Ministry of Environment

Public Disclosure of Industrial Pollution in Indonesia

Date posted: 
Feb 26 2010

The Public Disclosure of Industrial Pollution (PROPER) approach in Indonesia aims at reducing industrial pollution via public disclosure. It was developed and tested by the country’s National Pollution Control Agency (BAPEDAL) together with the World Bank.

Responsible Party: 
Enforcement Agency
I. Objectives or Impact: 

The Public Disclosure of Industrial Pollution (PROPER) approach in Indonesia aims at reducing industrial pollution via public disclosure. It was developed and tested by the country’s National Pollution Control Agency (BAPEDAL) together with the World Bank. A major problem in regulating pollution is that companies, compared with regulators and government agencies, will have more information in terms of the level of pollution generated, their capacity to reduce pollution, and the actual effort they exert in reduction. The PROPER program addresses this problem by encouraging companies to self-report, and eventually comply with standards by using non-regulatory channels like public and social recognition of exerted efforts on pollution reduction, In the PROPER program, the incentive of attaining recognition and avoidance of disgrace is great since dissemination of environmental performance rating conducted at the national level.

 

II. Description of the Good Practice (Outputs): 

During its inception in 1995, the program targeted major industrial water polluters.  It utilized a five-color scale to grade the environment performance of different facilities.  It initially handled 187 plants, which included medium and large-scale polluters, from several river basins in the islands of Sumatra, Java, and Kalimatan.  By 1998, the coverage was extended to 350 factories belonging to 28 sectors, situated in 14 provinces.

The program was temporarily halted during the Asian Crisis (1998-2001) due to the economic and political crisis experienced by the country.    However, it was re-instituted in 2002 and provided a more comprehensive assessment process for companies.  It then included air pollution control, hazardous and toxic waste management, and the implementation of Environmental Impact Assessment (AMDAL). By 2004, the number of participating companies increased to 251.  Around 1750 companies are expected to participate in 2009.

The PROPER program banks on the principle that citizens have the right to know about pollution control efforts and performance of companies.  It was designed in such a way that it is understandable by the public and at the same time still conveys enough information to influence compliance.  Therefore, it was recognized on set that an index indicating non-compliance or compliance would not do justice on the efforts exerted by the companies nor elicit community interest. 

For the PROPER program, a color-coded (gold, green, blue, red, and black) rating system was developed to grade factories’ performance against set benchmarks.  The color corresponds to the different levels of performance in pollution control.  The gold rating represents excellent performance in pollution control while the black rating relates to poor performance level.  Through public disclosure, companies garnering gold or green ratings are expected to get community support and praise.

PROPER proves to be cost-effective, with low transaction costs by mobilizing external agencies for support.  Interestingly, via the disclosure system and public inquiry, BAPEDAL was motivated to enhance its technical capability.  This resulted to both encouragement of the use of cleaner technology by companies and improvement of data collection and analysis capability of the responsible government agency.

III. Outcomes or Results: 

From a recent study made by the Resources for the Future, it was found out that there was a strong and positive response to the disclosure scheme. More importantly, firms with poor prior environment compliance records displayed intensive reduction in emissions (approximately by one-third). Also, the response made was immediate and consistent, as displayed by pursuit of further reductions in the succeeding months.

Two years after the after the program was launched (June 1995 to March 1997), the compliance level of the pilot program factories increased from 35 to 51%.  The program also contributed to voluntary participation by factories in conducting compliance ratings. 

 

IV. Essential Elements for Success: 

(not applicable)

A. Policy Framework: 

The success of prior programs like ADIPURA (President’s award for cleanest cities) and PROKASIH (wastewater management) gave credibility to the government’s ability to implement an environment performance rating system. The PROPER became an alternative compliance instrument that is aligned with existing regulatory and monitoring activities. The PROPER program relies on the existence of other laws and regulatory efforts on pollution reduction, particularly on water pollution and control of industrial wastewater. The Presidential Decree PP /20/1990 and Ministerial Degree KEP/MEN/03/1991clearly stipulates activities supportive of PROPER, namely: (1) sampling and effluent analyses (at least once a month), (2) installation of flow meter, (3) reporting true values of pollution, and (4) effluent charges. Also, national regulations require polluters to self-monitor and report on a monthly basis.

