The Green Fund - Icing Without the Cake
The Government of T&T has proposed the establishment of a Green Fund from 2001 to finance projects of community-based organisations (CBOs) and non-governmental organisations (NGOs). This Fund is to be financed by a levy of 0.1% on gross sales or receipts of a company operating in T&T. It is taxing the business sector to support environmental conservation.
Should we celebrate and sing the praises of a Government that has provided for environmental management for our country? Is the Green Fund really going to provide for environmental management in T&T?
While I cannot claim to be anything of an expert in economics, I would like to raise a few issues regarding: (1) the appropriateness of funding for CBOs and NGOs and not for the government agency responsible for environmental management; (2) the appropriateness of taxing the entire business sector; and (3) what alternative and additional economic measures could be implemented for sustainable development.
Icing without the cake
One of the main arguments expressed against the Green Fund idea has come from environmentalists themselves. They argue that a much more important issue is funding for and empowerment of the Environmental Management Authority (EMA). Government seems to be delaying key measures that will enable the EMA to take decisive action, for example through establishment of the Environmental Commission (which will act as an environmental court).
The role of CBOs and NGOs is broadly to supplement and support Government programmes. This is done through addressing needs of society that the Government is not or cannot address.
For example, CBOs and NGOs have become increasingly active in advocating visions for community development (e.g. SAD for Toco) and monitoring large-scale Government-endorsed developments that threaten the social and natural environment (e.g. Environment TOBAGO plays a “watchdog” role protecting the people’s interests in Tobago).
The role of CBOs and NGOs is NOT to replace Government programmes. Certainly they have an important role to play, but only in support of and complementary to Government, which holds the primary responsibility for ensuring environmental conservation and sustainable development. The natural environment is a publicly owned resource, which the public has entrusted the Government to manage.
Thus the allocation of funds for CBOs and NGOs and not towards the government agency responsibly for environmental management is rather strange. It seems that the Government is providing the icing and not the cake. CBOs and NGOs absolutely cannot take the place of a government authority that regulates industry and imposes penalties for environmental destruction.
Are they trying to pacify cries for serious environmental protection by giving biscuits to CBOs and NGOs? When and how will they provide funding for the EMA to act with the powers provided under the Environmental Management Act? It has been five years and the key measures designed to give the EMA the teeth it needs have yet to be approved by Cabinet and Parliament.
Targeted taxation is needed
A second issue concerns the blanket taxation of all businesses in T&T. Taxes are an economic measure that can be employed by Government to address market or policy failures. In this case, taxing business would imply that business is responsible for environmental degradation but is not bearing the costs of this, or that business is deriving benefits from environmental conservation, for which it is not paying.
Certainly some businesses are wrecking havoc on the environment and on society, which will continue unabated until the EMA is given the power it needs. For example, manufacturing industries are polluting our rivers, hotels are destroying wetlands and coastal areas, petrochemical industries are polluting our air and water, businesses are producing a gross amount of solid waste every day that is polluting our country, quarries supplying developers are destroying forests and rivers.
Government can target these industries very specifically to ensure that they are paying for the environmental destruction that they are causing.
And certainly some businesses benefit from efforts to ensure a beautiful natural environment. The tourism industry in Tobago is a prime example. This is based on a beautiful and clean sea, pristine beaches, and wild forests. But is the tourism industry paying for the benefit of environmental conservation programmes? Industries like these can similarly be targeted to pay for environmental conservation.
A blanket tax on all businesses clearly does not target the destroyers or those on a free ride. Both groups must be made to pay, and appropriate taxation schemes can be developed to achieve this. Targeted taxation will be justifiable and make businesses accountable. A blanket tax as proposed under the Green Fund scheme penalises all businesses while some are more at fault than others. - Nicole Leotaud, Education Coordinator of Environment TOBAGO - 11th September 2000
PART TWO - Economic Instruments for Environmental Management
Last week's article examined some of the inadequacies of the Government's proposed Green Fund, which suggests a 0.1% tax on all local businesses to raise money for environmental management. This article continues to explore this issue by briefly listing some alternate economic instruments that may be applied for environmental management in T&T.
