12 - MINISTRY OF ENVIRONMENT
AND SUSTAINABLE DEVELOPMENT
12.1
The Use of Economic Instruments as a Tool for Sustainable Environmental
Management: Problems Identified
Background
The major policy instruments/tools used to ensure the sustainability in environment
management included tools such as Environmental Legislation, Standards, Environment
audits and Impact Assessment and Economic Instruments (EIs). Governments worldwide,
including Mauritius, make use of EIs to influence good behaviour towards the environment
by discouraging undesirable practices or by encouraging the good ones through instruments,
such as taxes, duties, levies, environment protection fees, user charges as well as incentives in
the form of subsidies and rebates. EIs are not substitutes for other policy tools; rather they
complement them.
Over the years, many EIs were introduced by Government in various sectors: energy,
transport, water and sanitation to address environmental hazards such as emission of
greenhouse gases, poor air quality, urban road congestion and improper waste disposal. EIs
developed included environment protection fees, MID Levy on petroleum and coal, excise
taxes on petroleum and plastic products and other vehicle emission and ownership charges, as
well as waste water user charges. Yearly, Government revenue associated to environmental
protection taxes, levies, charges, fees, subsidies and rebates were roughly estimated at some
Rs 8 billion met by entities generating the pollution and the general public.
Purpose of the Review
This review was not aimed at a performance appraisal of the effectiveness of EI but rather
aimed at raising concerns for an integrated use of EI as a tool for national development
planning process including environmental strategies as well as future budget processes. EIs
have been applied in many sectors at different points in time but it is the institutionalised
systematic approach to their introduction, implementation, monitoring and evaluation that
needs to be improved. The major problems identified are listed below.
Major Problems Identified
12.1.1 Regulatory Framework for EIs
EIs were formulated in a staggered and fragmented manner at different points in time with
economic instruments split among different stakeholders (Ministry of Finance, Environment,
Registrar General, Wastewater Management Authority, etc.) and under various policy
decisions embodied in different legislations, such as the Finance Act, Mauritius Revenue
Authority (MRA) Act, Excise Act, Environment Protection Act, Registration Duty Act, and
Wastewater Management Authority Act.
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12.1.2 Independent Mechanism to Oversee the Implementation and Review of EIs
Government has implemented a wide range of EIs for environmental management in some
sectors. However, it did not adopt an integrated approach to ensure harmonisation in the
implementation, monitoring and evaluation of EIs. No dedicated, centralised and independent
mechanism existed to oversee the effectiveness of EIs in terms of meeting primarily the
environmental, equity and revenue objectives.
The Ministry did not also seek the support of international bodies such as UNEP/UNDP to
assist in the evaluation of the effectiveness of the EIs in meeting revenue and environmental
objectives as was the case with some other countries. The impact of taxes and incentives was
mixed, with achievements couched in revenue generation, but none to date gauging the state
of the environment.
12.1.3 Role and Responsibilities of Ministry of Environment in EI Issues
All stakeholders involved in the policy framing, implementation, monitoring, evaluation and
review of the EIs were not always fully aware of their responsibilities. They were managing
their EI in isolation. The MOFED has taken centre stage in the introduction of most of the EIs
but did not cater for a more inclusive and comprehensive approach towards an environmental
fiscal reform programme with properly allocated responsibilities to this Ministry
(Environment) and other implementing entities.
The role and mandate assigned to the Ministry as sole environment expert was not adequately
fulfilled in respect of the use of EI as Mauritius had internationally committed itself to the use
of EI in environmental management at the Rio Conference of the United Nations held in 1992
and furthered through successive National Environment Strategies (NES 1 and NES 2) of the
Ministry. In 1999, the Ministry had its own EI namely the Environment Protection Fee on
listed activities and products. However, little breakthrough was made at the level of the
Ministry to set up a formal mechanism to institutionalise the design and use of its EI as well
as other EIs:
 Setup- There was no dedicated Unit/Cell/ mechanism/platform at the Ministry to follow
the implementation of all EIs and to discuss EI environmental management issues.
 Development Framework/Methodology- The methodology/framework to develop EI was
fragmented and unstructured. The Ministry’s involvement in the design/ review of EIs
was minimal as implementing agencies, including the Ministry were not required to
integrate their EI with other broader environment management objectives.
12.1.4 Management information for EI
No thorough EI information/centralised database was readily available or compiled by the
Ministry despite the basis of introduction of EIs related primarily to a serious environment
concern. Without consistent and reliable information, it is difficult to set rational EI policies,
to choose appropriate policy instruments, to address perceived problems, or to measure
progress once such policies are in place. Implementing agencies did not continually collect
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and organised environment data into time series to document changing conditions of the
environmental parameters under their respective purview.