B. Budgetary and Financial Requirements: 

(not applicable)

C. Human Resources: 

The public disclosure process of PROPER involves three distinct steps: (1) data collection and verification from different sources at participating plants, (2) data analysis, (3) assignment of ratings and public disclosure. The performance ratings includes the following steps: (1) selection of polluters, (2) gathering data through mail surveys, (3) verification and inspection, (4) development of a pollution data base, (5) data analysis, (6) data verification, (7) obtaining of rating and subsequent approval, (8) reporting of results to the President, and (9) release of information to the public. Overall, the entire data collection and rating process goes through a strict channel and scrutiny to avoid errors. This requires people adept in both data handling and analysis. Also, the program needs a large manpower, able to organize even up the local level, to collect data.

D. Material Resources: 

Disclosure schemes are perceived to be cheaper and less complex. However, as the scope of sector and location increases, it can be very information-intensive. Data need to be regularly collected and properly analyzed to ascertain that emission reduction is indeed a result of the program and not a mere trend (e.g. reduction would have occurred even without the program). The PROPER program requires a tight data collection, monitoring, analysis, and disclosure system. It requires the availability of testing laboratories, monitoring system, and reliable database. In particular, the key to the assessment in PROPER is based on the database system which allows simultaneous comparison of results from existing sources (self-reported, PROPER, PROKASHI). With the database, PROPER is able to do the following analysis: (1) correlation analysis of pollution levels, (2) trend analysis of pollution, (3) other regression analysis on effluent and characteristics of the treatment systems and production processes.

E. Institutional Support: 

The system requires support from the regulated sector (industrial sector). Participation for PROPER was compulsory for selected firms. However, it also contained provisions for “opt-ins”. In the case of Indonesia, the government agency went to a great deal not to alienate or provoke the industry. This required from the regulatory agency the provision of accurate and timely advice about what firms can do to improve their ratings. There was also heavy use of media strategy in the release of information and other aspects of public relations related to the program. The implementation of the program is successful due to the garnered political support, community willingness to participate, and building of experience from the PROKASHI initiative.

F. Planning, Scheduling or Sequencing of Activities: 

(not applicable)

V. Further Information: 

Contact Person: The Ministry of Environment, Republic of Indonesia (proper@menlh.go.id), C Building - 2nd Floor, Jalan D.I. Panjaitan Kav. 24 Jakarta 13410 – Indonesia, Telp/Fax : +6221-8518423, +6221-85905639

Lopez, Jorge Garcia, Thomas Sterner, and Shakeb Afsah. Public Disclosure of Industrial Pollution: the PROPER Approach for Indonesia?. October 2004, Discussion Paper 04-34. Resources for the Future. Washington D.C.

PROPER: The Company’s Environmental Performance Rating Program (http://www.menlh.go.id/proper/proper%20baru/Eng-Index.html)

What is PROPER? Reputational Incentives for Pollution Control in Indonesia (http://www.performeks.com/media/downloads/what%20is%20proper.pdf)

Re-Evaluating and Continuous Assessment of Biodiversity Issues and the EIA: The Case of Vietnam

Date posted: 
Nov 20 2009

The Environment Impact Assessment is ideally an integral component of a project's planning process. It identifies potential risks given the present scenario and the perceived impact of the project's activities. Given this, the EIA gives recommendations given the set of information available during the time of the assessment. However, once the project takes place, a review of the EIA is seldom made. There is a need to revisit the EIA especially if perceived environment conditions change.

Responsible Party: 
Enforcement Agency
I. Objectives or Impact: 

There is a tendency for the Environment Impact Assessment (EIA) process to focus primarily on technical aspects (e.g. pollution created, emission). However, the process sometimes misses on actual environment concerns will surely be affected by the project, like relocation or biodiversity. Worse, concerns on economic development often takes the prime seat while issues related with conservation and biodiversity are placed aside. The problem is that environmental damages might prove to be irreversible. Also, biodiversity issues that seem to be trivial at initial glance might become big risks as an economic activity or project progresses. The case of cement manufacturing in Ha Tien Plane in Vietnam, a critical ecosystem, displayed the need to continually assess impacts of economic activities on biodiversity. A change in the treatment of the EIA, from being a mere procedural step in project implementation to a guide that advises and gives warning to potential impacts, is highlighted.

