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Technical Assistance Consultant’s Report
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
Project Number: 38626-01 April 2008
Thailand: Capacity Building for Pollution Taxation and Resource Mobilization for Environmental and Natural Resources Sectors — Phase II
Prepared by Mingsarn Kaosa-ard, Benoit Laplante, Kobkun Rayanakorn, Sakon Waranyuwattana
Bangkok, Thaliand
For Ministry of Finance
Fiscal Policy Office
ASIAN DEVELOPMENT BANK
Technical Assistance Report 4667 THA
Mingsarn Kaosa‐ard Benoit Laplante
Kobkun Rayanakorn Sakon Waranyuwattana
THAILAND
04/2008
Capacity Building for Pollution Taxation and Resources Mobilization for Environmental
and Natural Resources PHASE II
Technical Assistance Report 4667 THA
Capacity Building for Pollution Taxation and
Resources Mobilization for Environmental and Natural Resources
PHASE II
Mingsarn Kaosa‐ard Benoit Laplante
Kobkun Rayanakorn Sakon Waranyuwattana
Asian Development Bank April 2008
ADB TA-4667 (THA)
TABLE OF CONTENTS ACRONYMS ……………………………………………………………………………………………………i
EXECUTIVE SUMMARY ................................................................................................................................ iii
I. INTRODUCTION ................................................................................................................................. - 1 -
PART A BACKGROUND INFORMATION: POLLUTION AND ENVIRONMENTAL MANAGEMENT IN THAILAND
II. ENVIRONMENTAL DAMAGE AND POLLUTION SOURCES IN THAILAND ......................... - 5 -
ENVIRONMENTAL DAMAGE IN THAILAND ................................................................................................... - 5 - POLLUTION SOURCES IN THAILAND ........................................................................................................... - 7 -
III. INDUSTRIAL DISCHARGES OF WATER AND AIR POLLUTION IN THAILAND .................. - 9 -
INDUSTRIAL DISCHARGES OF WATER POLLUTION IN THAILAND .............................................................. - 9 - INDUSTRIAL DISCHARGES OF AIR POLLUTION IN THAILAND ................................................................... - 19 -
IV. FISCAL STRUCTURE ...................................................................................................................... - 30 -
4.1 TAX COLLECTION AGENCIES .......................................................................................................... - 33 - 4.2 EXCISE TAXES AND THE ENVIRONMENT ......................................................................................... - 35 - 4.3 DECENTRALIZATION AND ENVIRONMENTAL PROTECTION .............................................................. - 36 - 4.4 EXPENDITURE FOR ENVIRONMENTAL PROTECTION ....................................................................... - 40 -
V. ENVIRONMENTAL MANAGEMENT IN THAILAND ................................................................... - 43 -
DESCRIPTION OF EXISTING LAWS ............................................................................................................ - 43 - 5.2 ECONOMIC INSTRUMENTS IN EXISTING LAWS ............................................................................... - 48 - 5.3 AGENCIES RESPONSIBLE FOR POLLUTION CONTROL ................................................................... - 56 - 5.4 FUTURE DEVELOPMENTS ................................................................................................................ - 67 - 5.5 THE NATIONAL ENVIRONMENT FUND ............................................................................................. - 71 -
PART B FRAMEWORK FOR THE DESIGN AND IMPLEMENTATION OF POLLUTION TAXES IN THAILAND
VI. ANALYTICAL FRAMEWORK FOR DESIGNING POLLUTION TAX STRUCTURE ............. - 74 -
OVERALL VISION....................................................................................................................................... - 74 - PRINCIPLES GUIDING THE DESIGN OF POLLUTION FEES ........................................................................ - 76 - CONSIDERATIONS PERTAINING TO THE TAX ............................................................................................ - 79 - ESTIMATED REVENUE FROM WATER POLLUTION TAX ............................................................................ - 88 -
VII. CASE STUDIES ................................................................................................................................ - 89 -
SELECTION OF A CASE STUDY SITE ........................................................................................................ - 89 - EXISTING MONITORING CAPACITY ........................................................................................................... - 90 - 7.3 ESTIMATES OF REVENUE FROM WATER POLLUTION TAX ............................................................. - 92 -
VIII. CONSULTATIVE MEETINGS ......................................................................................................... - 95 -
IX. RECOMMENDATIONS .................................................................................................................... - 97 -
9.1 THE ACT ON ECONOMIC INSTRUMENTS FOR ENVIRONMENTAL MANAGEMENT (EI ACT) ............. - 98 - 9.2 PROPOSAL FOR WATER POLLUTION MANAGEMENT ................................................................... - 107 - 9.3 THE ROYAL DECREE ON POLLUTION TAX ON EFFLUENT DISCHARGE OF BOD AND TSS ........ - 111 - 9.4 RESPONSIBILITIES OF KEY AGENCIES .......................................................................................... - 115 -
X. IMPLEMENTATION PLAN ............................................................................................................ - 120 -
10.1 CAPACITY BUILDING ..................................................................................................................... - 120 - 10.2 IMPLEMENTATION SCHEDULES ..................................................................................................... - 124 -
ANNEX I LIST OF CONSULTATIVE MEETINGS AND INTERVIEWS ...................................... - 129 -
ANNEX II DIFFERENTIATED TARIFFS UNDER THE EXCISE TARIFF ACT B.E. 2527 ....... - 131 -
ANNEX III THE MINISTERIAL REGULATION ON THE RATES OF SERVICE FEES FOR COLLECTION AND TRANSPORTATION OF SOLID WASTES B.E. 2545 ............ - 133 -
ANNEX IV ESTIMATED EXPENSES FOR CAPACITY BUILDING ............................................. - 135 -
i
Acronyms ADB Asian Development Bank BMA Bangkok Metropolitan Administration BOD Biochemical Oxygen Demand CBD Convention on Biological Diversity CBNRM Community Based Natural Resource Management C7 Common Level 7 (Civil service officer rank in Thailand) CCP Cities for Climate Protection CERs Certified Emission Reductions CDM Clean Development Mechanism CFCs Chlorofluorocarbons CIDA Canadian International Development Agency CIT Corporate Income Tax CITES Convention on International Trade in Endangered Species of Wild Fauna
and Flora CMS Continuous Monitoring System COD Chemical Oxygen Demand COP Conference of the Parties DEQP Department of Environmental Quality Promotion DIW Department of Industrial Works DNA Designated National Authority DANCED Danish Cooperation for Environment and Development DANIDA Danish International Development Assistance DOE Designated Operational Entity DOLA Department of Local Administration EC Emission Charge EI Economic Instrument EIA Environmental Impact Assessment EID Environmental Inspection Division EMP Environmental Quality Management Plan EPA Environmental Performance Assessments ET Emission Trading FPO Fiscal Policy Office GEF Global Environment Facility GDP Gross Domestic Product GFMIS Government Fiscal Management Information System GIS Geographical Information System GMOs Genetically Modified Organisms GMS Greater Mekong Sub-region GPP Gross Provincial Product GTZ German Technical Cooperation IEAT Industrial Estate Authority of Thailand IGES Institute for Global Environmental Strategies ISEW Index of Sustainable Economic Welfare ISIC International Standard Industrial Classification ISO International Standards Organization IUCN International Union for the Conservation of Nature and Natural Resources
(the World Conservation Union) IPPS Industrial Pollution Projection System JI Joint Implementation JICA Japan International Cooperation Agency JOMPA Joint Management of Protected Areas LGUs Local Government Units MDGS Millennium Development Goals MN Municipality MOAC Ministry of Agriculture and Cooperatives MOE Ministry of Energy
ii
MOF Ministry of Finance MOPH Ministry of Public Health MOI Ministry of Industry MOL Ministry of Labor MONRE Ministry of Natural Resources and Environment MOST Ministry of Science and Technology MOT Ministry of Transportation MOTS Ministry of Tourism and Sports MPW Management and Protection of Wetlands Areas MRC Mekong River Commission NCC National Coordinating Committee NDC National Decentralization Committee NEB National Environmental Management Board N.E.C. Not Elsewhere Classified (ISIC notation) NEDO New Industrial Technology and Energy Development Organization NEF National Environment Fund NESDB National Economic and Social Development Board NEQA National Enhancement of Environmental Quality Act NIES National Institute for Environmental Studies NGO Non-Governmental Organization NRE Natural Resources and Environment O&M Operation and Maintenance ODSs Ozone Depleting Substances ODP Ozone Depletion Potential OECD Organization for Economic Co-operation and Development ONEP Office of Natural Resources and Environmental Policy and Planning
(formerly OEPP) PAO Provincial Administrative Organization PCD Pollution Control Department PIO Provincial Industrial Office PIT Personal Income Tax PM10 Particles less than 10 microns PMF Pollution Management Fee PNREOs Provincial Natural Resources and Environmental Offices RENREOs Regional Natural Resources and Environmental Offices SME Small and Medium-Sized Enterprise SRI Social Research Institute (Chiang Mai University) TA Technical Assistance TAO Tambon Administrative Organization TDRI Thailand Development Research Institute TEI Thailand Environment Institute THB Thai Baht TSP Total Suspended Particles TSS Total Suspended Solids UN United Nations UNCED United Nations Conference on Environment and Development UNFCCC United Nations Framework Convention on Climate Change UNDP United Nations Development Program UNEP United Nations Environment Program UNTEP UNDP - Thailand Environment Partnership USAID United States Agency for International Development USD United States Dollar VAT Value Added Tax VOC Volatile Organic Compounds WEEE Waste from Electrical and Electronic Equipment WSSD World Summit for Sustainable Development WWF World Wildlife Fund
iii
EXECUTIVE SUMMARY
This Technical Assistance project (TA – 4667 (THA)), funded by the Asian
Development Bank (ADB) with counterpart funding from the Government of Thailand, aims to facilitate the implementation of the polluter pays principle in Thailand by means of a greater use of economic instruments. Phase I of TA - 4667 reviewed the international and Thai experience concerning economic instruments for pollution control and recommended a framework for environmental taxation in Thailand. A key recommendation made in the context of Phase I was that a specific legal framework be further developed to facilitate the implementation of effective economic instruments in the Kingdom.
This report is the final report of Phase II which aims to propose a framework
for comprehensive environmental management based on economic instruments together with an implementation plan on water pollution tax. The draft Act on Economic Instruments for Environmental Management is an umbrella framework which covers 6 economic instruments aiming at a comprehensive environmental management. It prescribes governing institutional framework, the management of the revenue and the conditions under which revenues could be expended.
The recommended tax design is based on 5 key principles namely,
effectiveness, self-sufficiency, fairness, simplicity and feasibility. We propose that two pollutants, biological oxygen demand (BOD) and total suspended solids (TSS) be first targeted in the initial phase of implementing a water pollution tax. We also recommend that the more heavily polluting industries should be the first targets. For the non-industrial sector, the target tax payers in the initial phase are those activities which are injurious to health under the Public Health Act and point source polluters to be determined by the Ministry of Natural Resources and Environment (MONRE).
We recommend a two-part tariff system made of a fixed fee (designed for
revenue generation purposes) and a variable fee (designed to create incentives for pollution reduction). The variable fee is conceived as a uniform fee to be paid on the release of each and every tons of BOD and TSS into Thailand’s environment. Given existing implementation capacity, it is recommended that initially only a fixed fee be applied to small and medium firms, and that the variable fee be initially applied only to large firms. Estimates of revenues, institutional arrangements and an implementation schedule, as well as an assessment of resource requirements are provided in the report. It is recommended that revenues from water pollution taxes be earmarked into a fund to support activities leading to pollution reduction, cleaner technology adoption, environmental R&D, assistance to people whose health and livelihood are affected by environmental changes caused by pollution, and environmental clean-up.
To support the implementation of a water pollution tax, a draft of the Royal
Decree on Pollution Tax on Effluent Discharge of BOD and TSS prescribes taxable polluting sources and pollutants, the range of tax applicable to firms of different sizes, tax mechanism, the appeal procedure, as well as the management and the use of the fund.
iv
The draft Act on Economic Instruments for Environmental Management proposed in this study aims to put in place comprehensive environmental management in the country. This requires capacity building at all levels; decision makers, professional and practitioners at the national and local levels. The proposed capacity building program comprise 5 elements including 1) Public awareness campaign, 2) High level policy dialogue and co-ordination, 3) Database establishment, 4) Human resource development, and 5) Capacity upgrading.
The two draft legal documents (the Act and the Decree), both written in the
Thai language, are submitted as outputs with this report.
ADB TA-4667 (THA) Phase II
Capacity Building for Pollution Taxation and
Resources Mobilization for Environmental and Natural Resources
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I. INTRODUCTION
Rapid economic growth in recent decades has had an adverse impact on Thailand’s environment. Declining water quality, increasing air pollution, degraded coastal resources and reduced forest cover are all indicative of severe stress. A conservative estimate of the annual economic cost of natural resources and environmental degradation in Thailand is over 100,000 million baht per year. At the same time, the economic benefits of improving urban sanitation and reducing water pollution alone have been estimated to be also high. At this point in time, it appears clearly that reducing pollution and improving environmental quality would be a productive investment of the country’s wealth and resources.
Since the early 1970, the overwhelming approach to pollution control in Thailand has been characterized as a command-and-control approach. This approach essentially relies on:
• Instructing polluters in what they can do and cannot do (command). This instruction most often takes the form of maximum allowable concentrations of different pollutants that polluters may discharge into the air or water (concentration standards);
• Analyzing the behavior of these polluters, and assessing whether or not they
comply with the command (monitoring); and
• Using the threat of fines and penalties as an incentive mechanism to induce polluters to comply with the command (enforcement).
This approach suffers from significant difficulties:
• Since all polluters (within a sector or region) face the same ‘command’, this
approach does not allow polluting units to exploit significant differences in marginal pollution control costs. As a result, pollution control costs to achieve a given target level of aggregate pollution are not minimized;
• Once a polluter complies with the command, it has no incentive to continue
reducing its pollution since it can pollute freely for as long as it complies with the concentration standards;
• Pollution control authorities typically lack the necessary technical, financial,
and human capacity to put in place a reliable and credible monitoring strategy to assess the extent of compliance with the ‘command’;
• Fines and penalties are typically set at levels which are too low to generate
incentives for polluters to pay serious attention to their pollution discharges. As a result of the weak monitoring and insufficient enforcement of environmental regulations, an appropriate profit-maximizing strategy for polluters is generally to ignore the presence of such regulations; and
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• Since a polluter can discharge pollution freely up to the regulatory standards, the approach fails to generate fiscal revenues from these polluters based on their use of the environment.
Thailand’s Ministry of Finance (MOF) is examining the possibility of using
economic instruments to complement the above approach (where appropriate) in order to create incentives for a reduction of pollution and waste in the country. This initiative pursues the Government’s policy to conserve, protect, and restore the condition and quality of the country’s natural resources. The Government has strongly emphasized that both the public and the private sectors should be accountable for the social and environmental costs caused by their activities.
Principle 16 of the Rio Declaration on Environment and Development (Earth Summit, Rio, 1992) states that “National authorities should endeavor to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in general, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment.”
Ten years later at the 2002 World Summit for Sustainable Development (WSSD) in Johannesburg, South Africa, the WSSD Plan of Implementation re-asserted the continuing need to promote the increasing use of economic instruments, but implicitly recognized that economic instruments alone would not be sufficient to prevent a further degradation of environmental quality and depletion of natural resources:
“Article 19(b): Continue 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 costs of pollution, with due regards to the public interest and without distorting international trade and investment.
Article 26(b): Employ the full range of policy instruments including regulation, monitoring, voluntary measures, market and information-based tools, land-use management and cost recovery of water services, without cost recovery objectives becoming a barrier to access to safe water by poor people, and adopt an integrated water basin approach.”
At the international level, there is thus a general agreement: (1) that environmental costs need to be internalized into the process of production and pricing; and (2) that economic instruments, occasionally used in combination with other regulatory instruments, may be most effective in promoting this internalization.
Economic instruments alleviate some (but not all) of the difficulties experienced with the existing command-and-control approach. In particular, economic instruments:
• Aim to ‘internalize’ environmental costs by levying a tax or charge on
pollution, or on the products or the processes which are responsible for pollution (as a proxy for the effects of pollution);
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• Ensure that the overall cost of achieving target levels of aggregate pollution are minimized;
• Ensure that polluting facilities always have incentives to reduce pollution
further in order to avoid pollution payments (or in the case of tradable permits, to sell pollution permits that are no longer needed);
• Significantly facilitate the financial sustainability of public environmental
investments; and
• Generate fiscal revenues which could be used in any ways deemed appropriate by governmental authorities, including providing support to environmental investments or offsetting the undesirable impact that these instruments may have on trade and overall competitiveness.
In its four-year ministerial strategy (FY05-FY08), MOF is committed to four
strategic objectives including the promotion of a good environment. MOF is thus actively promoting and enabling the greater use of various forms of economic instruments (e.g. taxes, fees, surcharges, performance bonds, etc.) to achieve this objective and improve environmental quality in Thailand. In so doing, MOF aims to proceed clearly with the implementation of the polluter-pays principle in the country (see Box 1).
Box 1
Definition of the polluter-pays principle
The polluter-pays principle was first recognized and defined at international level in the 1972 Recommendation by the OECD Council on Guiding Principles Concerning International Economic Aspects of Environmental Policies. In its Recommendation, the OECD Council declared that:
“The principle to be used for allocating costs of pollution prevention and control measures to encourage rational use of scarce environmental resources and to avoid distortions in international trade and investment is the so-called “Polluter-Pays Principle. This principle means that the polluter should bear the expenses of carrying out the above-mentioned measures decided by public authorities to ensure that the environment is in an acceptable state. In other words, the cost of these measures should be reflected in the cost of goods and services which cause pollution in production and/or consumption. Such measures should not be accompanied by subsidies that would create significant distortions in international trade and investment.”
At the level of the European Union, the polluter-pays principle was itself introduced in the European Community Treaty in 1987. It is now set out under Art. 174.2 of the Treaty. It provides that:
“Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay.”
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The Technical Assistance project (TA – 4667 (THA)) is funded by the Asian Development Bank (ADB) with counterpart funding from the Government of Thailand with an aim to facilitate the implementation of the polluter-pays principle in Thailand by means of a greater use of economic instruments.
Phase I of TA - 4667 reviewed the international experience and the Thai experience with economic instruments for pollution control and its fiscal and institutional structure. It recommended an outline of framework for environmental taxation in Thailand. It recommended in particular that a legal instrument be developed to facilitate and guide the implementation of economic instruments in the country. Objective of Phase II
The key objective of Phase II is the drafting of the Act on Economic Instruments for Environmental Management which will be submitted to the government of Thailand for discussion and adoption.
As indicated in the report from Phase I, the purpose of this legal instrument is not to define in details the structures and levels of various environmental taxes or fees that may be implemented in the near and medium term in Thailand. Instead, this legal instrument aims to provide an umbrella framework for the implementation of various forms of environmental fees and taxes which could then be legally designed as further legal instruments under this framework (e.g. decree on water pollution taxation, decree on air pollution taxation, etc.), and implemented by agencies or departments which have the appropriate institutional responsibilities to implement such instruments. The TA team has also delivered a draft of the Royal Decree on Pollution Tax on Effluent Discharge of BOD and TSS. The two draft legal documents (the Act and the Decree), written in the Thai language are submitted with this report.
The Ministry of Finance fully recognizes that the capacity to monitor and assess pollution releases and the responsibilities for pollution control lie appropriately with other line ministries. Hence:
• A key purpose of the recommended Act on Economic Instruments for Environmental Management is not to remove existing responsibilities and functions from relevant line ministries, but instead to define clearly and comprehensively the parameters under which such instruments can be used and designed;
• In addition, a key purpose is to define and delineate clearly the institutional
responsibilities pertaining to the implementation of environmental taxes or fees (e.g. monitoring of pollution releases; collection of fees or taxes; etc.);
• A further purpose is to provide clear guidelines as to the earmarking and
appropriate use of the revenues that will be generated from implementing pollution pricing in the country.
This report is the final output of Phase II. It is divided into two parts.
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Part A presents background information necessary for the understanding of the nature of the recommendations made in the report. In particular, Part A discusses key issues pertaining to: (1) environmental damages in Thailand (Chapter II); (2) characterization of industrial discharges of water and air pollution (Chapter III); (3) Thailand’s fiscal structure (Chapter IV); and (4) the existing nature of environmental management in the country (Chapter V).
On the basis of this assessment, Part B presents a detailed framework for the
design and implementation of pollution taxes in Thailand. In particular, we first discuss the analytical framework for designing the structure of pollution taxes (Chapter VI). The results and key outcomes from specific case studies and consultative meetings are presented in Chapter VII and Chapter VIII. Specific recommendations are made in Chapter IX and a detailed implementation plan is suggested in Chapter X.
PART A BACKGROUND INFORMATION: POLLUTION AND
ENVIRONMENTAL MANAGEMENT IN THAILAND II. ENVIRONMENTAL DAMAGE AND POLLUTION SOURCES
IN THAILAND
Environmental Damage in Thailand
Environmental degradation has long been observed in Thailand. During the last decade, the quality of water in important rivers of Thailand has shown a declining trend (Figure 2.1). Air pollution in major cities (measured as particulates concentration) has been above critical levels (Figure 2.2). More recently environmental damage has been estimated in monetary terms (TDRI, 2006). A conservative estimate of health cost from water pollution was estimated at over 1.5 billion baht (2004 prices) per year and over 6 billion baht per year from air pollution. These are conservative estimates as they exclude opportunity costs of foregone earnings related to illness. Water and air pollution have become more severe with growing urbanization and time series data have shown that costs related to pollution has been increasing (Figure 2.3).
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Figure 2.1 Water quality in Thailand, 1998 versus 2006
Year 1998 Year 2006 Source: Water Quality Management Bureau, Pollution Control Department, 2007
Figure 2.2 Trends of PM10 in selected provinces
0
20
40
60
80
100
120
140
2000 2001 2002 2003 2004 2005 2006*
Year
PM10
con
cent
ratio
n (u
g/m
3)
Saraburi
Samutprakan
Phuket
Bangkok
Chiang Mai
PM10 Annual standard = 50 ug/m3
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Source: Air Quality and Noise Management Bureau, Pollution Control Department, 2006 Figure 2.3 Estimated costs of environmental damage in Thailand
(1977- 2003) (Unit: million baht)
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Costs of water pollution (T) Costs of water pollution (H)
Costs of air pollution Costs of solid waste management
Costs of community hazardous waste management Costs of hazardous substance accident
Source: TDRI unpublished data, Project on Prioritization of Natural Resources and Environmental Problems, 2006
Pollution Sources in Thailand
Manufacturing industries are widely held by the public as a (if not the) major
contributor to pollution especially water pollution in Thailand. This is because manufacturing industries are point source polluters and their impact is more visible. However, preliminary findings suggest that as far as the total load of biological oxygen demand (BOD) is concerned, the domestic sector is the largest contributor of pollution, with the manufacturing sector accounting for between 2% to 33% of total BOD load (Table 2.1). However, this is not to forget that industries are a major contributor of metal and toxic pollutants. Table 2.1 Sources of water pollution in Thailand, by Sector, 1999
(Unit: percent) Estimated % contribution to total BOD load
Central East North Northeast South Agriculture 37 17 6 41 26 Industry 24 33 11 2 11 Domestic 39 50 83 57 63 Source: Laplante, B., Meisner, C. (2001), "Estimating conventional industrial water pollution in
Thailand", World Bank, available at: http://www.worldbank.org/nipr/Thailand/ EstimatingConventionalIndustrialWater.htm
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The most recent estimate by the Pollution Control Department (PCD) of
sources of BOD load in the Tha Chin River conducted for upstream, middle stream and lower stream suggested that the major polluting point sources in the upstream and the middle stream were swine farms and aquaculture (Table 2.2). Contribution of industries was negligible in the upstream. In the lower stream where the role of the manufacturing industries is more prominent, accounted for 22.19% of the total BOD load.
Table 2.2 Quantity & percentage of BOD in wastewater from point sources & non-point sources (III)
(Unit: kilograms per day) Tha Chin river basin
Point sources Non-point sources
Total
Rainy season Dry season
Sw
ine
farm
s
Aqu
acul
ture
Com
mun
ities
Indu
stry
Pad
dy
Rur
al
com
mun
ities
Oth
er a
gric
ultu
ral
sect
ors
Pad
dy
Rur
al
com
mun
ities
Oth
er a
gric
ultu
ral
sect
ors
Upper stream
2,235 972 846 61 9,653 2,043 5,411 2,501 574 1,193 25,489 8.77% 3.81% 3.32% 0.24% 37.87% 8.01% 21.23% 9.81% 2.25% 4.68% 100.00%
Middle stream
24,588 32,392 4,643 5,293 11,255 4,162 4,119 2,790 800 1,945 91,988 27% 35.21% 5.05% 5.75% 12.24% 4.52% 4.48% 3.03% 0.87% 2.11% 100.00%
Lower stream
4,453 46,992 5,573 18,189 2,047 2,656 1,641 272 369 181 82,372 5.41% 57.05% 6.77% 22.08% 2.49% 3.22% 1.99% 0.33% 0.45% 0.22% 100.00%
Source: Pollution Control Department, 2005 For air pollution, the estimates of the Department of Energy Development
show that manufacturing and power industries are major sources of total suspended particulars (TSP), nitrogen oxides (NOx) and sulphur dioxide (SO2) (Table 2.3). The transport sector is by far the most significant discharger of carbon monoxide (CO).
Table 2.3 Sources of air pollution in Thailand
(Unit: percent) Point Sources
Industry and Power Transport Others
TSP 85.9 8.6 5.4 CO 6.1 90.8 3.2 NOx 46.6 32.5 20.9 SO2 95.6 3.6 0.9 Source: Department of Energy Development, 2004
While applying economic instruments to the manufacturing sector may be a
cost effective way of reducing industrial pollution in Thailand, the above findings suggest however that targeting the manufacturing sector alone may not improve the environmental situation in Thailand as a whole, but may do so in specific regions of the country. In specific areas of the country, other sources of pollution must also be targeted. More efforts must be made to manage other point sources and non-point sources. Furthermore, the public must be better informed about polluting sources so
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that they can participate more responsibly in the management and protection of our environment.
III. INDUSTRIAL DISCHARGES OF WATER AND AIR POLLUTION IN THAILAND
In this section, we aim to provide key characteristics pertaining to industrial
water and air pollution in Thailand. For this purpose, we use the Industrial Pollution Projection System (IPPS) developed and used by the World Bank.1 Numerous studies have been undertaken to characterize industrial pollution in Thailand. However, different studies have used different approaches and methodologies making it difficult to compare results across provinces, polluters, and pollutants. The IPPS offers the advantage of applying a uniform methodology throughout Thailand’s industrial sector. At the outset, it should be noted that the interest here is not in the absolute discharge values (in kilograms or tons) but instead in the ranking of provinces and sectors (from most polluted or polluting to least polluted or polluting).
The estimates clearly demonstrate that most of the industrial water and air pollution in Thailand is concentrated in a limited number of provinces, and is accounted for by a very limited number of industrial sectors: Across regions and provinces, typically 4 or 5 industrial sectors account for more than 80% of the total release of industrial pollution. The estimates also show that in some provinces, pollution discharges from industrial facilities located within industrial estates represent a large proportion of provincial industrial discharges.
These results clearly suggest that significant reductions in industrial water and
air pollution in Thailand can be obtained by focusing effort and resources on a very limited number of industrial sectors in a very limited number of provinces. Industrial Discharges of Water Pollution in Thailand
In this section, we apply sector specific pollution coefficients for BOD and TSS to estimate industrial water pollution load in Thailand by regions, provinces and water basins (Section 3.1.1), and examine specific industrial sectors’ contributions to these estimated loadings (Section 3.1.2). Geographical analysis
Regional and provincial distributions of BOD and TSS discharges are
presented in Figures 3.1 (BOD) and 3.2 (TSS). As shown, the Central region of Thailand accounts for the largest share of industrial water pollution in the country: 63% and 71% of all industrial discharges of BOD and TSS respectively. Within the Central region, the provinces of Samut Prakan, Bangkok, and Samut Sakhon account for the largest share of industrial pollution. In fact, these 3 provinces alone account for approximately 35% of all industrial pollution in the country. 1 See Hettige et al (1995) for detailed information on the IPPS.
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In the East Region, Rayong is the largest producer of both BOD and TSS. In the North, Chiang Mai and Nakhon Sawan are the largest producers of both BOD and TSS. In the Northeast Region, Nakhon Ratchasima is by far the largest producer of TSS while Khon Kaen is the largest producer of BOD. Finally in the South, the province Songkhla is the largest producer of both BOD and TSS. Figure 3.1 Regional and provincial distribution of industrial BOD discharges
Samut Sakhon
14%
Bangkok11%
Kanchanaburi 11%
Ratburi10%
Samut Prakan
22%
Prachinburi27%
Chonburi 19%
Chachoengsao10%
Rayong43%
Uttaradit 12%
Phitsanulok11%
Nakhon Sawan15%
Chiang Mai21%
Buri Ram10%
Nong Khai10%
Khon Kaen19%
Nakhon Ratchasima
34%
Surat Thani23%
Prachuap Khirikhan
22%
Chumphon6%
Songkhla 35%
South
Northeast
North
East
Central
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Figure 3.2 Regional and provincial distribution of industrial TSS discharges
Samut Sakhon
20%
Bangkok 15% Nakhon
Pathom8%
Samut Prakan
36%
Rayong31%
Chachoengsao 25%
Prachinburi7%
Chonburi36%
Phitsanulok10%
Lampang11%Tak
11%
Chiang Mai20%
Udon Thani6% Nong Khai
4%
Khon Kaen 17%
Nakhon Ratchasima
61%
Surat Thani12%
Nakhon SiThammarat
9%
Trang 9%
Songkhla 53%
South
Northeast
North
East
Central
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Industrial sector analysis
As indicated in Table 3.1, at the national level, the pulp, paper and paperboard sector is the largest producer of BOD. This sector accounts for 32% of total industrial BOD discharges. The industrial chemicals sector accounts for 15% of total BOD discharges. Other important sectors include sugar factories and refineries, distilled spirits and dairy products.
With respect to TSS, the iron and steel sector accounts for a very large share
of total industrial TSS discharges with a share of 61%. Other industrial sectors represent only a very small percentage of discharges when compared to iron and steel, with the pulp, paper and paperboard and nonferrous metals sectors coming a distant second with 9% of TSS discharges each.
It is of significant interest to note that 6 industrial sectors in Thailand account
for approximately 80% and 90% of all industrial discharges of BOD and TSS respectively in the country. It is of further interest to note that pulp, paper and paperboard, industrial chemicals (except fertilizer), and nonferrous metals are significant contributors to both BOD and TSS.