Compendium of all EIs
A compendium of all operational EIs was not available at the Ministry in order to have a
snapshot of all EIs so as to oversee their implementation and assess their effectiveness in
curbing environmental degradation. My Office had compiled a non-exhaustive compendium
with available information and had worked out the yearly financial envelope relating to
revenue collected on environment taxes, levies, charges, as well as Government revenue
foregone in terms of subsidies and rebates. The estimated figure was some
Rs 8 billion as per Table 12-1.
Table 12-1 Revenue Collection
Taxes/ Levies/ Charges/Fees
Amount
(Rs million )
Vehicle ownership charges – Excise duties on motor vehicles/
motor cycles excluding Registration Duties and Road Tax
2,403
Taxes/ Excise duty on petroleum products including MID Levy
on petroleum products and coal
3,219
(MID levy- 320)
Environment Protection Fee on Hotels/Guest houses/ Tourist
residences, Stone Crushing Plants, Tyres, Batteries and Mobiles
169
CO2 levy or rebate from Excise duty payable depending on the
CO2 emission of cars
109 (taxes)
300 (rebates)
Excise Taxes on Plastic Products- Bags, PET bottles, Cans
242
Waste water Charges
389
Passenger Fee and Solidarity Levy
1,266
Total
8,097
12.1.5 Monitoring, Evaluation and Review of EIs
There is no mechanism in place at the Ministry to continuously monitor the extent to which
environment concerns were being addressed by the EI. Measurement was needed to evaluate
progress, to determine when policy modifications were needed and to learn from the existing
applications as both the environmental problem and the baseline conditions change over time.
As sole technical expert of Government in environmental matters, the involvement of the
Ministry in continuous monitoring was minimal since no scientific data compilation and
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evaluation of the EI was seen. Also, there was no public reporting of the monitoring process
outcome to change mind-sets towards environment protection.
In the absence of serious, regular and scientific monitoring as well as rigorous evaluation of
programs, policy makers were deprived of vital information needed to continuously improve
environmental management. Some EIs needed more support while others may need to be
terminated as they no more serve their purposes. It was difficult to ascertain whether policy
modifications to the EI were always being carried in a structured manner.
12.1.6 Environment Protection Fee
In 1999, the Environment Protection Act (EPA) was amended to cater for an Environment
Protection Fee (EPF) which ‘was set up to provide for the imposition of an environment
protection fee in order to raise funds for the promotion of local environment initiative aimed
at preventing and reducing pollution.’
Initially hotels/ boarding-houses were targeted for the levy of the fees. Amendments were
later made to add stone crushing plants and polluting products such as tyres, batteries and
mobiles. EPF collected in 2014 amounted to Rs 169 million. Since its inception in 2000, the
collection and management of the EPF was assumed by the Ministry until 2007 when the
MRA took over the EPF in terms of the collection and revenue management. However, the
Ministry did not ensure that the EPF was effective in meeting environmental objectives. The
following issues were noted:
EPF Management Set-up
No protocol/coordination mechanism was set up by the Ministry for the management of the
EPF in a holistic manner despite being an environmental management tool under its purview.
No EPF information/data were available at the Ministry for the details of EPF collected under
the EPA for 2014. In fact, no Memorandum of Understanding existed between the MRA and
the Ministry to allow for the exchange of information for environmental policy monitoring
evaluation and review.
Review and Modifying the Portfolio of EPF Polluting Activities and Basket of Polluting
Products
The two designated polluting activities, hotels and stone crushing plants, remained the same
since their introduction more than 10 years ago, without any fundamental change/broadening
of the spectrum of the polluting activities. EI rates were not indexed on periodic inflation
rates to cater for erosion of taxes over time. The list of unsustainable products was also
worked out in an ad-hoc manner to adapt to new circumstances involving the market forces,
new technology and market dynamism. In November 2010, the Ministry recommended to the
MOFED a list of new items (computers, refrigerators, air conditioners and washing
machines) for inclusion in the EPF scheduled list, but were not supported by information,
such as their pollution load and import trends. None of the proposed products were retained
by the policy makers till to date.
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EPF Management Information System and Enforcement Strategy
Reliable tax collection data represented a vital MIS for gathering information for better
decision making in environmental management. Tax collection database was not used
strategically by the Ministry in order to gather intelligence to identify industries, firms and
communities that represented the main polluting agents and to develop risk based
enforcement strategies. In the absence of information on polluting agents engaged in hotel
and stone crushing activities, it was not known if polluters were paying their share of
environment taxes/penalties in a commensurate manner with their pollution load and their
nuisance value environment-wise.
