Czech Republic

A. Background

Present use of economic instruments, development, efficiency and prospects

  The absolute majority of economic instruments for environmental protection (charges, tax allowances, grants, soft-loans, etc.) is codified through legislation as acts or other regulations. Administrative instruments (rather than economic) dominate the present environmental protection system, vested in the so called Grand Ecological Acts (Act on the Environment, the Clean Air Act, the Water Management Act, the Waste Management Act, etc.). Presently, some important amendments to the aforesaid acts are being prepared, which shall directly effect economic instruments in some cases. The changes shall take place mainly in the area of environmental pollution charges (air, waste water, and solid waste disposal).

  It turns out, however, that the instruments were not created systematically and often discrepancies exist between their proclaimed and real functions. Some problems are consequences of the instruments being prepared predominantly by lawyers and engineers rather than economists. Additionally, for those involved in formulating new legislation the more traditional administrative mechanisms are more familiar and understandable than market-based economic instruments. Other problems resulted from the previously federal composition of Czechoslovakia, where three governments and three parliaments existed.

  Occasionally insufficient courage on the part of authorities to enforce the rather new and non-traditional instruments (for instance stimulating rates of charges for pollution) presents further problems. Similar concerns were also responsible for the introduction of economic instruments being prolonged over a period of a few years which, along with inflation, resulted in the significant decrease of the economic instruments' efficiency.

  At present, a new environmental policy, which assumes the application and use of even more economic instruments, is being formed on the basis of the previous period's evaluation. One reason for such a trend is the fact that the system of environmental protection based mainly on administrative instruments is enormously expensive and many experts have expressed their doubts as to whether such a fragile new market economy as that currently existing in the Czech Republic can bear the costs. Besides this, the present mainly administrative system of environmental protection shows numerous functional shortcomings which cause many particular problems which must be solved case by case.

  Apart from improving the current system of economic instruments the implementation of many new instruments is under preparation, such as ecological taxes, a deposit refund system for bottles (and possibly other packaging), further credit guaranty, environmental insurance, etc. All of these intentions are being discussed so far on a ministerial and inter-ministerial level and they shall gradually be tendered to the government for ratification. The experience gained thus far from the implementation of economic instruments is still mixed. Their fiscal function has been obviously preponderant, while their stimulative (incentive) function less clear. Some of the reasons for this are: the lack of expert environmental economists; pressure from some lobbies (mainly industrial) towards minimizing expenditures for environmental protection; low buying power of citizens and, consequently; political concerns about further immediate financial burdens posed by economic instruments for environmental protection.

  The importance of economic instruments grows as the transition to a market economy progresses, and these instruments are becoming irreplaceable. Market-based economic instruments, in contrast to administrative instruments, function systematically and objectively for the welfare of the environment. Without an understanding of the function, position and importance of these economic instruments there can be no possibility of reaching the objectives of the environmental policy in an efficient manner. The Ministry of Environment has established an extensive program for perfecting the currently used economic instruments and for introducing new ones. To what extent this program will succeed, depends on the further economic and political development of the Czech Republic.

  It is possible to consider the program of economic instruments for pollution control and the use of natural resources in the Czech Republic as progressive, even after world-wide comparison. A fairly comprehensive system is in place and all attributes recommended by the various international authorities (for instance the OECD committee) are reflected within. However, the biggest problem for the time being is how to practically enforce the program.

  Implementation of the official state ecological policy depends on the extensive enforcement of these instruments. International support may also contribute to their more efficient enforcement. Such support should come not only from organizations like OECD and EU committees, but also from Ministries of Environment in other countries.

Taxation system and environmental impacts

• Value added tax;
• Consumption tax (on hydrocarbon fuels and lubricants, alcohol and distilled spirits, beer, wine, tobacco and tobacco products);
• Income and corporation tax;
• Real estate tax;
• Road tax;
• Inheritance and gift tax;
• Real estate transfer tax, and;
• Environmental protection tax

  The first seven taxes are not primarily intended to further environmental protection interests. However, several of them do incorporate some environmental elements.

  For example, in VAT (where 2 rates are distinguished: 23% basic rate, and 5% reduced rate), the items taxed at the reduced rate include certain environmentally sound products, such as paints and varnishes which are water-soluble, products of 100% recycled paper, electric passenger cars, thermal pumps, flow meters for measuring heat and hot water consumption, biogas, catalysers for motor vehicles, discharge lamps and fluorescent lamps, etc. The Ministry of Environment is trying to extend the list of items classified in the reduced rate category (e.g., items related to waste management, products with environmental labels like "Blue Angel" etc.). However, the Ministry of Finance is resistant. An evaluation of the effects of the current items with reduced tax might take place in 1995.

  In the case of the Consumption tax, preferential treatment is given to lead-free petrol over leaded petrol of the same category. Bionaphta and biogas are tax exempt.

  The income and corporation taxes contain clauses that the incomes of legal and natural subjects operating small hydroelectric power plants (up to 1 MW), wind-power plants, solar energy installations, biogas production equipment for production of biodegradable substances will be exempt from tax within a 5 years period. The basic rates of charges will be included, in keeping with the principle of internalization of ecological externalities, among cost items. Surcharges will be paid from profits of polluters. Up to certain amounts, taxpayers will be able to make donations for ecological purposes which will be deducted from the tax assessment base.

  Real estate tax liberation can be claimed if a change in the heating system is made (use of coal is replaced by the use of gas or electricity, or a system using renewable energy, i.e. solar, wind, geothermal, or biomass), as well as changes vested in the reduction of heating demands of a building, for a 5-year period from when the change took place. Thousands of subjects take full advantage of this incentive today. It is still too early, however, to fully assess the effect of the tax allowances.

