Principle 12: Compliance promotion

Capacity Development Key to Stopping Illegal Trade in Hazardous and Electronic Waste

Date posted: 
Dec 7 2012

Building capacity among environmental and customs officials for detecting illegal transboundary shipments of hazardous and electronic wastes was the focus of the Second International Hazardous Waste Inspection Project. 11 countries participated in the Project, which was convened by the International Network for Environmental Compliance and Enforcement (INECE) Seaport Environmental Security Network (SESN).

Developing Financing Model for Energy Efficient Practices in the PRC

Date posted: 
Nov 18 2008

The China Utility-Based Energy Efficiency Finance Program (CHUEE) is established to provide market-based solutions that will promote novel and sustainable financing model to promote energy efficiency in the private sector. 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.

Responsible Party: 
Regulated Community
I. Objectives or Impact: 

Pressures from population growth create a heavy demand for energy resources. In China, economic growth puts a heavy toll on energy resources. Since 2001, energy consumption was seen to increase much faster than GDP. The increase in the country’s living standards created a demand for products. Also, the flourishing of the heavy industry in China is quite rapid due to its growing position in the world market as a competitive player in the sector. Interestingly, the demand pressures might naturally prompt producers to churn out large volume of products at the expense of efficiency, especially in energy use. The China Utility-Based Energy Efficiency Finance Program (CHUEE) is established to provide market-based solutions that will promote novel and sustainable financing model to promote energy efficiency in the private sector.

II. Description of the Good Practice (Outputs): 

Past experiences show that investments and efforts to promote energy efficiency, both in the household and firm levels, can be profitable. For example, conversion to less carbon-intensive energy sources is doable, and in fact can be a source of income. However, a major barrier to actual implementation is the scarcity in financing. It is typical that local banks have a skeptical view on the profitability of environment projects per se. Also, the guidelines of banks are often not aligned with the peculiarities of environment and renewable energy projects (e.g. long gestation periods, issues on track records of borrowers). Also, banks are most often not equipped to evaluate these projects. The International Finance Corporation (IFC) of the World Bank leverages its experience with renewable projects in promoting energy efficiency via the development of novel financial models and schemes. The CHUEE program is co-funded by the IFC, the Global Environment Facility, and the Finnish and Norwegian governments. The program offers a risk-sharing facility for partner banks and tailored advisory services that aim to develop the partner banks’ capacity to appraise projects, and at the same time develop its approval process and credit-underwriting procedures.

III. Outcomes or Results: 

Recently, the IFC signed a memorandum of understanding with the China Export-Import Bank to provide capacity building on the bank’s environmental and social risk management policy and practices for overseas investment. Since 2007, more than 1,400 product managers, credit officers, and loan officers from 100 business outlets in the country received energy efficiency financing training from the IFC. The participating banks included the Industrial Bank, the Bank of Bejing, and Shanghai Pudong Development Bank. Industrial Bank is the initial bank partner in the program. 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: 

One of the crucial steps for endeavors like this is how to fully incorporate a lending program for environment projects within the bank. Given the financial viability of environment projects, resistance from the top management of formal institutions is present. In the case of the CHUEE program, a memorandum of understanding was undertaken between IFC and the partner bank. A careful and explicit risk-sharing arrangement needs to be laid out due to perceived technical and financial risks of energy conservation investments and lending among industrial enterprises and banks.

On the side of the government, policy and regulatory interventions are required complements to encourage industrial enterprises to invest on energy efficient practices. This is pressing given a presence of the large size and share of energy-intensive industries in the economy. Strong regulatory policies, especially command-and-control schemes, and monitoring activities, might be required especially if inefficient practices are already widespread.

B. Budgetary and Financial Requirements: 

(see materials and resources; further information)

C. Human Resources: 

Initially, reliance for technical support for evaluation from outside expertise might be heavy. In China, support was given for staffing development, capacity building, and training. Trainings were also provided to instill due-diligence on skills related with project development and appraisal of energy efficient projects.

D. Material Resources: 

Aside from the financing requirements and support for partner banks, resources might also be required for energy conservation investment promotion, particularly via project demonstrations. Testing of business models and institutional arrangements will require resources for pre-investment activities like feasibility studies and the development of new financing mechanisms.

E. Institutional Support: 

For programs that aim to introduce novel practices, support from the banking sector might be required. For China, the IFC supported a series of national workshops to present successful case studies of subprojects.

F. Planning, Scheduling or Sequencing of Activities: 

The gestation period of programs that aim to promote sound practices on energy conservation is long, especially given perceptions on the nature of environmental investments. For China, the memorandum of understanding occurred in 2004. The initial years might just be devoted towards analyzing the capabilities of the banking sector with regard to business development. The development of strategies, financing models, and appropriate sectoral arrangements and practices, might occur after two years. Scaling-up of the lending activities might happen during the later years of the program.

