Comments on this example:
Integrating all stakeholders: This example demonstrates the efficient participation between the public and private sector. However, the other side of the coin is that Shell, which already has the large market share in the vessel fuel/marine sector, will have a great opportunity to drive other retailers out of business and increase its market share to eventually become a monopoly. If so, the company may take an advantage of the situation and raise the retail price, which decreases consumer welfare. In order to prevent this, the government should control the behavior of the lubricant company after project implementation and support other lubricant companies to follow this project.
On the other hand, if the oil company sells the lubricant (together with providing this service) at the higher price than the market price, or if there is a black market where the lubricant oil is available at lower price, fishing vessel owners will not buy lubricant from that oil company. They will buy lubricant from other sellers (not include used lubricant collection service) and still dump the used lubricant into the sea. The goals of this project will not be able to succeed.
Policies and measures: Pollution management and control doesn't necessarily have to be done through command and control measures. Incentive based measures can also be used very efficiently, as demonstrated in this example. Each party has the incentive to participate.
- Fishing vessel owners would participate because they can receive lubricant refilling service which would be very convenient for them. If the fishermen are aware that dumping the oil may have negative impacts on their fish stock, they may be even more encouraged to participate in the programme.
- Apart from its awareness to protect the environment and public image for the commitment to environment, oil companies may have vested interest to secure its market size or capture more market share by providing better services.
- GENCO may be interested to participate because it is interested in receiving used lubricant with low cost from Shell as their raw material for cement production.
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Sustainability of the project:
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Used lubricant dumped into the sea usually come from the fishing vessel because the large commercial vessel will change its new lubricant at the suitable port. In Thailand, there are approximately 16.9 million litres of used lubricant in fishery sector out of 330 million litres for the whole country in 1997, or about 3.2%. Shell have so far collected 40000 litres of used lubricant since the beginning of the project in July 2001. It may be too early the assess the effectiveness of the project at this stage.
The ranking for the sustainability is quite high because the project will improve the environment without causing economic loss to the parties involved (except the expenditure by the oil company) and at the same time provides enough incentive to all parties. Moreover, if the project succeeds, other lubricant companies will have to follow the similar system to compete for their market share. All lubricant retailers will respond to the used lubricant by collecting it and maybe selling it to other companies. This is the concept of the life-cycle management, the producer should responsible for its product for the entire product-life-cycle.
But the sustainability of the project over time will very much rely on the commitment of the private sector. In this project, each party plays an important role; hence, the cooperation of the parties is the most important factor in this project. If one party falls short of its role, the project is most likely to fail. In particular, in this project Shell has to spend some money (4 million baht) in the initial stage to invest in fixed assets like trucks. If their involvement is one-off commitment, the project may not sustain.
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Adaptability of the project to other situations:
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Location Adaptability: The location adaptability for this example may be quite low because this project is location specific. The major mechanism for this example is collection of waste by the producer(or retailer) of the product. This means that the means of transportation i.e. road has to be good. Retailers/producers may be discouraged to collect waste in very remote area.
On the other hand, example may be adapted to the other products, such as used bottle or used tires.
| Process of decision making and implementation: |
The process for this project is quite clear. Each party knows clearly what it has to do. However, there is a problem in monitoring process about how we can observe the effectiveness of the project. Initially, monitoring process was done by using helicopter to investigate the oil layer in the sea. But this process is a very costly one. One of the alternative methods is to consider the quantity of returned used lubricant as a measurement for the effectiveness of the project. Since July 2001, 40000 litres of used lubricant have been collected by Shell.
This project is driven by the incentives of the 3 parties to actively participate because they see the benefits gained However, at the beginning period, Shell have to invest in some fixed cost such as trucks which cost about 4 million baht.
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