Table 3.1 Contribution of industrial sectors to industrial water pollution,
Thailand (in order of importance)
% Contribution to total
Cumulative%
BOD ISIC Pulp, Paper and Paperboard 3411 32 32 Industrial Chemicals except Fertilizer 3511 14 46 Sugar Factories & Refineries 3118 10 56 Distilled Spirits 3131 8 64 Dairy Products 3112 8 72 Nonferrous Metals 3720 7 79
TSS Iron and Steel 3710 60 60 Pulp, Paper and Paperboard 3411 9 69 Jewelry and Related Articles 3901 8 77 Nonferrous Metals 3720 8 85 Drugs and Medicines 3522 4 89 Industrial Chemicals except Fertilizer 3511 2 91
At the regional level (Table 3.2), it is observed that a very limited number of
industrial sectors typically account for the bulk of the industrial discharges of BOD and TSS (typically for over 90% of discharges). In the Central Region, the pulp, paper and paperboard industry produces 37% of total BOD discharges and the iron and steel industry produces 61% of TSS discharges. This industry also accounts for 72% of TSS discharges in the Eastern Region, and for 70% of the same discharges in the Northeastern Region. It is also an important producer of TSS in the Southern Region, along with the rubber products industry. The industrial chemicals sector and the fish products sector are the largest producers of BOD in the Eastern Region
- 13 -
(41%) and Southern Region (43%) respectively. Pulp, paper, and paperboard and sugar products and refineries are large producers of BOD in the North and Northeast Regions. An examination of Table 3.2 thus reveals that the iron and steel industry is the most important producer of TSS in most regions of Thailand, except in the North Region where the pulp, paper, and paperboard industry comes first, and in the South Region where the rubber products industry represents shares first place with iron and steel. As for BOD, the pulp, paper, and paperboard industry represents the largest producer in the Central Region. In all regions of Thailand, important producers of BOD are the dairy products industry, the sugar factories and refineries, and the distilled spirits industry. Table 3.2 Contribution of industrial sectors to industrial water pollution, by
Regions (in order of importance)
Central Region % Contribution
to total Cumulative
% BOD ISIC
Pulp, Paper and Paperboard 3411 36 36 Industrial Chemicals except Fertilizer 3511 12 48 Dairy Products 3112 10 58 Nonferrous Metals 3720 8 64 Distilled Spirits 3131 8 72 Plastics Products, N.E.C. 3560 8 80
TSS Iron and Steel 3710 60 60 Jewelry and Related Articles 3901 10 70 Pulp, Paper and Paperboard 3411 9 79 Nonferrous Metals 3720 8 87 Drugs and Medicines 3522 5 92 Industrial Chemicals except Fertilizer 3511 1 93
Eastern Region % Contribution
Cumulative
BOD ISIC to total % Industrial Chemicals except Fertilizer 3511 39 39 Pulp, Paper and Paperboard 3411 27 66 Nonferrous Metals 3720 6 72 Sugar Factories & Refineries 3118 6 78 Distilled Spirits 3131 6 84 Plastics Products, N.E.C. 3560 5 89
TSS Iron and Steel 3710 71 71 Nonferrous Metals 3720 7 78 Pulp, Paper and Paperboard 3411 7 85 Sporting and Athletic Goods 3903 5 90 Industrial Chemicals except Fertilizer 3511 5 95 Jewelry and Related Articles 3901 1 96
- 14 -
Table 3.2 (continued)
Northern Region % Contribution
to total Cumulative
% BOD ISICPulp, Paper and Paperboard 3411 33 33 Sugar Factories & Refineries 3118 30 63 Distilled Spirits 3131 13 76 Dairy Products 3112 9 85 Preserved Fruits & Vegetables 3113 6 91 Nonferrous Metals 3720 5 96
TSS Pulp, Paper and Paperboard 3411 26 26 Jewelry and Related Articles 3901 23 49 Nonferrous Metals 3720 16 65 Sugar Factories & Refineries 3118 10 75 Iron and Steel 3710 9 84 Distilled Spirits 3131 5 89
Northeastern Region % Contribution
to total Cumulative
% BOD ISICSugar Factories & Refineries 3118 31 31 Pulp, Paper and Paperboard 3411 26 57 Distilled Spirits 3131 16 73 Dairy Products 3112 14 87 Plastics Products, N.E.C. 3560 4 91 Industrial Chemicals except Fertilizer 3511 3 94
TSS Iron and Steel 3710 53 53 Pulp, Paper and Paperboard 3411 14 67 Jewelry and Related Articles 3901 12 79 Sugar Factories & Refineries 3118 7 86 Distilled Spirits 3131 4 90 Nonferrous Metals 3720 3 93
Southern Region % Contribution
to total Cumulative
% BOD ISICFish Products 3114 62 62 Distilled Spirits 3131 18 80 Sawmills, Planing & Other Wood Mills 3311 6 86 Preserved Fruits & Vegetables 3113 4 90 Industrial Chemicals except Fertilizer 3511 3 93 Nonferrous Metals 3720 3 96
TSS Rubber Products, N.E.C. 3559 31 31 Iron and Steel 3710 30 61 Fish Products 3114 16 77 Nonferrous Metals 3720 6 83 Distilled Spirits 3131 5 88 Sawmills, Planing & Other Wood Mills 3311 4 92
- 15 -
0
5
10
15
20
25
30
Pulp
, Pap
er a
ndPa
perb
oard
Indu
stria
l Che
mic
als
exce
pt F
ertil
izer
Dai
ry P
rodu
cts
Non
ferr
ous M
etal
s
Plas
tics P
rodu
cts,
N.E
.C.
Fish
Pro
duct
s
Spin
ning
, Wea
ving
and
Fini
shin
gTe
xtile
s
Tann
erie
s and
Leat
her F
inish
ing
Synt
hetic
Res
ins,
Plas
tics M
ater
ials
and
Man
mad
e Fi
bers
Oils
and
Fat
s
That a very limited number of sectors accounts for a very large share of conventional industrial water pollution is even more accentuated when the estimates are examined at the provincial level. Focusing only on firms located outside of industrial estates, in Samut Prakan, 16 plants alone (7 plants in the pulp, paper and paperboard sector and 9 plants in the dairy products sector) produce 45% of all industrial BOD discharges in the province (Figure 3.3). Note in Figure 3.3 that the nonferrous metal sector and plastic products sector, with approximately 460 firms in Samut Prakan, produce much less BOD discharges than the first three sectors with only 55 firms. Even more importantly, the iron and steel sector in Samut Prakan, with 129 firms, accounts for 80% of total industrial discharges of TSS. Other industrial sectors are insignificant when compared to iron and steel.
Figure 3.3 Contribution of industrial sectors to BOD pollution (%)
Samut Prakan
Note: Numbers in parenthesis indicate the number of firms. In Rayong, the industrial chemicals sector (with 55 plants) explains 75% of
total BOD discharges (Figure 3.5); in Chonburi, 16 firms in the iron and steel sector produce 70% of industrial discharges of TSS (Figure 3.6); in Chiang Mai (Figure 3.7), 3 firms in the distilled spirits sector produce 45% of all industrial BOD discharges; finally in Songkhla, 33 plants in the fish products industry produce approximately 90% of total provincial discharges of BOD (Figure 3.8).
(403)
(59)
(7) (39) (9)
- 16 -
0
10
20
30
40
50
60
70
80
90
Iron
and
Ste
el
Non
ferr
ous M
etal
s
Pulp
, Pap
er a
ndPa
perb
oard
Indu
stria
l Che
mic
als
exce
pt F
ertil
izer
Dru
gs a
nd M
edic
ines
Ferti
lizer
s and
Pesti
cide
s
Jew
elry
and
Rel
ated
Arti
cles
Spor
ting
and
Ath
letic
Goo
ds
Fish
Pro
duct
s
Rubb
er P
rodu
cts,
N.E
.C.
0
10
20
30
40
50
60
70
80
90
Indu
stria
l Che
mic
als
exce
pt F
ertil
izer
Pulp
, Pap
er a
ndPa
perb
oard
Fish
Pro
duct
s
Non
ferr
ous M
etal
s
Petro
leum
Refin
erie
s
Synt
hetic
Res
ins,
Plas
tics M
ater
ials
and
Man
mad
e Fi
bers
Suga
r Fac
torie
s &Re
finer
ies
Plas
tics P
rodu
cts,
N.E
.C.
Saw
mill
s, Pl
anin
g &
Oth
er W
ood
Mill
s
Spin
ning
, Wea
ving
and
Fini
shin
gTe
xtile
s
Figure 3.4 Contribution of industrial sectors to BOD pollution (%) Samut Prakan
Note: Numbers in parenthesis indicate the number of firms.
Figure 3.5 Contribution of industrial sectors to BOD pollution (%)
Rayong
Note: Numbers in parenthesis indicate the number of firms.
(129)
(55)
- 17 -
0
10
20
30
40
50
60
70
80Ir
on a
nd S
teel
Spor
ting
and
Ath
letic
Goo
ds
Non
ferr
ous M
etal
s
Indu
stria
l Che
mic
als
exce
pt F
ertil
izer
Suga
r Fac
torie
s &Re
finer
ies
Jew
elry
and
Rel
ated
Arti
cles
Ferti
lizer
s and
Pesti
cide
s
Rubb
er P
rodu
cts,
N.E
.C.
Pulp
, Pap
er a
ndPa
perb
oard
Dru
gs a
nd M
edic
ines
0
5
10
15
20
25
30
35
40
45
50
Dist
illed
Spi
rits
Dai
ry P
rodu
cts
Pres
erve
d Fr
uits
&V
eget
able
s
Pulp
, Pap
er a
ndPa
perb
oard
Suga
r Fac
torie
s &Re
finer
ies
Plas
tics P
rodu
cts,
N.E
.C.
Saw
mill
s, Pl
anin
g &
Oth
er W
ood
Mill
s
Non
ferr
ous M
etal
s
Radi
o, T
V a
ndCo
mm
unic
atio
nEq
uipm
ent
Potte
ry, C
hina
and
Earth
enw
are
Figure 3.6 Contribution of industrial sectors to TSS pollution (%) Chonburi
Note: Numbers in parenthesis indicate the number of firms. Figure 3.7 Contribution of industrial sectors to BOD pollution (%)
Chiang Mai
Note: Numbers in parenthesis indicate the number of firms.
(16)
(3)
- 18 -
0102030405060708090
100
Lumpo
on
Rayon
g
Chonb
uri
Samutp
rakarn
Chach
eong
sao
Pranak
ornsri
ayutt
aya
Nakorn
ratch
asrim
a
Samutsa
korn
Sarab
uri
BOD Non-industrial estates BOD Industrial estates
0
10
20
30
40
50
60
70
80
90
100
Fish
Pro
duct
s
Plas
tics P
rodu
cts,
N.E
.C.
Saw
mill
s, Pl
anin
g &
Oth
er W
ood
Mill
s
Indu
stria
l Che
mic
als
exce
pt F
ertil
izer
Non
ferr
ous M
etal
s
Dai
ry P
rodu
cts
Oils
and
Fat
s
Suga
r Fac
torie
s &Re
finer
ies
Pres
erve
d Fr
uits
&V
eget
able
s
Non
met
allic
Min
eral
Pro
duct
s
Figure 3.8 Contribution of industrial sectors to BOD pollution (%) Songkhla
Note: Numbers in parenthesis indicate the number of firms. Finally, except for the provinces of Lamphun and Rayong, estimates reveal
that firms located in industrial estates appear to be small polluters relative to firms located outside industrial estates (Figure 3.9 and 3.10). This, however, is not the case for Lamphun and Rayong where discharges from firms located within industrial estates represent a larger share of discharges than firms located outside industrial estates. Figure 3.9 Contribution of industrial estates vs. non-industrial estates to
BOD pollution per province (%)
(33)
- 19 -
0102030405060708090
100
Lumpo
on
Rayong
Chonb
uri
Pranako
rnsria
yutta
ya
Patumtan
i
Nakornr
atchas
rima
Samutp
rakarn
Bangko
k
Chacheo
ngsao
TSS Non-industrial estates TSS Industrial estates
Figure 3.10 Contribution of industrial estates vs. non-industrial estates to BOD pollution per province (%)
Industrial Discharges of Air Pollution in Thailand
In this section, we apply the sector specific pollution coefficients for sulphur dioxide (SO2) nitrogen oxide (NOx), carbon monoxide (CO), volatile organic compounds (VOC), as well as total suspended particles, both total and less than 10 microns (TSP and PM10). Geographical analysis As for water pollution, we find a similar concentration of industrial air pollution discharges in a limited number of provinces. As shown in Figure 3.11, 3.12 and 3.13, the most significant sources of pollution remain in general the same as for water pollution with some exceptions:
• In the North, the province of Lampang, and not Chiang Mai is the most important source of SO2-NOx as well as of PM10-TSP;
• In the Northeast, the province of Nakhon Ratchasima is the most important of
all industrial air pollutants;
• With respect to PM10-TSP, the provinces of Saraburi and Lopburi in the Central Region, Nakhon Si Thammarat in the South and Chonburi in the East are the most important sources of discharges.
- 20 -
Figure 3.11 Regional and provincial division of total industrial SO2-NOx emissions
North
South
Northeast
East
Central
Saraburi 17%
Samut Sakhon
12%
Bangkok10%
Lopburi9%
Samut Prakan
19%
Chachoengsao 12%
Chonburi28%
Prachinburi 10%
Rayong47%
Chiang Mai8% Phitsanulok
6%
Tak14%
Lampang40%
Chaiyaphum7%
Udon Thani8%
Khon Kaen11%
NakhonRatchasima
41%
Surat Thani12%
Songkhla 9%
Phetchaburi 14%
Nakhon Si Thammarat
40%
- 21 -
Figure 3.12 Regional and provincial division of total industrial CO-VOC emissions
North
South
Northeast
East
Central
Samut Sakhon
15%
Bangkok 15%
Pathum Thani
9%
NakhonPathom
6%
Samut Prakan
28%
Chachoengsao 15%
Chonburi29%
Prachinburi 10%
Rayong43%
Nakhon Sawan9%
Lamphun 10% Lampang
18%
Chiang Mai19%
Udon Thani10%
Nong Khai 7%
Khon Kaen 15%
Nakhon Ratchasima
36%
Nakhon SiThammarat
17%
Trang12%
Surat Thani19%
Songkhla23%
- 22 -
Figure 3.13 Regional and provincial division of total industrial PM10-TSP emissions
Northeast
East
South
North
Central
Lopburi15%
Samut Prakan
10%
Bangkok6%
Samut Sakhon
6%
Saraburi29%
Chachoengsao 17%
Rayong 29%
Prachinburi8%
Chonburi36%
Chiang Mai 5%
Lamphun6%
Tak16%
Lampang50%
NakhonRatchasima
38%
Udon Thani8%
Khon Kaen7%
Surat Thani12%
Trang9%
Phetchaburi14%
Nakhon Si Thammarat
43%
- 23 -
Industrial sector analysis
As indicated in Table 3.3, at the national level, the cement, lime and plaster industrial sector is the most important industrial source of both SO2-NOx (27% of all industrial emissions) and PM10-TSP (50% of all industrial emissions). With respect to CO-VOC, the iron and steel sector is the most important source of discharges. This pattern is also observed when examined at the regional level (Table 3.4) where the cement, lime and plaster industrial sector remains the most significant source of pollution in most regions.
Table 3.3 Contribution of industrial sectors to industrial air pollution
(in order of importance)
% Contribution
to total Cumulative
% SO2-NOx ISIC
Cement, Lime and Plaster 3692 27 27 Nonferrous Metals 3720 8 35 Iron and Steel 3710 8 43 Pulp, Paper and Paperboard 3411 7 50 Industrial Chemicals except Fertilizer 3511 6 56 Spinning, Weaving and Finishing Textiles 3211 5 61
CO-VOC Iron and Steel 3710 15 15 Chemical Products, N.E.C. 3529 11 26 Pulp, Paper and Paperboard 3411 10 36 Sawmills, Planing & Other Wood Mills 3311 7 43 Industrial Chemicals except Fertilizer 3511 7 50 Nonferrous Metals 3720 6 56
PM10-TSP Cement, Lime and Plaster 3692 50 50 Nonmetallic Mineral Products 3699 8 58 Oils and Fats 3115 7 65 Iron and Steel 3710 6 71 Structural Clay Products 3691 4 75 Sugar Factories & Refineries 3118 3 78
- 24 -
Table 3.4 Contribution of industrial sectors to industrial air pollution, by Region (in order of importance)
Central Region % Contribution Cumulative
SO2-NO2 ISIC to total % Cement, Lime and Plaster 3692 28 28 Nonferrous Metals 3720 9 37 Iron and Steel 3710 9 46 Pulp, Paper and Paperboard 3411 8 54 Spinning, Weaving and Finishing Textiles 3211 7 61 Synthetic Resins, Plastics Materials and Manmade Fibers 3513 5 66
CO-VOC Iron and Steel 3710 16 16 Chemical Products, N.E.C. 3529 13 29 Pulp, Paper and Paperboard 3411 11 40 Nonferrous Metals 3720 7 47 Industrial Chemicals except Fertilizer 3511 5 52 Synthetic Resins, Plastics Materials and Manmade Fibers 3513 5 58
PM-10-TSP Cement, Lime and Plaster 3692 54 54 Oils and Fats 3115 8 62 Iron and Steel 3710 7 69 Nonmetallic Mineral Products 3699 6 75 Pulp, Paper and Paperboard 3411 3 78 Sugar Factories & Refineries 3118 3 81
Eastern Region % Contribution Cumulative
SO2-NO2 ISIC to total % Industrial Chemicals except Fertilizer 3511 23 23 Iron and Steel 3710 14 37 Petroleum Refineries 3530 12 49 Nonferrous Metals 3720 9 58 Pulp, Paper and Paperboard 3411 9 67 Synthetic Resins, Plastics Materials and Manmade Fibers 3513 7 74
CO-VOC Iron and Steel 3710 20 20 Industrial Chemicals except Fertilizer 3511 17 37 Petroleum Refineries 3530 9 46 Pulp, Paper and Paperboard 3411 9 55 Chemical Products, N.E.C. 3529 6 61 Nonferrous Metals 3720 5 66
PM-10-TSP Iron and Steel 3710 20 20 Nonmetallic Mineral Products 3699 11 31 Industrial Chemicals except Fertilizer 3511 10 41 Oils and Fats 3115 10 51 Grain Mill Products 3116 7 58 Sawmills, Planing & Other Wood Mills 3311 6 64
- 25 -
Table 3.4 (continued)
Northern Region % Contribution Cumulative
SO2-NO2 ISIC to total % Cement, Lime and Plaster 3692 50 50 Sugar Factories & Refineries 3118 8 58 Pulp, Paper and Paperboard 3411 7 65 Tobacco Manufactures 3140 5 70 Nonmetallic Mineral Products 3699 5 75 Structural Clay Products 3691 5 80
CO-VOC Pulp, Paper and Paperboard 3411 15 15 Sawmills, Planing & Other Wood Mills 3311 12 27 Chemical Products, N.E.C. 3529 10 37 Wood & Cork Products, N.E.C. 3319 9 46 Distilled Spirits 3131 8 54 Sugar Factories & Refineries 3118 7 61
PM-10-TSP Cement, Lime and Plaster 3692 65 65 Nonmetallic Mineral Products 3699 11 76 Structural Clay Products 3691 6 82 Sugar Factories & Refineries 3118 4 86 Wood & Cork Products, N.E.C. 3319 3 89 Sawmills, Planing & Other Wood Mills 3311 3 92
Northeastern Region % Contribution Cumulative
SO2-NO2 ISIC to total %
Sugar Factories & Refineries 3118 27 27 Cement, Lime and Plaster 3692 12 39 Structural Clay Products 3691 10 49 Nonmetallic Mineral Products 3699 10 59 Iron and Steel 3710 7 66 Misc. Petroleum and Coal Products 3540 4 70
CO-VOC Sugar Factories & Refineries 3118 16 16 Iron and Steel 3710 13 29 Sawmills, Planing & Other Wood Mills 3311 12 41 Distilled Spirits 3131 10 51 Structural Clay Products 3691 5 56 Furniture & Fixtures, Nonmetal 3320 4 60
PM-10-TSP Nonmetallic Mineral Products 3699 22 22 Grain Mill Products 3116 17 39 Cement, Lime and Plaster 3692 16 55 Sugar Factories & Refineries 3118 14 69 Structural Clay Products 3691 12 81 Sawmills, Planing & Other Wood Mills 3311 4 85
- 26 -
0
10
20
30
40
50
60
70
80
90
100
Cem
ent,
Lim
e an
dPl
aste
r
Non
met
allic
Min
eral
Pro
duct
s
Misc
. Pet
role
uman
d Co
al P
rodu
cts
Stru
ctur
al C
lay
Prod
ucts
Iron
and
Ste
el
Prep
ared
Ani
mal
Food
s
Indu
stria
l Che
mic
als
exce
pt F
ertil
izer
Non
ferr
ous M
etal
s
Potte
ry, C
hina
and
Earth
enw
are
Suga
r Fac
torie
s &Re
finer
ies
Table 3.4 (continued)
Southern Region % Contribution Cumulative
SO2-NO2 ISIC to total % Cement, Lime and Plaster 3692 55 55 Oils and Fats 3115 11 66 Structural Clay Products 3691 8 74 Sawmills, Planing & Other Wood Mills 3311 6 80 Misc. Petroleum and Coal Products 3540 5 85 Nonmetallic Mineral Products 3699 3 88
CO-VOC Sawmills, Planing & Other Wood Mills 3311 40 40 Oils and Fats 3115 7 47 Chemical Products, N.E.C. 3529 6 53 Structural Clay Products 3691 6 59 Cement, Lime and Plaster 3692 6 65 Misc. Petroleum and Coal Products 3540 5 70
PM-10-TSP Cement, Lime and Plaster 3692 57 57 Oils and Fats 3115 16 73 Structural Clay Products 3691 8 81 Sawmills, Planing & Other Wood Mills 3311 7 88 Nonmetallic Mineral Products 3699 6 94 Prepared Animal Foods 3122 2 96
At the provincial level, note that in provinces such as Saraburi (Figure 3.14),
Lampang (Figure 3.15) and Nakhon Si Thammarat (Figure 3.16), the cement, lime and plaster sector with a very small number of firms contributes a large share of total industrial emissions of PM10-TSP discharges. Figure 3.14 Contribution of industrial sectors to PM10-TSP pollution (%)
Saraburi
Note: Numbers in parenthesis indicate the number of firms.
(29)
- 27 -
0
10
20
30
40
50
60
70
80
90
100
Cem
ent,
Lim
e an
dPl
aste
r
Non
met
allic
Min
eral
Pro
duct
s
Stru
ctur
al C
lay
Prod
ucts
Misc
. Pet
role
um a
ndCo
al P
rodu
cts
Saw
mill
s, Pl
anin
g &
Oth
er W
ood
Mill
s
Woo
d &
Cor
kPr
oduc
ts, N
.E.C
.
Pulp
, Pap
er a
ndPa
perb
oard
Suga
r Fac
torie
s &Re
finer
ies
Potte
ry, C
hina
and
Earth
enw
are
Furn
iture
&Fi
xtur
es, N
onm
etal
0
10
20
30
40
50
60
70
80
90
Cem
ent,
Lim
e an
dPl
aste
r
Stru
ctur
al C
lay
Prod
ucts
Non
met
allic
Min
eral
Pro
duct
s
Saw
mill
s, Pl
anin
g &
Oth
er W
ood
Mill
s
Woo
d &
Cor
kPr
oduc
ts, N
.E.C
.
Misc
. Pet
role
um a
ndCo
al P
rodu
cts
Prep
ared
Ani
mal
Food
s
Food
Pro
duct
s,N
.E.C
.
Woo
den
and
Cane
Cont
aine
rs; S
mal
lCa
ne W
are
Engi
nes a
ndTu
rbin
es
Figure 3.15 Contribution of industrial sectors to PM10-TSP pollution (%)
Lampang
Note: Numbers in parenthesis indicate the number of firms. Figure 3.16 Contribution of industrial sectors to PM10-TSP pollution (%)
Nakhon Si Thammarat
Note: Numbers in parenthesis indicate the number of firms.
(3)
(62)
- 28 -
0
20
40
60
80
100
Rayon
g
Chonbu
ri
Samut
Prakarn
Phra N
akhon
Si A
yudh
ya
Bangk
ok
Chachoengsa
o
Samut
Sakhon
Lamphu
n
Sarabu
ri
Pathum
Than
i
Industrial Estates Non-industrial Estates
0
20
40
60
80
100
Rayon
g
Chonbu
ri
Samut
Prakarn
Phra N
akhon
Si A
yudh
ya
Bangk
ok
Chachoengsa
o
Lamphu
n
Sarabu
ri
Samut
Sakhon
Pathum
Than
i
Industrial Estates Non-industrial Estates
Finally, as for water pollution, except for Rayong, industrial facilities located within industrial estates are not the most important sources of air pollution (Figure 3.17, 3.18, and 3.19). Figure 3.17 Contribution of industrial estates vs. non-industrial estates to
SO2-NOx per province (%)
Figure 3.18 Contribution of industrial estates vs. non-industrial estates to
CO-VOC per province (%)
- 29 -
0
20
40
60
80
100
Rayon
g
Chonbu
ri
Samut
Prakarn
Bangk
ok
Phra N
akhon
Si A
yudh
ya
Chachoengsa
o
Samut
Sakhon
Lamphu
n
Sarabu
ri
Pathum
Than
i
Industrial Estates Non-industrial Estates
Figure 3.19 Contribution of industrial estates vs. non-industrial estates to PM10-TSP per province (%)
In this section, we have provided a distributional analysis of air and water pollution on a geographical and industrial basis. It was shown that for both air and water pollution, industrial sources are concentrated in a very limited number of provinces, and originate from a very limited number of industrial sectors.
These results thus suggest that significant reductions of industrial pollution
can be obtained by focusing effort and resources on a very limited number of sectors and provinces.
While it is readily admitted that one may look into more details in the above results and may wish to replicate the analysis with more recent data on industrial activities as well as corroborate the results with other studies, we believe these results are of significant importance for the following reason.
It is well known that in Thailand the existing capacity and resources devoted
to the implementation of industrial pollution regulations are severely constrained.2 Hence, it is not expected that any changes in pollution control policies, including the implementation of water and/or air pollution taxes, will be implemented at once throughout Thailand for all industrial sectors. The implementation of such economic instruments will in all likelihood be more effective if such implementation first targets selected sectors and/or selected provinces with the objective of increasing its coverage as capacity increases. It is in the context of developing a strategy for policy implementation that the above observations are of greatest interest.
2 Though of course this problem is not limited to Thailand and is widespread throughout Southeast Asia, and more generally to the developing world.
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IV. FISCAL STRUCTURE This section reviews Thailand’s tax system and the performance of its tax institutions with respect to environmental conservation. It presents an overview of the tax system and briefly reviews the structure of tax revenue.
The last one and a half decade saw a considerable growth of government revenue. In 2006, total revenue collected by the central government reached 1,367.1 billion baht, twice the revenue collected in 1990. Revenue collection in 1997-1998 experienced a sharp decline as a result of the economic crisis (Figure 4.1). After the economic crisis, and in response to the recovery of the country’s economic conditions, tax revenue collected has steadily increased.
Figure 4.1 Tax revenue collections 1991-2006
851062.3403
1148235.446
1367174.156
942146.2
805301.423
641884.8286
557487.8125
701130.123
0
400000
800000
1200000
1600000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
mill
ion
baht
Source: Calculated from FPO data As for other countries in early stages of modernization, and as the economy
grew more sophisticated, the composition of revenue has moved slightly towards direct taxes, increasing from 31% of total revenues collected in 1997 to 38% in 2006. Under the existing tax system in Thailand, direct taxes include personal income tax, corporate income tax, and income from petroleum tax. The government of Thailand has traditionally relied heavily on indirect taxes and corporation taxes. These indirect taxes include sale and consumption taxes, excise tax and international trade duties. The increasing share of direct taxation can be attributed to the declining share of indirect tax revenue from 57.2 percent in 1997 to 52 percent in 2006, and came primarily from a decrease in international trade tax revenue.
Table 4.1 illustrates the recent composition of central government revenues. The revenue share from direct taxes is 38 percent of the total and is composed mostly of corporation taxes. Rising share of corporate income tax indicates the increased share of corporations in the formal sector of the country. Personal income tax shows a declining trend. This may be due to the many tax reforms designed to broaden the tax base during previous government administrations. Income from
- 31 -
petroleum tax distinguishes it from other direct tax revenues as it is revenue collected from the sale of gasoline from refinery plants. Meanwhile, the data shows that value added tax (VAT) is also a major source of revenue for government. The VAT was implemented in 1992 and became a significant new revenue source. It appears to work well with a broad tax base and few exemptions. It contributed over 25 percent of the total revenue during 1991-2006, and its importance continues to increase in Thailand’s tax structure.
Excise and international taxes also reflect a substantial ratio of revenue to
total revenue collected. They provide over 20 percent of tax revenue collected but with a downward share. Of particular note are the international duties which include import duties. It has become the government’s policy to reduce import duties to accommodate commitments to the free trade policy agreement. However, this may be offset by higher quantities of imports and an increase in VAT revenue and excise tax collections on imported goods. The composition of these taxes results in a high dependence on indirect taxes.
There are three revenue collection agencies under MOF. These agencies are
in charge of various taxes and duties as indicated in tax laws. The most prominent agency is the Revenue Department which is in charge of collecting personal income taxes, corporate income taxes, petroleum tax, and VAT and sale taxes. The Excise Department has responsibility for the collection of selected taxes and excise taxes on products and services that are considered luxury goods or products that require restraint of consumption. The Customs Department levies revenue from international trade. There are additional departments and public agencies under MOF which contribute some public revenue to the government. The Treasury Department is the prominent office in charge of collecting revenue from public properties and investment. Another public institution that annually contributes substantial revenue to the government is the State Owned Enterprise. The Revenue Department is the agency that collects most of the tax revenue, with over 66 percent, followed by the Excise Department, collecting about 17 percent of the total tax revenue. The Customs Department contributes less in relation to other revenue collection agencies (Figure 4.2).
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Table 4.1 Tax revenue composition 1997-2006 (Unit: million baht)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Direct Taxes:
283.1 227.7 225.8 248.1 268.0 297.9 347.9 429.0 518.0 601.3 (31.1) (27.9) (28.5) (30.3) (30.6) (31.1) (31.5) (33.3) (35.1) (38.0)
Personal Income Tax
115.1 122.9 106.1 91.8 101.1 108.4 117.3 135.2 147.4 170.1 (12.7) (15.1) (13.4) (11.2) (11.6) (11.3) (10.6) (10.5) (10.0) (10.8)
Corporate Income Tax
162.7 99.5 108.8 145.6 149.7 170.4 208.9 261.9 329.5 374.7 (17.9) (12.2) (13.7) (17.8) (17.1) (17.8) (18.9) (20.3) (22.3) (23.7)
Petroleum Tax
5.3 5.3 10.9 10.7 17.2 19.1 21.8 31.9 41.2 56.5 (0.59) (0.7) (1.4) (1.3) (2.0) (2.0) (2.0) (2.5) (2.8) (3.6)
Indirect Taxes:
519.8 496.1 458.5 469.3 502.2 553.1 638.2 726.1 810.0 827.4 (57.2) (60.8) (57.8) (57.4) (57.4) (57.7) (57.8) (56.3) (54.9) (52.3)
Value Added and Sale Taxes
230.4 268.0 223.5 209.7 228.1 242.0 274.1 336.2 412.0 448.4
(25.3) (32.9) (28.2) (25.6) (26.1) (25.2) (24.8) (26.1) (27.9) (28.4)
Others
5.1 3.3 3.1 3.6 3.7 4.4 5.6 7.1 7.1 7.5 (0.6) (0.4) (0.4) (0.4) (0.4) (0.5) (0.5) (0.6) (0.5) (0.5)
Excise or Selective Sale Taxes
180.2 155.6 163.9 168.8 177.6 208.2 246.6 276.8 280.5 275.3
(19.8) (19.1) (20.7) (20.6) (20.3) (21.7) (22.3) (21.5) (19.) (17.4)
International trade duties
104.2 69.3 68.1 87.2 92.8 98.6 111.8 106.1 110.4 96.2 (11.5) (8.5) (8.6) (10.7) (10.6) (10.3) (10.1) (8.2) (7.5) (6.1)
Non-Tax 106.1 91.8 109.0 100.3 104.6 108.4 118.5 135.7 147.5 154.0
(11.7) (11.3) (13.7) (12.3) (12.) (11.3) (10.7) (10.5) (10.) (9.7) Total 909.0 815.7 793.3 817.6 874.8 959.4 1,104.6 1,289.9 1,474.4 1,581.5
100 100 100 100 100 100 100 100 100 100 Source: The Fiscal Policy Office, Ministry of Finance Note: Number in parenthesis is percentage of the total revenue.
