EUROPEAN COMMISSION Brussels, 8.9.2022 SWD(2022) 258 final COMMISSION STAFF WORKING DOCUMENT Environmental Implementation Review 2022

















Country Report - CROATIA



































Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Environmental Implementation Review 2022: Turning the tide through environmental compliance {COM(2022) 438 final} - {SWD(2022) 252 final} - {SWD(2022) 253 final} - {SWD(2022) 254 final} - {SWD(2022) 255 final} - {SWD(2022) 256 final} - {SWD(2022) 257 final} - {SWD(2022) 259 final} - {SWD(2022) 260 final} - {SWD(2022) 261 final} - {SWD(2022) 262 final} - {SWD(2022) 263 final} - {SWD(2022) 264 final} - {SWD(2022) 265 final} - {SWD(2022) 266 final} - {SWD(2022) 267 final} - {SWD(2022) 268 final} - {SWD(2022) 269 final} - {SWD(2022) 270 final} - {SWD(2022) 271 final} - {SWD(2022) 272 final} - {SWD(2022) 273 final} - {SWD(2022) 274 final} - {SWD(2022) 275 final} - {SWD(2022) 276 final} - {SWD(2022) 277 final} - {SWD(2022) 278 final}



This report has been written by the staff of the Directorate-General for Environment, European Commission. Comments are welcome. Please send them to ENV-EIR@ec.europa.eu . More information on the European Union is available at http://europa.eu . Photographs: For reproduction or use of these photos, permission must be sought directly from the copyright holder. ©European Union, 2022 Reproduction is authorised provided the source is acknowledged. Table of contents Executive summary Part I: Thematic areas 1. Circular economy and waste management Measures towards a circular economy

Waste management 2. Biodiversity and natural capital Nature protection and restoration Marine ecosystems Ecosystem assessment and accounting 3. Zero pollution Clean air Industrial emissions Prevention of major industrial accidents– SEVESO Noise Water quality and management Chemicals 4. Climate action Key national climate policies and strategies Effort Sharing target Key sectoral developments Use of revenues from the auctioning of EU ETS allowances Part II: Enabling framework: implementation tools 5. Financing Environmental investment needs in the EU

EU environmental funding 2014-2020 EU environmental funding 2021-2027 National environmental protection expenditure Green budget tools Overall financing compared to the needs 6. Environmental governance Information, public participation and access to justice Compliance assurance Effectiveness of environmental administrations Reforms through the Commission’s Technical Support Instrument (TSI) TAIEX EIR peer to peer projects Executive summary In previous Environmental Implementation Reviews (EIRs), the main challenges identified for Croatia in implementing EU environmental policy and law were: ·to improve waste management, in particular the separate collection of waste, and support municipalities in improving recycling performance and reducing landfilling; ·to strengthen the policy sector in order to speed up the uptake of the circular economy by all economic sectors; ·to finish designating Natura 2000 (Special Area of Conservation – SAC) sites, set up mechanisms for cooperation on Natura 2000 management with other sectors and ensure adequate funding; ·to implement projects in the water sector, in particular related to flood protection, and reach compliance with the requirements of the Urban Waste Water Directive, especially those laid down in Article 5 regarding more stringent treatment, in particular in big cities;

·to accelerate the reduction of particulate matter (PM2.5 and PM10) emissions and concentrations, nitrogen oxide (NOx) emissions, nitrogen dioxide (NO2) concentrations and ammonia (NH3) emissions. Progress on the separate collection and recycling of waste has been rather slow. Despite steady improvement, Croatia’s recycling rate of 30.2% remains far below the EU average for 2019 (47.7%) and falls significantly short of the EU target for 2020 (50%). Most municipal waste is still landfilled, often without prior treatment. In 2021, the Commission opened an infringement procedure for the landfilling of waste without prior treatment in five Croatian counties (based on the Malagrotta case law), though most of the country’s counties lack waste infrastructure. More efforts are needed to ensure that waste is managed in compliance with EU waste legislation in Croatia. There is no comprehensive circular economy strategy, but Croatia has included reforms relating to the circular economy in its national recovery and resilience plan (RRP), including a new legal framework and a reform of the tourism sector. Progress with the designation of SAC sites has been slow, as 99% of Sites of Community Importance (SCIs) (740 out of 745) have not yet been designated as SACs. Extensive work is underway, but more efforts are necessary to put in place concrete conservation measures, in particular in the marine environment. Regarding conservation status, in particular that of species, large gaps in the monitoring system are evident. The main human-induced pressures on nature come from agriculture, forestry, urban development, changes in the water regime, climate change and alien species, and a mechanism is needed to limit the impact of these factors on nature. As regards water management, the risk of floods is rising due to climate change. Flood protection efforts must be strengthened, taking into account alternative options and adequate mitigation measures. Compliance with the Urban Waste Water Treatment Directive is significantly lower than the EU average: 93% of urban waste water is not collected or treated. Greater efforts must therefore be made to reach compliance. Implementation of the Nitrates Directive has improved slightly. Progress on air quality has been limited. Although key air pollutants have decreased significantly in Croatia in recent years, exceedances above the EU limit values established by the Ambient Air Quality Directive (AAQD) were registered for particulate matter (PM10) and fine particulate matter (PM2.5) and the Commission has opened an infringement procedure. Additional steps should be taken to address these non-compliance issues. EU financing continues to provide substantial support to close the gap in the implementation of environmental measures. Croatia is due to receive over EUR 6 393.7 million in grants from its RRP (2021-2026) and EUR 8 707.6 million from the cohesion policy (2021-2027). Croatia’s national RRP responds to the urgent need to foster a strong recovery and make Croatia future-ready. 40.3% of RRP spending will support climate objectives, while the 76 reforms and 146 investments contained in the RRP will help Croatia become more sustainable and resilient and better prepare it for the challenges and opportunities presented by the green and digital transitions. Total environmental financing in Croatia amounted to around 1.32% of GDP in 2014-2020 (around EUR 4.5 billion), balanced between EU and national sources. Investment needs for 2021-2027 are estimated to be at least 1.79% of GDP, signalling a financing gap of 0.48% of GDP (assuming baseline financing levels).



Part I: Thematic areas 1. Circular economy and waste management Measures towards a circular economy The new circular economy action plan, adopted in March 2020, is one of the main building blocks of the European Green Deal. The EU’s transition to a circular economy will reduce pressure on natural resources and create sustainable growth and jobs. It is also a prerequisite for achieving the EU’s 2050 climate neutrality target and halting biodiversity loss. The action plan sets out initiatives for every stage of the product life cycle, aiming to reduce the EU’s consumption footprint and double the EU’s circular material use rate by 2030. It targets how products are designed, promotes circular economy processes, encourages sustainable consumption and aims to ensure that waste is prevented and the resources used are kept in the EU economy for as long as possible. The circular material use rate (also known as the circularity rate) is a good indicator of an economy’s circularity, as it includes all the materials that are fed back into the economy. The circularity rate differs greatly from one country to another. To help achieve the EU circular economy action plan’s goal of doubling the EU’s circular material use rate by 2030, the Member States need to take ambitious measures targeting the whole product life cycle. Such measures range from sustainable product design, which would increase the durability, reparability, upgradability and recyclability of products, to other measures like remanufacturing, increasing circularity in production processes, recycling, boosting eco-innovation and increasing the uptake of green public procurement. Croatia’s circular (secondary) use of material was 4.8% in 2014 and 5.1% in 2020, compared to the EU average of 12.8 %. Since Croatia’s circularity rate is increasing more slowly than the average EU increase, Croatia’s gap to the EU average has grown. The lowest rate was recorded in Romania (1%), followed by Ireland and Portugal (both 2%). Differences in the circularity rate among the Member States are based not only on the amount of recycling in each country but also on structural factors in national economies.

Figure 1: Circular material use rate (%), 2010-2020 Resource productivity refers to how efficiently the economy uses material resources to produce wealth. Improving resource productivity can help to minimise negative impacts on the environment and reduce dependency on volatile raw material markets. As shown in Figure 2, Croatia’s resource productivity, with EUR 1.02 generated per kg of material consumed in 2020, is well below the EU average of EUR 2.09 per kg. Figure 2: Resource productivity 2010-2020 Circular economy strategies The Commission encourages Member States to adopt and implement national/regional circular economy strategies covering the whole product life cycle, as they are one of the most effective ways to progress towards a more circular economy at Member State level. Since the European Circular Economy Stakeholder Platform was launched in 2017, national, regional or local authorities have used it to share their strategies and roadmaps. Beyond some isolated initiatives, Croatia has no comprehensive circular economy strategy, nor any sectoral strategies. Croatia has included the following circular economy-related reforms in its national RRP: -a new legal framework to facilitate the prevention, reuse and recycling of waste; -a reform to improve food donation systems; -a reform enhancing the sustainability of the tourism sector, with the aim of developing a new model of tourism that contributes to the green transition and adheres to circular economy principles; the development of a framework for the design and implementation of green urban renewal strategies, with the aim of to developing models for the circular management of space and buildings. Eco-innovation A successful transition to a circular economy requires social and technological innovation, because the full potential of the circular economy can only be reached when it is implemented across all value chains. Eco-innovation is therefore an important enabling factor for the circular economy. Product design approaches and new business models can help to produce systemic circularity innovations, creating new business opportunities. With a total score of 86, Croatia ranked 21st on the 2021 European eco-innovation scoreboard, placing it among the countries catching up with eco-innovation. While Croatia performed below the EU average on all components of the 2021 EU eco-innovation index, its highest scores were seen in eco-innovation activities (1% below the EU average) and resource efficiency outcomes (11% below the EU average). Croatia’s performance on eco-innovation inputs, eco-innovation outputs and socio-economic outcomes is significantly below the EU average. Figure 3: Eco-innovation performance, 2010-2019

