Toxic Waste Feasibility of Market

Toxic Waste

Feasibility of Market Approaches to Pollution Control on the Olifants River, South Africa

Introduction significant portion of the mining, agricultural, and power generation requirements of South Africa is currently managed with water from the Olifants River. Because of the very real problem of drought in the region, it is crucial that the water resources that available from the river are managed in an effective manner that efficiently distributes the limited resource to as many interests as possible in the highest quality form available. At issue is the matter of pollution of the Olifants River. This has been primarily attributed to runoff from existing and older, disused mines. Waste pollution from these operations, as well as from power generation and agriculture, significantly increases pollution in the river. In the past, river flow was high enough to dilute this effluent; however, decreases in river flow and increases in mining have both contributed to pollution concentrations that cannot be absorbed by the river.

The purpose of this study is to evaluate the feasibility of implementing market-based pollution control strategies in the Olifants River region of South Africa. Solutions include a discharge tax that would require mines and other operations to pay a tax based on the amount of effluent they release into the river system. Further pollution credits could be traded to help manage the release of effluent during periods of low river flow. The following study is divided into three sections to fully examine the issue. One, we will examine the current situation on the Olifants River and the extent of the pollution that is occurring. Two, we will consider similar market-based approaches to pollution control. Three, some suggestions will be made regarding the feasibility of applying similar market-based pollution controls in the Olifants River in South Africa.

The Situation: Discharge and Pollution in Olifants River

The Olifants River is one of the more significant river basins in South Africa and in much of sub-Saharan Africa. The Olifants River drains a catchment area of roughly 54,575 square kilometers through South Africa, into Mozambique, and then into the Indian Ocean ("Rivers and Catchments"). As it is such a significant river system, it is little wonder that the Olifants River represents one of the largest water resources in the region. In addition to supplying fresh drinking water to the 3.4 million people who live in the region by recharging subsurface aquifers, the Olifants River also supplies water to a significant number of other interests. The river provides irrigation for agriculture, water for mines, power for hydroelectric plants, water for industrial development, and water resources for the Kruger National Park through which the Olifants River flows.

In total, then, the Olifants River is a significant water resource in a region that is well-known to experience significant droughts. Additionally, because many different interests use the river continuously, it is crucial that the quality of the water be preserved so that it can meet the demands of all of the parties that depend on the Olifants River for their survival. The River passes through three provinces in South Africa before it heads farther down into Mozambique and then into the Indian Ocean. While the river itself is the longest and largest in the region, it is scarcely able to meet the burdens that are placed on it, even without taking into consideration the damage done by pollution. Currently demand for the river's resources are exceedingly the supplies the river can supply, with total water resources projected to be fully utilized by 2010 ("Olifants River Basin"). In the past, the river has been known to have some periods of zero flow conditions, though this situation has improved somewhat thanks to the efforts of government officials who are becoming more serious about managing the limited water resources available ("Olifants River Basin"; Wray and Venter). The cessation of flow of the Olifants River can be largely attributed to demands made by the agricultural industry, which seasonally has a very high demand for the water that the river provides.

In addition to agricultural uses for the river, a number of other interests lay claim to the water that flows through the Olifants basin. For instance, the people of the region already lay claim to the water that the Olifants drains through South Africa for drinking. But a large number of the people in this area live in Third World conditions. If development proceeds apace, the demand for water will grow significantly in the coming years ("Rivers and Catchments"). In addition, the river is a source of significant electrical power. There are currently thirty major dams along the river -- including hundreds more that are much smaller. These dams store water for later use but are also put to work to provide hydroelectric power for communities all throughout South Africa.

Both of these interests contribute in some ways to the deterioration of the water quality in the Olifants River. Human communities, combined with poor sanitation facilities, can result in raw sewage leaking into the water table or, worse, being dumped directly into the river (Wray and Venter). The power plants can contribute to the build up of silt in the water supply be preventing the natural behavior of the river that would transport that silt downriver and out into the ocean.

