Water

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)

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.

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