Environment Protection Act 1970 and Litter Act 1987/media/Publications/epa_ncp_final.pdf ·...

August 2000

FINAL REPORT

Environment Protection Act 1970and Litter Act 1987

National Competition Policy Review

The Allen Consulting Group Pty Ltd

ACN 007 061 930

Melbourne

4th Floor, 128 Exhibition StMelbourne Victoria 3000Telephone: (61-3) 9654 3800Facsimile: (61-3) 9654 6363Email: [email protected]

Sydney

3rd Floor, Fairfax House, 19 Pitt StSydney New South Wales 2000Telephone: (61-2) 9247 2466Facsimile: (61-2) 9247 2455

Canberra

Level 3, 60 Marcus Clarke StCanberra ACT 2600Telephone: (61-2) 6230 0185Facsimile: (61-2) 6230 0149

Online

Email: [email protected]: www.allenconsult.com.au

R E V I E W O F T H E E N V I R O N M E N T P R O T E C T I O N A C T 1 9 7 0 A N D T H E L I T T E R A C T 1 9 8 7

Table of Contents

Executive Summary i

Chapter One 1Background to the Review 1

1.1 The Legislation under Review 1

1.2 Review Methodology 2

1.3 Stakeholder Consultation 3

Chapter Two 4Conceptual Framework 4

2.1 National Competition Policy 4

2.2 Regulation and Environment Protection 8

Chapter Three 13The Environment Protection Act 13

3.1 Overview of Legislation 13

3.2 Markets Affected by Environment Regulation in Victoria 14

3.3 Preliminary Assessment of the Act 14

Chapter Four 16Objectives of the Act 16

4.1 Overview 16

4.2 Objectives of the Legislation 16

Chapter Five 21Powers of EPA 21

5.1 Overview 21

5.2 Powers of EPA to Recommend Policies and Regulations 21

5.3 Use of Economic Instruments 30

Chapter Six 33Regulation of Premises 33

6.1 Overview of the Regulations 33

6.2 Scheduled Premises 34

6.3 Works Approvals 35

6.4 Licences 42

6.5 The Accredited Licensee Scheme 48

6.6 Environment Protection Levy 50

6.7 Financial Assurance 52


Chapter Seven 55Management of Waste 55

7.1 Overview 55

7.2 Prescribed Waste 55

7.3 Transport of Waste 56

7.4 Industry Waste Reduction Agreements 59

7.5 Landfill Levy 62

Chapter Eight 65Appointment of Auditors 65

8.1 Appointment of Environmental Auditors 65

8.2 Appointment of Motor Vehicle Testers 68

Chapter Nine 70Enforcement 70

9.1 Overview 70

9.2 Infringement Notices and Prosecutions 70

Chapter Ten 76Regulation of Septic Tanks and Sewage Treatment 76

10.1 Regulating Alternative Waste Management Products and Systems 76

Chapter Eleven 79Overlapping with other Regulation 79

Chapter Twelve 81The Litter Act 1987 81

12.1 Overview of the Legislation 81

12.2 Offences and Penalties 81

Chapter Thirteen 85Concluding Remarks 85

Appendix A 87Terms of Reference 87

Appendix B 89Policies and Regulations 89


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Executive Summary

About the Review

This review of the Environment Protection Act 1970 and the Litter Act 1987 wascommissioned by the Victorian Environment Protection Authority (EPA) andDepartment of Natural Resources and Environment. The review is part of the NationalCompetition Policy (NCP) legislation review program endorsed by the Commonwealthand all State and Territory governments in the intergovernmental CompetitionPrinciples Agreement.

EPA and DNRE appointed The Allen Consulting Group to conduct the review in early1999. The review was designated a Model 4 review which does not require publicconsultation according to the then Victorian GovernmentÕs Guidelines for the Reviewof Legislative Restrictions on Competition. Nevertheless, stakeholders from industry,community and environment groups were encouraged to participate in roundtableconsultations and to provide written submissions. A Discussion Paper was releasedthat raised the core issues discussed in this report.

Focus of the Review

There are many policy issues that will arise in a review of environment regulation.These issues include use of the appropriate policy principles and objectives, use ofeconomic or regulatory instruments, issues of enforcement, dispute resolutionprocedures, access to information, extent of public and industry participation in policyformation, etc.

The focus of this review is on competition policyÑthat is, the principle that legislationmust not impose a restriction on competition unless there is a net public benefit indoing so.

Many of the issues raised by stakeholders during the review which are of a broader focusthan competition policy are worthy of further discussion and are discussed at timesthroughout the report, such as questions of third party enforcement of the Act. Many ofthese matters are the subject of discussion in ongoing forums between EPA, industryand the community.

Issues, Conclusions and Recommendations

Since its introduction in 1970, the Environment Protection Act has been designed asÔumbrellaÕ legislation covering all types of air, land, and water/sea pollution. Thenumerous additional or amended clauses now in the Act reflect changes in environmentregulation since 1970. The Litter Act regulates the disposal of litter in Victoria.

Table 1 summarises the competition issues and conclusions and recommendations thathave arisen as a result of this review.


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Table 1

Issues, Conclusions and Recommendations

Chapter Subsection Competition issue Conclusions / Recommendations

4. Objectivesof the Act

Objectives The objectives of the legislation are not clearlystated. The absence of a stated objective in theAct is not a restriction on competition. However,one of the principles of competition policylegislative reviews is to clearly identify theobjectives of the legislation. This also accordswith good legislative design.

The objectives of the Act should be clearly stated toprovide clarity to industry, the community, and theEPA. The objectives should be developed withreference to the principles listed in theIntergovernmental Agreement on the Environment,the principles of competition policy and theobjectives used in similar Acts in other jurisdictions.

5. Powers ofthe EPA

Powers of EPAto recommendpolicies andmake regulations

EPA has a considerable degree of discretion increating policies and regulations andadministering the Act. From a competition policyviewpoint, EPA could potentially use thisdiscretion to inappropriately target a particularindustry or individual companies or type ofpollution. This may be anti-competitive. To avoidthe possibility of discretion resulting in anti-competitive outcomes certain checks andbalances should be used.

EPA, as the authority with expertise and experiencein environment management, is the body that is bestplaced to create SEPPs, IWMPs and regulations. Tothe extent possible, policy and regulation creationshould be undertaken in a transparent manner thatmaximises industry and public input.

Pollution sources, whether from point or diffusesources, should be treated equitably. Furthermore,point source polluters, through existing fees andlevies, should not be required to subsidise regulationand monitoring of diffuse source pollution. Possiblefees or levies on diffuse source polluters should beconsidered where practicable.

Powers of EPAto use economicinstruments

Economic instruments attempt to address marketfailure by accounting for external costs. Thepowers of the EPA under the Act to useeconomic instruments are unclear.

The use of economic instruments should be madeclearly available to EPA under the Act. Thedevelopment of an economic measure should betreated in the same manner as the development of aregulationÑthe objectives of the instrument shouldbe clear; an impact statement should be prepared;and the measure should be periodically reviewed.

6. Regulationof premises

Works approvals The requirement for works approval restricts theundertaking of works subject to the conditions setby EPA.

The requirement for works approval is justifiedunder the precautionary principle. The competitionrestriction is outweighed by the benefits of certaintyto industry and the community.

Works approvalsfee

The works approval fee is an added costimposed on certain industries. The fee iscalculated according to the user pays principle,however it is based on the size of the workswhich may not be an accurate proxy for the costof EPAÕs resources.

As an initial measure, the fee structure should berevised to cap the fee as a proportion of works forsmall firms to no greater than 5 per cent of the valueof the works. Further down the track, the fee forworks approvals should be calculated based on areflection of user pays principles that more closelymatches the time and financial cost of EPAresources, rather than on the size of the works.Changes to fee calculation should be consideredwhen the Fees Regulations are reviewed in the nearfuture.

Works approvalprocess

The potential delays of the process are an addedcost imposed on certain industries (estimated tooccur in 10 to 15 per cent of approvals). Thiscould potentially place them at a disadvantage tothe producers of less regulated competingproducts or substitutes, or competitors from otherstates.

Whilst the four month limit is appropriate for themost complex of processes, EPA should consider ashorter allowable maximum processing period forless complex cases.

Licensing Licensing as a regulatory tool is a fundamentalrestriction on competition because it dictates whocan operate a business, by restricting theactivities of a business and prohibiting thosefirms that cannot meet the requirements of thelicence from operating.

The licensing system is justified on public benefitgrounds.

There are no restrictions on who can obtain alicence other than meeting standards which aredesigned to protect the environment.


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Licence fees The charging of licence fees can be argued torestrict competition by adding to the cost ofproduction of certain activities, in particularcompared to activities regulated in alternativeways. An issue is whether the fees should be setat a level that is greater than cost recovery andtherefore include an incentive to limit pollutingactivities (eg a loadÐbased licensing scheme).

The case for increasing the levels of the existingloadÐbased licensing scheme could be consideredwhen the Fees Regulations are reviewed. However,the present system already provides incentives forpollution reduction, and there may be other lesscostly means of reducing pollution, such as throughgreater communication of the benefits of cleanerproduction to industry.

The AccreditedLicenseeScheme (ALS)

The low number of participants in the schemesuggests that the conditions for participation maybe restrictive or that the perceived benefits ofparticipation are low.

Smaller companies are at a disadvantage as it isproportionally more expensive to institute themanagement systems required to participate inthe scheme.

The scheme should be made more attractive to firmsof all sizes. EPA should consider options forcommunicating the benefits of ALS and should alsoexamine whether there are benefits in developingan alternative or modified scheme for smaller firms.

EnvironmentProtection Levy

Whilst not a significant restriction on competitionin itself, the objective of the levy is not clear inthe Act. The levy is imposed on selectedscheduled businesses. There is no flexibility inthe levy to cater for individual circumstances.

The levy should be reviewed with the purpose ofmore clearly defining its objectives (andeffectiveness in meeting those objectives), abolishedor incorporated into the licence fee.

Financialassurance

The requirement for financial assurance imposesa cost on companies due to the cost of funds.

Although it is likely that companies would insureagainst liability of environmental hazard anyway,the risk that this may not occur, added to thepotential delays and costs of litigation, are sufficientto justify the retention of financial assurancerequirements. This is more a regulatory design issuerather than a competition policy issue.

7. Managementof waste

Prescribed waste Stakeholder reservations were expressed aboutsome of the wastes that have been prescribed inthe regulations.

This is an ongoing issue between industry and EPAthat should be dealt with in established forums. Thediscussion should be mindful of any competitionpolicy issues that may arise from prescribing eachtype of waste. This is more a regulatory design issuerather than a competition policy issue.

Transport ofwaste

The requirement for a permit is a restriction oncompetition as it restricts who can transportwaste.

There are no restrictions on who can obtain a permitother than meeting standards which are designed toprotect the environment from spills and leakages.The restriction passes the public benefit test underthe precautionary principle. The option of making apermit part of a licence, and therefore combiningapproval processes, should be made available tohelp to reduce administration costs. Greater use ofelectronic technology should be a high priority toreduce compliance and administration costs.Increased levels of enforcement, or periodicÔblitzesÕ, should also be considered to monitorcompliance.

Industry wastereductionagreements

There are some industries that are not coveredby IWRAs. This has to be seen in the context thatagreements are not mandatory (although EPAhas ÔpersuasiveÕ powers under the Act), so it isnot appropriate to imply a legislative competitionrestriction.

IWRAs are an appropriate tool for waste reductionand should continue to be developed whereagreements currently do not exist at a state-level ornationally. Rigorous analysis of the economic andpublic benefit justifications for IWRAs shouldcontinue to be undertaken by both EPA and theindustry.

IWRAs are one of a number of instruments forcontrolling and reducing waste, from nationalagreements and industry codes through to licence ornotice requirements. It is difficult to evaluate theeffect of waste reduction agreements in Victoriapurely by an examination of IWRAs because of theexistence of these other similar instruments.

Landfill levy The levy is an impost on waste managers andproducers, although it constitutes a relativelysmall cost as a proportion of landfill costs andtotal waste management costs. The difference inthe rate imposed on waste disposed atmetropolitan and rural landfill sites is an anomalythat needs to be justified.

The objectives of the landfill levy to reduce wasteand provide funds for waste management andreduction processes should be made clearer in theAct. The economic justification for the metro/ruraldifference in fees, if any, should be made clear. Ifno such justification can be made, the differentialshould be eliminated.


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8. Appointmentof auditors

Appropriatenessof assessmentcriteria

EPA-required environmental audits are asignificant portion of the environmental auditmarket. While EPA does not regulate theprofession of environmental auditor as such, itdoes stipulate who can be an accreditedenvironmental auditor for the purposes ofundertaking EPA-required audits. The auditsare a significant source of business for someenvironmental auditors. EPA accreditation mayalso give an auditor a competitive advantage inundertaking other environmental audit work notrequired by EPA eg some voluntary audits,because of the credibility of EPA accreditation.Therefore, it is important that EPA adoptselection criteria that do not restrict competitionon unjustifiable grounds.

The assessment criteria do not appear to impose anyunjustifiable restrictions and the process forselection appears to be largely transparent.

Regulatory forceof assessmentguidelines

While the Act includes the provision that allowsfor the appointment of auditors and penaltiesfor providing false or misleading information,there are no provisions in the Act that governthe appointment process itself.

To ensure the present principles are observed infuture, the Act should be amended to include aprovision for the appointment of auditors, whichwould set out general criteria for appointment,consistent with competition policy principles. Morespecific criteria should continue to be published inthe Guidelines. This is more a regulatory designissue rather than a competition policy issue.

Potential conflictof interest

The requirement for auditors to reveal theirconflicts of interests would provide a clearbenefit and meet community concerns in termsof transparency. It would complement existingstrong deterrents under the Act in the form ofsevere penalties for which auditors arepersonally liable.

There should be a requirement in the Act thatauditors reveal any potential conflicts of interest inundertaking an audit required by the Act. This ismore a regulatory design issue rather than acompetition policy issue.

Appointment ofmotor vehiclenoise testers

Potentially, a restriction on competition couldarise due to inappropriate requirements forEPA accreditation or if there is a restriction onthe number of accredited testers.

Requirements on applicants do not contain anyunreasonable standards.

EPA does not restrict the number of AccreditedNoise Testers so applicants need only meet therequirements of EPA to become accredited.

No changes are recommended.

9. Enforcement Infringementnotices

The issue of notices is a concern forcompetition policy if they are not servedaccording to the principles outlined in EPAÕsenforcement policy, ie they need to be fair,predictable and consistent.

An analysis of the issue of infringement notices didnot reveal any competition policy concerns. Nochanges are recommended.

Enforcement andthird partyprosecution

In terms of competition policy, EPAÕsmonopoly on enforcement is primarily a causefor concern if it is seen to bediscriminatoryÑtherefore anti-competitive.

If companies are obtaining an unfair advantagefrom ÔselectiveÕ enforcement of the Act or ageneral lack of enforcement of the Act then itmay be suitable for third party prosecution tooccur or some other response such as anincrease in funding for prosecutions by EPA.

Stakeholders did not raise any examples where thiswas the case and there were no submissions fromindustry claiming unfair enforcement.

The availability of third party enforcement is apolicy decision for government rather than acompetition issue. There does not appear to besignificant evidence from the review that thecurrent approach is not effective. There are risks ofhigher transaction costs from third partyenforcement.

10. Regulationof septic tanksand sewagetreatment

Lack of clearguidelines formunicipalcouncils

It is claimed that providers of some alternativeproducts to septic tanks, such as compostingtoilets and grey water systems, cannot competebecause, although they have been approved foruse by EPA, there are no clear guidelines fortheir use. The absence of such guidelines hasacted effectively as a barrier to entry becauselocal councils are unwilling to issue specificon-site permits if they are uncertain about thealternative systems.

This is not a legislative restriction, but one caused bylocal councilsÕ lack of knowledge about alternativesystems. EPA should expand its role as the delegatedauthority to assist local councils to better understandalternative systems to septic tanks.


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10. Regulationof septic tanksand sewagetreatment (cont.)

Conflict betweenthe regulatoryand providerroles of waterauthorities

Provisions under the Water Act permit waterauthorities to force premises to connect tosewerage systems constructed by thoseauthorities (and even make a capitalcontribution toward those systems) . Theseprovisions will be the subject of a separatecompetition review of the Water Act.

The suggestion to transfer the regulatory functionthat currently resides with the water authorities tothe EPA would sit well with existing regulations forseptic tanks and should be considered in the NCPReview of the Water Act. It is not perceived that theregulatory function would lead to any competitionissues under the auspices of the EPA because theEPA is not in the business of installing or maintainingsewerage systems.

11. Overlappingwith otherregulation

Costs ofoverlappingregulation

Overlapping regulations impose additionalcompliance costs. Often these costs areproportionally greater for small businesses, andmay even constitute an effective barrier toentry.

The impact of new regulations on the overallregulatory burden should be assessed, whereappropriate, under EPAÕs Protocol for theDevelopment of Regulations and the Preparation ofRegulatory Impact Statements.

Sometimes these overlaps are necessary to ensureprotection of employees, the environment and thecommunity. However, where possible, streamliningof regulations should be considered. This is more abroader regulatory design issue rather than acompetition policy issue.

12. The LitterAct

Restrictions onactivities

Some provisions of the Act, such as those thatprohibit placing advertising leaflets on motorvehicles, may also be seen to be placingcompetitive restrictions on smaller operatorswho cannot afford major electronic advertisingcampaigns.

Restrictions under the Act are justified by a publicbenefit.

Strengthening theAct

Some stakeholders supported making the LitterAct a more forceful piece of legislation,possibly by incorporating the Litter Act in theEnvironment Protection Act.

The proposal to incorporate the Litter Act in theEnvironment Protection Act is supported. This ismore an issue of regulatory design rather thancompetition policy.

Some activitiesshould beincluded in theAct

Stakeholders raised some activities that shouldbe offences under the Act, eg, deposit ofhousehold or commercial rubbish in a publicrubbish bin.

Some of those acts are offences under case law, butthe government may wish to consider their inclusionin the Act. If so, then these should comply withcompetition policy principles.