  Until the end of 1995 no road tax must be paid by vehicles used for commercial activities equipped with catalytic converters. More than 10,000 car owners are taking advantage of this incentive at present, including a couple of hundred electric automobiles. However, considering the prices of new cars (the cheapest cars cost more than 200,000 Kc), the incentive of this tax allowance is minimal.

  The eighth tax title has been constituted especially to further ecological interests. However, environmental protection taxes are still at the proposal stage. For instance, the taxation of natural resources (especially fossil fuels), or environmentally "unfriendly" products is still proposed. Such proposals still lack the interest of the Ministry of Finance. There has been no success in applying such instruments thus far, not even during the most recent tax acts amendments which took place in the second half of 1993. If these taxes shall ever be implemented, it probably will not happen before 1996-97.

Pricing of energy products, raw materials and natural resources

  Prices for electric energy shall remain regulated, probably for the long run. Current consumer prices differ from the world standards both in the price amount and the price policy. Prices for business enterprises are at present about three times higher than prices for households (3 Kc/1 kWh), but even so, prices oscillate under the price level of advanced neighboring countries. Since 1.7. 1994, a price increase of electric energy for households of about 10% has occurred. The rather low prices for electric energy are particularly caused by the fact that electric energy for households is classified in the reduced rate category of VAT, which is 5%.

  Low prices for households are presently motivated by, among other things, political considerations (elections). It is expected that electric energy prices for both enterprises and households shall roughly increase to the amount of 5 to 6 Kc/kWh within the next two or three years.

  Prices of heat for households are considerably subsidized and they are classified at the lower VAT rate. This is so for both political and social reasons. Current prices oscillate around the level of 30 to 50% of the real costs.

  The prices for coal were deregulated by 1.3. 1994. Market prices of black coal and coke should move up about 20% as a result. Prices of brown coal, however, have stayed almost unchanged. Also, coal is being classified at the reduced VAT rate.

  Prices of heating oil are derived from real processing costs in the Czech Republic today (petrol is exported from Russia and other countries at world prices). Even though the consumer price is laden with a lower consumption tax than on other petroleum products (gasoline, motor fuel), the use of heating oil is not widespread.

  Prices of natural resources vary according to processing costs (cheap labor, subsidized railway traffic, lower environmental protection expenses) but are deeply under the world market prices. As a consequence of this, the export of cement, sand, etc., has multiplied during the last two years along with all associated negative incidental results for the state of the environment.

General conditions for the functioning of economic instruments in environmental policy

Macroeconomic situation

  With respect to privatization, the transfer of state property into the private sector moves forward. Several methods are used to do so. Enterprises and industrial companies, land and agricultural farms, all kinds of estates as well as a substantial part of the health care apparatus are subject to privatization. The new owners are fully responsible for their actions, including environmental damages that might occur in conjunction with the use of their property. The Polluter Pays Principle applies. At present, more than 60% of the enterprises have been privatized.

  In 1991, an extensive price liberalization took place. The prices of about 90% of formerly regulated items were completely liberalized. The price regulation was, however, kept within selected socially sensitive areas (energy prices, wages, medical services, etc.). As a result of the price liberalization, steep price increases have occurred (in the range of 100 to 1000% for various kinds of goods and services). However, even under such conditions, it was possible to maintain social peace. The remaining regulated prices will gradually be liberated. The brown and black coal prices, for instance, were fully liberated in May 1994, and the gasoline prices were liberated in July 1994.

  Partial convertibility of the domestic currency against freely convertible foreign currencies has been achieved. In 1991, a pro-export exchange rate was adopted, according to which Czech products could be exported, to some extent at least, to world markets. Thus, it was possible to compensate for the drop in exports to the formerly communist countries (mainly the ex USSR). Although a steep increase of imports from advanced industrial countries (OECD countries) has occurred, it was possible to keep international trade relatively well-balanced.

  Due to a restrictive budget policy, it was possible to control hyperinflation. The rate of inflation in the years 1991 - 1993 was as follows:
  1991.....57%;
  1992.....11%;
  1993.....20%;
  1994.....10% (est.).

  However, a significant decline in industrial as well as agricultural production has occurred. The decline of total industrial production was 35% at the end of 1993 compared to 1989. The development of production in particular branches was uneven, and from an environmental point of view it was ambivalent. The production of the chemical industry for instance decreased notably, while some relatively clean production activities (e.g., electronics) were, however, also almost liquidated.

  Although there was an absolute decline in the mining of many types of natural resources, a great increase in the export of some raw materials and unprocessed products (cement, iron, wood, etc.) occurred, mainly into neighboring countries (Germany, Austria). Such type of export "weighs" heavily on the transportation systems (railways, highways). Additionally, strong tendencies have appeared in terms of the import of primary products, whose production is often energy intensive or environmentally unfriendly, into the Czech Republic. Repeated attempts were even made to export waste into the country, either directly in the form of waste or as "secondary raw materials".

  The significant decrease in agricultural production affected the state of the environment quite positively. A large decrease in the use of synthetic fertilizers and other related products resulted from steep price increases for such products. As a function of privatization the average size of farms is becoming smaller which has a beneficial influence as smaller production units, more environment-friendly, are being established.

  The decrease in industrial and agricultural production is reflected in the decrease of GNP. Only beginning in 1994 is growth of the GNP expected to resume. From 1991 up to 1993, the development of the GNP was as follows:

  Compared to 1989, the buying power of the Czech citizens has decreased to about 85%. However, a significant stratification of particular groups in society has occurred, with the difference between rich and poor becoming remarkable. According to estimates, about 35% of the households oscillate around the minimum living standards border (mainly senior citizens and young families). On the other hand, some thousands of millionaires and multimillionaires have emerged.