V. Further Information: 

The Clean Water Act Law of the Philippines: The Use of Incentives to Promote Investments

Date posted: 
Jan 26 2010

The Philippines is once known to be relatively abundant in water resources. However, the pressures of population growth, urbanization, and industrialization placed a toll on the resource. One of the most pressing concerns is the increased competition in the various uses of water. There is also serious concern regarding watershed degradation and unmonitored extraction of groundwater by illegal users. The Clean Water Act Law of the Philippines aims to promote and encourage the protection of the country’s water resources.

Responsible Party: 
Compliance
I. Objectives or Impact: 

The Philippines is once known to be relatively abundant in water resources. However, the pressures of population growth, urbanization, and industrialization placed a toll on the resource. One of the most pressing concerns is the increased competition in the various uses of water. There is also serious concern regarding watershed degradation and unmonitored extraction of groundwater by illegal users. At the same time, pressing issues on water pollution is present. From a World Bank study, 90% of the sewage generated in the country is not treated. Major rivers and waterways are also confronted with pollution and degradation due to the encroachment of settlers, especially in urban centers. The Clean Water Act Law of the Philippines aims to promote and encourage the protection of the country’s water resources. To fully encourage local governments, water districts, communities, and the private sector to partake in efforts on reducing water pollution, provisions on incentives are provided for in the law.

II. Description of the Good Practice (Outputs): 

The Clean Water Act provides incentives to local government units, water districts, enterprises, private entities, and individuals to develop or undertake efforts that would result to effective water quality management and pollution abatement. Specifically, it encourages efforts on wastewater treatment, cleaner production, and adoption of technologies that minimizes waste. Incentives specifically mentioned in the law are tax and duty exemption on imported capital equipment and tax credit on domestic capital equipment.

III. Outcomes or Results: 

The guidelines and procedures on availing the incentives provided by the Clean Water Act have just been recently formulated. However, from the consultations conducted by the Department of Environment and Natural Resources (DENR) with various stakeholders (manufacturers, private sector, NGOs, and local government units), positive response on the incentives was generally elicited.

A. Policy Framework: 

An initial barrier that was encountered was the Clean Water Act’s harmonization with preceding laws on incentives and taxation. For instance, heavy discussions with respect to exemption from Value-Added Tax (VAT) occurred. Also, it was realized that other government agencies are tasked on evaluating the merits of an application for tax exemptions. In the case of the CWA, heavy coordination with other government agencies, specifically with the Bureau of Investments (BOI), was necessary. Another barrier encountered is that though the law mentions the involvement of private lending institutions, it was discovered that lending institutions do not have a regular source of funding for environment projects like waste water treatment and pollution abatement. The funds they are using for existing environment projects are dependent on support given by various international donor agencies.

B. Budgetary and Financial Requirements: 

Another input that was identified as necessary is the availability of personnel within the DENR who can assess whether an application merits the CWA incentives. Also, it was also important to have a unit or regular staff that will assess the performance (in terms of pollution control, discharge) of those who would avail of incentives.

C. Human Resources: 

A complete program on evaluation to monitoring of CWA-related investments and efforts would require funding for regular operations. It was identified that regional DENR office need to have resources in order to conduct evaluation and monitoring of those granted with CWA incentives. Also, additional staff needs to be hired in order to accommodate the administrative tasks related with accommodating applicants.

D. Material Resources: 

The additional administrative tasks related with evaluating the applications would require additional resources like vehicles for inspection and evaluation, and an information and data base system for keeping track of the performance of those granted with the incentives. At the same time, the Bureau of Investment would also require an information system that will aid whether the incentives given were really spend on CWA-related activities.

E. Institutional Support: 

Partnerships with the local government and other stakeholders (NGOs, civic groups) are required to ensure that performance actually improves due to the provision of incentives. Also, regular coordination with other agencies like the Bureau of Internal Revenue and the Department of Finance needs to be undertaken.

F. Planning, Scheduling or Sequencing of Activities: 

Typical programs that provide subsidies or incentives for environment programs have a gestation period. This provides an incentive to stakeholders to immediately implement their program their investment plans. In the case of the Clean Water Act, less than ten years is provided for the the provision of incentives.

V. Further Information: 

Bureau of Investment. www.boi.gov.ph Department of Environment and Natural Resources. www.denr.gov.ph

Use of Effluent Charges in Malaysia's Palm Oil Industry

Date posted: 
Dec 12 2009

Malaysia is one of the countries to first introduce effluent charge system, specifically for palm oil and rubber mills. In 1977, the country’s Department of Environment (DOE) announced discharge standards for BOD on palm oil effluent. Prior to the introduction of the regulation, crude palm oil was the single worst pollution source in the country. Daily discharge alone increased by more than 300% from 1965 to 1977. The aim of the regulation was to reduce pollution created by the sector without hampering its growth.