Stakeholder Views

Overall, there was largely agreement among stakeholders that restrictions oncompetition due to environmental regulation under the Act can be justified on a publicbenefits basis given the externalities involved in the regulated activities. There wasrelatively little interest in the review by many stakeholders, with only a few majorissues raised. This was taken to reflect the general stakeholder view that both Acts arelargely working and that the approach to the administration of the legislation by theEPA is seen as appropriate.

Conclusions

The Environment Protection Act is an example of ÒumbrellaÓ legislation designed toregulate an array of activities under a common theme. In many cases environmentalregulation is very case specific for technological, economic or ecological reasons, whichjustifies the level of discretion awarded to the Regulator (the EPA) under the Act. Anumber of stakeholders put forward proposals to substantially increase the powers orcoverage of the Act. While these were analysed on their merits, some of these (such asmajor new taxes) are more in the realm of major policy changes.

Putting the detailed recommendations aside, the main conclusions of the review werethat both acts substantially comply with competition principles (or would withrelatively minor changes) and that a greater level of prescription of the powers of theEPA is unlikely to provide for more efficient regulation in many cases.


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Chapter One

Background to the Review

This review of the Environment Protection Act 1970 and the Litter Act 1987 wascommissioned by the Victorian Environment Protection Authority (EPA) andDepartment of Natural Resources and Environment (DNRE). The review is part of theNational Competition Policy (NCP) legislation review program endorsed by theCommonwealth and all State and Territory governments in the intergovernmentalCompetition Principles Agreement.

EPA and DNRE selected The Allen Consulting Group to conduct the review.

1.1 The Legislation under Review

The Environment Protection Act is the primary legislation for the protection of theenvironment in Victoria. The Act provides the legal framework for air, water and landprotection and the regulation of noise pollution. It also provides for the enforcement ofpenalties upon firms and individuals that breach the Act. The Act establishes EPA as astatutory authority and provides it with a range of functions including setting statutorypolicies, conducting research, providing information and education to the public,monitoring pollution, performing inspections and issuing licences, work approvals,permits and pollution abatement notices.

The deposit of litter in Victoria is regulated by the Litter Act. This Act detailsunacceptable disposal of litter and provides for the enforcement of penalties forindividuals and firms in breach of the Act.

This report discusses the principles of competition policy and environment protectionpolicy, outlines the legislation under review, and then reviews a set of competitionpolicy issues that were raised in a Discussion Paper (that was released publicly), inmeetings with key stakeholders and from stakeholder submissions. The main issuesraised in this review were:

• the clarity of the objectives of the Act;

• the discretion of EPA to make policies and regulations and enforce the Act;

• provisions to require occupiers of certain premises to apply for and act inaccordance with works approvals and licences issued by EPA;

• provisions which allow EPA to require persons or firms to enter into wastereduction agreements, and requirements for transport certification for some wastes;

• provisions for the appointment of environmental auditors and analysts andprovisions for the appointment of approved testers of motor vehicles by EPA;

• provisions for EPA to charge and collect levies;

• the regulation of alternative waste management products and systems; and

• the objectives and the enforcement of the Litter Act, and justification for restrictionsin the Act.


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1.2 Review Methodology

The review methodology and reporting and consultative arrangements were establishedin line with the requirements of the Victorian GovernmentÕs Guidelines for the Reviewof Legislative Restrictions on Competition.

The guiding principle of NCP is that legislation should only restrict competition if itis in the public interest to do so. In making this assessment, NCP reviews take intoaccount issues raised in stakeholder consultations and other relevant sources and applycompetition policy principles to the legislation under review. A discussion ofcompetition policy principles is provided in Section 2.1 of this report. The process forthe review is set out as follows:

• clarify the objectives of the Environment Protection Act and the Litter Act.Determine the market failures concerning the protection of the environment that thelegislation is intended to address;

• describe the legislative framework of environmental protection in Victoria;

• identify the nature of any restrictions on competition that can be attributed to thelegislation;

• assess the cost and benefits to the community caused by the restrictions, and assesswhether the benefits outweigh the costs; and

• consider alternative means to achieve the objectives, including non-legislativeapproaches.

Following the process outlined above, this report, where appropriate, contains optionsfor legislative reform in accordance with NCP. These options have been derived by:

• considering the comments of stakeholders raised during the consultation process;and

• examining the method and regulation of environmental protection in otherjurisdictions in Australia.

The costs and benefits of identified alternative options will be discussed in similarfashion to the assessment of the existing legislation.

Review timetable

This review was conducted according to the timetable set out in Table 1.1.

Table 1.1

Timeline for the Review

Task Description Date

Release of the DiscussionPaper

Notices published in the Victorian media advising of the releaseof the Discussion Paper in advance of the public consultationprocess.

3 April 1999

Submission Period Interested parties were invited to provide public writtensubmissions in response to the Discussion Paper.

3 April to5 May 1999

Roundtable consultations were held with representatives of keystakeholders:

Stakeholder Consultation

Government departments and agenciesEnvironment and community groupsIndustry groups

26 April 199927 April 199927 April 1999

Development of the FinalReport

Recommendations for legislative reform based on the outputs ofthe public consultation process and the application of NCPprinciples.


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1.3 Stakeholder Consultation

Environment protection affects many groups and sectors of the community. This reviewencouraged the participation of stakeholders. A notice was placed in The Ageadvertising the review with a call for submissions and a Discussion Paper that raisedkey competition policy issues was publicly released. A copy of the Discussion Paperand an invitation to attend roundtable consultations were sent to over 30 stakeholdersrepresenting industry, the community and government.

Roundtable consultations were held with three groups of stakeholders:

• industry representatives (referred throughout this document as the industrysubgroup);

• a collection of community and environmental organisations and other interestedindividuals (the community subgroup); and

• government representatives (the government subgroup).

Stakeholders who contributed to the review by attendance at roundtable consultations,other informal discussions or by contributing a written submission are acknowledgedfor their efforts.

Attendance at roundtable consultation groups

• Department of State Development (DSD)

• Department of Treasury and Finance

• Department of Premier and Cabinet

• Murray Raff, The University of Melbourne

• Friends of the Earth

• Environment Defenders Office (Vic) Ltd

• Plastics and Chemicals Industries Association

• Australian Industry Group

• Australian Chemical Specialities Manufacturers Association

• Australian Institute of Petroleum

• Victorian Waste Management Association

Other informal discussions

• Victorian Employers Chamber of Commerce and Industry

• Victorian Automobile Chamber of Commerce

• Institution of Engineers, Australia

• Other environmental audit representatives

Written submissions

Written submissions were received from the following stakeholders.

• Mr Murray Raff, Barrister

• Friends of the Earth

• Environment Defenders Office

• Department of Human Services

• Department of Natural Resources and the Environment

• Department of State Development

• Mr Trevor Ryan, CPEng, MIEAust


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Chapter Two

Conceptual Framework

2.1 National Competition Policy

The inaugural Council of Australian Governments (CoAG) meeting commissioned theÔHilmer CommitteeÕ to conduct an inquiry into the development of a nationallyfocused approach to competition policy. The subsequent Hilmer Report was presentedto CoAG in August 1993, and formed a major input to micro-economic reformdiscussions for CoAG.

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2.1.1 Legislation Review and the Public Interest

The Hilmer Report described regulation, by all levels of government, as the greatestimpediment to enhanced competition in many key sectors of the economy. It did,however, recognise that there may be a need for some government regulation whenmarket failures occur. The Hilmer Report recommended:

• the reform of regulation that unjustifiably restricts competition; and

• any restriction on competition that is to remain must be clearly demonstrated to bein the public interest.

As a consequence of these observations, through the Competition Principles Agreement(CPA), the Commonwealth, State and Territory Governments committed themselves toreviewing existing and new legislation to ensure legislation does not impose unduecompetitive restrictions:

(1) The guiding principle is that legislation (including Acts, enactments,Ordinances or regulations) should not restrict competition unless it can bedemonstrated that:

a) the benefits of the restriction to the community as a whole outweigh thecosts; and

b) the objectives of the legislation can only be achieved by restrictingcompetition.

Competition Principles Agreement, Sub-clause 5(1).

Sub-clause 5(1) acknowledges that competition is not an end in itself; that while, ingeneral, the introduction of competition will deliver benefits to the consumer, there aresituations where community welfare will be better served by not effecting particularcompetition reforms. That is, competition is to be implemented to the extent that thebenefits that will be realised from competition outweigh the costs.

NCP recognises that where anti-competitive behaviour is acceptable to achieve a publicgood, there must be a transparent process for assessing the balance between benefit andcosts, and the behaviour must be subject to review.

1 The Independent Committee of Inquiry, National Competition Policy, AGPS, Canberra, 1993.


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Sub-clause 1(3) of the CPA provides for considerations other than strictly economiccriteria in assessing public benefit in circumstances where, on balance, there is a netbenefit for the community. Sub-clause 1(3) sets out the circumstances in which theweighing up process is called for, and also some of the factors which need to be takeninto account in making the decision:

Without limiting the matters that may be taken into account, where this Agreementcalls:

(a) for the benefits of a particular policy or course of action to be balanced againstthe costs of the policy or course of action; or

(b) for the merits or appropriateness of a particular policy or course of action to bedetermined; or

(c) for an assessment of the most effective means of achieving a policy objective;

the following matters shall, where relevant, be taken into account:

(d) government legislation and policies relating to ecologically sustainabledevelopment;

(e) social welfare and equity considerations, including community serviceobligations;

(f) government legislation and policies relating to matters such as occupationalhealth and safety, industrial relations and access and equity;

(g) economic and regional development, including employment and investmentgrowth;

(h) the interests of consumers generally or of a class of consumers;

(i) the competitiveness of Australian businesses; and

(j) the efficient allocation of resources.

ÔPublic interest testÕ (sometimes called the public benefit test) is a shorthandexpression to describe the interplay of sub-cls.1(3) and 5(1) of the CPA.

The National Competition Council (NCC) has stated that:

A central feature of the National Competition Policy is its focus on competitionreform Ôin the public interestÕ. In this respect, the guiding principle is thatcompetition, in general, will promote community welfare by increasing nationalincome through encouraging improvements in efficiencyÉ

The aim in applying s.1(3) is to assess any special treatment in a transparent andconsistent manner, with the benefits and costs of particular anti-competitivebehaviour subject to public scrutiny.

National Competition Council 1996, Considering the Public Interest under theNational Competition Policy, AGPS, Melbourne, pp.2 & 8-9.

The NCC emphasises that sub-cl.1(3) is not exclusive or prescriptive. Rather, itprovides a list of indicative factors a government could look at in considering thebenefits and costs of particular actions, while not excluding consideration of any othermatters in assessing the public interest.

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2 This approach was re-affirmed by the House of Representatives Standing Committee on Financial

Institutions and Public Administration Ñ House of Representatives Standing Committee on FinancialInstitutions and Public Administration 1997, Cultivating Competition: Report of the Inquiry into Aspects ofthe National Competition Policy Reform Package, AGPS, Canberra, June, p.10.


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It is important when considering whether the public interest is served by competitiverestrictions to identify any public detriment that may arise from competitiverestrictions. Primary emphasis is on those detriments which affect economic efficiencyand which may take the form of:

• a reduction in the number of effective competitors (for example, as a consequence ofexcessively prescriptive regulation);

• increased restrictions on entry; and

• constraints on competition by market participants affecting their ability to innovateeffectively and conduct their affairs efficiently and independently.

Furthermore, it is also important to note that, even when a net public benefit isestablished, it must be demonstrated that the benefit can only be achieved by restrictingcompetition.

2.1.2 Creating ÔBetterÕ Regulation

One of the implicit goals of the legislation review process is to create ÔbetterÕregulation.

3 This may mean:

• greater regulation if pro-competitive frameworks need to be established or marketimperfections corrected; or

• less regulation where market forces provide appropriate outcomes.

This focus on the appropriateness of regulatory regimes rather then the traditional blackand white issues of ÔmoreÕ or ÔlessÕ regulation has been reinforced by the DeputyExecutive Director of the NCC

4:

it needs to be emphasised that the NCP legislation review program is not aboutderegulation for deregulationÕs sake, nor that it allows no room for (so-called)non-economic considerations, and nor that it sees no role for government.

Rather, the NCP legislation review program is about:

• ensuring that, where government does regulate, that regulation is necessary,effective and well designed;

• ensuring that regulation is not used to prop up the incomes and conditions ofvested interest groups, at the expense of the rest of us; and

• replacing the Ômaximum visible regulationÕ of the past with Ôminimum effectiveregulationÕ, which can pass the test of Ônet public benefitÕ.

So we are talking about reorienting and refining, rather than rejecting, theregulatory role of government.

2.1.3 Identifying Restrictions

The existing Victorian Government and National Competition Council guidelinesprovide the framework for this review. Table 2.1 below presents a number offundamental questions that should be asked of all legislation. Some of theserestrictions, such as compliance costs and restrictions on who can operate a business(licensing) are of particular relevance for this review.

3 See sub-cl.5(9) of the CPA.

4 Cope, D. 1998 ÔNational Competition Policy: Rationale, Scope and Progress, and Some Implications for

the ACT and the Role of GovernmentÕ at the ACT Department of Urban ServicesÕ Summer Seminar Series,Canberra, 20 March, 17. Emphasis in original.


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Table 2.1

Describing Restrictions on Competition

Type of restriction Questions

Entry or exit Does it:

• create or protect a single buyer or seller?

• limit the number of operators through licences?

• allow licences to be freely traded?

• restrict new competitors with similar products entering the market?

• restrict who can own or operate a business?

• restrict entry of products or services from other parts of Australia?

• place large penalties on plant closure?

Controls on price orproduction

Does it:

• limit the size of operation?

• restrict hours of trading or operating?

• limit what products a firm may produce or trade?

• affect the location of where a business may operate?

• affect in any way the price that would otherwise be determined by the

market?

Quality Does it:

• impose quality standards?

• restrict any range of quality from the market?

• force different qualities into different markets?

Advertising Does it:

• limit who may promote or advertise?

• limit how a product and/or service may be promoted?

• force businesses to promote or contribute funds for promotion?

Type of inputs Does it:

• require particular methods of production?

• require use and purchase of inputs from a specified supplier as a

condition of operation?

• limit access to important infrastructure?

• prevent the adoption of innovative methods of production and/or

marketing?

• require specific terms for employment different from national standards?

• interfere in the setting of input prices?

Significant costs Does it:

• impose any specific levies and/or imposts, which are not levied on all

other industries?

• impose high administrative or compliance costs?

Discriminating advantages Does it:

• advantage one firm over another?

• advantage government over the private sector?

• provide infrastructure access to one firm but not another?

• restrict consumer access?

• benefit one group of consumers over another?

Source: National Competition Council, Guidelines for NCP Legislation Reviews, prepared by Centre of

International Economics, Canberra, February 1999, p 35.


8

2.2 Regulation and Environment Protection

This section explains the economic principles that support government intervention toprotect the environment and identifies some policy tools to achieve such intervention.

2.2.1 Market Failure and the Rationale for GovernmentIntervention

While it is generally acknowledged that free markets encourage efficient production atlow cost and encourage innovation, it is also known that there are occasions whenmarkets fail to deliver optimum environmental and social outcomes. In such instances,governments have a role to intervene to limit the adverse effects of market failure. TheVictorian Guidelines on the Review of Legislative Restrictions on Competition notethat government intervention in markets should generally be restricted to suchsituations of market failure.

5

Market failure may arise in a number of instances related to the environment:

• Externalities are impacts of production methods and market transactions whichaffect third parties. They can be either positive or negative. Some examples of thecost of negative externalities, be they on other producers, the community as awhole, or other species, are:

• Other producers can be affected when the natural resources they require forproduction may be devalued by the activities of another producer. Forinstance, if an upstream mill discharges pollution into a river, this will impacton the production capacity of downstream producers who use that river aseither an input into production (eg, for the production of beverages) or as afeeding ground for production (eg, a source of fishing stock).

• Negative externalities can have adverse effects on community health. Forexample, the release of dangerous particles in the air, or the pollution of waterwhich is used for drinking, poses a serious danger to the communityÕs health,as can the inappropriate disposal of hazardous industrial wastes.

• Pollution, such as smog, diminishes quality of life by reducing the enjoymentthat people receive from living in a clean environment.

(In a market situation, the cost of these externalities is not borne by the polluterand so is not reflected in the price of the output. This can result in non-optimallevels of production and consumption of certain products. By contrast, a productor activity that has a positive externality, such as reafforestation, may not beundertaken because the producer cannot charge a price that will compensate forundertaking the activity).

• Public goods are those goods that the community demands but will tend to beunderÐproduced because they are nonÐexcludable (ie, people who have purchasedthe good cannot stop others using it up, like a footpath) and nonÐrivalrous (ie, thegood is not diminished with use, like a lighthouse). Generally, protection of theenvironment is a function performed by government because clean air and water arepublic goods that are shared by all members of the community.

• Information asymmetries exist where information is not evenly distributedthroughout the community. For example, when producers and consumers are notwell informed about the environmental implications of their activities, or how bestto minimise them, their decisions will be non-optimal and the environmentaleffects of their decisions can be aggravated.

5 Department of Premier and Cabinet, Guidelines for the Review of Legislative Restrictions Competition,

Victorian Government, Melbourne, 1996.


9

• Natural monopolies are justified where the costs of establishment, resources orinfrastructure are such that it is socially wasteful to have more than one supplier ofa good or service. Natural monopolies can be privately or publicly ownedenterprises. Water services providers are a common example of a publicly ownednatural monopoly. Governments may decide to regulate natural monopolies toprevent abuse of monopoly power, such as setting prices significantly above cost.

It is because of the effects of market failures pertaining to the environment that theVictorian Guidelines for the Review of Legislative Restrictions on Competition discussthe public policy goals of environment protection and the sustainable use of resources.A key consideration for policy makers is the integration of environmental and economicobjectives.

Market failure has always existed and there has always been a need for regulation toprotect the environment. However, it is only in recent decades that communityconcerns for the environment have grown in correlation with a realisation of the harmfuleffects of pollution. International efforts to address environmental issues have alsoheightened awareness. These factors have enforced the need for environmentalregulation, as the community increasingly expects a clean, protected environment.

2.2.2 Instruments for Environmental Protection

This section discusses a range of alternative means of regulating to correctenvironmentÐrelated market failures.

