IWRA Proceedings

Water pollution is the major environmental problem in industrial sector in Sri Lanka. Past experience reveals that existing regulatory mechanism based on Command-andControl (CAC) alone has provides little incentive for industrial firms to invest in technical improvements to comply with pollution discharge standards. The need for pollution prevention through a mix of regulatory and economic policies has been identified by relevant policy formulating bodies in Sri Lanka. These policies can be implement effectively by taking a river basin as an administrative unit. The main objective of this study was to examine the applicability of economic approach in conjunction with the regulatory approach to manage industrial water pollution in Sri Lanka.

Plant level data were obtained from firms located in Kelani River basin for this analysis. Primary data on abatement costs and emission concentrations of influent and effluent for parameters of BOD, COD and TSS were collected from four industry sectors namely textile, food processing, chemical and rubber industries. Standard software was used to estimate pollution abatement cost function. Marginal Abatement Cost (MAC) function was derived from the econometric results. A pair- wise comparison was done to find out the cost effective abatement policies.

The estimated Marginal Abatement Cost was 20.00 Rs./ Kg of COD where the pollution level reaches the National Environmental Standards (NES) or pollution level abated up to 250mg of COD. This value can be used to set base values to introduce incentive based policies. A charge can be levied for each additional unit of pollution, which exceeds the NES. Otherwise, a per unit pollution tax of 28.00 Rs. can be imposed for each additional lunit of pollution that exceeds the NES. Firms with abatement costs higher than the tax may pay the tax. The revenue generated from the charge can be directed to a pollution Control and Abatement fund, which can be utilized by firms to adopt clean technologies. The result of pair-wise comparison revealed that the cost-effective abatement cost is 51 Rs. / Kg of COD. This can also be used to set cost-effective incentive based policies. Even if this value is greater than the above-mentioned value (28.00 Rs.) it is still cost effective for firms. However, it is wise to introduce such policies to countries, which are at the initial stages of introducing such policies. This would provide reasonable time for firms to get adjusted to new policies and subsequently the charge level or tax can be raised up to cost-effective abatement level. An efficient level of abatement can be achieved by introducing such polices to manage water pollution in a river basin effectively