Green public procurement Public procurement accounts for a large proportion of European consumption, with public authorities’ purchasing power representing 14% of EU GDP. Green public procurement (GPP) can therefore help drive the demand for sustainable products that meet reparability and recyclability standards. Croatia has had a national action plan on green public procurement since 2015. A 2020 study developed a methodology for calculating carbon dioxide (CO2) savings in the five public procurement categories in which most purchases are made and for which there are EU GPP criteria. These categories are: -electricity supply; -cars and light commercial vehicles; -energy renovation of the outer shells of office buildings; -IT devices (computers and monitors) and mobile phone chargers; -reconstruction/modernisation of public lighting. According to this study, the CO2 savings from GPP in these product categories amounted to 121 000 tonnes in 2018. In Croatia, uptake of green public procurement is monitored annually through the official Electronic Public Procurement Advertisement channel. According to the data gathered, green public procurement uptakeuptake increased sharply between 2016 and 2019. In 2019, contracting authorities concluded 1 731 contracts incorporating green public procurement criteria, while in 2021, the Croatian government adopted a decision under which the Central Public Procurement Office (Croatia’s fourth largest contracting authority) will implement green public procurement. EU Ecolabel and the Eco-Management and Audit Scheme (EMAS) The number of EU Ecolabel products and EMAS-licensed organisations in a given country provides some indication of the extent to which the private sector and national stakeholders are actively engaged in the transition to a circular economy. It also shows how committed public authorities are to supporting instruments designed to promote the circular economy. In September 2021, Croatia had 43 products and 18 licences registered in the EU Ecolabel scheme out of 83 590 products and 2 057 licences in the EU. Take-up of these licences is therefore low. However, take-up in Croatia has increased compared to the numbers mentioned in the 2019 EIR country report (5 products and 2 registered licences). Moreover, three organisations from Croatia are currently registered in EMAS, the European Commission’s Eco-Management and Audit Scheme, whereas the 2019 EIR country report states that there were none previously. Some progress has therefore been made, as the country is starting from a low level of Ecolabel and EMAS take-up. Croatia has made limited progress on strengthening its circular economy policy framework, so the priority action from 2019 has been retained and a new one on improving the circular material use rate has been added.



2022 priority actions ·Strengthen the policy framework to speed up the transition towards the circular economy by all economic sectors, including priority sectors like plastics, textiles, and construction. ·Adopt measures to increase the circular material use rate. Waste management Turning waste into a resource is supported by:

(i) fully implementing EU waste legislation, which includes the waste hierarchy, the need to ensure separate collection of waste, the landfill diversion targets, etc.; (ii) reducing waste generation per capita in absolute terms; (iii) limiting energy recovery to non-recyclable waste and phasing out landfilling of recoverable waste. This section focuses on management of municipal waste for which EU law sets mandatory recycling targets. Preventing products and materials from becoming waste for as long as possible is the most efficient way to improve resource efficiency and reduce the environmental impact of waste. Waste prevention and re-use are the most preferred options and top the waste hierarchy. The amount of municipal waste generated is a good indicator of the effectiveness of waste prevention measures. After a downward trend, municipal waste generation in Croatia has started to increase in recent years. It came to 418 kg/year/inhabitant in 2020 but remains below the EU average (505 kg/year/inhabitant), as Figure 4 shows. This indicates that Croatia’s economic growth is not yet decoupled from its generation of waste. Figure 4: Municipal waste by treatment in Croatia, 2010-2020 According to the European Environment Agency (EEA), 95% of municipal waste was landfilled in 2010 and 59% in 2019. Furthermore, in 2015, the amount of biodegradable municipal waste landfilled was 110% of the amount landfilled in 1997, which is taken as a reference year. The EU Accession Treaty target for 2013 – to landfill a maximum of 75% of biodegradable municipal waste – was therefore missed by a wide margin. According to the Accession Treaty, after 31 December 2018 waste must no longer be deposited in landfills that do not comply with the requirements of the Landfill Directive. Moreover, the information available to the Commission suggests that a significant number of irregular and substandard landfills operate in Croatia, presenting serious risks for human health and the environment. Studies and investigations launched by the European Commission found that municipal waste was being landfilled without any treatment in all the sites visited (Diklo, Karepovac, Mraclinska Dubrava, Sv. Juraj and Totovec). These sites also lack infrastructure capacities, as do the counties where they are located￼ and the rest of Croatia’s counties . The Commission therefore opened an infringement procedure against Croatia in November 2021 Despite efforts to close and remedy illegal dumping sites, there is still scope for improvement. On 2 May 2019, the Court of Justice of the EU delivered its judgment in Case C-250/18 and condemned Croatia for breach of Articles 5(1), 13 and 15(1) of the Waste Framework Directive (2008/98/EC). The case concerns the illegal dump site in Biljane Donje, where approximately 140 000 tonnes of production residue from the processing of ferromanganese and silicomanganese has been deposited directly on the ground, less than 50 metres from houses, since 2010. As Croatia still had not executed the judgment, in August 2021 a letter of formal notice was issued under Article 260 TFEU. Additionally, in January 2022 the Commission opened an infringement procedure against Croatia in respect of the non-communication of transposition measures for Directive (EU) 2019/904 on the reduction of the impact of certain plastic products on the environment. Over the past decade, Croatia has made slow but steady progress on stepping up its recycling rate and diverting municipal waste from landfilling. However, after increasing modestly since 2017, the recycling rate for municipal waste stood at 34.3% in 2020. This is well below the EU average for 2020 (47.8%) and falls far short of the EU target for 2020 (50%). Figure 5 shows that Croatia needs to invest more in recycling to meet the EU recycling targets for 2020 and 2025. Figure 5: Recycling rate of municipal waste, 2010-2020 For this reason, the Commission’s Early Warning Report identified Croatia as one of the countries at risk of missing the EU target of recycling 50% of municipal waste by 2020. The report listed key priority measures which Croatia should take to close the implementation gap. The Commission is currently finalising its analysis of the progress made on the recommendations from the 2018 Early Warning Reports and an analysis of progress towards achieving the 2025 waste recycling targets. The report will be presented at the end of 2022. Implementation of the 2018 waste legislative package Member States had until 5 July 2020 to bring their national laws into line with the amendments included in the revised Waste Framework Directive, the Packaging and Packaging Waste Directive and the Landfill Directive . Croatia still had not done this for the whole waste package by July 2021, so the Commission sent a reasoned opinion urging Croatia to fully enact the new EU rules on waste into national legislation, as the case may be referred to the Court of Justice otherwise. Croatia adopted a new waste management act in July 2021.

Waste management plans and waste prevention programmes are instrumental for the sound implementation of the EU waste legislation. They set out key provisions and investments to ensure compliance with existing and new legal requirements (e.g. waste prevention, separate collection for a number of specific waste streams, recycling and landfill targets). Revised plans and programmes were due on 5 July 2020. The waste management plan for 2017-2022 was adopted in January 2017 and includes the waste prevention programme. A revised version of the Croatian waste management plan - for 2022 only - was adopted in December 2021. This plan is currently being assessed. Work has begun on preparing the next waste management plan for 2023-2027. Moreover, a food waste prevention and reduction plan for 2019-2022 was adopted in 2019, and efforts are underway to prepare the food waste prevention and reduction plan for 2023-2028. Four priority actions were identified for Croatia in the 2019 EIR. As there has been little to no progress in their implementation, they have been retained and a new priority action on compliance with EU waste rules has been added. 2022 priority actions ·Improve and extend separate collection of waste, including bio-waste. Establish minimum service standards for separate collection (e.g. frequency of collections, types of containers) in municipalities to ensure high capture rates for recyclable waste. ·Develop and run implementation support programmes for municipalities to support efforts to organise separate collection, implement ‘pay-as-you-throw’ schemes and improve recycling performance. ·Improve the functioning of extended producer responsibility systems, in line with the relevant general minimum requirements. ·Introduce and gradually increase landfill taxes to phase out landfilling of recyclable and recoverable waste. ·Implement a national waste management plan that is in line with the revised Waste Framework Directive.

2. Biodiversity and natural capital The 2030 EU biodiversity strategy adopted in May 2020 aims to put the EU’s biodiversity on a path to recovery and sets out new targets and governance mechanisms to achieve healthy and resilient ecosystems. In particular, the strategy sets out ambitious targets to: (i) protect a minimum of 30% of the EU’s land area and 30% of its sea area and integrate ecological corridors, as part of a true trans-European nature network; (ii) strictly protect at least a third of the EU’s protected areas, including all remaining EU primary and old-growth forests; (iii) effectively manage all protected areas, defining clear conservation objectives and measures, and monitoring them appropriately. The strategy also sets out an EU nature restoration plan – a series of concrete commitments and actions to restore degraded ecosystems across the EU by 2030, and manage them sustainably, addressing the key drivers of biodiversity loss. Croatia’s nature protection strategy and action plan, adopted by the Parliament on 7 July 2017 , contains many relevant national activities. In May 2020, the Commission opened an infringement procedure against Croatia for systematically failing to appropriately assess the impact of changes to wind farm projects on Natura2000 sites, contrary to Articles 6(3) and 7 of Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora.