6

Regulatory Instruments

Governments have typically employed prescriptive regulatory measures to limit andprohibit pollution, commonly referred to as a Ôcommand-and-controlÕ approach.Regulatory instruments generally prescribe a permitted level of pollution or abatement(Ôend-of-pipeÕ regulation) or the requirement for polluters to introduce changes toproduction that reduce pollution. The polluter must then comply with the regulationsor face a penalty. Prescriptive regulations are often criticised because:

• they can fail to examine overall environmental impacts;

• they do not give polluters the incentive to reduce pollution to levels lower than theprescribed level;

• can be inflexible in terms of how environmental outcomes are achieved;

• can impose high compliance costs on producers; and

• they often impose high monitoring and administration costs on the regulator.

6 This section is largely based on Gunasekera, "Role of Economic Instruments in Managing the

Environment" in Industry Commission (ed), 1997 Industry Economics Conference, ConferenceProceedings, 10Ð11 July, AGPS, Canberra, 1997.


10

Suasive Instruments

Suasive instruments, Òseek to change the perceptions and priorities [of producers] byinternalising environmental awareness and responsibility into individual decisionmakingÓ.

7 Using suasive instruments, government can also advise producers of bestÐ

practice, efficient methods of production, or it can encourage the use of cleaner methodsthrough awards for good environmental behaviour, such as EPA Cleaner ProductionAward. A similar instrument is an Environment Improvement Plan (EIP). An EIP isusually developed voluntarily by a company and in consultation with the community.The EIP represents a public commitment by a company to enhance its environmentalperformance. A reputation as an environmentally responsible producer is increasinglyregarded as a valuable asset by companies.

Economic Instruments

Much of the recent literature on environment protection explores the use of marketmechanisms, or economic instruments, as a more efficient means for achievingobjectives than regulatory instruments. According to the Industry Commission report,Environmental Waste Management Equipment, Systems and Service:

É at an operative level, the key difference between economic instruments andregulation is that economic instruments do not prescribe the behavioural patternsof individual polluters. Polluters are permitted some flexibility to modify theirbehaviour according to their own particular circumstances. By attaching a financialcost to varying levels of emissions, economic instruments provide firms with anincentive to reduce emissions in order to realise cost savings.

Industry Commission, Environmental Waste Management Equipment, Systems andService, AGPS, Canberra, 1993, p80.

Table 2.2 presents some economic instruments available to governments and theircharacteristics. As the table shows, there is a wide range of economic instrumentsavailable to regulators. Some of the most widely implemented economic instrumentsare emission and effluent charges, which are a charge per unit of mass, volume orconcentration of pollution emitted. For example, in South Australia a system of chargesis in place for the discharge of effluent into the marine environment. Emission andeffluent charges are mainly of use when pollution is discharged from a point source.

Trading schemes are economic instruments that allow regulators to set controls on thetotal quality and quantity of pollution or the use of a resource, such as water. A marketmechanism can then be established to allocate the rights to pollute or use the resource.The objective of trading schemes is for permits to be allocated to the producer willingto pay the highest price. In a recent report, James claims that such an approach is theoften the most effective means of pursuing environmental protection.

8

James discusses an example of this type of instrument, the Hunter River SalinityTrading Scheme, which is a system of tradeable salt discharge credits. A totalallowable load of discharge is set depending on river flows, and holders of credits arethen free to trade credits with other credit holders. The use of trading schemes iscurrently being considered for other environmental problems in Australia.

7 Gunasekera, ibid, p 107.

8 James, Australian Experience with Economic Instruments for Environmental Management, Consultancy

Report for Environment Australia, 1997. This paper is available on the Internet athttp://www.environment.gov.au/epcg/eeu/publications/enviro.html


11

Table 2.2

Economic Instruments for the Protection of the Environment

Type and definition Advantages Difficulties/disadvantages When is instrumentrelevant?

Emissions and effluentcharges

Charges based on the quantityand quality of pollutantsdischarged

• low transaction costs for firmsor individuals

• setting the charge at theright level

• monitoring requirement

Discharges from pointsources

Product charges

Levies on products which areharmful to the environmentwhen used or disposed of

• reduces the use of products thatare harmful to the environment

• setting the charge at theright level

• monitoring requirements

Where it is not feasible tomonitor pollution fromindividual sources

Clean up or restorationlevies

Levy to raise funds forenvironmental clean up

• levy funds are linked toenvironmental purposes

• determining the relevantgroup to levy

To fund clean up costscaused by past (but notongoing) activities

Subsidies

Payment by government tothose undertakingenvironmentally friendlyactivities

• encourages action to overcomeenvironmental problems

• externalities are notinternalised by polluter

• may reward poorenvironmental performers

• may pay those who wouldundertake action evenwithout a subsidy

Where other economicinstruments do not work orare too ÔexpensiveÕ

Performance bonds

Financial security lodged withgovernment againstenvironmental damage

• minimises the risks and potentialcosts of polluters defaulting onliability

• encourages restoration andclean up where necessary

• setting a realistic level ofsecurity

Where it is necessary tominimise the risk thatenvironmental damage willnot be rectified

Legislated deposit refundsystems

Refundable deposit which ispaid on products which cancause pollution if discarded

• reduces the volume of wasteand/or the release of toxicsubstances into the environment

• transaction costs may behigh

• significance of benefits(relative to changes incosts) not always clear

Most effective if applied toproducts which have anexisting distribution system,eg household milkcontainers

Tradeable permits

A transferable right todischarge a prescribed levelof pollutants or use a certainamount of a resource

• allocation of resources to thehighest value use

• reduced information needs forregulators

• more certainty regardingpollution or resource use levels

• establishing an efficientmarket

• setting overall level andinitial allocation of permits

• transaction costs

Where environmentalimpact is independent ofpollution source, eg for airpollution within a definedarea

Environmental liability

Making polluters legally liablefor environmental damage

• potential polluters are forced toeither adopt environmentallyfriendly practices or paypotential damage (throughhigher insurance premiums)

• choosing the levels ofincrease in premiums, etc.that will cover liability andrisk

• enforcement of liability

Where environmentaloutcomes are linked to theavailability of finance,insurance, etc.

Source: Industry Commission, Environmental Waste Management Equipment, Systems and Service, 1993, AGPS, Canberra, p.91.

Other examples of economic instruments are product charges and performance bonds. Aproduct charge is an added component to the price of a product that may have propertiesthat are damaging to the environment, such as a fuel levy or levy on ozone depletingsubstances. Product charges are not commonly used in Australia.

Performance bonds involve an up-front guarantee by developers and other companies toensure that in the event of bankruptcy, funds are set aside for environmental restorationexpenses. An instrument with a similar objective is a clean up and restoration levy.


12

Which Instrument to Use?

Many studies conclude that economic instruments generally enforce environmentalprotection at a lower cost to the community than regulatory instruments.

9 However, it

is also widely recognised that economic instruments usually need to be combined withother instruments such as regulation and information tools to be effective. It is alsoimperative that economic instruments are well designed and practical. Poorly designedeconomic instruments can be counter productive and they can be as costly to thecommunity as the regulatory instruments they are designed to replace.

In some instances, the use of regulatory instruments over other instruments may bepreferred, such as:

• where there is a potentially serious threat to public safety, such as in themanagement of some wastes;

• where the development of economic instruments is very difficult (for example,when designing economic instruments for single pollutants within an overallobjective to achieve efficiencies from integrated environmental management); and

• where the transaction or information costs of establishing an economic instrumentare excessive (for example, applying economic instruments to diffuse sourcepolluters and/or many affected parties).

In practice, the type of instrument used, be it suasive, economic or regulatory, will bedetermined by a number of circumstantial factors. As discussed in the previous section,the chosen instrument should be one that is designed to achieve the environmentalobjective by imposing the least cost on the community.

9 James (1997), ibid, p13. There have been many academic studies that evaluate regulatory and

economic instruments. James mentions several studies that examine the cost of poorly designed regulatoryinstruments, and other studies that focus on the efficiency gains from the use of economic instruments. Seealso: APEC Economic Committee, Survey results on the use of economic instruments in APEC economies,APEC Secretariat, 1998.


13

Chapter Three

The Environment Protection Act

3.1 Overview of Legislation

The Environment Protection Act is the primary legislation for the protection of theenvironment in Victoria. The Act provides the legal framework for air, water and landprotection and the regulation of noise pollution and provides for the enforcement ofpenalties upon firms and individuals that breach the Act. The Act establishes theEnvironment Protection Authority (EPA), defines EPAÕs powers, duties and functions,and contains a number of tools which are used by EPA to prevent pollution, minimisewastes and reduce environmental risks. Figure 3.1 provides a schematic presentation ofthe operation of the Act.

Figure 3.1

The Environment Protection Act Framework

Environment Protection Act

State Environment Protection Policies

Industrial Waste Management Policies

Research,

Monitoring &

Investigation

Economic

Mechanisms

Information

& EducationRegulations Works

Approval

Licensing

EnvironmentalAudits &

ImprovementPlanning

Enforcement Measures e.g directions, notices, prosecution

Offences and Penalties

Source: EPA


14

The core of the Act allows EPA to recommend State Environment Protection Policies(SEPPs) and Industrial Waste Management Policies (IWMPs) to State Governor-in-Council. SEPPs set environmental quality objectives for Victoria and the strategies toachieve those objectives. The Act has a basic philosophy of preventing pollution andenvironmental damage by setting appropriate ambient environment quality objectivesand establishing programs to meet them. Most amendments to the Act since 1970reflect the continuing evolution of mechanisms to meet the objectives established inSEPPs.

Over the last twenty five years the Environment Protection Act has evolved to takeaccount of growing understanding of the environment, rapidly changing technologies,and to encourage the use of some flexible and economic rather than prescriptiveinstruments for environmental protection. For example, a major amendment in 1994provided for the Accredited Licensee System. This change is indicative of an overallobjective for EPA to broaden its role from one which relies mainly on prescriptive rulesand sanctions to one that encompasses a role to encourage cleaner production and wasteminimisation through working in partnership with industry.

Policies and Regulations

In addition to SEPPs and IWMPs, under the Environment Protection Act theGovernor-in-Council, on the recommendation of EPA, has the power to makeRegulations. Current Policies and Regulations are listed in Appendix B.

3.2 Markets Affected by Environment Regulation in Victoria

In general, environment regulation is not specific to any particular industry or sector ofthe Victorian economy. Pollution and waste that are harmful to the environment andthe community can be the outputs of the production processes of businesses in anynumber of industries or from a multitude of activities by consumers (eg, pollution frommotor vehicles). Some aspects of environment regulation can apply to specific marketsand where this occurs a definition of the market will be provided in the report.

3.3 Preliminary Assessment of the Act

The Act is often referred to as ÔumbrellaÕ legislation, meaning it applies to a wholerange of polluting offences to air, land and water. As stated above, under the Act,polluting activities occur in many markets. The nature of environment regulationtherefore requires a large number of premises and activities to be assessed for theirimpact on the environment on a case-by-case basis. This is the key justification forgiving EPA discretionary powers to administer the Act.

In a general sense, the national competition policy requirement to consider alternativepolicy responses leads to a consideration of a more prescriptive Act with less discretion.The experience of industry in jurisdictions where this presently occurs is widelyunderstood to be less than satisfactory.

If discretion in the administration of the Act is therefore to be practised, it is importantthat it be accompanied by checks and balances that limit the potential for anti-competitive outcomes. This is discussed further in Chapter Five.


15

Finally, at a very basic level of analysis, there is no doubt whatsoever thatenvironmental regulation is necessary. It is the manner in which regulation is practisedthat is important. Stakeholders, as expected, had varying views on this issue.

Stakeholders from green and community groups generally sought fundamental changeto regulation that broadened the scope of regulation, imposed stiffer penalties onoffences, and gave interest groups greater involvement in policy-making andenforcement. While many of the issues and proposals may be worthy of being discussedon their merits, this review has been restricted to those of interest to competitionpolicy, with some discussion of some of the more extraneous issues also undertaken attimes.

Stakeholders from the industry subgroup raised some marginal issues but did not raiseany significant or general examples of competition policy restrictions.

Stakeholders from the subgroup representing government departments raised issuesabout the competitiveness of Victorian industry vis-�-vis other jurisdictions, and ofconcern over the level of discretion under the Act, and of concern over the level of thediscretionary powers given to EPA under the Act. With regard to the initial concern,the trend of other Australian jurisdictions to Ôcatch upÕ to some aspects of the Victorianregulatory regime is reducing differences in compliance burdens between the States.Indeed, recent changes to regulations in NSW have resulted in some fees being setconsiderably above Victoria. With regard to the latter concerns, there is an opinion thatEPAÕs more discretionary but co-operative approach, rather than a more prescriptiveapproach, minimises the compliance burden in Victoria.

There was largely agreement among stakeholders that restrictions on competition dueto environmental regulation under the Act can be justified on a public benefits basisgiven the externalities involved in the regulated activities. There was relatively littleinterest in the review by many stakeholders, with only a few major specific issuesraised. This was taken to reflect the general stakeholder view that the Act is largelyworking and that the approach to the administration of the Act by the EPA is seen asappropriate. A number of stakeholders put forward proposals to substantially increasethe powers or coverage of the Act, while these were analysed on their merits, some ofthese (such as major new taxes) are more in the realm of major policy changes.

Overall, by its very nature, the Act lends itself to a discretionary application, subject tothe necessary checks and balances. The assessment of the Act that follows will focus onspecific instruments used to achieve the objectives of the Act.


16

Chapter Four

Objectives of the Act

4.1 Overview

The Environment Protection Act does not include a stated objective. It is importantthat the objectives of legislation are clearly expressed to provide clarity and certainty tothose who are subject to the legislation. From a competition policy viewpoint, theobjectives of legislation should be framed so as to clearly state the public benefit of thelegislation and to ensure that the legislation applies evenly and fairly. For example, inthe case of pollution control, competition policy requires that the objective oflegislation should be to provide a clear public benefit, and that it should controlpollution in a manner that does not result in a particular industry or stakeholder bearinga cost of that control that is greater (or less) than their share of the pollution.

The absence of clear objectives does not provide any certainty that that will be the casein practice. Furthermore, when evaluating policy for competition restrictions, a clearobjective is required to determine whether or not a competition policy issue exists.

4.2 Objectives of the Legislation

As there are no objectives contained in the Act, the second reading speech is drawnupon to establish the objectives of the legislation. When introduced into Parliament inNovember 1970, the second reading speech for the Environment Protection Billdeclared that the purpose of the Bill was to establish the basis for a program ofenvironment protection for Victoria through the control of wastes and the prevention ofpollution. The Bill was formulated with four principal objectives in mind:

• to provide for the establishment of State policy respecting conditions to bemaintained in various segments or areas of VictoriaÕs environment. The adoptedpolicies would form the guidelines for action by all agencies in the prevention ofpollution;

• to provide a means of preventing pollution and to place the State in a position ofknowing what environmental degradations are taking place. This is accomplishedthrough a system of licensing the discharge of waste into the environment;

• to provide firm controls on pollution if it should occur despite the strongprevention program of licensing waste discharges; and

• to establish an authority to assume the overall responsibility for environmentprotection.

10

The second reading speech also discusses the fair application of environmentalprotection in Victoria, or an Ôequity of treatmentÕ that ensures that no industries are toreceive special treatment by way of exemption.

Another very fundamental aspect of this Bill is that it provides for no specificexemptions from its coverageÉ A strong objective in formulating this Bill was toprovide equity of treatment and coverage of all waste discharges so that there couldbe no claim made that some discharges or potential pollution problems are givenpreferential relief from coverage.

Cl(2), Environment Protection Bill, second reading speech, 12 November 1970.

10

Environment Protection Bill, second reading speech, 12 November 1970.


17

Despite the absence of a stated objective, EPA suggests that the EnvironmentProtection Act is designed to reflect the following key principles embodied in the 1992InterGovernmental Agreement on the Environment: the precautionary principle, theprotection of intergenerational equity, the polluter pays principle, and the protection ofbiodiversity.

11 The stated mission of EPA is:

To meet the aspirations of Victorians, now and in the future, for a safe andecologically sustainable environment through the protection and restoration of air,land and water quality and the control of unwanted noise.

EPA, Annual Report, 1997Ð98.

Is there a restriction on competition?

If the objectives of legislation are not clearly stated, then there is the possibility that theadministration of the Act will lead to indiscriminate and unwarranted regulation. Theabsence of a stated objective in the Act is not a restriction on competition. However,one of the principles in competition policy legislative review is to clearly identify theobjectives of the legislation. This also accords with good legislative design. Includinga stated objective would assist EPA to administer the legislation in a manner that doesnot lead to anti-competitive outcomes.

Stakeholders from all groups highlighted the lack of a clear objective for the Act as aproblem.

The objects of the Environment Protection Act 1970, are clear and appropriate butthey should be included in the Act, not just enunciated in the second readingspeech. Inclusion in the Act enshrines the objects in the law and makes it clear toall using the Act what its objects are.

Department of Human Services submission, p 2

Alternatives

The alternative to the present situation is to include a stated objective in the Act.

Some stakeholders suggested legislation in other jurisdictions that may be a suitablemodel for an objective in the Act.

It is clear that the Act is designed to reflect the 4 principles embodied in the IGAE.The Environment Protection Act 1983 (SA), Planning and Environment Act 1987(Vic) and Contaminated Land Management Act 1997 (NSW) are some of the Actsaround the country that specifically incorporate the principles from the IGAEÉ sothere is an Australia wide move to incorporate these principles into environmentalprotection legislation. It may even be implied from the IGAE that States arerequired to incorporate these principles in their state environment Acts.

Friends of the Earth submission, p 5

There are several examples which could be used as a basis for the incorporation of a setof objectives in the Act. Three prime examples are the Intergovernmental Agreement onthe Environment, the South Australian Environment Protection Act 1993 and the NSWProtection of the Environment Operations Act 1997.

11

EPA, ÒQuick Guide to EPA VictoriaÓ, EPA website.


18

The Victorian Government is a signatory to the InterGovernmental Agreement whichstates:

12

Precautionary principle Ð

Where there are threats of serious or irreversible environmental damage, lack of fullscientific certainty should not be used as a reason for postponing measures toprevent environmental degradation.