Reconciliation of EPF Data with Independent Data Sources
The Ministry did not ensure that the Polluters Pay Principle (PPP) was adequately
implemented as mandated by its law. The PPP is an environmental policy principle which
requires that the costs of pollution be borne by those who cause it.
No data analysis was performed by the Ministry as it was not aware of the database of the
EPF from the MRA. The NAO attempted to reconcile EPF data with data from independent
sources such as the Statistics Mauritius (for stone crushing plants in operation) and from
Tourism Authorities (for list of registered hotels/ tourist residences and guesthouses).
Discrepancies were noted. Out of a total of some 560 licensed entities required to comply
with the Polluters Pay Principle, some 105 entities only were complying as 95 were yet to
settle their dues. Some 360 officially licensed entities were not captured in the MRA database
of payees and debtors. Non complying entities were not identified by the Ministry for a risk
based enforcement action prompting them to settle EPF or fine them under the environment
law.
Consultants’ Report Extracts - Implementation of the Polluter Pay Principle (PPP)
In 2007 the Ministry awarded a contract to an Australian Consultancy Firm to update the
National Environment Strategy (NES) 2 and review the NEAP2. It commented adversely on
the Implementation of the PPP and the EPF as follows:
At present, PPP was not used as a guide for environmental protection. The EPF that is
imposed on certain sectors comes closest to this; however, the implementation mechanism of
the EPF does not address the externalities which should be the objective of the application of
the principle. In fact, such ad-hoc environmental protection measures may distort not only the
trade and investments (which needs to be based on economic efficiency) but also does not
help realise the environmental objectives for which such measures are supposed to be
introduced in the first place.’ Little changes were brought to the EPF since 2008 to date.
Recommendations
There is no policy in place for the use of EIs as a means to ensure sustainability in
environmental management. No monitoring has been carried out over the effectiveness of the
different types of EIs introduced in Mauritius. Government must adopt a structured approach
to manage EI in a holistic and harmonised manner for achieving sustainable environmental
management. EIs need to be independently reassessed to ascertain their need and
effectiveness in meeting revenue, social and environmental objectives. It should also consider
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building institutional capacity at Government and the Ministry of Environment level to
monitor the implementation of the EIs.
Other urgent corrective actions deemed important include:
 The roles and responsibilities of all stakeholders need to be clearly defined and assigned.
The appointment of an EI champion at each implementation agency to monitor
implementation and progress achievement might be considered.
 Establish a consolidated repository of information that generates sound environment data
from implementing agencies for EI policy formulation and review. A Memorandum of
Understanding with the MRA and other agencies might be considered to build a platform
for intelligence gathering and a more focused enforcement strategy
 Introduce new EIs, modify existing EIs within an established framework/methodology as
per recommended practices prescribed by UNEP and UNDP in order to take advantage of
emerging/existing opportunities and challenges.
 Challenge and support the business sector to finance complementary environmental
management initiatives and programmes. Hotels may be called to make more efforts in
coastal conservation initiatives in view of the stress the hotel activities create on the
coastal resources. Polluters should pay according to their level of pollution created and
the depletion of natural resources.
Ministry’s Reply
 It is understood that EIs are used mainly as a source for revenue raising and that most of
the EIs were introduced by the Ministry of Finance and Economic Development
(MOFED) and are implemented by different agencies and institutions. The Ministry
advised the NOA that the views of the MOFED be sought on issues regarding EIs and
also added that that the need to set up a dedicated unit and compile a compendium was
therefore not felt.
 The Ministry also considered that it had the required framework to raise awareness,
monitor and use regulatory instruments to ensure sustainable environmental management.
Nevertheless, it also proposed to use EIs as a tool, amongst others, to attain the objective
of a few forthcoming environmental projects.
 The effectiveness of the EPF in meeting environmental objectives was partly observed
through the monitoring of ambient air quality around a few stone crushing plants. The
setting up of a coordinating mechanism for the EPF activities could not be established as
same were cross-sectoral and under the purview of the different Ministries.
 Given that the MRA took the responsibility to manage the collection of the EPF, the onus
to monitor same rests with the line Ministries concerned. The absence of an EPF
Information System was mainly due to a lack of expertise in the field of EIs and
Environment Economics.
 In respect of the PPP, it was noted that the EPA provisions such as fines (up to
Rs 500,000 and 10 years imprisonment) and fixed penalty (ranging from Rs 2,000 to
Rs 10,000) for polluters were acting as deterrent to polluters.
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MINISTRY OF ENVIRONMENT AND SUSTAINABLE DEVELOPMENT