RUSSIAN SYSTEM OF POLLUTION FEES IN 1991



In 1991, the Russian government introduced fees for stationary
and mobile air pollution sources, water pollution, and solid
waste disposal.



Legal Basis


A 1991 decision by the Russian Council of Ministers established
the legal basis for pollution fees and their implementation. 
The decision adopted fees for 1991 and stressed it would collect
fees from all polluters independently of their institutional
position whether government-owned or private.  The decision
opened the possibility of reducing some regional fees due to
environmental and economic conditions by negotiating among
parties and adopting to local conditions.  It made a special
provision to include environmental protection costs in their
calculations.


Fee Rates 


Supplements to the decision included rates of fixed fees.  There
were two rates for water and air pollution--one for emissions
below the limit and another for emissions above the limit.  Fees
for above-limit emissions were five times greater than for below-
limit emissions.  Tables 3 and 4 show fee examples.  The decision
established pollution fees for atmospheric emissions of 211
substances.


Table 3.  Fees for Selected Air Pollutants, 1991

                          Fee rate (rubles/ton)
Pollutant  ------------------------------------------------------
                        allowed emissions   above-limit emissions
_________________________________________________________________

NO                            55.01                  263.39
Sulpher Dioxide               66.00                  316.00
Pb                        10,999.89               52,666.14
Dust (timber, lime, coal)     22.01                  105.39
CO                             1.09                    5.21
Benzopyrene            3,300,000.00           15,800,000.00
_________________________________________________________________

Source: Russian Council of Ministers 1991


In the same way, the decision fixed water pollution fees for 92
pollutants on the basis of two rate types (table 4).  It also
fixed fees for above-standard emissions for 33 pesticides.  The
Council of Minister decision did not levy fees on
technologically-approved amounts of pesticide because of unstable
economics in agriculture.


Table 4.  Fee for Selected Water Pollutants, 1991

                              Fee rate (ruble/kg)
Pollutant  ------------------------------------------------------
                     below-limit discharge  above-limit discharge
_________________________________________________________________

Aluminum hydrate               8.870                 46.934
Aniline                    4,435.000             23,467.000
Vanadium (V)                 443.500              2,346.700
Oil                           44.350                234.670
Arsenic                        8.870                 46.934
Phosphates                    17.740                 93.868
_________________________________________________________________

Source: Russian Council of Ministers 1991


For mobile sources, the Council calculated the fee per ton of
fuel.  Fees were 6.83 rubles/t for diesel fuel, 5.10 rubles/t for
petrol without lead, and 8.40 rubles/t for petrol with lead.  The
price of one ton of retail petrol was 400 rubles/t, with the fee
representing 2.1% of the price.  The price of wholesale petrol
was about 1200 rubles/t, with the fee comprising 0.7% of the
price.

Finally, the Council decision set fees for solid waste disposal,
dividing the wastes into four classes according to their risk. 
Disposing of one ton of solid waste at the highest risk level
cost 100 rubles.  Nontoxic solid wastes cost one ruble/t.

The essential feature of the pollution fee system was its
uniformity, independent of location.  But, the regions had
different abilities to absorb and compensate for pollution.  For
that reason, the Council introduced a special correction factor,
similar to in equation (1), to account for regional
differences.  Policymakers multiplied the previously-mentioned
pollution fees by the correction factor.  For air pollution, the
country was divided into 11 regions.  The Far Eastern Region had
a correction factor of one for air pollution.  The Ural Region
had a correction factor of two.  For water pollution,
policymakers divided the area into 99 water regions.

Correction factors solved only part of the problem.  As mentioned
earlier, one of the main goals of the pollution fee system was to
create independent funding sources for regional environmental
programs.  For that reason, policymakers linked fee rates with
regional financial demands.



Environmental Funds


The system of environmental funds had three levels: local,
republican (regional), and federal.  According to 1991 data from
the Environmental Protection and Natural Resources Ministry, the
government collected about one billion rubles as pollution fees,
penalties, and compensation for environmental damage.  The main
source was the fee for allowed pollution (65%).  Above-standard
pollution fees constituted 14.8%, actions - 9.3%, penalties -
2.6%, and other sources - 8.6%.  Penalties and compensation
constituted only 12% of the total.  Clearly, fees for allowed
pollution became the main source of environmental funds.  In
1991, the government transferred 25.1 million rubles (2.6%) to
the federal environmental fund.

An analysis of how the government allocated environmental funds
resources showed that they spent only 53.2%.  At the end of 1991,
0.4 billion rubles remained in the fund.  After policymakers
raised prices on Jan. 1, 1992, the funds depreciated more than 10
times.

Why did the government leave such a large sum unspent?  The
explanation may lie in the importance of regions having the
institutional structure for managing environmental protection. 
As a rule, the regions that participated in the experiment from
1989 to 1990 were better prepared to introduce pollution fees. 
The only exception was Moscow.  The 47% of funds it spent was
lower than in other participating cities.  The reason lies in the
conflicts between legislative and executive authorities who could
not agree on how and where to spend the money.

A major problem that surfaced during the experiment as well as
afterwards was collecting payments from polluting enterprises. 
Because there was no legal basis for collecting pollution fees,
paying them was voluntary.  As a result, many enterprises simply
refused to pay.  The government sued them with little success. 
In Moscow, of the 95 cases that went to court or arbitration,
only 16 were resolved in favor of Moscompriroda (the Moscow
Environmental Committee).  The enterprises that refused to pay
were often large, monopolistic factories that had political and
economic power in both local and federal governments.  For
example, in 1990, the auto manufacturer ZIL did not pay the 10
million rubles it owed the environmental fund.  In 1991, electric
power stations in Moscow (Mosenergo plants) also refused to pay. 
According to estimates, if the government had collected fees and
satisfied all actions, the environmental fund would have
collected about 200 million rubles in Moscow alone.  The
Environmental Protection Act of 1992 took into account all these
aspects.