Annex 7. New Economic Instruments Proposed in CEE Countries

New economic instruments planned for introduction in CEECs:

Bulgaria
  • Bulgaria plans to introduce waste related product charges according to the provisions in the new Waste Act passed in 1997.
  • Emission charges on water and air pollution are proposed.
  • The draft Act on Mineral Resources foresees the introduction of mining charges and natural resource charges with an environmental component.
  • An annual nature tax is planned. It would have to be paid by hotels, stores, sport facilities etc. located in nature protected areas.
Croatia
  • Tax/duty allowances for environmental technology, for instance for renewable energy technology, import of waste incineration equipment and equipment for interventions in case of sudden Adriatic Sea pollution;
  • Environmental Fund at National level;
  • Other economic instruments are considered for creating a revenue basis for the new National Environmental Fund and to help resolving specific environmental problems (for instance, charges on industrial and hazardous waste).
Czech Republic
  • A number of new instruments are proposed: deposit refunds on packaging material, batteries and accumulators; charges on fertilizers and pesticides.
Hungary
  • Air emission charge (official designation: environmental load charges): the basis of the planned charge is the quantity of air pollutants emitted from stationary industrial sources. The emphasis is on SO2, NOx, CO and non-toxic dust while other air pollutants could be charged as well. The charge rates were determined through cost-benefit analysis but these rates were decreased in the consultation process according to enterprises' ability to pay (proposed rates at present: SO2 - USD 60 or 120/ton; NOx: USD 120 or 240 / ton; CO and non-toxic dust: USD 60 / ton; most hazardous air pollutants: USD 1500 / ton). The charge rates would be increased gradually until the final rate is reached in the fifth year after introduction. The planned total revenue in the fifth year after introduction is 50-80 mln USD (at exchange rate of HUF 250 / USD).
  • Water and soil pollution charges (official designation: environmental load charges): The main objectives of the proposed charges are: to implement the polluter pays principle; to give incentive for firms and for sewage companies to decrease effluents; to give incentive for individuals to decrease water consumption; to connect to sewage channels. In case of water charges, the chargeable subjects are those persons and entities who discharge waste water to water basins. The basis is the quantity and toxicity of effluents discharged. Sewage companies will probably increase sewage charges. In case of soil charge, those individuals and entities have to pay who discharge wastewater into the soil or use waste water reservoirs. The basis is the quantity of waste water discharged, and the danger of technology. For some of the main pollutants, the range of proposed water charge rates is as follows (at actual exchange rates): COD - USD 150-220/ton; BOD - USD 250-360/ton; phosphorus - USD 2500-3650/ton; nitrate - USD 300-440/ton. Multipliers reflecting regional, and hazard factors as well as the sensitivity of receiving water are proposed too. The charges would be introduced gradually over 5 years. In the 5th year after introduction, the planned revenue would be ca. USD 60 mln (at current exchange rates). Most of the revenue would go to the Central Environmental Protection Fund and part to the regional water basin protection agencies and the respective municipalities.
  • New product charges (paper, dyves and solvents) will be proposed.
  • New legislation on deposit refund systems is under preparation covering not only on packaging materials. The proposals are still in an early stage.
Latvia
  • Environmental tax on energy resources based on CO2 and/or SO2 content;
  • Tax differentiation between leaded and unleaded gasoline;
  • Road tax allowance for cars equipped with catalytic converters.
Lithuania
  • Product charges on packaging materials to reduce use of packaging, improve collection of used packaging and increase re-use;
  • A marketable permit system in the water sector in a determined region of Lithuania is currently being prepared. Judging from the work done so far, positive results can be expected.
FYR Macedonia
  • Air pollution charges are planned to be introduced: charges shall be payable by both legal entities and individuals. The revenue from the charges shall be channeled to the Fund for Environment and Nature Protection. Apart from 5 basic air pollutants (Particles, SO2, NOx, CO, CxHy), the charges shall be imposed on approx. 80 air pollutants grouped into three toxicity classes. The proposed charge rates for the main pollutants are as follows (at current exchange rates): Particles: 9 USD/ton; SO2: 6 USD/ton; Nox: 4 USD/ton; CO: 10 USD/ton; CxHy: 4 USD/ton.