Figure 4.2 Revenue collected by departments
57.161.2
57.0 56.4 57.1 56.7 56.8 59.9 63.6 66.8
19.819.1
20.7 20.6 20.3 21.7 22.321.4
18.917.3
11.5 8.58.6 10.7 10.6 10.3 10.1 8.2 7.5 6.1
11.7 11.3 13.7 12.3 12.0 11.3 10.7 10.5 10.0 9.7
0%
20%
40%
60%
80%
100%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
OthersCustoms DepartmentExcise DepartmentRevenue Department
Source: The Fiscal Policy Office, Ministry of Finance
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4.1 Tax Collection Agencies Table 4.2 shows that VAT is the major source of revenue collected by the Revenue Department; it has increased two- fold from over 230 billion baht to almost 500 billion baht in the last fiscal year. Tax revenue under the supervision of the Revenue Department consists of Personal Income Tax (PIT), Corporate Income Tax (CIT), Income from Petroleum Tax, and Value Added Tax (VAT). Figure 4.3 shows the VAT significantly contributed over 42 percent of total revenue collected by this department during the period 1997-2006. Over the same period, personal income tax declined in its significance and it was compensated by increases in corporate income tax and petroleum tax combined. The sharp increase of revenue from petroleum tax can be partly attributed to the increase of world oil prices that has affected the domestic price of gasoline. The Revenue Department is also responsible for the collection revenue from stamp duties for public legal documents and trivial taxes that remain insignificant throughout the period. Table 4.2 Income tax collected by revenue department
(Unit: billion baht)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Personal Income Tax 115.14 22.94 106.07 91.79 101.14 108.37 117.31 135.16 147.35 170.08
Corporate Income Tax 162.66 99.48 108.82 145.55 149.68 170.42 208.86 261.89 329.57 374.69
Petroleum Tax 5.32 5.32 10.87 10.74 17.15 19.13 21.77 31.94 41.18 56.52
VAT and Sale Tax 230.36 267.97 223.47 209.65 228.09 242.01 274.11 336.16 412.02 448.40
Others 5.14 3.36 3.08 3.59 3.65 4.36 5.63 7.10 7.08 7.51
Total 518.62 498.97 452.32 461.32 499.71 544.28 627.68 772.24 937.15 1,057.20
Source: The Fiscal Policy Office, Ministry of Finance Figure 4.3 Share of revenue collected by the Revenue Department
22.2 24.6 23.5 19.9 20.2 19.9 18.7 17.5 15.7 16.1
31.4 19.9 24.1 31.6 30.0 31.3 33.3 33.9 35.2 35.4
1.0
1.12.4
2.3 3.4 3.5 3.5 4.1 4.4 5.3
44.453.7 49.4 45.4 45.6 44.5 43.7 43.5 44.0 42.4
1.0 0.7 0.7 0.8 0.7 0.8 0.9 0.9 0.8 0.7
0%
20%
40%
60%
80%
100%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Personal Income Tax Corporate Income Tax Petroleum Tax VAT Others
Source: Ministry of Finance Note: The labels are in million baht.
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Table 4.3 provides information about products that are subject to excise tax levy and the size of tax revenue collected. The excise tax revenue collection during 1997-2006 showed a steadily increasing trend, except for fiscal year 1998, when the country was in economic depression. The data also reveal that taxes on gasoline and automobiles are the most important excise taxes that have been levied. The combination of the two taxes provides over 45 percent of the total excise tax revenue. Recent government policy trying to stabilize gasoline prices on the domestic market is reflected in this table. Other substantial excise tax revenue includes tax on cigarettes, liquor, and beer duties. They consistently shared around 50 percent of the total excise tax collected during the fiscal years of 1997-2006.
The main functions and responsibilities of the Customs Department include
collection of customs and duties, collection of other import and export taxes on behalf of other government agencies such as (VAT), excise tax, and municipal tax, supervision of imports and exports to ensure compliance with relevant laws and regulations, prevention and suppression of smuggling, tax and duty evasion including other customs offences, promotion of manufacturing and export through tax measures, and facilitation of international trade. Table 4.3 Revenue collection by the Excise Department Unit: billion baht
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Total Excise Tax 180.3 155.5 163.9 168.8 177.6 208.2 246.7 276.8 280.5 275.3
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Gasoline 64.0 65.4 66.6 64.8 64.1 68.8 73.6 77.0 76.5 70.7
(35.5) (42.) (40.6) (38.4) (36.1) (33.1) (29.8) (27.8) (27.3) (25.7)
Cigarettes 29.8 28.6 26.7 28.1 32.1 31.7 33.3 36.3 38.2 35.7
(16.5) (18.4) (16.3) (16.7) (18.1) (15.2) (13.5) (13.1) (13.6) (12.95)
Liquor 22.8 20.3 22.8 8.3 8.9 22.3 25.7 26.2 28.6 29.1
(12.6) (13.) (13.9) (4.9) (5.) (10.7) (10.4) (9.5) (10.2) (10.6)
Beer 21.4 23.2 25.0 26.4 30.0 31.7 37.0 42.7 45.5 44.2
(11.9) (14.9) (15.3) (15.7) (16.9) (15.2) (15.) (15.4) (16.2) (16.1)
Automobiles 32.3 8.6 13.9 26.8 30.3 41.6 56.5 65.0 58.8 59.8
(17.9) (5.5) (8.5) (15.9) (17.1) (20.) (22.9) (23.5) (20.9) (21.7)
Beverages 7.5 7.0 6.5 7.4 8.1 7.7 8.6 9.3 10.1 10.8
(4.2) (4.5) (4.) (4.4) (4.6) (3.7) (3.5) (3.4) (3.6) (3.9)
Electrical Appliances 1.8 1.0 0.9 1.1 1.4 1.8 2.3 2.9 3.7 3.5
(0.98) (0.6) (0.6) (0.7) (0.8) (0.9) (0.95) (1.03) (1.3) (1.3)
Motor Cycles 0.1 0.5 0.5 0.8 0.9 1.2 1.6 1.6 1.8 2.0 (0.07) (0.35) (0.29) (0.47) (0.52) (0.59) (0.64) (0.59) (0.66) (0.73)
Batteries 0.5 0.4 0.4 0.4 0.7 0.6 0.6 0.8 0.8 1.2
(0.26) (0.28) (0.26) (0.26) (0.4) (0.28) (0.24) (0.28) (0.27) (0.43)
Telecommunication - - - - - - 6.4 12.6 13.9 15.5
- - - - - - (2.6) (4.6) (5.) (5.6)
Others 0.3 0.6 0.6 4.6 1.0 0.8 1.1 2.3 2.6 2.7
(0.17) (0.39) (0.37) (2.72) (0.56) (0.38) (0.45) (0.83) (0.93) (0.98) Source: The Fiscal Policy Office, Ministry of Finance Note: Numbers in parenthesis are percentage share to total revenue
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The revenue collected by the Customs Department as shown in Table 4.4 is a major revenue source for the government. Revenue from the Customs Department contributed over 11 percent of total government revenue in 1997 but its significance has diminished. This is because the government reduced the tax rate to comply with the international trade agreement. Over 98 percent of revenue collected by the Customs Department is derived from import duties. Government policy of maintaining competition in the international market has resulted in low revenue from export duties. However, the customs revenue has been unstable because it depends largely on international trade, an area in which the Thai government has little influence.
Table 4.4 Revenue collection by Customs Department
(Unit: billion baht)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Import Duties
102.70 67.11 66.99 85.34 91.36 96.33 110.05 103.64 106.92 93.63
(98.6) (96.8) (98.4) (97.9) (98.4) (97.7) (98.4) (97.7) (96.8) (97.3)
Export Duties
0.008 0.017 0.036 0.075 0.082 0.16 0.22 0.27 0.28 0.31
(0.0) (0.0) (0.1) (0.1) (0.1) (0.2) (0.2) (0.3) (0.3) (0.3)
Others 1.45 2.21 1.06 1.78 1.40 2.14 1.55 2.22 3.20 2.28
(1.4) (3.2) (1.6) (2.0) (1.5) (2.2) (1.4) (2.1) (2.9) (2.4)
Total 104.16 69.34 68.09 87.19 92.84 98.63 111.82 106.12 110.40 96.23 Source: The Fiscal Policy Office, Ministry of Finance Note: Numbers in parenthesis are percentage share to total revenue collected
4.2 Excise Taxes and the Environment
The Thai government has increasingly used the tax system to provide guidance for economic direction. However, since currently there is no environmental tax law, the excise tax has been used in a few cases to redress environmental problems. For example, differentiated taxes on batteries (5% for those using recycled lead and 10% for those without) and a 30% excise tax on Ozone Depleting Substances (ODSs) have been implemented. The limitation is that the excise tax is a tax on producers not consumers. Therefore, it may not send the right signal to consumers when consumption is a source of pollution. More importantly, excise taxes cannot be applied directly to pollution discharges since such discharges are not products. .
In addition, the current Excise Tax Act allows for the implementation of excise taxes on 15 different categories of products. These excise taxes can be specific (e.g. 5 baht per unit of the product) or ad valorem (e.g. 10% of the value of the product). For any products other than those explicitly listed in the Act, the Excise Tax Department may introduce an excise tax but only in its ad valorem form, and not in its specific form. This creates a significant difficulty for the implementation of product surcharge using the Excise Tax Act since there is no good rationale why such surcharge should be computed in its ad valorem form.
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4.3 Decentralization and Environmental Protection
Thailand is a unitary state with a highly centralized fiscal system which grants limited local autonomy in terms of functions, and decision making. However, since the introduction of the Constitution of 1997, the public sector in Thailand has undergone dramatic change. The 1997 Constitution laid the guidelines for public sector reforms: one strand of the policy reforms involves decentralization and devolution of responsibilities from central agencies. International experience shows that decentralization can be a key way to improve governance, provided that it is well designed. By clearly defining the level of government responsible for providing, financing and delegating appropriate authority, responsibility and resources, local services may be provided more effectively and local accountability may be enhanced. Decentralization in Thailand has been underway for five years, but has progressed slowly as a result of changes in political and economic institutions. In order to restrict misused or wasted funds, a strong system of local accountability is yet to be developed to support the greater resources that have been devolved to local authorities.
The Constitution of 1997 appointed the National Decentralization Committee:
(NDC) to take responsibility for fiscal reform in accordance with the principle of decentralization. Two years later, the Decentralization Act of 1999 specified the steps and methods for the devolution of functions from central government agencies to local authorities within a given time-frame. The targets of 245 functions and responsibilities were set to be devolved from central government agencies within a time frame (10 years).3 These are classified under 6 programs as follows:
1. Public Infrastructure: 87 activities from 17 departments 2. Local services related to quality of living: 103 activities from 26
departments 3. Civil and community ordering, and peace maintenance: 17 activities
from 9 departments 4. Planning, Investment Promotion, Business, and tourism: 19 activities
from 6 departments 5. Natural resources and environment management and conservation:
17 activities from 9 departments 6. Art, culture, tradition, and local wisdom: 2 activities from 1 department.
Table 4.5 provides a list of the environmental functions to be transferred to local administrations.
3 At present (evaluated as of mid 2006) there are signs that a) devolution of functions from central- to local-governments will not meet the target, about 180 tasks have been transferred and some 65 tasks still in the hands of central government agencies; and b) the revenue assignment to local governments in total is at 25.2 percent of the central government revenues – which is far from the target of 35 percent.
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Table 4.5 Environmental functions to be transferred to local administration
Ministry Departments Transferred Functions
Ministry of Agriculture and Cooperatives
Royal Forest Department Department of Fisheries Department of Agriculture Extension
1. Community forest development 2. Forest fire control 1. Training for marine resource
conservation volunteers 1. Conservation and rehabilitation of
natural resources
Ministry of Industry
Department of Primary Industry and Mining
1. Monitoring and Controlling environmental impact and pollution from mining activities
Ministry of Natural Resources and Environment
Office of Natural Resources and Environmental Planning Pollution Control Department
1. Enhancement of public awareness and participation in environmental conservation
2. Monitoring protection of environment
3. Rehabilitation and maintenance of environment
4. Conducting research on environmental management
5. Supporting provincial environmental protection activities
1. Monitoring and reporting of environmental quality of local areas
Ministry of Interior Department of Public Works and Town and Country Planning Department of Provincial Administration Department of Lands
1. Building 23 wastewater treatment plants 2. Building 2 solid waste treatment plants 1. Maintenance and protection of
public space for general public use
1. Maintenance and protection of idle land
Source: Office of the National Committee for Decentralization; http://www.dloc.go.th Note: this plan was formally approved by the Decentralization Committee since 25 June 2001. Altogether there are 245 functions to be devolved to local administration; and these involved 11 ministries and 50 departments.
In order to support a smooth transition, the decentralization plan recognized the need to allocate fiscal resources and to encourage the transfer of man power from central government agencies to local administration. The fiscal target stated that: by the end of 2006 the local governments, in total, should command an amount
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of fiscal revenue not less than 35 percent of the government net revenue.5 At the end of 2006, the percentage of share of local revenue was only about 26%, short of the 35% target. This shortfall is mainly due to the slow process of devolution, especially in the areas of education and public health. The current structure of local governments’ revenue is provided in Figure 4.5 and the share of grant allocation to LGUs are given in Figures 4.6 and 4.7.
Figure 4.4 Size of local government revenue
11.5
88.5
20.7
79.3
21.9
78.1
22.2
77.8
22.7
77.3
23.5
76.5
24.1
75.9
25.2
74.8
0%
100%
2000 2001 2002 2003 2004 2005 2006 2007 Fiscal Year
Local Revenue Share Central Revenue Share
Source: National Decentralization Committee
Figure 4.5 Local Revenue Structure
11%
35%
8%
46%
12%
33%
11%
44%
12%
33%
19%
36%
10%
34%
18%
38%
10%
34%
17%
39%
9%
34%
19%
39%
9%
34%
18%
39%
0%
100%
2001 2002 2003 2004 2005 2006 2007 Fiscal Year
1. Locally Levied Taxes 2. Centrally Collected Taxes 3. Shared Taxes 4. Grants
Source: National Decentralization Committee
5 The prefix ‘net’ revenue is used here to distinguish between the ‘gross’ and ‘net’ revenue concepts. A portion of tax revenue must be refunded (for instance, the value added tax).
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Figure 4.6 Share of Grant Allocation to LGUs
19.5
79.7
14.4
84.9
11.8
86.7
12.1
86.5
10.2
88.5
11.3
87.5
10.2
88.7
0%
20%
40%
60%
80%
100%
2001 2002 2003 2004 2005 2006 2007
BMA PAOs,Municipalities,TAOs Pattaya
Source: National Decentralization Committee
Figure 4.7 Grant Allocation to PAOs, Municipalities, and TAOs
through DOLA Classified by Grant Types
40.6
23.7
35.7
60.0
7.1
32.9
45.3
36.9
17.8
36.1
49.0
14.9
49.3
49.6
1.1
45.8
44.8
9.4
51.0
41.5
7.5
0%
20%
40%
60%
80%
100%
Share (%)
2001 2002 2003 2004 2005 2006 2007 Fiscal Year
General Grants Grant with Specific Purposes Specfic Grants
Source: National Decentralization Committee
After the recent political crisis which resulted in the dissolution of parliament,
the interim government altered the Decentralization Act of 1999. In particular, the
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Decentralization Act No. 2 (2006), which was approved by the National Legislative Assembly and announced in the Royal Gazette on January 8th, 2007, postponed the time frame for achieving the target requiring that local government’s revenues should be 35 percent that of the central government by 2006. However, the new law did not specify a target year for this to be achieved. The new law stated that the amount of subsidy and the share of LGUs’ revenue to the central government’s revenue should not be less than the level achieved in FY 2007 (25 percent), and that the amount of funds transferred should correspond to the activities transferred to the local governments. Under this amendment of the Act, the government is no longer bound to increase revenue for LGUs to 35 percent of total net revenue. However, the devolution of functions to LGUs continues. The amendment would put the LGUs in a very difficult position in their financial management as they attempt to balance expenditure and revenue.
4.4 Expenditure for Environmental Protection
The national budget for all development strategies is given in Table 4.6. The natural resources and environment strategy (no. 4) accounts for 2.99 percent of the total government budget but there is more funding for environmental functions for local governments. Since this money is awarded as a block grant, it is impossible to determine how much is being spent on environmental managements.
The annual budget for natural resources and environmental management (NRE) consists of (1) natural resources conservation budget and (2) environmental development budget. The conservation budget covers activities related to forests, water resources, soils and land development, minerals and geological resources and energy. Environment development budget includes pollution prevention and control, activities which mitigate the impact of pollution on livelihood and health. Prior to 2001, data were compiled from the project budgets. From 2002, the Bureau of the Budget started to group projects into two programs: (1) the Program for conserving and developing natural resources and (2) the Program for Environmental Development. Therefore the data for the period between 2001 and 2003 were taken directly from these programs. From 2004, the Bureau of the Budget has grouped budgets according to output rather than activities or projects. In Table 4.7, the total NRE budget and its distribution between conservation and development are shown. Overall, since the fiscal year 2000, the percentage of the conservation budget has been increasing each year while the percentage of the development budget has been declining.
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Table 4.6 The 2007 Annual budget plan of Thai Government (Unit: billion baht)
No. Strategy Amount (million
baht) Percent
1. Poverty Alleviation and Rural Development 57.41 3.662. Development of Human and Quality Society 591.49 37.763. Adjustment of Economic Structure for Balance Growth 184.66 11.794. Management of Sustainable Natural Resources and
Environment 46.80 2.99
4.1 Creating Balance in Utilization and Conservation of Natural Resources (16.74) (1.03)
4.2 Protection and Utilization of Bio-diversity (0.32) (0.02) 4.3 Systematic Management of Water (28.64) (1.83) 4.4 Control of Toxics from Waste, Polluted Water,
Dust, Gas, Odor and Noise (1.09) (0.07)
5. Adjustment on Efficient Use of Energy 2.20 0.14 5.1 Increasing Efficiency in the Use of Energy (0.35) (0.02) 5.2 Creating Security in Energy (0.56) (0.04) 5.3 Energy Substitution (1.28) (0.08)
6. Upholding National Security and Promoting Good Governance 348.65 22.26
7. Improving Management of Public Sector 334.99 21.39 Total 1,566.2 100.00Note: Classified according to budget allocation strategy Source: Bureau of the Budget Table 4.7 Environment budget 2000-2005
(Unit: million baht)
Fiscal Year
Distribution Total Conservation Development Policy and
Planning
2001 11,484.83 (62.60)
6,861.32(37.40) n/a 18,346.15
[2.02]
2002 10,004.14 (57.96)
7,255.71(42.04) n/a 17,259.85
[1.69]
2003 9,669.11 (64.44)
5,170.75(34.46)
164.93(1.10)
15,004.80[1.50]
2004 11,160.64 (83.37)
1,584.79(11.84)
641.81(4.79)
13,387.23[1.30]
2005 12,699.21 (85.26)
1,614.85(10.84)
580.82(3.90)
14,894.88[1.24]
2006 16,685.24 (79.12)
4,403.76(20.88) n/a 21,089.04
[1.55]
2007 43,124.2 (91.33)
4,091.33(8.67) n/a 47,215.53
[2.43]
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Notes: 1) Numbers in parentheses ( ) under conservation, development, and policy and planning budget are the percentage of the total environment budget. Numbers in parentheses [ ] under total budget are the percentage of the total national budget. 2) Conservation budget in the fiscal year 2006 is a combination of the budget for the national strategies no. 4.1, 4.2, and 4.3 with the exception of the government agencies; Development budget is a combination of the budget for the government agencies listed under the strategy 4.3 and for the strategy 4.4 (Budget Document 2006 Issue 4 p. 89 – 95) 3) Conservation budget in the fiscal year 2007 is a combination of the budget for the national strategies no. 4.1, 4.2, and of the Prime Minister’s Office, the Ministry of Agriculture and Cooperatives, the Ministry of National Resources and Environment, and the Ministry of Interior listed under the strategy no. 4.3. Development budget is a combination of the budget for the government agencies listed under the strategy no. 4.3 and for the strategy no. 4.4 (Budget Document 2007 Issue 4 p. 86 – 91) 4) For the fiscal year 2007, a large sum of budget (21,648.45 million baht) was allocated for dam construction; this amount is included in the conservation budget in order to be consistent with the data from the previous years.
Sources: Bureau of Budget. Budget Documents 2001- 2005 Issue 3(5) via TDRI’s Prioritizing Issues in Natural Resources and Environmental Management, 2006. Budget Act 2006 – 2007 no. 4.
Table 4.8 indicates the distribution of the budget within the Ministry of Natural Resources and Environment in 2005 - 2007. It should be noted that the budget allocated for the Pollution Control Department was quite small accounting for only around 3 percent of the budget each year. The proportion of the budget (around 500 million baht), which provided the link between MONRE and local governments, was the smallest, accounting for only 3 percent of the total Ministerial budget.
Table 4.8 The 2007 annual budget within MONRE (Unit: million baht)
Department Annual Budget, Fiscal Year 2005 2006 2007
1. Office of the Permanent Secretary 399.98(2.39)
790.27 (4.86)
897.13(5.11)
2. Pollution Control Department 494.77(2.96)
491.43 (3.02)
518.78(2.96)
3. Department of Marine and Coastal Resources
819.17(4.90)
885.72 (5.44)
1,048.77(5.98)
4. Department of Mineral Resources 418.66(2.50)
498.95 (3.07)
506.82(2.89)
5. Department of Water Resources 1,478.68
(8.85)1,727.98
(10.62) 1,764.05
(10.07)
6. Department of Groundwater Resources 1,158.61(6.93)
998.65 (6.14)
1,001.58(5.72)
7. Department of Environmental Quality Promotion
449.50(2.69)
493.25 (3.03)
494.94(2.82)
8. National Park, Wildlife and Plant Conservation Department
7,947.46(47.56)
8,381.75 (51.52)
8,755.05(49.96)
9. Office of Natural Resources and Environmental Policy and Planning
2,573.67(15.40)
222.03 (1.36)
251.88(1.44)
10. Royal Forest Department 970.72(5.81)
1,777.17 (10.92)
2,284.03(13.03)
Totalas % of National Budget
% Change
16,711.191.33n/a
16,267.20 1.20
- 9.77
17,523.051.29
+ 7.50Note: Numbers in parentheses ( ) are the percentage of the total MONRE budget. Source: Bureau of Budget. Budget Document 2005 Issue 1 p.43. Budget Document 2006 Issue 1 p.41. Budget Document 2006 Issue 1 p. 39.
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V. ENVIRONMENTAL MANAGEMENT IN THAILAND
Description of Existing Laws
There is a vast amount of environmental legislation in Thailand which provides for pollution control by different government agencies. Among these, the Pollution Control Department (PCD) of MONRE, and the Department of Industrial Works (DIW) of the Ministry of Industry (MOI) play the most prominent role in environmental management and pollution control. With the ongoing process of decentralization, local governments, albeit their present limited capacity, will play an increasing role in environmental management. Despite some provisions in various laws on the use of economic instruments (to be discussed under 5.2), environmental legislation in Thailand is still based largely on command and control.
The two most important laws for pollution control are the National Enhancement of Environmental Quality Act B.E. 2535 (NEQA) and the Factory Act B.E. 2535 (1992). Broadly speaking, the Factory Act gives DIW the comprehensive control over pollution discharge from industrial facilities, whereas under the NEQA, PCD is left with the monitoring and control over non-industrial pollution which also includes all non-point source pollution. As far as industrial estates are concerned, the Industrial Estate Authority of Thailand (IEAT) has the power under the Industrial Estate Act B.E. 2522 (1979) to apply the factory laws and regulations to factories located within the 34 industrial estates in Thailand.
5.1.1 The NEQA
The NEQA was designed to establish a framework for the overall environmental protection and management in Thailand. It provides for the preparation of a long-term enhancement and conservation of environmental quality policy and plan, a five-year national environmental quality management plan, and provincial environmental management plans. The National Environmental Management Board (NEB) is given a wide range of power including approval of national ambient quality standards for air and water, noise and vibration, coastal and estuarine waters, and underground waters. The Minister of MONRE is authorized, subject to the approval of the NEB, to issue ministerial notifications prescribing emission and effluent standards, as well as noise emission standards from point sources. Point sources subject to complying with emission and effluent standards set under NEQA can therefore include all point sources, as well as industrial plants.
To date, the Minister of MONRE has prescribed emission and effluent standards for a vast number of point sources. Point sources which are required to comply with effluent standards are as follows:
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(1) Buildings and various establishments of certain types and sizes. This category includes residential buildings of more than 500 units; hotels with 200 rooms or more, hospitals which can host 30 in-patients or more; public and private schools and university buildings with working space of 25,000 m2 or more; office buildings of government agencies, state enterprises, international organizations, or private entities, with working space of 55,000 m2 or more; shopping malls or department stores with floor spaces totaling 25,000 m2 or more, markets with space of 2,500 m2 or more; and restaurants with 2,500 m2 space or more;
(2) Type 2 and Type 3 factories (factories with more production capacity and impact on the environment, see below for classification of factories under the Factory Act) and industrial estates listed by MONRE notification (covering 104 categories of industrial plants);
(3) Land developments of more than 100 units; (4) Pig farms raising breeding pigs, fattened pigs or piglets totaling 60
livestock units (one livestock unit = 500 kilograms); (5) Aquaculture covering an area of more than 10 rai (1.6 hectares); and (6) Fishing boat ports, fish landing piers, and fish markets of all sizes.
Point sources which are required to comply with air emission standards are
the following:
(1) Type 2 and Type 3 factories listed by MONRE notification (covering 20 categories of factories). These include polluting industries such as agricultural produce and food processing, rice milling, sugar, textiles, wood, pulp and paper, chemicals, fertilizers and pesticides, oil refineries, rubber, plastics, cement, lime and plaster, and iron and steel basic industries, and so on;
(2) Power plants using a combination of at least two fuel types of coal, oil, or natural gas;
(3) Designated old power plants; (4) Rock quarries and rock grinding industries are required to comply with
prescribed emission standards (dust or particulate matters) and noise and vibration standards;
(5) Solid waste and clinical waste incinerators; (6) Petroleum oil storage facilities (benzene vapor standards); (7) Crematoriums in BMA, Pattaya, city (nakhon) municipalities, and town
(mueang) municipalities; and (8) Smelting gold or gold alloy enterprises
Therefore, point sources subject to control under NEQA also include those under the jurisdiction of other government agencies, in particular DIW. Although Sections 80-81 of NEQA establishes a mechanism for self-reporting and monitoring of all the above point sources, the rules and modalities of the mechanism are to be provided in a ministerial regulation. Unfortunately, no such instrument has yet been issued and therefore the mechanism under section 80 has not yet been implemented. This leaves the regulation of the above point sources to other relevant legislation, such as the Public Health Act B.E. 2535 and the Building Control Act B.E.
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2522 (1979). Nevertheless, the effluent standards and emission standards set under NEQA can still be used as reference in the enforcement of other environmental laws.
Section 82 of the NEQA does provide for the power of “pollution control officials” to inspect and issue administrative order to owners or occupiers of point sources to make improvement on their wastewater, emission, and other waste treatment facilities, as well as to impose fines on those who fail to send their wastewater or waste to central wastewater or waste treatment facilities, send their wastewater or waste to the facilities without paying service fee, or refrain from operating their on-site treatment facilities to comply with the prescribed standards. Pollution control officials are those appointed by the Minister of MONRE to implement NEQA. They include both PCD staff and those affiliated with other ministries, such as provincial governors, district officers, and livestock officials (to monitor pig farms).
However, as far as industrial plants are concerned, a pollution control official can only act after notifying DIW officials and when the latter has failed to take action. Since there is hardly an occasion where DIW or its provincial industry offices can be said to have failed to act completely, the Environmental Inspection Division of PCD, and its provincial arms, the provincial natural resources and environmental offices (PNREOs) and the regional natural resources and environmental offices (RENREOs) have little power over the monitoring of industrial pollution in practice.
Because fines can be imposed under NEQA only for non-payment of wastewater or waste treatment service fee or failure to operate on-site wastewater or waste treatment facilities, its application is limited. In practice, no administrative fines under section 82 of NEQA have ever been imposed. Administrative fines have been imposed by PCD Director-General on point sources such as pig farms and restaurants, but this power has been exercised under the Administrative Procedure Act B.E. 2539 (1996), not NEQA. Although the maximum fine which can be imposed under the Administrative Procedure Act is 15,000 Baht per day, the actual fine imposed as set by the Legal Division of the PCD is much lower. In practice, the fine imposed in cases where the point source already has wastewater treatment facilities is not to exceed 2,000 Baht per day, and where there are no wastewater treatment facilities, not to exceed 7,000 Baht per day. Owners or occupiers of point sources who object to the order to pay fine may appeal the decision to the Director-General or deputy Director-General of PCD.
5.1.2 The Factory Act B.E. 2535
Under the Factory Act, industrial pollution control is exercised through numerous ministerial regulations and notifications. In essence, they prescribe air emission standards and effluent standards for industrial plants. Movement of industrial wastes, both hazardous and non-hazardous requires permission from the Director General of DIW and is subject to a manifest system covering storage, transport, treatment and disposal of the wastes.
Currently there are 107 categories of industrial plants classified into 3 types of factories according to their production capacity (horsepower or number of employees) or impact on the environment. Type 1 factories are those which can
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start operation without notification or license (thus rendering them practically beyond the supervision of DIW and its provincial industry offices). Type 2 factories are those which can start operation after notifying DIW (if located within the Bangkok Metropolitan Area (BMA)) and the respective provincial industry office. Finally type 3 factories are those the operation of which would require a license from DIW or the provincial industry office concerned. The total number of all three types of factories is estimated at around 120,000, of which DIW estimates about 4,000 to be major polluters.
Violations of the Factory Act and its regulation are a criminal offence. Sanctions include suspension order, or closure order in serious cases, fines (200,000 Baht maximum) and imprisonment (two years maximum). In any case, the large number of factories classified as Type 1 and Type 2 factories are beyond the monitoring and inspection capacity of DIW and its provincial offices. However, most of these establishments would fall within the definition of “activities injurious to health” under the Public Health Act B.E. 2535, the operation of which would require a license from the local governments concerned. This makes the role of local governments important in pollution management as will be discussed later.
5.1.3 The Public Health Act B.E. 2535
The Public Health Act B.E. 2535 is an important law which deals with municipal wastes, pollution from entrepreneurial activities in urban areas and non-point source pollution. It provides for local governments’ functions in the collection, transport and disposal of solid wastes. They can authorize a private person or entity to perform these functions on their behalf. In addition, they have the power to issue license to private persons or entities to carry out the functions for business. The Minister of Public Health has the power to establish the maximum charge for such services by ministerial regulation. This is usually set at the rate too low (on average 40 Baht per household) to recover the cost for delivering the services. Although there have been calls that local governments be given more power to set their own fees, the fact is that a substantial number of local governments set the fees below 40 Baht per household. This reflects the reluctance on the part of local governments to implement measures which are politically unpopular.
Apart from solid waste management, the Public Health Act plays an important role in regulating pollution discharge from establishments in municipal areas. Most point sources subject to NEQA control and almost all industrial activities are deemed “activities injurious to health” under the Public Health Act. As mentioned earlier, DIW’s major focus is on Type 3 factories which require a license to operate. Type 1 and Type 2 factories which do not require a license, as well as other point sources under the NEQA may therefore fall under the Public Health Act and the jurisdiction of local governments. A key issue is whether local governments have the capacity to perform these functions effectively. Most local governments including those financially well endowed still lack both personnel and technical capability to carry out their environmental functions.
5.1.4 The Building Control Act B.E. 2522
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The fact that the self-reporting and monitoring mechanism of point sources under the NEQA is awaiting a ministerial regulation for its implementation makes the Building Control Act relevant for regulating wastewater discharge from buildings. Under the Act, construction of all buildings requires a permit from local governments. The Minister of Interior has the power to issue ministerial regulations prescribing rules for building control in various matters including types and shape, location, safety, and pollution discharge of buildings. This includes a regulation which requires that big buildings of 23-meter height upwards or with floor spaces from 10,000 m2 upwards install wastewater treatment and solid waste disposal facilities. Local governments are also given power to issue by-laws for regulating buildings in their area. This power is rarely exercised except in the BMA. They are also responsible for implementing all the regulations issued under this Act which include those relating to wastewater discharge and waste management of big buildings. However, as mentioned earlier, local governments do not have this capacity. Except for the case of BMA, local governments only grant building permits, but do little to implement environmental regulations.
5.1.5 The Thai Navigable Waters Act B.E. 2456 (1913)
This old piece of legislation which has been amended several times remains one of the most important laws governing water pollution of waterways. Waterways under the Act include all rivers, canals, ponds, reservoirs, and lakes which are for public use, as well as the maritime waters under national jurisdiction. The law gives the Marine Department (formerly the Harbor Department) the power to maintain and protect waterways from encroachment and discharge of pollution. It is prohibited to discharge any pollutant into waterways. Violation of the provisions of the Act is a criminal offence punishable with fines and imprisonment. It is generally admitted that the Marine Department does not have the human resources to supervise the enforcement of the Act. Under the decentralization process, many functions are supposed to be transferred to local governments but the transfer has been particularly slow. At present, the Department is still largely held responsible for preventing pollution of all waterways throughout the country.
5.1.6 Laws relating to local governments’ environmental responsibilities
Apart from the above major legislation, there are laws which assign environmental functions to local governments. Among these are the Municipality Act B.E. 2496 (1953), the Tambon (sub-district) Councils and Tambon Administrative Organizations Act B.E. 2537 (1994), and the Decentralization Act B.E. 2542 (1999). Basically, local governments are responsible for the maintenance of all roads and waterways as well as the management of solid wastes within their area. The Decentralization Act provides that local governments have the power and duty to carry out public services consisting of 31 functions. These include environmental functions, most notably the maintenance of roads and waterways, sewage systems, maintenance of cleanliness and orderliness, solid waste disposal, and municipal wastewater treatment. As indicated earlier, the central government is bound to provide local governments with sufficient revenues to carry out all the functions, currently set at 25% of the state revenue.