Agriculture has become a growing concern for those who are watching the water quality of the Olifants River. Pesticide use, fertilizers, and poor farming practices contribute to the contamination of the river when these chemicals find their way into the river in the form of field runoff. Overgrazing fields through the river basin leads to greater erosion of the land and results in more silt ending up in the river ("Rivers and Catchments"; Wray and Venter). However, the most significant and concerning source of pollution in the Olifants River remains the mining industry ("Olifants River Basin"). Existing mines channel runoff into the river that contains acids, chemicals, and heavy metals. Defunct mines channel similar substances into the river, but without any kind of control or oversight. This pollution has a significant impact on the quality of the water that flows through the Olifants River. While the national government has become increasingly strict with effluent violations by mining companies, the potential for abuse is still high and the threat to water quality is still quite significant (Wray and Venter).

The mining industry channels salts, heavy metals, and silt into the Olifants River. At times, the sheer volume of the river can account for this kind of influx of foreign materials. However, since there has been increased demand on this limited resource, the flow of the Olifants River has been significantly below its historical highs. This means that the river is less able to absorb these pollutants and the concentrations of salts, heavy metals, and silt is far above safe levels in many parts of the Olifants River Basin. These high concentrations have led to the disappearance of at least five different species of fish that once lived in the Olifants River. In some case, the concentrations can be high enough to render the water from the river and the surrounding water table entirely non-potable ("Rivers and Catchments").

For example, the Highveld Steel and Vanadium Corporation, which operated at least one mine in the Olifants River Basin, was discovered to have contaminated groundwater supplies by operating an unpermitted and unlined hazardous waste dump (Van Der Walt). A effluent like this one will not only contaminate the water of the river, it will also deposit heavy metals into the soil of the river. Added to the chemicals that are the byproduct of any industrial operation, and this effluent will have a significant detrimental effect on the water quality of the river.

In the long-term, then, those individuals, corporations, and governmental agencies with an interest in the health of the Olifants River must face a series of interrelated concerns for the coming years. These include:

Water quality of the river system because of pollution

Limited supplies, exasperated by water quality issues

The expansion of demand, such as calls for more irrigated land, the development of more mines, and urbanization

Increasingly vocal demands from downstream interests in Mozambique who also can lay claim to the water resources of the Olifants ("Olifants River Basin")

Managing these competing interests while providing for the health of the Olifants River Basin is an exceptionally complex and challenging task, but one upon which the future of the region literally rests.

Solution: Trading Discharge Credits for Pollution Management

Finding an effective way to manage such a diverse range of interests and sources of pollution is a challenge. However, programs and methods have been implemented in other locales that point toward an effective solution for this problem. In the past, efforts to reduce pollution by environmental interests have centered on outright banning with legal consequences for noncompliance. However, such methods are not always effective often leading to a situation in which offenders covertly dump pollutants into water sources without any oversight or accountability. Another unfortunate reality is that simply banning the discharge of effluents into the Olifants River will only stymie efforts to improve the economic situation of the region. New mining, agricultural, and electrical interests are being encouraged to invest in the region because they will facilitate economic growth and propel communities out of poverty. An outright ban on the discharge of effluents into the Olifants River will have the net result of undermining economic growth and crippling the communities that already rely on this economic base for their livelihood.

Many communities and governments, however, are experimented with market-based solutions to situations in which the interests of many firms, individuals, and organizations must be balanced with the larger desire to protect valuable environmental resources so that all can utilize them. The Australian government, in particular, has pioneered efforts to introduce market economic into pollution control and regulation. Their experiences with this method of environmental resource protection have been remarkably positive and indicate that market-based approaches may be well suited for application in South Africa.