Nature protection and restoration The EU Habitats and Birds Directives are the cornerstone of EU legislation to conserve of the EU’s wildlife, natural habitats and ecosystems. As such, they are key legislative tools for delivering on the targets of the EU Biodiversity Strategy for 2030. Natura 2000, the largest coordinated network of protected areas in the world, is the core instrument for achieving the Birds and Habitats Directives’ objectives of ensuring the long-term protection, conservation and survival of Europe’s most valuable and threatened species and habitats and the ecosystems they underpin. Setting up a coherent Natura 2000 network, designating Sites of Community Importance (SCIs) as Special Areas of Conservation (SACs) and identifying conservation objectives and measures for the Natura 2000 sites are key milestones towards meeting the objectives of the Directives. Setting up a coherent network of Natura 2000 sites Croatia hosts 76 habitat types and 244 species covered by the Habitats Directive. The country is also home to populations of 125 bird taxa listed in Annex I to the Birds Directive. By 2021, 36.7% of Croatia’s land area was covered by Natura 2000 (EU average: 18.5%), with Special Protection Areas (SPAs) classified under Birds Directive covering 30.2% (EU average: 12.8%) and SCIs under the Habitats Directive covering 28.4% (EU average: 14.2%) of the country’s territory. Although the terrestrial network can be considered largely complete, there are still gaps in the marine network. Considering both Natura 2000 and other nationally designated protected areas, Croatia legally protects 37.8% of its terrestrial areas (EU-27 average: 26.4%) and 9.5 % of its marine areas (EU-27 average: 10.7%). Figure 6: Marine & terrestrial protected area coverage, 2021



Figure 7: Natura 2000 terrestrial protected area coverage, 2021 Designating Special Areas of Conservation (SACs) and identifying conservation objectives and measures The six-year deadline set by the Habitats Directive for designating SCIs as SACs and establishing appropriate conservation objectives and measures expired on 4 December 2020 for all but a few sites in Croatia. Nevertheless, 99% of SCIs (740 out of 745) have not yet been designated as SACs. Moreover, site-specific conservation objectives have not been established for the sites. As regards the necessary conservation measures, Croatia has defined management plans for only a few SCIs. Several national projects, supported by EU funds, are engaged in extensive work to:

- establish the Natura 2000 management framework; -draw up management plans for the sites; - develop monitoring and reporting systems; and -map coastal and seabed habitats and biodiversity in waters under Croatian jurisdiction. However, more efforts are necessary to put in place concrete conservation measures for the sites with regard to activities linked to the most important pressures, in particular agriculture, forestry, fisheries, energy, and water management. Therefore, Croatia is still to identify the necessary conservation objectives and measures for the designated sites and fill the gap in designation for the marine environment. Progress in maintaining or restoring favourable conservation status of species and habitats The results of Habitats Directive Article 17 and Birds Directive Article 12 reports on progress towards maintaining or restoring favourable conservation status of species and habitats are key for measuring the performance of Member States. According to Croatia’s report on the conservation status of habitats and species covered by the Article 17 of the Habitats Directive in 2013-2018 (the first such report it had ever submitted), 39.2% of habitat assessments show good conservation status. However, the share of protected-species assessments showing good conservation status in 2018 was only 7.14%. Many conservation status assessments, particularly for species (46.67%), are reported as unknown, which indicates a very large gap in the monitoring system. As far as birds are concerned, only 10% of breeding species showed increases or stability in their short-term population trends (for key wintering species, this figure was 11%). However, there is a very large knowledge gap (83% for breeding and 84% for key wintering species). The habitat groups faring poorly are, in particular, dunes, bogs, mires and fens, grasslands, freshwater habitats and coastal habitats. The species groups faring poorly are, in particular, mammals, fish, vascular plants and molluscs. However, it should be noted that there are large knowledge gaps on the conservation status of species. Figure 8: Assessments on the conservation status of habitats for the 2007-2012 and 2013-2018 reporting periods Figure 9: Assessments on the conservation status of species for the 2007-2012 and 2013-2018 reporting periods In May 2020, the Commission issued Croatia with a letter of formal notice for incorrect application of Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora, as it had failed to ensure that changes to wind farm projects were assessed appropriately. Progress on maintaining or restoring favourable conservation status of species and habitats is slow, In part due to a large knowledge gap on monitoring. The main human-induced pressures as reported under Art. 17 HD and Art. 12 BD are from agriculture, forestry, urban development, changes in the water regime, climate change and alien species. Bringing nature back to agricultural land and restoring soil ecosystems Agricultural land The biodiversity strategy works alongside the new farm to fork strategy and the new common agricultural policy (CAP) to support and achieve the transition to fully sustainable agriculture. The biodiversity and farm to fork strategies have set four important targets for 2030: - a 50% reduction of the overall use of – and risk from – chemical pesticides;

- a 50% reduction in the use of more hazardous pesticides; - a 50% reduction in losses of nutrients from fertilisers while ensuring there is no deterioration of soil fertility (which will result in a 20% reduction of the use of fertilisers); - bring back at least 10% of agricultural area under high-diversity landscape features and increasing areas under organic farming to at least 25%. With an estimated 7.21% of its agricultural area under organic farming, Croatia is below the EU average of 9.07% (2020 data, Eurostat). Figure 10: Share of total utilised agricultural area occupied by organic farming per Member State, 2020 Croatia’s agricultural sector lags behind the EU average in competitiveness and productivity, but performs better on environmental/climate-related issues connected with agriculture (e.g. biodiversity, greenhouse gas emissions). As in many other EU Member States, generational renewal remains a challenge and rural areas face negative demographic trends, depopulation and a lack of basic infrastructure. Soil ecosystem The new EU soil strategy, adopted on 17 November 2021, stresses the importance of soil protection, of sustainable soil management and of restoring degraded soils to achieve the Green Deal objectives as well as land degradation neutrality by 2030. This entails: (i) preventing further soil degradation; (ii) making sustainable soil management the new normal; (iii) taking action for ecosystem restoration. One factor of degradation is the area of soil that is sealed or artificialised. In Croatia, the land taken per year between 2012 and 2018 (see Figure 11) can be seen as a measure of one important source of pressure on nature and biodiversity: land use change. This also constitutes a source of environmental pressure on people living in urbanised areas. Land take in the EU-28 amounted to 539km2/year between 2012 and -2018 despite decreasing in the last decade (from over 1 000 km2/year in 2000-2006). Net land take compares the area of land taken with the area returned to non-artificial land categories (re-cultivation). While some land was re-cultivated in the EU‑28 in 2000-2018, 11 times more land was taken. Croatia ranks above the EU average as regards net land take, with 179.4 m2/km2 (EU-27 average: 83.8 m2/km2). Figure 11: Land take and re-cultivation in the EU-27 (m²/km²), 2012-2018

Forests and timber The EU forest strategy for 2030, adopted in July 2021, is part of the ‘Fit for 55’ package. The strategy promotes the many services that forests provide. Its key objective is to ensure healthy, diverse and resilient EU forests that contribute significantly to the strengthened biodiversity and climate ambition. Forests are important carbon sinks and conserving them is vital if the EU is to achieve climate neutrality by 2050. Although 27% of EU forest area is protected under the Habitats Directive, less than 15% of assessments show a favourable conservation status. The share of assessments showing bad conservation status increased from 27% to 31% in the EU compared to 2015. Forests cover 47.86% of Croatia’s territory and more than 25% of the assessments show a favourable conservation status, which is well above the EU average In 2020, Croatia had 7 000 ha of primary forests .A complaint concerning illegal logging in Natura 2000 areas was filed in 2021 and is being assessed by the Commission. Figure 12: Conservation status of forests protected under the Habitats Directive in EU Member States, 2013-2018 (% assessments) The European Union Timber Regulation (EUTR), which prohibits the placing on the EU market of illegally harvested timber, requires the competent authorities in the EU Member States to conduct regular checks on operators and traders and apply penalties in the event of non-compliance. With the amendment of Article 20 of the EUTR, biennial reporting became annual; as of 2019, reports cover the calendar year. Between March 2017 and February 2019, Croatia carried out 104 checks on operators importing timber. It is estimated that Croatia had 3 589 operators placing imported timber types on the internal market over the reporting period. A proposal for the Regulation on the making available on the EU market and the export of products associated with deforestation and forest degradation (Deforestation Regulation) was adopted on 17 November 2021 following a 2019 request from the Council to table a legislative proposal to address the problem and a European Parliament resolution recommending the Commission come forward with an EU legal framework to halt and reverse EU-driven global deforestation. This Regulation will repeal and replace the EU Timber Regulation, as it will essentially incorporate and improve the existing system for controlling timber legality. Invasive alien species (IAS) IAS are a key cause of biodiversity loss in the EU (alongside changes in land and sea use, overexploitation, climate change and pollution). Besides inflicting major damage on nature and the economy, many invasive alien species also facilitate the outbreak and spread of infectious diseases, posing a threat to humans and wildlife. The implementation of the EU Invasive Alien Species Regulation and other relevant legislation must be stepped up. The biodiversity strategy for 2030 aims to manage recognised invasive alien species and decrease the number of ‘red list’ species they threaten by 50%. The core of the Regulation on invasive alien species (the IAS Regulation)is the list of Invasive Alien Species of Union concern. There are currently 66 invasive alien species (IAS) of Union concern, of which 30 are animal species and 36 are plant species. According to a 2021 report on the review of the application of the IAS Regulation, the Regulation’s implementation is already starting to deliver on its objectives, such as a coherent framework for addressing IAS at EU level and increased awareness of the problem of IAS. At the same time, the report identified some challenges and areas for improvement. Given that the deadlines for implementing the various obligations of the IAS Regulation were staggered between July 2016 and July 2019, it would be premature to draw conclusions about several aspects of the implementation of the IAS Regulation. A 2021 report on the baseline distribution shows that of the 66 species on the EU list, 23 have been observed in the environment in Croatia. The spread can be checked in Figure 13. Figure 13: Number of invasive alien species of EU concern, based on available georeferenced information for Croatia, 2021

2022 priority actions ·Complete the process of designating SCIs in the marine environment. Designate all SACs and put in place site-specific conservation objectives and necessary conservation measures for all Natura 2000 sites. ·Complete an adequate framework for managing the Natura 2000 network, including by ensuring sufficient financial and human resources in accordance with the needs identified in the prioritised action framework. ·Set up a mechanism for effective cooperation with economic sectors, in particular water management, forestry, agriculture, fisheries and energy, on Natura 2000 management and the restoration of habitats and species. ·Fill in the gaps in the system for monitoring the conservation status of protected habitats and species. ·Enhance control of logging in Natura 2000 areas, efficiently preventing and prosecuting illegal logging in particular. ·Implement the action plans necessary to control the spread of IAS in accordance with the IAS Regulation. Marine ecosystems The EU Biodiversity Strategy 2030 aims to substantially reduce the negative impacts on sensitive species and habitats in marine ecosystems and to achieve good environmental status as well as eliminate or reduce the incidental catches of protected, endangered, threatened and sensitive species to a level that allows species recovery and conservation . The Marine Strategy Framework Directive (MSFD) requires Member States to achieve good environmental status (GES) of their marine waters. To that end, Member States have to develop marine strategies for their marine waters and cooperate with Member States sharing the same marine region or subregion. These marine strategies comprise different steps to be developed and implemented over six-year cycles. Among other obligations, the MSFD requires Member States to define a set of GES characteristics for each descriptor (Article 9) and provide an initial assessment of their marine waters (Article 8), both by 15 October 2018. The Commission then assesses whether this constitutes an appropriate framework to meet the requirements of the Directive The Commission assessed Croatia’s 2018 determinations of GES for each MSFD’s 11 descriptors and established their level of adequacy in relation to the Commission Decision on criteria and methodological standards on good environmental status of marine waters . A good or very good score indicates that the national determinations of GES are well aligned with requirements of the Commission GES Decision, providing qualitative and quantitative national environmental objectives to be achieved for their marine waters. Figure 14: Level of adequacy of GES determination by Croatia (MAD region) with criteria set out in Article 9 of the Commission GES Decision (2018 reporting exercise) Croatia has one marine subregion, MAD (Mediterranean: Adriatic Sea). In this marine subregion, 6 out of 11 determinations of GES were assessed as good or very good, indicating that the national determination of GES by Croatia is consistent for 6 out of 11 descriptors. The MSFD also requires Member States to make an assessment of the current environmental status of their marine waters in relation to the determination of GES. A good or very good score indicates that Member States have good capabilities to assess their marine environment in accordance with the requirements set out in the Commission GES Decision.

