Operationalization of a market-based instrument for environmental management: the Environmental User Fee System (EUFS) of the Laguna Lake Development Authority

Applying the 'Polluters Pay Principle', the Environmental User Fee System (EUFS) as implemented by the Laguna Lake Development Authority (LLDA), is an economic or market-based instrument to reduce industrial water pollution of Laguna Lake. Started in 1997, EUFS is instituted to help achieve an acceptable water quality level of the Laguna de Bay through incentives to industries. The charging system applied in the EUFS considers the volume of the effluent, substances contained in the effluent, and the organic load of the effluent as expressed in its five days Biochemical Oxygen Demand (BOD5) concentration. The total annual EUF fee is composed of the fixed fee and the variable fee. The fixed fee covers the compliance monitoring, cost of analysis, and processing fee. The rate used in the computation of the variable fee depends on BOD concentration in the effluent. BOD concentration less than or equal to 50 mg/l complies with effluent standard while concentrations greater than 50 mg/l do not meet the DENR [Department of Environment and Natural Resources] standards, thus, a higher fee is assessed. The fee is incorporated in the annual payment for the Discharge Permits that LLDA issues to establishments that discharge wastewater. With almost 10 years of implementation (since 1997), how effective is EUFS in reducing wastewater from the industries. The monitoring records of LLDA show that there is an increasing compliance to the EUFS from industries within the Laguna de Bay region. There is an increasing number of discharge permit applications and the corresponding issuance from 1997-2004. The average annual application for the eight-year period is 662 applications, of which 387 (61 percent) are issued with discharge permits. By 2004, LLDA has been monitoring 3,010 estabishments, 47 percent of which are covered by the EUFS. Compliance of these establishments has significantly reduced BOD loading by 19 percent yearly for the period 1997-2004. On the other hand, the implementation of EUFS to reduce the lake's water pollution has encountered a host of problems and issues. These problems include insufficient coverage (that is, households and small enterprises are not covered); inefficient collection of fees, and; the collected fees are not plowed back to the industries and the communities. All in all, however, the EUFS can serve as a model in operationalizing an economic or market-based instrument for environmental management. As stipulated in the Clear Water Act of 2004, it should be adopted and implemented in other regions in the country where the environmental integrity of lake or other aquatic ecosystems is adversely affected.