  All processes were complicated by the split of Czechoslovakia, which took place through revision of the constitution at 1.1.1993. The separation, however, did not lead to any serious conflicts and the Czech economy quickly became independent. The Czech Republic's orientation towards Western countries is being strengthened, in all areas - economic relations, political mechanisms and security arrangements.

  Together with privatization and the inflow of foreign capital, restructuring of the economy has progressed. On the one hand, in almost every case modernization and the implementation of new technology results in a reduction of the environmental "load" (lower emissions, less waste etc.). On the other hand, some older technologies and operations still survive and keep running, (those which because of certain comparative advantages can effectively export their products to advanced countries), and are very unfriendly towards the environment (pollution intensive, energy intensive, exacting raw materials, etc.).

  Unfortunately, some of these products are still important to keep the balance of foreign trade and hard currency reserves (raw materials constitute about 10% of total exports, while the export of semi-finished goods and unprocessed products contributes another 20%).Also for this reason the current State Industrial Policy does not show real attention to curtailing the production of such goods, which would be necessary for improving the state of the environment.

Financing environmental protection

  The state will finance only those environmental protection efforts which are vested primarily in the public interest as well as the elimination of the "old" ecological burdens. Such financing shall be realized through the state budget or municipal budgets or through several indirect subsidies (tax allowances, etc.). The State Environmental Fund, established in 1991 as a source for subsidiary financing of the state environmental policy, can give grants, soft loans and loan guaranties.

  This environmental financing system will be fully functional only in the latter half of the 1990s. Financing from the state budget and from the State Environmental Fund is preponderant at this point.

  Since 1994, the importance of financing environmental protection from polluters' resources (other resources) shall significantly increase. It is expected that implementation of the passed environmental laws (mainly air, water, waste management) will claim 20-30 billions of Kc yearly (meaning -together with other resource expenses - 2.5%-4% of GNP) up to the year 2000.

  It is also apparent from above table that the importance of the state budget share is diminishing while the importance of financing from the SEF is increasing. This role of the SEF, however, is temporary. For 90% of its income is from charges for environmental pollution, which should decrease significantly as emissions are steeply reduced by the end of the century.

  In the next three years, a specific portion of the means made available from the National Property Fund will be committed to environmental protection. Three to six billion Kc shall be released (the Parliament shall decide about the exact amount in the next months) and used, in the form of subsidies, for the introduction of gas fuel systems in cities.

  The spending strategies of the Czech State Environmental Fund disbursements are based on the national environmental policy, a draft of which has been prepared by the MoE and is currently being negotiated by the Government. A detailed description of the Fund's medium-term priorities is given in the Guidelines for the Use of SEF Resources. The short-term priorities are updated annually by the Amendment to the Guidelines which is prepared by the Ministry of Environment. The following two tables show the profile of supported projects and the profile of the beneficiaries of the SEF during the years 1992 - 1993.

* "Public institutions" include hospitals and schools while "Private institutions" include foundations.

References

1. Kovar, J. - Stepanek, Z.: Charges and taxes on environmental protection. SDS, 1993 Prague (Czech)
2. Yearbook "Environment in the Czech Republic". MoE, 1993 Prague (Czech)
3. Statistical yearbook. Czech statistical office, 1993 Prague (Czech)
4. S.B. of the Czech Republic

B. Overview on the use of economic instruments in the Czech Republic

Emission charges on air pollution from large and medium sources

SPECIFICATION:
  A charge is imposed for every ton of discharge emitted from so-called large and medium-sized air pollution sources. The self-measurement of the emissions is, consequently, necessary and obligatory.

STATUS:
  In force since 1.1.1992

AIM:
  The charges provide economic incentives for the air polluters to take pollution reduction measures. Another function of the charges is to provide income and to enable financial support of activities which improve the environment.

SUBJECT:
  So-called large and medium-sized air polluting sources must pay charges:
  Large sources:

1. thermal units above 5MW
2. most important technologies (e.g., production of coke, steel and iron, cement, oil, etc., heavy chemistry, waste incinerators, etc.)

  Medium sources:

1. thermal units within range 0.2 MW to 5 MW
2. other technologies

OBJECT:
  The charges are imposed on four categories of air pollutant emissions (ca. 80 pollutants are being classified into I, II, III classes): The classification with final rates in Ecu/ton (actual rates) are the following:

1. main pollutants:
   solid emissions (particulates) 87.2 Ecu/t
   SO2 29.1 Ecu/t
   NOx 23.3 Ecu/t
   CO 17.4 Ecu/t
   hydrocarbons 58.1 Ecu/t
2. I class pollutants (e.g., asbestos, cadmium, mercury, benzene etc.) 581.4 Ecu/t
3. II class pollutants (e.g., arsenic, chlorine, phenol, tin etc.) 290.7 Ecu/t
4. III class pollutants (e.g., ammonia, acetone, toluene etc.) 29.1 Ecu/t

INCOME:

	1992-total	780 mln Kc	(= 21.3 mln ECU)
	1993-total	800 mln Kc	(= 23.3 mln ECU)

USE OF INCOME:
  Income from emission charges goes into the State environmental Fund. This income is used to finance programs related to air pollution.

IMPLEMENTATION AND EFFECTIVENESS:
  The charge is based on self-monitoring of the polluters in accordance with a methodology produced by the Ministry of the Environment. Random inspections are conducted by a state control body. Surprisingly, the self monitoring does take place for all 80 pollutants. In case of incorrect self-monitoring or reporting, the CEI (Czech Environmental Inspectorate) can take control over monitoring; if a difference is found in monitoring, the inspection body may impose a high penalty. The amount of charges collected during 1992-93 was rather low. The polluters paid quite law-abidingly. The administrative costs for assessing, collecting, and controlling the charges are low - approximately 1% of the income.