In the application of the precautionary principle, public and private decisionsshould be guided by:

(i) careful evaluation to avoid, wherever practicable, serious or irreversibledamage to the environment; and

(ii) an assessment of the risk-weighted consequences of various options.

Intergenerational equity Ð

The present generation should ensure that the health, diversity and productivity ofthe environment is maintained or enhanced for the benefit of future generations.

Conservation of biological diversity and ecological integrity Ð

Conservation of biological diversity and ecological integrity should be afundamental consideration.

Improved valuation, pricing and incentive mechanisms Ð

i. Environmental factors should be included in the valuation of assets andservices.

ii. Polluter pays ie, those who generate pollution and waste should bear the costof containment, avoidance, or abatement.

iii. The users of goods and services should pay prices based on the full life cyclecosts of providing goods and services, including the use of natural resourcesand assets and the ultimate disposal of any wastes.

iv. Environmental goals, having been established, should be pursued in the mostcost effective way, by establishing incentive structures, including marketmechanisms, which enable those best placed to maximise benefits and/orminimise costs to develop their own solutions and responses toenvironmental problems.

IGAE (1992), paras 3.4-3.5.

In the South Australian Environment Protection Act 1993, the objectives and principlesof the legislation are clearly stated:

The objects of the Act are:

(a) to promote the following principles ("principles of ecologically sustainabledevelopment"):

(i) that the use, development and protection of the environment should bemanaged in a way, and at a rate, that will enable people and communities toprovide for their economic, social and physical well- being and for their healthand safety while-

(A) sustaining the potential of natural and physical resources to meetthe reasonably foreseeable needs of future generations; and

(B) safeguarding the life-supporting capacity of air, water, land andecosystems; and

(C) avoiding, remedying or mitigating any adverse effects of activitieson the environment;

12

InterGovernmental Agreement on the Environment, 1992, p6.


19

(ii) that proper weight should be given to both long and short term economic,environmental, social and equity considerations in deciding all mattersrelating to environmental protection, restoration and enhancement; and

(b) to ensure that all reasonable and practicable measures are taken to protect,restore and enhance the quality of the environment having regard to the principlesof ecologically sustainable development, and-

(i) to prevent, reduce, minimise and, where practicable, eliminate harm to theenvironment-

(A) by programmes to encourage and assist action by industry, publicauthorities and the community aimed at pollution prevention, cleanproduction and technologies, reduction, re-use and recycling ofmaterial and natural resources, and waste minimisation; and

(B) by regulating, in an integrated, systematic and cost-effectivemanner-

¥ activities, products, substances and services that, throughpollution or production of waste, cause environmental harm; and

¥ the generation, storage, transportation, treatment and disposalof waste; and

(ii) to co-ordinate activities, policies and programmes necessary to prevent,reduce, minimise or eliminate environmental harm and ensure effectiveenvironmental protection, restoration and enhancement; and

(iii) to facilitate the adoption and implementation of environment protectionmeasures agreed on by the State under intergovernmental arrangements forgreater uniformity and effectiveness in environment protection; and

(iv) to apply a precautionary approach to the assessment of risk ofenvironmental harm and ensure that all aspects of environmental qualityaffected by pollution and waste (including ecosystem sustainability andvalued environmental attributes) are considered in decisions relating to theenvironment; and

(v) to require persons engaged in polluting activities to progressively makeenvironmental improvements (including reduction of pollution and waste atsource) as such improvements become practicable through technological andeconomic developments; and

(vi) to allocate the costs of environment protection and restoration equitablyand in a manner that encourages responsible use of, and reduced harm to, theenvironment with polluters bearing an appropriate share of the costs that arisefrom their activities, products, substances and services; and

(vii) to provide for monitoring and reporting on environmental quality on aregular basis to ensure compliance with statutory requirements and themaintenance of a record of trends in environmental quality; and

(viii) to provide for reporting on the state of the environment on a periodicbasis; and

(ix) to promote-

(A) industry and community education and involvement in decisionsabout the protection, restoration and enhancement of theenvironment; and

(B) disclosure of, and public access to, information about significantenvironmental incidents and hazards.

In NSW, most of the previous collection of Acts and Regulations for the control ofpollution and protection of the environment was replaced by the Protection of theEnvironment Operations Act 1997, which came into effect on 1 July 1999. Theobjectives of the legislation are clearly expressed in the Act:


20

The objects of this Act are as follows:

a) to protect, restore and enhance the quality of the environment in New SouthWales, having regard to the need to maintain ecologically sustainabledevelopment,

b) to provide increased opportunities for public involvement and participation inenvironment protection,

c) to ensure that the community has access to relevant and meaningful informationabout pollution,

d) to reduce risks to human health and prevent the degradation of the environmentby the use of mechanisms that promote the following:

i. pollution prevention and cleaner production,

ii. the reduction to harmless levels of the discharge of substances likely tocause harm to the environment,

iii. the reduction in the use of materials and the re-use or recycling ofmaterials,

iv. the making of progressive environmental improvements, including thereduction of pollution at source,

v. the monitoring and reporting of environmental quality on a regular basis,

e) to rationalise, simplify and strengthen the regulatory framework forenvironment protection,

f) to improve the efficiency of administration of the environment protectionlegislation,

g) to assist in the achievement of the objectives of the Waste Minimisation andManagement Act 1995.

Discussion and Recommendations

The objectives of the Act are presently found in the second reading speech for theEnvironment Protection Bill, made in 1970. The general evolution of attitudes andapproaches to environment protection since that era is evident by comparing theobjectives in the IGAE, the South Australian Environment Protection Act and theNSW Protection of the Environment Operations Act. It is likely, therefore, that theobjectives of environmental protection in Victoria have changed since 1970.

The Act in its present form fails to provide clarity. By comparison, other environmentallegislation in Australia outline their objectives more clearly.

Recommendation 1: The objectives of the Act should be clearly stated to provide clarityto industry, the community, and EPA. The objectives should be developed withreference to the principles listed in the IGAE, the principles of competition policy andthe objectives used in similar Acts in other jurisdictions.


21

Chapter Five

Powers of EPA

5.1 Overview

When introduced in 1970 the Act was the first significant environment protectionlegislation in Australia that was designed to provide an ÔumbrellaÕ of legislation overall types of air, land, and water/sea pollution. The numerous additional clauses nowcontained in the Act reflect the many changes in environment regulation since 1970.

In addition to the administration and enforcement of the Act, EPA has powers torecommend that the Governor-in-Council make policies and regulations under the Actto correct for market failures adversely affecting the environment within Victoria. TheAct permits EPA a degree of discretion in its application. Typically, market failures arethe failure to limit environmentally damaging activities and to hold producersaccountable for the external costs of production.

Section 5.2 will examine the discretionary powers of EPA to administer the Act andalso the processes that are presently in place to ensure that discretion does not lead toanti-competitive outcomes.

Section 5.3 will examine the ambiguity in the Act regarding EPAÕs powers to useeconomic instruments. In some cases, economic instruments may be preferred toexisting regulatory instruments to correct market failures and should be made availableto EPA.

5.2 Powers of EPA to Recommend Policies andRegulations

Provisions for Making Policies

The rationale for the provision for making State Environment Protection Policies(SEPPs) was outlined in the second reading speech:

ÉState policy either in terms of expressed objectives or by a classification systemwould be established for all segments of the environmentÉ With a publiclyadopted, expressed and published State policy much of the confusion and lack ofdirection that frequently surrounds pollution control can be removed.

cl.17(1), Environment Protection Bill, second reading speech, 12 November 1970.

The Governor-in-Council, on recommendation from EPA, can declare SEPPs for:

• the environment in general;

• in any portion of Victoria; and

• in respect to any element or segment of the environment.

To date, 15 SEPPS have been made under the Environment Protection Act. These arelisted in Appendix B. SEPPs and their provisions are legally enforceable through arange of tools. However, a direct breach of a SEPP is no longer an offence under theAct. SEPPs establish the basis for maintaining environmental quality and include:

• identification of the environment and boundaries of an area to be protected;


22

• identification of the beneficial uses to be protected;

• selection of the environmental indicators to be employed to measure and define theenvironmental quality;

• a statement of the environmental quality objectives (where practicable); and

• the program, if any, by which the stated environmental quality objectives are to beattained and maintained including, where appropriate, the specification of:

(i) maximum quantities and qualities of waste permitted to be discharged tothe environment;

(ii) maximum levels of noise permitted to be emitted to the environment;

(iii) minimum standards for the installation and operation of works orequipment for the control of waste or noise from specified sources or classes ofpremises; and

(iv) measures designed to minimise the possibility of the occurrence ofpollution.

A case study on the State Environment Protection Policy (Air Quality Management)has been provided in Box 5.1 to illustrate how these policies are applied in practice.

SEPPs: Case Study

The State Environment Protection Policy (Air Quality Management) was first Gazettedin 1981, and has subsequently undergone eight amendments, with the most recentbeing in February 1999. It applies to the air environment throughout the state ofVictoria except inside buildings.

The Policy sets out measures for the management of air quality throughout Victoria. Itdefines three classes of indicators that can be used to indicate levels of air quality,depending upon their commonality and toxicity. The policy prescribes the rate ofemission, and concentration around all point sources of these indicators. It isimplemented using environment protection tools such as works approvals, licensing,pollution abatement notices, code of practices, and regulations.

Industrial Waste Management Policies

In addition to SEPPs, Industrial Waste Management Policies (IWMPs) can be declaredin respect to any aspect of the management of industrial waste in Victoria including:

• the generation, storage, treatment, transport (including routes and methods),disposal and general handling of industrial waste;

• the procedures to be implemented in the recycling, recovery, reclamation and re-useof industrial waste and the use of recycled substances;

• the location of treatment and disposal plants; and

• the allocation of responsibility for industrial waste management operations anddisposal.

IWMPs include:

• the objectives of the IWMP;

• the substances, circumstances and regions to which the IWMP is to apply; and

• the time by which or period during which the IWMP is to be in force.


23

Box 5.1

SEPP (Air Quality Management) Ñ Case Study

As a result of a review of monitoring data EPAdetermined that the flexographic/gravure printingindustry was a major contributor to the emissionof Volatile Organic Compounds (VOCs) to theatmosphere.

A number of these compounds, such as xylene,toluene, methyl ethyl ketone, and methyl isobutylketone are all class 2 indicators under the SEPP(Air Quality Management). They are highlyphotochemically active, and when emitted to theatmosphere make a significant contribution to theformation of photochemical smog.

Under the attainment program set out in the SEPP(Air Quality Management) and in consultationwith the key stakeholders, EPA set out a Code ofPractice for VOC Emissions from theFlexographic/Gravure Printing Industry.

This process used the principles established inthe Industrial Waste Management Policy (WasteMinimisation). It set out a broad complianceprogram which will bring about a reduction inthe emissions of VOCs from the industry as awhole, whilst also focusing on reduction of thephotochemically active VOC class 2 indicatorslisted in the SEPP (Air Quality Management).

The code was designed to minimise costs toindustry by taking into account wasteminimisation opportunities and capitalinvestment cycles in the industry.

All facilities in this industry must comply withthe compliance program set out in the code ofpractice, however premises which are the subjectof justified complaints may be required to achievecompliance on an accelerated program on anindividual basis.

Source: Best Practice Environmental Management Series Code of Practice for VOC Emissions from the

Flexographic/Gravure Printing Industry, EPA Publication 487 March 1996.

Like SEPPs, IWMPs are enforceable using a range of tools, but the Act also provides adirect offence for breach of an IWMP. Under section 17A of the Act, the Governor-in-Council may incorporate a National Environment Protection Measure (NEPM) or varya SEPP or IWMP so as to make the policy consistent with a NEPM.

There are currently four IWMPs under the Environment Protection Act 1970, and a listof these policies is contained in Appendix B. The case study in Box 5.2 illustrateshow these policies are applied in practice.

IWMPs: Case Study

The Industrial Waste Management Policy (Waste Minimisation) was gazetted in 1990and applies throughout the State of Victoria to all facilities that generate, store,reprocess, treat, or dispose of industrial waste. It applies to all wastes discharged fromthese facilities to land, air, water, sewer, transported off site, or stored prior to disposalor treatment.

The IWMP specifies the following waste hierarchy for preference in industrial wastemanagement options: waste avoidance; reuse; recycling; reclamation; treatment anddisposal.

The policy is applied using environmental protection tools such as works approvals,licensing, notices, and programs such as the Cleaner Production Program. Using thesetools, industrial waste producers are required to conduct waste audits, or produce wastemanagement plans which apply the waste hierarchy.

The policy requires the use of commonly available waste reduction technology in allnew plant and equipment, and requires best available technology for processes wherepriority wastes are produced.


24

Box 5.2

IWMP (Waste Minimisation) Ñ Case Study

Company B, as a part of a plant modification, wasrequired to submit a works approval application.As a part of this application it was required tocomply with the IWMP (Waste Minimisation).

In the course of applying the IWMP (WasteMinimisation) hierarchy, it identified andquantified the constituents of the waste streams ofthe proposed new equipment. This Ôwaste auditÕfrom the IWMP (Waste Minimisation) helped thecompany identify that one of the waste streams ofthe proposal could be expected to contain a largeamount of dust which would be discharged to theenvironment.

The company, armed with this knowledge,identified that it could avoid the production ofthis waste by the installation of a dust collector.

Such a collector, classed as commonly availabletechnology under the IWMP (WasteMinimisation), removed the dust from the air andretuned it to the operation.

The capital cost of this unit was about $500,000.However the company reported that theinstallation of the unit resulted in direct costsavings of about $100,000 per annum due to anincrease in product recovery. Indirect costsavings have also flowed from increased productyield. According to Company B, Òwhen all thesebenefits are taken into account, the project hasgenerated a positive financial returnÓ.

Source: Extracted from Regulatory Impact Statement Proposed Environment Protection (Scheduled Premises &

Exemptions) Regulations, May 1996, p. 27.

Assessment of SEPPs and IWMPs

Section 18C of the Act requires that the development of SEPPs and IWMPs be subjectto a policy impact assessment, which must include:

• a statement of the purposes of the declaration or variation of policy;

• an identification of the different means by which the purposes of the declaration orvariation of policy can be achieved including the alternative of not declaring thepolicy or varying the existing policy; and

• an assessment of the possible financial, social and environmental impacts of eachalternative expressed in qualitative and, to the extent practicable, quantitative termsto ensure that the costs are not disproportionate to the benefits to be achieved.

Provisions for Making Regulations

Under Section 71 of the Act, the Governor-in-Council makes regulations on therecommendation of EPA. Section 71 lists activities that may be regulated, some ofwhich are:

• prescribing fees;

• prescribing penalties;

• prescribing premises,

• determining exemptions;

• prescribing standards or criteria for the implementation of SEPPs;

• prescribing noise emission standards;

• prescribing types or classes of waste;

• management, storage, handling and use of prescribed waste;

• regulating and controlling the vehicular transport of waste; and

• generally the prevention, control, abatement, or mitigation of pollution and noise.

The Subordinate Legislation Act 1994 requires the development of regulations beaccompanied by a Regulatory Impact Statement (RIS). In 1996, EPA developed aprotocol for developing and assessing regulations, which follows the followingprinciples:


25

• when proposing a regulation, EPA has a responsibility to prepare an RIS whichcontains an adequate assessment of the costs and benefits of that regulation;

• all key economic, environmental and social costs and benefits of the proposedregulation must be identified and assessed, including those which are difficult toassess (for example, non-financial values such as environmental benefits and issuesof considerable uncertainty such as those involved in ecosystem protection);

• regulations generate benefits and impose costs. In developing a regulation andpreparing an RIS, EPA will endeavour to make such costs and benefits transparent;

• EPA is committed to maximising the opportunity for public input and will workwith interested stakeholders throughout the regulation development process; and

• peak representative bodies should play a key role in the consultative process byworking with their members to help identify and assess potential costs.

13

There are currently nine regulations under the Environment Protection Act 1970Ña listof these regulations is contained in Appendix B. The case study in Box 5.3 illustrateshow these regulations are applied in practice.

Regulations: Case Study

The Environment Protection (Scheduled Premises and Exemptions) Regulations 1996play a specific and critical role within Victoria's environment protection system. Thecurrent Regulations were gazetted in 1996.

The objective of the Regulations is to provide a mechanism (ie, scheduling) to ensureeffective management of premises with potential for significant environmental impact.The Regulations define what industrial premises are required to apply for worksapprovals and licences.

Works approvals and licences are statutory processes that set out specific conditionsunder which scheduled premises are permitted to discharge waste to air, water or land,emit noise or handle industrial waste. Works approvals are required before beginningconstruction or modifying facilities or processes. Licences are required before operating,and include discharge limits, operating conditions and monitoring and reportingrequirements to ensure environmentally sound operations.

Is there a Restriction on Competition?

By nature, policies and regulations interfere in the normal workings of the market tocorrect for the marketÕs failure to deliver socially and environmentally optimaloutcomes. In so doing, they impose restrictions on competition.

SEPPs, IWMPs and regulations could raise competition policy concerns if certainindustries, pollutants or geographic areas are unfairly targeted by policies.

The general coverage of SEPPs, the appropriate policy impact assessment requirements,and the lack of major stakeholder concerns suggest that competition issues are notsignificant in this area. No major instances of inconsistent or arbitrary coverage ofSEPPs were raised by stakeholders.

13

EPA, ÒProtocol for Development of Regulations and the Preparation of Regulatory Impact StatementsÓ,February 1996, p 1


26

Box 5.3

Environment Protection (Scheduled Premises and Exemptions) Regulations - Case Study

Company C was planning to establish a newplant which would have enabled it to expandproduction beyond levels achievable at itsexisting plant. The proposed plants operationswere of a type that is scheduled under theEnvironment Protection (Scheduled Premises)Regulations.

The companyÕs initial proposal, if constructed,would probably have resulted in significantemissions from the new plant leading to majorenvironmental impacts such as serious odourproblems. These impacts would have been ofparticular concern as the proposed plant waslocated next to residential properties. Hence ifthe company had pursued its original plans, i twould potentially have been the subject of alarge number of complaints from local residents.In the worst scenario, this could have involvedsignificant equipment retrofitting costs,temporary closure, and legal action.

