Environmental Protection Fees on Industrial Wastewater
Attributes
Medium: Water
Country: Vietnam
Analytical Framework(s): Other
Study Date: 2005
Publication Date: 2009
Major Result(s)
| Resource/Environmental Good | VND (2005) |
VND (2014)1 |
USD (2014)2 |
|---|---|---|---|
| Payment of wastewater fees by firms in Hanoi | 8,905,340.00 | 16,616,117.69 | 777.81 |
| Amount of wastewater fees paid by the food processing industry in Hanoi | 10,953,400.00 | 20,437,510.92 | 956.69 |
| Payment of wastewater fees by firms in HCMC | 2,548,060.00 | 4,754,323.23 | 222.55 |
About the Inflation Adjustment: Prices in Vietnam (VND) changed by 86.59% from 2005 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.87 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2025) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.
Study Note: This research aims to evaluate the impacts of Vietnam's "Decree 67 on firms' behavior. This decree is Vietnam's first attempt at adopting the "polluter pays" principle (PPP) to control industrial pollution. The primary results of the implementation of wastewater fees in Vietnam for two years, as assessed by domestic and international experts, are positive in terms of raising budget revenues for environmental protection activities and public awareness of environmental issues (MoNRE 2006). A MoNRE report (MoNRE 2006) indicates that as of 2004, the total collected wastewater fees were approximately VND 6.8 billion (equivalent to USD 425,000) 5 . The amount of collected fees in the first half of 2005 was double the amount collected in 2004. However, whether or not this intervention is able to limit the environmental pollution is not well understood. How much pollution is reduced and how the firms' environmental performance is changed as a result of the policy are not clearly established.
Study Details
Summary: Applying economic instruments to environmental management is the right approach to managing the current environmental pollution in Vietnam. By charging industrial wastewater fees (Decree 67), the Government of Vietnam has clearly signaled that it is embarking on a significantly greater use of economic instruments as a policy tool to prevent the further degradation of the country's environment and to improve environmental quality. This study aimed to generate evidence to inform decision-makers about the effectiveness of Decree 67 in inducing changes in pollution abatement behavior of Vietnamese firms and the factors affecting their environmental performance. Decree 67 has been successful in raising environmental awareness among the different stakeholders, especially business enterprises. The declining trend in average fees paid by industrial firms may reflect the slight effect of Decree 67 in inducing changes in the pollution control behavior of firms. However, this trend may also imply some weaknesses in the implementation process. The weaknesses may include lack of appropriate knowledge, awareness, and management capacity at all levels. There is little or no evidence that the top government agencies have sufficient environmental/financial knowledge and capacity to effectively implement Decree 67. Regarding the firms' environmental performance, the study's results indicate a rather poor performance iof the food processing industry. Most companies show little concern for environmental improvement. They are not under much pressure to change. It was also found that the government remains to be the most important source of pressure on companies to improve their environmental performance. However, this advantage largely depends on the government's enforcement and inspection capacity. Also, exposure to the export market can be a potential source of motivation for firms to have a good environmental performance, particularly when enterprises try to expand their market. The other sources of pressure for environmental improvement include the general public and type of firm ownership; however, their impacts are still small at present.
Site Characteristics: The focus areas of evaluation study are food-processing enterprises in Hanoi and Ho Chi Minh City (HCMC). There are two reasons for this. First, both cities have a high concentration of food processing factories and now are facing serious problems of water pollution (Figure 1). HCMC is one among the provinces where the implementation of wastewater fees has been more effective. In contrast, Hanoi belongs to the group of provinces, where the program has not been implemented effectively. This difference may reflect the prominent role that the local governments have in policy enforcement.
Comments: The study aims to generate information on the effectiveness of Decree 67 in inducing changes in pollution abatement behavior of firms over time. Information on the firms' insights and perceptions on the effectiveness and implementation of Decree 67 would be useful input into efforts at refining and improving this policy. As far as policymaking is concerned, the outcomes of this study are expected to serve as important inputs to the relevant authorities in effectively responding to the development challenges arising from industrial pollution.