LEGAL BACKGROUND:
  Law No 389/91 S.B., on the State Administration of Air Protection and the Charges for its Pollution
  Law No 309/91 S.B., Air Protection Act
  Law No 388/91 S.B., on the State Environmental Fund

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: CEI
  Enforcement: CEI
  Revenue use: SEF

PERSPECTIVES:
  In the future it will be necessary to prepare an amendment of Law No 389/91 S.B., by:

• preparing new, higher rates in the schedule of charges for air pollution,
• reducing the number of pollutants covered from the present (almost 90),
• making a decision regarding the possibility of further decentralization of certain charges.

INFORMATION SOURCES:
  Law No 389/91 S.B., Law No 309/91 S.B., Law No 388/91 S.B.
  Lit./1/

Emission charges on air pollution from small sources

SPECIFICATIONS:
  The charge is imposed upon operators of so-called small sources of pollution.

STATUS:
  In force since 1.1.1992

AIM:
  To provide financial incentives for polluters to reduce air emissions.

SUBJECT:
  The charges are paid by operators (non-household) of so-called small sources of air pollution (thermal units not exceeding 0.2 MW).

OBJECT AND LEVEL:
  Emissions from the burning of fossil fuels. The charge rates are presented in the following table.

INCOME:
  Unknown

USE OF INCOME:
  The charges go to a municipal budget. This income is used for the benefit of the environment.

IMPLEMENTATION AND EFFECTIVENESS:
  Implementation is optional and depends on the decision of each municipality mayor. The charges have been low, so far. The charges are not indexed to inflation.

LEGAL BACKGROUND:
  Law No 389/91 S.B.

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: municipality
  Enforcement: municipality
  Revenue use: municipality

INFORMATION SOURCES:
  Law No 389/91 S.B.,
  Personal enquiry MoE.

Emission charges on air pollution from CFC substances

STATUS:
  Has not come into force yet.

AIM:
  Relates to substances damaging the Earth's ozone layer. The aim is to provide financial incentives for polluters to reduce the use of substances damaging or endangering the Earth's ozone layer (Chloro-Fluoro-Carbonates - CFCs).

SUBJECT:
  Producers and importers of CFCs.

LEVEL:
  100 Kc per 1 kg CFC (= 2.9 ECU / kg)

USE OF INCOME:
  The charges will go to SEF. The income will be used for the support of air protecting measures.

IMPLEMENTATION AND EFFECTIVENESS:
  The charges will be promulgated through a legal regulation, which has not been enacted yet.

LEGAL BACKGROUND:
  Law No 211/93 S.B., on prohibition of production, import and use of substances damaging or endangering the Earth's ozone layer.

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: CEI
  Enforcement: CEI
  Revenue use: SEF

PERSPECTIVES:
  Amendment of law No 211/93 S.B. is being prepared. Charges should be differentiated:

1. 100 Kc per 1 kg for so-called hard CFCs
2. 50 Kc per 1 kg for so-called soft CFCs

INFORMATION SOURCES:
  Law No 211/93 S.B.,
  Personal enquiry MoE.

Non compliance fee for air pollution

STATUS:
  In force since 1.1.1992

AIM:
  Provide economic motivation for the observance of prescribed emission limits for large and medium-sized air pollution sources.

SUBJECT:
  Operators of large and medium-sized air pollution sources.

OBJECT AND LEVEL:
  In cases where a source operator exceeds the prescribed emission limit, the total amount of standard charges for air pollution will increase up to 50%.

INCOME:
  1992: 0 Kc, 1993: 0 Kc

USE OF INCOME:
  Additional charges should go to the State Environmental Fund. They serve as financial support for clean air activities.

IMPLEMENTATION AND EFFECTIVENESS:
  The importance of additional charges shall increase in accordance with tightening emission limits. They should reach 1986 Western European levels by 1998. Strict limits are applied only to new sources (established after 1.1.1992), whose number is still very limited. For existing sources, individual limits are determined by the CEI according to their technical state (equipment and age), which are, however, only valid up to 1998.

LEGAL BACKGROUND:
  Law No 389/91 S.B. on the State Administration of Air Protection and the Charges for its Pollution
  Law No 309/91 S.B. Air Protection Act
  Law No 388/91 S.B. on State Environmental Fund

EXECUTING AUTHORITIES:
  Design of the instrument: MoE
  Revenue collection: CEI
  Enforcement: CEI
  Revenue use: SEF

PERSPECTIVES:
  It is under consideration to take full advantage of additional charges as a regional instrument (income would be placed at the disposal of the municipality in which the source is located).

INFORMATION SOURCES:
  Law No 389/91 S.B.
  Law No 309/91 S.B.
  Law No 388/91 S.B.
  Personal enquiry CEI, SEF, MoE
  Lit. /1/

Charges for the withdrawal of water from surface water-courses

SPECIFICATION:
  The charge is an element of a permit system. It is paid for the consumption of water exceeding the standard limits.

STATUS:
  In force since 1973, amended in 1979 and 1993.

AIM:
  The charges provide financial incentive for users to manage water on the basis of established standards.

SUBJECT:
  Each subject taking water from a water-course, whose volume exceeds the standard limits - more than 150000 m3 yearly or 1250 m3 monthly - does not pay for water taken for: running ponds and swimming pools; fire uses and skating rinks; and, army uses.