However, as the factoryÕs operations werescheduled under regulation, the company wasobliged to apply for a works approval. Theprocess highlighted the potential difficultieswith the project at an early stage leading to analternative process utilising different technologywith significantly lower waste emissions. Thenew proposal, worked out in consultation withEPA, resulted in no likelihood of environmentalhazard on or off-site, and no adverse effect on thirdparties.

As a result, adverse environmental impacts wereavoided as the works approval process enabledEPA to ensure that the company complied withthe Environment Protection Act 1970. If theworks approval process had not existed, it i sunlikely that the proposal would have come toEPAÕs attention. EPA would not have been ableto work with Company C to prevent these adverseenvironmental impacts. This would result in thecompany having to retrofit equipment at a muchgreater cost in order to comply with theEnvironment Protection Act 1970.

Source: Extracted from Regulatory Impact Statement Proposed Environment Protection (Scheduled Premises &

Exemptions) Regulations, May 1996, p. 24.

Nevertheless, some aspects of SEPPs were raised for discussion by stakeholders. Forexample, the definition of Ôbeneficial usesÕ

14 was questioned:

EPA must be clear up-front as to what are Ôbeneficial usesÕ. It needs to be testedout at the start of the policy making process what is beneficial.

Government subgroup

A stakeholder from the government subgroup questioned whether the creation of SEPPsshould be in the hands of a delegated authority (ie, EPA), or whether they should besubject to further parliamentary scrutiny and public debate than occurs presently.

Friends of the Earth, Environment Victoria and Murray Raff all suggested that SEPPsshould be legally enforceable.

15

SEPPs are the interface between real science and the law, economics andadministration of pollution prevention. This role should be reinforced andexpanded in consultation with scientists, regardless of economic instruments. Itwas a mistake to remove the direct legal enforceability of SEPPs.

Environment Victoria submission, p 3

It was suggested by other stakeholders that SEPPs do not always set realisticcompliance targets for industry.

14

ÔBeneficial usesÕ are defined in section 4 of the Act as Òa use of the environment or any element orsegment of the environment which:• is conducive to public benefit, welfare, safety, health or aesthetic enjoyment and which requires

protection from the effects of waste discharges, emissions or deposits or of the emission of noise; or• is declared in State environment protection policy to be a beneficial use.15

Submisions from Friends of the Earth, p 10, and Murray Raff, p 6.


27

Some policies (waste management and SEPPs) are unrealistic and should beaccompanied by a compliance plan. The targets need to be attainable. There i salways room for more industry dialogue in waste policy, and sometimes industrycould be more pro-active in seeking a greater role. It is important that EPA giveindustry enough notice in advance of policy preparation.

Industry subgroup

Regulations that arbitrarily target one sector of the economy or certain types ofcompany (eg, large companies over small companies; point source polluters over diffusesource polluters), could be deemed to be anti-competitive. Even if this is not found tobe the case under the practices of the present administration of EPA, the concernremains that it may occur under future administrations.

In a general comment about the setting of fees and charges, the Department of StateDevelopment suggests that there needs to be more publicly available information on therationale and calculation of fees and charges.

The review should examine the basis for the setting of fees and charges. Industryneeds to be confident that sound analysis of industry types and pollution patternsunderlies fee structures and levies. This would allow for more informed opinion asto whether fees and levies are fair and appropriate across industry sectors anddifferently sized companies.

Department of State Development submission, p 2.

Ultimately, the issue is whether the discretionary powers of EPA under the Act arebeing employed in a way that is anti-competitive. And what are the other ways ofmaking clear how this discretion will be used (eg, more transparent policies andadministrative guidelines)? A member of the Government subgroup questioned thesediscretionary powers.

EPA has too much power and discretion under the Act, which creates someuncertainty. The quality of the decisions depend on the quality of thedecisionÐmakers at the time.

Government subgroup

While there were no specific examples raised of concerns over the use of discretionarypowers by stakeholders, one member of the industry subgroup did comment that:

Éthere is a perceived imbalance of resources allocated to diffuse source and pointsource regulation. Because little can be done about air pollution, it is easier to takeon prescribed waste.

Industry subgroup

In summary, implicit in the discretionary powers of EPA is the potential for restrictionson competition to arise. Whether or not this occurs depends on EPA administrativepractices. In response to some of the points raised by stakeholders, it is worthconsidering ways that administrative practices can be used to limit anti-competitiveoutcomes (or to address perceptions that inappropriate use of discretion may lead toanti-competitive outcomes).

Possible Reforms

One redress to a finding that discretion was being improperly used would be to alter theadministrative discretion of EPA. For example, it could be decided to involve greaterpublic input in policy formulation.


28

Another alternative may be for greater parliamentary discussion of all policies; however,this is not likely to be a practical response as it would be time intensive forparliamentarians and would run the risk of politicising what are often technical issues.


Where a Government established body is given authority to administer legislation,there will naturally be some discretion exercised in how it devotes resources to policyand regulation making and enforcement and other tasks.

The issue of the powers of the Victorian EPA under the Act and the discretion that EPAcan employ in administering the Act goes to the heart of many of the concerns raised bystakeholders. (EPAÕs discretion in enforcing the Act is discussed later in Chapter Nine).

On the one hand, environmental legislation should not be overly prescriptive, andshould allow the administrators of environment policy a certain degree of flexibility, ordiscretion, to respond promptly to environmental threats and to ensure the use of themost appropriate tools. This is all the more relevant considering the dynamic nature ofenvironment protection theory and practice. On the other hand, industry and thecommunity require some certainty and clarity of what is being and what is to beregulated, and how it is to be regulated.

The level of public (or parliamentary) involvement in the administration of the Act alsoneeds to be balanced carefully. There is a risk of overÐpoliticising processes that aredebated publicly and therefore not reaching optimal outcomes but outcomes that maybe swayed by strong, private interests.

EPA, as the authority with expertise and experience in environment management, is thebody that is best placed to create SEPPS, IWMPs and regulations. Given thesignificance of these policies for both industry and the community as a whole, theirdevelopment involves extensive public consultation, impact assessment processes andfinal approval by Cabinet. Transparency can also be achieved through use of publiclyavailable regulatory impact statements, reports and guidelines wherever there areconfusions or perceived competition restrictions in the legislation. Transparencysubjects administrators to greater public scrutiny and either helps to highlight areas ofdiscretion or address public perceptions that discretion may be employed unjustly.

EPA already does provide numerous publications on the administration of the Act, andfurther provision will need to be balanced against the cost of framing and producingguidelines and the resources available to EPA.

Further, the requirements for policies and regulations to be developed through a publicconsultation process, required by the Subordinate Legislation Act and the EnvironmentProtection Act, as well as further review by the Scrutiny of Acts and RegulationsCommittee, are safeguards to protect against discretionary administration of the Act thatis anti-competitive.

Recommendation 2: To the extent possible, the creation of SEPPs, IWMPs andregulation and their administration should be undertaken in a transparent manner thatmaximises industry and public input to address perceptions of discretionary powersbeing used unjustly.


29

Overall, the procedures currently in place for the development of policies andregulations appear to be adequately transparent and address competition principles.EPAÕs protocol for the development of regulations contains many similar principles tothose applying to competition policy reviewsÑsignificant public involvement;estimation of the costs and benefits of proposed regulations; and consideration ofalternative measures.

The Subordinate Legislation Act requires that environment protection regulationssunset and be re-developed every ten years. The most recent regulations to be subject tothe protocol were the Environment Protection (Prescribed Waste) Regulations 1998.The regulatory impact statement for the Environment Protection (Scheduled Premisesand Exemptions) Regulations 1996 followed a similar procedure. The EnvironmentProtection (Fees) Regulations 1991 are due to sunset in 2001 and will also be subjectto the protocol, which will require the calculation and justifications of fees to bepublicly discussed.

One perceived imbalance raised by stakeholders that is central to competition policy isthe concentration of regulation on point source polluters rather than diffuse sourcepolluters, such as motor vehicle emissions or run-off from pastoral properties. Thisclaim is difficult to prove with evidence, but if it is the case, some industries (generallylarger companies) can justly claim that they are being penalised by being subject to adisproportionate level of fees, compliance costs and penalties.

From an administrative perspective, this may be due to the lower costs of monitoringand enforcing regulations on point source than diffuse source regulations. Regardless ofthe cost of enforcement, regulation should be made according to the objective of Ôequityof treatmentÕ. (Note that industry stakeholders did not make any claims of unfairindustry targeting or over-regulation, and there is no evidence to suggest that is thecase.)

EPA has indicated an awareness of this problem, as evidenced in annual reports andcorporate plans. For example, the corporate plan for 1998Ð99 highlighted aims to targetdiffuse source pollution by improving air quality using measures such as vehiclechecks, and a priority to Òensure that environmental impacts of major seweragedischarges, urban stormwater, bacteriological inputs onto swimming beaches and litterare reducedÓ.

16

Recommendation 3: Pollution, whether from point or diffuse sources, should beregulated equitably. Furthermore, point source polluters, through existing fees andlevies, should not be required to subsidise regulation and monitoring of diffuse sourcepollution. Possible fees or levies on diffuse source polluters should be considered,where practical.

In relation to the issue of SEPP enforcement, it is not recommended that breach ofSEPP should be reinstated as an offence. SEPPs are a set of environmental objectivesfor a geographic region, covering a multitude of polluters and it would be extremelydifficult to prove that a single source of pollution could be found to be the sole cause ofa breach of a SEPP, since air or water pollution may be attributed to a number ofdifferent sources. There are other more appropriate avenues for addressing offences underSEPPs, namely pollution abatement notices, clean up notices and prosecutions.

16

EPA, Corporate Plan, 1998Ð99, p 18.


30

5.3 Use of Economic Instruments

Economic measures attempt to correct market failure by using market mechanisms toinfluence behaviour rather than using traditional commandÐandÐcontrol regulations.Table 2.2 in Chapter Two lists some economic instruments: emissions and effluentcharges; product charges; clean up or restoration levies; subsidies; performance bonds;legislated deposit refund systems; tradeable permits; and environmental liability(making polluters legally liable for environmental damage).

Currently EPA uses a number of economic instruments under the Act such as loadbased licence fees, offset provisions, levies and financial assurances. The current use ofinstruments is clearly subject to the provisions of the Act, for example, Section 71outlines the instruments that EPA may use to achieve its objectives, such as the powerto charge fees (eg, licence fees) and to collect levies (the Environment Protection Levyand the Landfill Levy). However, it is not clear to what extent these sections allow theVictorian EPA to use the full range of available economic instruments, such astradeable emission schemes, subsidies and other levies (described in Table 2.2), tocontrol economic activity and to influence behaviour.


Economic instruments are usually designed to correct for the failure of the market tomake producers accountable for the external costs of production, such as pollution.Producers that do not fully account for external costs can gain a competitive advantageover producers who do account for all costs. Furthermore, by failing to forceaccountability, the governmentÕs actions can reinforce this competitive advantage.Existing regulation does attempt to correct for this situation, but as discussed earlier inChapter Two, economic instruments may be more effective and efficient in many cases.

The failure to account for the external costs of production is inconsistent with the coreprinciples of the IGAE, namely intergenerational equity and polluter pays principles.

Friends of the Earth made the following observations about the present use of economicmeasures and suggest that their use should be expanded:

The current levies are too small to have enough impact to address the magnitude ofcurrent environmental problems. Levies need to be large enough to get firms tochange the way they perform. This is not happening at present. Levies should beover and above the cost of disposing of the waste in such a way as to remove anythreat to future generations. They should also reflect at least some of theenvironmental costs of producing wasteÉ


An example of a situation where the market price for a product does not reflect the truecost of production, and thereby results in competitive advantage, was provided:

At present, non-recycled paper does not represent the real cost to the environment.For example, the carbon released by logging of old growth forests is not factoredinto the cost of the paper, nor is the destruction of hollow-bearing trees as habitatfor powerful owls, nor is the effect on water quality and quantity. The habitat issueis not within the jurisdiction of the Environment Protection Act, but the waterissue is within its jurisdiction. Accordingly it needs to be able to intervene in themarket to address this effect, otherwise recycled paper will not be able to competebecause it is trying to compete with a product which is not adequately priced.



31

Taken in the context of the above discussion, the failure of the market to account for theexternal costs of production, and an absence of government intervention to correct forthat failure, inhibits competition from occurring on an equal footing. In developing apolicy response, however, consideration must be given to the costs and benefits ofintervention using economic instruments. This analysis will determine what level ofintervention may be required.

Possible Reforms

As discussed, the use of economic instruments as an alternative to present regulatoryinstruments is likely to be more appropriate for problems where the full cost ofproduction is not accounted for (in which case levies may be used) or where there is afinite resource to be allocated efficiently (trading schemes).

The Act could be altered to explicitly state which economic instruments are permittedto be used. At the time the Act was written in 1970, many of these instruments werenot considered.

By comparison, the NSW Protection of the Environment Operations Act (POEO)(effective 1 July 1999) explicitly allows NSW Environment Protection Authority toÒdevelop and implement schemes involving economic measures for environmentprotectionÓ. Part 9.3 of the NSW POEO Act is included here for reference:

Part 9.3 Economic measures

Schemes for economic measures

(1) EPA may develop and implement schemes involving economicmeasures as a means of achieving cost-effective environmentalregulation or environment protection.

(2) EPA may approve of the development and implementation of such ascheme by other regulatory authorities.

(3) Without limiting the above, such a scheme may involve measures thatprovide an economic incentive for avoiding or minimising harm to theenvironment when carrying out an activity.

(4) An example of such a scheme is a tradeable emission scheme, as referredto in section 294.

(5) EPA may alter or terminate such a scheme.

(6) Compensation is not payable by EPA or the State for a loss of (or thevalue of) any entitlements under such a scheme as a consequence of thealteration or termination of such a scheme.

Tradeable emission schemes

(1) A tradeable emission scheme may include any or all of the followingelements:

(a) the determination of aggregate limits on any form ofpollution (whether or not in a particular locality),

(b) monitoring and reporting levels of pollution and emission ofpollutants,

(c) the creation of tradeable emission permits or credits (andtheir cancellation),

(d) the rights and duties of holders of tradeable emission permitsor credits,

(e) the initial sale or allocation and further sale or allocation oftradeable emission permits or credits.


32

(2) This section does not affect the generality of section 293, and atradeable emission scheme may include elements other than thosementioned in subsection (1).

Regulations

The regulations may make provision for or with respect to the development orimplementation of schemes involving economic measures, and their alterationor termination.

The NSW provision was deliberately included to allow the NSW EPA to establishtradeable emission schemes and to use other economic instruments at its discretion.

It was suggested by one stakeholder that there may be a role for SEPPs to play inimplementing economic measures:

SEPPS should also specifically address the fact that the market currently preventsmany Ôenvironmentally friendlyÕ products from competing. SEPPs should addressthe inequities between those trying to internalise environmental costs, and thosewho are not taking this approach.



Economic measures, such as levies and trading schemes, can be a more effective meansfor correcting market failure, such as accounting for external costs, than regulatorymeans. Many studies have been undertaken in recent years that find economicinstruments can, in many cases, deliver environmental outcomes more efficiently thanregulatory measures.

It is logical to argue that the greater the range of potential instruments that are availableto protect the environment, the more likely it is that policy makers can use theinstrument that achieves the environmental objective most effectively and at least costto the community. EPA, as the administrator of environment policy, should haveaccess to the full range of instruments. Regardless of whether or not the EPA canemploy economic measures under the present Act, the perception of ambiguity suggestssome hesitation over the use of these instruments.

It is important that the formulation of economic measures is a balanced decisionprocess. One of the key problems with setting economic measures (and indeed anyenvironmental regulation) is determining the value of the environment. This value willinfluence the severity of the instrument and hence the impact on business. An opendecisionÐmaking process would help to make sure extreme measures are not employed.

Recommendation 4: Although the Act currently allows the EPA to use economicinstruments such as load-based licence fees, offset provisions, levies and financialassurances, these powers should be broadened to allow the use of the full rangeeconomic instruments under the Act. EPA should develop economic measures in thesame manner as it develops regulationsÑie, the objectives of the instrument should beclear; an impact statement should be prepared; and the measure should be periodicallyreviewed. (Economic measures would most likely come under the requirements forsubordinate legislation in the Subordinate Legislation Act 1994.)


33

Chapter Six

Regulation of Premises

6.1 Overview of the Regulations

The works approvals and licensing provisions of the Environment Protection Act arecore regulatory instruments (discussed in Sections 6.2 and 6.3 below) that are appliedto premises currently scheduled under the Environment Protection (Scheduled Premisesand Exemptions) Regulations 1996. Scheduled premises are identified as having thepotential for significant environmental impact.

Premises that produce pollution and waste which are harmful to the environment areregulated under the Act because the market fails to adequately ensure that pollution andwaste are restricted, treated or disposed in the appropriate manner.

The Regulations were recently reÐdeveloped. The Regulatory Impact Statement (RIS)17

expressed the objective of the review of the Regulations in 1996 as:

To establish a mechanism to ensure effective management of premises which havethe potential for significant environmental impact.

Regulatory Impact Statement, p 1

The outcome of the RIS is provided here as background to discussion later in thisChapter about the appropriateness of scheduling premises, and use of works approvalsand licensing. The RIS considered three alternatives to scheduling:

• making new Environment Protection (Scheduled Premises and Exemptions)Regulations (ie, minor alterations to the status quo);

• using other EPA and government controls (eg, greater reliance on EPA penaltiesand notices, planning processes, etc); and

• Òleaving high-risk premises to rely on their own judgement to make sure that theyare complying with the ActÓ, focussing on broad tasks such as establishingenvironmental objectives, and assisting industries to develop systems to complywith the Act.

The second and third options would involve a greater use of alternative measures (tolicensing) to enforce the Act, with some active support and assistance to industries indeveloping systems to comply with the Act and can effectively be considered incombination.

The other alternative to licensing, which is effectively a variant of the present licensingregime, is the co-regulatory initiative that is currently available on a voluntary basis tocompanies under the Accredited Licensee Scheme. This is discussed in Section 6.5.

17

Environment Protection (Scheduled Premises and Exemptions) Regulations, Regulatory ImpactStatement, Environment Protection Authority, May 1996.


