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Swiss Session on Water Pollution: New Approaches to Face Risks to the Environment and Human Health.21 March 2003, Kyoto, Prince Hotel

Ladies and gentlemen,

How we manage the planet's water resources will determine to a large extent whether we are able to achieve sustainable development.

The Millennium Summit, the World Summit on Sustainable Development and, before that, the Earth Summit, which gave us Agenda 21, have provided us not only with a blueprint for action but, in many cases, especially in regard to water and sanitation, a set of time-bound commitments.

Finding ways to achieve those commitments is among our tasks here at the Third World Water Forum. We have to ask what tools do we have available, what tools do we need to develop, what are the obstacles we need to overcome?

Sustainable development depends on the application of certain fundamental principles. These principles are listed in the 1992 Rio Declaration-27 in total.

I would like to highlight four of these principles, which I think provide a focus for today's session.

Principle 4 of the Rio Declaration states that environmental protection shall constitute an integral part of the development process and cannot be considered in isolation from it.

Principle 11 says that States shall enact environmental legislation; while Principle 13 declares that States shall develop national law regarding liability and compensation for the victims of pollution and other environmental damage.

And there is Principle 16: 'National authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution…'

These principles are a guide. They tell us that if environmental protection is not to be the poor relation of social progress and economic growth, it needs to be treated as an equal partner, not just in rhetoric, but in legislation. National laws and associated systems of economic incentives have to promote environmental protection not hamper it.

The World Water Vision, which was presented at the Second World Water Forum, argues that most water crises in the world today are caused by poor water management. Generally, poor management thrives in an atmosphere where it is rewarded, and declines markedly when it is punished.

The Second World Water Forum's Ministerial Declaration therefore includes emphasis on the importance of increasing the effectiveness of pollution control strategies based on the polluter pays principle by developing appropriate liability and compensation rules and procedures.

Polluters should pay the cost of the damage they inflict on others, including the environment, and compensate their victims as part of a comprehensive set of mechanisms that discourage or punish environmental damage and the profligate waste of natural resources.

There is no doubt that voluntary agreements and strategies have an important role to play in regulating the effects of various industrial sectors on the environment.

However, there is no substitute for solid, coherent environmental legislation, legislation that has teeth and which is actively implemented. UNEP is convinced of the essential and vital nature of the role of law and, in particular, civil liability, in efforts to protect the environment.

This is something UNEP is pushing strongly, especially in the developing world and in countries with economies in transition, where laws, or their implementation, are often the weakest.

UNEP is keenly aware of the role that civil liability legislation can play and is currently undertaking an expert-led review to determine how best UNEP can support and promote the use of environmental liability to deter environmental damage and ensure just compensation in cases where damage occurs.

This review is at an early stage, but UNEP has received many strong expressions of support for these efforts. This support, coupled with the growing number of initiatives to address environmental liability in an international context, has convinced me more firmly than ever that UNEP can be of great assistance in this area, through legal capacity building, the development of legal resources on this subject and possibly the development of non-binding guidelines or model national laws.

UNEP is already working with governments to develop and reinforce national environmental legislation and institutions, and with senior judges from around the world to raise awareness of both the existence and the efficacy of environmental laws to help countries protect their natural resources.

Last year we organized the Global Judges Symposium, a parallel event to the World Summit on Sustainable Development and the largest gathering of Chief Justices and High-Court Judges ever convened. This Symposium resulted in the unanimous adoption of the Johannesburg Principles, an affirmation by the world's judiciary of their dedication to sustainable development and their own commitment to the just development, interpretation and enforcement of environmental law.

One outcome of the Global Judges Symposium, which was the culmination of a number of regional symposia, was that the judges called for the improvement of training in environmental law for the judiciary, prosecutors, legislators and other legal stakeholders. UNEP has heeded this call and already hosted the first of a series of ad hoc judges' meetings to implement a broad-ranging and intensive capacity-building programme in environmental law. This programme was just endorsed by UNEP's Governing Council in February of this year.

UNEP has also developed guidelines on compliance with and enforcement of Multilateral Environmental Agreements and working very closely with countries to help them to implement them.

These examples, I think, go a long way to addressing one of the questions of today's session: how to promote the use of existing civil liability instruments.