Responsible Party: 
Compliance
I. Objectives or Impact: 

Malaysia is one of the countries to first introduce effluent charge system, specifically for palm oil and rubber mills. In 1977, the country’s Department of Environment (DOE) announced discharge standards for BOD on palm oil effluent. Prior to the introduction of the regulation, crude palm oil was the single worst pollution source in the country. Daily discharge alone increased by more than 300% from 1965 to 1977. The aim of the regulation was to reduce pollution created by the sector without hampering its growth. Sector/subsector: The policy specifically targets the crude palm oil industry of the country. Specifically, it aims to reduce pollution in 42 rives in the country that were greatly affected by pollution due to disposal of untreated effluents.

II. Description of the Good Practice (Outputs): 

The action combined two measures: the use of market-based instruments and command-and-control approaches. The annual license fee of a mill was linked with its projected BOD load. A two-tiered effluent charge was applied to the licensing fee. The licensing fee was based on (1) location and class of premises, (2) quality of water discharged, (3) pollutants and quality of pollutants discharged, (4) existing level of pollution, To monitor the accuracy of the projections, the rule specified that quarterly reports on actual discharge and the average BOD concentrations. The licensing fee system utilized a progressive reduction program due to the lack of proven technology on effluent treatment. Overtime, the standards of the government became stringent. This gave time for the industry to learn and explore schemes of improving and reducing discharge. Firms conducting research on reducing effluent treatment were given partial or full waiver on licensing fee. The licensing fee system was also complemented by an effective command and control scheme. One of which is that compliance with the BOD standard became mandatory after the first year. The DOE showed its commitment by suspending the operating licenses of violators. This was showed by the high profile case of one mill in 1979. The regulation also announced in advance that more stringent measures will be adopted in the coming years. This prompted the mills to prepare their capacity to meet, not only the existing standards, but the more stringent rules in the coming periods.

III. Outcomes or Results: 

A year after the imposition of the regulation, the pollution load fell more than half. Reduction in the pollution load decreased as well in the succeeding years. From 1977 to 1994, organic pollution load in the rivers decreased significantly by about 91%. As of date, only 13% of 936 stations monitored in the river systems are categorized as very polluted. Interestingly, the number of crude palm oil mills in the country increased significantly as well around the same period. On the side of the firms, the progressive approach taken by the regulation allowed them to adjust on the more stringent rules that followed. They were also given enough time to invest on technologies on treatment facilities. Interestingly, a number of firms were able to develop commercial byproducts form the effluent, thus avoiding the cost of treatment as well as the pollution charges. The byproducts include animal feed, fertilizers, and biogas.

IV. Essential Elements for Success: 

Policy Framework: Enabling Policy, Regulation, Inter-agency/Multiparty Agreements

The success of the effluent charging system in Malaysia was due to the proper combination of market-based incentives and command and control scheme.  The country recognized, as early as 1974, that command and control mechanisms alone is not sufficient to address pollution concerns.  The 1974 Environmental Quality Act of Malaysia contains punitive and economic measures to control pollution.  The 3rd Malaysian Plan (1976-1980) laid down the principles for pollution control to achieve environmental objectives.  In the succeeding Malaysian Plans, the role of licenses, fines and charges, and other economic instruments in the control of effluent disposal was identified. 

Human Resources and Skills

The scheme followed by Malaysia requires a regulatory body that can both handle command and control schemes and economic instruments.  Also, it requires the regulator to have skills in determining the fee given a particular level of discharge.  On the other hand, the cost of monitoring this scheme may not be too high since monitoring of the licenses can be easy.  Also, random checks can be conducted anytime.  The only concern for Malaysia is that the growth of the sector resulted to an increase in monitoring costs since the number of firms also increased. 

For this type of schemes, the monitoring costs might also be high if the charge is based on the concentration rather than the load of emission.  The regulator should be able to ensure that there is no incentive for mills and firms to high the total discharge.

   
Material and Resources

The scheme followed by Malaysia can be information-intensive since necessary data needs to be analyzed to ascertain that reports given by the mills are accurate.  The entire program requires a tight data collection, monitoring, and analysis.  It requires the availability of testing laboratories, monitoring system, and reliable database.

Institutional Support

The system requires a regulatory body that is dedicated to the policy it is pursuing.  Also, one of the key in the success of the projects is the transparency of the rules and the phasing of standards.