34

The RIS was conducted according to the guidelines set out in EPAÕs Protocol for theDevelopment of Regulations and the Preparation of Regulatory Impact Statements, andincluded an interview process with 21 licensees.

18 The RIS satisfactorily concluded

that, at the time, neither alternative to new Regulations was a Ôviable optionÕ to meetthe objectives of the Regulations. This is a sensible conclusion under presentcircumstances, so long as the benefits of co-regulatory approaches are also recognised.

The costs and benefits of the existing Regulations were summarised in the RIS (seeTable 6.1)

Table 6.1

Summary of the Benefits and Costs of the Regulations

Benefits Costs

A high level of assurance that premises with thepotential for significant environmental impact arebeing effectively managed and are complyingwith the Environment Protection Act.

A high degree of certainty to industry.

Retro-fitting costs avoided and waste minimisationopportunities identified

Reduced likelihood of site contamination and theresultant need for costly clean up

High degree of community confidence

Estimated total annual licence fees of $11.7 M

Estimated total annual works approval fees of $0.48 M

Preliminary estimates of the annual cost to Schedule 4premises of providing financial assurances ranged from$220,665 to $294,220.

Estimated project delays in 10Ð15 per cent of worksapprovals

Annual licence compliance costs

Other administration costs

Source: Adapted from Environment Protection (Scheduled Premises and Exemptions) Regulations, RegulatoryImpact Statement, p 59.

6.2 Scheduled Premises

The Regulations classify, or ÔscheduleÕ, premises according to their function. Table 6.2presents the six different types of premises scheduled in the Regulations.

Table 6.2

Types of Scheduled Premises

Schedule Description of function/activity of premise

Schedule 1 Premises discharging or emitting to atmosphere

Schedule 2 Premises discharging or depositing waste onto land or into waters

Schedule 3 Premises emitting noise

Schedule 4 Premises which reprocess, treat, store or dispose of prescribed industrial wastes

Schedule 5 Premises which pose an environmental risk with high clean up costs (for financialassurance purposes)

Schedule 6 Premises handling ozone depleting substances (no works approval applicable)

Source: Environment Protection (Scheduled Premises and Exemptions) Regulations


The key issue is whether the scheduling of premises should reflect the function/activityof the premise or some other measure related to the impact of the activity on theenvironment. The scheduling of premises according to function/activity rather than bysome other measure of environmental impact was questioned by stakeholders.

18

The consultation process was open to all licensees.


35

The schedule of premises to which the works approvals and licences provisionsapply should be more directly linked with actual environmental degradationcaused by the activity on the premises.


The Environment Protection (Scheduled Premises and Exemptions) Regulations1996 defines the kinds of premises which are to be subjected to Works Approval.They do this on a functional basis, such as ceramics works with certain discharges,but it is not clear why this should be so. The schedules should, at least, beorganised on the basis of values/quantities which the environment is capable ofaccepting.

Murray Raff submission p 5

While scheduling itself is not a Ôrestriction on competitionÕ, it is an important initialstep in determining whether regulatory tools (such as licensing and works approvalswhich do restrict competition) should apply to premises. The basis for shedulingpremises therefore is an influential factor in the eventual impact of those instruments oncompetition.

Alternatives

Premises could be scheduled according to other determinants, such as estimated size ofenvironmental impact (as suggested by stakeholders), scale of emissions and/or size ofoperation.


While the impact on the environment is the most relevant variable to determine theextent of regulation of premises, gathering the information required to schedulepremises by estimated environmental impact is likely to be difficult and resourceintensive.

Size of operation is not a sound basis for scheduling as it does not provide a reliablebasis for determining environmental impact.

Scale of emissions is a more useful proxy for environmental impact, and is arguablybetter dealt with through the actual regulatory tools used, such as the calculation of thelicence fee (discussed below).

Scheduling premises by function is the most appropriate means for schedulingpremises, as it covers all the main types of pollution regulated in the Act (air, land,water and noise).

Recommendation 5: Premises should continue to be scheduled according to functionand the degree of environmental impact should continue to be addressed by regulatorytools.

6.3 Works Approvals

Works approvals, along with licensing, are the main regulatory tools used to regulatepremises. Works approvals, as described under section 19 of the Act, identify potentialenvironmental risks at the design stage of a proposal. Works approvals address thefailure of the market to ensure that premises are constructed in a manner that avoidsthese potential environmental risks.


36

Works approvals allow companies to anticipate and avoid such risks, preventunintended environmental damage, avoid costly retrofitting and minimise costs oncethey begin operating. Works approvals should reduce the need for subsequentregulatory intervention by EPA and other government agencies to solve problemsresulting from lack of initial attention to the environmental implications of newdevelopments. Eighty-nine works approvals were issued in 1998.

The Act requires works approvals from any Schedule One (Air), Schedule Two (Water& Land) and Schedule Four (Prescribed Industrial Waste Treatment and Disposal)premises that propose to carry out works which may:

• install or alter an operation process, fuel type, processing materials and fuelburning equipment where to do so would increase the emission of waste to theatmosphere;

• alter the discharge of waste to land and waters, alter the treatment system of wasteprior to discharge to land or water and any act that is likely to cause an increase oralteration to the waste discharged to land; or

• install or alter a method for reprocessing, treatment, storage and disposal ofprescribed industrial waste and alter the type of prescribed industrial waste beingtreated, stored, reprocessed or disposed of on the premises.

Irrespective of which Schedules premises fall under, a single works approval covers allissues together. (The same approach is used for licences.) Plans for works are assessedon the basis of their compliance with industrial waste management policies, includingthe nature of technology to be used and whether the works will allow maintenance ofSEPP objectives. The works approval process is co-ordinated with any necessaryplanning approvals. The application is advertised and third parties are given anopportunity to participate in approvals processes.

In some cases, an exemption from works approval requirements may be granted if EPAis satisfied that the proposed works will not adversely affect the quality of any segmentor element of the environment or adversely affect the interests of any third party.Exemptions are available for Schedule Four (Waste Disposal) premises where EPA issatisfied that the proposed works are unlikely to cause an environmental hazard oradversely affect the interests of any third party.


The requirement for a works approval is a restriction on competition because it restrictsthe undertaking of works subject to the conditions set by EPA. Delays in the approvalprocess and works approval fees are also restrictions that are discussed later.

However, stakeholders generally agreed with the rationale for works approvals.

Prevention is generally cheaper than treatment, although its benefits may notalways occur in the short term, and its effects are not always immediately obviousor politically expedient. Department of Human Services considers thatdevelopment projects should be screened at an early stage for potential healthhazards.



37

It is plainly more efficient to cooperate from the earliest time to ensure that a projectwill meet environmental standards when it is completed, rather than inspecting i tat a later date and requiring retro-fitting of pollution control equipment or evenclosure.

At the same time, there are small projects for which a set of discharge values couldbe specified, and then no further permission granting process would be necessary.Implementation of the criteria could be directed through the planning system, andthen subjected simply to on-going inspection to ensure that the values are beingmet.

Murray Raff submission, p 5

Works approvals follow the precautionary principleÉthe view that industriesshould not have to pay for environmental damage, or regulation to ensureenvironmental damage does not occur by reason of their activities, is outdated.Companies must pay for the damage they do, and the costs of regulating theiractivities where they have the potential to cause harm. If they donÕt pay, thecommunity, the environment or future generations will end up paying a muchhigher price.


There is a potential restriction on competition where polluting premises are able toavoid works approvals. Murray Raff commented on this problem:

É a problem with the Works Approval system is that polluting premises andinstallations are excluded because of -

¥ the legally erroneous doctrine on point sources

¥ the narrowness of expression in section 19A

¥ the functional approach to defining premises in the regulations, instead ofstating unacceptable values from any kind of premises.

Needless to say, a prospective industrialist who can wriggle around these pointsgains a distinct and unfair market advantage.


Inappropriate exclusion of premises from works approvals was not supported by anyspecific examples raised by stakeholders and it is not possible to say on presentevidence whether or not this is occurring.

Murray Raff also suggested that excessive noise should be controlled by requiring noiselimits to be incorporated into works approvals (in addition to noise control notices).

The physical characteristics of noise, that it travels in waves, creating effects andthen is gone, create great difficulties for internalisation of the costs which it createswith respect to human and natural environments. Because it is so transient, oneproblem is what costs? It is well documented that persistent daytime noise above59 dB(A) and 49 dB(A) at night creates interferences with private property rightsand human health problems as well. Such market failures lead one to conclude thata licensing system should be reintroduced for premises which produce noise, butthis time including the requirement of obtaining Works Approval before the plantis constructed.

Murray Raff submission, pp 9-10

EPA advised that the option to prescribe and monitor noise limits as part of a worksapproval and licences is presently being addressed in works approval provisions to theAct which are yet to be proclaimed.


38

Alternatives

The main alternative to works approvals is to remove the provision and require theowner of the works to take on the risk of compliance with the Regulations. EPAÕs rolewould then be to provide guidance if requested, and monitor compliance with the Act.The main benefit of this alternative would be to avoid the time cost of works approvalsand the application fee. The costs are that there is potentially a greater risk of non-compliance, and, in the absence of works approvals fees, it would also be difficult forEPA to recover the funds required to undertake regular inspection of works to ensurecompliance.

The removal of the works approval requirement may be an appropriate option forsmaller works only, and only where it is decided that there is a low risk ofenvironmental damage (noting that a small works can have a relatively largeenvironmental impact). As mentioned earlier, there are provisions for exemptions underthe Act for some Schedule Four premises.

An arrangement that is to come into effect in NSW is for the works approval andlicence to be combined in the one instrument, the environment protection licence. Thecombination of works approval and licence, while not ostensibly different to theVictorian system, could deliver small benefits in terms of reduced compliancecostsÑeg, by charging one fee and requiring one application. Approvals for new workscould continue to be sought and granted under the combined licence.


The requirement for works approval is justified under the precautionary principle. Thecompetition restriction is outweighed by the benefits of certainty to industry (in termsof knowing what is required to comply with the Act) and the community (in terms ofoutcomes for the environment).

Recommendation 6: Retain works approvals as a regulatory tool.

6.3.1 Works Approval Fees

Works approvals require payment of an application fee, which is prescribed in theEnvironment Protection (Fees) Regulations 1991. Fees are calculated according to fullcost recovery principles. The projected total project cost is used as a proxy for theamount of time that EPA expects to devote to assessing the works approvalapplication. The fee schedule is presented in Table 6.3.


39

Table 6.3

Works Approvals Application Fee

Proposed value of the works Fee ($) Per cent

Up to $10,000 480 > 4.8

$10,000 up to $50,000 960 9.6 Ñ 1.9

$50, 000 up to $250,000 2,000 4.0 Ñ 0.8

$250,000 up to $1 million 3,360 1.3 Ñ 0.3

$1 million up to $5 million 5,600 0.6 Ñ 0.1

$5 million up to $25 million 11,200 0.2 Ñ <0.1

$25 million up to $100 million 16,800 <0.1

More than $100 million 36,000 <0.1

Source: EPA, EPA Works Approvals, www.epa.vic.gov.au.Note: Works approvals fees are constrained under section 71 of the Act tono more than 4,500 fee units (equal to $36,000).

The RIS estimated total works approvals fees of $0.48M per annum, with compliancecosts of around $0.57M per annum.

19 However, it was also noted in the RIS that

industry would have incurred those compliance costs anyway to comply with the Act.


The works approval fee is an added cost imposed on certain industries, which, if notjustified, could potentially place them at a disadvantage to the producers of lessregulated competing products or substitutes, or competitors from other jurisdictions.

The appropriateness of the basis for the calculation of the works approval fee was raisedby one stakeholder:

With Works Approvals, the fees are based upon the cost of the proposal, whichmay not be very well related to the environmental/health damage that proposedemissions may cause.

Consideration should be given to having fees related to the value/cost [nonmarket] of being able to make such emissions.

Consideration should also be given to ensuring that cost recovery includes theDepartment of Human Services evaluation of the Works Approval.


The Department of State Development commented that the rationale for the setting ofthe works approval fee according to works size needs to be clearly demonstrated:

Where fee structures are designed on a cost-recovery basis, underlyingassumptions need to be justified. For example, if É[works]É size is used as themain driver in setting a particular fee (as is the case for Works Approvals), then thelink between company size and the effort involved in providing the service wouldneed to be demonstrated.

Department of State Development submission, p 2

19

Environment Protection (Scheduled Premises and Exemptions) Regulations, Regulatory ImpactStatement, Environment Protection Authority, May 1996, p 59


40

Discussion and Recommendation

According to the graded fee schedule, fees vary as a proportion of the value of theworks. Fees for large works approvals are not a significant cost to businessÑin mostcases less than 0.1 per cent of the total value of the works. However, fees are a muchgreater percentage of smaller works, and can be up to 10 per cent of the value of theworks (eg, a $10,000 works incurs a fee of $960 which is equal to 9.6 per cent of theworks, whereas a $1,000,000 works incurs a fee equal to 0.6 per cent of the works).

According to user pays principles, the relatively large fee for smaller works is justified.However, it may also deter companies from undertaking smaller works. To overcomethis problem, the scale should include an extra grading, say, for works of size $10,000to $25,000 and should cap the proportion of a works approval fee to works size to nogreater than 5 per cent.

Preferably, the method of calculating fees for larger projects should be reviewed toachieve a better reflection of user pays. Using the size of the works as the proxy for userpays can result in a very large works project which has a minor potential impact on theenvironment, and consequently a small use of EPA resources, paying a relatively largefee in absolute terms under the present approach.

An alternative would be to require EPA to estimate the time and resources required toundertake the approval at the beginning of an approval process and provide a quote forthese services. Other factors that determine the cost of resources of EPA in evaluating aworks approval, including the expertise and attitude of the applicant, may also beincluded.

In the RIS, it is commented that there would be a very large cost to EPA to maintainrecords on the time and expense for each application. However, a close, rather thandetailed estimate of time and expense would suffice. One method could be to classify aproposed approval into one of a number of categories, each with a different rate to beapplied to the project value (eg, straight forward, complex, very complex).

It may be argued that this approach would create uncertainty for industry by comparisonto the present fixed schedule. However, most businesses are well acquainted with thepractice of suppliers providing quotes based on these principles.

From a Ôpolluter paysÕ perspective, the potential impact of the works on theenvironment is also a factor, but this is probably better reflected in the calculation oflicence fees.

These issues are not major competition issues, but should be considered when theEnvironment Protection (Fees) Regulations 1991 sunset and are reviewed (sometimebefore 2001).

Recommendation 7: As an initial measure, the fee structure should be revised to capthe fee as a proportion of works for small firms to no greater than 5 per cent of the valueof the works. Further down the track, the fee for works approvals should be revised andbased on a reflection of user pays principles that more closely matches the time andfinancial cost of EPA resources, rather than on the size of the works. Changes to theformula should be considered when the Fees Regulations are reviewed in the nearfuture.


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6.3.2 Approval process

Works approvals are generally assessed in three months or less, although complexapplications may require up to four months (the maximum allowable time as stipulatedin the Act).

20 A major cost of works approvals is the potential delays to projects as a

result of the approval process. It was noted in the RIS that 10 to 15 per cent of projectsmay be delayed by the process and that third party appeals may result in further delays.This is likely to occur because some approvals involve complex and contentious issuesthat require significant analysis and public input, which takes time.

If EPA doesn't meet the four month deadline, s.19B(7) allows for the firm to receive adefault approval for its proposals and the development can go ahead.


The potential delays of the process are an added cost imposed on some producers(estimated in the RIS to occur in 10 to 15 per cent of approvals).

21 This could

potentially place them at a disadvantage compared to the producers of less regulatedcompeting products or substitutes, or competitors from other states.

The cost of the time of the process was raised by the industry subgroup.

There is a question of the time required for works approvals. The scale of timerequired to the size of the works seems a bit out. Perhaps smaller projects could begranted approval in quicker time. What are the mechanisms for speeding up theprocess?

Industry subgroup

Friends of the Earth, on the other hand, believe the timeframe is adequate and Ômustnot be watered down any moreÕ.

22


EPA should undertake regular reviews of its process for undertaking works approvals toidentify any possible changes that may reduce the time of the process. Using datacollected on time and resources required for each approval to calculate works approvalfees could also be drawn upon to improve fee calculation.

Outsourcing some of the functions of the works approval process may be an option forkeeping costs down and ensuring resources are available in times of heavy demand forapprovals. However, because many works approvals are generally followed by anapplication for a licence, there is a strong link between the information required for theworks approval and licensing processes. The benefits of keeping the informationgenerated from the works approval process ÒinÐhouseÓ to be used in the licensingprocess favours EPA to continue to perform the works approval task. Outsourcing maybe more feasible for works that are not followed by a licence application. However, EPAis ultimately accountable under the Act for the approval of the works, and EPA wouldstill be required to make the final decision. If outsourcing of the works approval processis to occur, it should occur at the discretion of EPA.

20

EPA recently reduced the maximum allowable time to undertake the approval process from six monthsto four months.21

Regulatory Impact Statement, op cit, p5922

Friends of the Earth submission, p 11.


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Recommendation 8: Whilst the four month limit is appropriate for the most complexof processes, EPA should consider a shorter allowable maximum processing period forless complex cases.

6.4 Licences

Licences are required by those premises identified in the Environment Protection(Scheduled Premises and Exemptions) Regulations as those where operations pose apotentially significant risk to the environment which needs to be managed on anongoing basis. Regulated risk management addresses the failure of the market toundertake risk management without a regulatory requirement to do so. Licences helpensure that the relevant companies adopt environmentally sound practices, monitortheir operations and maintain appropriate levels of environmental performance. In manycases, licences are issued once works (with works approval) have been satisfactorilycompleted (though not all industries subject to works approval have licences). 1201licences were in operation during 1998.

Licence conditions typically specify:

• the location and number of discharge points at each premises;

• the concentration, volume, load and types of discharge from each discharge point;

• approaches to waste management and contingency planning; and

• licence monitoring and reporting requirements.

Licence monitoring enables companies to monitor their compliance with licencerequirements. Monitoring data also provide companies with valuable information onthe efficiency of their production and control processes.


