legal framework for NGOs, professional organizations and consumer organizations.

• Develop a national clean development mechanism strategy and implement key projects.

• Analyze existing hydro-energy potential based on international best practice for large and small dams.

• Establish the institutional capacity to produce regular energy balances within the national statistical system, ensure the independence of this system from regulatory and policy institutions in the energy sector and publish the energy balance resulting from such process as soon as possible.

• Prepare and adopt a range of environmental policy–related documents.

It is also said that conservation, while admirable, has only limited potential. But economists now broadly agree that improved energy efficiency and other “no regrets” strategies could bring great benefits at little or no cost. Enlightened corporate leaders are already seizing the opportunity to use and develop green technology. Many governments are pushing this transition along through creative use of tax and fiscal policies, notably by eliminating the enormous subsidies that have sustained many harmful practices. And many major energy suppliers agree that technical, financial and economic obstacles to a less damaging energy future are all rapidly disappearing. —Kofi Annan, Secretary-General, United Nations, 2001

98

• Develop a national spatial planning policy through an appropriate participatory process.

• Develop a national industrial development policy, including sector development policies.

• Encourage local authorities to work on their local action plans in energy efficiency, industrial development, spatial planning and poverty reduction.

• Establish a national policy for efficient transportation, including a policy to shift transport loads to more efficient modes (railroads, ships).

• Pay particular attention to development plans for the Belgrade metropolitan area and coastal areas in Montenegro, given their significance for overall national development.

• Create a national plan to replace the expensive heat-only boilers used in district heating systems (by using waste heat or biomass, for example) in order to reduce poverty and spur development.

Additional Recommendations for MontenegroThe government could take the following additional actions in Montenegro:

• Provide an enabling investment environment that could help tap the considerable hydro potential as well as opportunities related to existing or planned water supply systems throughout Montenegro.

• Develop an affordable solution to water supply and solar water heating that standardizes water supply and facilitates a shift towards solar accumulation water heating systems. Doing so could improve the economics of the supply of domestic hot water and electricity. The electrical utility company and the government could consider providing price or tax discounts to encourage the process.

• Develop an energy strategy and policy that provides affordable energy all year long, so that tourism can be developed throughout the year. Doing so is likely to improve returns on real estate and infrastructure as well as provide employment opportunities.

99

Box 9.1 What Is National Ownership?

The United Nations Development Programme defines national ownership in the following way:

• Government ownership is not synonymous with national ownership. • National ownership is a continuous process that progressively involves

increasing numbers of actors at the national level. No single country actor can be termed “the nation.”

• National ownership encompasses a government’s relations with both national and international actors—defining its responsibility, capability and legitimacy for political action.

• True ownership of a poverty reduction strategy must derive from what political action means for the poor themselves—both currently and potentially.

Nature of the Poverty Reduction Strategy

1. Recognize that poverty reduction is a long-term process and that poverty reduction strategies should therefore be conceived for the long term but should stipulate intermediate benchmarks of progress.

2. Contribute to building a broad understanding across societies of what poverty is. Without such an understanding, the poverty reduction strategy will never have legitimacy.

3. Help ensure that consultations within the country are a fully inclusive process, giving voice to such groups as women, minorities and geographically dispersed populations, but also recognize that full consensus may be neither possible nor desirable.

4. Utilize local expertise and national institutions in technical cooperation programmes wherever possible.

5. Facilitate better coordination by governments and ensure that the poverty reduction strategy is well integrated with other planning and programming instruments. Do not impose new instruments conceived externally by donors.

6. Support training and education in poverty issues, both within and outside formal educational establishments.

7. Help ensure that strategies are fundable by matching domestic and external resources to needs.

Assessment and Monitoring

8. Build local capacity for assessing poverty in its varied forms and identifying its causes.

9. Assist in developing benchmarking systems based on Millennium Development Goals and

Pictures of buildings and

houses in Belgrade produced by

a digital thermal vision camera.

Lighter areas indicate energy

radiation.

VE^ERNJE NOVOSTI Daily, 7

January 1974, “Thin walls heat

streets”.

“In 1972 a rule was passed

that has permitted a four

times higher heat transmission

ratio than the Swedish rule. That

practically means that we lose

four times more heat through the

walls than people in Sweden,”

Ms. N.A. Krsti} said.

Several attempts have been

made since the 1970s to enforce

the comprehensive building

code. A distinction needs to be

made between registered and

unregistered buildings, since

unregistered buildings have not

been subject to any inspection.

Pictures are courtesy of Institute

Nikola Tesla of Belgrade.

Photo 9.1: Housing Energy

Efficiency

100

101

Annex A

Cluster Analysis and Survey Results

The household survey collected data from five regions of Serbia and Montenegro (map 1). Because the number of households surveyed was insufficient to provide reliable results, the cluster analysis examines only the strata in Serbia. Definition of the strata was based on population density (map 2), demographic characteristics (map 3), the distribution of forested area (map 4), and an estimate of emissions by thermal power plants in municipalities surrounding Belgrade.