Figure 15: Level of adequacy of national assessment of Croatia’s marine environment (MAD region) with the criteria set out in Article 8 of the Commission GES Decision (2018 reporting exercise) 7 descriptors out of 11 were scored as good or very good. Croatia’s assessment of its marine environment is therefore consistent with the requirements set under the Commission GES Decision for 7 out of 11 descriptors. In the EIR 2019, the Commission recommended that Croatia ensure timely reporting of the different elements under the Marine Strategy Framework Directive so that Croatia could be part of future Commission assessments. This priority action has been fulfilled. As highlighted in the Commission’s report on the implementation of the MSFD, while regional cooperation has improved since the adoption of the MSFD, more cooperation is needed to attain full regional coherence of the marine strategies, as required by the Directive. Furthermore, in March 2022, the European Commission published a Communication with recommendations for the Member States. The Commission assessment highlights that the Member States need to step up their efforts to determine the good environmental status and improve their use of the criteria and methodological standards laid down in the Commission GES Decision. These considerations form the basis for the 2022 priority actions. 2022 priority actions ·Improve the status of descriptors that were assessed as very poor. ·Implement the Commission’s recommendations regarding the preparation of marine strategies, encompassing: assessment, determination of good environmental status and establishment of environmental targets. ·Ensure regional cooperation with Member States sharing the same marine (sub)region in order to address predominant pressures. Ecosystem assessment and accounting The EU biodiversity strategy for 2030 calls on Member States to better integrate biodiversity considerations into public and business decision making at all levels and to develop natural capital accounting. The EU needs a better performing biodiversity observation network and more consistent reporting on the condition of ecosystems. The first study on the mapping and evaluation of ecosystems on the national level was made in 2015. This was the first initiative towards implementing the Member States’ obligations under the EU Biodiversity Strategy by 2020. The result of the project is a map of ecosystems and a summary overview of the state of ecosystem types in Croatia. Unfortunately, this map was made in 1:100 000 scale and provides only rough information about the distribution of ecosystems of Croatia. In 2018, the Croatian Agency for the Environment and Nature started a project to evaluate the quality of data available for assessing ecosystem services and identify and connect the scientists and other relevant experts who could implement ecosystem services essessment in Croatia. There has been a great increase in the number of local-level studies of ecosystem services in recent years. All of these studies, together with the above projects, are contributing to work on the national project to map and assess the state of ecosystems and ecosystem services nationwide. Croatia has provided up-to-date information and significant progress has been recorded since January 2016 (Figure 16). This assessment is based on 27 implementation questions and is updated every six months. Figure 16: ESMERALDA MAES barometer (January 2016 - March 2021) Progress on the implementation of ecosystem accounting is assessed at national level, based on 13 questions (see Figure 17).

Figure 17: Ecosystem accounting barometer 2022 priority actions ·Continue supporting the mapping and assessment of ecosystems and ecosystem services, and the development of ecosystem accounting, through appropriate indicators for integrating ecosystem extent, ecosystem condition and ecosystem services (including some monetary values) into national accounts; continue supporting the development of national business and biodiversity platforms, including natural capital accounting systems, to monitor and evaluate the impact of business on biodiversity. 3. Zero pollution Clean air EU clean air policies and legislation need to significantly improve air quality in the EU, by moving the EU closer to the air quality recommended by the WHO and curbing emissions of key air pollutants. Air pollution and its impacts on ecosystems and biodiversity should be further reduced with the long-term aim of not exceeding critical loads and levels. This requires strengthening efforts to reach full compliance with EU clean air legislation and defining strategic targets and actions for 2030 and beyond. The 2030 zero pollution action plan targets are to reduce the health impacts of air pollution by 55% and to reduce the EU ecosystems threatened by air pollution by 25% compared to 2005. The EU has developed a comprehensive body of air quality legislation, which establishes health-based standards and emission reduction commitments for a number of air pollutants. Air quality in Croatia gives cause for concern. The latest available annual estimates (for 2019) by the European Environment Agency point to about 4 200 premature deaths (or 43 400 years of life lost (YLL)) attributable to fine particulate matter concentrations , 240 (2 600 YLL) to ozone concentration and 170 (1 700 YLL) to nitrogen dioxide concentrations. Emissions of key air pollutants have decreased significantly in Croatia in recent years, while GDP growth continued (see Figure 18) According to the latest projections submitted under Article 10(2) of the National Emission Reduction Commitments Directive (NECD) , Croatia expects to fulfil its emission reduction commitments for all air pollutants covered by the Directive for the period 2020 to 2029 and for most pollutants for the period from 2030 onwards. However, the projections do not indicate that the emission reduction commitments for NOx will be fulfilled for the period from 2030 onwards. The latest inventory data submitted by Croatia, prior to review by the Commission, indicate that Croatia is in compliance with the emission reduction commitments for all pollutants in 2020. Croatia submitted its national air pollution control programme on 11 October 2019. Figure 18: Emission trends for main pollutants/GDP in Croatia, 2005-2019

Figure 19: PM2.5 and NOx emissions by sector in Croatia (2019) For the year 2020, exceedances of the EU limit values established by the Ambient Air Quality Directive (AAQD) were registered for particulate matter (PM10) and fine particulate matter (PM2.5) in two agglomerations and one zone respectively. Furthermore, the target values regarding ozone concentration have not been met for one air quality zone . Persistent breaches of air quality requirements, which have severe negative effects on health and environment, are being followed up by the European Commission through infringement procedures (mainly for PM10 and NO2 limit value exceedances) in all Member States concerned, including Croatia. The aim is for appropriate measures to be put in place to bring all air quality zones into compliance. There is an ongoing infringement procedure concerning daily exceedances of PM10 and PM2.5 limit values for three air quality zones in Croatia. Continuous monitoring of PM10 in Croatia shows persistent exceedance of PM10 limit values: in two agglomerations (Zagreb and Osijek) and one zone (Industrijska zona), limit values were exceeded for more than 35 days (and in some years as many as 100 days) per year from 2013 until at least 2018, while the limit value for the annual average was also exceeded in Industrijska zona. Monitoring of PM2.5 in Croatia shows that the annual limit value for PM2.5 (25 μg/m³) was exceeded in the agglomeration of Zagreb and in Industrijska zona from 2015 until at least 2018; some years, PM2.5 concentrations even reached 41 μg/m³). The trends of exceedance in these areas show no signs of changing, indicating that the measures taken under the Croatian authorities’ air quality plans are not effective. As emissions of particulate matter have not decreased, it is evident that the 2019 priority actions have not been addressed completely. 2022 priority actions ·Take additional measures to attain the emission reductions required to fulfil NECD emission reduction commitments, as the latest air pollutant emission projections suggest that such measures are necessary. ·Take, in the context of the national air pollution control programme, actions towards reducing the main emission sources. ·Maintain downward trends for air pollutant emissions and reduce the adverse effects of air pollution on health and the economy with a view to reaching WHO guideline values in future and fully comply with EU air quality standards where these are not met. Industrial emissions The main objectives of EU policy on industrial emissions are to: (i) protect air, water and soil;

(ii) prevent and manage waste; (iii) improve energy and resource efficiency; (iv) clean up contaminated sites. To achieve this, the EU takes an integrated approach to the prevention and control of routine and accidental industrial emissions. The cornerstone of the policy is the Industrial Emissions Directive (IED) . The Commission tabled a proposal in April 2022 . The revision seeks to improve the Directive’s contribution to the zero-pollution objective, as well as its consistency with climate, energy and circular economy policies. The below overview of industrial activities regulated by the IED is based on data reported to the EU Registry (2018) . In Croatia, around 230 industrial installations are required to have a permit based on the IED. The distribution of installations is shown in the figure below. In 2018, the industrial sectors in Croatia with the most IED installations were the intensive rearing of poultry and pigs (23%), followed by landfill sites (23%), mineral production (12%) and the food and drink industries (7%). Figure 20: Number of IED industrial installations per sector in Croatia, 2018

The industrial sectors identified as placing the largest burden on the environment in terms of emissions to air were the energy sector (power and refineries) for sulphur oxides (SOx), particulate matter (PM2.5), arsenic (As), chromium (Cr) and nickel (Ni); surface treatment using organic solvents for non-methane volatile organic compounds (NMVOCs); intensive rearing of poultry or pigs for ammonia (NH3); other industrial product use for lead (Pb), copper (Cu) and cadmium (Cd); mineral production for nitrogen oxides (NOx), mercury (Hg) and zinc (Zn); and waste management for dioxins. The breakdown is shown in the following graph. Figure 21: Emissions to air from IED sectors and other national total air emissions in Croatia, 2018 The environmental burdens for industrial emissions to water mainly result from the production of chemicals, in the case of nitrogen, and refineries, in the case of heavy metals (based on E-PRTR data). The EU’s enforcement approach under the IED creates strong rights for the public to have access to relevant information and to participate in the permitting process for IED installations. This empowers the general public and NGOs to ensure that permits are appropriately granted and their conditions complied with. As part of their environmental inspection work, the competent authorities conduct site visits to IED installations to take samples and gather the necessary information. Article 23(4) of the IED requires site visits to be carried out between once a year and once every 3 years, depending on the environmental risks posed by the installations. In 2018 Croatia undertook around 200 site visits, the majority of which to landfill sites (38%), followed by mineral production installations (12%), refineries (7%) and food and drink production sites (7%).