II. Description of the Good Practice (Outputs): 

A Swiss-based cement company, Holcim, approached the International Finance Corporation (IFC) about a proposed greenfield cement plant in Hon Chong in 1993. Around that time, Vietnam was experiencing economic growth, and was opening its country to foreign investment. Specifically in the cement industry, the supply of cement from two initial operators was already being overtaken by demand. The proposed site of Holcim was highly scenic, which actually supports tourism activities. However, the view then was that the area appeared to be unproductive. In fact, the site did not appear to meet the IFC’s natural habitat standard. Interestingly, the initial EIA undertaken for the proposed cement factory noted that there is little wildlife in the area and lack of birdlife. The EIA also focused on technical issues (e.g. emission), with modest attention to biodiversity. Issues on biodiversity were raised but it was concluded that the need for cement was of prime importance relative to conservation. With the operation of the cement plant, it was realized that construction and related costs were higher than expected. Also, the production volumes were lower compared with the projected volumes. At the same time, the Asian Crisis halted the growth of the cement industry. Around that time as well, stakeholders slowly learned and realized the biological value of the affected area. Simultaneous with the cement plant’s operation, the IFC revisited the adequacy of the earlier EIA. It was learned that the landscape of the area is one of the world’s most threatened karst landscape. The biodiversity value of the area also changed due to what was happening in the other parts of the region. Grassland habitats were lost throughout the region due to the expansion of shrimp farming and rice cultivation. As grasslands slowly disappear in other areas, the endangered Eastern Sarus Crane (the world’s tallest flying bird), congregated in larger numbers in other areas, specifically the Holcim Vietnam site.

III. Outcomes or Results: 

Given the “change” in the biodiversity value of the site, Holcim and the government were placed in a predicament. The government’s priority was still economic development. At the same time, Holcim holds mineral rights on the limestone of the site. In 1999, the IFC commissioned a biodiversity assessment of the site, and the entire Hon Chong region. The assessment recognized the need for an integrated conservation initiative, encompassing the adjoining limestone, wetland, and sandstone. Though Holcim recognized that the concern is region-wide and not limited to its site, it realized that its corporate image could be affected. The biodiversity issues that emerged prompted Holcim Vietnam and the IFC to form a partnership with the International Crane Organization. Their primary aim was to demonstrate that maintaining the natural habitat could be more economically valuable than pursuing competing activities like shrimp and rice cultivation. An area (Phu My) was finally identified as an area for conservation management. It showed to be economically viable for the area. Other small-scale industries from conservation management also emerged like handicrats-making. The development of the area won the financial support from the World Bank Development Marketplace. Local government support is also strong for the conservation management efforts in the area. The linkage between IFC and the Industrial Bank started in 2004, with the IFC’s initial investment of US$ 52 million on the bank. The first-phase of the risk-sharing arrangement in 2006 made possible the creation of a facility that has been used to leverage a portfolio of US$ 65.7 million of energy efficiency equipment and project loans for small and medium-scale projects. Projects typically pursued were industrial boiler retrofitting, wasted heat recovery, co- and tri-generation projects for district heating, power saving, and optimization of industrial energy use. The initial efforts of the IFC and Industrial Bank attracted two prominent international co-investors, namely the Hang Seng Bank of Hong Kong and Singapore’s GIC Special Investments. In March 2008, participating banks in the CHUEE program approved 70 energy efficiency loans, with a loan portfolio of US$ 243 million. Interestingly, projects financed by the loans contribute to a net annual reduction of greenhouse gases of 4.3 million tons.

A. Policy Framework: 

There is a strong need to review how the EIA is conducted, particularly on the issue of securing commitment to the measures prescribed by the EIA. Also, regulatory and implementation polices that make the review of EIAs possible should be in place, with the fact that economic activities can surely have unforeseen impacts.

B. Budgetary and Financial Requirements: 

The concerned government agency needs to set up a fund that will finance regular review of selected EIAs, particularly large-scale and huge-impact projects.

C. Human Resources: 

There is a need to have a strong monitoring staff that traces whether the stakeholders comply with the measures identified by the EIA and the commitments given by respective parties. Also, given that economic activity could have irreversible consequences, the environment agency should have skills that would allow them to take preventive actions.

D. Material Resources: 

Given that a preventive action is the ideal stance, resources that would enable the regulator to track commitments and performance are necessary. A sole unit, equipped with a good data base system, is required in tracking industry actions.

E. Institutional Support: 

Partnerships with the local government and other stakeholders (NGOs, civic groups) are required to continuously keep track of biodiversity concerns. In the case of Holcim, the clamor for a review of the EIA came from the scientific community.

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