Cluster Analysis Cluster analysis was used to distinguish groups of households based on their energy patterns and welfare status. Analysis of the household survey indicators yields four clusters, based on the following 16 factors:

• Number of rooms per household member • Living space per household member • Heated living space per household member • Number of household members under the age of 15 • Number of household members 60 or older • Number of household members with income • Income per household member • Number of chronically ill household members • Incidence of asthma among household members • Presence of another apartment or at least 10 centimetres of ceiling

insulation above living space • Energy consumption for space heating per square metre of heated

space58

• Connection to district heating system • Use of reduced heating as saving method • Cooking stove fuelled by electricity, natural gas or liquefied petroleum

gas• Age of refrigerator and freezer • Ownership of and age of car

The first two clusters, which together represent about half of the population, constitute those most marginalized by the energy-poverty nexus. The third cluster, which represents less than 20% of the population, is made up of people who are relatively secure socially. The fourth cluster, which represents about a fourth of the population, can be classified as socially secure primarily because of the energy-related subsidies they enjoy. The cluster specification sheets

58Aggregate indicator of energy consumption from various fuels consumed in the household, including electricity, wood, lignite, liquefied petroleum gas and natural gas.

102

present these results in greater detail. Figure A1 shows the geographical distribution of the clusters.

Figure A.1. Distribution of Households, by Cluster and Stratum

1 2 3 4

BelgradeW Serbia

E SerbiaVojvodina

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Clusters

Belgrade W Serbia E Serbia Vojvodina

Source: Household Survey.

The distinctive geographical distribution of energy use patterns reflects the historical diversity in Serbia and Montenegro, as well as population density.The most interesting is, of course, distribution of clusters throughout theterritory and urban/rural areas. The concentration of fourth cluster households in urban areas and household incomes as well as distinctive energy use patterns suggest that subsidized urban living expenses attract large population groups.59

It comes as no surprise that Belgrade urban area and households with district heating account for half of this cluster.

59 Subsidization goes far beyond simple subsidies for district heating services. Urban households supplied with districtheating are much more likely to obtain price discounts and welfare benefits than the rural poor. Urban car owners donot pay for the use of urban infrastructure, parking areas, and so forth. The size of public transport subsidiescorresponds to the size and value of public transport services in such a way that the most valuable service is the mostsubsidized. As energy expenses account for a lower share of household revenues in urban households, households areable to redirect some spending towards other goods and services. Geographic concentration is a winning strategy for the urban population as long as it can transfer costs to others else and receive benefits free of charge.

Pe

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FYRO MACEDONIA

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Kilometres

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0 0

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KOSOVO&METOHIA, DATA N/A

ROMANIA

The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries

CROATIA

20E

1)Estimated data

STRATUMS: AREA, NUMBER OF

MUNICIPALITIES, POPULATION, HOUSHOLDS AND HOUSHOLDS THAT

OWN PASSENGER CAR

MAP A1

Stratum 1.VOJVODINA

Stratum 3.CENTRAL SERBIA

Stratum 4.CENTRAL SERBIA

Stratum 5.MONTENEGRO

1)

Stratum 2.BELGRADE WIDER AREA

BELGRADE

Total Area: 21 506 km2Number of municipalities: 45Population: 2 031 992Households: 724 108Households thatown passenger car: 41,2 %

Copyright © UNDP Serbia and Montenegro

LEGEND:

State Border

Republic Border

Stratum Border

Capital

Total Area: 5 702 km2Number of municipalities: 23Population: 1 860 639Households: 685 037Households thatown passenger car: 46,6 %

Total Area: 23 015 km2Number of municipalities: 45Population: 1 712 488Households: 574 929Households thatown passenger car: 52,3 %

Total Area: 27 726 km2Number of municipalities: 48Population: 1 892 882Households: 630 773Households thatown passenger car: 53,7 %

Total Area: 13 812 km2Number of municipalities: 21Population: 664 865Households: 159 155Households thatown passenger car: 61,8 %

104

Cluster 1 Characteristics

Cluster 1 includes urban (48%) and rural and suburban (52%) households that live in substandard houses and use low-efficiency heating devices. Low income per household member is provided by no more than one earner per household. Households are not able to heat sufficient living space during the winter and may be exposed to cold, mould, drought and mites. Household size is larger than average. Very few households are connected to district heating networks; fuel wood use is above average. The number of cars per household is above average, but average mileage per vehicle is below average.

Table A.1. Cluster 1 CharacteristicsItem Average Standard deviation

Number of members per household 4.81 1.55 Monthly income per member (dinars) 2,843 1,762 Total living space per member (square metres) 17.92 9,07 Reduction in living space during heating season (percent of space not heated)

55 n.a.

Available heated space per member (square metres) 8.00 n.a. Heat energy per square metre of heated area (kWh) 325.4 235.8 Share of energy expenses in total income (percent) 20 n.a. Household electricity consumption in May (kWh) 664 Household electricity consumption in February (kWh) 923Share of all households (percent)

Maximum 26.1Minimum 22.1Most likely 25.8Estimated number of households in cluster 502,000 Estimated population in cluster 2,414,000 n.a. Not applicable. Source: Household Survey.