Figure 22: Number of inspections in IED installations in Croatia in 2018 The development of best available techniques reference documents and BAT conclusions ensures good collaboration with stakeholders and a better implementation of the IED. Since the last EIR report, BAT conclusions were adopted for waste incineration, for the food, drink and milk industries and for surface treatment using organic solvents, including wood and wood product preservation with chemicals. The Commission relies on the national competent authorities to implement the legally binding BAT conclusions and associated BAT emission levels in environmental permits. Their efforts have resulted in considerable and continuous reduction in pollution. In 2019, Croatia’s priority actions included reviewing permits to ensure that they complied with the newly adopted BAT conclusions and strengthening control and enforcement to ensure compliance with the BAT conclusions. The Commission followed up these actions through Croatia’s reporting to the EU Registry, finding no systematic breaches of EU law in the relevant areas. No non-compliant permits were reported in 2018. In 2019 Croatia identified implementing BAT in the waste management sector as a key challenge. The Commission developed tools to support implementation in this domain, such as an implementation exchange platform and dedicated workshops. Croatia has still not transposed some articles of the IED correctly and is subject to a pending infringement procedure. Among other things, the definitions of ‘installation’, ‘best available techniques’ and ‘baseline condition’ have been transposed incorrectly. In addition, national legislation lacks special requirements on the frequency of site visits and the timeliness of inspections and fails to lay down a clear obligation for the inspection report to describe the relevant findings. Prevention of major industrial accidents– SEVESO The main objectives of EU policy on the prevention of major industrial accidents are to: (i) control major accident hazards involving dangerous substances, especially chemicals; (ii) limit the consequences of such accidents for human health and the environment; (iii) continuously improve prevention, preparedness and response to major accidents. The cornerstone of the policy is Directive 2012/18/EU (the Seveso-III Directive). The below overview of industrial plants regulated by the Seveso III Directive (‘Seveso establishments’) is based on data reported to the eSPIRS database (2018) and Croatia’s report on the implementation of the Seveso III Directive for 2015-2018 . Of Croatia’s 72 Seveso establishments, 37 are categorised as lower-tier establishments (LTEs) and 35 as upper-tier establishments (UTEs) based on the quantity of hazardous substances likely to be present. The UTEs are subject to more stringent requirements. Figure 24 presents the change in the number of Seveso establishments. Figure 23: Number of Seveso establishments in Croatia, 2014 and 2018

According to Croatia, an external emergency plan (EEP) is required for 37 UTEs. In 2018, all 37 UTEs had an EEP and all 37 of these EEPs had been tested in the past 3 years. The summary is shown in Figure 25. The establishment of EEPs is essential to allow proper preparation and effective implementation of the necessary actions to protect the environment and the population should a major industrial accident happen. Figure 24: Situation regarding EEPs in Croatia, 2018 The information to the public referred to in Annex V of the Seveso III Directive – especially information about how the public concerned will be warned in the event of a major accident, the appropriate behaviour in the event of a major accident and the date of the last site visit – is permanently available for all the Seveso establishments in Croatia. Figure 26 shows the share of UTEs for which information on safety measures and appropriate behaviours was actively made available to the public in recent years. Figure 25: Share of UTEs for which information on safety measures and appropriate behaviours was actively made available to the public in Croatia, 2014 and 2018 Croatia’s transposition of several provisions of the Seveso III Directive was non-compliant. This includes definitions that are important for defining the Directive’s scope, provisions on the time limits for submitting the safety report, a provision on operators’ obligations if establishments and installations are modified and certain requirements regarding emergency plans. In addition, Croatian legislation does not contain all the guarantees relating to the public’s rights to access information and participate in decision-making. An infringement procedure opened by the Commission has been pending since October 2019. Noise The Environmental Noise Directive provides for a common approach to avoid, prevent and reduce the harmful effects of exposure to environmental noise although it does not set noise limits as such. Its main instruments in this respect are strategic noise mapping and planning. A key target under the 2030 zero pollution action plan is to reduce by 30% the share of people chronically disturbed by transport noise compared to 2017. Excessive noise from aircraft, railways and roads is one of the main causes of environmental health‐related issues in the EU. It leads to ischaemic heart disease, stroke, interrupted sleep, cognitive impairment and stress.

In Croatia, according to a limited set of data , environmental noise is estimated to cause at least around 100 premature deaths and 200 cases of ischaemic heart disease annually . Moreover, some 15 000 people suffer from disturbed sleep. The reported data show that overall noise exposure in Croatia decreased by 22% between 2012 and 2017. Based on the latest full set of information that has been analysed, noise mapping of agglomerations, roads and railways is complete. Water quality and management EU legislation and policy requires that the impact of pressures on transitional, coastal and fresh waters (including surface and ground waters) be significantly reduced. Achieving, maintaining or enhancing a good status of water bodies as defined by the Water Framework Directive will ensure that EU citizens benefit from good quality and safe drinking and bathing water. It will further ensure that the nutrient cycle (nitrogen and phosphorus) is managed in a more sustainable and resource-efficient way. Water Framework Directive The Water Framework Directive (WFD) is the cornerstone of EU water policy in the 21st century . Along with other water-related legislation , the WFD sets out the framework for sustainable and integrated water management, which aims at a high level of protection of water resources, prevention of further deterioration and restoration to good status. Member States have to report the third generation of River Basin Management Plans (RBMPs) drawn up under the WFD by March 2022. The Commission will assess the reported status and progress, checking how the findings identified in the assessment of the second RBMPs have been addressed. Croatia has not yet reported the third RBMPs. The Commission published its sixth report on the implementation of the WFD and the Floods Directive (FD) in December 2021. It includes an interim assessment of the progress made in implementing the Programmes of Measures and of the monitoring of the new priority substances. The assessment report for Croatia estimated that implementing the Programme of Measures would not enable the water protection objectives to be achieved by the end of 2021. According to the reporting on the second RBMPs and to data published in 2020 , in Croatia 42.1% of all surface water bodies have good ecological status and 91.8% have good chemical status, while 9.1% of groundwater bodies failed to achieve good chemical status and 3% have poor quantitative status. The figure below illustrates the proportion of surface water bodies failing to achieve good ecological status in Croatia and other European countries. Figure 26: Proportion of surface water bodies (rivers, lakes, transitional and coastal waters) not in good ecological status in each river basin district The following figure presents the percentage of surface water bodies failing to achieve good chemical status in Croatia and other European countries. For Croatia, the percentage is 8.2%; this includes the water bodies failing due to ubiquitous persistent, bio-accumulative and toxic substances. If the bodies failing due to these substances are excluded, the percentage is 6%. Figure 27: Percentage of surface water bodies not achieving good chemical status The total volume of water abstracted annually (corresponding to 2019 baseline) from surface and groundwater sources in Croatia is 680.74 hm3 (EEA, 2022). The percentage of this water abstracted by each sector is 4.39% for agriculture, 66.26% for public water supply, 11.37% for electricity cooling, 10.70% for manufacturing, 6.74% for manufacturing cooling and 0.53% for mining and quarrying, as illustrated in the following figure. Croatia uses a register to record water abstractions that are subject to permits. This is automatically updated any time there are changes to the permits. Low-volume abstractions do not require permits in Croatia and are not listed in the register.

Figure 28: Water abstraction per sector in Croatia Croatia’s Water Exploitation Index plus (WEI+) is 0.36%, which is much less than the 20% generally considered to be indication of water scarcity. The bar chart below presents the WEI+ for Croatia and other European countries. Croatia is ranked 25th (from high to low score) in the in terms of WEI+. Figure 29: Water exploitation index plus for Croatia and the EU, 2017 Croatia has developed a reporting system based on best practices (EstuarIS project) in order to share knowledge about environmental data management and reporting in the field of water. This can be highlighted as a good practice. The system can be used to manage data storage, receive, store and process data, view information, and prepare, draft and distribute reports. Floods Directive As mentioned previously, the Commission published its sixth implementation report in December 2021. The report includes the review and update of the preliminary flood risk assessments (PFRAs) performed during the second cycle (2016-2021). The assessment report showed that climate change was taken into consideration in the assessment of future flood risks. Also, flood risk was assessed for every settlement and for all historic floods for which data could be found (since 1667). The significance of historical floods was assessed using expert judgement. However, the PFRA could be improved in future cycles by adopting an approach to risk assessment based on improved data collection. Croatia has not adopted and reported the second generation of Flood Risk Management Plans under the Floods Directive. The European Commission will assess progress since the adoption of the first Flood Risk Management Plans and publish a new report, as it did in 2019. Drinking Water Directive As regards the Drinking Water Directive , no new assessment of drinking water quality has been issued since the EIR 2019. The quality of drinking water in Croatia has not been indicated as an area of concern. The recast Directive entered into force on 12 January 2021 and Member States have until 12 January 2023 to transpose it into their national legal systems. Croatia will have to comply with the revised quality standards it contains. Bathing Water Directive Regarding the Bathing Water Directive, Figure 31 shows that in 2020, 95.1% of Croatia’s 935 bathing waters were of excellent quality . Detailed information on Croatia’s bathing waters is available from a national portal and via an interactive map viewer provided by the European Environment Agency .