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A notable function which many local governments have been reluctant to take on is the responsibility to operate municipal wastewater treatment plants. To recover the cost of operating municipal wastewater treatment facilities, local governments would have to levy a wastewater treatment charge. So far, only a few have done so. This includes Pattaya, Chonburi, Songkhla and Patong district in Phuket. The BMA has also issued a by-law since 2003 to levy wastewater treatment service fee and therefore should be another local government to implement wastewater treatment fee in the future. Apart from the limited number of local governments implementing wastewater treatment charge, some big municipalities which are badly in need of central wastewater treatment facilities, such as Rayong and Samut Prakan do not have a workable wastewater treatment plant. In the case of Rayong, the facilities which were constructed by the former Department of Public Works some years ago are technically flawed and unworkable and the Rayong city municipality has refused to take on its operation up till now. As for the wastewater treatment plant in Samut Prakan, its finalization has been considerably delayed and the plant is still not operational
There are also provisions in the NEQA which are related to this issue of levying charges for wastewater treatment. Local governments are not compelled as such to levy the charge, but in the case where the facilities have been constructed with a grant from the National Environment Fund (NEF), the NEB has the power to set wastewater treatment charge for those areas. Such is in the case of Pattaya and Songkhla. However, where the treatment system has been constructed without support from the NEF, the levy of wastewater treatment charge is left totally to the discretion of the local governments concerned. It remains a matter of policy issue whether there should be some provisions which require local governments to levy the charge.
5.2 Economic Instruments in Existing Laws
In this section, we explore the use of economic instruments in existing environmental laws. As previously mentioned, environmental regulation in Thailand is still based largely on command and control. In so far as economic instruments are used, these are mostly confined to fees and, to a lesser extent, taxes, with non-compliance fees (or fines) used invariably as a penalty when violation of a particular environmental provision is also a criminal offence. The most important law using tax measures to influence consumers’ behavior is the Excise Tax Act. The following is the outline of laws which provide for environmental fees and taxes. Some of these laws also contain provisions for subsidies.
5.2.1 The NEQA
The NEQA provides that wastewater or waste treatment fees or charges be levied from owners or occupiers of point sources who discharge their wastewater or other waste into central wastewater or waste treatment facilities. Although the provision is broad enough to cover both wastewater and other waste treatment, in practice it only applies to central wastewater treatment plants operated by local governments as solid waste treatment and disposal is already covered by another law, namely the Public Health Act.
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As indicated earlier, Section 88 gives the NEB the power to set service fees where such facilities have been constructed with partial contribution from the NEF. The rates set may vary as appropriate for each locality. Those who evade paying the fees are liable to an administrative fine of four times the amount of the service fees.
Section 93 further provides that local governments and the government agencies concerned have a duty to collect service fees and fines, as well as to claim compensation for damages caused by polluters discharging pollutants into wastewater treatment facilities. The fees and fines collected are not to be directed to the state budget, but to be used for the maintenance of the wastewater or waste treatment facilities, with part of the sum to be deducted for contribution to the NEF, the proportion of which is to be determined by the NEB. Although the obligation of local governments to levy fees under this section seems clear, it is hardly enforced as the majority of local governments with wastewater treatment facilities still refrain from levying any fees for the delivery of such service. A significant number of them have chosen not to turn on the system at all.
As far as subsidies are concerned, grants and soft loans may be disbursed from the NEF for environmental purposes, including for construction of wastewater or waste treatment facilities by local governments. The administration of the NEF has been under substantial criticism (Section 5.3 below). Subsidies can also be provided in the form of assistance for import duties levied on machinery, equipment, tools, or necessary materials, as well as income tax exemptions for foreign experts, for the installation and operation of wastewater, air emission, and other waste treatment facilities.
Assignment of liability to polluters is provided by section 96 which makes polluters strictly liable for damages caused by a proliferation or leakage of pollution from point sources under their responsibility.
Although the NEQA was designed to be comprehensive covering all forms of pollution and all point sources in theory, MONRE still has to rely substantially on other government agencies concerned in the implementation of their prescribed effluent and emission standards. In practice, MONRE or PCD has no control over the performance of other government agencies. Their power over industrial plants is secondary to DIW, and in any case is constrained by PCD and MONRE’s provincial offices’ limited human resources (see 5.3.4 below).
The fact that the resources and capacity available for monitoring and inspection are limited makes it advisable that there should be more use of economic instruments. Under the existing provisions of the NEQA, the economic instruments used are mainly wastewater or waste treatment fees, assignment of strict liability, and subsidies, and even these have been quite limited in their application. NEQA still focuses heavily on standards and does not address the questions of reducing pollution load in the environment adequately. This would require the imposition of pollution tax, as well as making local governments implement wastewater treatment fees more seriously.
5.2.2 The Excise Tax Act B.E. 2527 and the Excise Tariff Act B.E. 2527
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These two pieces of legislation in combination have been used extensively to create differential tax measures to discourage the use of products which are considered harmful to the environment. For instance, diesel with higher sulfur content is taxed higher than that with lower sulfur content; motorcycles with four-stroke engine are taxed higher than those with two-stroke engine. The same applies to batteries using non-recycled lead versus those with recycled lead, and various types of motor cars of different sizes and seating capacity (see details in Annex II). Recently energy saving vehicles have also been included in this differential tax scheme.
However, as indicated earlier, excise taxes can apply to only a limited number of categories of goods and services, and cannot be applied to pollution discharges per se..
5.2.3 The Public Health Act B.E. 2535
The major economic instruments prescribed by the Public Health Act are administrative fees, user fees and non-compliance fees (or fines). Administrative fees are paid to local governments for various activities which require a permit or license under the Act. These include a license to conduct a business of collection, transport and disposal of solid waste, to operate a market place, to conduct activities deemed “injurious to health”, to run an establishment for selling cooked meals or accumulating cooking materials and to sell goods in public places.
Of more importance is the provision that user fees be levied for the collection, transport and disposal of solid waste by local governments. Local governments can contract out the delivery of this service or grant license to a private person or entity to carry out the work as their business. As mentioned earlier, the Minister of Public Health retains the power to issue ministerial regulation for setting the maximum fees which can be levied and this is generally too low to recover the cost for the delivery of such services. For details of the rates of user fees for the management of solid waste, see Annex III.
Although most local governments are still reluctant to raise their solid waste collection and disposal fees, it is important that they should be made more aware, or even compelled, to apply these fees more seriously. At least in theory, the power to determine the rates of the fee should be left to local governments. A provision on this line can be written into the new draft law, but this should be accompanied by an amendment of the Public Health Act under which the Minister of Health still retains this power.
5.2.4 The Maintenance of Cleanliness and Public Orderliness B.E. 2535
Section 10 of the Act provides that posting of advertisements and spreading leaflets in public places require a license and a license fee be paid to the local governments concerned. The fees set by a Ministerial Regulation issued by the Minister of Interior are 200 Baht for such activities which are done for commercial purposes and 100 Baht for those done for non-commercial purposes.
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The above provision and the rate of license fee imposed are not significant enough to generate incentive for environmental improvement. Again, this is an area in which local governments should be given more power to prescribe activities and set their own fees as appropriate.
5.2.5 The Factory Act B.E. 2535
Operators of Type 3 industries have an obligation to pay a license fee and an annual fee at the rate not exceeding the maximum fees attached to the Act. According to the fee schedule attached to the Act, the maximum license fee is 100,000 Baht and the maximum annual operation fee is 30,000 Baht. Section 6 gives the Minister of Industry the power to issue ministerial regulation prescribing the rates of fees to be paid. Currently, the prescribed fee is much lower than the maximum fee permitted by the Act, depending on the size and the horsepower of the industry as follows:
Ministerial Regulation No. 7 (B.E. 2535) prescribe rates for levying of license fee ranging from 500 Baht (for factories with no machines), increasing according to the horsepower of machines up to 60,000 Baht for factories employing machines with 6,000 horsepower or equivalent or more.
Ministerial Regulation No. 8 (B.E. 2535) sets the rates for annual operation fee ranging from 150 Baht for factories employing no machines, to 18,000 Baht for factories employing machines with 6,000 horsepower or equivalent or more.
Section 6 also gives power to the Minister to exempt some industries from paying annual fee. By a Ministerial Regulation issued in 2004, a 5-year exemption is granted to industrial plants which are certified as complying with environmental management standards (ISO 14001) and occupational health and safety standards (ISO 18001).
The Factory Act also provides for payment of non-compliance fees or fines (Sections 45 - 63). Like other environmental laws, these are imposed in cases of a criminal offence where the law is violated. The penalty ranges from less serious offences, such as failure to display operating license which entails a maximum fine of 5,000 Baht, to more serious offences such as operating Type 3 industries without a license which can lead to a maximum fine of 400,000 Baht and a sentence not exceeding 4 years’ imprisonment.
As in the case of the NEQA, DIW’s major focus under the Factory Law is still on effluent and emission standards. To improve the environment, economic instruments to reduce the pollution load in the environment, such as implementation of pollution taxation, should be used
5.2.6 The Industrial Estates Act B.E. 2522
Section 37 gives power to the Minister of Industry to issue ministerial regulation prescribing rules, methods and conditions for the setting up of industrial
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estates. According to the latest ministerial regulation issued under this section in 2005, operators of industrial estates are required to arrange for infrastructural systems, facilities, and necessary services as appropriate for each type of industrial estates, including wastewater treatment facilities. The services and facilities provided must meet standards prescribed by rules issued by the IEAT Committee chaired by the governor of IEAT. Where such systems and services which are managed by government agencies or private entities are available outside an industrial estate, the operator of that industrial estate may comply with this provision by using those systems and services instead.
Section 12 gives IEAT the power to set appropriate fees for the rental of immovable and movable property, maintenance of facilities, and services provided in an industrial estate to enable sufficient fund for the operation of that industrial estate. The same applies where an industrial estate has been developed by a private person or entity. Section 14 gives IEAT the power to determine the price to be charged for the sale, the rental and hire-purchase of immovable and movable property, and the service fees for facilities and services provided in that industrial estate, taking into account the appropriate business rate.
Due to the fact that industrial estates are an important contributor to industrial pollution, it is desirable that industrial estates should be required to pay pollution tax in the same way as other industrial facilities under the draft law. Where there is a central wastewater or waste treatment facility in a particular industrial estate, the facility should be charged as one unit. But where any industrial facilities are discharging their effluents directly into the environment, each unit should be liable to pay the tax.
5.2.7 The Decentralization Act B.E. 2542
Section 16 of the Decentralization Act provides that municipalities, the city of Pattaya and Tambon administrative organizations (TAOs) have a duty to provide public services for inhabitants within their areas of responsibility. The provision lays down 31 functions for the provision of such services, which include the maintenance of cleanliness and orderliness, solid waste disposal and wastewater treatment, and public health services. Section 17 authorizes provincial administrative organizations (PAOs) to provide public services in 29 functions for inhabitants within their areas of responsibility, which include solid waste disposal and wastewater treatment facilities. All the public services specified in these two sections apply also to the BMA under Section 18.
In the performance of their functions under the above provisions, all the local governments may receive income from fees, license fees, and fines levied from users or beneficiaries of the public services delivered (Sections 23 -28)
Despite the provisions that local governments may generate income from fees and fines, these sources of income remain limited, especially as most local governments fall far short of implementing various service fees adequately, among which are the wastewater treatment and the solid waste management fees as discussed above. It is necessary therefore that the new draft law should contain some provisions to ensure that local governments make more and better use of
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economic instruments. In addition, the new law should ensure that a substantial part of the revenue generated should be allocated to local governments to increase their capacity for environmental management.
In summary, use of economic instruments for environmental management has been limited, and is usually confined to the levying of fees or charges, and fines. Tax measures have been used through differential tax schemes implemented under the excise tax law. Therefore, there is more room for the implementation of the polluter pays principle through more extensive and diverse use of economic instruments. The table below provides a summary of existing use of economic instruments under Thai law.
Table 5.1 Summary of economic instruments in Thai law
Laws Economic Instruments Responsible Agencies
NEQA 1992
Sections 88 -89, 93
Service fees for central wastewater or waste treatment facilities
National Environment Board (NEB) Local governments
Sections 90 – 92
Fines for avoidance of paying fees
Pollution control officials
Sections 94 – 95
Subsidies for import duties on machinery, equipment, tools, and necessary materials. Income tax exemptions for foreign experts
NEB Government agencies concerned
Sections 96 – 97
Liability assignment
Government agencies concerned
Sections 98 -111 Fines Government agencies concerned
Excise Tax Act B.E. 2527
Section 7 Excise taxes on goods and services
Excise Tax Department
Excise Tariff Act B.E. 2527
Sections 3, 103
Differentiated taxes on gasoline, motor cars, two-stroke/four stroke motorcycles, batteries using recycled and non-recycled lead, and ODSs
Excise Tax Department
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Laws Economic Instruments Responsible Agencies
Public Health Act B.E. 2535
Sections 19, 33, 34, 38, 39, 41
License fees
Local governments
Section 20
User fees for solid waste collection and transportation
Local governments
Ministerial regulation B.E. 2545 on solid waste collection and transportation service fees
User fees
Local governments
Sections 68 – 85 Fines Local government officials, police officers, provincial governors, public prosecutors
Maintenance of Cleanliness and Public Orderliness Act B.E. 2535
Section 10 Ministerial Regulation B.E. 2535
License fee for posting, dropping, and spreading advertisements or leaflets
Local governments
Factory Act B.E. 2535
Sections 6, 12
License fee for Type 3 factories.
DIW Provincial Industry Office
Section 43
Annual operation fee for Type 2 and Type 3 factories
DIW Provincial Industry Office
Ministerial Regulation No. 7 (B.E. 2535)
License fee
DIW Provincial Industry Office
Ministerial Regulation No. 8 (B.E. 2535)
Annual operation fee DIW Provincial Industry Office
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Laws Economic Instruments Responsible Agencies
Industrial Estate Act B.E. 2522
Sections 12, 14 User fees for maintenance of facilities and services provided, including wastewater treatment services
IEAT
Decentralization Act B.E. 2542
Sections 23 – 25, 28 Taxes, service fees, license fees, fines
Local governments
Municipality Act B.E. 2496
Section 60
Fines
Municipalities
Section 66 Taxes, fees, license fees, fines as provided by law
Municipalities
Tambon Administrative Organization Act B.E. 2537
Section 71 Service fees, fines TAOs
Section 82 Fees, license fees and fines as provided by law
TAOs
Provincial Administrative Organization Act B.E. 2540
Sections 48 – 49, 69, 71
Service fees
PAOs, private entities, or government agencies assigned by PAOs to collect service fees
Section 51 Fine PAOs
Section 73 Taxes, fees, license fees and fines as provided by law
PAOs
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5.3 Agencies Responsible for Pollution Control This section outlines the organizations and agencies responsible for pollution
control. The details given here are those required to understand the line of control, existing management capacity and critical information which are available and are needed for designing implementation plan of the pollution taxation policy.
5.3.1 The Ministry of Industry
As mentioned earlier, industrial pollution control is the primary responsibility of the Ministry of Industry. The major agencies in charge of industrial pollution in the Ministry are the Department of Industrial Works (DIW), the Provincial Industrial Offices and the Industrial Estate Authority. The mandate of controlling industrial pollution within the industrial estates is given to the Industrial Estate Authority in accordance with the Industrial Estate Act B.E. 2522. DIW and the Provincial industry office are in charge of industrial pollution outside the Industrial Estates. Prior to the public sector reform in 2002, the Provincial Industry Office was under the Department of Industrial Works. Today, the Office is affiliated with the Office of the Permanent Secretary of the Ministry of Industry (MOI).
(a) Department of Industrial Works (DIW)
DIW has 14 bureaus and 4 divisions. Two of its bureaus are in charge of water and air pollution, namely the Water Technology and Industrial Pollution Management Bureau and then Industrial Environment Research and Development Bureau. Hazardous substances are managed by a separate bureau. Laboratory facilities are attached to 6 regional centers under the Industrial Environment Research and Development Bureau. The organizational structure of DIW is given in Figure 5.1.
The Water Technology and Industrial Pollution Management Bureau is mandated to take technical initiatives, provide technical assistance, and monitor industrial pollution from type 3 firms which need a license for factory operation. Type 3 firms are those using more than 50 horse power or those employing more than 50 workers or those whose productive activity could have an environmental impact, or firms in the industry specified as type 3 such as the electrical industry. Of the total of about 120,000 industrial entities in Thailand about 50,000 factories can be classified as type 3 and about 4,000 factories discharge some significant amount of waste water. At present, it appears that the Bureau keeps records of effluent discharge of about 2,800 firms.
Factories which discharge more than 500 cubic meters per day or BOD load over 4,000 kg per day will be required to have, in operation, a continuous monitoring system by December 31, 2008. DIW has also required factories which could make significant environment impact to have various types of environment officers. For
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example, these are factories discharging more than 500 cubic meters of wastewater per day and factories discharging wastewater with heavy metal contents.
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Figure 5.1 Department of INDUSTRIAL WORKS, 14 Bureaus and 4 Divisions
Notes: 1) * refers to newly created or recently re-structured
2) Unofficially translated from DIW’s website: http://www.diw.go.th, June 1, 2007
Office of Secretary *Human Resource Management Division
Financial Division Legal Affairs Division Policy and Management Development Bureau
*Treaties and International Strategies Bureau
*Central Office for Machinery Registration
*Industrial Cluster 1 Bureau
*Industrial Cluster 2 Bureau
*Industrial Cluster 3 Bureau
*Industrial Cluster 4 Bureau
*Industrial Cluster 5 Bureau
*Industrial Cluster 6 Bureau
Safety Technology Bureau *Information and Communication
Technology Bureau
Hazardous Substances Control Bureau
*Water Technology and Industrial Pollution
Management Bureau
*Industrial Environment Research and
Development Bureau
Director-General
Advisory Unit
Internal Audit Unit
Deputy Director-General Deputy Director-General Deputy Director-General
National Authority on Chemical Weapons Prohibition
Research Center – Head Office
Regional Research Ctr. - Central
Regional Research Ctr. - Northern
Regional Research Ctr. – Eastern
Regional Research Ctr. - Northeastern
Regional Research Ctr. - Southern
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The tool which enables effective control of factories for DIW is the authority to issue and renew license and relatively high non-compliance fees. Factories may be fined up to 200,000 baht for each offence. However, two gaps remain. First, the current law does not allow sufficient incentives for pollution reduction and DIW monitoring system still focuses on compliance to standards rather than reducing pollution loads. Secondly, although community wastewater treatment plants are considered as factories under category 101 which is subject to DIW’s pollution control, these treatment plants do not depend on DIW to issue or renew license. Therefore, DIW’s control over the community wastewater treatment plants cannot be expected to be effective.
(b) Regional Industrial Environmental Quality Research and Development
Centers
The 6 Regional Centers under the Industrial Environmental Research and Development Bureau provide laboratory services to provincial industry offices for analysis of water and air pollution and hazardous wastes. No service is provided to the private sector. At present, five centers have been certified for their laboratory service quality control, being awarded ISO 17025 while the Southern Center is in the process of gaining certification.
One of the usual routines of the centers is to receive water samples from
various provincial industry offices and analyze the parameters and the pollution content of the samples. Individual provincial industry offices have their own schedule of collecting samples and monitoring industrial pollution. Some provinces prefer to have the centers collect the samples, while others would collect the samples themselves. Each collected sample would be marked with the name of the official who took the sample on it. The centers also provide services for analysis of air pollution samples when required. However, this is much more difficult because many factories have not constructed an opening in the chimneys for inspection and the lab tests are more complicated.
(c) The Provincial Industry Office
The Provincial Industry Office is the major administrative arm of MOI to monitor compliance with laws and regulations of type 2 and type 3 industries in the provinces outside Bangkok. Each Office manages environmental problems within their geographical areas of responsibility and promote energy saving. It is also in charge of the registration of machines in accordance with the Machines Act.
The Office is responsible for the inspection of factories located outside
industrial estates and outside Bangkok. The only industrial pollution regularly inspected by the Office is water pollution. Inspection is carried out according to each provincial office’s schedule. Owners of industrial facilities may be notified prior to inspection. Inspection can be carried out on-site by visual examination or by collecting samples from a factory’s wastewater treatment system or end of pipe. The Office may be involved with inspection of factories in industrial estates when there are complaints from residents.
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Monitoring and samples may be taken from industrial wastewater discharges at night if necessary. Water samples are then sent to the Regional Center for Industrial Environmental Research and Development or to DIW’s lab in Bangkok. Although BOD tests usually take 5 days, the total process normally takes at least one month before the results are sent back to the Provincial Office.
Air pollution is not routinely monitored but samplings may be taken when there are complaints by local residents. Complaints vary from location to location. Provincial officials usually try to resolve the cases at the local level first, and if the problem cannot be resolved, the center would be called upon to prove the case through laboratory evidence.
The Provincial Office usually exercises closure power according to the Factory Act through the governor of the province. For instance, in the recent closure of a few dyeing factories in Samut Prakan, the provincial governor exercised his power as an enforcement official under sections 37 and 39 of the Factory Act to suspend the factories’ operation. The provincial governor however has the power to inspect factories under both the NEQA and the Factory Act. In cases of complaints, the governor can ask for a search warrant from the court to enter factories with the media. This has the added effect of publicizing the information about delinquent factories and deterring other factories from breaking the law. Either the provincial governor or the Provincial Industry Office can issue an order to an industrial plant to suspend their operation. The order may apply to the whole factory or partially. In the latter case, that part of the factory not covered by the suspension order may continue operation. Only the permanent-secretary of MOI has power to issue a closure order. Owners of industrial plants may appeal the decision to issue suspension order or closure order to MOI. This of course rarely happens and only applies to extreme cases of serious violations. An industrial entrepreneur may also appeal the Minister’s decision to the Administrative Court.
Apart from command and control, MOI also provides some incentive measures for improving industrial performance by exempting the annual fee payment for industrial plants which have been awarded an ISO 14000 certificate. The certificate can be issued by the Industrial Product Standards Office or an accrediting organization approved by the office. The exempted annual fee varies according to the factory size, the maximum amount being 18,000 Baht. DIW also has many projects aiming at improving existing technology with regard to environmental and energy conservation as well as introducing cleaner technology.
(d) The Industrial Estate Authority of Thailand (IEAT)
At present there are 34 industrial estates located in 14 provinces, 12 of them were developed by the Authority and the remaining 22 estates were developed jointly with private firms. IEAT is required to establish environmental management system within the estates, prevent and mitigate industrial accidents. Each industrial estate generally operates a central wastewater treatment plant within the estate.
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5.3.2 MONRE MONRE’s primary responsibility is the management of non-industrial pollution
including non-point source pollution. Within MONRE, PCD is the main administrative arm for pollution management. Figure 5.2 provides the organizational structure. It determines environmental policy, sets ambient emission and effluent standards, prescribes pollution sources and publishes a list of industries for which pollution control is of top priority in critical areas, for example in the Tha Chin river basin.
Figure 5.2 Pollution Control Department
Source: Pollution Control Department, 2007
Pollution Control Department
Director General
Deputy Director General (2) Management System Development Group
Environmental Quality and Laboratory Division
- Pollution Management Technology Section
- Laboratory Section - Administrative Section
Inspection and Enforcement Division - Enforcement 1 Section - Enforcement 2 Section - Enforcement 3 Section - Enforcement 4 Section - Support Section - Control Section - Administrative Section Water Quality Management Bureau
- Inland Water Division - Marine Water Division - Industrial Wastewater Division - Agricultural Wastewater Division - Domestic Wastewater Division - Planning and Evaluation Division - Administrative Section
Legal division - Environmental Law Section - Case and Juristic Act Section - Administrative Section
Planning Analysis And Evaluation Division
- Planning Analysis and Evaluation Group - Environmental Economics and Foreign
Group - Pollution Information Technology Group - Administrative Section
Air Quality and Noise Enforcement Division
- Industrial Air Pollution Division - Automotive Air Pollution Division - Noise and Vibration Division - Ambient Air Quality Division - Planning and Evaluation Division - Administrative Section
Waste and Hazardous Substance Management Bureau
- Hazardous Waste Division - Hazardous Substance Division - Waste Minimization Division - Solid Waste Management Division - Emergency Response and Remediation
Division - Planning and Evaluation Division - Administrative Section
Office of the secretary - Correspondence Section - Finance and Commodity Section - Personnel Section - Administrative Section - Public Relations Section - Planning Section
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The design for non-industrial pollution control under NEQA rests on two pillars: a self reporting system of the large polluting sources monitored by an enforcing unit in PCD called Environmental Inspection Division (EID) and provincial (PNREOs) and regional offices (RNREOs) and the promotion of local governments to set up wastewater treatment plants.
The self reporting system requires an identification of polluting sources and the determination of standards that the polluting sources have to comply with6. The determination of polluting sources and their standards has largely been established but the self reporting form is still under reviewed by the Council of the State.
Although the self reporting system is not yet in operation, PCD, through EID,
continues to monitor environmental compliance. Its major responsibilities include the inspection of pollution from controlled point sources under the NEQA (see section 3.1.1) and follow-up of complaints on environmental problems.
EID’s main function is to monitor whether point sources comply with the
prescribed standards. Its authority includes the inspection of pollution from controlled point sources under the NEQA (e.g. emission from motor vehicles, big buildings such as hotels, hospitals, shopping malls, pig farms, power plants and industrial plants.
To reiterate, MONRE also has a secondary responsibility for industrial
pollution management. The power of inspection and issuing administrative orders is provided by section 82 of the NEQA. However, PCD can only take action against industrial plants after consulting DIW or the provincial industry offices concerned or if the latter fail to take action.
Due to limited staff, EID has agreed to inspect factories with DIW, in the
Bangkok Metropolitan Administration (BMA). In the provinces, the power and duty to inspect and monitor pollution from point sources are delegated to the provincial and regional natural resources and environment offices (PNREOs and RNREO) in the areas. The chiefs of these offices would coordinate with the provincial governor to take action. In cases where point sources which are the objects of complaint are industrial plants, the Division or the PNREO or the RNREO concerned would coordinate with DIW (if the industrial plants are located within BMA) and the provincial industry offices (if they are located in provinces outside BMA) to inspect the industrial plants and issue administrative orders requiring them to improve their wastewater or waste treatment facilities to comply with the prescribed standards or to pay the fine. PNREOs or RENREOs have little capacity and power over the monitoring of industrial pollution in practice, and no administrative fines under section 82 of NEQA have ever been imposed.
6 Under sections 80-81 of the NEQA, owners or occupiers of point sources have a duty to record statistics and data of the daily operation of their wastewater or waste treatment facilities and to report these to the local government official in their area (municipality mayor, governor of BMA, mayor of Pattaya etc.) at least once every month. The local government official then has the duty to collect the reports and send them to the pollution control official in charge at least once a month. However, collection of data must be done in a form prescribed by ministerial regulation. At the time of the preparation of this report, no such ministerial regulation has yet been issued.
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Apart from carrying out inspection of point sources according to its own work schedule, the EID follows up complaints concerning nuisance from pollution. The Division has a unit for receiving complaints through postal mail, e-mail, telephone, fax, and hotline number 1650. The hotline number operates 24 hours, but complaints outside office hours would be recorded only for further action. According to the protocol, response to complaints must be given within 5 days. Complaints are also received by PNREO.
Unlike DIW, PCD does not have strong enforcement tools at its disposal since
point source polluters are not required to register with PCD and PCD has no authority in issuing license for operation. For instance, large pig farms are not required to be registered with PCD or the Livestock Department. The Department of Livestock does maintain a list of farms which submit their identity to the Department of Livestock voluntarily in order to obtain technical assistance from the department. Large buildings, another polluting point source, are issued license by local governments but local governments seldom exercise their environmental enforcement power because of lack of enforcement capacity and the fear of losing political support. Hence, the larger part of PCD’s current responsibilities are mainly technical with mostly scientific staff.
PCD also encounters a number of enforcement problems. For instance,
although large pig farms which raise around 5,000 pigs are one of the controlled point sources under the NEQA, the number of pigs may fluctuate over time. When the number of pigs has dropped below the designated size, it is not clear whether PCD still has pollution control authority over these enterprises. Another example indicating difficulty in law enforcement concerns the monitoring of wastewater discharge from housing developments. Most housing developments do not have central wastewater treatment facilities, but choose to install basic on-site wastewater treatment system to each housing unit instead.
An effective enforcement system and the use of economic instrument require
a good data base. The Division of Planning Analysis and Evaluation in PCD is in charge of surveying and storing location of point source polluters in its data base. The system is updated online by provincial offices or regional offices. At present, it is estimated that its data base can cover only locations and pollution discharges of 70-80 percent of the polluting sources listed under the ministerial notification. Since the self reporting form for the point source polluters is being reviewed by the State Council and has not been announced, there is therefore no updated information on the discharge from non-industrial polluting point sources.
The PCD is also in charge of promoting wastewater treatment technology to
local governments. The master plan for community waste management was approved by the Cabinet in 2003. The vision is for local governments to be able to operate wastewater treatment plants by themselves by 2011.
5.3.3 The role of local governments Even before the decentralization process began in 1999, local governments
have been given ample power by various laws (see section 5.1) to exercise control over non-industrial pollution sources. However, within environmental management
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areas, most local governments have overwhelmingly been preoccupied with solid wastes management. There is much less attention of local governments on other types of environmental problems. For wastewater treatment, another reason for local governments’ unwillingness to take control of treatment plants is that the plants which were constructed by another agency were costly to operate. Moreover, local governments also claimed that they do not have manpower of the right skills to operate the plants.
As of 2006, 82 community wastewater treatment plants were in operation with
a total capacity of 2.32 million cubic meters per day. Twelve more systems are under construction which will add 0.15 million cubic meters to the total treatment capacity. Most of the wastewater management facilities are operating at below 50 percent capacity because of the high electricity cost and because of the incomplete wastewater collection system. The Domestic Wastewater Division under the Water Quality Management Bureau of PCD has recently surveyed 55 facilities of which 50 of these can meet effluent standards7.
Local governments are quite reluctant to charge wastewater treatment fees
for fear of losing political support8. For instance, the BMA has announced a by-law for wastewater treatment charges which was published in the Royal Gazette in May 2005. The subsequent Bangkok Metropolitan Administration has delayed the announcement which would be required to render the by-law effective. According to the by-law, all households using more than 10 cubic meters of water per month would have to pay 2 baht per cubic meter for waste treatment charge and business enterprises would pay 4-8 baht depending on the type of business.
Community wastewater treatment plants are not necessarily run by local
governments. Private firms are hired to manage 8 treatment plants including one plant in Mab Taphut municipality in Rayong. The Wastewater Management Authority, a public enterprise attached to MONRE manages 11 plants including one plant of Tambon Ban Phae municipality in Rayong. Sixty-three plants are managed by local governments themselves. Although local governments are allowed to charge wastewater treatment fees according to NEQA, few have done so. This has started a vicious cycle of high cost, low income, restricted services and the cycle repeats itself.
As far as industrial pollution control is concerned, the functions of monitoring
industrial operation have not been transferred to local governments. DIW has a work plan to transfer the responsibility over certain type 2 and 25 categories of type 3 industries to local governments, but this has not happened so far, due largely to the lack of local governments’ capacity.
Although local governments have not been given the power under the Factory
Act to manage industrial pollution, there are various other laws that apply to both industrial and non-industrial entities. Moreover, ample pollution problems are produced by type 1 factories which are not under the control of DIW and need 7 Water Quality Management Bureau, Pollution Control Department, “Report on Community Wastewater Collection and Treatment all over Thailand”, Bangkok, October 2006, p.7 8 Daily News, “BMA to bear burden – 400 million baht funding on wastewater treatment”, Bangkok, July 16 2001, p.32
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immediate attention but local governments have seemed to be rather lenient and unenthusiastic to take initiative.
It is worth noting that lack of financial resources is not an obstacle for many
big local governments to take more initiative in environmental management because many local governments have greater budget resources than PCD (Table 5.2). The real problem may be the lack of willingness to take greater environmental initiative by the leadership rather than the lack of resources.