OBJECT:
  Water from water-courses

LEVEL:
  Since 1993, prices are determined by "material regulation", meaning that the prices are determined by including operational costs and rightful profits. Each of the present five "Povodi" (River Basins) Enterprises has a different rate.

INCOME:

	1992	1000 mln Kc	(= 27.3 mln ECU)
	1993	1100 mln Kc	(= 32.0 mln ECU)

USE OF INCOME:
  Financial support for the River Basin Enterprises for measures and actions aimed at the protection of water sources.

IMPLEMENTATION AND EFFECTIVENESS:
  Charges do not operate in the most effective way possible for this tool which would include the desirable stimulation of rational water management.

LEGAL BACKGROUND:
  Law No 138/73 S.B., Water Act
  Government regulation No 35/79 S.B., on Charges in Water Management

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: River Basin Enterprises
  Enforcement: q.v.b
  Revenue use: q.v.b

PERSPECTIVES:
  Charges for the withdrawal of water from water-courses will increase and differentiate according to particular costs of particular River Basin Enterprises.

INFORMATION SOURCES:
  Law No 138/73 S.B.
  Personal enquiry MoE, River Basin Enterprises

Charges for the withdrawal of ground water

SPECIFICATION:
  The charge is an element of a permit system. It is paid for water consumption which exceeds the standard limits.

STATUS:
  In force since 1973, amended in 1979 and 1988. The current rate has been in force since 1.1.1989.

AIM:
  The charges would provide financial incentives for managing the water and motivate the saving of water.

SUBJECT:
  Each subject taking ground water in a volume exceeding the standard limits (more than 15000 m3 yearly or 1250 m3 monthly) does not pay for water taken for: water supply system; housing estates supply system; and, army uses. In total, no charges are paid for about 90% of extracted ground water.

OBJECT:
  Water taken from ground sources.

LEVEL:
  2 Kc per 1m3 of extracted ground water (0.058 ECU/m3)

INCOME:

	1992	62 mln Kc	(= 1.69 mln ECU)
	1993	60 mln Kc	(= 1.74 mln ECU)

USE OF INCOME:
  The financing of protection of ground water reserves. Charges go to the SEF.

IMPLEMENTATION AND EFFECTIVENESS:
  Because these charges have to be paid only for about 10% of ground water actually extracted, these charges do not fulfil the function of an effective economic instrument.

LEGAL BACKGROUND:
  Law No 138/73 S.B., Water Act
  Government regulation No 35/79 S.B., on Charges in Water Management
  Government regulation No 91/88 S.B., on Charges in Water Management

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: River Basin Enterprises, since 1.1.1994 State finance offices
  Enforcement: q.v.b
  Revenue use: SEF

PERSPECTIVES:
  In the future it will be necessary to establish new charge rates, and to re-appraise the current extent of exemptions from paying the charges with the aim of reducing them to a minimum.

INFORMATION SOURCES:
  Law No 138/73 S.B.
  Personal enquiry MoE.
  Lit./1/

Effluent charges on waste water

SPECIFICATION:
  This charge is an element of a permit system. The charge is based on self-monitoring. The amount of charges depends on the quantity of pollutants in the waste water and on the degree to which the quality of water it is discharged to has deteriorated.

STATUS:
  In force in its present form since 1992.

AIM:
  The charges stimulate water polluters to construct technology for cleaning water prior to discharging it /waste water treatment plants/ and also create well-balanced economic conditions between subjects with waste water treatment plants and those without plants. The second function is to generate income.

SUBJECT:
  Enterprises releasing waste water into surface waters.

OBJECT:

1. BOD 5
2. undissolvable substances
3. crude oil substances
4. evident alkalinity and evident acidity
5. dissolved inorganic salts

LEVEL:
  The amount of charge in thousands Kc per year equals:

    for a:  21,5 x Z0,8265  (Note: figures are derived from empirical investigations)
            Z: the amount of polluting subject to the payment of charge in tons per year

    for b:  2,34 x Z0,7514

    for c:  the amount of pollution in tons per year x K
            K: within 5 to 10 mg/l = 1,00 Kc/m3
                     10 to 20 mg/l = 1,50 Kc/m3
                     20 to 35 mg/l = 2,00 Kc/m3
                     35 to 50 mg/l = 2,50 Kc/m3
                 more than 50 mg/l = 3,00 Kc/m3

    for d:  the amount of pollution in tons per year x M
            M: rate 135 Kc/k mol evident alkalinity resp. acidity

    for e:  the amount of pollution in tons per year x S
            S: rate 600 Kc/t within flow    up to 0,01 m3/s
                    300 Kc/t                0,01-0,1 m3/s
                    200 Kc/t                0,1-1,0 m3/s
                    150 Kc/t                1,0-10,0 m3/s
                    120 Kc/t                more than 10,0 m3/s

INCOME:

	1992	960 mln Kc	(= 26.2 mln ECU)
	1993	1300 mln Kc	(= 37.8 mln ECU)

USE OF INCOME:
  The support of water protection through the mediation of SEF.

IMPLEMENTATION AND EFFECTIVENESS:
  The system was established in 1979 and amended in 1988 and 1992. Until 1993 it functioned quite well, however, the amount of charges ceased to correspond to its function of motivation, among others due to the influence of inflation. It is estimated that the charges represent about 30% of the actual abatement costs at present. Since 1.1.1994 decisive changes within property relations (through privatization) have taken place and it is unknown yet what sort of problems will arise under the new circumstances. The administrative costs for assessing, collecting and controlling charges were 15 mln. Kc in 1993.