105

Cluster 2 Characteristics

Cluster 2 includes predominantly rural and suburban households (77%) living in low-quality but spacious houses and using low-efficiency heating devices. Low income per household member is provided by no more than one earner per household. Most households are able to heat sufficient living space during the winter, although some may be exposed to unhealthy living conditions, including cold, mould, drought and mites. Household size is smaller than average. Very few households are connected to district heating networks; fuel wood use is above average. Households own a lower than average number of cars and put on only minimal average mileage per vehicle. Most households (84%) have chronically ill or elderly members.

Table A.2. Cluster 2 CharacteristicsItem Average Standard deviation

Number of members per household 3.10 1,60 Monthly income per member (dinars) 5,456 3,319 Total living space per member (square metres) 31.48 18,28 Reduction in living space during heating season (percent of space not heated)

59 n.a.

Available heated space per member (square metres) 12.91 n.a. Heat energy per square metre of heated area (kWh) 338.99 206,80 Share of energy expenses in total income (percent) 15 n.a. Household electricity consumption in May (kWh) 538 Household electricity consumption in February (kWh) 707

Share of all households (percent)

Maximum 24.1Minimum 20.1Most likely 23.2Estimated number of households in cluster 451,000 Estimated population in cluster 1,400,000 n.a. Not applicable. Source: Household Survey.

106

Cluster 3 Characteristics

Most Cluster 3 households live in urban areas (79%). Households in this cluster live in spacious houses of reasonable quality and use heating devices of standard efficiency. Moderate income per household member is provided by no more than one earner per household. Households are capable of heating sufficient living space during the winter. Average household in this cluster is smaller than average. About 35% of households are connected to district heating networks; fuel wood use is below average. Households own a smaller than average number of vehicles per household, but average mileage per vehicle is high (almost 10,000 kilometres a year). A significant proportion of households have a chronically ill (38%) or elderly (60%) member.

Table A.3. Cluster 3 CharacteristicsItem Average Standard deviation

Number of members per household 2.65 1,38 Monthly income per member (dinars) 8732.5 5285,2 Total living space per member (square metres) 34.9 19,9 Reduction in living space during heating season (percent of space not heated)

35 n.a.

Available heated space per member (square metres) 22.7 n.a. Heat energy per square metre of heated area (kWh) 182.0 137,4 Share of energy expenses in total income (percent) 12 n.a. Household electricity consumption in May (kWh) 541 Household electricity consumption in February (kWh) 788

Share of all households (percent)

Maximum 26.3Minimum 22.3Most likely 23.6Estimated number of households in cluster 459,000 Estimated population in cluster 1,216,000 n.a. Not applicable. Source: Household Survey.

107

Cluster 4 Characteristics

Cluster 4 includes predominantly urban (89%) households. Households in this cluster live in spacious apartments of reasonable quality and use heating devices of standard efficiency. Medium income per household member is provided by no more than one earner per household. Households are capable of heating sufficient living space during the winter. The size of households is average. Almost half (49%) are connected to district heating networks; use of fuel wood is minimal. Households in this cluster own an above-average number of cars, but mileage per vehicle is comparable to that of cluster 1 households. Income is lower and more volatile than that of cluster 3 households. A small proportion of households have members who are chronically ill (11%); a below average percentage have elderly household members.

Table A.4. Cluster 4 CharacteristicsItem Average Standard deviation

Number of members per household 3.42 1,41 Monthly income per member (dinars) 7712.5 5804,9 Total living space per member (square metres) 24.0 15,6 Reduction in living space during heating season (percent of space not heated)

18 n.a.

Available heated space per member (square metres) 19.7 n.a.

Heat energy per square metre of heated area (kWh) 139.0 87 Share of energy expenses in total income (percent) 8.8 n.a. Household electricity consumption in May (kWh) 568 Household electricity consumption in February (kWh) 780

Share of all households (percent)

Maximum 31.4Minimum 27.4Most likely 27.5Estimated number of households in cluster 536,000 Estimated population in cluster 1,832,000 n.a. Not applicable. Source: Household Survey.

PERCENTAGE OF FOREST COVERED AREA

less than 1,0 %

1,1 - 10,0 %

10,1 - 20,0 %

20,1 - 30,0 %

30,1 - 40,0 %

40,1 - 50,0 %

> 50,1 %

MAP A2

LEGEND:

State Border

Republic Border

Stratum Border

Capital

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BU

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FYRO MACEDONIA

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ROMANIA

KOSOVO&METOHIA, DATA N/A

The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries

Copyright © UNDP Serbia and Montenegro

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ANDRIJEVICA

110

accumulation heaters (66% of these households use them). Twenty-four percent of households are connected to district heating systems (99% use the facilities), 19% of the population have an electric fan heater or a quartz electric heater (52% use them), 18% of the population have electric heaters or an electric radiator (49% use them), 13% of the population has solid fuel residential heating (92% use it), 9% have a solid fuel masonry stove (87% use it), 5% have gas fuel residential heating (96% use it), 3% of the population have electricity residential heating (71% use it), 2% of the population have air conditioners (44% use them), 2% have gas heaters (81% use them), 2% have naphtha-burning stoves (32% use it), 1% have an electric masonry stove (71% use it).