Table 5.2 Top 20 local administration organizations with the highest revenue
in 2004 (Unit: million baht)
Local name of municipalities Total
Permanent Revenue
Total Special
Revenue Grand Total
1 Mueang Pattaya, Chonburi 1,071.94 1,453.28 2,525.22
2 TAO Yan Matsi, Nakhon Sawan* 5.69 2,286.08 2,291.77
3 MN Nonthaburi 1,499.22 288.6 1,787.68
4 PAO Chonburi 913.95 362.13 1,276.08
5 MN Phuket 344.30 886.89 1,231.20
6 MN Had Yai, Songkhla 746.89 385.27 1,132.16
7 MN Chiang Mai 698.58 395.50 1,094.08
8 MN Pak Kred, Nonthaburi 692.36 264.53 956.89
9 PAO Nakhon Ratchasima 517.99 435.85 953.84
10 PAO Samut Prakan 780.28 105.88 886.17
11 PAO Nonthaburi 717.98 77.97 795.95
12 MN Udonthani 401.92 370.46 772.38
13 MN Nakhon Ratchasima 463.87 244.21 708.08
14 MN Khon Kaen 390.00 289.71 679.71
15 PAO Songkhla 408.84 250.76 659.60
16 PAO Khon Kaen 392.63 210.57 603.20
17 MN Trang 303.28 270.63 573.91
18 MN Phitsanulok 259.40 297.53 556.92
19 MN Yala 366.09 166.56 532.65
20 MN Nakhon Si Thammarat 286.12 241.46 527.58 Source: The Department of Local Administration, 2004 Notes: 1) Total permanent revenue is revenue from taxation and non-taxation, while special
revenue is grants from central government.
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2) MN = Nakhon (City) Municipality - a municipality of which population is greater than 50,000 or population density is higher than 3,000 per sq.km. 3) PAO = Provincial Administration Organization 4) TAO = Tambon (Village) Administration Organization 5) *The figure on TAO Yan Matsi, Nakhon Sawan is highly likely to contain error -- but there is no means to verify its validity with the source. 5.3.4 Staffing and capacity
Staffing and capacity for pollution management are likely to be a major
obstacle towards achieving Thailand’s environmental goals. In Samut Prakan where the concentration of Type 3 industries is the highest (6,000 factories), the capacity of the agencies concerned in dealing with pollution is very low. The PNREO has only one environmental enforcement official who is appointed a pollution control official under the NEQA. Other officials are former forestry officials who are appointed pollution control officials. Therefore it is difficult for PNREO to carry out their task of inspecting pollution point sources under the NEQA. The Samut Prakan Industry Office has a total nine staff members of whom seven are directly responsible for carrying out inspection of 600 industrial plants which use water in their production processes. The Rayong provincial industry office is in no better position. It has seven engineers to supervise 300 factories outside industrial estates which generate water pollution.
The regional offices of DIW seem to have sufficient scientists for the current
responsibilities. The Northern Center, for example, covers 16 provinces in northern Thailand (excluding Uthaithani) has a total of nineteen staff members, including four permanent government officials, six hired scientists, and support staff for the rest.
The Environmental Inspection Division of PCD at present has about 40
permanent staff members (civil servants), 20 contracted officials (Panak Ngan Rajchagaan), and another 20 non-permanent staff members. Most of the staff is environmental scientists.
As far as local governments are concerned, both the city municipality office and the provincial administrative organization have an environmental and sanitation management unit. However, they do not have the capacity to inspect pollution from point sources due to limited staff and the unclear mandate on industrial pollution control. Like other local governments, the city municipality office merely monitors and inspects pollution from activities deemed injurious to health under the Public Health Act B.E. 2535. These mostly cover small and medium enterprises such as restaurants, to ensure that they install on-site sewage treatment tanks. Besides, local governments do not have laboratory facilities to analyze pollutant samples.
At present, there are only 104 laboratories in the whole of Thailand which
have obtained ISO17025 certificates including PCD’s and DIW’s laboratories. However there are more laboratories, both private firms and local universities, which provide commercial laboratory tests for air and water pollution. A normal charge given for a BOD test is 450 baht per sample and for TSS is 150 baht per sample.
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Chiang Mai University however charges 300 and 75 baht respectively. For air pollution, the charge of a private laboratory is 1,500 baht per parameter.
5.3.5 Summary Our review of management responsibilities has identified a number of
management gaps as follows:
• There are relatively sufficient database of industrial polluters only for water pollution and regular monitoring is carried out only for water pollution control;
• The self reporting system for non-industrial polluting sources is not yet in
operation; • The lack of requirement for polluting point sources to register with PCD results
in incomplete database of the non-industrial polluting sources; • Sufficient sticks and carrots are available for local governments to undertake
environmental responsibilities in pollution control but there seems to be inertia in taking more initiative in environmental management for fear of losing votes or for fear of local conflicts;
• Although local governments are required by NEQA to set up wastewater
treatment plants, there are no sanction clauses against inertia and non-implementation.
5.4 Future Developments
Some initiatives have been taken recently by DIW and PCD on the use of pollution tax and product surcharge respectively for environmental management. These seem to have been prompted by the desire to raise funds which are seen as necessary for a more effective performance of their functions. Each of these initiatives may be summarized as follows.
DIW initiative on pollution tax law Since 1997, DIW has conducted studies with the support of the German
government through GTZ on the use of economic instruments for industrial pollution management in Thailand. The studies initially recommended two types of economic instruments: namely effluent charge and pollution management fee (PMF). Subsequent studies commissioned by DIW from 2003-2005 recommended that effluent charge should initially focus on BOD in wastewater discharge in 38 types of highly polluting industries. These include most food and beverage industries, distilleries, dyeing and bleaching industries, pulp and paper mills, soap and cosmetics industries, rubber industries, seeds industries, fertilizers, pesticide, and chemical industries. The rate of 35 baht per kilogram of BOD load of effluent has been recommended, being based on the operation and maintenance (O & M) cost of Bangkok central wastewater treatment plant and another 20 factories. It has been envisaged that as more experiences are gained from the implementation of pollution tax, the charge could be extended to other parameters such as heavy metals.
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As far as the implementation of effluent charge is concerned, factories are to
be divided into 2 categories to which different rates would apply. Small and medium-sized factories (discharging less than 100 kilograms of BOD load of effluent per day) would be charged a flat rate. Large firms which discharge 100 kilograms or more of BOD load of effluent per day would be charged according to the actual amount of their effluent discharge. Their discharge must be monitored by a licensed third party registered with DIW. According to DIW’s estimate in 1997, there were about 4,321 factories (out of 9,500) which discharged more than 100 kilograms BOD load of effluent.
DIW with the support of GTZ also commissioned TEI to propose appropriate
economic instruments for industrial air pollution. Four measures were proposed: including a fuel user charge, a raw material charge, a pollution management fee and an air emission charge.
The actual rates for fuel user charge were not specified but it was
recommended that the rates should vary with the type of fuels and the type of pollutants. Fuel uses below a specified minimum quantity would be exempted. The targeted industries are:1) high energy consumption industries, e.g., non-metals, food, and beverages and chemical products, pulp and paper, 2) textiles and basic metals and metal products, 3) other industries wood, furniture whose consumption of energy causes air pollution.
The raw material charge was proposed only for arsenic which is used in
paints, dyes, tanning and explosive factories. A surcharge of 1-10 percent of the prices was recommended.
The proposed pollution management fee is to be applied to Type 3 factories in
the industries that DIW has provided guidelines for pollution reduction in the manufacturing process. The targeted industries are non-metal, chemicals, food and beverages industries. The fee was suggested to be proportional to input used, unit cost of pollution treatment and its efficiency. The incentives of this scheme include a soft loan for investment in pollution treatment and reimbursement of the fees as soon as a factory starts its investments.
TEI’s emission charges are to be calculated from a set of relatively
complicated equations. There are different equations for firms meeting and firms not meeting the emission standards. Moreover, there are two formulae for firms meeting emission standards (for those whose emission is between the standard values and 50 % of the standard and for those whose emission is between 0 to 50% of the standards). The charge has two components: a management fee which is dependent on the level of pollution and a component which varies with the amount of emitted pollutants. This means that as the level of pollution is reduced over time the fee would decline proportionally and this could pose future administrative financing problems.
At the time of this report submission and after several consultative meetings
with the private industry and the FPO consultant team, DIW has settled for a fixed
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management fee and the following equation for air emission charge was proposed to the private sector in Rayong.
Charge = 2.50P + 0.05.S02 + 1.50NOx + Mag
where P : Particulate (measured in kilogram)’ SO2 : Sulphur dioxide (measured in kilogram); NOx : Nitrogen oxide (measured in kilogram); and Mag : a fixed management fee which is initially set at 50,000 baht,
100,000 and 200,000 baht for small, medium and large factories respectively.
DIW is in the process of preparing data to justify the level of the fixed fees.
According to DIW’s original scheme, the revenue generated by the above
charges would be deposited in the Industrial Pollution Management Fund to be set up within the Ministry of Industry. DIW would then be able to disburse the fund for purposes such as providing grants and low- interest loans to industrial enterprises for research and development to improve their environmental performance; supporting training of personnel; and dissemination of information to the public. The whole effort has culminated in a draft law. However, it seems DIW is now willing not to push forward with the draft pending FPO’s initiative on environmental tax law.
The recent air pollution problem in Rayong has made it necessary for DIW to
move quickly on the use of air emission charge. DIW’s policy to implement EC in Rayong is a result of the publicity given by the media about air pollution problems in Rayong during the last few months. In response to calls for action, the Ministry of Industry (MOI) appointed a Working Group chaired by the deputy permanent secretary of MOI on March 8, 2007, to study the implementation of EC. The Working Group consists of representatives from various government agencies concerned, including PCD, Office of Energy Policy and Planning, FPO, ONEP, Industrial Estate Authority of Thailand (IEAT), NESDB, King Mongut University of Technology in Thon Buri, Thailand Environment Institute (TEI) and DIW. The Working Group met twice on March 13 and April 24, 2007. At the last meeting, it was decided that DIW should go ahead with the plan to levy EC using Rayong as the area for this pilot project and the formula developed in the TEI’s study as a starting point
Since then, the TA team has worked with DIW on the appropriate model for
implementing EC and effluent charge. This collaboration has yielded important outcomes. In particular, the fee structure now recommended by DIW is a two-part tariff structure (up to recently, the management fee – ‘mag’ in the above formula – was calculated as a percentage of the pollution fee as opposed to being a fixed fee). It has been suggested that the model from DIW’s study using pollution coefficients may not be appropriate because of the limited resources for monitoring. Besides, pollution coefficients approach may be difficult to apply to thousands of industrial facilities across dozens of different types of industrial sectors. DIW’s study which suggested that database be updated to enable the development of reliable coefficients would impose enormous burden on data collection. As a result, the TA team has recommended a different model which is simpler and could be
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implemented immediately. This will be discussed below. More consultation with DIW will be needed on this issue.
PCD’s initiative on product surcharge In 2003, PCD commissioned a study on the use of economic instruments in
the management of hazardous wastes from consumer products. The study recommended that a system of product surcharge on consumer products causing hazardous wastes and a buy-back scheme for used or discarded consumer products should be implemented. A draft law on the management of wastes from consumer products was completed as an output from the project.
The wastes targeted are waste from electrical and electronic equipment or
WEEE, used tires (the incineration of which produces toxic gases such as dioxin and furan), used car batteries, and other waste from domestic consumption of no value such as discarded pesticides, chemicals, light bulbs, batteries. The revenue from the product surcharge would be deposited in an earmarked fund to be set up within MONRE and used to finance a buy-back scheme, the administration of which would require extensive and active participation of local governments.
Since PCD’s draft law involves earmarking revenue for environmental
management, it is likely that PCD’s draft law may not make much progress pending the draft environmental taxation law to be produced under the TA project.
MONRE’s proposed amendment of NEQA For the last several months, MONRE has been overhauling natural resources
and environmental laws within its jurisdiction. Among these is the NEQA which is scheduled to complete its revision soon. Of relevance here are the provisions in NEQA which concern the environment fund (NEF). Ideally, substantial part of the revenue to be generated by an environmental taxation law should be directed to the NEF. Unfortunately, it is generally admitted that the administration of NEF needs to improve. This includes the restructuring of the NEF Board, which consists mostly of government officials, and more delegation of power to NEF manager to appraise and approve proposals, as well as clearer criteria on the kinds of project which are eligible to apply for the use of the fund. A more detailed discussion is provided below (Section 5.5).
However, the work on the revision of NEF provisions has not produced much
change. The amendment proposal from the NEF office under ONEP includes a proposal to transform the NEF office into a legal entity, but little change on the reform of the NEF committee or its power to approve grants and loans. The existing apparent reluctance to revise considerably the institutional structure and functioning of the NEF has important implications on the nature of the recommendations provided below pertaining to the management of the revenues which will be generated from the implementation of environmental taxes.
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5.5 The National Environment Fund
5.5.1 Status of the Fund
According to section 22 of NEQA, the sources of the Fund are as follows:
(1) An amount of the Fuel Oil Fund as determined by the Prime Minister; (2) Money transferred from the 1992 Revolving Fund for environmental and
quality of life development; (3) Service fees and fines collected under the NEQA; (4) Periodically allocated funds from the government; (5) Money and other assets received from the private sector both in and
outside the country, foreign governments or international organizations; (6) Interest and other benefits generated by the Fund; and (7) Other income received for the purpose of carrying out the functions under
the Fund.
Currently, the amount of the uncommitted Fund stands at around 3,800 million Baht. Most of the Fund (about 90%) was and has been committed to support the construction of central wastewater and solid waste disposal systems in accordance with section 23 (1) of the NEQA. Until September 30, 2006, the Fund has given support either in the forms of grants or loans to 206 projects, 189 of which have been completed.
5.5.2 Administration of the Fund
According to Section 23 of the NEQA, the Fund must be expended for the following purposes:
(1) To give grants to government agencies or local governments for
investment and running of central wastewater treatment plants or solid waste treatment systems, including for procuring land, materials, equipment, tools and necessary accessories for the working and maintenance of such systems;
(2) To give loans to government agencies or state enterprises in the provision of air emission or wastewater treatment, waste disposal, or other equipment for their specific own use;
(3) To give loans to private entities in cases where they are required to set up a system of air emission or wastewater treatment, waste disposal, or other equipment for the control or elimination of their point source pollution, or in the case where such entities or persons have acquired a license to render service for wastewater treatment or waste disposal. (No private entity has obtained such license up till now);
(4) To give aids and support to activities relating to the enhancement and conservation of environmental quality as deemed appropriate by the Fund Committee and as approved by the National Environment Board (NEB); and
(5) To be used for the administration of the Fund.
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Applications for grants or loans from the Fund are considered according to the Rules of the Fund Committee established in 2001 setting the criteria and conditions for projects seeking money from the Fund. Local governments’ projects for the construction of central wastewater treatment or central solid waste disposal systems must meet certain criteria as follow:
(1) The projects must be those partially funded by state budget or the
concerned local governments’ own revenue. According to a resolution of the Fund Committee, the grants from the Fund must not exceed 65-70% of the project cost, the rest 30-35% is to be provided out of the requesting local governments’ own budget. It has been suggested that the proportion of the project cost provided by local governments should be increased under the present circumstances because local governments are now allocated a bigger budget under the decentralization process; and
(2) The projects need to be implemented urgently and it is not possible to acquire government budget or other funding in the current year.
Allocation of the Fund for other projects relating to environmental
conservation under Section 23 (4) of the NEQA is set at not exceeding 100 million baht a year in total. The Fund Committee has the power to approve projects not exceeding 5 million baht. Projects exceeding that amount must be submitted to the National Environment Board (NEB) for approval. Request for support from NGOs come under this subsection.
The Environment Fund Office of the Office of Natural Resources and Environmental Planning (ONEP) serves as the secretariat for the administration of the Fund. The Fund is managed by the following agencies:
(1) The Comptroller General’s Department serves as the depositary of the
Fund and manages grants or aids paid out of the Fund to government agencies, local governments and non-governmental environmental organizations;
(2) Krung Thai Bank (the only state bank willing to undertake the task) serves as the manager for loans given under the Fund to local governments, state enterprises and private entities. Currently, the Bank charges 3.5 % as administration cost. The NEQA provides that loans from the Fund must be administered by a government bank. So, there is no other option available.
The repayment period for loans is 7 years for the private sector and 10 years
for local governments. However, local governments have rarely observed this requirement strictly so far. Besides, since the establishment of the Fund, there have been only a few cases of loans granted to the private sector in accordance with section 23 (3). These include projects to construct their on-site wastewater treatment system in an industrial estate and to develop biogas in a pig farm. The Fund has never given out loans to private investors to invest in the construction of central waste treatment plants after obtaining a license under Section 23 (3) of the NEQA because no such license has ever been issued due to the disagreement between DIW and PCD as to who should have the authority to grant a license for this purpose.
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5.5.3 Problems concerning the administration of the Fund An extensive review of the structure and operations of the NEF was
undertaken by the World Bank in 2003. Among numerous others, the following problems have been noted:
(1) Although the Rules of the Fund Committee issued in 2001 specify the
conditions of projects eligible to apply for support from the Fund, the Fund Committee’s decisions to approve grants or loans remain largely discretionary. There should be clearer criteria concerning eligible projects.
(2) The procedure for submission and approval of projects is too lengthy. For
instance, a project submitted by Khon Kaen Municipality to construct a solid waste sanitary landfill (costing over 100 million baht) has now been under consideration for 4 years and is still waiting to be evaluated by the Technical Sub-committee.
(3) Projects from local governments also have to go through a cumbersome
process. They are to be submitted through provincial governors and incorporated in the Provincial Development Plan. Then the projects concerned will be sent to the Environment Fund Office for evaluation and finally to the NEB for final approval.
(4) Problems also stem from the quality of proposals submitted for funding.
Many proposals lack details and clear objectives. Currently a proposal format is posted in the website for applicants to use as guidelines. A time frame for annual application has also been provided.
(5) Although Section 23 (3) opens the way for licensed private investors to
apply for loans from the Fund for the purpose of constructing central waste treatment systems, at present, no private investors have been licensed due to the disagreement as to who should have the authority of licensing.
5.5.4 Possible means to improve the effectiveness of the Fund The same World Bank review provided a number of recommendations to
improve the effectiveness of the Fund, including: (1) There should be clear criteria on the types of projects which are eligible for
the Fund. At present, the disbursement of the Fund rests very much on the discretion of the Fund Committee.
(2) The Fund should be used to fund special types of environmental projects
which are not part of the normal functions of the government agencies. For instance, projects to monitor law enforcement or projects to demarcate forest boundaries or projects to develop water sources should be supported by regular budget, not by the Fund. In some situations, it should be possible to request money from the Fund to support projects considered to be a matter of urgency or emergency, such as to implement measures containing damage from accidental pollution or chemical leakage. In any cases, the support should not amount to 100% of the cost. So far, the Fund has been treated by government agencies as a source of government budget to support projects when they cannot get funding from the regular channels.
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(3) Although the NEQA gives power to the NEB to determine user charges for
the service rendered by central waste treatment systems which have been constructed with partial support from the Fund, the NEB has rarely exercised this power. So far, it has set wastewater treatment charges only for Hat Yai Municipality and Pattaya city, although there are at least 40-50 local governments which have constructed either central wastewater treatment system or solid waste disposal system with support from the Fund. Without the NEB’s initiative, it is unlikely that these local governments will set user charges for wastewater or solid waste management. The fact that the NEQA allows different rates to be set as appropriate to each location has added the work to NEB in determining various rates and has delayed its action in this matter. It may be more desirable for the NEB to set rates which can be used in all provinces where the waste management service is provided.
(4) Technically, the income from pollution tax or product charge can be
administered under the Fund. Section 22 (7) of the NEQA provides that income and assets of the Fund may come from various sources for the purpose of carrying out its functions. These incomes can then be earmarked and administered separately by the Fund Committee under different regulations as may be deemed appropriate. In response to the concern of DIW and PCD that part of the revenues collected from pollution tax or product charge should be returned to them to enable them to carry out their functions, a certain percentage of the revenue could be allocated for this purpose.
PART B FRAMEWORK FOR THE DESIGN AND IMPLEMENTATION OF POLLUTION TAXES IN THAILAND
VI. ANALYTICAL FRAMEWORK FOR DESIGNING POLLUTION TAX STRUCTURE
In this section, we aim to provide an analysis pertaining to the design of the
pollution fee system in Thailand. At the outset, it is of importance to note that these fees are first targeted at point sources of pollution, including but not necessarily limited to industrial facilities. For example, point sources of pollution targeted by pollution fees may also include commercial and institutional facilities, commercial agricultural facilities such as pig raising facilities from which wastewater is discharged, as well as wastewater treatment plants (such as those operated by industrial estates). It should also be noted that in this report, pollution fees are understood to be fees on specific air or water pollutants, for each and every unit (generally measured in kilogram or ton) discharged the point source.
Overall Vision
As illustrated in Figure 6.1, it is understood that incentives for pollution control will come from two different sources. First, the effective and strong implementation of
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the polluter-pay and user-pay principles should create incentives for firms to reduce pollution (Box 2 presents a simplified model of firm behavior). Notwithstanding monitoring and enforcement issues, this will be achieved if the fee per unit of pollution is sufficiently high. Figure 6.1 Two sources of incentives for pollution control
On the other hand, it is also recognized that in a (limited) number of cases, it may also be appropriate to provide financial support to facilitate the implementation of pollution control devices or the adoption of cleaner production technologies. An environmental fund may serve as an appropriate institutional mechanism linking these two potential sources of incentives whereby revenues from pollution fees (either all or a portion of these revenues) are earmarked to the fund which is then used to provide advantageous financial support to those desiring to reduce pollution. Sources other than revenues from pollution, either internal or external to Thailand, may also be deposited into the environmental fund as pollution fees alone may not generate sufficient revenues to ensure the effectiveness of the fund.
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Box 2
A model of firm behavior Suppose that a pollution fee iF must be paid by an industrial facility for every ton (or
kilogram) of pollutant iP that the firm discharges into the environment, where i represents the number of pollutants targeted by the pollution fee system. For example, if 2 pollutants are targeted by the pollution fee system, then total pollution fee payment by the firm will be 2211 PFPF + .
Let us note by NiP the level of discharge of pollutant i without pollution control effort (No),
and by YiP the level of discharge of the same pollutant with pollution control (Yes). Hence, if
a total number of I pollutants are targeted with pollution fees, the total fee payment in year t by the firm without pollution control will be:
∑=
=I
i
Nii
Nt PFTP
1
With pollution control, the total annual fee payment will be:
∑=
=I
i
Yii
Yt PFTP
1
While the firm will pay less pollution fees if it controls pollution ( Nt
Yt TPTP < ), it must trade-
off this saving against the cost of control pollution. Let us note by CtC the capital cost of a
pollution control device in year t, and by MtC the maintenance cost of the device in year t.
The decision rule followed by the firm is to invest in pollution control and reduce pollution if the present value of the pollution control cost is smaller than the present value of the savings associated with paying less pollution fees. In other words, invest in pollution control if:
∑∑== +
−<
++ T
tt
Yt
Nt
T
tt
Mt
Ct
rTPTP
rCC
11 )1()(
)1()(
and do not to invest in pollution control otherwise.
Principles Guiding the Design of Pollution Fees Five key principles guide the recommendations made in this report pertaining to the structure of pollution fees. These are detailed below.
Principle 1: Effectiveness
This implies that the pollution fee system must be structured in such a way as to create incentives at least for large sources of pollution, to reduce pollution discharges. In particular, the pollution fee (per unit of pollution) must be high enough to create a situation where investing in pollution control becomes the most profitable option for profit maximizing firms as opposed to simply paying the fee on unabated pollution discharges.
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Principle 2: Self-sufficiency
While this criterion may not be expected from any other form of fees implemented by the state, it is generally expected (rightly or wrongly) that the revenues obtained from pollution fees should be at least sufficient to cover the agency’s implementation costs (equipment, monitoring, collection of fees, etc.).
It is important to note that to some significant extent, the above two principles are competing with one another. Indeed, if the pollution fee were to be extremely effective in terms of inducing a large reduction of pollution, then there may not be ‘enough pollution’ to generate sufficient revenues to ensure the self-sufficiency of the fee system. As will be discussed later, these opposing principles explain the two-part fee structure recommended below. Principle 3: Fairness
While fairness remains an appealing concept, it is often difficult to implement effectively in practice as ‘fairness’ generally means different things to different individuals. Nonetheless, we mean it to imply the following in the present context.
First, the pollution fee system should avoid creating a situation whereby the system itself, by its very own design or implementation strategy, provides undue competitive advantage to a subset of firms at the expense of other firms within the same industrial sector.
Second, it is clear that the implementation of pollution fees in Thailand should avoid hurting the international competitiveness of Thailand’s industrial sector especially relative to firms in the immediate region. This implies that: (1) all other things being equal, pollution fees in Thailand should be relatively similar to those found in the region; and (2) specific attention should be paid to the use of revenues from pollution fees to facilitate investment in pollution control at reasonable cost to industrial facilities.
Principle 4: Simplicity
It is readily understood that the effectiveness of the pollution fee system greatly depends on its simplicity. Targeted facilities must be able to compute in a straightforward manner what should be their total pollution fee payments and be able to easily perform financial calculations as to the net benefits of reducing pollution (as illustrated in Box 2 above). Similarly, the pollution fee system must be simple to comprehend for those implementing the system. This is especially true when one recognizes that implementation capacity and resources are likely to be limited as the pollution fee system is initially introduced.
As far as we understand, the emission charge and pollution management fee system presented by TEI/GTZ is depicted in Figure 6.2. Whether DIW is still promoting this system is not entirely clear. In any event, it is not a system characterized by ‘simplicity’. In particular, there are a number of issues with respect to the pollution management fee program:
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• Can any large firm participate in the Pollution Management Fee (PMF) program or only a subset of firms satisfying some pre-determined criteria?
• What is the length (the duration) of the PMF program? • How is the ‘target’ defined? • What is the ‘reduced EC”? Is it per unit of pollution or the total pollution
payment? • Which interest rate is going to be used if the firm fails the target? • Which pollution level is going to be used if the firm fails the target?
Figure 6.2 Emission charge and pollution management fee system proposed to DIW
Principle 5: Feasibility
Finally, at the outset of its implementation, it is fully expected that an effective pollution fee system could not target a very large number of pollutants and a very large number of industrial facilities. Hence, choices will have to be made aiming at limiting the number of pollutants and polluters targeted by the pollution fee system.
Economic instrument for water pollution
Small / medium firms
(less than 100 kg BOD per
day)
Large firms
(more than 100 kg BOD per
day)
EC is compulsory to all firms discharging effluent; Fee payment is BOD pollution load estimated with pollution coefficients
EC is compulsory to all firms unless they agree to participate in the PMF program; Fee payment is BOD pollution load estimated from actual monitoring and sampling.
Emission Charge (EC)
Pollution Mgmt Fee (PMF)
Voluntary participation
If does not participate
If participates
Pay EC
Meet targets
Fail targets
Do NOT pay EC
Reduced annual
EC
Pay annual EC including
interest.
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Coverage is then likely to increase as experience and capacity both increase. Results presented in Chapter III earlier with respect to the identification of most significant sources of industrial pollution explicitly aimed at designing an implementation strategy deemed to be feasible.
In light of the above 5 principles, specific recommendations are presented below pertaining to the structure of the pollution fee system.
Considerations Pertaining to the Tax
In this Section, we provide considerations pertaining to both the recommended structure of the pollution fee system and the environment fund. However, issues and recommendations about the NEF have been discussed previously and extensively provided in previous documents.9 As a result, we devote considerably more space to the fee system. (1) Structure of the pollution tax system When considering the design of a pollution fee system, 6 issues are of importance. These are:
• Which pollutant(s) to include? • Which industrial polluters to include? • What is the appropriate fee structure? • How to account for different size of firms? • How to estimate the fee base? • What is the appropriate fee level?
We discuss these issues in turn. However, we will show that the design of the fee structure, the treatment of firms of different size and the estimation of the fee base are issues which are in fact related and can be tackled simultaneously. (i) Which pollutant(s) to include?
A large number of countries apply pollution fees to air and/or water pollution. A key lesson from this varied experience is that targeting a very large number of pollutants has proved a very difficult task to implement. More successful experiences indicate that targeting at first a limited number of pollutants and then increasing the coverage of pollutants as expertise and capacity increase are more likely to yield better results. If that is the case, then an important issue is the selection of pollutants to which to apply pollution fees.
A systematic review of the international experience indicates the following:
9 For more details on environmental funds, please see Anantanasuwong, D., Varanyuwatana, S., and B. Laplante (2004), A Framework for Pollution Taxation Policy in Thailand, Ministry of Finance, Thailand and Asian Development Bank.
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Insofar as water pollution is concerned, biological oxygen demand (BOD) and total suspended solids (TSS) are almost always included in the list of targeted pollutants. In Thailand, industrial discharges of these two pollutants have been subjected to regulatory standards and monitoring for a very long period of time. Furthermore, the existing system of regulation requires that industrial facilities self-report their discharges of at least these two pollutants (at a frequency which depends on the characteristics of the firm). There thus exists a significant amount of information about industrial discharges of these pollutants. These two pollutants also offer the distinct advantage that laboratory analysis to measure their degree of concentration in a given sample is relatively inexpensive (unlike other pollutants such as heavy metals). Finally, in the process of abating BOD and TSS, it is known that other pollutants (such as heavy metals) may also be abated in significant proportion. Hence, these two pollutants would appear to be a reasonable starting point given the existing experience and capacity in Thailand. However, we also recognized that it has been occasionally argued that chemical oxygen demand (COD) could be a more reliable target than BOD (Box 3). The choice of BOD vs COD may thus be further discussed at the time of preparing a final decree implementing water pollution taxes.
Box 3 BOD vs. COD
While a number of countries have implemented pollution fees or taxes on BOD, there is good evidence that from a technical point of view, COD may be a preferred pollutant to target: • If there are traces of toxics or heavy metals in the firm’s effluent, then the
biological process may be impaired and BOD may then become an unreliable measure of pollution;
• The actual measurement of BOD can vary significantly from one laboratory to
another depending on the equipment used and the handling of the sampling. BOD, unlike COD, is known to experience large margins of error;
• While BOD takes 5 days to measure, COD takes approximately 2 hours. So,
COD measures give much faster information about what’s going on the firm’s effluent.
Insofar as air pollution is concerned, countries around the world have typically aimed at controlling a set of pollutants known as ‘conventional’ or ‘criteria’ pollutants. These include: sulphur dioxide (SO2), nitrogen oxide (NOx), total suspended particulates (TSP or PM10), carbon monoxide (CO), volatile organic compounds (VOC) and lead (Pb). A key source of lead emissions is related to the use of leaded gasoline which has now been phased out in Thailand. VOC are typically not targeted by pollution fees since they result from the interaction between various pollutants mainly discharged from the transport sector with sunlight. Finally, as shown earlier in Chapter III, CO emissions are mainly related to the transport sector. The industrial and power sectors are key sources of emissions of SO2 and TSP, and to a smaller
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extent of NOx. In particular, TSP and PM10 are known to be very significant problems in Thailand’s urban centers while SO2 is known to create very significant environmental damages in waterways (acid rain) and may impact severely agricultural productivity. These 3 pollutants would thus appear to be on a reasonable starting point for the implementation of air pollution fees.
(ii) Which industrial polluters to include? It appears obvious that at the initial phase of implementation, not all industrial
polluters will be targeted by the pollution fee system. Indeed, the existing institutional capacity and resources would not allow such a broad coverage. But perhaps more importantly, it has been shown earlier that there is no need to target all industrial polluters to achieve significant reductions in industrial pollution discharges in Thailand. Indeed, as was shown previously, a very large share of industrial water and air pollution is accounted for by a very small number of industrial sectors, sometimes covering a very small number of industrial facilities in each region or province.
If not all polluters need be included in the pollution fee system, then an
important issue pertains to the selection of whom to include. One may consider 3 approaches to guide the selection of polluters to target with pollution fees: Approach 1: Select specific industrial sector(s) and apply the pollution fee to all
firms within the selected sector(s);
Approach 2: Select the larges sources of pollution discharges regardless of the sectors to which they belong and regardless of the areas where they are located;
Approach 3: Select specific areas (such as provinces, regions, watersheds (e.g.
river basins), or air sheds and apply the pollution fee to all or a subset of firms within the selected area(s).
As shown in Figure 6.2 below, each approach has its advantages and
disadvantages. Thus far, discussions with stakeholders reveal a significant reluctance to the third approach since it may (albeit not necessarily) violate the fairness principle. Indeed, Approach 3 may imply that some firms within any given sector will be targeted by the pollution fees while others in the same sector will not. In consultations held in Rayong, representatives of industrial facilities have strongly raised this issue.