Promotion of Compressed Natural Gas (CNG) in Bangladesh via Command and Control Schemes

Date posted: 
Nov 13 2008

The transport sector is identified to be one of the contributors of air pollution in Dhaka. In particular, two-stroke auto rickshaws or baby taxis were identified as one of the strongest contributor. It was also found out that this vehicle emits a hydrocarbon; volatile organic compound; and particulate matters. The program to achieve better air quality was kicked-off by conversion to Compressed Natural Gas (CNG) and the startup of fueling stations in October 2001. In December 2002, the Ministry of Communications issued a ban on two stroke baby taxies.

Responsible Party: 
Enforcement Agency
I. Objectives or Impact: 

The transport sector is identified to be one of the contributors of air pollution in Dhaka. In particular, two-stroke auto rickshaws or baby taxis were identified as one of the strongest contributor. It was also found out that this vehicle emits a hydrocarbon; volatile organic compound; and particulate matters. The program to achieve better air quality was kicked-off by conversion to Compressed Natural Gas (CNG) and the startup of fueling stations in October 2001. In December 2002, the Ministry of Communications issued a ban on two stroke baby taxies. The following year, a new fleet of CNG three-wheeler was introduced.

Sector/subsector:

The objective of the policy was to ease air pollution problems in major cities like Dhaka. It was easy for the government to pinpoint the source of pollution in the capital since there are no heavy industries or power stations near the city.

II. Description of the Good Practice (Outputs): 

The program employed command and control schemes to address the problem. The government introduced an option by bringing in CNG. The program was also accompanied by an air quality-monitoring project funded by the World Bank and the Dhaka Clean Fuel Project of the ADB.

With the introduction of CNG in 2001 and the start-up of fueling stations, about 25,000 light vehicles were converted to CNG. Initially, conversion to CNG was thought to be prohibitive, averaging to about US$583 per vehicle. However, increasing prices of fuel triggered the demand for conversion. Currently, an average of about 3500 vehicles are converting to CNG. Currently, there are more than a hundred refueling stations in the country.

Currently, the government is also converting their fleet to CNG. As of today, almost half of their fleet converted to CNG. The government also recently established the Bangladesh Energy Regulatory Commission, which aims to monitor and make regulations on CNC use.

Currently, the government is also looking at CNG conversion for diesel buses and trucks. The plan is to do it side by side with the phasing out of old buses and trucks. It is also planning to look at pricing issues on fuel. For example, there is an incentive in the other sectors to use diesel fuel since it is provided with subsidy.

III. Outcomes or Results: 

The introduction of CNG resulted to an improvement in air quality of urban cities, like Dhaka. As of date, around 50,000 baby taxis converted to CNG. Initially, the public found the initial phase out of old rickshaws difficult. However, the benefit of the program was realized with the improvement of air quality in the city. Currently, the increasing price of fuel creates an incentive to convert to CNG.

IV. Essential Elements for Success: 

Policy Framework: Enabling Policy, Regulation, Inter-agency/Multiparty Agreements

The government carefully planned the move towards promotion of alternative fuels.  The country’s Environmental Conservation Rules requires the use of catalytic converter and diesel particulate filter for petrol and diesel driven vehicles.  Also, this policy was effective since ban on old buses plying the city was done side by side. 

In terms of the program’s operation, a national standard that will guide daily program routines (conversion, refueling, etc) needs to be developed.  The various components, from licensing, conversion, monitoring, and enforcement of emission standards, need to be properly assigned to respective agencies.

Human Resources and Skills

A well-integrated organization is required to man the program’s operation.  A licensing office should be prepared to handle the annual increase of applicants for vehicle regulation, inspection, and CNG conversion.  A pool of trained technicians and fleet managers should be developed to handle the day-to-day operation (refueling, ensuring of safety, conversion). 

On the side of monitoring of air quality and emission standards, technicians should be regularly available.  Also, the tasked agency should be prepared for expert who can handle the equipment used for emission testing.

Material and Resources

The program is quite intensive in the use of capital equipment, from licensing to monitoring of air quality.  For the CNG stations, fueling stations should be carefully designed for efficiency and safety.  The size of the fueling station should be appropriate given the daily demand for CNG.  The government should also invest on proper emission testing equipment. 

Institutional Support

The business of CNG refueling and conversion is becoming lucrative given the demand for CNG.  In Bangladesh, a large number of entrepreneurs is applying license to operate fueling and CNG converting stations.  The government recently granted more than 2000 permits to operate for CNG fueling stations alone.  The mechanisms on accreditation and monitoring should be laid down since there are both safety and pricing concerns in this business. 

In terms of emission testing, an office should be properly designated on handling the daily emission testing activities.  A procedure on how to properly conduct testing should also be prepared. 

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