1. Information in Environmental Management:
State
Markets
Community
Information in Environmental Management:
Public Disclosure of Pollution

2. Presentation Outline Three Waves of Environmental Policy
Command-and-Control
Market-Based Instruments
Public Information
Public Disclosure Policies
Toxic Release Inventories
Environmental Performance Ratings
Implementation: PROPER & ECOWATCH
New Programs: Vietnam, China
The New Paradigm for Regulation

3. Wave 1: Command and Control
Characteristics
Firms are required to meet discharge standards, failing which legal actions are initiated by regulators
Emphasis is on end-of-pipe treatment
Requires strong and comprehensive monitoring, which is generally lacking in pollution control agencies
Not cost-effective and does not provide sufficient incentives for firms to invest in pollution reduction

4. Wave 2: Economic Instruments
Characteristics
PPP -- Polluter Pays Principle is the main driver
Economic Instruments used in combination with effluent and/or emission standards.
Commonly used instruments - pollution charges, emission charges, product charges and surchages, tradable permits and others
Also requires strong monitoring and enforcement capacity
Promotes cost efficiency and provides polluters with incentives to invest in pollution prevention. Cost of investments (CP/EOP) may be recovered by a reduction in total pollution charges

5. 3rd Wave : Public Information
Ambient Conditions
Damages
Quality Targets & Timing
Emissions
Performance Ratings
Adjustment Costs
Citizens
NGO’s
Consumers
Investors
Channels 15

6. Toxic Polluters in Baltimore
South
Baltimore

7. Who’s Next Door?
FMC Corp
Benjamin Franklin
Middle School

8. FMC’s Plant
1996 Rankings: Major Chemical Releases or Waste Generation at This Facility*
In 1996, this facility ranked in the top 20% of all facilities in the US in terms of
cancer hazards
In 1996, this facility ranked in the top 20% of all facilities in the state in terms of
air releases of suspected gastrointestinal or liver toxicants
air releases of suspected respiratory toxicants
air releases of suspected skin or sense organ toxicants
total air releases

9. FMC’s Response to TRI? Toxic Releases, 1988-1996 Lbs 100,000 200,000
300,000
400,000
500,000
600,000
700,000
1988
1990
1992
1994
1996

10. Lessons closer home ………

11. Indonesia’s Regulatory Problem
BAPEDAL
But ...
Options }
Weak
Institutional
Capacity
Regulatory Standards?
Market-based Instruments?
TRI?
Enforcement of formal regulation in Indonesia is currently weak, and the modest size of the regulatory budget assures that this weakness will persist. However, manufacturing is growing at over 10% annually, and the Indonesian Government recognizes the mounting risk of severe pollution damage. Faced with this dilemma, Indonesia’s National Pollution Control Agency (BAPEDAL) has decided to initiate a program for rating and publicly disclosing the environmental performance of Indonesian factories. }
Need for
Interpretation
PRDEI, December 18, 1996 9

12. BAPEDAL’s Five-Color System
Grading Factories: A+
BAPEDAL’s Five-Color System A B D
In PROPER, a polluter is assigned a color rating based on BAPEDAL’s evaluation of its environmental performance. A Blue rating is given to factories which are in compliance with national regulatory standards; Gold is reserved for world-class performers; and Black is assigned to factories which have made no attempt to control pollution and are causing serious damage. Intermediate ratings are Red, for factories which have some pollution control but fall short of compliance; and Green, for factories whose emissions control and housekeeping procedures significantly exceed those needed for compliance. F
PRDEI, December 18, 1996 12

13. INDONESIA’S PROPER: FIRST RATINGS, 1995
World Class
Very Good
Compliant
Non-Compliant
Very Poor

14. PROPER RATINGS: % CHANGE AFTER 18 MONTHS
-100
-80
-60
-40
-20 20 40 60 80

15. PHILIPPINES’ ECOWATCH
Pilot Program
APRIL 1997
ECOWATCH
RATINGS
World Class
Very Good
Compliant
Non-Compliant
Very Poor

16. PHILIPPINES’ ECOWATCH
Pilot Program
APRIL 1997
NOVEMBER 1998
ECOWATCH
RATINGS
World Class
Very Good
Compliant
Non-Compliant
Very Poor

17. VIETNAM: Green Bamboo FIRST DISCLOSURE, 2002
FEBRUARY, 2002
RATINGS
World Class
Very Good
Compliant
Non-Compliant
Very Poor

18. VIETNAM: Green Bamboo FIRST DISCLOSURE, 2002
RATINGS
World Class
Very Good
Compliant
Non-Compliant
Very Poor
FEBRUARY, 2002
JUNE, 2002

19. CHINA’S GREENWATCH: FIRST DISCLOSURE, 1999 1999 RATINGS Excellent Good
Compliant
Non-Compliant
Very Poor

20. Currently Covers 2,500+ Factories
CHINA’S GREENWATCH:
FIRST DISCLOSURE, 1999
Currently Covers 2,500+ Factories
1999
2000
RATINGS
Excellent
Good
Compliant
Non-Compliant
Very Poor

21. Lessons Learnt from PROPER and ECOWATCH
Scale and Coverage Matter
Small in number and focused methodology is good for introductory phase; scaling up strategy is essential part of program design
Institutionalization Strategy Should be Comprehensive
Sustainability requires institutionalization at all levels
Minister’s endorsement to commitment at the data-entry level;
Public participation and local government participation
Technical Quality Matters
Not perfect but defensible; process of analysis as important as technical methodology
New Understanding on Informational Incentives Work
Internal transparency as crucial as external transparency
Tremendous internal demand for performance information
Performance information missing because management system and governance mechanism is weak or non-existent
Internal and external communication system exists but simple-minded (viewed as a PR function and not a strategy)

22. Traditional Model: Regulator “The Public Interest”
Enforcement of formal regulation in Indonesia is currently weak, and the modest size of the regulatory budget assures that this weakness will persist. However, manufacturing is growing at over 10% annually, and the Indonesian Government recognizes the mounting risk of severe pollution damage. Faced with this dilemma, Indonesia’s National Pollution Control Agency (BAPEDAL) has decided to initiate a program for rating and publicly disclosing the environmental performance of Indonesian factories.
PRDEI, December 18, 1996 9

23. Informal Regulation Community Elements Power Social Norms Negotiations
Citizens
Plants
Elements
Power
Social Norms
Negotiations
Community
NGOs

24. Markets as Regulators Markets Reputation Credit Profits Plants
Consumers
Elements
Reputation
Credit
Profits
Markets
Investors

25. The New Paradigm State Community Markets
Joining Communities and Markets to the State produces a new model of pollution regulation. In a world of multiple agents and multiple incentives, we must rethink the regulator’s appropriate role in pollution management. No longer is this role confined to producing, monitoring and enforcing rules and standards. Instead, the regulator can gain leverage through non-traditional programs which harness the power of communities and markets. There is ample room for information-oriented approaches such as voluntary participation/compliance programs and public disclosure of factories’ environmental performance. A broader implication is that one size no longer ‘fits all’ for regulatory policy design: Optimal combinations of regulatory tools will depend on country-specific social, economic and institutional conditions.
PRDEI, December 18, 1996 7