LEGAL BACKGROUND:
  Law No 281/92 S.B., on the Charges for Discharge of Waste Water
  Law No 138/73 S.B., on Water
  Law No 388/91 S.B., on State environmental Fund
  Law No 458/92 S.B. on the State Administration of Water Management

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: until 1993 River Basin Enterprises, since 1994 State financial offices
  Enforcement: q.v. b
  Revenue use: SEF

PERSPECTIVES:
  At the moment the new Law on water is being prepared. In conjunction with it, the fundamental amendments of the Law on charges for releasing waste waters will be carried out. Among others it is proposed that BOD would be replaced with COD, and, that charge levels would be raised.

INFORMATION SOURCES:
  Law No 281/92 S.B.
  Law No 138/73 S.B.
  Law No 388/91 S.B.
  Law No 458/92 S.B.
  Lit./1/

User charge for sewerage and sewage treatment

SPECIFICATION:
  Citizens and other subjects are charged by a municipality for these public services.

STATUS:
  These regulations were set up before World War II and since 1991 the charges have been significantly raised. They cover all costs, including charges for releasing waste waters into surface waters (even profits, if needed). The payment, however, can be established independently by each municipality. Sewerage user charges are being paid together with waste water charges, the particular calculation is rather formal. The total payment consists of: operation costs + charges + profit ( - subsidies; this in some cases only).

AIM:
  Reimbursement of real costs for public service resulting in the motivation for rational water policy.

SUBJECT:
  All users of sewerage.

OBJECT:
  The volume of waste waters released into sewerage

LEVEL:
  The charge is usually included in the cost of drinking water and is determined by each municipality. The charges for Prague were for instance (before 1993, the drinking water rate and the sewerage rate were not distinguished): (the prices in other municipalities are plus/minus 50% of this)

INCOME:
  Not directly determined. The average consumption of water per citizen was about 150 l/day in 1993; about 7 mln Czech citizens use sewerage.

USE OF INCOME:
  Reimbursement of costs for public services or waste water treatment plant operations.

IMPLEMENTATION AND EFFECTIVENESS:
  Significant price increases since 1990 have led to a reduction in water consumption - ca 25% before 1993. In many cases municipalities provide subsidies themselves. On the other hand, the public services' providers claim that the current price does not even cover all costs.

LEGAL BACKGROUND:
  Law No 138/73 S.B., on Water

RESPONSIBLE BODIES:
  Design of the instrument: MoF, municipality
  Revenue collection: operator of appropriate plant
  Enforcement: q. v. b
  Revenue use: q. v. b

PERSPECTIVES:
  It is possible to expect another price increase for these services.

INFORMATION SOURCES:
  Law No 138/73 S.B.
  Personal enquiry MoE, MoF.

Non compliance fee for waste water

STATUS:
  In the present form it has been in force since 1992.

AIM:
  To provide financial incentives for polluters to minimize the volume of released waste water.

SUBJECT:
  Organizations releasing waste waters into surface waters.

OBJECT:
  The non-compliance fee on waste water can be levied if the legally fixed standards are violated. Additional charges depend on the degree of deterioration of the relevant water-course, which is caused by the discharge of waste water. The rate is determined in accordance with the concentration of pollutants in the water-course. Its amount is as many percent of basic rate as how many times the so called deterioration unit is embraced in computed quality deterioration of water in water-course. An example for this is:

Supposing that the water quality deterioration is 15 mg/liter of BOD5, the percentage of the additional charge of the regular waste water effluent charge is calculated taking into account the deterioration unit: 15 : 0.25 = 60. If for instance the regular effluent charge was 150,000 Kc, the additional charge for non-compliance with the standards is 90,000 Kc (i.e., 60% out of 150,000). The total payment to be done is thus 150,000 + 90,000 = 240,000 Kc.

Deterioration units are:

• for BOD 5      0.25 mg/l
• for insoluble pollutants      0.50 mg/l
• for oil pollutants      0.05 mg/l
• for dissolved inorganic salts      5.00 mg/l
• for significant acidity resp. alkalinity      0.025 mmol/l

INCOME:
  Income is incorporated into the whole income from charges for releasing waste waters (q.v. waste water charges). From the whole amount about 20% goes for additional charges.

USE OF INCOME:
  Same as with basic charges.

IMPLEMENTATION AND EFFECTIVENESS:
  The function of additional charges is hampered by many exemptions including:

• public institutions (e.g., schools, hospitals, etc.),
• subjects which have a waste water purification plant and adhere to discharge criteria,
• charges above 100% of basic rate,
• public sewerage operators pay additional charges only up to 20% of computed amount.

LEGAL BACKGROUND:
  Law No 281/92 S.B. on the Charges for Discharge of Waste Water
  Law No 138/73 S.B. on Water Management
  Law No 388/91 S.B. on State Environmental Fund
  Personal enquiry MoE, SEF
  Lit./1/

EXECUTING AUTHORITIES:
  Design of the instrument: MoE
  Revenue collection: until 1993 River Basin; since 1994
  State financial offices
  Enforcement: q. v. b
  Revenue use: SEF

PERSPECTIVES:
  Along with the preparation of a new Water Act, new ways of using additional charges are being considered. It is not even possible to exclude their contingent cancellation.

INFORMATION SOURCES:
  Law No 281/92 S.B.,
  Law No 138/73 S.B.,
  Law No 388/91 S.B.
  Personal enquiry MoE

Charges on solid waste disposal

SPECIFICATION:
  Charges are imposed on operators of waste dumps and are incorporated into the price of storing waste at the dump.

STATUS:
  In force since 1.4.1992

AIM:
  The existing charges have two basic functions:

1. Rate I of the charges: financial compensation to the municipality in whose district the dump is located.
2. Rate II of the charges: stimulation of disposal of the solid waste in the dumps which correspond to the required criteria

SUBJECT:
  Rate I is imposed on the operator of every dump
  Rate II is an additional charge imposed on operators who do not adhere to strict criteria for dump operation.

