Annex 2: Definition of instruments
(following OECD, 1993, Integrating Environment and Economics: the Role of Economic Instruments and OECD, 1989, Economic Instruments for Environmental Protection)
- Charges on emissions or effluent charges
- Charges on the discharge of pollutants into air, water or on the soil and the generation of noise (e.g., aircraft noise). Emission charges are calculated as to the quantity and quality of pollutant. Emission charges may take the form of user charges:
- User charges
- Payments for the costs of collective or public treatment of effluents/pollutants. Only those connected to the public service are charged. Tariffs may be uniform or they may differ according to the amount of effluent treated. (Ex.: municipal waste user charges, water user charge for sewerage and sewage treatment)
- Product charges or taxes
- Charges levied on products that are harmful to the environment in the manufacturing or consumption phase or for which a disposal system has been organized. Charge rates can be based on some product characteristic (e.g., a charge on sulphur content in mineral oil; CO2 tax on fossil fuels; charges on fertilizers on e.g., N-, P-, K- content) or on the product itself (e.g., a mineral oil charge, a charge on batteries, packaging materials etc.). One form which product charges may take in practice, is that of tax differentiation leading to more favorable prices for "environmentally friendly" products and vice versa. (E.g., car sales differentials as on fuel efficiency, existence of catalytic converter, compliance with emission standards etc.; and tax differentiation between leaded and unleaded fuel).
- Deposit refund systems
- In deposit refund systems a surcharge is laid on the price of potentially polluting products. When pollution is avoided by returning these products or its residuals to a collection system, a refund of the surcharge follows. Examples: Deposit refunds on car hulks, plastic beverage containers, metal cans, glass bottles etc.
- Tradable pollution rights
- Dischargers operate under some multi-source emission limit and trade is allowed in permits adding up to that limit. Such systems can also operate in cases of single source permits: if a discharger releases less pollution than its limit allows, the firm can sell or trade the differences between its actual discharges and its allowable discharges to another firm which then has the right to release more than its initial limit allows. Trades can take place within a plant, within a firm or among different firms.
- Non-compliance fees
- Fees imposed if polluters do not comply to certain regulations. There are fees with non-fixed rates, bearing a proportional relationship to environmental damage inflicted and/or benefits reaped by non-compliance. Non-compliance is 'punished' either ex ante (by asking a payment returnable upon compliance) or ex post (by asking a fine when non-compliance is occurring).
REC * PUBLICATIONS * USE OF ECONOMIC INSTRUMENTS * ANNEX 2