Another development which I think will improve recognition of the important role that environmental liability can play in protecting water resources is the finalization of the UNECE Joint Protocol on Liability and Compensation under two UNECE Conventions-the Convention on the Protection and Use of Transboundary Watercourses and International Lakes, and the Convention on the Transboundary Effects of Industrial Accidents.

After less than a year and a half of negotiations, a working group convened under these two conventions has succeeded in finalizing a draft liability protocol under both instruments. This protocol, which will be opened for signing at the Environment for Europe Conference at Kiev in May 2003, fills a major gap in international law.

It provides a legal claim to compensation for individuals affected by industrial accidents on transboundary watercourses. Operators of industrial installations, including tailings, dams and pipelines, will be required to establish financial securities (such as insurance) to ensure that compensation is available in the event of an accident.

Not only will this protocol have the affect of ensuring restitution and redress, but it will have the advantage of deterring environmentally unsound operations and allocating financial risks in a just and realistic manner.

These concepts: restitution and redress, deterrence, and environmental justice form the core of the polluter pays principle. Civil liability instruments are an essential tool in turning that principle into practice.

However, like all instruments, if they are to be successful, they have to be well thought out, and they have to take into account conditions on the ground. This is a particularly important point when we consider developing new instruments or transferring some of the instruments that have been created in the developed world to developing countries and countries with economies in transition.

To date, experience with civil liability and compensation, and with broader 'polluter pays' financial incentives to reduce pollution, is concentrated in the developed world. We have to recognize that developing world conditions present their own sets of problems, requiring their own distinct solutions, whether we are talking about civil liability or about some of the other tools for preventing pollution, such as pollution taxes or discharge permits.

The aim of the polluter pays principle is simple: To create financial incentives to reduce pollution and to internalize the costs of the external impacts of polluting activities.

Even if the costs of reducing pollution are ultimately passed on to the consumer these are shorter term costs. The benefits to society are still significant because pollution imposes real costs-illness, death and lost production on-people-usually the poorest people.

What are the potential advantages of applying polluter pays solutions?

· They are more cost effective, allowing the worst offenders to be targeted.

· They allow increased flexibility. It is easier to modify fines or pollution charges than to modify legislation, and polluters end up with more freedom of choice in deciding how to decrease pollution.

· They are a valuable source of finance for local and national governments which can be used to subsidize pollution abatement or to improve water supply and sanitation. They allow improved economic efficiency in the allocation of resources.

Solutions such as pollution taxes, effluent charges or emissions trading can minimize the total cost of pollution control to society. Therefore, they can and should be an important part of pollution control strategies.

However, their use must be based on assessments of the particular issue and the preconditions needed for the successful application of various economic instruments.

· For example fertilizers and pesticides used in agriculture can significantly affect water quality, but it is not so easy to identify the specific source of the pollution. Because it is very difficult to charge producers directly in the case of non-point sources of pollution, input taxes on fertilizers, pesticides etc. dominate. However, experience indicates that this form of pollution tax is not very cost-effective, because of the high taxes needed to impact on levels of pollution and because the inputs are but a proportion of total production costs.

· Point source pollution taxes, based directly on pollution discharged show more promise. An example is water effluent charge. This clearly reflects the polluter pays principle, with polluters charged on the basis of the impact on water quality. Again, there are both successful and unsuccessful examples. A successful example is the Dutch effluent charge system, because the relationship between the taxed effluent and environmental harm was reasonably clear and because monitoring was relatively straightforward.

· A third example is the provision of a market for pollution discharge permits. Under this system, the overall level of emissions is determined for an area or water body, and permits to pollute are allocated to polluting firms in the area. Polluters who keep their emissions below the permitted level can sell their surplus pollution rights. The advantage of this approach is that it provides incentives for polluters who can more cheaply reduce their pollution levels to do so, and then sell their surplus pollution rights. In turn, this results in a cheaper overall cost for reducing pollution than if non-tradable pollution limits were set for each polluter. However, experience with tradable permits is more limited than with non-point and point source pollution taxes. Significant problems exist:

· What exactly should the pollution permit contain?

· Are there sufficient numbers of polluters in the market?