Essentially, licensing as a regulatory tool is a fundamental restriction on competitionbecause it dictates who can operate a business by restricting the activities of a businessand prohibiting firms from operating who cannot meet the requirements of the licence.However, as discussed below, there are no restrictions on who can obtain a licenceother than meeting standards which are designed to protect the environment.Nevertheless, it is appropriate to consider alternative instruments (see below).

Licensing can result in a competitive advantage for incumbent license holders when thetotal number of licences is restricted, thereby creating a barrier to entry for new entrants.In practice, each application for a licence is considered by EPA according to theproducerÕs ability to meet licence conditions. Therefore, there is no restriction on thetotal number of licences allocated in Victoria, and, hence, no competitive advantagecurrently gained by licensed premises.

A measure of the potential restriction on competition of licensing is the compliancecost, particularly the compliance cost due to prescription of the use of certain processesor inputs to meet licence conditions. Whether the licence conditions are input or outputfocused will determine the level of compliance costs. EPA has been moving toward aoutcome oriented approach to setting licence conditions.

Alternatives

Alternative or variants to licensing may achieve more efficient regulation. As mentionedearlier in Section 6.1, alternatives to licensing include:


43

• abolish licensing, and make greater use of general regulations and penalties toenforce the Act;

• greater use of co-regulatory models, such as the development of EnvironmentManagement Systems with industry and implementation of EnvironmentImprovement Plans, as is presently the case under the Accredited Licensee Scheme;and

• greater use of Ôself-regulatoryÕ models, such as voluntary codes of practice, whereindustry has a greater degree of responsibility for determining appropriatestandards, subject to ratification by EPA.

The first and third options above were considered by EPA in the RIS process. Thesecond option is presently operating as the Accredited Licensee Scheme. (Victoria isthe only state to operate such a scheme; however, it was recently considered in NSW.)Table 6.4 summarises the alternatives to the present licensing system and theconclusions of the RIS.

Table 6.4

Alternatives to Licensing

Alternative Comment

Using general legislation provisions toprevent and punish undesirable businessconduct

Considered by RISÑlow level of assurance andcommunity confidence; inherently reactive approach leadsto ultimately greater costs; likely increased penalties andfines.

Working with industry to develop non-legislative approaches (co-regulation)

This is likely to be the future direction for premisesregulation, and is gradually gaining acceptance amongindustry and the community. Co-regulatory initiatives aimto involve industry and the community more in regulationdesign, with a side benefit of direct dialogue betweenindustry and the community, rather than using EPA as aconduit. Accredited Licensee Scheme (see Section 6.5) isbest example. Mixed results so far, but still too early tomake any firm judgements about the success or failure ofthe Scheme.

Encourage self-regulation and industrycodes of practice

Considered by RISÑunlikely to work because Ôfly bynightÕ operators may come and go at their leisure, abusingthe regulations in the process. Therefore, self-regulation isonly likely to work where there are Ônatural barriers toentryÕ ie, where it is only feasible for large firms to enterthe market due to the high fixed costs of start-up; high costfor industry to develop codes.

Sources: EPA, Environment Protection (Scheduled Premises and Exemption) Regulations, Regulatory

Impact Statement; and Victoria Government, National Competition Policy Guidelines, p 91-92

Another possible alternative to licensing is Ônegative licensingÕ23

which puts greateremphasis on targeting businesses which fail to comply with environmental standardsby disallowing them from continuing to operate. For the purposes of environmentalmanagement, however, negative licensing is not favoured as it is:

• not consistent with the precautionary principle;

• would impose costs of education (ie, educating business of their obligations underthe Act, which currently is stated in licences); and

• would require a high level of enforcement to ÔreactÕ to potential environmentalhazards.

23

The Victorian Government National Competition Policy Guidelines refers to negative licensing asremoving Òfrom the industry businesses which persistently fail to adopt acceptable practicesÓ (p.92).


44

Ultimately, regulation of premises by licensing or other means should adhere to thefollowing principles outlined in the Victorian GovernmentÕs Guidelines for the Reviewof Legislative Restrictions on Competition to limit the intervention to the minimalamount required:

• place more reliance on performance based standards, which indicate expectedoutcomes, rather than prescriptive standards, which specify how outcomes are to beachieved;

• remove all restraints which do not directly deal with the problem identified ascause for concern; and

• modify unduly costly administrative processes, for example those associated withthe issuing, transfer or variation of licences or arising from having a multiplicity oflicence or quasi-licence (permit) categories.

The use of Ôbubble licencesÕ, where a single licence is issued for a site with multipletypes of discharges, is a tool that is used to reduce the overall level of licensing forsome premises. Amalgamation of licences has occurred to a large degree in Victoria.


Stakeholders generally agreed on the need for a licensing system. The main point ofinterest was in the setting of licence fees which is discussed separately in Section 6.4.2.

Licensing is clearly a restriction on competition. However, a significant body of workhas been undertaken, not only in Victoria but also in NSW, which justifies its practiceon environmental and public health grounds.

24 Its use as a regulatory instrument for

pollution control is widespread around the world.

Furthermore:

• the outcomes of the RIS, which included significant public consultation, a costbenefit analysis of licensing and an evaluation of alternative instruments, supportthe continued use of licensing to achieve the objectives of the Act; and

• restrictive licensing does not take place in Victoria. Any business that can prove itcan comply with the Act can be granted a licence.

In conclusion, licensing is an appropriate regulatory tool for enforcing the Act.However, variants of the present scheme should be considered for greater use, inparticular an expansion of co-regulation, such as the Accredited Licensee Scheme. Thepresent use of co-regulatory schemes will be discussed in more detail in Section 6.5.Variants or alternatives to licensing must only be considered if they can be assured tomeet environment protection objectives.

To limit compliance costs, licence conditions should generally only specify requiredoutcomes. This gives producers the flexibility to choose the least cost mechanism formeeting conditions. (This does not mean that the licensing mechanism does not have arole to play in suggesting the most appropriate method for achieving licence conditionsat least cost.)

Recommendation 9: Variants to licensing that reduce compliance costs, such as greateruse of co-regulatory approaches and amalgamation of licences (eg, bubble licences),should be explored and further applied, where appropriate, to introduce greaterflexibility into licensing and minimise the regulatory burden on business.

24

Environment Protection Authority of NSW, Protection of the Environment Operations Bill1996ÑImpact Analysis of the Draft Schedule of EPA-licensed Activities.


45

6.4.2 Licence Fees

Licence fees are set under the Environment Protection (Fees) Regulations and aredesigned in accordance with the following principles:

25

• EPA should recover the costs associated with the assessment of industry proposalsand monitoring, enforcement and administration of licences;

• fees should reflect the Ôpolluter paysÕ and Ôuser paysÕ philosophy and be weightedtowards the volume of emissions and their potential for environmental impact; and

• fees should encourage waste minimisation.

Further indication of the polluter pays and user pays bases on which fees can be set arecontained in the second reading speech to the Environment Protection Bill:

É different fees for licences or approvals will be prescribed according to specifiedfactors. É some of the criteria which might be used in this connection includevolume of wastes, impact on the receiving environment in relation to a wasteloading equivalent, relative toxicity or character of the waste, and the anticipatedwork load in terms of review, inspections or other activities of the licensingagency.

cl.25; 24 (4) and (3), Environment Protection Bill, second reading speech, 12November 1970.

Individual licence fees are constrained under Section 71 of the Act to no more than42,000 fee units (equal to $336,000). Within the full cost recovery context, fees forindividual licences are calculated as a function of the volume and nature ofemissionsÑtwo factors which determine the level of environmental risk and alsogenerally the level of resources EPA must commit to managing these issues. EPAapplies these two measures for calculating fee levels to represent a proxy calculation ofthe administrative costs involved in each licence. In this way, the fee system alsoeffectively operates as a load-based licensing system, though it must be stated that thisis not the same as a pollution ÔtaxÕ which would be specifically set to influencebehaviour to reduce pollution creating activity.

Fees are generally calculated based on peak rather than average emissions which followsthe principle that the environmental impact of pollution is more closely related to peakemissions and providing additional incentives to lower peaks.

Total Licence fees were $8.7 million in 1994Ð95. At present, the EnvironmentProtection (Fees) Regulations provide for a transition to full cost recovery. Once thistransition phase is passed, the total estimated licence revenue is expected to beapproximately $11.7 million per annum.

The results of a study of a comparison of licence fees across selected states show thatVictorian fees are presently among the highest in Australia. However, that situationwill change when the NSW legislation comes into effect (see Table 6.5). Averagelicence fees for selected states are provided in Table 6.6. It should be noted that thereare differences in the calculations of licence fees in all states so the figures provided givea general rather than specific evaluation.

The main conclusions of a comparison of licence fees across the selected states is that:

• SA and WA licence fees are lower than Victoria and NSW;

• Victorian fees are currently higher than NSW; and

25

Environment Protection (Scheduled Premises and Exemptions) Regulations, Regulatory ImpactStatement, p 34.


46

• when Load-Based-Licensing is introduced in NSW, fees in NSW will besignificantly higher than Victoria.

Table 6.5

Licence Fee Payments *

State Year Payments ($M) Fees as % of GSP*

VIC 1989/90(a) 2.96 (licence fee only)

3.04 (licences plus transportpermits)

0.00289

0.00297 (licences plus transportpermits)

2000/01(f) 11.70 (licence fee only)

12.38 (licences, transportpermits and EnvironmentProtection Levy)

0.00732

0.00774 (licences, transportpermits and EnvironmentProtection Levy)

NSW 1997/98(a) 30.20 0.0151

2002/03(f) 44.00 0.0175

SA 1997/98(a) 2.10 0.0055

1998/99(f) 2.68 0.0066

2005/06(f) 2.36 0.0041

WA 1995/96(a) 0.75 0.0014

1998/99(f) 3.40 0.0052

(a) actual (f) forecast

Note: Licence revenue figures were obtained from the respective environment protection agencies. GrossState Product data up to 1997Ð98 was obtained from the Australian Bureau of Statistics. GSP forecasts to2002Ð03 were obtained from Access Economics. GSP forecast for South Australia from 2002Ð03 to 2005Ð06was derived using an average annual rate of growth of 2.5 per cent.

* Figures for Victoria also include fees for waste transport permits, where specified, to allow comparison withother States that control waste transport by licensing eg SA.

Source: Gabrynowicz, S., Review of Licensing Arrangements under the Environment Protection Act 1993(South Australia): Internal Discussion Paper, South Australian Department for Environment, Heritage andAboriginal Affairs, 1999, unpublished.

Table 6.6

Average Licence Fees

State Year Average Fees ($)

VIC 2000/01 9,726 (licence fee only)

5,413 (licences plus transport permit fees andEnvironment Protection levy) a

NSW 1997/98 2,140 (private sector only)

Admin fees in 2000/01 2,200 (private sector only)

2,600 (all licensees)

Total fees in 2002/03 7,450 (private sector only)

9,649 (all licensees)

SA 1998/99 1,492

2005/06 1,315

WA 1998/99 3,579

a Average fee is derived by dividing total fees by the combined total number of issued licences and

permits. Hence the average fee is lower than the average Ôlicence fee onlyÕ which divides by the number of

issued licences only. It is provided to allow for comparison with other states that control waste transport by

licensing.

Note: All data is sourced from the respective environment protection agencies.

Source: Gabrynowicz, S, ibid, 1999.


47


The charging of a fee can be argued to restrict competition by adding to the cost ofproduction of certain activities, in particular compared to activities regulated inalternative ways.

The charging of licence fees is acceptable so long as they are calculated according to thegenerally accepted principles outlined earlier. That is, the fee should reflect:

• cost recovery of the cost of administration of the licensing system, using ÔuserpaysÕ principles, as a priority;

• some element of Ôpolluter paysÕ principles to provide incentive to discontinue thepolluting activity or modify production techniques; and

• encourage waste minimisation.

Competition between states for industries and projects on the basis of the lowest fees(and also most favourable licence conditions) clearly needs to be tempered by thebroader public interest basis for the licensing regime. Differences in fees betweenjurisdictions could potentially affect competition. However, the fees are not generally asignificant component of the cost structures of licences and hence are not a large costimpost on individual firms.

The setting of fees is generally supported by stakeholders though some changes weresuggested.

Load based licensing is a good basis as it is user-pays, gives tradeoffs to industryand permits flexibility. However, there is a danger that it could be taken to costlyextremes.

Industry subgroup

With respect to fees, it would be more relevant to set them relative to thesensitivity of the eco-system concerned, rather than the size of polluter.

Murray Raff submission, p. 7

While no competition policy restrictions were identified with the present fee settingtechnique, the discussion of alternatives is provided below to address the topical issueof ÔloadÐbased licensingÕ.

Alternatives

The present regime is to set fees within a cost recovery context (incorporating a load-based licensing element). Alternatively, fees could be set to represent a tax on activitiesthat is designed to correct polluting activities. The latter approach is likely to raiserevenues over and above the cost of EPA licence setting and is therefore considered anÔeconomic measureÕ. Such a system, a load-based licensing system, is to come intoeffect in NSW.

VictoriaÕs present system of setting fees operates as quasi-load-based licensing scheme,as it does have some incentives to reduce pollution. However, if the NSW system wasintroduced in Victoria, it would most likely result in an increase in fees.


48

A factor on which load based licensing schemes are based, but which does not appear tohave been taken into account in the present system, is the impact of the pollution onthe local and wider environment. However, incorporating this factor in a fee setting thatis limited to full administrative cost recovery would be unlikely to influence economicbehaviour because the effect on licence fees would be too small. Furthermore, it wouldrequire costly and time consuming data collection, and would probably be open todispute. This factor is more appropriately incorporated in a load-based licensing systemwhich is less restrictive of fee amounts and therefore can result in a greater influence onbehaviour. Alternatively, it may be that the best way to achieve this may be in thesetting of the licence conditions.


The setting of licence fees incorporates a load-based element (size of emissions) withina full cost recovery system. Therefore, the fees system aims to provide a deterrent topollute, but not to the same extent as a more explicit load-based licensing scheme(such as the system to be introduced in NSW). Licence fees in Victoria, therefore, donot appear to impose an excessive cost burden on Victorian industry or make themuncompetitive compared to firms in other jurisdictions.

The broader matter of whether much higher fees, charges or taxes should be leviedsignificantly beyond administrative cost recovery (eg, carbon tax, NSW style load-based licensing, etc) involves complex matters concerning economic and environmentalimpacts and national and international coÐordination. These initiatives properly remainas major potential policy issues for governments, and are beyond the scope of thisreview. Once again, it is expected that they will be addressed when the EnvironmentProtection (Fees) Regulations 1991 are reviewed sometime before 2001.

Recommendation 10: The case for the introduction of a more explicit load-basedlicensing scheme should be considered when the Fees Regulations are reviewed. Thepresent system already provides some incentives for pollution reduction, and there maybe other less costly means of reducing pollution through greater communication of thebenefits of cleaner production to industry. Monitoring the experience in otherjurisdictions should provide more information on the effectiveness of more explicitload-based licensing systems.

6.5 The Accredited Licensee Scheme

As mentioned earlier, coÐregulatory approaches that increase industry and communityinvolvement are increasingly popular and successful forms of regulation. The AccreditedLicensee Scheme (ALS)

is such a scheme, whereby Òcompanies subject to

environmental regulation can be freed from the standard prescriptive approach of theregulatory regime if they can demonstrate a high level of environmental performance andan ongoing capacity to maintain and improve that performance.Ó

26 The scheme also

offers industry a 25 per cent reduction in licence fees.

26

Victorian Law Reform Committee, Regulatory Efficiency Legislation, October 1997, p37


49

To qualify for the scheme, firms are required to implement an EnvironmentImprovement Plan, an accredited Environment Management System and anEnvironment Audit System, and must also show a record of improvement inenvironmental performance, such as a waste reduction program. The scheme requiresconsultation with the community.

The scheme was introduced in 1994 and there were eleven accredited licences inoperation by the end of 1998.


The low number of participants in the scheme suggests that the conditions forparticipation are restrictive or that the perceived benefits of participation are low. Therequirements for an Environment Improvement Plan, an accredited EnvironmentManagement System and an Environment Audit System are more suited to large scalecompanies, which are more likely to be able to put these systems into place.

27 Smaller

companies are at a disadvantage as it is proportionally more expensive to institute suchsystems.

Some of the reasons for the low number of participants in the ALS were suggested bystakeholders:

ALS requires a tremendous resource input for a relatively small benefit (ie, feereduction). Other benefits, such as improved corporate image, are not as wellcommunicated. The role of Government should be to facilitate the scheme, topromote the benefits, such as flexibility, etc. It is a scheme that is perceived to beaimed at the big end of town, at companies that already have the systems, theliaisons, etc. Perhaps more needs to be done to encourage smaller players to takeup ALS.

Industry subgroup

It is questionable whether the 25 per cent licence fee reduction, and the unquantifiablepublic relations benefits, are sufficient enticement for most companies (large or small, asappears to be the case) to join the scheme.

There was some criticism of the requirement for Environmental Management Systemsto participate in ALS. It was suggested that EMS may not be an appropriate instrumentto force business to meet its commitments under the scheme:

EMSs [environmental management systems] are improvement strategies, and areoften not based on actual environmental performance. It is inappropriate that theyshould be used as an indicator of environmental performance until they becomeperformance based.


Furthermore, it was suggested that there should be incentives built into the scheme toreward a performance level beyond that required by EMS.

It is praiseworthy that EMS is required for accreditation, but there should also bemarket reward for exceeding ISO 14000.


27

Evidence of the attractiveness to large companies is the five new participants to the scheme in1997Ð98: BHP Petroleum; Edison Mission Operation & Maintenance Loy Yang Pty Ltd; Ford Motor Co ofAustralia Ltd; Generation Victoria; and Loy Yang Power Management Pty Ltd. Source: EPA AnnualReport, 1997Ð98, p 55.


50

In conclusion, the lack of small firm participation implies the ALS is not adequatelyaddressing the peculiarities of smaller firms. Therefore, smaller firms are not given thesame incentives to reduce their licensing burden as larger firms.

