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levies were imposed on the basis of actual emissions, causing both discharges to public sewerage plants and directly to surface waters to be subject to effluent charges.

Secondly, the Dutch effluent charges were simply higher than the French and German effluent charges. Figure 12 shows the level of effluent charges in the three countries. In the Netherlands, the economic incentive to control pollution was considerably stronger than in the other two countries when firms considered their marginal abatement costs versus the rate of the levy. It is unexpected, however, when one considers the low French levies, that French industry has reduced pollution so much. In fact, most French observers claim that the French levies are too low, and that it is more profitable for firms to ignore the levy and continue to pollute. It is odd, too, that Dutch industries discharging to state waters, and thus subject to the smaller state water levy, have reduced pollution more than Dutch industries discharging at a higher rate to Waterboard waters.

(Figure 12 here)

The explanation for these oddities is the third factor behind the success of the Dutch policy -- the institutional factors. The economic instrument was not, as Baumol and Oates claim, a single policy instrument. Without the supervision of RIZA and the earmarking of the revenue, pollution would hardly have been reduced to the extent actually achieved. In France, it was branch contracts that secured pollution control at the source among the largest polluters in the pulp- and paper industry and in the sugar industry. In other parts of the food processing industry, there were no branch contracts and thus no response to the levy. This is reflected in the absolute pollution level of the French foodprocessing industry, which is almost equivalent to the Danish level (see Figure 8).

In Germany, on the other hand, revenue has not been not earmarked, and there has been no programme for cooperation between public authorities with know-how and private companies. Funds from the levy have been used by the Länder for other water pollution control purposes. Although it is difficult to assess the impact of the German levy (and despite differences also in the computation of discharges), reductions have not been so significant as in France and the Netherlands. The existence of branch guidelines meant that the levy was not a single instrument, but the interplay between more traditional command-and-control regulation and the waste water levy has been less successful than has the interplay between the Dutch/French water authorities and the use of effluent levies.

Germany is generally similar to Denmark in the importance attributed to the municipalities, although there are specialised water authorities in the Ruhr district. Municipal authorities seem to be more inclined to support local industries by subsidising their discharges, or to accept higher pollution levels, than specialised water authorities. While one would perhaps expect local government to offer a very balanced consideration of environmental protection versus employment, and water authorities to be more rigid, it is surprising that the economic burden on industry has been no smaller in Germany and Denmark than in France and the Netherlands. Local governments, keen to protect local employment (and tax income) have as a paradox been less efficient in their management of pollution control than those coun- tries where pollution control authorities were special-purpose bodies.

This finding must be seen in light of the transboundary character of pollution. A local authority may choose to ignore the social costs of its policies that are imposed down-stream, while a water authority operating on hydrological principles will have to consider the total impact of its choice. The precarious question raised is whether local authorities are entities suitable for sustainable development, or whether environmental management calls for a stronger state, with special-purpose bodies of public management.


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