German Effluent Water Tax

Intensive sectors (such as energy, chemicals, and construction) in the post-war period caused serious environmental problems as the construction of wastewater treatment facilities did not keep pace. Compared to other industrial nations, such as the UK and Japan, Germany did not have the option to dispose wastewater from its industrial areas directly to the sea, which led to highly polluted river systems. A future acceptable water supply would have been under a serious threat in German.

The effluent charge was introduced in 1976 as a reaction to the insufficient implementation of direct regulation. Innovatively, German combined three regulations following together.

The policy mix consists of the following instruments:

• Discharge Permits (Federal Water Act, implemented in 1957)

• Effluent Tax (Effluent Tax Act; implemented in 1976)

• Discharge limits and technological standards (Waste Water Ordinance implemented in 1997)

All discharges of effluent require a permit. This permit is issued only if the effluent to be discharged is kept as low as possible for the required process and with the best available technology. In 2004, the emission-related requirements, such as pollutants limits and technical standards, were further specified for 57 areas of origin and production sectors by enforcing the Waste Water Ordinance. Permits can be granted temporarily or permanently and can be withdrawn if concerns regarding water protection and management arise.

The effluent tax is based on these permits, rather than on actual measurements. The tax rate is based on damage units, which are calculated as the equivalents of pollutants in the discharged effluent. Measured pollutants include phosphorous, nitrogen, organic halogen, mercury, cadmium, chromate, nickel, lead, copper, and indicators on the chemical oxygen demand and the toxicity for fish eggs.

The effluent tax implement the “polluter pays principle”, ,leading to the internalization of external costs. The effluent tax shall provide an economic incentive to avoid or reduce harmful effluent discharges. The revenue of the effluent tax is used for investments in water quality programs by the Länder, such as the construction of municipal sewage treatment and the administration of water quality programs tax’s incentive effect in improving water quality. As a consequence, the costs to mitigate, eliminate, and balance damage to water bodies were distributed among the polluters, which reflects a successful implementation of the polluter pays principle.

The policy mix consisting of regulatory and economic instruments can be very powerful in implementing and enforcing policies to address direct effluent emissions. Obviously, goods results have been achieved in terms of environmental outcomes due to the policy mix.

However, personally, it has shown the importance of creating the right incentive structure to achieve the targeted objectives -it was found that the effluent tax rate has been set too low since its introduction in 1979. In addition, the effluent tax rate has not been adjusted to inflation. In this case, I do not believe tax is approximately equal to the marginal damage from the pollutant, as times goes. As the cost of measures for abatement have increased with inflation, and standard become more strict, the effluent tax could not develop its full potential for setting innovation incentives to abate residual pollution.

Reference:http://www.ecologic.eu/files/attachments/Publications/2012/effluent_tax.pdf

Posted: 03|8|13 at 10:21 pm. Filed under: Uncategorized.
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