Valuation Study

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Value of Controlling Industrial Pollution


Medium: Water

Country: Philippines

Analytical Framework(s): Economic Analysis

Study Date: 2001

Publication Date: 2003

Major Result(s)

Resource/Environmental Good PHP, per kg BOD5
PHP, per kg BOD5
USD, per kg BOD5
MAC of controlling BOD5 discharges of hog raising3 16.39 26.54 0.59
Slaughtering 17.91 29.01 0.65
Poultry Dressing 20.66 33.46 0.75
Tuna Canning 7.53 12.19 0.27
Fish & Other Seafood Processing 31.44 50.92 1.14
Production of Fishmeal 1.81 2.93 0.07
Grain Processing 68.52 110.97 2.48
Beverage 21.70 35.14 0.79
Production of Crude Coconut Oil 3.84 6.22 0.14
Banana Chips Mfg. 5.25 8.50 0.19
Paper Products Mfg. 1.63 2.64 0.06
Fish port Complex 18.71 30.30 0.68
Average 18.00 29.15 0.65

About the Inflation Adjustment: Prices in Philippines (PHP) changed by 61.95% from 2001 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.62 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2022) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.

Study Note: This study assessed, in terms of cost savings and pollution discharge reductions, the use of effluent charge scheme as a management tool for protecting and maintaining good water quality in Sarangani Bay.

Study Details

Reference: Anabeth L. Indab, Aireen I. Guzman, Ricardo T. Bagarinao. 2003. An Effluent Charge for Sarangani Bay, Philippines: An Ex-ante Assessment. EEPSEA Research Report, No. 2003-RR4.

Summary: This study looks at the implications of using an effluent charge to control industrial pollution in Sarangani Bay, the Philippines. It finds that an effluent charge of Pesos 6/kg (USD 0.11/kg) on BOD would bring about a 92% drop in industrial pollution. This would be sufficient for the waters of the bay to meet the national Class SB ambient pollution standard. The study also finds that the total abatement cost under this level of charge would be about Pesos 14 million (USD 265,000) per year less than the cost of the current command and control scheme. In light of these findings, the study recommends that the government of the Philippines should consider using such an economic instrument.

Site Characteristics: The Bay is effectively categorized as Coastal/Marine Water Class SA where discharge of waste or effluent is absolutely prohibited. Ironically, by virtue of the previous and current usages of the Bay, it is effectively placed under Coastal/Marine Water Class SB, and not SA. Under the SB classification, a certain level of discharge can be allowed in the Bay along with the other beneficial usages. Related to this issue is the confusion on who should have administrative power over the Bay. Both General Santos City and Sarangani Province, prior to the proclamation in 1996, were initially granted the legal jurisdiction over the Bay. But by virtue of its proclamation as a protected seascape, the administrative power was consequently turned over to the Protected Area Management Bureau (PAMB). The Bureau, however, has not asserted its control over the management of the Bay.

Comments: The considerations associated with direct regulation also apply to economic instruments. There is still a need to know what the harmful level is; the need for monitoring and enforcement remains and these factors also serve as the main argument that favors economic instruments over a pure CAC scheme. Economic instruments or other instruments will not deliver economic efficiency and achievement of environmental goal if the instruments are not enforced effectively. It is far from attainable under a pure CAC scheme to allocate sufficient manpower and technical resources to enhance enforcement and monitoring to ensure that a 92% industrial pollution reduction will be achieved. If CAC could be complemented with effluent charge scheme, a certain proportion of revenue from pollution charges could be used to cover the implementation cost and/or used for self-construction of environmental protection agencies. In achieving economic efficiency and in effective environmental management, a Pesos 14 million (USD 264,150) abatement cost saving may not be significant compared to the experiences of other countries, but its value is appreciated.