There are clear advantages to using economic instruments to promote conservation. Economic instruments effectively integrate economic and environmental policy, turning the business sector into a powerful ally by providing incentives for sustainable development. Businesses become active partners in environmental protection because doing so makes good economic sense.
Six types of economic instruments that may be applied in T&T are listed below, a few of which are proposed in the National Environmental Policy (NEP), but have yet to be implemented.
1. Bonds and Deposit Refund Systems
Bonds and Deposit Refund Systems provide a direct financial incentive for environmental conservation practices. The NEP notes Government's intention to implement deposit/refund taxes for beverage containers, tires, batteries, fluorescent bulbs, appliances, used oil and automobiles. When the systems are in place, these used items can be returned to collection centres for cash. This is currently being done for Carib glass bottles by Carib Glassworks Limited, and for all glass and bulk paper by Solid Waste Management Company Limited.
There are various types of bonds that may also be applied. For example, businesses can be required to pay Environmental Accident Bonds. An oil company would thus forfeit their bond should an oil spill occur and the bond would be used in clean-up efforts. Similarly, Environmental Performance Bonds may be issued. A lumber company employing poor forestry management practices resulting in forest degradation would forfeit their bond, which would be used in forest restoration efforts.
2. Charge Systems
Charge Systems are a strategy recommended in the NEP. Any company causing damage to the environment would be made to pay reparation costs. The NEP recommends that pollution fines and emissions or effluent charges should be applied. Thus polluters would be made to pay for clean-up efforts using the "Polluter Pays Principle". Another type of charge is the user or access charge. Users of the Buccoo Reef or Main Ridge Forest Reserve would pay user fees, which would go towards conservation of these ecosystems.
3. Fiscal Instruments
Fiscal instruments include taxes and subsidies to promote environmentally friendly choices as economically prudent. The NEP specifies taxes on energy consumption and a fuel tax on leaded gasoline and diesel. These taxes will promote energy conservation and use of unleaded gasoline, natural gas or other environmentally friendly energy sources that are not taxed.
Subsidies can also be used to encourage environmental conservation. Subsidies can be given for purchase of environmentally friendly agrochemicals or purchase of water and energy-saving technologies by hotels.
4. Financial Instruments
Some Financial Instruments are already being applied, but need to be more clearly structured to achieve environmental conservation. Financial Instruments include soft loans, grants, subsidised interest rates, and sectoral funds. For example, loans can be provided at low interest rates to allow manufacturers to redesign technologies and systems for greater environmental protection. Grants or soft loans can be given to landowners seeking to implement sustainable land management plans. Grants can also be provided to the wastewater management sector to provide adequate domestic sewage treatment systems for small villages. Incentives can be provided for the use of natural gas technology.
5. Property Rights
Property Rights attempt to issue ownership, use or development rights for natural resources through the issuing of land titles, water rights, mining rights, licensing for use, royalties, and concessions. This promotes an ethic of stewardship and promotes sustainable use. For example, issuing medium to long term logging rights for a tract of forest encourages the user to log in a sustainable manner that protects the forest and the land and so ensures a future harvest.
6. Market Creation
Markets can be used to promote environmental conservation. For example, companies who feel they cannot do business without releasing toxic emissions can be compelled to purchase Tradable Emission Permits. Market forces will naturally encourage such polluters to reduce pollution to avoid paying for the expensive permits, which will be in high demand. Tradable Fisheries Quotas similarly promote more efficient fishing methods. Tradable Reforestation Credits that give tax deductions for reforestation make reforestation profitable.
Implementation and the EMA
The Government clearly needs to take a broader look at the variety of economic instruments that may be used to promote environmental conservation. The Green Fund uses only one of the potential strategies available. Much more creative and effective economic instruments are available to fund environmental management in T&T, some of which have already been recognised in policy documents.
These potential ideas must be developed into practical plans to raise money for a Green Fund that would fund the Environmental Management Authority (EMA) and other key governmental management agencies. Through this the Government would be financially empowered to fulfill its mandate of protecting the interests of the people of T&T by managing the environment for sustainable development. - Nicole Leotaud, Education Coordinator of Environment TOBAGO - 18th September 2000