In Montenegro the most common heating device used during the winter of 2002/2003 was the solid fuel cooking stove (64%), followed by the electric accumulation heater (41%), electric fan heaters (11%), electric heaters (8%) and central heating (6%).

During the winter of 2002/2003, the most frequently used heating fuel was solid fuel (60% in Serbia, 59% in Montenegro). District or central heating (22% in Serbia, 6% in Montenegro); electricity (12% in Serbia, 35% in Montenegro); and gas (4% in Serbia) and other fuels (2% in both Serbia and Montenegro) were all used by a much smaller percentage of households.

Quality of Heating During the previous heating season, 34% of households in Serbia and Montenegro perceived their homes as warm and comfortable; 23% complained that heating their home required a lot of work, 19% reported that their homes were cold; 17% reported that the heating in their home was poor, primarily because they heated only one room; and 6% said that their home was “warm but suffocating.”

The largest proportion of the population (62% in Serbia, 34% in Montenegro) believes that district heating is the most comfortable source of heating. Just 5% believe that an open wood-burning fire place and air conditioners are the most comfortable, 4% think an electric accumulation heater is best, and 3% rate wood masonry stoves as the best. Some 12% of respondents believe that the source of heating is not relevant: for them the only thing that matters is that the apartment is warm.

Assessing heating by comfort (1 = least comfortable, 5 = most comfortable), the highest rankings were awarded to district heating (4.8 in Serbia, 4.760 in Montenegro); electricity (4.3 in both Serbia and Montenegro); gas (3.7 in Serbia, 2.5 in Montenegro); butane gas (3.2 in Serbia, 2.5 in Montenegro); coal (2.6 in Serbia, 2.9 in Montenegro); and naphtha or crude oil (3.8 in Serbia, 2.7 in Montenegro). In Serbia coal is considered the least comfortable type of

111

heating (2.6); in Montenegro the lowest mark was given to both types of gas (2.5).

Preferred Type of Heat Up to 53% of respondents in Serbia and Montenegro would like to be connected to district heating, 32% not want to do switch, and 15% are not sure. Respondents who want to be connected cite the fact that the heat is on all day (30%), it is more comfortable (29%), it is cheaper (28%), it is cleaner 9% and it does not require additional work (4%).

In Montenegro 31% of households would like to be connected to district heating, 47% of them would not, and 15% are not sure. The most common reason cited for wanting to connect to a district heating system, cited by 53% of Montenegrins who wanted to switch, is the possibility of heating all rooms, followed by comfort (30%), and price (10%).

About 26% of households would like to be connected to the natural gas supply network, 55% do not want to, and 19% are not sure. Those who would like to have a gas connection cite the low cost (53%) and their belief that gas provides more comfortable heating (23%). Some 14% prefer gas because using it would allow them to heat all of the rooms in their home, 6% see it as cleaner and 4% are attracted to it because it does not require any work to use.

Allowed to choose between district heating and gas heating, 71% of respondents would opt for district heating and 19% would opt for gas (10% did not respond). The main reason for choosing district heating is its lower cost, but 19% of respondents stated that they did not believe that gas heating is safe. Montenegrins reveal a strong reluctance towards using gas. Only 2% of households would be ready to connect to the gas network, 84% would not, and 14% were not sure. About 9% of households in Serbia and Montenegro are planning to switch to gas or district heating (4% to the gas network and 84% to the district heating system. Households that are not converting are technically unable to do so (63%) or believe it costs too much to switch (29%).

Respondents’ first choice of power is hydro power plants (78%), followed by solar energy (69%) wind-generated energy (48%); gas (34%); electricity from coal-burning thermal power plants (25%); electricity from biomass-burning thermal power plants (19%); electricity from thermal power plants that burn gas, crude oil, or naphtha (13%); electricity from nuclear power plants (6%); and propane butane gas vessels (4%).

Perceptions of safety also vary, with residents in Serbia ranking it by far the safest system (table A.6).

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Table A.6. Perceptions of Safety of Various Heating Systems Rating Ranking

Heating system Serbia Montenegro Serbia Montenegro

District heating 4.6 4.1 1 1–2 Electricity 3.8 3.6 2–3 4 Wood 3.8 4.1 2–3 1–2 Coal 3.6 3.7 4 3 Oil/heavy fuel oil 2.9 2.7 5 5 Gas 2.5 1.9 6 6–7 Liquified petroleum gas 2.2 1.9 7 6–7 Note: 1 = heating is not safe at all; 5= heating is quite safe. Source: Perception Survey.

Asked to rank how safe they feel (1 = I feel safe, 4 = I am afraid), respondents indicated considerable anxiety. Respondents are afraid of fire (3.4 in Serbia, 3.3 in Montenegro), followed by explosion of butane gas vessels and leakage of butane gas vessels (3.2 each; 2.9 each); possible failure of electrical devices and inadequate electrical installation (3.0 each; 2.9 each); inadequate electrical facilities (2.9 in both Serbia and Montenegro); power failures lasting longer than 12 hours (3.2 in both Serbia and and Montenegro); and fluctuations in voltage (2.6 in Serbia, 2.9 in Montenegro).

