Problem overview:

     Policies and measures: Industries that have a potential to cause catastrophic damage to environment also have the potential to cause catastrophic damage to themselves. If a company self-destructs and at the same time causes severe environmental harm, who is going to pick up the cost? In the Philippines, an Environmental Guarantee Fund is a kind of industrial insurance fee to pay for monitoring, clean-up costs and compensation damages.

Background:

     Polluter pays, risk liability system for toxic wastes

     Initiation of the Environmental Guarantee Fund (EGF): As part of the implementation of the Environmental Impact Statement System, the Environmental Guarantee Fund (EGF) was created. Department Administrative Order No. 21 s. of 1992 known as 'Amending the Revised Rules and Regulations Implementing ' P. D. 1586 (EISS) paved the way for its creation.

     What is the Environmental Guarantee Fund: The Environmental Guarantee Fund (EGF) is a financial policy aimed at industries that have highly toxic waste streams (and thus have the potential to cause catastrophic damage to the environment). The official definition of the EGF "...a negotiated amount, on a per project basis, that covers expenses for information and communication activities by multisectoral teams, any repair or rehabilitation works, and compensation for damages attributable to the operation of the project".

     Increase in the number of projects that requires establishing EGF: As of March 1996, a total of 96 projects had been required by the Department of Environment and Natural Resources to establish an EGF. Twenty-five per cent of those ventures were power-generating projects. The number of projects required to put up an EGF is increasing with an average of 20 projects per year from 1992 to 1995. The government is initiating steps to strengthen the implementation of the EGF, particularly on the need provide a strong legal basis for the fund.

     The Philippine EGF comprises of three parts:

1. A multisectoral fund allocated expressly for environmental monitoring by a multiparty monitoring team:
   
   
2. A trust fund set aside for damage compensation to aggrieved parties, and to finance environmental restoration and the rehabilitation of environmental quality caused by project operations; and
   
   
3. A cash fund to be used by companies in implementing environmental management and rehabilitation programmes.
   
   

     Management of the EGF: The fund is managed by a multisectoral group made up of community and local government representatives, the Department of Environment and Natural Resources regional office staff, and industry representatives. The Department of Environment and Natural Resources has reported two contentious issues in the negotiation of EGF arrangements: the basis for computing trust fund amounts; and the opportunity costs of a company for the funds that are put in trust.