OECD Green Growth Studies Addressing Industrial Air Pollution in Kazakhstan Reforming Environmental Payments Policy Guidelines

Foreword Acknowledgements List of abbreviations Executive summary Notes Chapter 1. What are the issues? 1.1. The overall cost of air pollution – the single greatest environmental health risk 1.2. Why is it important to address air pollution in Kazakhstan? 1.3. A very much command-and-control environmental regulatory framework 1.4. Environmentally related taxes for industrial air pollutants: Focusing on raising revenues 1.4.1. ERT are now below OECD comparators 1.4.2. However, their design for industrial air pollutants is complex and diverges from OECD/EU acquis EQS/MAC ELV Environmentally related taxes for air polluting emissions from stationary sources 1.4.3. The system is largely discretionary and discriminatory 1.4.4. High administrative costs discourage abatement 1.5. Air pollution regulations and environmentally related taxes in the OECD 1.5.1. The challenge of environmental fiscal reform, rationales and factors shaping the design of environmentally related taxes 1.5.2. Choosing between market-based instruments and regulations 1.5.3. Choosing among MBIs: Taxes/fees/charges, trading or tax incentives Notes References Chapter 2. How to charge taxes for air pollutants from stationary sources? 2.1. Introduction 2.2. Comparative analysis 2.2.1. The “pure” tax rate model 2.2.2. The ELV/BAT model without payments for emissions within the limits 2.2.3. The ELV/BAT model with payments for emissions within the limits 2.3. Proposed recommendations 2.3.1. Reduce discretionary powers and avoid any forms of discrimination 2.3.2. Further focus the tax base on priority pollutants 2.3.3. Progressively increase the tax rates/charges in line with abatement costs 2.3.4. Carefully assess the option of setting up environmental funds 2.3.5. Sustain efforts towards OECD/EU acquis and analysis on AQS, BAT/ELV and IEP Air quality standards “Quick-wins” for process improvements, before the adoption of a BAT-model 2.3.6. BAT/ELV Scope and benefits of BAT Derogation in OECD members Process followed Awareness development and communication Implementation period Specific recommendations to plan for BAT-led environmental regulations Framework conditions for innovation Notes References Chapter 3. Moving to a broader and more effective range of non-compliance responses 3.1. Introduction 3.2. Comparative analysis 3.2.1. Enforcement pyramid and the choice of response In Kazakhstan OECD member countries and the non-compliance enforcement pyramid 3.2.2. Administrative enforcement In Kazakhstan OECD member countries 3.2.3. Penalty assessment In Kazakhstan OECD member countries 3.2.4. Civil judicial enforcement In Kazakhstan OECD member countries 3.2.5. Criminal enforcement In Kazakhstan OECD member countries 3.2.6. Citizen enforcement In Kazakhstan OECD member countries 3.3. Proposed recommendations 3.3.1. Fully use compliance assurance and approaches of an enforcement pyramid 3.3.2. Reform the system for penalties/fines following a min-max amount per day, non-discriminatory model with a gravity component 3.3.3. Delink criminal liability from civil monetary damages 3.3.4. Improve the effectiveness of penalties 3.3.5. Adjust legislative acts, principles and tools for enforcement Principles of good regulation Risk management and compliance assurance Self-monitoring and use of third-party assurance Environmental auditing Better use of new technology and information, including digitalisation, artificial intelligence and remote sensing Notes References Chapter 4. What to do about monetary damages for industrial air pollutants? 4.1. Introduction 4.2. Comparative analysis 4.2.1. Legal framework for environmental liability In Kazakhstan OECD member countries 4.2.2. Assessment of environmental damage In Kazakhstan What and when The direct/indirect method The missing reference to equivalency analysis The very notion of environmental damage OECD member countries 4.2.3. Environmental liability and financial security In Kazakhstan OECD member countries 4.3. Proposed recommendations 4.3.1. Eliminate any form of fault-based damages (e.g. liability arising from unauthorised emissions or exceeding a limit in an IEP) and discrimination 4.3.2. Define further environmental damage 4.3.3. Move towards equivalency analysis to assess damages instead of the indirect method 4.3.4. Reserve power to bring lawsuits in the public interest to state authorities 4.3.5. Strengthen the requirements for operators to make financial provisions Notes References Chapter 5. Conclusions and ways forward 5.1. Introduction 5.2. Deepening the implementation plans at sectoral level 5.3. Communicating, co-operating and building multi-level capacity for enforcement 5.4. Enhancing data availability and quality for adequate monitoring and evaluation 5.5. Enforcing at ground level with adequate incentives 5.6. Drawing resource implications for better compliance, possibly with cost recovery charges 5.7. Furthering the work on air pollution from mobile sources Notes References Annex A. Historical overview of the evolution of payments for emission Annex A. Historical overview of the evolution of payments for emission Evolution of the collection of payments for emissions in Kazakhstan Categorisation of environmental charges and payers Annex B. Environment Agency (England): Interventions available for enforcement Advice and guidance Warnings Notices, powers and orders Civil penalties for climate change schemes Civil sanctions Criminal proceedings Notes Annex C. Illustration of a penalty calculation with a gravity component Annex D. Natural Resource Damage Assessment (NRDA) using equivalency analysis Equivalency analysis and the ELD Key steps in conducting an equivalency analysis Equivalency methods: Strengths and weaknesses Notes Annex E. Means of evidencing financial provision Cash deposit Charge on assets (trust funds, escrow accounts and cash deposits) Risk transfer (insurance, letters of credit, bank guarantees and surety bonds) Financial test (self-insurance, self-bonds and parent company guarantees) Compensation funds Annex F. Terminology Notes References Kazakhstan has recorded impressive economic growth rates since its independence, driven mainly by export of commodities and high rate of energy use. These rates are not sustainable and are generating significant air pollution, in particular from industrial stationary sources. This is putting at risk the country's development ambitions to become one of the top global economies by 2050 and converge towards OECD living standards. Building on OECD previous analysis, this publication shows that Kazakhstan's environmental payments (environmentally related taxes, non-compliance penalties and compensation for damage regulation) for industrial air pollutants, as currently applied, impede energy efficiency and pollution abatement with heavy-handed non-compliance responses and focus on rising revenues. They also add to the cost of doing businesses in the country with limited environmental benefit. In the spirit of the Polluter-Pays Principle, much more reforms of regulation of environmental payments are needed. This report provides guidelines for reform drawing from air pollution regulations in OECD member countries and the results of the analysis of the system in Kazakhstan carried out by the OECD in close co-operation with the Government of Kazakhstan