Saving Energy Over the previous two years, half of all households had implemented some methods for saving energy, including turning out lights often (39% in Serbia, 18% in Montenegro; using electricity at night, when the cheaper tariff is in effect (32% in Serbia, 18% in Montenegro); switching to coal or wood (30% in Serbia, 16% in Montenegro); reducing the use of certain devices (28% in Serbia, 17% in Montenegro); reducing the number of heated rooms (27% in Serbia, 14% in Montenegro) (tables A7–A11); avoiding using certain devices (22% in Serbia, 13% in Montenegro); insulating windows and doors (19% in Serbia, 11% in Montenegro); reducing the indoor temperature (17% in Serbia, 11% in Montenegro); using devices that consume less energy (6% in Serbia, 3% in Montenegro); insulating outer walls (3% in Serbia, 1% in Montenegro); and installing new windows and doors (3% in Serbia, 6% in Montenegro).

Less than two-fifths (37%) of all households heat all the rooms in their home, 14% heat more than 15 square metres per household member, 25% heat 8–15 square metres per member, and 24% heat 8 square metres or less per member.

Almost all natural gas consumers interviewed invested in insulation or planned to do so. These respondents show the highest level of awareness of the importance of insulation and good windows and doors for warmth. They recognize that “their money blows away through the window.”

—Focus groups, 2003

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Table A.7. Area Heated, by Income per Household Member (percent of all households)

Item

Less than 2,500

dinars per

month

2,500–

6,000

dinars a

month

4,001-–

6000

dinars a

month

6001–

9000

dinars a

month

More than

9,001

dinars a

month

All rooms heated (residential heating)

13 15 19 15 14

All rooms heated (district heating)

5 11 24 37 55

More than 20 square metres per member heated

2 4 5 8 12

8.1–20 square metres per member heated

31 40 33 32 17

8 square metres or less per member heated

49 30 19 8 2

Source: Perception Survey.

Table A.8. Area Heated, by Perception of Economic Status(percent of all households)

Item Poor

Below

average Average

Above

average

All rooms heated (residential heating)

7 11 20 27

All rooms heated (district heating) 10 19 24 25 More than 20 square metres per member heated

5 6 5 12

8.1–20 square metres per member heated

41 34 31 27

8 square metres or less per member heated

37 30 20 9

Source: Perception Survey.

Table A.9. Area Heated, by Perception of Household Purchasing Power

(percent of all households)

Item

Insufficient for

food

requirement

Insufficient

for

purchase of

clothes

Enough for

electrical

appliances

Enough for

appliances

but not

enough to buy

a car

All rooms heated (residential heating)

5 10 21 26

All rooms heated (district heating) 19 17 23 30 More than 20 square metres per member heated

6 5 6 6

8.1–20 square metres per member heated

34 36 31 26

8 square metres or less per member heated

36 32 19 12

Source: Perception Survey.

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Table A.10. Area Heated, by Level of Education

(percent of all households)

Item

Did not

complete

primary

school

Completed

school

completed

Received 3-

year high

school

diploma

Completed

4-year high

school

completed

College or

university

degree

All rooms heated (residential heating)

9 11 16 20 15

All rooms heated (district heating)

1 11 11 26 39

More than 20 square metres per member heated

8 3 6 5 10

8.1–20 square metres per member heated

45 39 30 29 27

8 square metres or less per member heated

37 36 37 20 9

Source: Perception Survey.

Table A.11. Area Heated, by Age of Respondent

(percent of all households) Item At least 60 years old Younger than 60

years old

All rooms heated (residential heating) 8 19 All rooms heated (district heating) 13 24 More than 20 square metres per member heated

9 5

8.1–20 square metres per member heated 45 28 8 square metres or less per member heated 25 24

Source: Perception Survey.

Almost half of respondents agreed with statements about ways of saving energy. Forty-six percent of people in Serbia and 44% in Montenegro agreed with the statement “good insulation considerably contributes to the home being warmer.” Results for other statements were as follows: “Investing in insulation pays off in the long run” (45% in Serbia, 40% in Montenegro); “buildings with thicker walls are warmer” (45% in Serbia, 43% in Montenegro); “energy should be saved primarily for financial reasons” (45% in Serbia, 46% in Montenegro); and “energy is a public asset and as such it should not be over-used” (39% in Serbia, 40% in Montenegro). Few respondents (2% in Serbia, 32% in Montenegro) agreed with the statement “turning off the lights is not very important—lights are not major power consumers,” and few (19% in Serbia, 24% in Montenegro) believed that “irrespective of how much you invest in insulation, savings will not be very noticeable.”

About three-quarters of the population in Serbia and Montenegro had seen public campaigns about energy saving in the mass media.

Perceptions of Electricity Most respondents (57% in Serbia, 37% in Montenegro) believe that if they fail to pay their bill on time they will receive a warning, after which they will pay the bill. One-quarter of respondents (25% in Serbia, 27% in Montenegro) fear

115

that their electricity would be cut off if they failed to pay a bill on time. Seven percent of respondents in Serbia and 28% in Montenegro believe that nothing would happen; 6% of households in Serbia and 1% in Montenegro say that they would pay later, in instalments and with a discount; while 5% of households in Serbia and 8% in Montenegro say that they do not know what happens if they pay late.

