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

DEVELOPMENT OF CP POLICY
MODULE 4: POLICY TOOLS AND INSTRUMENTS
EXAMPLE
Market-based instruments in Latin America
There has been substantial experimentation with market-based instruments in Latin America, and a
wide range of mechanisms have been developed and applied. In most countries of the region, the
environmental sector is largely subsidized by government funds, with resources drawn from national
budgets, donations, grants, transferable compensatory certificates, fees, loans, contribution legacies,
fines and other resources determined by legislation.
Brazil, Chile, Colombia and Mexico seem to have experimented most with economic instruments. The
use of economic incentives has been directed mainly at controlling pollution and access to certain
natural resources.
The major impetus behind many of the economic instruments in Latin America has been to raise
revenue. Other potential objectives, such as reduction of environmental impacts or improving the costeffectiveness
of regulations, have been underemphasized or not achieved.
Most Latin American countries have existing legislation that established environmental institutions
and provided for the use of economic incentives in environmental management. In reality, however,
institutional weaknesses, such as underfunding, inexperience, unclear jurisdiction, or the lack of
political will, limit the effective implementation of market-based instruments (MBIs).
The administrative intensity of market-based instruments remains high. Monitoring requirements,
legal design requirements, public consultation needs and enforcement or collection needs of MBIs are
not always noticeably different from strict command-and-control approaches. Economic instruments
are, therefore, not a substitute for weak institutions or for direct regulation; the need for some
regulatory elements is inevitable and a strong institutional base is a prerequisite to implementation.
Finally, economic instruments are not decided by a single policy maker, but have to be approved by a
political system where the negotiating processes can dilute what is theoretically the most efficient type
of mechanisms. In fact, there are often significant political constraints that act against the effective
introduction of market-based instruments.
In some cases, a failure to make economic instruments and direct regulations complementary has had
negative environmental effects. Command-and-control economic instruments are likely to remain in
application in the future, but the use of penalties, taxes, fees, tax deductions and subsidies will
probably be intensified as more prevention-oriented environmental policies come into being. There is,
however, a tendency to expect too much from regulatory programmes based on economic instruments.
Direct regulation is still necessary for several environmental problems and a mix of direct regulations
and economic instruments is likely to be needed.
http://www.rec.org/REC/Programs/SofiaInitiatives/EcoInstruments/sourcebook.html
Emission fees and non-compliance fines
Environmental charges and taxes are direct payments from polluters and represent a clear application
of the “polluter-pays” principle. Environmental charges include fees or taxes that are collected for the
“use of environment” or the “right to pollute” within the accepted standards, and they tend to be tied to
the conditions stipulated in operating permits. Another form of environmental charges are fines for
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