Figure 30: Bathing water quality in Europe in the 2020 season



Figure 31: Bathing water quality in Croatia and the EU, 2017-2020 Nitrates Directive The latest Commission report on the implementation of the Nitrates Directive89, covering 2016-201990, warns that nitrates are still causing harmful pollution to water in the EU. Excessive nitrates in water are harmful to both human health and ecosystems, causing oxygen depletion and eutrophication. Where national authorities and farmers have cleaned up waters, this has had a positive impact on drinking water supply and biodiversity and on the sectors such as fisheries and tourism that depend on them. Nevertheless, excessive fertilisation remains a problem in many parts of the EU. According to the 2016-2019 implementation report, groundwater quality has improved slightly compared to the previous reporting period: the percentage of stations reaching or exceeding 40 or 50 mg of nitrates per litre decreased from 23.91% to 21.4% and from 20.4% to 17.9% respectively. The situation concerning nitrate concentrations in surface water is rather good and stable, and some improvements were recorded in the reduction of eutrophication of surface water. Croatia has a low livestock density, the surplus of nitrogen is about the EU average and the surplus of phosphorus is low. There is a well-developed network of monitoring stations in nitrate vulnerable zones, but no monitoring station outside these zones. Groundwater quality is generally good. However, many bodies of surface water are eutrophic. Urban Waste Water Treatment Directive Croatia has, over the years, encountered difficulties in meeting its obligations under the Urban Waste Water Treatment Directive (UWWTD). In 2018 Croatia’s overall compliance rate was 7%, which is significantly lower than the EU average of 76%. 93% of urban wastewater in Croatia is not collected and/or does not meet the requirements for biological treatment. Pursuant to its Accession Treaty, Croatia should reach full compliance with the requirements of the Directive by the end of 2023. However, it is already clear that Croatia will need to step up its efforts if it is to meet the deadlines set out in its Accession Treaty. Figure 32: Proportion of urban waste water that meets all requirements of the UWWTD (collection, biological treatment, biological treatment with nitrogen and/or phosphorus removal), in compliant urban areas of the UWWTD (‘compliance rate’), 2018 2022 priority actions ·Assess new physical modifications to water bodies in line with Article 4(7) of the WFD, ensuring these assessments include alternative options and adequate mitigation measures.

·Continue current efforts to ensure that hydrotechnical flood protection activities do not lead to additional serious hydromorphological deterioration. ·Better coordinate the implementation of between water, marine and nature policies. ·Implement the Urban Waste Water Treatment Directive in full in all agglomerations by building up the necessary infrastructure. Chemicals The EU seeks to ensure that chemicals are produced and used in a way that minimises any significant adverse effects on human health and the environment. On 14 October 2020, the European Commission published its chemicals strategy for sustainability ‘Towards a Toxic-Free Environment’ , which led to some systemic changes in EU chemicals legislation. The strategy is part of the EU’s zero pollution ambition, a key commitment of the European Green Deal. The EU’s chemicals legislation provides baseline protection for human health and the environment. It also ensures stability and predictability for businesses operating within the internal market. The Commission has gathered information on the enforcement of the Registration, Evaluation Authorisation and Restriction of Chemicals (REACH) and the Classification, Labelling and Packaging (CLP) Regulations since 2007. In December 2020, the Commission assessed the Member States’ reports on the implementation and enforcement of these Regulations in line with REACH Article 117(1) and CLP Article 46(2). According to the new data (for 2015-2019), national enforcement structures have not changed much. However, it is apparent from the latest report (2020) that there are still many disparities in REACH-CLP implementation, notably in the area of enforcement. In August 2021, the Commission published a measurable assessment of the enforcement of the two main EU Regulations on chemicals using a set of indicators covering different aspects of enforcement. Responsibility for checking compliance with REACH in Croatia lies with the state inspectorate . Croatia has not devised or implemented any strategy for the enforcement of the REACH or CLP Regulations, but there are plans to devise one . As a rule, all infringements of REACH are classed as serious or very serious environmental administrative offences. If the infringement is sufficiently serious, the competent authority may decide to impose further penalties in addition to a fine. That authority may also, where necessary, order the provisional seizure of assets and documents. In Croatia, 4 inspectors have been allocated to REACH and CLP enforcement at national level and 30 at regional level . As a result, the number of REACH controls carried out in the reporting period (62) remains well below average. Most of the controls carried out are proactive (inspections) rather than reactive/non-routine (i.e. investigations in response to complaints, accidents and referrals). The percentage of cases of non-compliance out of the total number controls is below the EU average . Figure 33: Percentage of cases of non-compliance out of the total number of REACH and CLP controls carried out in 2019, per Member State and compared to the EU average 2022 priority actions ·Upgrade the implementation and enforcement Enhance administrative capacities for implementation and enforcement to move towards zero tolerance for non-compliance. ·Devise and implement a REACH and CLP enforcement strategy.

4. Climate action In line with the Paris Agreement and as part of the European Green Deal, the European Climate Law sets the EU target of reaching climate neutrality by 2050 and reducing greenhouse gas (GHG) emissions by 55% by 2030 compared to 1990. The law also limits the contribution that carbon removals can make towards emission reductions in 2030 to ensure a sufficient mitigation effort. The EU and its Member States submitted updated Nationally Determined Contribution (NDC) to the UNFCCC in December 2020. The EU is working across all sectors and policies to cut GHG emissions and make the transition to a climate-neutral and sustainable economy, as well as addressing the unavoidable consequences of climate change. EU climate legislation incentivises emissions reductions from power generation, industry, transport, the maritime sector and fluorinated gases (F-gases) used in products. For road transport, EU legislation requires the GHG intensity of vehicle fuels to be cut by 6% by 2020 compared to 2010 and sets binding GHG emission standards for different vehicle categories. Under the F-gas Regulation, the EU’s F-gas emissions will be cut by two-thirds by 2030 compared with 2014 levels. From 2021, emissions and removals of GHG from land use, land use change and forestry (LULUCF) have been included in the EU emission reduction efforts. The EU adaptation policy is an integral part of the European Green Deal. From 2021, Member States are required to report on their national adaptation policies , as the EU Climate Law recognises adaptation as a key component of the long-term global response to climate change. Member States will be required to adopt national strategies and the EU will regularly assess progress as part of its overall governance on climate action. The updated EU adaptation strategy, published in February 2021, sets out how the EU can adapt to the unavoidable impacts of climate change and become climate resilient by 2050. Key national climate policies and strategies Croatia has an integrated national energy and climate plan (NECP) for 2021-2030. In 2021, it adopted a long-term strategy for decarbonisation, which sets the goal of reducing GHG emissions by between 57% and 73% by 2050 (excluding land use and forestry). While Croatia is likely to meet the proposed and more ambitious target for 2030 if all additional measures are implemented, the economy will need to be decarbonised more quickly if climate neutrality is to be reached by 2050. In its RRP, Croatia allocates around 40% of spending to climate objectives and outlines crucial reforms and investments to support the transition to a more sustainable, low-carbon and climate-resilient economy. The Climate Change and Ozone Layer Protection Act (Croatian Official Gazette No 127/19) is the Republic of Croatia’s basic legal act regulating the issue of adaptation to climate change. It determines the relevant responsibilities and implementing documents and identifies the sectors most exposed to climate change. Croatia has had a strategy on climate change adaptation since 2020. By 2020, the country’s total GHG emissions had decreased substantially compared to 1990, although less than in the EU as a whole. Between 1990 and 2020, GHG emissions in Croatia decreased by 25%. However, the Croatian economy remains GHG-intensive. Figure 34: Total GHG emissions (incl. international aviation) in Croatia, 1990-2020 Effort Sharing target

For emissions not covered by the EU ETS, Member States have binding national targets under the Effort Sharing legislation. In 2019, Croatia’s emissions from sectors not covered by the EU emissions trading system (such as buildings, road transport, agriculture, small industry and waste) were lower than its 2020 target of limiting the increase to 11% compared to 2005. Croatia therefore met its Effort Sharing emissions reduction target for 2020. Croatia’s national energy and climate plan aims to achieve greater reductions than the 2030 target of 7% set down in the Effort Sharing Regulation. Figure 35: Emissions and targets for Croatia under the Effort Sharing Decision/ Effort Sharing Regulation, 2020 and 2030 as percentage change from 2005 Figure 36: Emissions, annual emission allocations (AEAs) and accumulated surplus/deficit of AEAs for Croatia under the Effort Sharing Decision, 2013-2020 ‑ Key sectoral developments In road transport, the GHG intensity of vehicle fuels in Croatia decreased by 2.5% from 2010 to 2019. The country needs to act swiftly to meet the current target of a 6% reduction by 2020. Member States can take several types of action in this regard, such as further expanding the use of electricity in road transport, supporting the use of biofuels (in particular advanced biofuels), incentivising the development and deployment of renewable fuels of non-biological origin and reducing upstream emissions before refining processes. In 2019, road transport accounted for 27% of total GHG in Croatia. Emissions have increased by almost 20% compared to 2005 and emissions in the transport sector are projected to continue to increase. The share of renewable energy sources in transport is among the lowest in the EU. Although the number of electric vehicle charging points in Croatia is above the EU average, the market share of newly registered electric passenger cars is among the lowest in the EU. Figure 37: Greenhouse gas emissions by sector in Croatia – historical emissions 1990-2020, projections 2021-2030 More building renovation is needed to reduce emissions in buildings. Croatia’s residential sector accounts for over a third of total energy consumption, well above the EU average. In the land use, land use change and forestry (LULUCF) sector, Croatia’s projections in its national energy and climate plan indicate that net removals will decrease further by 2030. The quantities reported under the Kyoto Protocol for the LULUCF sector in Croatia show average net removals of -6.36 Mt CO2-eq for 2013-2019. In this regard, Croatia contributes 1.9% to the EU-27’s annual average sink of -344.9 Mt CO2-eq. Accounting for the same period shows average net credits of -1.1 Mt CO2-eq, which corresponds to 1.0% of the EU-27 accounted sink of -115.0 Mt CO2-eq. Reported net removals decreased between 2013 and 2017 and increased slightly towards 2019. This trend is more defined for accounted net credits. Figure 38: Reported and accounted emissions and removals from LULUCF in Croatia

Use of revenues from the auctioning of EU ETS allowances Croatia’s revenues from the auctioning of emission allowances under the EU ETS in 2012-2021 totalled EUR 463 million. Pursuant to the Climate Change and Ozone Layer Protection Act, 100% of Croatia’s auctioning revenues are spent on the climate and energy. 2022 priority actions ·Support funding of incentives for purchasing electric vehicles, subsidies and car scrapping schemes together with further roll-out of adequate and matching recharging and refuelling infrastructure. ·Encourage energy renovation of residential buildings especially, and decarbonise heating system.



