Would green tax increase help Ukraine overcome environmenal challenges

Author : Olena Holubeva

Source : 112 Ukraine

The revenues from the eco-tax are being spent non-transparently and inefficiently, and the majority of the environmental problems remain unresolved
13:00, 28 September 2018

Ukraine’s draft state budget for 2019 provides for an increase in the environmental tax. Will it help improve the country’s environmental issues – this is an open question. The revenues from the green tax are being spent non-transparently and inefficiently, Ukraine’s Minister of Ecology and Natural Resources Ostap Semerak acknowledged. Since 2011, the fee for polluting the environment has been charged, but the majority of the environmental problems remain unresolved. In the current realities, it is advisable not to increase the eco-tax, but to increase control over the money use, redistributing them for the benefit of the local communities that suffer from environmental pollution

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Green tax from companies that have a negative impact on the environment in Ukraine has been charged since 2011. Business entities that emit pollutants into the atmosphere, discharge sewage, place waste (except for enterprises that place waste as secondary raw materials), and form radioactive waste must pay it. Enterprises that deal with radioactive waste generated as a result of the Chornobyl disaster are exempt from paying the green tax.

45% of the collected tax goes to local budgets, and 55% goes to the state budget. Minister of Ecology and Natural Resources Ostap Semerak said at a press conference that this year the total amount of tax collection proceeds will be about 140 million USD. At the same time, the Minister noted that the use of funds in Ukraine is inefficient, and often they are not used for environmental activities.

The minister specified that this year only 10,5 million USD (out of 140 million USD) was allocated from the central budget for nature protection measures. In particular, 6,9 million USD were allocated to combat the harmful effects of water. "The rest of the money was spent on activities, indirectly related to environmental issues," Ostap Semerak claimed.

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The tax does not solve the problem

At the same time, most systemic environmental problems in the country remain unresolved.

In particular, the situation with the disposal of domestic waste remains disastrous. According to Ukrtvorma (Ukrainian production and environmental association for storage and use of secondary material resources), last year in Ukraine only 6.6% of household waste was recycled and disposed of: 2.48% of them were burned and only 4.18% of household waste came to the procuring points of secondary raw materials and incineration plants. The rest is still transported to landfills, many of which are in a terrible state. For example, Kyiv’s only landfill in the village of Pidhirtsi (Obukhiv district) has been functioning for more than 30 years and has long been overloaded. About 10 million tons of household waste have accumulated at the landfill: the height of the garbage bed has risen to 90 meters, which equals the height of the 27-storey building. A filtration lake is also very dangerous as this is a mixture of toxic liquids from a dump, mixed with the rainwater. At the moment, about 1 million tons of filtrate has accumulated in the lake.

In total, there are 5,500 dumps and landfills in Ukraine with a total area of 8.5 thousand hectares. Annually about 10 million tons of garbage are buried there, including hazardous wastes that are disposed of the landfills as many localities just do not have a separate waste collection system. The problem with the disposal of oil waste remains unresolved, the large share of which is burned in furnaces, polluting the environment with thousands of tons of hazardous substances (nitrogen oxides, sulfur dioxide, methane, formaldehyde, hydrogen chloride, carbon monoxide). According to market participants, up to 40% of oil waste is used for heating in Ukraine. In Europe, the burning of oil waste is prohibited.

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With respect to the inefficient approaches to the recycling of household waste, the annual loss of valuable raw materials in Ukraine is enormous. According to Ukrtorma, only 56% of the paper is used as secondary raw materials in Ukraine. Domestic capacities of paper and cardboard plants are loaded with domestic waste paper only by 70%. They are forced to compensate for the deficit through imports (last year it 320 thousand tons were imported). Also in Ukraine, only 28% of plastic and 30% of glass are reused. For comparison, in European countries, such as Austria, Belgium, the Netherlands, the reuse of valuable resources is paper - 95-98%, plastic - 86-85%, glass - 81-100%.

How to improve the situation?

The situation with the collection and utilization of household waste through an environmental tax could be improved by the local administrations and communities. There is no clear order for the targeted spending of money for the environment from the central budget; however, it is clearly regulated for the local administrations. "The list of measures to which local administrations can send money for the environment is stipulated by Cabinet of Ministers Resolution No. 1147 of September 17, 1996 "On approval of the list of activities related to environmental measures." The local administration decides on allocating money in its own discretion," the head of the Association of Small Cities Pavlo Kozyrev (ex-mayor of Ukrainka town, Kyiv region) explained.

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According to the Resolution, local administrations can direct the money for the environment for rational use and storage of industrial waste and household waste. Also, money can be spent on the protection and rational use of water resources, protection of the atmosphere, measures for the rational use of land and mineral resources, protection and rational use of plant resources and wildlife resources, and nuclear and radiation safety. These funds can also be spent on science, awareness, training, environmental expertise, labor organization, participation in the activities of international environmental organizations.

"We used the money for the environment for of sewage treatment plants, sewer collectors overhaul in Ukraine. We have implemented a program for sorting garbage, carried out the greening campaign, managed to introduce irrigation systems for plantations," Kozyrev said.

At the same time, not all Ukrainian cities use the money for the environment effectively, experts assure. "We know about the cases of misuse of funds received from the collection of green tax. In 2014, as far as I know, the Kyiv State Administration has received fire extinguishers from revenues from the green tax, although logically, these funds had to be spent in a different way," head of the "Second Life" public environmental organization Serhiy Volkov stated. He added that, unlike Ukraine, European countries use their green tax more efficiently. They introduce technologies that reduce the harmful impact on the environment.

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Minister Semerak also recognizes the fact that local budgets also have questions about the effectiveness of using local money. "The use of these funds by local governments raises controversial issues," he claimed. Often this money simply lies dead in the accounts of local budgets.

* * *

Taking into consideration the abovementioned increase in the green tax, envisaged in the draft budget for 2019, the experts believe that it is unlikely to lead to an increase in the effectiveness of the use of money to preserve the environment. At the same time, this will increase tax pressure on heavy industry enterprises, which are major donors of the state budget. It is no secret that the conjuncture on the world markets is not in favor of Ukraine now and domestic metallurgists are going through hard times. Market participants lament that additional tax pressure will only worsen the competitiveness of Ukrainian products in the world.

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"I do not know whether it makes sense to increase the payment for damage to the environment, but obviously, it makes sense to distribute it differently, increasing revenues specifically to the budgets of local communities," Kozyrev states.

"It is advisable to raise the amount of the fee (green tax) only if the control over the distribution of funds is strengthened," Volkov agrees.

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