Problem overview:

     Awareness and visions: The Philippines has recognized that to sustain economic development without sacrificing the environment, new measures and policy instruments has to be designed to complement existing command and control approaches which have been proven ineffective because of budget inadequacy. The successful pilot testing of Environmental User Fee System in Laguna lake and its integration in the Laguna Lake Development Authority's environmental management program serves as a precedent and catalyst for other local government units, to implement similar or improved system based on the lessons learned.

     Policies and measures: The use of environmental user fee system (EUFS) in the management of Laguna lake resulted to reductions in pollution loads and to expansion of cooperation of major industries, through requests for issuance of discharge permits. The successful complementation of EUFS with the existing command and control approach, however, required the decentralization of decision-making, provision of legal power to levy and retain other than fines and permit fees, and intensified involvement of stakeholders.

Background in summary:

     Recognizing the need to integrate environmental considerations into economic decision making processes: The first indication of any attention being given to environmental problems in the Philippines came in the late 70s, however it was only in 1987, when the country first recognized the need to integrate environmental considerations into economic decision-making process after it found that the activities aimed at achieving economic and social gains resulted to further degradation and depletion of environment in many parts of the country.

     Introduction of the Environmental User Fee System: Adoption of market-based approaches in the Philippines has been relatively slow due to moral and political objections against creating a "right to pollute"; perception of a loss of control or greater unpredictability of environmental outcomes by the government regulator in cases where an emission/effluent charge is contemplated; preference for an administrative status quo; legislative restrictions placed on the regulator to tax pollution, inhibiting a search for suitable tax-based approaches; resistance by certain groups that feel they would be worse-off as a result of the introduction of a particular economic instrument; and limited body of empirical evidence concerning the pattern of abatement costs and scope for cost-savings that MBIs truly offer in local conditions. One of thesolutions to the above causes is the introduction of the Environmental User Fee System (EUFS), an effluent taxes based on presumptive discharges, by pilot testing it in the Laguna Lake.

     Why Laguna de Bay Region: Firstly, Laguna de Bay is the largest lake in the Philippines strategically located within the Philippines' center of urban and industrial development. Secondly, because of the social and economic uses and other industrial activities, which poses a big risk of becoming the sink for the waste generated by the industries located along the periphery. And thirdly, because of the presence of operational local institution, the Laguna Lake Development Authority, which was created in 1966 under Republic Act 4850

     Environmental protection efforts become more effective: The EUFS complements the existing regulatory system and has been aimed at reducing the pollution loading into the lake by encouraging all liquid waste dischargers to account the cost of environmental degradation and enhancement in the business decisions or actions. Charges of user fees comprise of a fixed fee based on the volumetric rate of discharge, and the variable fee, which will be based on the unit load of pollution.

     The achievements and expansion of EUFS: During the first year (1997) of implementation, biochemical-oxygen demand (BOD) loading was reduced by 88%. In 1998, the system was expanded to include 100 percent of industries and wastewater discharges from top five polluting industries, resulted to BOD reduction of 3,014.83 tons. The following year, coverage was expanded to food chains and restaurants. Subsequently, the EUFS became an integral part of LLDA's Environmental Management Program in 2000 after it had successfully completed the initial stage of pilot testing the pioneer MBI in the Philippines.

     Successful combination of MBI and CC: In 2001, the system was able to cover 728 industrial, commercial establishments, housing subdivisions and condominiums. The major factors which contributed to the successful integration of EUFS in LLDA's environmental management program are (i) the decentralization of decision-making process; (ii) its legal power to levy and retain other than fines and permit fees; (iii) the degree of involvement or participation of stakeholders was intensified through multi-stakeholder consultations; and (iv) the revenues generated, which provide a long-term internal financing for environmental improvement. The Philippines, specifically the LLDA, has successfully combined a market-based instrument with existing command and control measures to achieve the desired goal. Using LLDA's experience, the government may now be able to mainstream the system throughout the country, and across sectors and media.

Peer Review Committee Good practice rating: (1 for the best, 5 for the lowest score)
Sustainability		Efficiency
2	Improvement in either the environment of economic condition with no harm to the other.	2	Cost efficient.
2	Sustainable over time (not one-off)	Process
Adaptability		2	Participation of the community
2	Location adaptability (can the project be done in other places?)	1	Participation of resource owners/users
2	Socio-cultural adaptability.	2	Partnerships between various actors (Governments, NGO, Academia, Private)
3	Level of development adaptability.	2	Degree of coordination and cooperation between government departments.
3	Style of government adaptability.	2	Ability to attract political interest/support
-	Degree of decentralization adaptability.	-	Procedures for feedback and review.
Comments on this example:   Sustainability of the project:      Sustainability of the project: The use of environmental user fee system proved to be a potent tool in reducing BOD loads in the lake, because the revenues from collected fees were used to refinance important activities e.g. monitoring of industries' discharges and better enforcement of user fees. Adaptability of the project to other situations:      Adaptability to other situation: The high degree of decentralization in decision-making has made the implementation of EUFS successful along with multi-stakeholder approach and legal power to levy. If other countries would like to apply EUFS with existing CAC approaches, it should account other factors such as political, administrative, equity and effectiveness. In particular, in applying such scheme, local governments may face regulatory constraints to change the rate of charges. Process of decision making and implementation:      One of the key factors that contributed to the successful implementation of the programme is the degree of involvement or participation of stakeholders. The stakeholder participation in decision-making process was intensified through multi-stakeholder consultation. For an implementation process, participation of industries is also an important criteria for the success of the programme. Cost efficiency:      As the largest lake in the Philippines and also ranked as one of the largest inland body of water in Southeast Asia, monitoring cost may be administratively expensive. To some extent, self-monitoring can reduce such costs.