Ideally, one would be able to find some of our key polluting sectors (identified previously) in a very limited and concentrated number of regions in the country, thus combining Approach 1 and Approach 3. Only a thorough examination of the Ministry of Industry’s database would allow such identification. This may very well be an important exercise to undertake as one seeks to identify the first set of industrial facilities to target with pollution fees.
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Figure 6.2 Selection of targeted polluters
(iii) What is the appropriate fee structure? As indicated earlier, the fee structure should not only address both the effectiveness and self-sufficiency principles, but should also acknowledge that these two principles are to some extent competing with one another. To this effect, a limited number of countries have implemented a fee structure known as two-part tariff. A two-part tariff structure is made, as its name suggests of two parts. A first part is fixed in the sense that it does not depend on the level of pollution itself. A second part is variable in the sense that the more the firm pollutes, the more it pays; and the less it pollutes, the less it pays. This variable part is simply calculated as the product of the per unit pollution fee and the quantity of pollution produced.
As shown in Figure 6.3, the key purpose of the fixed part of the fee structure is precisely to generate revenues for the agency to undertake the implementation of the pollution fee system. Regardless of the level of pollution, the agency can be more or less assured of a given amount of revenues it can use for this purpose.10 On the other hand, the purpose of the variable fee is to create incentives for pollution control. This two-part tariff system has been successfully applied in Canada and in the Philippines. Viet Nam is currently revising the fee structure it has been using since 2005 and will adopt this two-part tariff structure.11
10 Up to very recently, DIW’s formula for air pollution fees was based on a two-part tariff system to cover administration costs. However, the part of the fee aimed at covering these costs was calculated as 10% of the variable fee calculated for the firm. With this approach, the ‘fixed fee’ was not in fact ‘fixed’ but was a function of the level of pollution. As a result of recent discussions, DIW has agreed to amend its proposed air pollution fee ‘formula’ to introduce this fixed fee approach. 11 In Viet Nam, local pollution control departments quickly recognized that more pollution meant more revenues.
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Figure 6.3 Recommended fee structure: Two-part tariff
(iv) How to account for different size of firms?
Assuming that an industrial sector approach (Approach 1) or an area approach (Approach 2) or a combination of these two approaches is selected,12 then it will inevitably result that the pollution fee system will cover a number of firms varying significantly in size, from very small to very large. Two questions are then raised. First, which variable is going to be used to group the firms into small, medium and large? Possible parameters include: number of employees, horsepower, production capacity, pollution discharges, wastewater discharges, etc. Second, a related but separate question pertains to the selection of the precise value of the selected parameter which will be used to group firms into small, medium, and large. Simply for illustration purposes, if the number of employees is selected, one may use the following categories:
• Less than 25 employees: Small firm • Between 25 and 50 employees: Medium firm • More than 50 employees: Large firm
Irrespective of the parameter and values used, along this spectrum, it is
expected that there will be a very large number of small firms, a large number of medium-sized firms, and a limited number of large firms. This could initially create difficulties for the agency mandated to implement the pollution fee system. However, it is possible to address this issue by allowing for the fact that while all firms (within an area or a sector) are targeted by the pollution fee system, not all firms are to be treated exactly the same way.
In addition to being able to separate the need to generate revenues from the need to create incentives for pollution control, the two-part tariff structure here offers a second important benefit. Indeed, given that small firms are likely to produce, individually, low levels of pollution, given their large numbers, and given the limited 12 We note that DIW has selected the province of Rayong for the pilot implementation of its air pollution fees.
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capacity of the implementing agency, it may be appropriate to adopt a fee system whereby small firms pay only the fixed part of the two-part tariff system (Figure 6.4). Figure 6.4 Fee structure and size of firms
In doing so, all firms are included in the fee system (thus addressing to some
extent the issue of fairness), but it does so in a way that is actually manageable by the implementing agency. A large number of firms can be targeted all at once and get the pollution fee system initiated. (v) How to estimate the fee base? Under the recommended approach described above, both medium and large firms would pay both a fixed fee and a variable fee where the variable fee is based on the estimated level of pollution. For the first of the 5 principles introduced earlier (effectiveness), it is readily apparent that for large firms, the fee base must be the actual estimated level of pollution discharges (measured in ton or kilogram). For the purpose of such estimation, a specific sampling, self-reporting and monitoring protocol will have to be developed to estimate as precisely as possible the actual level of pollution discharges of the firm. Given the small number of such large firms, this would not appear to be an overwhelming burden, albeit a significant challenge which will require focused attention. The issue of fee base calculation is more acute for medium firms of which there is likely to be a very large numbers, even within a given industrial sector or geographical area. In previous studies sponsored by DIW, the use of pollution coefficients has been recommended. An important objective of pollution coefficients is to simplify the implementation of pollution fees by greatly reducing the needs for actual data collection. However, while simplifying the implementation of pollution fees is the key rationale for the use of pollution coefficients, the studies themselves conclude that even the use of pollution coefficients is likely to require a vast amount of information:
Thus, it is important that the database must be updated and improved continuously in order that the analyzed coefficients are reliable for the application of emission charge collection. (DIW, Phase II, p.9)
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Data should be collected and kept up-to-date for establishing an industrial database for the purpose of emission charge collection. It should be made as requirement for every factory to report to DIW of the information concerning their production management, such as quantity of raw material used per day, quantity of products made per day, influent and effluent flow, and wastewater management. (DIW, Phase I, p. 55)
In addition to the above difficulties, it is important to recognize that the use of
pollution coefficients is unlikely to create strong incentives for pollution control unless the implementing agency credibly commits itself to adjust the coefficients whenever the firm demonstrates that it has undertaken activities to reduce its pollution. Without such commitment, firms will perceive that whatever they do to reduce their pollution, the pollution coefficients used by the agency remain the same, and therefore they continue to pay the same pollution fees. If this were to become the case (as is likely to be indeed), incentives for pollution control will not be very significant. An alternative to the use of pollution coefficients is a system referred to as presumptive charge. Under a presumptive charge system, for the purpose of calculating the fee payment for the firm (and solely for this purpose), it is presumed that the firm complies with the existing regulatory standards. For instance, the existing BOD concentration standard in Thailand is 20 mg/l. Hence, for the purpose of calculating the fee payment, the value of 20 mg/l is used. Under such a system, the firm simply needs to report its wastewater discharges (cubic meter) so as to calculate the BOD load using a concentration of 20 mg/l.
Some firms may argue that they are polluting less than the concentration standards used to calculate pollution fees. When such a claim is made, a presumptive charge system will have to develop a clear protocol for firms to substantiate their claims. If these are indeed substantiated, then the lower value can be accepted.
In all likelihood however, it is reasonable to expect that most firms in Thailand
pollute beyond the concentration standards. Such firms benefit from the presumptive charge by paying fees on quantities of pollution lower than actual discharges. Hence, the key to this approach that the presumptive charge system is used solely as the pollution fees are initiated. Gradually, as experience, capacity and resources improve and increase, the presumptive charge system will gradually be abandoned, and more and more firms will pay fees based on actual estimated discharges.
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Figure 6.5 Fee structure, size of firms and fee base
(v) What is the appropriate fee level? In theory, the appropriate fee level should be set equal to the value of the marginal abatement cost measured at the targeted level of pollution. Needless to say, the practice diverges significantly from the theory. Indeed, in practice the level of the pollution fee depends on a combination of the following elements:
• The level of pollution fees in other countries; • The amount of revenues estimated to be necessary to implement the pollution
fee system; and importantly • Negotiated agreements with the targeted stakeholders.
If we first examined the fixed fee only, it may be of interest to note the
following levels in the following two countries and one province (of Canada):
• Philippines Between 4,500 and 10,000 THB • Malaysia Approximately 1,700 THB • British Columbia Approximately 2,900 THB
On this sole basis, it would appear that a fixed fee (on average) in the order of
1,000 to 5,000 THB could appear appropriate. It is of interest to note that in a presentation prepared in January 2002, DIW estimated that the cost for the agency to implement BOD discharge fees could amount to approximately 45 million THB. Assuming that approximately 15,000 firms would be targeted by the pollution fee system, this would represent for cost-recovery purposes an average fixed fee of approximately 3,000 THB. A thorough examination of DIW’s industrial database would allow a better approximation of the appropriate level of the fixed fee. As for the variable fee, some examples are show in Table 6.1. These vary considerably. They are particularly large in Eastern Europe. Note that in the Philippines, the level of the unit fee is also relatively large. In Viet Nam and Malaysia,
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the unit fee reaches something like 100 THB per ton of pollution. It reaches 450 THB per ton in British Columbia. Once again, further studies and discussions will be necessary to set the level of these fees in Thailand. However, we believe these offer interesting first approximations. Table 6.1 Examples of variable pollution fee
Country THB per ton BOD Viet Nam 65 Malaysia 95 Philippines 3,300 Estonia 2,525 Latvia 1,640 Lithuania 2,460 Poland 5,640 British Columbia 450
A summary of the possible pollution fee design and structure is presented in Figure 6.6 below. Figure 6.6 Recommended pollution fee design and structure
In this section, we have presented recommendations pertaining to the design
and implementation of a system of pollution fee in Thailand which satisfies 5 key principles. We strongly believe that it is due time for Thailand to proceed resolutely towards the implementation of the polluter-pay principle in the country. We believe that the system described above would allow the implementing agency to proceed rapidly and with focus towards the effective implementation of pollution fee in the
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country. In the course of coming months, discussions with a large number of various stakeholders will allow the fine-tuning of the above recommendations.
Estimated Revenue from Water Pollution Tax
On the assumption that the fixed fees to be charged will be 1,000, 3,000 and 10,000 THB for small, medium and large firms respectively, the estimated revenue from fixed fees from industrial firms are provided in Table 6.2. If a variable fee of 1,500 baht per ton of BOD and TSS are charged, at a first glance, it may seem that the total revenue from variable fee of 3.599 billion baht could be derived by multiplying the variable fee with the total amount of pollutants (Table 6.3). However, since a variable fee has an inherent incentive to encourage firms to reduce pollution and on the basis of a study in China that a fee of USD 50 per ton of BOD would reduce pollution discharge by 70 percent13. If the estimated revenue is based on this behavior, the revenue generated by the variable fee would reach approximately 1.079 billion baht. The grand sum of the two revenues totals 1.813 billion THB on an annual basis. There is of course significant uncertainty as to the precise magnitude of the revenues which may be generated by a system of water pollution taxes structured as recommended here. However, revenues in the order of 1.5 to 2.5 billion THB would appear likely. When compared to existing public expenditures on pollution control, and when examined in comparison with existing budgets allocated to those department and authorities mandated to protect environmental quality in the country, revenues in this order of magnitude are large indeed. Table 6.2 Estimated revenue from fixed fees
Factory Type No. of Factories Fixed Fee Level (baht/year/factory)
Revenue from Fixed Fee (baht)
Type 1 43,609 1,000 43,609,000 Type 2 18,164 3,000 54,492,000 Type 3 63,574 10,000 635,740,000
Total 125,347 733,841,000 Source: calculated from DIW data
13 Dasgupta, S., Huq, M., Wheeler, D., Zhang, C., Water Pollution Abatement by Chinese Industry: Cost Estimates and Policy Implications, Policy Research Working Paper 1630, Policy Research Department, Environment, Infrastructure, and Agriculture Devision, The World Bank, August 1996
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Table 6.3 Estimated revenue from variable fee
Region Load (tons)
Revenue from Variable Fee1,500 baht/ton
BOD TSS BOD TSS Central 118,086 1,583,494 177,129,000 2,375,241,000East 32,082 424,278 48,123,000 636,417,000North 14,418 62,471 21,627,000 93,706,500Northeast 16,540 104,696 24,810,000 157,044,000South 5,810 37,596 8,715,000 56,394,000
Total 186,936 2,212,535 280,404,000 3,318,802,500Total Revenue, BOD + TSS 3,599,206,500
Assume 70% reduction 1,079,761,950 Source: Same as Table 6.3
VII. CASE STUDIES Selection of a Case Study Site
According to the TA, a case study of a site or industry must be undertaken to explore how the pollution tax policy should be implemented. The team has initially selected two provinces which have serious industrial pollution problems, namely, Samut Prakan and Rayong.
Both provinces are very important industrial centres of Thailand. In 2006,
Samut Prakan account for 15.9 percent of total national manufacturing value added while Rayong accounted for 8.5 percent (Table 7.1). Both are highly industrialized with their manufacturing sector accounting for more than half of their gross provincial product.
Table 7.1 Comparison of manufacturing value added of Rayong and
Samut Prakan
Rayong Samut Prakan
1. Share of provincial manufacturing value in national manufacturing value added 9.2 15.9
2. Share of provincial manufacturing value added in gross provincial product 47.8 81.5
Source: Calculated from GPP and GDP from http://www.nesdb.go.th/Default.aspx?tabid=189 (July 6, 2007)
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Samut Prakan is an industrial city with about 6,000 industrial plants which are category 3 factories licensed by the provincial industry office. Of these, it is estimated that approximately 600 use water in their production process, with about 300 discharging more than 100 cubic meters of effluents a day. Many of the factories are old, existing prior to the enactment of NEQA and more stringent effluent standards. Therefore, many of these factories would need time and supportive measures to adjust. Apart from the large number of category 3 factories, Samut Prakan also has a large number of category 1 and category 2 factories which total about 10,000. Samut Prakan has a population of about 1.5 million. At present, there is no central wastewater treatment plant in operation.
Benefiting from a large deep sea port, Rayong is one of the provinces with the
largest number of modern industrial estates and plants. It has 1,700 industrial plants. Its registered population is around 600,000 but it has unregistered population of not less than 200,000. It has very strong civil societies groups that have been voicing the negative impact of industrial pollution. In response to the civil societies’ calls for action, MOI has appointed a Working Group chaired by the deputy permanent secretary of MOI on March 8, 2007, to study the implementation of economic instrument to curb pollution in Rayong.
In order to select the site for the pilot project, the team held meetings with PCD, DIW, regional and provincial officials from the related ministries including the local governments and private industry in both Samut Prakan and Rayong. We have finally come to the conclusion of selecting Rayong as the site for pilot project for the following reasons:
1. DIW plans to implement an air emission charge in Rayong and put the
levies in a fund. This provides a good opportunity for the team to collaborate and exchange ideas with DIW as well as having access to better data and statistics.
2. Although both provinces have both air and water pollution, the problems in
Rayong are related to the manufacturing industry. The air pollution problem in Samut Prakan is more complex and related to construction and transport industries.
The TA team has obtained approval from the TA Steering Committee and
FPO to select Rayong as a case study of pollution implementation. Two trips were taken to Rayong to collect the needed data. In addition, two consultative meetings were held with relevant agencies. Relevant data were collected.
Existing Monitoring Capacity
Environmental management and monitoring responsibilities of PIO and local
government has been documented in Section 5. In this section only some further details related to water pollution tax will be given. The Sanitation, Environment and Health Division of Thedsaban Nakhon Rayong is in charge of environment management. Currently, they monitored over 1,000 enterprises under the Public Health Act suggesting a staffing ratio of about 300 establishments per staff and the current ratio is considered insufficient. For PIO, the ratio is about 295 factories per staff.
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Thedsaban Nakhon Rayong has 8 staff members in the tax section who handle 8,000 cases of Signs, Building and Land Tax indicating 1,000 cases per staff. The municipality has a good digital database but cannot readily serve our water pollution tax purpose. However, it has a database on size of buildings for which the PCD tax formulae can be readily applied. The municipality also conducts ground surveys of buildings and signs every year in order to update its list of tax payees.
The Provincial Excise Office currently collects taxes from firms and factories
under a number of legislation. Its manning ratio is 211 tax cases per one staff member. The Officce is an e-office and its tax collection and reporting is on line and tax information is linked to the GFMIS system.
Wastewater Treatment Thedsaban Nakhon Rayong has no wastewater treatment facility. Although a
treatment system was built by the Department of Public Works and Town and Country Planning, Thedsaban would need a lot more investment to bring the system into operation so it has hesitated to accept the facility. Therefore cost structures for running a wastewater treatment were obtained from adjacent municipalities and shown in Table 7.2. It should be noted that the BOD concentration for influence is relatively low ranging between 23 to 46 mg/l and the cost of treatment per ton of BOD ranged from 1830 to 6138 baht and the cost of treatment per cubic meter of waste water ranged from 0.55 to 2.42 baht.
Table 7.2 Cost Structure: Water Treatment Plant
Unit: baht
PAO
Chonburi Mueang PattayaThedsaban Mab Taput
1. Salaries and wages 2,100,000 5,280,000 1,282,800 2. Water 14,518 165,003 13,029 3. Electricity 3,428,181 10,360,852 867,009 4. Chemicals 1,279 865,441 18,434 5. Maintenance 2,300,000 - 296,925 6. Misc. 1,000,000 - 522,000 Total (baht/year) 8,843,978 16,671,296 3,000,197 Water Treated m3/day 10,000 64,100 15,000 m3/year 3,650,000 23,396,500 5,475,000 Avg. Cost (baht/m3) 2.42 0.71 0.55 BOD concentration avg. Influent (mg/L) 43.34 45.99 22.65 avg. Effluent (mg/L) 3.87 7.06 9.1 Total BOD treated (ton/year) 1,440.66 9,108.26 741.86
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PAO
Chonburi Mueang PattayaThedsaban Mab Taput
Avg. Cost (baht/ton BOD) 6,138.86 1,830.35 4,044.14 Avg. Cost (baht/kg BOD) 6.14 1.83 4.04 Source: Center of Energy and Environmental Engineering, Interim Report: Assessment of Efficiency on Community Wastewater Collection and Treatment System in the Eastern Region, Kasetsart University, Bangkok, July 2007
7.3 Estimates of Revenue from Water Pollution Tax Two sources of data were collected for the estimates of water pollution tax.
Provincial Industry Office (PIO) provided data on wastewater of 220 (Type 2 and 3) factories outside industrial estates in Rayong. The Fiscal section of Thedsaban Nakhon Rayong provided data on capacities (measured in square meters) of point source polluters under NEQA. The data provided by PIO is not complete as factories in industrial estates are not under its control. There are 368 more factories in industrial estates and industrial zones. Therefore the following estimates can be considered conservative or low estimates. Formulae for estimating the BOD loads from these capacities were given by PCD.
Table 7.3 provides 2 scenarios of estimates of water pollution tax on industrial firms. The first scenario assumes that firms pay a fixed fee varying with its size, i.e., 1,000 baht for a small factory, 3,000 baht for a medium firm and 10,000 baht for a large firm. The fixed fees from the industrial sector then amount to 0.74 million THB. The second option is that the large factories pay both a fixed fee and a variable fee. In addition to a fixed fee, large firms will be charged 1,500 baht per ton of BOD discharged. All firms are assumed to discharge according to effluent standards set by DIW. If a variable fee for BOD is 1,500 baht, the revenue that could be collected from the industry is 1.195 million baht. This based on the assumption that pollution is reduced by 70%.
Tax revenue for the non industrial sector is also estimated on the basis of BOD discharge (calculated from the formulae given by PCD) for point source polluters under NEQA. The list of enterprises was given by the local governments. Since the data does not allow the separation of small and medium firms, smaller firms are assumed to pay a fixed of 2,000 baht. It should be noted that markets, pig farms and schools are important sources of pollution. The estimates are given the assumptions of firms’ behavior that the tax could reduce BOD loads by 70% (and therefore the revenue is smaller). The estimate under the variable rate of 1,500 THB per ton of BOD is given in Table 7.3. The amount of revenue from the variable fees is estimated based on the assumption that the amount of total discharged would be reduced by 70 % if the variable is imposed. The total fee collected from the industry outside industrial estate is 1.195 million baht. This is a low estimate because most of the large firms are in the industrial estates
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Table 7.3 Estimate of water pollution tax revenue from factories in Rayong Type of Fee Firm Size Fee Level
(baht) No. of Firms (Total = 220)
Revenue Total Revenue
Fixed Fee Small 1,000 121 121,000
740,000 Medium 3,000 53 159,000 Large 10,000 46 460,000
Variable Fee Large 1,500 46 3,051,579
915,474 With 70% reduction 915,474
Total 1,195,474 Source: Rayong Provincial Industrial Office, 2007 Tables 7.4 and 7.5 provide a comparison of estimated revenues with existing revenue sources of the local government. It is apparent that the lowest estimated revenue of water pollution tax is slightly less than Land Development Tax. Table 7.4 Revenue estimates from non-industrial pollution in Thedsaban Nakhon Rayong
No.
Revenue from Fixed Fee
Revenue from Variable Fee
2000 1500
Condo* 95 68,000 13,771
Hotel* 32 60,000 43,688
Shopping Mall* 6 8,000 22,466
Hospital** 5 0 71,728
School** 70 0 261,983
Marktet** 14 0 749,378
Spa** 2 0 2,633
Pig Farm** 12 24,000 369,912
Total 236 160,000 1,535,558
With 70% reduction on revenue from variable fee 460,667
Total revenue 620,667As % of the total revenue of Thedsaban nakhon Rayong 0.3%
Sources: * = data from Nakhon Rayong Municipality, 2007 ** = data from PCD, 2007
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Table 7.5 Tax Revenue of Thedsaban Nakhon Rayong
Amount (baht) %
Building and Land Tax
32,544,630.02 17.0%
Land Development Tax
984,773.80 0.5%
Sign and Board Tax
6,415,176.60 3.3%
Slaughter Tax
230,405.00 0.1%
Total Locally Collected Taxes 40,174,985.42 21.0% Surcharge and Centrally Collected
Taxes 151,361,665.36 79.0%
Total 191,536,650.78 100.0%Source: Nakhon Rayong Municipality, 2007
On the basis of this case study, the following conclusions and recommendations could be made:
1) It is proposed that the local government should be the tax collector
of non industrial pollution sources because it has in place a relevant data base, a monitoring team for both environment and tax purposes. On the basis of the size of estimated revenue, there is also a sufficient incentive for local government to be a pollution tax collector.
2) For large industrial point sources, DIW and PIO have more relevant
database and the Provincial Excise Office is a more appropriate tax collector with technical and monitoring support from DIW or PIO. Industrial estates should be treated as a factory and the wastewater discharge from an industrial estates’ treatment plant should be monitored by PIO.
3) Substantial capacity increasing and upgrading will have to be given
to PIO, DIW, the Sanitation Health and Environmental Section of local governments both in terms of number of staff, technical skills related to water pollution control and equipment and skills for handling common database. As far as laboratory tests are concerned, outsourcing to commercial lab and university is possible. The Regional Centers of DIW that have good laboratory facilities could consider the option of transforming themselves into a commercial operation.
4) A shared data base is needed to ensure transparency, efficiency
and completeness of the collection system.
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5) On the basis of the knowledge gained from the case study a tax collection and auditing system is designed and is to be presented in the following section of this study.
VIII. CONSULTATIVE MEETINGS
During the implementation of this study, over 800 representatives of local and central government, private sector and development partners, were consulted in 27 meetings and interviews. Four large consultative meetings were held in accordance to the requirements of the TA. The first meeting was with 30 mayors or their representatives of large provinces. The second consultative meeting, with 120 participants, was held in Rayong to present the initial tax design proposal and estimates of the revenue with the governor, the private sector, representatives from government agencies and local governments. The third meeting, with 190 participants, aimed at providing first hand information to ministries that are likely to be the co-sponsor of the decrees under the Act. The fourth meeting was held in December 19, 2007 and was attended by 220 participants.
Annex I lists the major four meetings and the number of people participating in the four meetings. The following are the more frequently voiced concerns and suggestions from the meetings.
• There was a concern that the proposed fiscal package should involve both tax
and sufficient incentives and should not to penalize better environmental performers. The package of tax and incentives should support current initiatives on wastewater treatment investments of local governments and the private sector;
• Tax on tourists is welcome if it is disbursed to local governments. Some local
governments earn substantial tourism revenue for the country, but the budget allocated to the municipality for environmental management is very small. In such province, wastes management resulting from tourism activities has become considerable budgetary burden for local governments;
• The EI Law could include measures that deal with big and sudden
environmental shocks and disasters such as oil spills as well as environmental impacts that are incremental but cumulative and long lasting. Some insurance system should be incorporated. Damage valuation and compensation should also be incorporated in the EI law. In awarding compensation, long-term environmental effect should be taken into account;
• There was a concern from the private sector and public agencies that
economic instruments are not effective in improving the environment and end up as a revenue raising device;
• An option of charging water pollution fees with water use fees should be
considered at least for households;
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• Attention should also be paid to water consumption by industry. Tax or charge should be introduced on the amount of water consumed. It would be more practical to include the charge in water bills and let the municipal and provincial waterworks authorities collect the fee together with water consumption charge;
• Severe criminal sanctions are of little value because there have hardly been
cases where factory owners are penalized for releasing pollution in violation of laws;
• For non-industrial point sources which are liable to pay pollution tax, some
sizes of point sources under MONRE notifications are too big. All residential buildings and condominiums with 80 units and over should be targeted. The law should specify the rate instead of leaving discretion to individual local governments. All point sources wherever the location should pay the same rate;
• Local government representatives showed substantial interests in using other
various economic instruments. They wanted to be given power impose product surcharge on certain products, such as plastic bags;
• Since pollution is, by and large, area-based, pollution tax collected should be
regarded as local governments’ revenue instead of being directed into central government fund. Once the tax is deposited with the central government, it becomes very difficult for local governments to access the money;
• Local governments have different levels of capacity. Some have more
capacity than others. NEF has played little role in capacity building. Capacity building for local governments is important. Environmental complaints are usually filed at local governments and it usually takes some time before a central government agency acts. Therefore a better approach is to decentralize power to local governments, while central government agencies play the role of technical support provider;
• An Environment Fund should be established separately from the NEF, and
allows more participation of local governments in the management of the Fund;
• There should be an agency set up, comprising representatives of all local
governments in the province, plus some impartial third parties to administer the fund. The money should not go to the provincial administrative organizations or be administered by the provincial governor. The pollution tax system should incorporate some automatic disbursement mechanism of tax revenue to the areas where pollution intensity or the amount of variable fee is high. Fund allocated to local governments should not be in a fixed proportion. There should be some flexibility depending on the impact caused to each administrative area. Local governments directly affected should be allocated more funds than others. The long-term environmental impact to some localities such as Mabthaput in Rayong should be taken into account;
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• The Fund manager should be more proactive and provide support to local governments. The Fund Committee for each account should include representatives of municipalities, Tambon administrative organizations, BMA, and Pattaya. The law should provide for the qualifications of the fund manager and his or her team to avoid conflicts of interest;
• It should be possible that apart from waste treatment, the Fund could be used
for cleaner production technology which saves the environment or construction of central slaughter house;
• Government regulations concerning recruitment of human resources are an
obstacle for the capacity building of local governments. For instance, they allow recruitment of only personnel with a bachelor degree for a lowly paid technical job. The local government needs some flexibility regarding the rates of remuneration in order to employ and retain good technical people;
• There was a concern that the attempt to implement economic instruments for
environmental protection should not lead to oversized government and there is a need to avoid conflicts of interest and to design a system with appropriate check and balance.
IX. RECOMMENDATIONS
Environmental degradation has imposed significant costs to the country and
the trend is rising. The current economic instruments in use are related to resource extraction rather than for environmental protection and the main economic instrument for environment protection is user charge. It is time that more economic instruments be introduced to strengthen and to initiate comprehensive environmental management for Thailand.
We therefore propose:
(1) A framework law which would encompass a menu of economic instruments to address the various pollution issues in Thailand and enable different ministries to implement the economic instruments according to their mandate. This framework law would also provide the institutional framework for determining appropriate economic instruments for different purposes and the administration of funds derived from the use of particular economic instruments; and
(2) A Royal Decree as a subordinate law to implement water pollution tax under
the Act. The Decree would stipulate the tariffs, mechanism for and process of tax collection.
These two draft legislative documents written in the Thai language are also
submitted with this report.
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In this chapter, we highlight the main features of the two documents and the corresponding institutional arrangement and implementation schedules and a supporting capacity building program.
9.1 The Act on Economic Instruments for Environmental Management (EI Act)
This framework law is designed to be broad in scope covering major types of
economic instruments sufficient to ensure a comprehensive management of different types of environmental problems. The Act on Economic Instruments for Environmental Management, to be called the EI Act in short, can be considered as a legal innovation for the following 3 reasons. First, it is an integrative law in the sense that a number of ministries will have to work under the same law. Secondly, it is the first law that empowers local governments to tax and keep the larger proportion of the revenue and remit a minor proportion of the revenue to the Fund. Thirdly, it allows direct private stakeholders participation in the administration of tax revenue that is earmarked for a common fund.
This legal innovation also has several advantages. First, it encourages
integrated management among various government agencies. It requires ministries to integrate their activities and provide interactive check and balance. These various agencies also act as each other’s catalyst. Secondly, it strengthens the power of local governments to tax and use the proceeds to manage its own environmental affairs. This is consistent with the decentralization principle. Thirdly, it provides a venue for stakeholders’ participation in deciding how the tax revenue can be used directly to redress environmental problems prioritized by them.
There are also challenges associated with the innovation. First, it requires
salesmanship on the part of the MOF/FPO to act as the promoter of the Act. Secondly, a strong inter-ministry core team is required to drive the Law to be fully effective. Thirdly, there is a need to set up a data base system that helps maintain system efficiency as well as good governance. These challenges are well recognized and supporting measures are incorporated in the capacity building plan detailed below.
The following section briefly outlines the main features of the EI Act.
9.1.1 Provisions for the use of various economic instruments
The Act provides for a variety of economic instruments which can be utilized
by different government ministries for environmental purposes. They are as follow:
(1) Environmental Tax; (2) User fees or charges for pollution management; (3) Product tax and product surcharge; (4) Performance bonds; (5) Tradable permits; (6) Subsidies and other support mechanisms; and (7) Other economic instruments as determined by the EI Committee.
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We provide below details for each instrument. Environmental tax 1. All polluters, (defined by the Act to include all point source polluters under the
NEQA, the Factory Act, and the Public Health Act) are liable to pay pollution tax. The rates of taxes, rules, terms, conditions and mechanism for tax collection are to be prescribed by a Royal Decree. The amount of tax can be assessed according to the unit of pollution discharged, the toxicity of the pollutants, and the carrying capacity of the receiving environment in a particular geographical area;
2. The responsible ministries, by recommendation of the EI Committee (see
9.1.2), are authorized to issue ministerial notifications to specify the types and sizes of point source polluters which are subject to paying pollution taxes. MOI may propose the categories, types, and sizes of industrial plants which are subject to paying pollution tax. This includes all central wastewater or waste treatment facilities operated by industrial estates and industrial zones. Similarly MONRE may propose the types and sizes of pollution point sources which are subject to pollution taxes;
3. The Excise Department is assigned to collect pollution tax from industrial point
sources; 4. Local governments, with technical support from PCD, will be responsible for
collecting pollution tax from other point sources under NEQA, the Public Health Act, and other laws governing activities impacting the environment. According to the Royal Decree to be described below, these include type 1 and type 2 industrial plants, point sources as specified by MONRE ministerial notifications, activities injurious to health under the Public Health Act and other activities causing adverse environmental impact under other laws;
5. In the case where polluters are already paying wastewater treatment charge
for the services provided by local governments or licensed private or state enterprises, including those operating in industrial estates and industrial zones, they would be exempted from the duty to pay water pollution tax; and
6. Responsible ministries may propose to the EI Committee that an eco-tax be
levied from those benefiting from the use of natural resources and environment. In the future, a tax on tourists may be initiated under this scheme.
The rates of taxes, rules, terms and conditions, and mechanism for the
levying of all environmental taxes will be prescribed by a royal decree.
The management and allocation of revenues from environmental taxes are to be determined by the Royal Decree concerned. In principle, an appropriate amount of revenue is to be allocated to relevant agencies to enable them to implement the system and to support capacity building of these agencies for this purpose.
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User fees and charges 1. Local governments in charge of operating a central wastewater or waste
treatment facilities or public services have a duty to collect fee or charge from polluters for the delivery of wastewater or waste treatment or other public services. The terms and conditions and the rate of charge or fee are to be prescribed by the relevant local governments’ by-laws or responsible agencies’ regulations;
2. Local governments have the power to issue by-laws to prescribe fee for the
services of collection, transport, and disposal of solid waste and other waste as may be provided by other laws. In setting the fee, due consideration must be given to the need to recover cost for the delivery of such services; and
3. The service fee collected by local governments for the delivery of
wastewater treatment, solid waste management and other public services are deemed to be the revenue of the local governments concerned.