Part II: Enabling framework: implementation tools 5. Financing Environmental investment needs in the EU Financing environmental measures is essential for their success. Although most financing comes from national sources, various EU funds contribute significantly, helping to close the financing gap between countries. Post-2020, environmental measures will also be supported by the EU’s COVID-19 Recovery Fund (via the RRF) and the ’do no significant harm’ (DNSH) principle, which runs across the EU budget. The renewed commitments made at the COP26 (Glasgow, October-November 2021) and the Biodiversity Convention (April-May 2022) will also be reflected in the EU budget. Overall environmental investment gaps (EU-27) The EU’s green transition investment needs cover a range of interlinked areas. The additional investment needs over the baselines (i.e. the investment gap between what is needed and what is forecast to be invested if no additional action is taken) for climate, energy and transport were estimated at EUR 390 billion per annum (EU-27), plus a further EUR 130 billion to achieve the EU’s core environmental objectives. Climate adaptation costs can also be significant, reaching a total of EUR 35-62 billion (narrower scope) or EUR 158-518 billion (wider scope) per year. These investment needs reflect the implementation objectives to 2020 and to 2030 (except for climate adaptation, the costs of which are expected to linger over a longer period). The following table provides a preliminary update of the EU’s core environmental investment gap. Almost 40% of the environmental investment gap relate to dealing with pollution, while pollution and water management together account for nearly two-thirds of the total gap. The investment gap in the circular economy and waste is estimated to be between EUR 13-28 billion p.a., depending on the levels of circularity implemented. The annual biodiversity financing gap is estimated at around EUR 20 billion. Table 1: Estimated breakdown of the EU’s environmental investment gaps by environmental objective, 2021-2030 per annum Environmental objective Estimated investment gap EU-27, EUR billion p.a. EUR billion % Pollution prevention & control 42.8 39% Water management 26.6 24% Circular economy & waste 13.0 12% Biodiversity & ecosystems 21.5 20% R&D&I and other 6.2 6% Total 110.1 100%

Environmental investment needs in Croatia Priorities include sustainable management of natural resources (particularly waste management and the circular economy), a shift away from landfilling towards separate collection and recycling, decarbonisation, and climate change adaptation (including risk prevention and disaster resilience). The investment gap remains large as Croatia is still substantially below the EU average for municipal and packaging waste recycling, its sewage systems are underdeveloped and its water supply networks have high leakage rates. Pollution prevention & control The EU’s first Clean Air Outlook under the Clean Air Programme estimated that in order to fulfil the NECD emissions reduction requirements by 2030, the total air pollution control costs for Croatia would be equivalent to EUR 448 million per year, including EUR 291 million for capital investment. As the second Clean Air Outlook suggests, implementing all 2018 legislation, the 2030 climate/energy measures and the NAPCP will largely facilitate reaching the targets by 2030 (except for ammonia for 15 Member States, though Croatia is not one of these). However, the NEC Directive also requires certain emission reductions as early as 2020-2029. This includes reductions aimed at reaching pro-rata progress towards the 2030 targets by 2025 (based on a linear trajectory, or another trajectory if flexibilities are applied), implying that investments need to be implemented in a timely manner. Water management According to the OECD’s 2020 study ‘Financing water supply, sanitation and flood protection’, Croatia faces significant challenges in financing expansion of water supply, sewerage, wastewater treatment and flood protection infrastructure to meet the requirements of the EU water directives. The affordability of water supply and sanitation tariffs remains a concern for poor households and limits Croatia’s ability to raise tariffs. In addition, water losses are high (50%). Croatia is hit regularly by flooding events (river, pluvial and coastal), with serious economic damage costs. Climate change will increase the severity and frequency of extreme flood events. Moreover, the recent 6th Water Framework Directive and Floods Directive Implementation Report and the financial - economic study accompanying it, are also a relevant source of information in this domain. Waste & the circular economy According to a Commission study, if Croatia is to meet the recycling targets for municipal waste and packaging waste, it needs to invest an additional EUR 99 million (around EUR 14.1 million per annum) over the baseline in collection, recycling reprocessors, biowaste treatment, waste sorting facilities and waste registry digitalisation between 2021 and 2027. This does not include the investment required to address other key waste streams (plastics, textiles, furniture) or unlock a higher uptake of circularity and waste prevention across the economy. Biodiversity & ecosystems The prioritised action frameworks (PAFs) adopted by the Member States under Article 8 of the Habitats Directive present the conservation priorities for the Natura 2000 network and its supporting green infrastructure, the associated costs and the planned funding sources for the period corresponding to the current multiannual financial framework (MFF), i.e. 2021-2027. For Croatia, the total identified costs amount to EUR 182.4 million per year (including EUR 24.5 million in one-off costs). The main conservation priorities relate to the establishment of the Natura 2000 management framework (management plans and resources), the establishment of new sites and the restoration and/or maintenance of grassland and forest habitats. This covers some of the preliminary additional costs of implementing the priorities stemming from the Biodiversity Strategy up to 2030, including costs for increased protection and restoration. However, the final EU ambition levels are not yet known. EU environmental funding 2014-2020 The MFF for 2014-2020 allocated almost EUR 960 billion (in commitments, 2011 prices) for the EU. The green transition commitment included a 20% climate spending target and funding opportunities for the environment, in particular, under the European structural and investment funds (ESIFs) . The 2014-2020 budget was subsequently topped up with over EUR 50 billion (current prices) from REACT-EU (Recovery Assistance for Cohesion and the Territories of Europe) for cohesion policy action against COVID-19 .

Croatia received EUR 12 091.9 million from the ESIFs over 2014-2020 to invest in job creation and a sustainable and healthy European economy and environment. The planned direct environmental investment amounted to EUR 1 829.8 million and a further EUR 611 million was identified as indirect environmental investment value, bringing total investment to EUR 2.4408 billion. Figure 41 provides an overview of the (planned) individual ESIFs from which amounts were earmarked for Croatia for 2014-2020 (the graph shows EU amounts, without national amounts) and the environmental investments these included. Figure 39: ESIFs allocated to Croatia, including environmental investments, 2014-2020 Table 2: Direct and indirect environmental investments under the ESIFs in Croatia, 2014-2020 Instrument Allocations for the environment (EUR million) Under cohesion policy (ERDF + CF) Direct environmental investments water waste air quality biodiversity and nature land rehabilitation climate and risk management Indirect environmental investments renewable energy energy efficiency other energy sustainable transport 2 145.5 1 553.0 849.3 276.0 18.7 125.0 74.8 209.1 592.6 38.0 127.9 40.0 256.0 Under EAFRD/rural development Direct environmental investments climate and risk management Indirect environmental investments renewable energy 240.1 224.9 224.9 16.1 16.1 Under EMFF Direct environmental investments environment protection & resource efficiency Indirect environmental investments business development, R&I 54.3 52.0 52.0 2.3 2.3 Total under ESIFs Direct environmental investments Indirect environmental investments 2 440.8 1 829.8 611.0 Environmental funding under the ESIFs has been supplemented by other EU funding programmes available to all Member States, such as the LIFE programme, Horizon 2020 or loans from the European Investment Bank (EIB). This additional funding comes to an estimated total of EUR 2.5 billion for Croatia for 2014-2020. The LIFE programme is entirely dedicated to environmental and climate objectives. It finances demonstration and best-practice actions for green solutions that are to be deployed. In 2014-2020, Croatia received EU support for five LIFE nature projects, with EUR 10.0 million from the LIFE programme (from a total of out of 1 028 LIFE projects in the EU-27 and a total EU contribution of EUR 1.74 billion) . In 2014-2020, Horizon 2020 allocated about EUR 7.3 million to Croatia for the environment, in particular for thematic area within the societal challenges pillar (climate action, environment, resource efficiency and raw materials). The share for the environment was therefore around 5.3% of Croatia’s total allocation . Croatia received a total of EUR 89 million from the European fund for strategic investments (EFSI); this did not cover projects with an environmental objective . Overall EIB lending to Croatia in the period amounted to EUR 3 212.6 million; none of the loans related directly to the environment . The country ranks 19th in terms of total EIB lending. In 2020, the EIB provided EUR 24.2 billion to fight climate change, accounting for 37% of its total financing, and EUR 1.8 billion (3% of its financing) for the environment . EU environmental funding 2021-2027 The 2020 European Green Deal investment plan calls for EUR 1 trillion in green investments (public and private) by 2030. The MFF for 2021-2027 and NextGenerationEU programme will mobilise EUR 2.018 trillion (in current prices) to support COVID-19 recovery and the EU’s long-term priorities, including environmental protection . In line the EU Green Deal’s ‘do no harm’ pledge and the Interinstitutional Agreement on the 2021-2027 MFF , 30% of the EU budget will support climate efforts and 7.5% (from 2024) and 10% (from 2026) biodiversity. To reach these targets, more increased financial resources must be allocated to biodiversity, specifically under the 2021-2027 cohesion policy and the 2023-2027 common agricultural policy (CAP). Sustainable finance significantly increases transparency regarding environmental sustainability (a goal promoted by the EU Taxonomy) , strengthens non-financial reporting requirements and facilitates green bond issuance (by the EU green bond standard ). Reinforced by the Renewed Sustainable Finance Strategy (2020) , it will increase investment flows to climate and the environment. In support of financing climate adaptation, the new strategy on adaptation to climate change can facilitate the closing of the insurance protection gap for non-insured climate-related events . The EIB will align 50% of its lending with climate and environment by 2025 with a EUR 250 billion contribution to the Green Deal investment plan by 2027. Table 3 provides an overview of the EU funds earmarked specifically for Croatia for the 2021-2027 period. These funds are supplemented by other EU funding programmes available to all Member States. Table 3: Key EU funds allocated to Croatia (current prices), 2021-2027 Instrument Country funding allocation (million EUR) Cohesion policy ERDF CF ESF ETC (ERDF) Total:8 708.2 5 355.7 1 182.4 1 982.6 187.6 Just Transition Fund 185.9 EAFRD/rural development under CAP strategic plans forStrategic Plans 2023-2027 1 486.5 European maritime, fisheries and aquaculture fund (EMFAF) 243.6 Recovery and resilience facility (RRF) 2021 – 2026 6 393.7 (grants) In Croatia, the programming for the majority of EU funds (cohesion policy funds, EAFRD and EMFAF) is ongoing. However, the negotiations under the RRF have been concluded. Croatia’s RRP responds to the urgent need to foster a strong recovery and make Croatia future-ready. The reforms and investments will help Croatia become more sustainable and resilient and better prepare it for the challenges and opportunities presented by the green and digital transitions. To this end, the plan comprises 146 investments and 76 reforms. Croatia requested almost EUR 6.4 billion in grants, and 40.3% of the plan will support climate objectives (see Figure 42). Croatia’s RRP supports the green transition, through investments in: energy efficiency and post-earthquake reconstruction of buildings (EUR 789 million), sustainable mobility (EUR 728 million), low-carbon energy transition (EUR 658 million) and assistance for businesses for green transition and energy efficiency (EUR 542 million). Figure 40: Climate expenditure in RRPs, 2021-2026