  • Water effluent charges are planned to be introduced: charges shall be collected from industrial facilities and entities releasing pollutants into the water. It is proposed to charge the following water pollutants (in parenthesis the proposed charge rate is given at actual exchange rates): hard metals (31 USD/kg); BOD and suspended particles (26 USD/kg); chlorides and sulfates (20 USD/kg); other emissions (9 USD/kg). An additional 50% shall be added to the basic charges if a pollution source has exceeded the maximum permissible concentrations (MPC).
  • The current system of waste charges does not allow for a realistic cost coverage of waste disposal, recycling and combustion, and has also not allowed investment activities in this area. New waste charges are proposed. Three groups of waste have been identified as basis of the charges. The charge rates are differentiated in these 3 categories according to the cost of treatment:
    1. Municipal waste: the current system of user charges is continued. The new element is that 2% of the revenues from these charges is channeled into the Fund for Environment and Nature Protection.
    2. Technological waste disposal charges: USD 7/ton (at current exchange rates) for waste created with wood processing, paper cellulose and cardboard production; USD 11/ton for waste with leather and textile industry; USD 18/ton for waste from oil processing, natural gas refining and coal pyloric processing; USD 18/ton for organic chemistry processes waste; USD 18/ton for waste generated with the production of paints and polishes, glass enamel; USD 11/ton for waste from waste mineral and transformer oils; USD 7/ton for hospital waste or created with relevant research in the area of health protection; USD 118/ton (18'000 pieces of 2l bottles) for waste of PET-packaging in the food industry; USD 116/ton (62'500 pieces of 0.33l tins) for waste with tins in the food industry.
    3. Hazardous waste: divided into three categories in accordance with the Act on Ratifying the Basel Convention on Transport of Dangerous and Hazardous Substances. USD 27/kg for waste from the three categories in accordance with the Basel Convention, excluding waste covered by the technological and communal waste (categories 1 and 2 above).
Poland
  • An environmental product charge (surcharge) on fuels is proposed: two teams of experts hired by the Polish Ministry of Environment have proposed a solution in which surcharge would be applicable to all mining energy agents and fuels (coals, petrol, oils and gases). The proposed level would amount to a determined percentage of the total sales of fuels. Differentiation of rates of the surcharge have been strongly recommended. These differentiated rates should reflect the proportional content of carbon, sulfur and nitrogen compounds in the given type of fuel. The Polish Ministry of Environment has been considering a number of options for introduction of the surcharge on fuels. One recommendation was on introduction of surcharge with maximum rate of 8% for all gasoline consumers together with the exemption on charges emission of SO2, NOx and CO2.
  • An emission charge on CO2 is considered;
  • New product charges are proposed: the Polish Ministry of Environment is investigating possibilities to introduce product charges on washing agents, PET packaging, paints and varnish on hydrocarbon dissolvents, packaging of fertilizers, pesticides and food products, metal cans, Tetra-Pack for soft drinks, fertilizers and pesticides and glass packaging.
  • New deposit refund systems are proposed: at present the Polish Ministry of Environment is working on the concept to introduce deposit refund systems on accumulators and tires. At a later stage, deposit refund systems could be established on car bodies, fluorescent lamps, refrigerators, TV sets and monitors;
  • There is interest in introducing tradable permits: Tradable permits especially enjoy the interest in Poland due to the already existing system of pollution permits for individual users. So far, Poland's experience with tradable permits are limited to the so called "Chorzów experiment" which had been started in March 1991 with participation of the Steelwork "Ko&brkbar;ciuszko" and Power Station "Chorzów". In addition to this experiment, a Phare funded project was launched with the aim to research on the institutional and legal conditions needed to introduce the tradable permit system into the Polish environmental policy. The project covered for its experimental purposes the territory of Opole Voivodship. The recommendations of the project referred to the coverage of all corporate and individual bodies obliged to have the permit for SO2 emission. The assumption was made that the system of tradable permits would be functioning along with the currently existing system of fees and fines. Additionally, a new instrument - a fine for emissions higher than allowed by the number of permits would be introduced. The introduction of tradable permits would require new legislation;
  • Work on the concept of ecological insurance is carried out;
  • Further expansion of tax allowances and exemptions are considered for giving incentive to pro-ecological activities undertaken by both companies and individuals.