Product Tax and Product Surcharge 1. The responsible ministries may propose that tax be levied on products which
are hazardous substances under the hazardous substances law; 2. The responsible ministries may propose to the EI Committee to levy product
surcharge on consumer products which cause adverse effect on the environment when used or discarded by consumers;
3. Tax and surcharge on products under 1 and 2 are to be levied from
producers, importers, or consumers as appropriate. The rate of taxes and surcharge, rules, terms and conditions, and the mechanism for the collection of product tax or product surcharge will be prescribed by a royal decree;
4. The types of products to be subject to tax or product surcharge are to be
determined by the relevant ministerial notifications issued by the responsible ministries;
5. Product tax or surcharge must be levied from polluters. Where pollution is
caused by the production of such products, tax or surcharge would be levied from producers or importers. On the other hand, where pollution is caused by consumers’ use, the tax or surcharge would be levied from consumers at the time of purchase of the relevant products;
6. The agencies responsible for the collection of product tax or surcharge would
depend on whom the product tax or surcharge is levied from. Where it is levied from producers and importers, the Excise Department and the Custom Department respectively would be assigned the task of collecting the product tax or surcharge. In the case where it is levied from consumers, the Revenue Department would be responsible for its collection;
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7. Revenue from product tax or surcharge is to be directed to the Fund and earmarked for the management of waste products; and
8. Responsible ministries may propose a strategic plan and a work plan to
implement a deposit-refund or buy-back scheme for waste consumer products, supported by revenue generated from the use of product tax or surcharge.
Performance Bond Firms, state enterprises, governmental and non-governmental agencies
engaging in the following activities which may cause serious impact on the environment or human health have a duty to deposit fund, bank guarantee, or performance bonds to ensure their compliance with relevant environmental regulations and standards and to compensate or redress damage to the environment or human health resulting from the conduct of such activities:
(1) Mining activities under the Minerals Act; (2) Waste treatment and disposal; (3) Disposal of solid waste and other waste; (4) Land digging and land filling activities; and (5) Other activities potentially causing serious environmental impact as
determined by the EI Committee The responsible ministries upon recommendation of the EI Committee have
the power to issue ministerial notifications to prescribe rules, terms and conditions, and procedure for the deposit of fund, bonds and bank surety. In the case of activities (3) and (4) which fall under local governments’ jurisdiction, the power to prescribe these matters would rest with the local governments concerned through the issuance of by laws. The deposit of fund, bonds, or bank guarantee must be made prior to the commencement of the activities. Upon the completion of the activities in compliance with environmental laws and regulations, the entities making the deposit would be entitled to the return of the deposits with interests. On the other hand, if they fail to fulfill their legal obligations, they would have their deposits forfeited wholly or partially in proportion to the impact or damage which has been caused.
Tradable permits For the purpose of limiting pollution load or equitable use of natural resources
in any particular area, the EI Committee may authorize the responsible ministries to implement a tradable permit system in the use of natural resources and pollution discharge. Responsible ministries may at their own initiative propose to the EI Committee for approval in the implementation of such system in the performance of their functions. The rules, terms and conditions, and procedure for the implementation of a tradable permit system will be prescribed by a royal decree.
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Subsidies, grants, loans, and other favorable treatment For the purpose of supporting and creating incentives for pollution control and
improving environmental management, responsible ministries may introduce various supportive measures as follows:
(1) reduced or differentiated excise taxes for products that are
subject to excise taxes; (2) reduced custom duties or tax exemption for wastewater or waste
treatment equipment or equipment embodying certain advanced or clean technologies;
(3) accelerated depreciation schedule for pollution control equipment;
(4) grants or low interest loans for resource conservation activities, such as renewable source power generation, energy-saving measures, and collection of used or discarded consumer goods;
(5) reduced pollution tax for entities or individuals who have treated their pollution discharge above the effluent or emission standards prescribed by law;
(6) financial assistance to farmers to engage in recommended practices in environmental sensitive areas; and
(7) Other supportive measures for natural resources and environmental conservation.
Where there are existing laws which give power to government ministries to
implement the above supportive measures, the government ministries concerned may implement such measures in accordance with those other laws. Where there is no law which give them the power, government ministries may initiate the use of such measures under this law. The rules, terms and conditions, and procedure for implementing respective supportive measures will be prescribed by a royal decree.
9.1.2 Institutional Framework for the determination of economic
instruments policy The Act provides for a central governing body to oversee and supervise the
implementation of economic instruments. A national committee called “the Committee on Economic Instruments for Environmental Management Policy” (hereafter called “the EI Committee”) is to be established. The EI Committee is chaired by the Minister of Finance (MOF). Other committee members consist of the permanent-secretaries of the Ministry of Industry (MOI), Ministry of Natural Resources and Environment (MONRE), Ministry of Finance (MOF), Ministry of Interior, and Ministry of Public Health (MOPH); representatives from the private sector concerned, namely the Federation of Thai Industries, and the Thai Chamber of Commerce; representatives from local governments, namely the Provincial Administration Organization Council of Thailand, the National Municipal League of Thailand, and the Tambon Administrative Organization Council; experts or academics specialized in environmental economics; and the Director of FPO as member and secretary to the EI Committee.
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The EI Committee has a wide range of power and duties, including the following major functions:
(1) Set policies and plans for the use of economic instruments; (2) Approve the strategic plans submitted by the fund managers for the
disbursement of the Fund;
(3) Approve the proposal submitted by relevant ministries for the use of economic instruments for environmental management;
(4) Recommend and approve royal decrees, ministerial regulations, and
ministerial notifications submitted by the relevant ministries;
(5) Recommend and approve the types of polluters, products, and activities to be subject to the use of economic instruments;
(6) Determine the range of taxes and fees to be levied under this law;
(7) Perform any other functions for the implementation of this Act. Figure 9.1 depicts a process whereby a government agency can sponsor a
draft decree. The sponsoring agency will have to submit the decree through the EI Committee for Cabinet approval. Once the Cabinet has approved the decree, responsible ministries will have to announce ministerial notifications or regulations to support the decree.
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Figure 9.1 Institutional Arrangement
9.1.3 Management of revenue from taxes and fees It is expected that the major revenues under this law will be generated by
pollution taxes and product tax and surcharge after allocation to responsible government agencies and local governments for the implementation of the pollution and environmental tax system.
The following two options have been considered for the management of
revenue generated under this law: 1. Transferring the revenues into the National Environment Fund (NEF) of
NEQA and earmarking them in separate accounts to ensure access of the money for specific purposes. This option would entail a major reform of the NEF which has been under criticism (see 5.3.3). It has been suggested that NEF be given a legal entity with more power delegated to the NEF manager to administer the fund according to set targets and objectives. A financial institution should be contracted as a manager to manage the Fund professionally, including appraising and approving projects of the size not exceeding a specified limit. Alternatively, the structure of the NEF committee should be reformed to include more non-governmental members and other stakeholders, such as representatives from industry, local governments, academics and NGOs.
Responsible Agency initiating a
Decree Inter-ministry Task Force FPO
Secretariat
Committee for EI Policy
Cabinet Approval
MOF Ministerial regulations
on rates and fees
Responsible Ministries Ministerial notifications
on technical issues
Responsible Ministries Ministerial
notifications on technical issues
Draft Decree
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Despite the need to reform the NEF, it is unlikely that NEQA will be amended in the near future to accommodate any of the proposed changes above. Although the NEF office has proposed that the office should be given a legal entity, there has been little other change envisaged for the reform of the NEF. Under thesecircumstances, it is not possible to recommend transferring revenue generated under this new law into the NEF.
2. The second option is to establish an Environmental Tax and Charge Fund in the Ministry of Finance (hereafter called “the Fund”). The revenues under the Fund will be earmarked in separate accounts according to their sources and objectives. For instance, revenue from pollution tax should in principle be expended for the purpose of increasing polluters’ capacity to reduce pollution discharge and to invest in clean technologies. In addition, revenue from product surcharge should principally be used for setting up a scheme for buying back or collection of waste consumer products in order to promote waste reduction, recycling and proper management.
It is recommended that the second option be taken. To facilitate the efficient
management of the Fund, the Act provides that the Fund have a legal entity and that the proceeds from its operation not be directed to the government budget. The law also stipulates a broad framework for the disbursement of the Fund as follows:
(1) To support and provide loans or grants for projects proposed by
government agencies or the private sector for the purpose of pollution control or reduction and environmental clean-up;
(2) To support research and development projects concerned with
pollution and natural resources management as proposed by government agencies and environmental non-governmental organizations;
(3) To support management of waste from consumer products,
including setting up a collection or buy back system for waste from consumer products;
(4) To provide subsidies or loans for industries or activities relating to
waste reuse, recycling and recovery; (5) To provide financial assistance to activities or projects proposed by
responsible government agencies concerned with natural resources and environmental conservation;
(6) To provide assistance to people whose health and livelihood are
affected by environmental changes caused by industrial pollution and to support environmental clean-up;
(7) To expend on the administration of the Fund; and (8) To support other activities relating to natural resources and
environmental management as determined by the EI Committee.
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(i) Institutional arrangement for the administration of the fund The Fund shall be administered by a Fund Committee chaired by the
permanent secretary of MOF. Other committee members consist of the Director-Generals of DIW and PCD, the Secretary-General of Office of Natural Resources and Environmental Policy and Planning and not more than 10 qualified expert members, among them are three representatives from the manufacturing industries, two from the service industries, three from local governments, two experts from the financial sector, one representative each from the Association of Municipality League, Association of Tambon Administrative Organizations, the Bangkok Metropolitan Area, and a financial management expert. The Director of Fiscal Policy Office is a member and secretary to the EI Committee.
A specialized financial bank or institution or a legal entity with expertise in
financial management will be contracted as manager for each account under the Fund. The manager will be responsible for preparing a five-year strategic plan, an annual operational plan and budget to be submitted for approval by the Fund Committee. The five-year strategic plan must also be submitted to the EI Committee for final approval.
After the strategic plan, the operational plan and the budget have been
approved by the respective governing bodies, the manager will be responsible for soliciting, selecting, appraising, and approving proposals submitted to request support from the Fund. The manager also has a power to approve project proposals within a specified limit as determined by the Fund Committee, e.g. not exceeding 10 million Baht.
(ii) Auditing, reporting, and evaluation of the Fund Each account under the Fund is subject to internal and external financial
audits. The fund manager of each account is responsible for preparing a balance sheet and a report on activities conducted under each account at least once a year.
The Fund is also subject to an annual evaluation conducted by an evaluation
committee appointed by the Cabinet on recommendation of MOF. The evaluation committee consists of seven experts specialized in financial matters and environmental management.
9.1.4 Sanctions and mechanism for compliance
(1) Those who fail to comply with the obligation to pay pollution tax, product tax or product surcharge are liable to pay an incremental fee of three percent a month calculated from the outstanding unpaid tax or surcharge. Failure to file tax forms or submission of false data which affect the correct tax assessment also render offenders a liability to fines twice and equal the amount of the due tax respectively;
(2) Like other laws, the Act also provides for criminal sanctions i.e. fine and
imprisonment in serious circumstances, such as intentional submission of false data for tax assessment, deliberate non-compliance with
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administrative orders, failure to pay tax or surcharge, and failure to deposit performance bonds; and
(3) Information disclosure, such as a system for disclosing information on the
rating of firms on their compliance with environmental standards.
9.2 Proposal for Water Pollution Management
Our findings confirm that industrial water pollution in Thailand is concentrated in a very limited number of provinces, and is produced by a very limited number of industrial sectors. Therefore, industrial pollution in Thailand could be significantly reduced by targeting these sectors and focusing the application of economic instruments or other regulatory tools as well as monitoring and enforcement resources in a limited number of provinces and/or a limited number of industrial sectors. Our review of management responsibilities has found that there is a relatively sufficient database only for water pollution and regular monitoring is carried out only for water pollution control.
Based on the above findings, it is recommended that water pollution should
be the primary target for applying pollution tax in both industrial and non-industrial sectors.
9.2.1 Tax Proposal
Our proposed tax design is based on 5 key principles namely, effectiveness –
self-sufficiency, fairness, simplicity and feasibility. Our tax package comprises the following key components:
(1) Target pollutants and target polluting sources We propose two pollutants, BOD and TSS for the initial phase for water
pollution tax. We recommend the following industries to be the first industries to be charged water pollution tax. These are:
BOD TSS
Pulp and paper Iron and steel Sugar Pulp and paper Fish products Rubber products Distilled spirits Dairy products Industrial chemicals All point sources are required to pay a tax on the targeted pollutants, namely
BOD and TSS. These can be grouped into 2 categories as follows: Category 1: Type 3 factories. DIW and the Excise Department are
responsible for the implementation of the tax on Type 3 factories.
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Category 2: All other point sources. Local governments with the support of PCD are responsible for implementing the tax on all other point source polluters which include the following:
● Type 1 and type 2 factories; ● Controlled point sources specified by MONRE; ● Establishments and activities requiring a license under the
Public Health Act and other law.
(2) Fee model
We recommend a tariff system which would consist of a fixed fee and a variable fee. The fixed fee or administrative fee is designed to cover monitoring costs by regulators. This component of the tax aims to achieve the self sufficiency principle outlined earlier. The fixed fee should vary according to factory size. A variable fee which is calculated by multiplying pollution fee per unit of pollution with quantity of pollution is designed to create incentives for pollution reduction and to achieve the principle of effectiveness. The more pollution a polluter discharges, the higher the payment.
We propose two options for fee models. Option 1 is one where a fixed fee for
the three sizes (Small, Medium, and Large firms) is 1,000, 3,000 and 10,000 THB respectively. In addition, large firms will have to pay a variable fee of 1,500 THB per ton of BOD and TSS. The second option is to charge a fixed fee to small and medium firm at the same rate as option 1, but for the large firms, only a variable fee of 2,500 THB per ton of BOD and TSS is charged.
The advantage of the first option is that a fixed fee generates a constant stream of revenue which would enable advanced planning for revenue use and disbursement. In the case where the large firms or type 3 firms are unable to quantify BOD loads, we propose, for the initial phase, the use of a “presumptive charge” where all firms’ discharge are presumed to be at the effluent concentration standards and charged accordingly. If a firm believes that it pollutes less than the prescribed standards, it would have to demonstrate to verify the claim. If it is successful, a lower level of pollution will be used to calculate fee payment For firms that pollute more than the concentration standards, they may enjoy this grace period until regulating agencies have the capacity to monitor pollution discharge, preferably not longer than three years since the tariff is adopted. In this way, the use of presumptive charge is a starting point. As capacity increases, more and more factories which use the presumptive charge will move into the category of paying for actual pollution. Because of its simplicity and feasibility, this system can be implemented right away without having to wait until the coefficient for each sector is developed.
We propose that the second option should be selected. The advantage of adopting this option is that there is only one fee for each category which is easier for tax administration and it aims directly at pollution reduction. However, given existing implementation capacity, it is recommended that initially only a fixed fee be applied to small and medium firms, and that the variable fee be initially applied only to large firms.
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Type 1/2 Firms & Non-Industrial
Other Enterprises
LGU
The Fund
Type 3 Firms
Excise 3%
MOI
Tax
25% 72% 25%
DIW PIO
PCD
70%
LGU
5%
9.2.2 Tax collection process
Tax collection is to be implemented by the Excise Department for large Type-3 industrial factories if they are located in Bangkok or by Provincial Office of the Excise Department if the factories are outside Bangkok. The remaining types of industrial firms (Type 1 and 2 factories) and non industrial polluting sources are to be reported to the local government in the area where the facilities are located. Local governments are particularly suitable as tax collectors because they have detailed tax maps, names and address of polluting sources in their jurisdiction. They also conduct local survey each year to update their land and building and sign taxes.
As tax on pollution is area or factory based not headquarter based, each
factory will have to register with its corresponding tax agent. Firms paying wastewater treatment charges to industrial estates or municipalities are exempt from water pollution tax. Pollution taxes will however be collected from entities providing wastewater treatment services such as central wastewater treatment plants in industrial estates.
The revenue from water pollution tax should be allotted to the Fund (Figure
9.2). The Fund is to be disbursed according to merits, i.e. the amount of pollution reduced. Priority sectors and activities could be determined by the EI Committee and could be adjusted periodically to be consistent with changing situations.
Figure 9.2 Tax collection and reimbursement
For the industrial sector, firms pay pollution tax once a year. For the non-industrial sector, water pollution tax could be collected at the same time as the Building and Land taxes are filed, which is once a year.
Figure 9.3 depicts the process of tax collection by the Excise Department. Type 3 factories will file pollution self assessment forms with reported amount of discharged pollutants and estimated tax to DIW. Factories that do not possess laboratory facilities and ability to measure and estimate pollution loads could be assumed to discharge BOD and TSS at the standard rate of concentration. After DIW has examined the form, it will validate appropriate tax estimates and invoice or
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inform the factory to proceed to file its tax forms to the corresponding tax agent. The process of filing and invoicing should be conducted on line. If DIW disagrees with reported estimates, firms could file complaint to the Appeal Committee to start a process of dispute settlements where a third party laboratory that has registered with DIW could take part. If a solution cannot be reached, the dispute will be settled by the Tax Court. The Excise Department and its Provincial Office will be responsible for follow up on non paying factories.
Small and medium non industrial polluting sources and type 1 and 2 factories
will pay a fixed fee to local governments (Figure 9.4). Large non-industrial enterprise will file pollution tax forms with reported amount of discharged pollutants and estimated tax to local governments who will cross check the estimates with the formulae provided by PCD. Should tax disputes arise, these would be settled by the Appeal Committee and finally settled by the Tax Court. Local governments would be responsible for follow-up on non paying enterprises.
The tax proposal and the mechanism for taxation described above are
included in the draft Royal Decree on Pollution Tax on Effluent Discharge on BOD and TSS (see below).
Figure 9.3 Process of tax collection from Type-3 factories: Variable Fee
LLaarrggee FFiirrmmss SSeellff--aasssseessssmmeenntt ooff wwaasstteewwaatteerr ddiisscchhaarrggee//
EEssttiimmaattiioonn ooff ppoolllluuttiioonn ccoonncceennttrraattiioonn
DDIIWW//PPIIOO AAsssseessss vvaalliiddiittyy ooff rreeppoorrtt
IInnffoorrmm EExxcciissee ddeepptt..
IInnffoorrmm ffiirrmmss
AAppppeeaall CCoommmmiitttteeee
NOT Approved
Approved
OK EExxcciissee ddeepptt.. FFoollllooww--uupp//
FFiinneess
Monitoring Collection
DATABASE
Tax NOT collected Tax Collected
Tax Court
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FFiirrmmss
LLaarrggee SSmmaallll// MMeeddiiuumm
Fixed Fee
OK LLGGUUss ffoollllooww--uupp
FFiinneess
Monitoring Collection
DATABASE
Tax NOT collected Tax Collected
PPCCDD pprroovviiddeess tthhee lliisstt
LLGGUUss vveerriiffiieess
Self-Report Variable Tax Est.
Figure 9.4 Process of tax collection from Type1-2 factories and non industrial enterprises
9.3 The Royal Decree on Pollution Tax on Effluent Discharge of BOD and TSS
As the Act on Economic Instruments for Environmental Management only
provides a framework for the use of relevant economic instruments, a Royal Decree, as a form of subordinate legislation, is needed to implement each of the selected instruments. As an example to render pollution tax operational, a Royal Decree on Pollution Tax on Effluent Discharge of Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS) has also been prepared under this TA in addition to the Act. The choice to tax BOD and TSS is based on feasibility consideration, taking into account the available data and the capacities of the governmental agencies concerned, as well as of local governments. While the methods and rates for taxing other water pollutants such as heavy metals are different, international experiences have shown that the modalities and rates for taxing BOD and TSS are normally the same. After a series of consultative meetings with the industry, government agencies concerned especially DIW and PCD, and local governments, it was decided that, as a first step, a Royal Decree to tax BOD and TSS should be drafted.
The key features and substances of the Royal Decree can be summarized as
follows: Point sources liable to pay water pollution tax All point sources are required to pay a tax on the targeted pollutants, namely
BOD and TSS. These can be grouped into 2 categories as follows:
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Category 1: Type 3 factories. DIW and the Excise Department are responsible for the implementation of the tax on Type 3 factories. Category 2: All other point sources. Local governments with the support of PCD are responsible for implementing the tax on all other point source polluters which include the following
● Type 1 and type 2 factories; ● Controlled point sources specified by MONRE; ● Establishments and activities requiring a license under the
Public Health Act and other laws. Each category of point sources is classified into three sizes, each subject to a
different rate of pollution tax: ● Small firms pay a fixed fee of 1,000 – 3,000 baht/year; ● Medium firms pay a fixed fee of 3,000 – 10,000 baht/year; ● Large firms pay a variable fee of 2,500 – 10,000 baht/ton of BOD and TSS MOI, on recommendation of the EI Committee, will issue ministerial
notifications specifying the types and sizes of type 3 factories to be subject to pollution tax. For other point sources under the jurisdiction of local governments, MONRE, by recommendation of the EI Committee will be responsible for issuing ministerial notifications specifying types and sizes of point sources to be subject to water pollution tax.
Type 3 factory entrepreneurs who have paid wastewater treatment fee to
central wastewater treatment facilities in industrial estates and industrial zones are exempt from paying water pollution tax under this Royal Decree. In such cases, owners or operators of central wastewater treatment facilities are liable to pay water pollution tax. Similarly, all other point source polluters which have already paid wastewater treatment fee to central wastewater treatment facilities operated by local governments are exempt from paying water pollution tax.
For the purpose of implementing water pollution tax under this Royal Decree,
all type 3 factories and point source establishments which are liable to paying the tax are required to install a meter for wastewater discharge.
Mechanism for implementing water pollution tax ● Type 3 factories are required to register with the Excise Department or its provincial offices depending on the location of their industrial establishments. DIW is required to provide the Excise Department with the data from their register of type 3 factories while the Excise Department is responsible for setting up a database of type 3 factories liable to water pollution tax;
● All other point sources must register with the local governments within whose jurisdiction their establishments are located;
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● Entrepreneurs of type 3 factories have to file an annual self assessment report of their effluent discharge to DIW for verification. For large firms which are required to pay a variable fee, their self assessment reports should be filed periodically to enable reliable assessment of their effluent discharge. After their self assessment reports have been verified by DIW, they then file a tax form to the Excise Department or its provincial offices in order to pay tax. A copy of DIW tax assessment is also to be sent to the Excise Department;
● Entrepreneurs of other point sources are required to file a tax form to local governments for payment of water pollution tax. For large point sources (e.g. such as 500-room hotels), they are required to pay a variable fee per unit of pollutants;
● All tax forms must be filed for tax payment within March of each year. Appeal procedure
Where there is disagreement over tax assessment, those subject to water pollution tax under this decree may take the following procedure.
Type 3 Factories a. Type 3 factory entrepreneurs have a right to appeal to the Appeal
Committee on Pollution Tax within 30 days from the date they are notified of DIW’s tax assessment;
b. The Appeal Committee under (a) is chaired by the permanent secretary of MOI, other members include a representative each from DIW, Bureau of Water Technology and Industrial Pollution Management, Excise Department, Revenue Department, Office of the Attorney-General, and the Council of State. It has the power to uphold or overrule DIW’s assessment;
c. After notified of the Appeal Committee’s decision, type 3 factory entrepreneurs who are dissatisfied with the decision still have the right to appeal the case to the tax court.
Owners or operators of other point source establishments Owners or operators of establishments liable to pay water pollution tax to local
governments who disagree with local governments’ tax assessment may appeal according to the following procedure:
(1) They have a right to appeal to the Provincial Appeal Committee on
Pollution Tax where their establishments are located, or in the case where the establishments located in BMA, to the BMA Appeal Committee on Pollution Tax within 30 days from the date they are notified of the local governments’ tax assessment;
(2) The Provincial Appeal Committee in each province is chaired by the provincial governor. Other members consist of chairman of the Provincial Administrative Organization, chief of Provincial Excise
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Office, chief of Provincial Industrial Office and chief of Provincial Public Health Office, or their representatives;
(3) The BMA Appeal Committee is chaired by the permanent secretary of the Ministry of Interior. Other committee members are the director-generals of the Excise Department, DIW, PCD, Department of Health, Department of Local Administration, and the assistant governor of BMA;
(4) The Provincial Appeal Committee or the BMA Appeal Committee has the power to uphold or overrule local governments’ tax assessment. Owners or operators of pollution point sources who disagree with the Committee’s decision may appeal to the tax court for a final decision.
Monitoring and control To strengthen the implementation of water pollution tax and to monitor that
entrepreneurs provide accurate data for tax assessment, DIW and provincial industry offices have a duty to monitor type 3 factories’ effluent discharge. DIW may contract other governmental or non-governmental agencies which possess certified laboratories to carry out the task. Factories reporting false or incorrect information are liable to a fine equal the amount of outstanding unpaid tax and an additional fee of 3 per cent a month of the outstanding unpaid tax.
Likewise, local governments have a duty to monitor effluent discharge from
establishments located within their jurisdiction. They may contract other agencies, governmental or non-governmental, which possess certified laboratories to carry out the task. Where there are complaints about pollution from point sources, the pollution control officials under NEQA have the power to monitor and examine whether point source polluters covered by the Decree comply with prescribed standards or not and enforce the law in accordance with NEQA as well as inform the local governments concerned to take action accordingly.
Management of revenue In principle, the revenue from water pollution tax would be directed to the
Fund. However, part of the revenue should be allocated to responsible government agencies to support their implementation of the pollution tax system as follows:
● Revenue from tax collected from type 3 factories should be allocated as follows (Figure 9.2):
(1) DIW is to be allocated 25 per cent of the revenue to support the implementation of the tax system and its monitoring efforts;
(2) Three per cent of the total amount of collected tax must be allocated to the Excise Department to support their administration of the tax collection;
(3) The remaining revenue is to be directed to the Fund.
● Revenue generated from water pollution tax collected from all other point source establishments under local governments’ jurisdiction is to be allocated as follows to support responsible agencies’ implementation of the tax system.
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(1) Not more than 70 per cent is to be allocated to the local governments concerned. This allocated revenue must be used by local governments for the purpose of environmental management only. In addition, local governments are required to produce an annual financial report on the use of the fund and a state of the environment report. They may also use this fund to support the preparation of their local environmental management plan and the operation of central wastewater or waste treatment facilities under their responsibility; (2) Five per cent of the revenue is to be allocated to PCD to support their implementation of the system and provision of technical support to local governments; (3) The remaining revenue is to be directed to the Fund.
For the revenue directed to the Fund, it is to be deposited in an account
entitled “Pollution Taxation Account” under the Fund. The disbursement of the fund in the account is governed by the following criteria:
(1) To support or provide loans or grants for projects proposed by the
private sector which are related to pollution control and reduction, environmental clean-up and adoption of cleaner technology;
(2) To support pollution management projects proposed by the
government agencies concerned; (3) To support research and development projects proposed by
government agencies and the private sector; (4) To expend on the administration of the account; (5) To support or provide assistance to any other activities relating to
environmental management as determined by the EI Committee.
9.4 Responsibilities of Key Agencies
MOF
As the draft EI Act is an umbrella law that involves multiple agencies, the impact of the law will take full effect only if a sufficient number of instruments are adopted by other relevant agencies. MOF will have to take a number of steps to render the EI Act fully effective as follows:
1. MOF is to establish an Economic Instrument Unit (EI Unit) that is responsible for giving force to the draft law. An EI Unit with 5 staff members with at least one economic instrument specialist position (C8) should also be created. The Unit is to be the secretary of the Committee on EI policy. The responsibility of the Unit is to:
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- disseminate and propagate the draft law to relevant agencies; - initiate, co-ordinate and organize inter-ministry meetings that would
lead to a master plan that determines the schedule for the drafting and launching of new decrees;
- implement public relations campaigns for the general public, - co-ordinate training and capacity building programs and pilot
projects related to EIs; - provide a venue for solving of problems and constraints that may
arise from implementation of the EI Act; and - - monitor progress and report outcome of EI implementation to the
Director of the Fiscal Policy Office. 2. Dissemination or propagation of the EI Act to relevant agencies should be
undertaken in the form of focused group meetings. Key personnel (Strategic Planning Directors) from relevant ministries and departments should be invited to join the inter-ministry EI team or working group. MOF should encourage stakeholder agencies to delegate a focal point officer.
3. Prior to the enactment of the EI Act, the EI unit could undertake a project to
facilitate database establishment with key municipalities and the Excise Department in a number of provinces. The provinces to be considered include Bangkok, Samutprakan, Samut Songkhram, Rayong and other provinces where major polluting industries exist such as Khon Kaen and Kanchanaburi. The output of this project could be used in a nation-wide training program.
4. The EI unit will implement a public relations program which aims at educating
the public about the seriousness of environmental problems, impact on health, cost to the country and the need to step up environmental management through economic instruments.
5. The EI Unit will establish a web-based tax collection database system with co-
operation from key agencies (Table 9.1). The best tax code, however, is the same one that is used by the Revenue Department. The system will be transferred later to the Fund Office and is accessible by all stakeholder agencies.
6. The EI Unit in FPO will become a supporting secretariat for the EI policy
Committee. It will also be responsible for setting up the Fund Office and become an active coordinator between the Fund and the Committee.
7. The EI Unit could also prepare and issue an operation manual for agencies
involved in sponsoring a decree.
8. The Excise Department and its Provincial offices are the taxing agents of industrial water pollution from industrial point sources. The Excise Department
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and its Provincial offices will check to make sure that all firms in the list have registered. It will also be responsible for following up on tax payments. The Excise Department will have to report tax collection to relevant stakeholder agencies until the tax information system is on line.
Table 9.1 Database establishment
Responsibility
Collector Monitor
LGU Excise DIW PCD
1. Listing of Firms
- Type 3 Factories X
- Sources a/c to Public Health Act X
- Non-Industrial Sources X
2. List verification X X X X
3. Tax form /Code X X X X
MOI
1. Technical command and control responsibilities for industrial pollution control which complement and support the EI Act are based on the Factory act. Thus the Ministry of Industry continues to issue and monitor technical regulations as well as promotion of cleaner technology.
2. DIW would be responsible for determining the coverage of the taxable sub-sectors and DIW and PIO are to prepare a list of factories in the targeted industries classified by size and by province. Tentatively, the three sizes could be grouped according to their effluent discharge as follows:
S = 0-50 cubic meters M = 50-500 cubic meters L = 500+ cubic meters DIW will issue ministerial notifications on group size and at a later date could
also alter the size category as appropriate. The list of factories under each size category with supporting information on flow rate, discharged pollutants and the level of output and so on will be given to the Excise Department for tax collection and to FPO for database establishment. The list of firms should be updated as firms come to MOI for license renewal.
3. The division of responsibility between DIW and Provincial Industry Office remains unchanged from the existing arrangement. PIO monitors type 3 factories in provinces outside Bangkok.
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4. DIW should set up a self-reporting process including a self-report form, procedure of pollution monitoring under the new Act, estimation of pollutant concentration and so on. The form and process would be announced in ministerial notification support the Royal Decree on BOD and TSS.
5. DIW and PIO would provide their list of targeted firms, BOD loads and flow rates of large firms to the Excise Department and submit this information to FPO for establishing a common database system and as baseline information. There should be a continual updating of this list every year to take care of new entrants.
6. When tax collection commences, DIW would have to validate self report form, inform firms, inform tax collectors of its assessment, input self-reports in the database, certify labs/candidates for 3rd party settlements of dispute as well as continue to monitor and audit factories. 7. The task of monitoring and auditing wastewater is with DIW and PIO (or its certified labs if a part of this function has been outsourced). Both will make random check of quality of discharge. The auditing procedure is to be announced by DIW. 8. DIW should establish baseline data of large firms which will allow assessment of the effectiveness of the tax measure as well as a panel database to assess behavioral change of firms.
9. DIW could monitor tax payments from the report from the Excise Department in the initial phase and finally monitor tax collection online.
MONRE/PCD 1. PCD under MONRE is empowered by the EI Act to determine the
coverage of polluting sources to issue and monitor technical regulations, and to promote cleaner technology. PCD will have to prepare ministerial notifications on taxable point source polluters.
2. Technical command and control responsibilities for non-industrial
pollution management which complement and support the EI Act are based on NEQA, the Public Health Act and other legislation concerned.
3. PCD will update the list and location of non-industrial polluting point
sources. The list will be given to the Excise Department and to FPO for database establishment.
4. PCD will set up a self-reporting process including a self-report form,
procedure of pollution monitoring under the new Act, estimation of pollutant concentration and so on.