Under NextGenerationEU, the Commission will issue up to EUR 250 billion of EU green bonds (one third of NextGenerationEU funds) by 2026. These bonds will comply with the general spirit of the DNSH principle, but will not be subject to the current delegated acts relating to the EU Taxonomy and will not fully align with the proposed EU green bond standard. In addition to the EU funds earmarked specifically for Croatia in 2021-2027, there are also funding programmes that can been accessed at EU level and are open to all Member States. These include the LIFE programme (EUR 5.4 billion), Horizon Europe (EUR 95.5 billion) , the Connecting Europe Facility (EUR 33.7 billion) and the funds to be mobilised via InvestEU . These programmes will also support the green transition, including research and innovation activities for environmental protection (Horizon Europe) , clean transport and energy (the Connecting Europe Facility) or sustainable infrastructure (InvestEU) . National environmental protection expenditure Total national environmental protection expenditure (including all relevant current and capital expenditure) in the EU-27 was EUR 272.6 billion in 2020. This represents 2% of the EU’s GDP and has remained quite stable over time. While absolute expenditure is concentrated in a few countries, as a share of GDP, most countries spend between 1 and 2%, while Croatia’s expenditure is slightly higher (2.3% of GDP). Of the above total, the EU-27’s capital expenditure (CapEx) on environmental protection (i.e. investment in environmental protection) amounted to EUR 56.3 billion in 2018, falling to EUR 54.5 billion in 2020 (around 0.4% of GDP). While most Member States invested 0.2-0.5% of their GDP in environmental protection, Croatia invested 0.6%. Between 2014 and 2020, investment in environmental protection totalled around EUR 376 billion for the EU-27 and EUR 1.67 billion for Croatia. Figure 41: Direct and indirect environmental protection investments in the EU-27 (EUR million and % of GDP), 2018 By institutional sector, around half of Croatia’s environmental protection investments (CapEx) came from the business sector, 35% from the general government and 14% from specialist producers (of environmental protection services, e.g. waste and water companies). At EU level, 37% comes from governments, 33% from specialist producers and 30% from industry (business). Figure 42: EU-27 Member States’ environmental protection investments (CapEx) by institutional sector (total economy = 100%), 2018 A partial breakdown of investment by environmental topic is available, but only at the level of institutional sectors (instead of the entire economy) due to different reporting patterns . Of the environmental protection investments made by Croatia’s general government 47% went to waste management, 38% to tackling pollution and 15% to waste water. Around two-thirds of investments by the country’s specialist producers concern waste management and one-third wastewater, while 72% of the business sector’s investments went to waste water and 18% to the protection of air, to name just the most significant items. In 2020, total annual green bond issuance by European countries was USD 156 billion (EUR 137 billion), up from USD 117 billion (EUR 105 billion) in 2019. This figure includes bonds issued by some non-EU European countries . The 2020 annual green bond issuance by the EU-27 was EUR 124 billion. Croatia did not issue green bonds. Between 2014 and 2020, 83% of the green bonds issued by European countries served energy, buildings or transport objectives, 8% water and waste objectives and 6% land use objectives, with links to ecosystem conservation and restoration . Figure 43: Annual EU green bond issuance in 2020 (EUR billion) Green budget tools Green taxation and tax reform Croatia’s revenue from environment-related taxes remained amongst the highest in the EU in 2020, accounting for 3.28% of GDP (EU average: 2.24%). Of this revenue, almost 77% was derived from energy tax%, 22% from transport-related tax and 1.1% from tax linked to pollution and resources. This last type of tax accounted for 0.04% of GDP, half of the EU average.

Figure 44: Environmental taxes in the EU-27, 2020 The 2019 European Green Deal underlines that well-designed tax reforms can boost economic growth and resilience and foster a fairer society and a just transition by sending the right price signals and incentives to economic actors. The Green Deal creates the context for broad-based tax reforms, removing fossil fuel subsidies, shifting the tax burden from labour to pollution and accounting for social considerations . The application of the ‘polluter pays principle’ (PPP) , which stipulates that polluters should bear the cost of measures to prevent, control and remedy pollution, is facilitated by the Commission’s Technical Support Instrument (TSI) flagship on greening taxes. Environmentally-harmful subsidies Addressing and removing environmentally-harmful subsidies is a further step towards wider fiscal reforms . Fossil fuel subsidies are costly for public budgets and adversely impact the achievement of the Green Deal objectives. In many cases, they also go against incentives for green investments as they do not contribute to levelling the playing field. Fossil fuel subsidies in the EU have stood at around EUR 55 billion since 2015. They increased by 4% between 2015 and 2019, although some countries, such as Latvia, Lithuania Sweden, Greece and Ireland, managed to decrease them. In the EU, subsidies for petroleum products, in sectors such as transport and agriculture, kept growing over the period, while subsidies for coal and lignite decreased due to the diminishing role of solid fuels in electricity generation. As a share of GDP, fossil fuel subsidies ranged from 1.2% in Hungary to less than 0.1% in Malta in 2019 (EU average: 0.4%). For Croatia, the share was 0.29% of GDP, which is below the EU average. In 2020, the EU27’s total fossil fuel subsidies decreased to EUR 52 billion (due to falling consumption trends amid the COVID-19-related restrictions). However, -without Member State action, they are likely to rebound as economic activity has picked up from 2020 . Figure 45: Trends in natural gas subsidies in Croatia % GDP 2015 2016 2017 2018 2019 2020 Natural gas 0.18 0.18 0.24 0.21 0.13 0.07 Current green budgeting practices Green budgeting encompasses various climate and environmental tagging and tracking practices in budgets. It helps identify and track green expenditure and green revenues to increase transparency on the environmentl implications of budgetary policies, improving policy coherence and supporting green policies (including climate end environmental objectives). Some EU Member states already use green budgeting elements. EU climate proofing and sustainability proofing guidance have also been developed. It is intended as a tool for assessing project eligibility and compliance with environmental legislation and criteria . The European Commission established a green budgeting reference framework and launched a technical support project (supported by the TSI) on green budgeting in 2021 to assist Member States in developing or further developing national green budgeting frameworks so that they can reap the benefits for policy coherence and the green transition. Croatia is participating in this technical support project. Overall financing compared to the needs Overall environmental financing for investments in the EU is estimated to have been 0.6-0.7% of GDP in 2014-2020, taking into account major EU funds and national financing. Total environmental financing in each Member State ranged from 0.3% of GDP (Ireland) to 1.91% (Bulgaria), linked to the level of environmental challenges in the country. The EU’s environmental investment needs for 2021-2027 are estimated at 0.9-1.5% of GDP , suggesting a potential environmental financing gap of at least 0.6-0.8% of GDP at EU level (previous financing levels assumed) . Figure 46: Total environmental financing baseline (2014-2020) and estimated needs (2020-2030) in the EU 27 (% of GDP) Croatia’s environmental financing for investments is estimated to have been 1.32% of GDP (higher than the EU average) in 2014-2020. The bulk of this (54%) came from EU funding. Environmental investment needs for 2021-2027 (based on partial information available at country level) are estimated to reach over 1.79% of GDP, suggesting an environmental financing gap of at least 0.48% of GDP. The actual financing gap is likely to be greater be higher taking into account needs that are estimated at EU level (e.g. water protection, circularity, biodiversity strategy, etc.).– This is to be addressed by mobilising additional financing for environmental implementation priorities.

2022 priority actions ·The investment gap remains significant as Croatia is still substantially below the EU average for municipal and packaging waste recycling, sewage systems are underdeveloped and water supply networks face high leakage rates. ·In terms of prioritisation of environmental investments in Croatia, waste management and circular economy is considered as a main priority, followed by water– that provides an opportunity to potentially increase the share of private financing as well for the environment (which is around one-third overall in Croatia). ·Technical assistance could support capacity building for management bodies of the Natura sites in line with the Environmental Implementation Review (EIR) 2019 priority action.



6. Environmental governance Information, public participation and access to justice Citizens can more effectively protect the environment if they can rely on the three ‘pillars’ of the Aarhus Convention: (i) access to information; (ii) public participation in decision making; (iii) access to justice in environmental matters. It is of crucial importance to public authorities, the public and businesses that environmental information is shared efficiently and effectively . Public participation allows authorities to make decisions that take public concerns into account. Access to justice is a set