Manual on the Development of Cleaner Production Policies ... - Unido

DEVELOPMENT OF CP POLICY
MODULE 4: POLICY TOOLS AND INSTRUMENTS
Grants, subsidies and financial assistance for CP
There are a number of economic instruments that can facilitate the implementation of CP projects.
Grants and subsidies for CP assessment and/or implementation can offer an incentive to the producer
to determine options for CP and to make improvements to the process when the required changes may
not yet have proven profitable in a particular industrial sector or region. Financial subsidies, for
example in the form of low-interest loans, direct grants or preferential tax treatment, can target specific
industries in order to stimulate technological development.
Soft loans (subsidized interest payments) for CP investments will encourage the producer, particularly
the small and medium enterprise, to introduce changes in process or operation that can contribute to
CP. SMEs are often family enterprises and, for various reasons, do not maintain huge assets in the
name of the company. Consequently, they have difficulty accessing conventional loan facilities that
require collateral. Special loan facilities that recognize the needs of SMEs as well as the competitive
advantage of investments in CP (that may not show a corresponding increase in net assets) may
facilitate investment for the introduction of changes in favour of CP.
Accelerated depreciation is a preferential tax facility offering companies the opportunity to apply
accelerated depreciation on environmentally friendly operating assets. This provides an attractive
liquidity and interest gain for these companies, since accelerated depreciation permits larger tax
deductions in early years.
Last but not least, assistance may be provided for the preparation of bankable projects. One of the
common complaints of companies is that banks are not willing to give loans for CP, while the banks
maintain that the quality of applications (technical and financing proposals) is low. This presents an
acute problem for many SMEs, where a lack of financial skills prevents many interested companies
from developing the type of business proposal necessary to access a loan. One solution is a loan fund
for project proposal preparation as a revolving fund, with loans for failed proposals written off but
those for successful proposals repaid to the fund from the resulting loan proceeds.
EXAMPLE
The Mexican Foundation for Innovation and Technology Transfer (FUNTEC) has, for the last three
years, been providing financial engineering and loans to small and medium companies implementing
CP programmes. More than 40 small and medium companies received technical assistance and loans
up to 80 per cent of the project cost. The financing is provided through the Pollution Prevention Fund
(FIPREV).
Fiscal tools successfully used in Latin America include reforestation subsidies that were first
implemented in Brazil and Chile at the beginning of the eighties.
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