Thursday, January 16, 2014

Vietnam News: Environmental management through economic instruments (1 Jan 2014)

Environmental management through economic instruments

Law on Environmental Protection and bylaw documents were institutionalized in the views on the application of Economic Instruments (EIs) in environmental management, in particular, Ministry of Natural Resources and Environment’s Official Section of Communist Party issued Resolution No. 27/NQ-BCSDBTNMT on strengthening the economization policy of natural resources and environment sector. Thereby, in terms of management, EIs can be divided into two groups: EIs in pollution management and biodiversity conservation.

Application of EIs in environmental management is the right approach to curb pollution and environmental degradation in Vietnam. Currently, a number of EIs have been deployed at different scales, initially, EIs has a positive impact in curbing pollution and environmental degradation. However, the process of deploying these instruments has faced many difficulties; there are many EIs which have not been applied, especially in areas such as biodiversity conservation.

The EIs in pollution management

Currently in Vietnam, taxes/fees imposed on pollution unit discarded into the environment is being applied in the form of fees for environmental protection (EP) for wastewater, solid waste and mineral extraction.

Environmental protection fee for wastewater is first defined in Decree 67/2003/ND-CP dated 13/6/2003. However, after years of implementation, environmental protection fee for wastewater still exists many problems. The agency also faced difficulties in fee collection and calculation. Businesses still find the way to evade and owe fees. As a result, the fee collection rate of industrial wastewater is low.

Environmental protection fees for common solid waste and hazardous solid waste is regulated in Decree 174/2007/ND-CP dated 29/11/2007. However, revenues from these fees are not enough to offset the cost of collection and treatment of solid waste.

Environmental protection fees for mineral extraction is implemented under Decree No. 63/2008/ND-CP of the Government dated 05.13.2008. However, the fee collection still faces many difficulties because fee payers do not voluntarily perform such obligations. There still exists the situation that businesses enumerate the lower amount of mineral extraction compared to reality to reduce fees payable.

In addition to three types of fees included in Pigouvan tax/fee group which was mentioned above, there is Law on Environmental Protection Tax. This is tax regulation charged on raw materials/products, including 8 groups of products: Oil, coal, cleaning solvents containing HCFC, plastic bags and restricted-use group such as: plant protection drugs, herbicides, termiticides and warehouse disinfectants.

The pros of applying environmental protection taxes for materials/products are easy to calculate and apply. Regarding the cons, this type of tax only encourages pollution but not encourage the investment in pollution treatment in product manufacturing process. For the kind of luxury goods, this tax is more effective in curbing pollution (through curbing consumption/production) but for the essential commodities, this tax has little effect on reducing pollution.

The EIs in biodiversity conservation

Compared to the EIs in pollution management, the EIs in biodiversity conservation has not been widely applied in Vietnam, including taxes for natural resource, environmental services and environmental label some forestry and fishery products.

Currently a number of EIs in biodiversity conservation is being studied and applied such as: Development rights, which can be exchanged or traded, are the rights given to the owner of the land in the area of biodiversity conservation. These rights can be sold to investors who intend to invest in development projects in other lands; however, according to regulations of law, a certain number of conservation licenses are required to have the right to implement investment activities. As a result, investors should acquire this license from those who carry out conservation activities.

Besides, there is also Green development mechanism, a form which is studied and proposed by international scientists. Green development mechanism will create a exchange market for the quotas of economic development activities affecting biodiversity. Accordingly, there will be a number of certain quotas of development activities which are determined for a regional or global area. If a country wants to develop the economy exceeding this quota, it must buy the rights from other nations.
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