Environmental User Fee System for Laguna de Bay

Lessons LearnedThe LLDA’s experience in the implementation of the EUFStaught two important lessons: (i) start simple and buildexperience; and (ii) the battle cry should be “READY, FIRE,AIM” rather than “READY, AIM, FIRE”. Thus, it is better tostart simple, just fine tune as experience builds up.The right way forward for pollution charges/ user fees thatemerged are:• Simple, modest approach;• Sector-based pilot run to help in understanding feasibilityaspects, administrative convenience, institutionalarrangements, acceptability by all stakeholders;• Pick one to two controllable parameters;• Revise charges based on results of monitoring;• Strong and credible regulatory arm with multi-stakeholderorientation;• Pollution charges at all levels from zero discharge andincreasing above the effluent standards.The Environmental User Fee System has created a strongincentive for regulated firms to reduce the BOD concentrationof wastewater discharged into the lake. Unfortunately,it has also created an incentive for firms to dilute their discharges.This is a potential weakness of the system, and itsuggests the importance of properly pricing input water toavoid perverse responses to EUFS.It is the policy position of LLDA that Market BasedInstruments (MBIs) should not replace traditional regulatorysystems. Rather, they are to be used as complementarytools for promoting efficient use of resources. To leverageits unique experience in MBIs, the strategy is for LLDA is toexpand the Environmental User Fee System (EUFS) usingfour strategies:• Revising the existing formula for industrial EUFS byintroducing other parameters in addition to BiochemicalOxygen Demand (BOD)• Exploring arrangements to include the households inthe coverage of the EUFS• Exploring the opportunities for introducing EUFS forraw water extracted from the Lake• Public Disclosure ProgramDrawing on international and local experiences, a publicdisclosure program will be in place to create incentivesfor pollution control and improve the environmental performanceof industrial polluters. This program is aimedto introduce the concept of public disclosure to LGUs andinclude them in a program of monitoring and disclosureof environmental performance that will encourage themto invest in improving their environmental managementperformance.Since the EUFS is implemented to complement the existingcommand and control approach for pollution control andabatement, administering the system vis-à-vis the existingregulatory system was administratively complex anddifficult to enforce. In response to this concern, the LLDAhad to introduce policy refinements and clarifications intothe existing rules and regulations to ensure effective implementationof the System and enforcement of existing policiesand regulations.2 Environmental User Fee System for Laguna de Bay