Keywords
polluter pays principle, stock pollution, conflict of interests
Start Date
1-7-2006 12:00 AM
Abstract
The conventional implementation of polluter pays principle (PPP) in many countries is based on the use of an environmentaltax, which is determined proportionally to the amount of emissions of the polluting substances. Using aspecific mathematical model this study shows that this practice is not adequate for the real negative impact if thepollutant accumulates to a stock in the environment. Moreover, in many cases there is a danger of an unavoidableconflict between the interests of society as a whole and the interests of private business, generated by these proceduresof PPP implementation. This paper also presents a mathematical formula (obtained as an analytical result)which expresses the time period, when the conflict arises, therefore it is called “the time boundary of investmentexpediency”. On the basis of the model analysis, “a corrected” amount of environmental tax which covers the negativeeffect on social welfare is suggested. One of results of the model analysis demonstrates that this tax should bedependent on the lifetime of the production project, not only on the amount of emitted pollution. This approach allowsto construct specific information system for the calculation of several indicators which provide quantitativecharacteristics for evaluation of production projects (eco-intensity, eco-efficiency, interests on ecological debt etc.).The information system can be used for comparative analysis of different investment projects and for the forecast ofthe consequences of decision taken. The study gives also some practical tools for strengthening governance in theenvironmental sector and for the evaluation of investment initiatives from a “quality of growth” point of view.
A model for investment decision support based on multicriteria analysis
The conventional implementation of polluter pays principle (PPP) in many countries is based on the use of an environmentaltax, which is determined proportionally to the amount of emissions of the polluting substances. Using aspecific mathematical model this study shows that this practice is not adequate for the real negative impact if thepollutant accumulates to a stock in the environment. Moreover, in many cases there is a danger of an unavoidableconflict between the interests of society as a whole and the interests of private business, generated by these proceduresof PPP implementation. This paper also presents a mathematical formula (obtained as an analytical result)which expresses the time period, when the conflict arises, therefore it is called “the time boundary of investmentexpediency”. On the basis of the model analysis, “a corrected” amount of environmental tax which covers the negativeeffect on social welfare is suggested. One of results of the model analysis demonstrates that this tax should bedependent on the lifetime of the production project, not only on the amount of emitted pollution. This approach allowsto construct specific information system for the calculation of several indicators which provide quantitativecharacteristics for evaluation of production projects (eco-intensity, eco-efficiency, interests on ecological debt etc.).The information system can be used for comparative analysis of different investment projects and for the forecast ofthe consequences of decision taken. The study gives also some practical tools for strengthening governance in theenvironmental sector and for the evaluation of investment initiatives from a “quality of growth” point of view.