5. The main role of PCD will be to provide technical support to local
governments (LGUs), e.g. training for LGUs tax staff for calculating BOD loads
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for each polluting point source and issuing a monitoring and auditing protocol for LGUs.
6. Both PCD and the Regional Environmental Office would become advisors
and trouble shooters for LGUs. 7. MONRE could monitor tax payments through online tax information
system.
Local governments
1. Local governments are in charge of tax collection from Type 1- 2 industrial firms and all non-industrial enterprises which have been designated as point source polluters.
2. Two sections of the LGUs would be responsible for collecting tax and
auditing payments. The Finance Section which would be in charge of tax will have to be the registrar and will have to put up a list of taxable enterprises. This list should be compared with the list of factories provided by PCD and the list of those paying Building and Land Tax and Sign Tax to make sure that the list is as complete as possible. The section is also responsible for data entry and control.
3. LGUs will need to finance the training of their staff e.g. sending staff to
training sessions organized by PCD. 4. The Sanitation Section of LGUs would perform ground check to make
sure that these enterprises produce wastewater and is liable to waste water pollution tax. It is also a monitoring and auditing arm. The procedure for monitoring and auditing should be prepared and given to LGUs by PCD.
Table 9.2 Summary of the division of responsibilities of key agencies
Responsibility
Collector Monitor
LGUs Excise. DIW PCD
Finance Envi
I. Setting Database X X X II. Assessment of Tax Payment - Provision of Formulae X - Training X - Assessment of Payment X - Monitoring of Facilities X X - Handling of Self-report X X - Validations X X III. Collection of Tax Payment X X IV. Monitoring of Collection X X
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X. IMPLEMENTATION PLAN
In implementing the EI Act, three important considerations need to be noted: 1. Economic instruments are not the final solution to environment
problems. They must be used in an appropriate mix and appropriate timing with other instruments, namely social and legal instruments. For example in the case of water pollution, social instruments such as public relations campaigns may need to precede economic instrument to stimulate the awareness of the public on environmental impact on health. These will help reduce resistance and increase support for pollution tax. At the same time, command and control activities remains important as a complementary means for monitoring and auditing. Finally, the effectiveness of economic instruments also depends on how the revenue is used to reduce pollution.
2. For one type of pollution such as water pollution, there are many
sources of pollution (sectors) and different types of pollutants. Although some of them can share the same instrument, others may need a different type of instrument. For example, pollution from the overuse of agro-chemicals may be better handled by a product charge.
3. For one type of pollutant such as water pollution from BOD, different
economic instruments may be needed for different types of stakeholders. For example, pollution tax is an appropriate instrument for industries but for households, a wastewater treatment charge is more appropriate because households have less possibility of reducing their wastewater. This is because of different nature of waste production, the availability and the range of technology, the geographic distribution of stakeholders and the cost of tax collection and so on.
These considerations imply a necessity of implementing the EI Act to its full
potential so that eventually all polluting sources will have to be managed. Within the resources given to this project, it is only possible to concentrate on the implementation of only water pollution from BOD and TSS from the non household sector. The mechanism for driving the EI Act to its full extent has been recommended.
10.1 Capacity Building
The draft EI Act proposed in this study should lead eventually to a multidisciplinary, multi-ministry and comprehensive environmental management. Thus a capacity program for this purpose needs to cover the different phases of this comprehensive environmental management. This requires capacity building at all levels; decision makers, professional and practitioners at the national and local
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levels. It is proposed that the corresponding capacity building program should comprise 5 elements as follows:
1. Public awareness campaign, 2. High level policy dialogue and co-ordination, 3. Database establishment, 4. Human resource development, and 5. Capacity upgrading.
The total cost for capacity building is estimated 236.6 million baht, 96% of
which is for electronic database establishment. Details for each project are given in Annex IV.
Public awareness campaigns
Public awareness campaigns are important for reducing resistance and increasing willingness to pay of potential tax payers and at the same time help mobilize support from the general public. Public awareness campaigns for pollution tax need to
indicate the severity of environmental problems. Special emphasis should be given to environmental cost to citizens especially environment-related health cost and cost to tax payers to mitigate and rehabilitate the environment,
increase the knowledge and awareness of the public of polluting sources including indicating to the public that it is a significant polluter, and
explain how different groups of polluters would be responsible for their activities under the EI Act and how the public could participate in monitoring environmental degradation or improvements.
The public awareness program comprises two components as follows:
(1) Economic Instrument Workshops for mass media and NGO groups Under the public awareness program, two important groups should be
involved and provided with opportunities to understand the full potential of the EI Act. These groups are 1) environmental news reporters, staff from other mass media and 2) environmental NGOs. These groups would become important supporters and disseminators of our economic instruments for environmental protection in the long term.
The EI public awareness program could start with information dissemination
seminars to these two groups who would act as of catalysts and vocal supporters of the pollution tax. The two groups can be mixed in the same workshop. Two workshops for 30 participants each could be held each year. The content of the workshop in the first year could include possible application of economic instruments in Thailand, international experience, difference between charge and tax, sources of water pollution in Thailand, level of tax and use of tax revenues.
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The total cost for 5 years of this activity is estimated at 2.8 million baht. The project details and costing are given in Table A1 in Annex IV.
(2) EI on Air Radio spots, followed by television spots, preferably on popular channels
could be used to disseminate the EI Law to the public. Government radio and television channels could also be used to provide information in the form of expert interviews and talks. The production of scripts and television spots could be outsourced to external consultants. The spots should raised awareness and the responsibility of stakeholders in participating in environmental betterment activities.
The summary of the activities and financial requirements for the public
environment campaigns are estimated for water pollution tax and more details of production cost estimates and topic for discussion are given in Table A1 of Annex IV. The total cost is estimated at 227 thousand baht per year. However, the cost of on-air time is not included as this could range from 55,000-450,000 baht per minute depending on airing hours from 5.00-01.25 hours. However, government channels should be used for airing at no cost.
Policy dialogue and co-ordination
Multi-stakeholder policy dialogues at decision making levels to promote co-ordinated policy responses and actions on economic instruments are critical for full implementation of the EI Act. The FPO should organize at least two inter-ministry policy dialogue and co-ordination meetings for high level decision makers. This should be approached by making the policy dialogue a session of a meeting of the National Committee on Environment Policy where the Prime Minister or designated Deputy is the Chairman. If the meetings are organized independent of the National Committee on Environment, attendees should be at least Director General level and the meeting should be chaired by the Finance Minister or the Permanent Secretary.
The second level of policy dialogue should be held at the level of heads of Planning Division and heads of the EI Unit of related departments in order to produce a master plan indicating division of responsibilities among cooperating agencies and the phased development of new decrees could be outlined. Apart from presenting the potential use of the EI Act and the pollution tax case study to the audience, international resource persons could be recruited via the Country Environment Program of ADB to provide international experience on the use of economic instruments and new issue such as clean development mechanism.
These high level meetings should be held every two years to monitor progress
of the implementation of the EI Act.
The expected output of the meeting is the production of common vision and the master plan on EI and the outcome of the meeting is the delegation of focal points in each ministry to form the EI inter-ministry task force. The cost for holding the meeting is provided in Annex IV.
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Database Establishment: Pollution Tax Database System A project to set up a database for a common use by stakeholders of the Fund could be undertaken. During phase 1, the project should cover major provinces such as Bangkok Metropolitan area, Samut Prakan, Chonburi and Rayong. The experience gained during the Phase 1 Project would also be used to produce training materials and manuals for operators. It should be noted that although this is a pilot project, substantial co-operation is needed from stakeholder agencies in discussing a common tax form and self-assessment forms so that a uniform code, forms and the information system could be designed. The total cost of the pilot project is estimated at 227.2 million baht.
Capacity Upgrading Implementation of the Water pollution decree will involve a fair number of an
increase in the number of manpower for tax assessment, tax collection, monitoring and auditing in the Ministry of Industry and the Ministry of Finance as well as large municipalities.
(1) Ministry of Finance
The Ministry of Finance will need 4-5 officers to be in charge of the EI unit
under FPO. The Department of Excise Tax should also strengthen its staff on EI by having 2-3 officers in the EI unit. One non public servant administrator is required for the 88 tax districts including Bangkok. Entering tax forms can be outsourced at the rate of 20 baht per case. The allocate expense from the fund for the Excise Department (3%) should be sufficient for this purpose.
(2) Ministry of Industry At the moment DIW already has an EI officer as its EI focal point. DIW need
to strengthen its EI capacity in order to perform the new tax assessment responsibility. At least 5 EI civil officers should be recruited to be in charge of tax assessment. These staff would need to have combined knowledge of industrial and environmental economics. They will supervise tax assessors who can be non civil servant employees. These employees will cross check data, assess tax and record input into the common database. Tax assessor should be recruited and trained specifically for the purpose. One tax assessor should be able to process 130 forms per year. For a total of 60,000 type 3 firms, additional tax assessors would be 411 persons which for PIO. Bangkok has 10,186 factories and should have 75 additional tax assessors in DIW. Each PIO should have one additional tax officer to supervised tax assessor. The tax assessor could be hired by using the 25 % of the revenue accrued to the Fund.
Monitoring and auditing could be outsourced to private labs or education
institutions which are certified by DIW. Lab service costs for BOD and TSS are about 600 baht per test. Factories randomly selected for auditing should be visited at least twice a year.
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(3) Ministry of Natural Resources and Environment (MONRE) and its Pollution Control Department (PCD)
MONRE will have to at least double the capacity of its officials in the
Inspection and Enforcement Division of PCD once the law is passed to provide support to LGUs in monitoring and auditing non industrial enterprises.
Training to be provided to LGUs can be jointly conducted by the Water Quality
Management Bureau Division and the Division of Planning Analysis and Evaluation and the Regional Environmental office. The Budget for this purpose is provided in Annex IV.
(4) Local governments At Thedsaban Nakhon and Muang level, tax collection does not need more
staff and the activity could be combined with the collection of Land and Building tax However, an officer for field surveys and environmental monitoring and auditing is needed to update and check the location of the enterprises.
At Thedsaban Tambon level, there is a need to add one or two more tax
assessors and collectors, as well as one employee for conducting surveys and monitoring depending on the density of enterprises.
Our experience in Rayong suggests that there is no need to increase the
permanent staff of the Tambon Administration organizations but some of these TAOs close to Bangkok and industrial centers could be densely populated with polluting sources. In such case, a need for the increase in the number of permanent staff is necessary.
Since the local government can keep at least 10 percent of the revenue
collected, this should be sufficient to support their new EI related activities.
10.2 Implementation Schedules
Phase 1 (2008-2009)
This is the period of preparation to launch the EI Act and the Decree on Water Pollution. The main activities would include:
1) Setting up a permanent mechanism (the EI Unit under FPO). 2) Dissemination or propagation of the full potential of the EI Act to relevant
agencies should be undertaken in the form of inter-ministry focused group meetings. Key personnel (Strategic Planning Directors) from relevant ministries and departments should form part of an inter-ministry team or a working group on EI. Stakeholder departments in ministries that are likely to sponsor a decree should be encouraged to establish an EI unit in its own department or at least designate some C7 level staff as a focal point.
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3) Setting up an inter ministry task force to affect the Act to its full potential. 4) Organizing public awareness and education campaigns to attract support from
the public for the Act and to reduce resistance to new tax responsibility. 5) Capacity building activities for agencies which will be involved in implementing
the Water Pollution Decree. 5.1) Policy Dialogue 5.2) Training to LGUs 6) A study on the impact of proposed fees on industrial cost structure, abatement
method and costs of key sectors in order to support the decision to group firms into (S, M, L) and fee levels and so on should be conducted by EI Committee.
7) Preparation of ministerial notifications that are needed to support the decree,
e.g., regulations concerning polluting sources that are taxable under different phases, the categorization of firms into 3 groups(S, M, L), and technical procedure.
8) Preparation of more decrees, the most likely ones being the Decree on Air
Pollution Tax, the Decree on Community Hazardous Wastes and the Decree on Tourism Tax.
9) During this phase, technical assistance could be sought from ADB to set up a
database system necessary for assuring transparency and good governance for a multi-stakeholders tax collection system (Table 10.1). A project which will mock our proposed taxation scheme could be undertaken in some important pollution control areas as a useful training device on the basis of real hand experience.
Phase 2 Enforcement of the EI Law (2009-2013)
The main activities under phase 2 would include: 1) Setting up the EI Policy Committee as stipulated in the EI Act. 2) Issuance of Ministerial Notifications and Departmental Regulations by relevant
agencies for example self report system and tax forms, etc. 3) Establishment of an electronic data base system and should be fully
operational within one year from the date of initiation. Setting up a common data base would require cooperation from local governments, DIW, PCD and PIO national wide.
4) In the first year of Phase 2, BOD and TSS charges will be applied to selected
groups of industries. In the third year BOD charges will be extended to the 38 groups of polluting industries. In the fifth year heavy metal charges will be applied to the targeted industries.
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5) The Environmental Tax and Charge Fund would be established and the Fund
manager recruited. At least one sub-account (water pollution) of the fund would come into effect. Figure 9.2 summarizes the allocation of the revenue and the Fund to the agencies involved.
6) Other decrees for example, air pollution, product surcharges and tourism tax
would be enacted.
7) Towards the end of this phase a comprehensive evaluation of the effectiveness of the water pollution tax should be undertaken. A panel data of firms’ performance from DIW should also be obtained for this purpose.
Phase 3 (2013+)
1) During this phase, heavy metals would be taxed under the Water Pollution
Decree. All type 3 industrial firms will be under actual variable charge. 2) On the basis of evaluation at the end of phase 2, fee and scale adjustments
and some reorganization of responsibilities could be necessary.
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Table 10.1 Implementation Schedules
Activity Respon-sible Agency
Phase 1 Phase 2 ….. Year 2008 Year 2009 Year 2010 Y2011 Y2012 Y2013
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
S 1
S 2
S 1
S 2
S 1
S 2
Phase 1 Launching of EI (Y1-2) 1. Setting up a permanent
mechanism for driving the Act to its full potential
MOF
2. Dissemination or propagation of the law to relevant agencies
FPO, MOI, LGU
3. Setting up working group and delegation of focal point
MOF
4. Organizing public awareness and education campaigns
FPO
5. Capacity building activities Policy Dialogue Training to LGUs
FPO, PCD, DIW
6. Preparation of more decrees FPO 7. Preparation of baseline data DIW,
PCD
Phase 2 EI Act in action (Y2-5) 1. Enactment of EI Act: Setting
up EI Policy Committee MOF
2. Ministerial notifications supporting decrees
FPO, DIW, PCD
3. Establishment of database system
DIW, PCD, PIO, LGUs
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Activity Respon-sible Agency
Phase 1 Phase 2
….. Year 2008 Year 2009 Year 2010 Y2011 Y2012 Y2013 Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
S 1
S 2
S 1
S 2
S 1
S 2
4. Implementing water pollution tax (BOD and TSS)
DIW, PIO, PCD, LGU, Excise Dept.
5. Establishment of Environmental Fund and recruitment of fund manager
MOF
6. Preparation of more decrees FPO, DIW, PCD
7. Comprehensive evaluation EI Committee
Phase 3 EI-A in full force (Y6+) 1. Other pollutants e.g. Heavy
metal DIW, PCD
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Annex I List of Consultative Meetings and Interviews Period: April 1 – Dec 19, 2007 TA-4667 (THA): Capacity Building for Pollution Taxation and Resource Mobilization for Environment and Natural Resources Sectors, Phase II Date Place No. of
Participants Main Activity
1 April 4, 2007 PCD, Bangkok 7 Consultative meeting with PCD on designing of EIs for pollution control 2 June 6, 2007 DIW, Bangkok 13 Consultative meeting with DIW on designing and implementing EIs for
pollution control 3 July 11, 2007 PCD, Bangkok 14 Interview and consultative meeting with PCD on designing and
implementing water pollution tax for non-industrial sector 4 July 18, 2007 PCD, Bangkok 2 Interview with Director of Planning and Policy Analysis on database system
of non-industrial sector 5 August 1, 2007 DIW, Bangkok 6 Consultative meeting with DIW on designing and implementing water
pollution tax for industrial sector 6 August 2, 2007 Nakhon Rayong
Municipality, Rayong 2 Interview on capacity building of Nakhon Rayong Municipality as an auditing
agency for non-industrial sector 7 August 2, 2007 Tambon Chaeng Naen
LAO:, Rayong 1 Interview on capacity building of an LGU as a taxing and auditing agency for
non-industrial sector 8 August 3, 2007 Rayong Provincial
Industrial Office, Rayong 1 Interview on capacity building of a PIO as a taxing and auditing agency for
industrial sector 9 August 3, 2007 Eastern Regional
Research and Development Center for Factory Environment, Chonburi
2 Interview on capacity building of a local government laboratory
10 August 7, 2007 Mueang Patum Thani Municipality, Patum Thani
2 Interview on capacity building of a municipality as a taxing and auditing agency for industrial sector and on municipality-owned water treatment plant
11 August 8, 2007 DIW, Bangkok 5 Consultative meeting with DIW on list of industries to be taxed on water pollution
12 August 8, 2007 Sub-regional Environment Office, Chonburi
3 Interview on capacity building of a local government laboratory
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Date Place No. of Participants Main Activity
13 August 9, 2007 Nakhon Rayong Municipality, Rayong
1 Interview on capacity building of Nakhon Rayong Municipality as a taxing and agency for non-industrial sector
14 August 9, 2007 Rayong Provincial Excise Office and Revenue Office, Rayong
9 Consultative meeting on capacity building of PEO and PRO as a taxing and agency for industrial sector
15 September 12, 2007 FPO, Bangkok 25 Consultative meeting with representatives from related government departments on designing and implementing water pollution taxation
16 September 12, 2007 DIW, Bangkok 1 Interview on list of industries to be taxed and on water pollution database 17 September 13, 2007 Board of Trade of Thailand
and Thai Chamber of Commerce, Bangkok
25 Consultative meeting on designing and implementing water pollution taxation
18 September 14, 2007 Federation of Thai Industries, Bangkok
30 Consultative meeting on designing and implementing water pollution taxation
19 October 5-6, 2007 LGUs, Hua Hin 40 Consultative meeting with LGUs on implementing water pollution taxation for non-industrial sector
20 October 10, 2007 FPO, Bangkok 5 Consultative meeting with PCD and DIW on finalizing design and implementation process on water pollution taxation for both industrial and non-industrial sector, and finalizing the BOD tax rate
21 October 12, 2007 Rayong 122 Consultative meeting with all stakeholders in Rayong 22 October 17, 2007 FPO, Bangkok 25 Intra-ministry consultative meeting on Royal Decree 23 November 8, 2007 DIW, Bangkok 10 Consultative meeting with PCD pollution specialized officers to draw
suggest and conclusion on the design of EIs on water pollution 24 November 9, 2007 PCD, Bangkok 11 Consultative meeting with PCD deputy director general and officers to draw
suggest and conclusion on the design of EIs on water pollution 25 November 20, 2007 Inter-ministries meeting,
Bangkok 190 Consultative meeting with all stakeholders from public sector who are to be
involved in the implementation process of the EI Act and the Royal Decree 26 December 17, 2007 Steering Committee
meeting, Bangkok 42 Final steering committee meeting to finalize the draft EI Act and the draft
Royal Decree 27 December 19, 2007 Final meeting, Bangkok 220 Consultative meeting with all stakeholders from both public and private
sectors
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Annex II Differentiated tariffs under the Excise Tariff Act B.E. 2527 Gasoline
(1) Unleaded Benzene 3.685 Baht/liter
(2) Benzene other than (1) 4.685 Baht/liter
(3) Gasohol with no less than 10% ethanol 3.316 Baht/liter
(4) Diesel with sulfur content exceeding 0.25% 2.405 Baht/liter
(5) Diesel with sulfur content not exceeding 0.25% 2.305 Baht/liter
Motor cars
Excise tax rates vary according to the cylinder size and the engine power. For instance:
(1) Motor cars - less than 2,000 C.C. 30% of goods value
- exceeding 2,000 C.C. 35%
- exceeding 2,500 C.C. 40%
- exceeding 3,000 C.C. 50%
(2) Semi-truck motor cars (PPV)
- not exceeding 3,250 C.C. 20%
- exceeding 3,250 C.C. 50%
(3) Double cab - not exceeding 3,250 C.C. 12%
- exceeding 3,250 C.C. 50%
(4) Modified passenger cars (Chassis with windshield)
- not exceeding 3,259 C.C. 3%
- exceeding 3,250 C.C. 50%
(5) Passenger cars seating not more than 10 passengers
- not exceeding 2,000 C.C. 30%
- exceeding 2,000 C.C. - 2,500 C.C. 35%
- exceeding 2,500 C.C. – 3,000 C.C. 40%
- exceeding 3,000 C.C. 50%
(6) Energy saving vehicles seating not exceeding 10 passengers
- Hybrid electric vehicle
Not exceeding 3,000 C.C. 10%
exceeding 3,000 C.C. 50%
- Electric powered vehicle 10%
- Fuel cell powered vehicle 10%
(7) Passenger cars seating not more than 10 passengers using renewable fuel with
cylinder not exceeding 3,000 C.C.
- Using fuel with not less than 20% ethanol content 20%
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(from 1 January 2009 onwards)
- using natural gas 20%
(8) Motorcycles
Two-stroke engine 5%
Four-stroke engine 3%
Batteries
Using non-recycled lead 10%
Using recycled lead 5%
(9) Ozone depleting substances 30%
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Annex III The Ministerial Regulation on the rates of service fees for collection and transportation of solid wastes B.E. 2545
1. Rates for collection and transportation fees of solid wastes
- Not exceeding 20 liters/day 40 Baht/month
- Exceeding 20 liters, but not exceeding 500 liters/day 40 Baht/month for every
additional 20 liters
- Exceeding 500 liters, but not exceeding 1cm3 2,000 Baht/month
- Exceeding 1 cm3 2,000 Baht/month
for every additional cm3
- Fees for each specific collection of solid waste
- not exceeding 1cm3 150 Baht
- exceeding 1 cm3 150 Baht/ cm3
2. Rates for collection and transportation fees of clinical wastes
- Not exceeding 2 kg or 13 liters 300 Baht/month
- Exceeding 2 kg or 13 liters 300 Baht/month for every
additional 2 kg or 13 liters
- Fees for each specific collection of clinical wastes
- Service fee 3,000 Baht
- Not exceeding 75 kg or 500 liters, an additional charge of 400 Baht
- Exceeding 75 kg or 500 liters, charge for each additional unit 400 Baht
3. Rates for license fees
(1) License to conduct the business of collection, transportation, and disposal of
solid waste under Section 19
- Collection and transportation of non-hazardous solid waste 5,000 Baht
- Disposal of non-hazardous solid waste 5,000 Baht
- Collection of clinical waste 10,000 Baht
- Disposal of clinical waste 10,000 Baht
(2) License to conduct activity deemed “injurious to health” 10,000 Baht
(3) License to establish an open air market 2,000 Baht
(4) License to establish places for vending cooked food or for accumulating
cooking materials 3,000 Baht
(5) License to sell goods in public places
- With vending stall 500 Baht
- Without vending stall 50 Baht
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4. Notification certificate fees for establishment of places
for vending cooked meals or accumulation of cooking materials
with area space not exceeding 200 m2
(license not required but need to notify) 1,000 Baht
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Annex IV Estimated Expenses for Capacity Building Table A1 Summary of Capacity Building Program
Projects/Activities Work Plan Cost
Structure (baht)
Total Cost (baht)
Man-days
Involved Agencies Remark Y
1 Y2
Y3
Y4
Y5
1. Public Awareness Campaigns 1.1 EI Workshop (1-day session)
Mass media (30 participants per year) X X X X X 5 x 281,160 1,405,800 5 FPO/DIW/PCD NGOs (30 participants per year) X X X X X 5 x 281,160 1,405,800 5 FPO/DIW/PCD
1.2 EI on air Radio (6 spots per year) X X X X X 5 x 85,200 426,000 - FPO/DIW/PCD Television (2 spots per year) X X X X X 5 x 142,000 710,000 - FPO/DIW/PCD
2. Policy Dialogue and Co-ordination (1-day session) Ministries and DG Level (20 participants each) X X X 3 x 88,750 266,250 2 FPO Head of Department Level (40 participants each) X X X X X 5 x 86,620 433,100 5 FPO
3. Database Pilot Project 5 provinces: Bangkok, Samut Prakarn, Rayong, Chonburi and Samut Sakhon X X 227,200,000 227,200,000 - PCD/DIW/FPO
4. Human Resource Development 4.1 Training of EI focal points and staff (2-day session; 30 participants each; one session per year)
X X X X X 5 x 278,320 1,391,600 10 FPO
4.3 Training of Tax Assessors (300 participants) X 1 x 2,754,090 2,754,090 3 DIW 4.2 Training of LGUs
High Level Administrators X X X - - - PCD/DIW/FPO Environmental Staff X X X - - - PCD/DIW/FPO Tax Collection Manual for Tax Collection Staff X 1 x 667,400 667,400 20 FPO
Total 236,600,040 50
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I. Public Awareness Campaigns
1.1) 1-day EI workshops for mass media and NGOs Brief Description:
A comprehensive training course comprises 4 topics: 1. Environmental Status of Thailand 2. Economic Instruments in Thailand and International Experience 3. EI Act & Water Pollution Decree and Implementation Plan 4. Charge vs. Tax and the Use of Tax Revenue
Target Participants: i) Environmental news reporters (Radio/T.V./Newspapers) ii) Environmental NGOs
Session size: 30 participants/session Session duration: 1 days/session Cost Estimation:
Item Unit Cost Unit Amount 1. Compensation for
Instructor(s)/Speaker(s) 15,000 baht/man-
day 1 man-days 15,000 baht
2. Function: Lunch & 2 Breaks
800 baht/day/head
1 days; 35 heads
28,000 baht
3. Transportation 2,000 baht/head 35 heads 70,000 baht 4. Accommodation +
dinners 1,500
baht/day/head 2 days; 25
heads 75,000 baht
5. Audio/Video equipment, office operation and misc.
10,000 baht
Total 198,000 baht
+ 42% Overhead 281,160 baht
1.2) Radio programs Production of 6 x 1-minute spots and scripts 60,000 baht + 42% overhead 85,200 baht Air time on government station (no cost) Total 85,200 baht
1.3) Television programs
Production cost of 2 x 1-minute spots 100,000 baht + 42% overhead 142,000 baht Air time on government station (no cost) Total 142,000 baht
II. Policy Dialogue and Co-ordination
Brief Description: A session comprises 4 issues:
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1. Environmental Status of Thailand 2. Status of current EI practices 3. More on EI laws and decrees 4. New issues such as CDM
Target Participants and Session Size: i) Director Generals and Deputy Director General 20
participants/session ii) Heads of EI Unit and Heads of Planning Division 40
participants/session Session duration: 1 days/session Cost Estimation:
i) Director Generals Session
Item Unit Cost Unit Amount 1. Compensation for
Instructor(s)/Speaker(s) 15,000
baht/man-day 1 man-days 15,000 baht
2. Function: Lunch & 2 Breaks
1,500 baht/day/head
1 days; 25 heads
37,500 baht
3. Audio/Video equipment, office operation and misc.
10,000 baht
Total 62,500 baht + 42% Overhead 88,750 baht
ii) Heads of EI Unit and Heads of Planning Division
Item Unit Cost Unit Amount 1. Compensation for
Instructor(s)/Speaker(s) 15,000
baht/man-day 1 man-days 15,000 baht
2. Function: Lunch & 2 Breaks
800 baht/day/head
1 days; 45 heads
36,000 baht
3. Audio/Video equipment, office operation and misc.
10,000 baht
Total 61,000 baht + 42% Overhead 86,620 baht
III. Establishment of Tax Information System
Activity Cost (baht) 1. Internet-based information system design 20,000,000 2. Database management system design and development, including - Data development platforms - Application programming interface - Database system - Business intelligent*
80,000,000
3. Data collection for a pilot phase (5 provinces) 25,000,000 4. Integration of the database system 25,000,000 5. Demo and evaluation 10,000,000
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Total 160,000,000
+42% Overhead 227,200,000* It must at least enable data mining on behaviors of the tax payers.
IV. Human Resource Development 4.1) Training of EI focal points and staff
Brief Description: A comprehensive training course comprises 6 topics: 1. Environmental Status of Thailand 2. Economic Instruments 3. International Experiences 4. Economic Instruments: Design for Thailand 5. Implementation Plan 6. Climate Change and CDM
Session size: 30 participants/session Session duration: 2 days Cost Estimation:
Item Unit Cost Unit Amount 1. Compensation for
Instructor(s)/Speaker(s) 15,000 baht/man-
day 2 man-days 30,000 baht
2. Function: Lunch & 2 Breaks
800 baht/day/head
2 days; 35 heads
56,000 baht
3. Accommodation + dinner
1,500 baht/day/head
2 day; 30 heads
90,000 baht
4. Audio/Video equipment, office operation and misc.
20,000 baht
Total 196,000 baht
+ 42% Overhead 278,320 baht
4.2) Training of Tax Assessors (Ministry of Industry)
Brief Description: A comprehensive training course comprises 6 topics:
1. Environmental Status of Thailand 2. Economic Instrument Design for Thailand 3. EI Act & Water Pollution Decree and Implementation Plan 4. Industrial Economics and Environmental Economics for Selected
Industries 5. Industrial Environment: Issues and Characteristics 6. Environmental Assessment Technique for Tax Collection
Target Participants: DIW/PIO Tax Assessing Officers Session size: 300 participants/session Session duration: 3 days
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Cost Estimation:
Item Unit Cost Unit Amount 1. Compensation for
external instructor(s)/speaker(s)
15,000 baht/man-day
3 man-days 45,000 baht
2. Function: Lunch & 2 Breaks
550 baht/day/head
3 days; 330 heads
544,500 baht
3. Accommodation + dinner
1,000 baht/day/head
2 days; 330 heads
660,000 baht
4. Transportation 2,000 baht/head 330 heads 660,000 baht 5. Audio/Video equipment,
office operation and misc.
30,000 baht
Total 1,939,500 baht + 42% Overhead 2,754,090 baht
4.3) Training of LGUs
4. 3.1) 1-day training Brief Description:
Training of LGUs is divided into 2 modules: a course for high level administrators and for environmental staff 1. A high level administrator course comprises 4 topics:
1.1 Environmental Status and Indicators of Thailand 1.2 Economic Instruments: Design for Thailand 1.3 Tax vs. Charge 1.4 EI Act & Water Pollution Decree and Implementation Plan
2. An environmental staff course comprises 3 topics: 2.1 Environmental Status and Economic Instrument Design for Thailand 2.2 The Laws and Implementation Plan 2.3 Environmental Assessment and Techniques, including auditing/sampling procedures, effluent standards, assessing pollutant loads and reporting environmental and indicators.
Session size: 40 participants/session Target Participants:
Unit High Level
Administrators Environmental
Staff 1. Thedsaban Nakhon 22 44 1102. Thedsaban Mueang 111 222 4443. Thedsaban Tambon 1,023 1,023 2,0464. Provincial Administration Organization
75 150 450
5. Tambon Administration Organization 6,746 6,746 13,4926. BMA and Muang Pattaya 2 4 20
Total# of Participants 8,189 16,562Total Sessions for First Year 205 414
Total Sessions for the remaining years
10 20
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Session duration: 1 day per session on each module Cost Estimation:
Item Unit Cost Unit Amount 1. Compensation for
Instructor(s)/Speaker(s)15,000 baht/man-
day 1 man-days 15,000 baht
2. Function: Lunch & 2 Breaks
550 baht/day/head 1 days; 45 heads
24,750 baht
3. Transportation 2,000 baht/head 45 heads 90,000 baht 4. Audio/Video
equipment, office operation and misc.
10,000 baht
Total 139,750 baht + 42% Overhead 198,445 baht
Training Cost for High Level Administrators
Total Cost for first year = 205 sessions x 198,445 baht/session
40,681,225 baht
Total Cost for the remaining years = 10 x 198,445 1,984,450 baht Training Cost for Environmental Staff
Total Cost for first year = 414 sessions x 198,445 baht/session
82,156,230 baht
Total Cost for the remaining years = 20 x 198,445 3,968,900 baht
4.3.2) Tax Collection Manual for Tax Collection Staff
Item Unit Unit Cost Total Amount
1. Content Design & Document Preparation
22 man-days
15,000 baht/man-day
330,000 baht
3. Manual Production 2,000 sets 20 baht/set 40,000 baht 4. Delivery Cost 2,000 nodes 50 baht/node 100,000 baht
Total 470,000 baht + 42% Overhead 667,400 baht