As many as 93% of households in Serbia (98% in Montenegro) believe that it pays to pay on time. Of the 7 % of respondents in Serbia who think it pays to pay late, 59% believe the electric company will provide incentives for late payments, while 26% are late with payment because they are waiting to be paid.

Perceptions of how electrical utility treats households with high overdue bills vary. Forty-three percent of households in Serbia (23% in Montenegro) believe that the power distributing company (Electro Distribution, or ED) is too lenient; 24% in both Serbia and Montenegro think that the company treats them the way it should; and 14% (23% in Montenegro) state that ED is too strict.

Perceptions of how electrical utility treats commercial consumers with high overdue bills also vary. Some 53% of households in Serbia (48% in Montenegro) believe that the power distribution company (ED) is too lenient; 18% think that ED treats commercial consumers the way it should. Some 6% of respondents in Serbia (36% in Montenegro) believe that ED is too strict; 23% did not know how to answer.

In Serbia 57% of respondents read the explanations provided on the electricity bill. Figures were similar in Montenegro (where the number of responses was too low to justify reporting).

About 55% of households in Serbia monitor the status of the electricity metre. Figures were similar in Montenegro (where the number of responses was too low to justify reporting).

Respondents perceive electricity as the most expensive type of heating. On a scale from 1 (very cheap energy source) to 5 (very expensive), electricity ranks 4.7 in Serbia and 4.4 in Montenegro; naphtha/crude oil ranks 3.8 in Serbia and 2.7 in Montenegro; butane gas ranks 3.4 in Serbia and 2.5 in Montenegro; wood ranked 3.3 in Serbia and 3.8 in Montenegro; coal ranked 3.3 in Serbia and 3.0 in Montenegro; gas ranked 3.3 in Serbia and 2.5 in Montenegro; and district heating ranked 3.3 in Serbia and while central heating ranked 4.7 in Montenegro.

As supplemental heating, 60% of respondents in Serbia and 81% in Montenegro found electrical accumulation heaters the least expensive option. Some 19% of people in Serbia and 8% in Montenegro believe the least expensive option is the marble-thermal heating plate; 14% rate of households in

We are not protected in any way because Elektroprivreda (Electrical utility) holds a monopoly. They do whatever they want. —Focus group participant, 2003

116

Serbia rate the quartz heater least expensive, 4% rate electric fan heater least expensive, and 3% did not know.

In response to a multiple-choice question about the increased price of electricity, respondents most frequently stated that EPS wants to increase profits and salaries (49% in Serbia and Montenegro) and that generating facilities are not well maintained and neglected (46% in Serbia, 60% in Montenegro). These responses were followed by those who believe that price increases result from conditions imposed by the International Monetary Fund (IMF) (37% in Serbia, 22% in Montenegro) or integration with the European Union (33% in Serbia,13% in Montenegro). Some 33% of the population in Serbia and 13% in Montenegro think that the electrical utility has insufficient funds to maintain the system. Somewhat less than one-quarter of people in both Serbia and Montenegro believe that prices are increased without a specific justified reason, 12% believe that the previous price was too low, 11% believe the increase was caused by environmental expenditures, and 7% do not know. Asked to state the single most important reason for prices increases, 24% of respondents in Serbia indicated that EPS wished to increase profits and salaries, 17% report that the generating facilities are not properly maintained, 15% state IMF requirements, 12% state no reason, 10% cite joining the European Union, and 10% that EPS revenues are insufficient for system maintenance. In Montenegro 27% of respondents think that the price should include ecological protection, 22% see no valid reason for the price increase. A small percentage of respondents think that the previous price was lower than it should have been.

Knowledge of Energy-Related IssuesAs many as 83% of respondents in Serbia and 64% in Montenegro think that larger water heaters consume more electricity, 76% of respondents in Serbia and 67% in Montenegro think that it consumes energy proportionally to water consumption, and. 59% of households in Serbia and 48% in Montenegro think that it consumes more energy when it is switched off for longer periods. Some 55% of respondents in Serbia and 63% in Montenegro believe that they save energy by keeping the water heater switched on all the time; 44% of respondents in Serbia and 22% in Montenegro turn the boiler off only at night.

Half of respondents state that they do not know the difference between the lowest and the highest tariff. About 13% think that the lowest tariff is half the highest tariff, 12% think it is one-third the highest tariff, 21% think that it is a quarter of the highest tariff, and 4% believe that it is four times cheaper in the first two tiers and two times cheaper in the third tier.

Respondents do not have a high opinion of their own knowledge about energy consumption. On a scale from 1 to 5, households in Serbia rank their knowledge at 2.5 (2.4 in Montenegro). They rank their interest in obtaining knowledge about energy consumption at 3.1 (2.9 in Montenegro).

