Polluter Pay Principle

Friday, 4 November 2016 00:01 - - {{hitsCtrl.values.hits}}

Cabinet this week passed a landmark proposal by President Maithripala Sirisena to introduce the Polluter Pays Principle (PPP) to hold importers of plastic and other non-degradable materials and consumers who use the products responsible for their actions.

A special committee is to be appointed to make recommendations on PPP, which is widely practised around the world and to establish an implementation method as well as a pilot program. Despite laws and awareness programs, producers, traders and consumers irresponsibly dispose naturally non-degradable containers, electrical and electronic waste to the environment. About 60% of polythene and plastic imported to Sri Lanka (210,000 MT) is disposed to the environment.

Under the PPP system, the law could charge a temporary deposit from the consumer by the trader or producer at the time of purchase of goods and reimburse it when non-degradable containers and material are returned. For electronic and electrical items used for a long period an annual interest calculated on the deposit will also be reimbursed.

PPP is a basic economic idea that firms or consumers should pay for the cost of the negative externality they create. The PPP usually refers to environmental costs but it could be extended to any external cost.

In a purely free market, you would only face your private costs. However, for goods with negative externalities, there are additional external costs e.g. damage to the environment. This means the social cost of some goods are greater than the private cost.

The PPP is simply the idea that we should pay the total social cost including the environmental costs. This requires some authority or government agency to calculate our external costs and make sure that we pay the full social cost. This in itself can be a complicated process depending on how wide the Government wishes to cast the net. Having a PPP system should be hard-hitting for all polluters and not necessarily just for companies. On the opposite paradigm firms should be well monitored to ensure that they do not hide pollution.

The difficulties of implementing PPP don’t undermine its validity. It just means in the real world it will be hard, if not impossible to get a perfect approximation of the external cost. As long as we get closer to the social cost, there will be an increase in economic welfare.

However, some may argue that certain types of environmental pollution are so bad they should just be banned rather than taxing them, for example, it is immoral to pollute a river and therefore we shouldn’t allow it to occur even if the polluter does pay some financial cost. The Government also has to work harder to implement existing environmental laws, which frequently does not happen when political patronage is exercised.

The Government must also move forward with practical efforts that should start with building recycling plants around the country as a matter of priority or even the present effort to separate waste would fall by the wayside after a few months. For a problem so serious the Government has to take multiple steps at the same time.