OBJECT:
  It is paid for waste divided into five categories:

1. earth and organic matter
2. other waste, excluding waste in group 1
3. communal waste
4. special waste, except category 3 and 5
5. dangerous waste

LEVEL:
  Rate I is constant. Rate II will be phased in over 3 years (rates in Kc/ton of waste):

INCOME:
  Rate I is revenue for the budget of the municipality in which the dump is located.
  Rate II is revenue for the State environmental Fund.

  Income of rate I: unknown
  Income of rate II:
    1992: 120 mln Kc (3.28 mln Ecu)
    1993: 170 mln Kc (4.94 mln Ecu)

USE OF INCOME:
  Income of rate I: financing environmental protection in the given municipality
  Income of rate II: support of the waste policy in the Czech Republic

IMPLEMENTATION AND EFFECTIVENESS:
  Since this is quite a new charge and still there is no exact inventory of existing of dumps, the incomes from storing waste are lower than expected to date. However, the introduction of charges very positively motivated the establishment of new dumps in accordance with the strict required criteria concerning the safe storing of waste. Charges also increased, often significantly, the price for storing waste, which makes waste producers implement rational waste policies.

LEGAL BACKGROUND:
  Law No 238/92 S.B., on Waste Management
  Law No 62/92 S.B., on Charges for Deposit of Waste
  Law No 388/91S.B., on State Environmental Fund

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: State financial offices
  Enforcement: State financial offices
  Revenue use:
    Income of rate I-municipalities
    Income of rate II-SEF

PERSPECTIVES:
  It is being considered to amend and unify legal regulations concerning waste by 1995-96 so as to systematically resolve the issues of waste management policy. Significant changes resulting from this process will undoubtedly also affect the present charges.

INFORMATION SOURCES:
  Law No 238/92 S.B.
  Law No 62/92 S.B.
  Law No 388/91 S.B.
  Personal enquiry MoE
  Lit./1/

User charge on municipal waste

SPECIFICATION:
  Price charged citizens and other subjects by a dump or an incinerator operator for municipal waste storing or its disposal.

STATUS:
  The payments had been established in many cases before World War II and since 1992 they have been fundamentally raised. However, they do not always cover all costs (including charges for waste dump storing and plant operator's profit).

AIM:
  Reimbursement of real costs for safe municipal waste disposal and consequently to provide incentive to reduce the volume of municipal waste.

SUBJECT:
  Citizens producing solid municipal waste

LEVEL:
  Price is determined by the individual municipalities. The charges are calculated in such a way that they include the waste treatment operating costs, the charges on solid waste disposal and the operator's profit. The waste producer pays to the waste treatment operator, the operator returns the charges on solid waste to the SEF. The charge in 1993 in Prague, for instance, was 500 Kc per ton (14.53 Ecu/ton). Prices in other municipalities are plus/minus 60% of this.

INCOME:
  Not directly determined. Solid municipal waste production was about 5 mln tons in the Czech Republic in 1993.

USE OF INCOME:
  Reimbursement of costs for public services and waste treatment plant operator's profit.

IMPLEMENTATION AND EFFECTIVENESS:
  Significant price increase since 1992 has led to inconsistent effects to date:

• it is not possible to quantify exactly a contingent reduction of solid municipal waste production, but probably growth of the waste volume has slowed down, and;
• the number of so-called black, illegal dumps has increased, as well as the number of citizens who are not willing to pay for disposal services.

LEGAL BACKGROUND:
  Law No 238/92 S.B., on Waste Management

RESPONSIBLE BODIES:
  Design of the instrument: Municipality
  Revenue collection: Operator of appropriate plant
  Enforcement and revenue use: q. v. b

PERSPECTIVES:
  It is reasonable to expect another price increase for these services.

INFORMATION SOURCES:
  Personal enquiry MoE

NOTE:
  Charges for other waste categories are similarly determined and implemented (compare "charges on solid waste disposal").

Charges for dispossession of agricultural land

OFFICIAL DESIGNATION:
  Levies for dispossession of agricultural land.

STATUS:
  In the present form it has been in force since 1.7.1992. A similar charge had existed earlier, but it was drawn up in a completely different way.

AIM:
  The aim of the charge is to discourage the use of agricultural land, which is limited in the Czech Republic, for purposes other than agricultural. Agricultural land includes arable land, hop fields, vineyards, gardens, orchards, meadows and pastures.

SUBJECT:
  Each subject who occupies agricultural land for other purposes, either temporarily or permanently.

OBJECT:
  Land which is officially designated as agricultural land.

LEVEL:
  Computation is made in accordance with tables provided with two parameters:

1. Kc/ha according to so-called main units (78 units are determined)
2. treatment according to so-called climatic regions (9 regions are determined)

Charges computed in this way can be increased on the basis of environmental factors (multipliers to the basic rates exist within the range of 5 to 20) in national parks and other protected areas.

INCOME:
  Design of the instrument:

1. 60% goes to State Environmental Fund. 1993: 250 mln Kc (7.29 mln Ecu),
2. 40% goes to municipality budget.

USE OF INCOME:
  Support of actions towards rural revitalization (e.g., revitalization of rivers), and financing of actions for environmental protection (e.g., stabilization of ecosystems).

IMPLEMENTATION AND EFFECTIVENESS:
  Paying the charge has a compensatory character. It is mainly implemented in the form of permits, which are strict, as the number of applications in the matter of agricultural land occupation grows larger.

LEGAL BACKGROUND:
  Law No 334/92 S.B., on protection of agricultural land.