117

Television is the dominant source of information for 88% of respondents in Serbia and 75% in Montenegro. Radio and the instructions on monthly electricity bills are far behind, at 3% each. Newspapers, friends and the ED office are each the main source of information for 2% of households. Just 0.6% of respondents knew the telephone number of the ED information desk.

Television enjoys the highest credibility, with 44% of households in Serbia and 53% in Montenegro rating it credible. In Serbia and Montenegro television is, followed by the instructions indicated on the electricity bill (15%), friends (12%), the ED office (12%) and newspapers (10%). At the very bottom of the list are radio broadcasters (4%), the ED information telephone (2%) and the Internet (1%). Overall, just 20% of respondents state that they believe that the media reports objectively on the situation in the energy sector. Some 41% believe that the media are not objective; 39% state that they cannot judge their objectivity.

Institutions in the energy sector do not enjoy a high level of credibility. In response to the question “If you filed a complaint for bad quality of heating, for a failure or fault, do you believe that your complaint would be considered?” 49% of respondents in Serbia and 64% in Montenegro replied that ED would respond; 35% in Serbia and 24% in Montenegro had confidence in the Association of Consumers; 29% in Serbia and Montenegro trusted the city district heating plants, 26% in Serbia and Montenegro trusted the local media, 24% in Serbia and 8% in Montenegro trusted the municipality, 20% in Serbia and Montenegro trusted the Ministry of Mining and Energy; 18% in Serbia and Montenegro trusted gas distributors, 15% in Serbia and Montenegro trusted national media and 10 in Serbia and Montenegro trusted the oil industry.

Some 66% of respondents in Serbia and 46% in Montenegro are able to find the telephone number of EPS, 38% in Serbia and Montenegro] are able to find the telephone number to the jurisdictional district heating plant and 30% in Serbia and Montenegro can find the telephone number to the city gas distributor. One-third of respondents (35%) in Serbia and Montenegro have had a defect situation to report. About 57% state that defects were properly addressed within a reasonable amount time, while 31% state that the defect was fixed only after several interventions. Some 5% of respondents have had a very negative experience.

In respect to the need of people to be informed about new facilities in the energy sector or of changes in the existing facilities in their vicinity, some 48% of respondents in Serbia and Montenegro agree with the statement “I should be informed of all plans.” About 32% of respondents believe “Being informed is a fundamental civil right.” More than 27% of respondents state that they are interested and should be informed, 19% say that they are not interested but should be informed, 18% are not interested but want to be informed of new construction and changes, 12% want to leave all decisions up to the state and only 9% prefer not to receive any information about new facilities.

118

Health Status of Households Twenty-two percent of households in Serbia and Montenegro have one member with health problems. Thirteen percent of households have two or more members with health problems.

Some 37% of households of Serbia and 22% in Montenegro have no smokers, 30% in Serbia and 36% in Montenegro have one smoker, 24% Serbia and 29% in Montenegro have two smokers; and 9% in Serbia and 13% in Montenegro have three or more smokers.

About half of respondents in Serbia and 35% in Montenegro reported experiencing breathing difficulties during a three-month period over the past two years. About 9% of respondents in Serbia and 13% in Montenegro complained of asthma.

In 17% of households in Serbia and Montenegro, a member has been diagnosed with eczema or an allergy. Over the past year 16% of respondents suffered from sinus problems, and 3% of households had someone suffering from cancer.

Environmental Issues When asked to identify the three major pollutants, respondents most often stated oil refineries (58% in Serbia, 45% in Montenegro) and industry (56% in Serbia, 64% in Montenegro), followed by waste landfills (37% in Serbia, 38% in Montenegro); thermal power plants (36% in Serbia and Montenegro); traffic (36% in Serbia and Montenegro]); wastewater (32% in Serbia, 37% in Montenegro); district heating plants (9% in Serbia, 4% in Montenegro); and individual home chimneys (5% in Serbia and Montenegro). Thermal power

Box A.1: Right to Participation

Each Party shall ensure that, subject to the following paragraphs of this article, public authorities, in response to a request for environmental information, make such information available to the public, within the framework of national legislation, including, where requested and subject to subparagraph (b) below, copies of the actual documentation containing or comprising such information:

(a) Without interest having to be stated; (b) In the form requested unless:

(i) It is reasonable for the public authority to make it available in another form, in which case reasons shall be given for making it available in that form; or

(ii) The information is already publicly available in another form.

Each Party shall provide for early public participation, when all options are open and effective public participation can take place.

— Article 4, Aarhus Convention, 1998

119

plants were given a mark of 4 as a source of pollution (maximum pollution = 5).

Assessment of polluters depends on where the respondent lives. Most frequently, respondents state that pollution comes from waste landfills (50% in Serbia, 65% in Montenegro); traffic (44% in Serbia and Montenegro); wastewater (33% in Serbia, 54% in Montenegro); industry (26% in Serbia, 41% in Montenegro); individual home chimneys (24% in Serbia, 4% in Montenegro); district heating plants (7% in both Serbia and Montenegro); refineries (6% in Serbia); and thermal power plants (2% in Serbia, 9% in Montenegro). The average assessment of environmental pollution that they have been exposed to is 3 on a 1–5 scale.

