1. The Development Economics Research Group The World Bank June 2001

2. Six Years of Collaboration Philippines China Mexico Colombia India Brazil Indonesia

3. The Development Economics Research Group The World Bank June 2001

4. Regulators The Law Plants Regulatory Standard Traditional regulatory model

5. But in DCs, environmental regulator have difficulties Limited Human and Technical Resources Limited Information and Analytical Capacity Little Political Support

6. A standard conclusion…. There is nothing the regulator can do. And polluters have a good time.

7. A standard conclusion…. There is nothing the regulator can do. And polluters have a good time. Another standard conclusion…. The country will have to reach higher levels of income before seeing the environment improving.

8. Challenges these standard conclusions: It does not have to be like that.

9. Three Approaches That Work (Without Sacrificing Growth) Pollution Charges / Economic incentives Public Disclosure Environmental Management

10. Pollution Charges Philippines Colombia China Malaysia

11. China: Pollution Charge Despite its weaknesses, Each 1% increase in the water- pollution charge has reduced industrial organic water pollution by about 0.8%. Each 1% increase in the air-pollution levy has reduced industrial air pollution by about 0.4%.

12. Philippines: Laguna Lake Environmental User Fee Fixed FeeVariable Fee Volume of DischargeFee Less than 30 cu.m./ day P 5,000 In BetweenP 10,000 More than 150 cu.m./ day P 15,000 Effluent Concentration Fee Within 50 mg/l of BODP5 / kg BOD Above 50 mg/l of BOD P30 / kg BOD

13. Philippines: Laguna Lake After two years of implementation of pollution charges, LLDA reports that BOD discharges from the pilot plants dropped 88%. The Philippines Government has announced its intention to implement pollution charge system nationwide.

14. Colombia’s Program: A World Leader for Pollution Charges - Regionally-Based - Reflects Costs - Provides Incentives - Reduces Pollution - Finances Cleanup Rio Negro

15. CORNARE Results Industrial Discharges After Six Months: BOD 52% TSS 16%

16. Public Disclosure Systems Indonesia Philippines Mexico Current India

17. A+A+ B D F A Indonesia’s PROPER BAPEDAL’s Five-Color System

18. GREEN BLUE RED BLACK No pollution control effort, Serious environmental damages Clean technology, waste minimization, pollution prevention Efforts don’t meet standards Efforts meet minimum standards Above standards & good maintenance, housekeeping GOLD PERFORMANCE CRITERIA PERFORMANCE LEVELS

19. Very Good Compliant Non-Compliant Very Poor PROPER: FIRST RATINGS

20. -100 -80 -60 -40 -20 0 20 40 60 80 PROPER RATINGS: % CHANGE AFTER 18 MONTHS

21. Jun-95Dec-95Dec-96Jun-95Dec-95Dec-96 32%39% 47% 62% 58% 47% Green factories increased from 4 (2%) to 7 (4%) Black factories decreased from 6 (3%) to 3 (3%) Overall compliance rate increased from 34% to  50% Average BOD Conc. (187 fac.) 154 mg/L 19951996 268 mg/L 43% Reductio n Impact of PROPER on Ratings and Pollution Blue & GreenRed & Black

22. PHILIPPINES ECOWATCH RESULTS ECOWATCH RATINGS World Class Very Good Compliant Non-Compliant Very Poor APRIL 1997NOVEMBER 1998

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

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

25. Bad News 0 10000 20000 30000 40000 50000 60000 Date Stock Price in Mexican Pesos Mexico: Government fines Kimberly-Clark for a water pollution violation. 5/18/925/20/925/22/925/26/925/28/926/01/926/05/926/09/926/11/926/15/926/17/92

26. Good News 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 55.00 60.00 Date Stock Price in Philippine Pesos Philippines: Regulatory authority highlights San Miguel Corporation’s environmental commitment and the installation of pollution control equipment. 1/25/911/31/912/06/912/18/912/22/912/26/913/06/913/12/913/18/913/22/912/12/91

27. 3 Broad Results The conventional policy discussion focuses on State/Factory interaction as determinant of performance. This discussion is too narrow. Interaction and pressure of various agents explain a plant environmental performance: regulators, communities, markets. Communities and markets need timely and accurate information to play their role.

28. State Markets Community The New Model: Multiple Agents, Multiple Incentives

29. Focus on Information Products Orchestrate, Don’t Dictate Increase Community Involvement Learn From Policy Experiments New Approaches to Pollution Control Multiple Agents, Multiple Incentives

30. For More Information: www.worldbank.org/nipr