To understand the nature of a market-based approach to pollution control, it is worthwhile to examine some of the methods employed and lessons learned by the Australian government. Simply taxing firms for discharging pollutants into the river is one method of placing a tangible price on the act. However, placing a cost on the act of discharging effluents does not necessarily mean that polluters will change their behaviors; they may be willing to simply absorb this tax as an increased cost of doing business. In theory, any tax will eventually reach the point when it will force firms to invest in alternative pollution control methods. However, in the meantime, the river system in question will continue to face pollution excesses that could permanently damage the resource.

This is why even if discharge taxes are applied that it is important to combine them with the concept of discharge credit trading. The concept of discharge credit trading is a relatively simple and harkens back to basic economics. A central authority, such as the national government or environmental protection agency, determines the total environmental load that the river system can reasonably bear and still meet the diverse needs of those individuals who rely on the river for industrial needs, agricultural projects, and drinking water. Said central authority then issues discharge credits that can be bought, sold, and traded between interested parties (James). The advantage to a system like this should be obvious: the market can allow the highest valued uses to be prioritized while limiting the discharges that the river system can accept. With a limited number of discharge credits, the market should be able to value and decide which activities are most desirable and then only permit those, all within the limits previously set by a central authority. In theory this means that even environmentalists who wanted to end discharges altogether could purchase pollution credits and prevent them from being used.

While there can be some limitations in distributing the original pollution credits and deciding who deserves them and in what amount, this system has proven quite effective at managing river discharges. The experience of the Australian government in the Hunter River Valley in New South Wales is a useful example. There, the NSW EPA wanted to control the salinity levels of the Hunter River. By presetting salinity levels permitted and then issuing 1000 credits, each worth 0.1% of the total salinity level allowed, the government created an artificial market that could self-regulate discharges into the river system ("How the Scheme Works"). Once the credits were initially distributed, controlling parties were free to trade the credits amongst themselves. This allows for individual variability -- firms could trade credits to account for varying levels of desired discharge -- while still maintaining system level controls of salinity levels. The success of the Hunter River Valley credit trading scheme illustrates the usefulness of the approach for regulating a precious water resource.

Application: Feasibility in the Olifants River Situation

The feasibility of such a market-based solution in the Olifants River region of South Africa is dependent upon a number of factors. Primarily, we need to evaluate whether or not the nation and the consequent communities possess the institutional and infrastructural sophistication to support the creation and development of a new market based on the trading of pollution credits. The system may have been successful in Australia, but that is a First World nation with all the benefits of the modern world -- both technically and politically. As already admitted, the Olifants River Valley is comprised mostly of communities still locked in a Third World developmental phase. Their capacity for integrating a pollution-trading scheme into the local economies may be asking too much. An analysis of some recent attempts to control pollution in the region should be illustrative as to the potential that exists in South Africa for such a scheme.

As a strike against institutional suitability, a recent case study found that the political organization of the agencies involved in managing water quality in South Africa is complicated and sometimes in conflict (Helmer and Hespanhol 347). This means that there are different agencies that manage the environmental health of the region, separating roughly by land, water, and air. This complicates the application of any market-based solution because river effluent pollution is not simply a matter for one agency to regulate or control. The same pollution that affects the water table will probably contaminate the land as well as clog the atmosphere. Further problems arise as we consider the variety of sources that all vie for a piece of the limited resources available and the different ways in which they all can negatively impact the overall quality of the water. Since any market approach will depend on the careful application of credit value by a central authority that sets the environmental loads permissible, the institutional climate in South Africa may prevent the easy application of such a mechanism.

Currently, efforts are under way in South Africa to provide a purely regulatory solution in the Upper Olifants River region that stress interagency cooperation in a bid to set and control levels of all forms of pollution that could occur from any activity in the region (Helmer and Hespanhol 349-351). While preliminary results indicate that some progress is being made, the environmental agencies in the country have decided to favor a purely regulatory approach to the matter of water quality, rather than setting limits and allowing stakeholders to compete for their share of a strictly controlled pie. While the market based approach could be ultimately much more efficient in this type of situation, it would require a level of institutional sophistication that may not be possible yet in South Africa.