Respondents in Serbia and Montenegro believe that the main reasons for pollution are negligence by management (40%) and behaviour of people themselves (31%). Nine percent believe that pollution reflects lack of financial resources; 6% believe that pollution is an unavoidable consequence of economic development. Interestingly 14% of respondents in Serbia and 9% in Montenegro believe that they are not exposed to any kind of pollution.

Only 13% of respondents consider themselves informed on the subject of air pollution in their area, 67% think that they are not informed, and 20% are not sure if they know something about it or not.

Sixty-one percent of respondents believe the media pays inadequate attention to environmental pollution. Some 11% think otherwise, and 28% do not know, as they do not follow the media.

On a scale of 1 (“I feel safe”) to 4 (“I am scared”), respondents fear unhealthy water (3.4 in both Serbia and Montenegro); polluted food (3.3 in Serbia, 3.5 in Montenegro); natural disasters (3.2 in Serbia, 2.9 in Montenegro); and unsafe landfills and transport of hazardous waste (3.1 in Serbia and Montenegro). Respondents in Serbia and Montenegro fear large polluters (industry, thermal power plants), , waste water and air pollution equally (3.0). However, the fear of air pollution is somewhat higher in Montenegro (3.4).

more than 5 001 per km

101 - 300 per km

data n/a

less than 50 per km

51 - 100 per km

301 - 550 per km

POPULATION DENSITY PER TOTAL AREA

MAP A3

1001 - 5 000 per km

LEGEND:

0 50 100

HUNGARY

CROATIA

BU

LGA

RIA

FYRO MACEDONIA

ALBANIA

BOSNIA ANDHERZEGOVINA

ADRIATIC SEA

State Border

Republic Border

Stratum Border

19E

BEOGRAD

BEOGRAD

Capital

SKOPJE

Kilometres

SARAJEVO

0

20E

0

21E0

45 E0

46 E0

44 E0

43 E0

42 E0

ROMANIA

KOSOVO&METOHIA, DATA N/A

The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries

Copyright © UNDP Serbia and Montenegro

2

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less than 10,0%

10,1 - 15,0 %

15,1 - 20,0 %

20,1 - 25,0 %

25,1 - 30,0 %

30,0% and over

ELDERLY POPULATION (65 YEARS AND OVER)

SHARE IN TOTAL POPULATION

MAP A4

data n/a

LEGEND:

State Border

Republic Border

Stratum Border

Capital

0 50 100

HUNGARY

CROATIA

BU

LGA

RIA

FYRO MACEDONIA

ALBANIA

BOSNIA ANDHERZEGOVINA

ADRIATIC SEA

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BEOGRAD

BEOGRAD

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Kilometres

SARAJEVO

0

20E

0

21E0

45 E0

46 E0

44 E0

43 E0

42 E0

ROMANIA

KOSOVO&METOHIA, DATA N/A

The designations employed and the presentation of material on this map do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations or UNDP concerning the legal status of any country, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries

Copyright © UNDP Serbia and Montenegro

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123

Annex B

Internet Resources

Republic of Serbia Electric Power Utility of the Republic of Serbia: www.eps.co.yuGovernment of the Republic of Serbia: www.srbija.sr.gov.yuMinistry of Social Affairs: www.msoc.sr.gov.yuPetroleum Industry of Serbia: www.nis.yuPoverty Reduction Strategy of the Government of the Republic of Serbia: www.prsp.sr.gov.yuRepublic Statistical Office-Republic of Serbia: www.statserb.sr.gov.yuSerbian Chamber of Commerce and Industry: www.pks.co.yuStanding Conference of Towns and Municipalities: www.skgoj.org

Republic of Montenegro Electric Power Utility of the Republic of Montenegro: www.epcg.cg.yuGovernment of the Republic of Montenegro: www.vlada.cg.yuInstitute for Strategic Studies and Prognoses: www.isspm.orgMinistry of Labour and Social Welfare: www.minrada.vlada.cg.yuMontenegro Chamber of Commerce: www.pkcg.org

International institutions Economic Reconstruction and development in South East Europe: www.seerecon.orgEuropean Agency for Reconstruction: www.ear.eu.intEuropean Bank for Reconstruction and Development: www.ebrd.comInternational Energy Agency: www.iea.orgSustainable Energy Ireland: www.sei.ieThe Externe Project, A Research Project of the European Commission: http://externe.jrc.es/UNDP-Energy and Environment: www.undp.org/energyandenvironmentUnited Nations Development Programme in Serbia and Montenegro: www.undp.org.yuUnited Nations Economic Commission for Europe: www.unece.orgUnited Nations Human Settlement Programme: www.unhabitat.orgUnited Nations in Serbia and Montenegro: www.un.org.yuWorld Bank Country Office in Serbia and Montenegro: www.worldbank.org.yuWorld Health Organization Regional Office for Europe: www.euro.who.int

Information on housing and fuel poverty Centre for Sustainable Energy: www.cse.org.ukCentre on Housing Rights and Evictions: www.cohre.orgHousing 21, A Home for Life: www.housing21.orgNational Energy Action: www.nea.org.uk

125

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