RESPONSIBLE BODIES:
  Design of the instrument: MoE, MoF, MoA
  Revenue collection: State financial offices
  Enforcement: State financial offices
  Revenue use:
    a/ 60% SEF
    b/ 40% municipalities

PERSPECTIVES:
  In the future it will be necessary to increase progressively the levies in case of building activities.

INFORMATION SOURCES:
  Law No 334/92 S.B.
  Personal enquiry SEF
  Lit./1/

Charges for exploitation of deposits of raw materials

OFFICIAL DESIGNATION:
  Charges for exploitation of deposits of raw materials

SPECIFICATION:
  The charges would affect the prices of selected raw materials whose exploitation, processing or consumption, present significant impact on the environment.

STATUS:
  In force since 1.1.1993

AIM:
  Economic compensation of externalities caused by exploring for and extracting raw materials.

SUBJECT:
  Each subject who has started an enterprise for the exploration and extraction of raw materials or any similar mining activity.

OBJECT:

1. extracting area,
2. extracted selected raw materials.

LEVEL:

1. 10,000 Kc yearly per every started 1 km2 or, up to 2 ha, 2000 Kc yearly.
2. max 10% of market price of extracted raw materials.

INCOME:

1. unknown
2. 1993 - SEF : 0

USE OF INCOME:
  Financing environmental protection activities.

IMPLEMENTATION AND EFFECTIVENESS:
  Charges cover any environmental criteria just for the time being, therefore do not play an effective role in providing economic incentives for environmental protection.

LEGAL BACKGROUND:
  Law No 439/92 S.B., Mining Act
  Decree of the Ministry of Economy No 617/92 S.B.

RESPONSIBLE BODIES:
  Design of the instrument: MoE
  Revenue collection: State mining offices
  Enforcement: q. v. b
  Revenue use:
    a/ municipality
    b/ 50% municipality, 50% SEF

PERSPECTIVES:
  In the future it will be necessary to:

• assess the possibilities of modifying the charges, resulting in proposals for amendment, and,
• assess the possibilities of using other forms of economic stimulation of ecological interests, joined with the exploitation, processing or consumption of raw materials.

INFORMATION SOURCES:
  Law No 439/92 S.B.
  Decree of MoEc No 617/92 S.B.
  Lit./1/

Non compliance fees

SPECIFICATION:
  Penalties can take the form of sanctions for infringement of the determined regulations.

AIM:
  To provide financial incentives for the observance of prescribed regulations.

OBJECT:
  At this time in the Czech Republic there are a large number of penalties for the infringement of obligations regarding the protection of the environment. The concrete object of the penalties is defined in particular acts and regulations.

LEVEL:
  From 10,000 Kc up to 10 mln Kc. The amount is determined by the CEI case-by-case.

INCOME:
  There is no comprehensive data. Some penalties serve as income to municipalities, some are SEF income. It is used for the benefit of the environment.

IMPLEMENTATION AND EFFECTIVENESS:
  Penalties are still used rather infrequently and are mostly levied at the lowest possible limits.

LEGAL BACKGROUND:
  Particular laws

RESPONSIBLE BODIES:
  Revenue collection: Prescribed with a corresponding law
  Enforcement: q. v. b
  Revenue use: q. v. b

PERSPECTIVES:
  In the future it will be necessary to:

• analyze the present regulations with respect to penalties and if necessary formulate proposals for amendments;
• assess the current rates of the penalties in the separate laws from the standpoint of the impacts of the penalties to the payers, and also from the point of view of the relation of the level of the penalty to the relevant weight of the reason for which the penalties would be imposed;
• assess the possibilities for the gradual unification of the penalties for the separate components of the environment with the objective to create a consistent system of penalties in the area of environmental protection.

INFORMATION SOURCES:
  Personal enquiry MoE

Deposit refund on glass bottles

SPECIFICATION:
  The system had been established after World War II. Its aim had not been environmental, but economic. After 1990 an unintentional break of this system occurred. It was revitalized in 1992 and its aim today is environmental.

STATUS:
  In terms of new legislation, since 1992

PRODUCT(S) AND RATE:
  The deposit refund is levied on selected types of glass bottles. There are two rates for various types of bottles; examples:

EFFECTIVENESS:
  Selected types of glass bottles present about 70% of all glass bottles. The return rate is 70-80%. With the price increase of bottled products and the constant deposit rate, the system's effectiveness is declining.
Privatization caused temporary break-downs of the whole system (sellers tend to provide refunds only for bottles bought in the same place). In comparison with the period before 1990, the number of types of bottles to which the law applies has been reduced. At the same time there has been a dramatic increase in different types of bottles and packaging (PET-bottles, cans), which are still not included in the deposit refund system.

EXECUTING AUTHORITIES:
  Design: MoE, Ministry of Industry and Trade (MIT)
  Setting up rate: MoF
  Implementation: MIT

PERSPECTIVES:
  A Packaging Act is being prepared. It should include a complex solution for the deposit refund system issue as well. Within this act should be included glass bottles, PET-bottles, cans, and maybe even other packaging containers. The new regulation is being prepared taking into consideration the EU recommendations in this field.

INFORMATION SOURCES:
  MoE, MIT, MoF

Environmental insurance (proposed)

STATUS:
  The instrument is being prepared and should be introduced together with similar EU-systems. The next steps in the preparation process are:

• complete the proposal of the law regarding compulsory insurance against environmental hazards,
• assess foreign experience in this area,
• solve, with the cooperation of the insurance institutes, the additional economic uses and implications of this environmental insurance (for example, the levels of the insurance rates and their impacts on the pertinent subjects, the possibilities for the partial use of the insurance for prevention, etc.).