Romania
  • There are plans to establish an environmental fund at national level;
  • In air protection a number of options for new economic instruments are considered:
    • Sulfur tax: adopting domestic tax on the sulfur content of all fuels (fuel oil, diesel fuel, and coal) would give fuel producers an incentive to lower the sulfur content which is far cheaper than trying to capture SO2 at the point of combustion. Exports would be exempted and imports would be taxed. The tax could be made high enough to completely eliminate any cost advantage to refineries of producing 0.6 % sulfur content diesel relative to 0.05% sulfur diesel. The revenues from this tax would be used as an air pollution control fund.
    • Emission charges: This instrument would be a direct charge levied on measured and monitored emissions by a group of large emissions sources. The charge levels will be based on levels established in the environmental permit, at modest values initially. The profits would be placed in air pollution control fund and earmarked for stationary source pollution control investments.
    • Emissions trading: emission trading give sources flexibility to find low cost alternatives for pollution control. The opportunities for trading in Romania are restricted to SOx, NOx and suspended particulate matter. Before such systems can be recommended, current procedures for estimating the quantity of emissions from point sources would have to be improved and the new Law on Atmosphere should be in force. The potential for allowance or marketable permit trading systems for selected air pollutants in Romania is to be considered in the medium term.
  • In water protection a number of options for new economic instruments are considered: There a number of possible instruments; revenues from new instruments could be placed in a river basin water fund.
    • Effluent trading: Industry and municipal sewage treatment plants as point source do have potential for implementing trading systems for BOD, nitrogen, and phosphate discharges. Through trading, the point sources are allowed to satisfy what for it are costly discharge requirements through the purchase of credits that another point source earns for reducing discharges below permitted amounts. The result is that overall pollution goals are satisfied at lower cost.
    • Increased effluent tariffs: Based on toxicity to health and the environment, the tariffs may be increased within permitted quantities and differentiate among various types of suspended and dissolved substances. All the receipts from effluent tariffs will go to the Water Fund with the money earmarked for reducing effluent discharges of point sources.
    • Flood protection fees and dam protection&enhancement fees: Through a surcharge on local property taxes for land and structures located within flood plains, Apele Romane may impose charges for flood protection services. The money collected will be channeled to the Water Fund with earmarking for flood protection activities.
    • Fertilizer and pesticide product charges: product charge on domestic fertilizer and pesticides sales, with proceeds earmarked for non-point source control measures such as education of farmers, monitoring of non-point runoff, and subsidies for not planting or maintaining livestock in a buffer zone near watercourses.
  • In waste management a number of options for new economic instruments are considered:
    • Product charges: A charge can be imposed on packaging material, tires, batteries, newspapers, and other items typically found in post-consumer waste. The amounts collected can be distributed to municipalities so that they can pay for a basic level of waste collection; separate waste streams and recover recyclable items; create additional environmentally sound solid waste landfills; and give subsidies to clean up litters and informal dumps.
    • Penalties: Regulations for waste management must be fair and practical. Penalties must have impact containing clear financial disincentives for non-compliance, a punitive measures for willful violators.
    • Improve user charges: Each user should pay a charge for providing basic solid waste collection services.
    • Deposit-refund for selected waste: The quantities of solid wastes that may be reduced and the recycling can be increased by imposing a mandatory deposit-refund system for materials such as plastic bottles, glass and metal containers, lead-acid batteries and other materials.
Slovak Republic
  • Product charges on packaging material, batteries and accumulators, and tires are proposed in the draft new Waste Act which is supposed to be adopted in 1998.
  • The proposal for the Act on the Protection of Inhabitants against Noise from Aviation Industry and Compensation for Aircraft Affected Neighboring Houses is currently being developed. The revenue from payments introduced under this Act will be a source of revenue of the State Environmental Fund.
Slovenia
  • According to the National Environmental Action Program, charges on fertilizers and pesticides are planned to be levied from 1999 on.
  • A nature protection non-compliance fee is proposed as part of the planned amendment to the Law on Environmental Protection.
FR Yugoslavia
  • Various types of economic instruments are foreseen in environmental policy documents and the framework environmental law. No specific proposals have been made to date.

REC * PROGRAMS * SOFIA INITIATIVES * ECONOMIC INSTRUMENTS * REPORT ON THE USE OF ECONOMIC INSTRUMENTS * ANNEX 7

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