· How should the original permits be allocated? Should permits be allocated on the basis of existing pollution, so that new players have to pay, or should they be auctioned so that existing polluters have to bid against new comers to the market?

These, then, are some of the options available when we talk about transferring polluter pays principles to the developing world. However, we must also recognize the potential pitfalls and problems associated with developing economies and those that are in transition.

I spoke earlier about some of the issues related to the enforcement of civil liability in developing countries-for instance the need for institutional capacity building and the development of legislation-and have indicated some of the ways that UNEP is helping. But what of these other financial instruments that are available for applying polluter pays principles?

Experience with economic instruments to control pollution has shown that, for pollution taxes or other financial penalties or incentives to work, there has to be transparency with what is being done with the money that is collected. There needs to be an absence of corruption and the presence of good governance.

This is just one of a number of issues that need to be addressed.

Other issues include:

· The scarcity of financial resources for design and implementation.

· Inadequate technical, economic and administrative capacity.

· Inadequate environmental, economic and social data.

· Inadequate monitoring and enforcement of existing environmental protection laws.

· Relatively inefficient markets, including small numbers of polluters who might be more cost effectively targeted with regulation.

· Extensive poverty such that polluter pays may bring a real burden if not applied appropriately.

· Political acceptability may be lower due to poverty, different cultural values and lower public participation.

Another issue is the argument of political sensitivity sometimes raised regarding polluter pays approaches. The interests of the poor are frequently cited as a convenient reason for not making polluters pay. This is an argument used by those who are well enough off to pollute as a side-product of production. It is the poor who suffer the most from pollution! Carefully designed polluter pays approaches will not harm the poor-they will help them.

Despite these potential problems, the increased application of polluter pays approaches is recommended in developing countries. Not least because the impact of pollution in developing countries is often higher-resulting in illness and death.

However, a pragmatic approach is urged, rather than one an overly complicated one that seeks to approach theoretical perfection. (Incidentally this applies to developed countries also!).

In conclusion, then, I would like to propose a series of steps that need to be taken to institute polluter pays approaches in developing countries.

Assuming that the necessary legal frameworks are in place-which, as I mentioned earlier, is something that UNEP is working on in partnership with developing country governments-I suggest the following approaches:

1. First, developing and developed countries need to work together to generate donor support-technical and financial-to identify, develop and apply appropriate polluter pays approaches.

2. Consultations should be instigated to inform the public of the costs of pollution and the intention to introduce pollution taxes, and to provide plenty of warning to polluters.

3. Basic pollution charges should be introduced slowly. Even though incentives to cut pollution may be less, revenue should be higher than if more ambitious schemes are introduced only to fail.

4. Part of the revenue should be used to build capacity to develop further polluter pays and civil liability approaches.

5. Part of the revenue can also be used to subsidize assistance for polluters to invest in pollution reduction and to fund public pollution abatement infrastructure and other measures. Time limits can be imposed on the ability to receive subsidies to encourage earlier investment in pollution reduction practices.

6. In due course, the application and sophistication of polluter pays approaches can be gradually increased.

7. Finally, it will be essential to continually monitor the effectiveness of the systems introduced, and modify them in line with experience and circumstance.

In closing, I would like to reflect on how, and why, the countries of Western Europe and North America in particular have been able to make great strides in recent decades to clean up notoriously polluted rivers.

These changes have been brought about by a combination of factors. Public understanding of the dangers of pollution, and their tolerance of it, has changed. Environmental legislation and financial incentives have provided the tools for environmental protection. These tools continue to evolve.

Many challenges remain for improving water quality and the environment in the developed world, but there are many, many tools now available for meeting those challenges.

These tools, and the principles that lie behind them, also need to be available to the people of the developing world.

The principles are clear. They were set out in Rio, and overwhelmingly endorsed in Johannesburg:

· The environment has to be treated as an equal partner with the goals of development and trade, with rules and incentives that are no less strong.

· The environmental costs of development must not be borne by the people living at the end of the pipe, but by those who are polluting the system.

Hopefully, today's session, and others like it at this Third World Water Forum, will help take us further down the road to a cleaner, safer, more prosperous future for everyone who shares this planet.

Thank you.