Possible Reforms

Considering the low number of participants, the scheme could be made more attractivefor firms of all sizes to participate by altering the requirements for joining the schemeand perhaps offering a greater incentive by increasing the licence fee discount. Thescheme could be amended to offer some reduction in fees for partial compliance. Also,more active assistance could be provided to firms to comply with ALS (eg, assistancein developing EMS).

A variation of the ALS, ÔenforcedÕ industry self-regulation, could be considered. Thiswould involve an invitation to industries or companies to draft a plan that specifies thelevel of environment performance to be achieved. The draft plan would be considered byEPA, and, if ratified, would become the standard for environment protection for thatcompany or industry. In some cases, Ôenforced self-regulationÕ is a Ôreasonable middlegroundÕ between direct regulation by government and industry self-regulation (such asindustry codes of practice).

28 However, it is probably more appropriate to gain more

widespread acceptance of ALS before industry is ready to take on more regulatoryresponsibility.


The ALS is a fundamentally good approach to regulating for environment protection. Itaims to increase communication between industry and the community, while guidingindustry on the best methods for complying with environmental regulations. However,the low number of participants for a scheme that has been running since 1994 signalsthat the scheme is either too costly for smaller companies to implement, or just notperceived as delivering enough benefits for companies to justify the expense and effortinvolved in implementation.

The main competition policy concern with the ALS is that it appears to be directedtowards large companies.

Recommendation 11: The ALS should be made more attractive to firms of all sizes.EPA should consider options for communicating the benefits of ALS and should alsoexamine whether there are benefits in developing an alternative or modified scheme forsmaller firms.

6.6 Environment Protection Levy

In addition to the licence fee, Section 24A of the Act requires premises which produce,store or handle prescribed industrial waste to pay an Environment Protection levy ofthree per cent of the licence fee.

28

Office of Regulation Review, ÒRecent developments in regulation and its reviewÓ, Information Paper,November 1993, p 35.


51

The levy funds are directed into the Environment Protection Fund, which isadministered by EPA and used for the purpose of protecting the environment. (Bycomparison, licence fees are directed into government consolidated revenue.) In1997Ð98, the Levy raised just over $234,000 for the fund. Recently, revenues from thefund have been primarily used for developing waste management strategies andprograms, such as the recent Industrial Waste Management Strategy, titled Zeroing inon Waste.

In the second reading speech for the Environment Protection General Amendment Bill1989, the levy was introduced as one of a series of measures that will ensure that it ispolluters and not the community and taxpayers who bear the cost of protecting theenvironment.

29 The second reading speech does not provide a justification for the level

of three per cent nor specify to which environment protection activities the funds shouldbe directed. Section 70(4) of the Act directs the use of the Funds Òtowards the cost ofcarrying out any necessary works for the treatment or disposal of wastesÓ.

The Levy is an example of an economic instrument that has been specially legislated(discussed in Section 2.2).


There are justifications for using economic instruments such as levies to makeproducers accountable for external costs of production (see earlier discussion in ChapterTwo). Where they are used they should be accompanied by clear objectives. In thiscase, the objective of the environment protection levy is not clear in the Act, except thatthe proceeds of the levy are directed to the Environment Protection Fund. Theintentions that supported the imposition of the levy are in the second reading speechbut a more rigorous justification should be provided to justify the levy and explain whyit is set at three per cent.

ÔEnvironment protectionÕ is a broad term that could include any type of activity. Sincethe levy is imposed on producers, storers and handlers of waste, funds from the levyshould be expressly devoted to the reduction of waste. While this has occurred recently,there is no requirement for the funds to be used for activities that that are linked towaste reduction. Perhaps the levy/fund should be renamed to more precisely reflect itsfunction.

The key anti-competitive characteristic of the Environment Protection Levy is that it isan impost on selected businesses (managers of prescribed waste only). It is essentially asurcharge on the licence fee, and so places those firms at a commercial disadvantage.Furthermore, it is not clear that the calculation of the levy reflects the true nature of theenvironmental activities of the businesses as a fixed percentage of the licence fee andthere is no flexibility in the levy to cater for individual circumstances. The restriction isnot significant, however, because of the low financial impost of the levy.

No issues pertaining to the levy itself were raised by stakeholders, though Departmentof State Development made a general comment stressing that the rationale for fees andlevies should be made clear.

29

State Government of Victoria, Environment Protection Bill 1989, Second Reading Speech, 12 October1989.


52

Links between fees or levies and Ôcleaner productionÕ initiatives should continueto be made clear to industry. This makes it possible to compare fees more accuratelyacross States.


Alternatives

Two alternatives would address competition policy concerns with the levy:

• alterationÑ the formula for the calculation of the levy could be changed to includeincentives to reduce pollution and better reflect Ôpolluter paysÕ principles. This isnot likely to be worth the effort for such limited funds. Plus, if licences are properlycalculated, then there is no need to review the calculation.

• abolitionÑthe levy could be abolished and the activities funded by theEnvironment Protection Fund could be funded directly from budget, or via anincrease in the licence fee for premises currently paying the levy.

If the levy is to be retained, renaming the levy the ÔWaste Reduction LevyÕ (andrenaming the fund the ÔWaste Reduction FundÕ) would give a better indication of thepurpose of the levy.


Stakeholders generally raised no issues with this levy and it is not a significant imposton business, so its impact on behaviour is likely to be minimal at most.

However, the levyÕs function and the public benefit justification of the levy needs to beclearly stated in the Act, ie, is it for funding strategy development by EPA for wastereduction only? Is the levy designed to influence behaviour to reduce waste andpollution? The second reading speech provides the polluter pays justification for thelevy (which suggests an objective to influence behaviour to reduce waste), but does notelaborate on the uses to which funds should be put or why a level of three per cent ischarged. Only upon clarification of the objectives of the levy can its effectiveness incontributing to the overall objectives of the Act be assessed.

Recommendation 12: The objectives and public benefit of the levy are not clear and intheir present form do not adequately justify the use of the levy. The levy should bereviewed with the purpose of more clearly defining its objectives (and effectiveness inmeeting those objectives), abolished or incorporated into the licence fee.

6.7 Financial Assurance

Financial assurances are a risk management tool that address the failure of the market torequire polluters to insure against the costs of environmental damage. Financialassurances provide a guarantee of monies available to fund clean-ups in cases wherepolluters are insolvent or unable to fund work which is necessary to prevent orremediate pollution. Financial assurance reduces the likelihood of the State (or privatethird parties) having to fund clean-ups which are required because of the failure of aprivate operator to act in an environmentally responsible manner. This is justifiedunder Ôintergenerational equityÕ and Ôpolluter paysÕ principles. The power to requirefinancial assurances from Schedule Four and Five premises was introduced in 1988.

Financial assurances may be applied via works approvals, licences, notices or permits.The type and extent of an assurance is determined by EPA. The financial assuranceswhich the Authority requires may include any of the following:


53

• a letter of credit from a bank;

• certificates of title;

• personal and bank guarantees;

• bonds;

• insurance; or

• any other form of security that EPA considers appropriate.

The annual cost to companies of providing their financial assurances is substantiallylower than the level of assurances provided. This is because companies are given theflexibility by the Act to use a range of financing mechanisms to provide financialassurances.

The methodology for setting the level of financial assurance is designed to reward thosecompanies which take adequate precautions to minimise the risk of site contamination.Financial assurances are therefore intended to play a key role in encouraging premises toensure that they have good management practices in place to reduce the risk of sitecontamination occurring.


Essentially, the financial assurance is a form of compulsory insurance againstenvironmental damage. The requirement for financial assurance imposes a cost oncompanies due to the cost of funds. This is more a regulatory design issue than acompetition issue.

The RIS30

estimated the annual cost of bank guarantees for all Schedule Four premisesin Victoria would range from $220,665 to $294,220 (reflecting a range of annual bankfinancing charges of 1.5 per cent to 2 per cent). This means that, for a large scaleSchedule Four premises that was required to provide financial assurance of, say,$1,000,000, the cost of funds would equate to an annual cost of between $15,000 and$20,000.

31

The compliance cost of the requirement of financial assurance is a restriction oncompetition. Furthermore, the requirement could be applied in a manner that is anti-competitive impact where it is not imposed on non-Schedule Four or Schedule Fivepremises that are polluters and potentially liable for clean up (eg some Schedule Twopolluters).

Alternatives

An alternative would be for EPA to waive the requirement for financial assurance as partof a works approval application. Companies would be responsible for ensuring theyhave the necessary clean up insurance or funds set aside in case of environmental hazard.The cost of funds would not be any lower under this scenario.

30

Environment Protection (Scheduled Premises and Exemptions) Regulations, Regulatory ImpactStatement, 1996.31

Environment Protection (Scheduled Premises and Exemptions) Regulations, Regulatory ImpactStatement, 1996, p 37. The RIS did not estimate the annual cost to Schedule Five premises.


54


Without financial assurances, many companies would insure against environmentaldamage anyway. However, the risk of the cleanÐup cost to the community should someproducers not insure is adequate to justify making financial assurance a requirement.Some abandoned contaminated sites have caused major problems in the past.

Stakeholders were generally of the opinion that assurances are warranted. Industrygroups did not oppose the use of financial assurances. Murray Raff reiterated thephilosophical justifications for requiring assurances:

The need for a financial assurance for potential contaminated land clean-up costs i shardly disputed. It is justified on grounds as philosophical as intergenerationalequity and as practical as the plain fact that the costs will otherwise inevitably fallback on Consolidated Revenue unless some security is obtained.


Financial assurance is justified under the precautionary principle and meets communityconcerns. The flexibility to choose the cheapest finance options allowed under the Actreduces the potential cost of competitive restrictions in this area by limiting compliancecost.

Although it is likely that many companies would insure against liability ofenvironmental hazard anyway, the risk that this may not occur, added to the potentialdelays and costs of litigation, are sufficient to justify the retention of financial assurancerequirements.

Recommendation 13: Retain financial assurance as a regulatory tool.


55

Chapter Seven

Management of Waste

7.1 Overview

This Chapter reviews other instruments used to manage the production, storage andtransport of waste in Victoria. Processes for the management of wastes are controlledeither directly by the Act or by policies and regulations developed under the Act. Theinstruments discussed below are used in addition to the works approvals and licensingprovisions for premises scheduled under the Environment Protection (ScheduledPremises and Exemptions) Regulations 1996.

Waste is a by-product of the production of many commercial goods. For some types ofwaste there is a market for recycling and re-using that waste. For other types of waste,there is a market for the management of that waste, which by and large involvestreatment of waste and disposal of waste at landfill. Since prescribed waste is consideredharmful to the environment, recent EPA strategies have focussed on encouragingindustry to adopt Ôcleaner productionÕ processes that aim to reduce waste production.

7.2 Prescribed Waste

The Environment Protection (Prescribed Waste) Regulations 1998, which replaced theprevious set of regulations, were recently developed after community consultation.

32

For the purposes of this review, therefore, it was assumed that competition policyissues relating to the Regulations were sufficiently addressed in the earlier review anddo not require further discussion. The Regulatory Impact Statement drew the followingconclusion:

The Regulations in no way limit competition within the markets for services for themanagement, transport, treatment or disposal of prescribed waste or prescribedindustrial waste. The Regulations simply set out the management regimes whichare necessary to protect the community and environment from risk of spills orinappropriate management, treatment or disposal of these wastes.

Regulatory Impact Statement, Environment Protection (Prescribed Waste)Regulations, 1998, p 42


Stakeholder reservations were expressed about some of the wastes that have beenprescribed in the regulations (specific examples were not provided).

32

The current Prescribed Waste Regulations replaced the Environment Protection (Prescribed waste)Regulations 1987 and the Environment Protection (Transport) Regulations 1987 which sunsetted on 22 July1998.


56


Waste prescription is more a regulatory design issue than a competition policy issue.The content of the waste list in the regulations is an ongoing issue between industry,the community and EPA that should be dealt with in established forums. Thediscussion should be mindful of any competition policy issues that may arise fromprescribing each type of waste (in terms of identifying a public benefit of prescriptionthat outweighs the compliance costs that will be incurred by producers of that waste).

7.3 Transport of Waste

Waste is generally disposed or treated off-site. There is a market for the transport ofwaste from the site of production to landfill sites or treatment plants. The failure of themarket to ensure transported waste does not create environmental damage by spillage orleakage provides the rationale for regulation of waste transport.

Transport of prescribed waste is regulated by permitting under Part IXA of the Act.About 600,000 tonnes of prescribed waste are transported on public roads in Victoriaeach year. The Act requires transporters to obtain a Vehicle Transport Permit fromEPA, valid for one year, for each vehicle used to transport prescribed waste (1,117 wereissued during 1998). The permit system adopts the precautionary principle by requiringan appropriate standard of vehicle and practices be used to transport prescribed waste toavoid possible spills and leakages. The permit specifies general and specific conditionsincluding:

• details of the permitted vehicle;

• the prescribed wastes which may be transported;

• certain conditions which are to be employed during the transport of wastes in orderto minimise the risk of pollution from handling and transportation of the waste;and

• certain conditions appropriate to the status and nature of the waste beingtransported.

The permit also requires that vehicle drivers be appropriately trained and follow certainprocedures in the case of an emergency to minimise the threat to humans and theenvironment.

An additional benefit of the waste transport permit system is that information ontransported wastes is kept in a central database that is a useful source of information onoff-site waste removal.

The fees for transport permits are specified in the Environment Protection (Fees)Regulations 1991. Fees are primarily based on waste carrying capacity, but alsorecognise the potential hazard of wastes by specifying three categories of waste (seeTable 7.1).


57

Table 7.1

Vehicle Gross Combination Load Carrying Capacity

Type of Class of Prescribed Waste Less than 1.5tonnes

1.5 or morebut less than8.0 tonnes

8.0 or morebut less than

25 tonnes

25 or moretonnes

Putrescible, organic wastes, inertsludges, slurries, infectious orpotentially infectious wastes

$200 $320 $400 $800

Prescribed waste where notspecified elsewhere in this Table

$320 $400 $560 $1120

Waste which is explosive orflammable or highly reactive

$400 $480 $640 $1280

Other fees are charged in some cases for fleet vehicles and Prime Movers, and for temporary fees. EPA chargesa fee to transfer a permit.Source: EPA, Instructions for Completion: Application for a Permit to Transport Prescribed Waste, InformationBulletin 436, October 1998.

EPA can issue an infringement notice to waste transporters who breach permitconditions. A total of nine infringement notices were served in 1997Ð98 (compared toeleven and forty in the two previous years).


The requirement for a permit is a restriction on competition as it restricts who cantransport waste. However, there are no restrictions on who can obtain a permit otherthan meeting standards which are designed to protect the environment from spills andleakages.

Permits impose compliance costs and permit fees are a cost to waste transporters.However, as Table 7.1 shows, permit fees are not a significant annual amount, even fora small business. However, compliance costs, which may include training or vehiclemodification, may be larger.

In theory, any lack of enforcement of offenders (ie, those who either do not obtain apermit or those in breach of their permit) would undermine the permit system and givesoffenders a competitive advantage. The competitive advantage that is enjoyed byoperators who do not obtain a permit and are not detected was raised by stakeholders:

Épermits, with the requirement for insurance, is an appropriate response totransport of waste issues. However, these need to be combined with strongpublicly enforceable penalties, and significant incentives to reduce the amount ofwaste that needs to be transported in the first place.


The record of permits over the last 25 years is quite good, it is an adequate system.However, enforcement is an issue. There are some ÔcowboysÕ out there. Non-complying operators can have a competitive advantage if they are not picked up.

Industry subgroup.

In practice, a total of nine infringement notices were issued for waste transport offencesin 1997Ð98. This suggests either a degree of underÐenforcement or very highcompliance.

33

33

EPA, Annual Report 1997Ð98, p 65.


58

Alternatives

While a permit system for waste transport is justified by the public benefits of a lesserrisk of spillage of prescribed waste, it is useful to consider alternative measures thatmay reduce the costs of permitting. Alternative instruments to permits, which areeffectively an annual licence to transport waste, would be:

• industry accreditation of waste transportersÑthis would be unlikely to provide anynet benefits in terms of reduced administration costs, nor reduce risks of non-compliance;

• the need for permits could be abolished and more resources could be placed intoenforcing the Act and raising penalties to discourage breaches of the ActÑhowever,this is against the precautionary principle of permits which aims to reduce the riskof spill and clean up and would also lose the database of information; and

• to include transport of waste as a condition of licences. (Under the Protection ofthe Environment Operations Act in NSW, the transportation of waste may be acondition of an environment protection licence.) This may be a sensible option toreduce administration for licensed premises. Permits would still be required forwaste transporters who are not connected with a licensed operation.

There was an opinion that fees for permits should offer economic incentives to changebehaviour, rather than merely cover administrative costs.

The fees for permission should reflect the risk and cost of clean up and remediation.There should be an incentive for the reprocessing of waste on site, if possiblerendering it safe prior to transportation, but also remembering that many ÒwastesÓcan be recycled for use in other industrial processes and this would be theoptimum.


There was an opinion in the Government subgroup that the system for transportcertificates should operate ÔelectronicallyÕ. In other words, the system for informingEPA of waste transport activities is presently too reliant on the use of a paper basedtracking system and opportunities for electronic transfer and storage of informationshould be explored.


Permitting of waste transport is justified by the precautionary principle and the publicbenefit from the reduced risk of environmental hazard. The costs of the system on wastetransporters are outweighed by the benefit to the environment and the community of areduced risk of spills and leakages.

The current annual fee (see Table 7.1) and compliance cost of permits would not be asignificant addition to the operating costs of most businesses.

Some alternative methods of regulating waste transport could be considered. The mostappropriate of these options would be to explore the inclusion of waste transportation asa licence condition. Furthermore, increased use of electronic technology (to transferwaste transport information) will help reduce compliance costs with the system. EPAadvises that increased use of electronic technology has been facilitated through recentamendments to the Act.


59

Under the present system, to address the Ôcompetitive advantageÕ of those who avoidobtaining a permit, EPA should consider the benefits of more active enforcement ofpermits. Current enforcement appears to be low, with only nine infringement noticesissued in 1997Ð98. EPA systems that monitor waste from producer to landfill makeabuse of the system more difficult because producer, transporter and treater/disposerwould need to collude to avoid detection by EPA. Nevertheless, an adequate level ofenforcement remains important.

However, increased emphasis on enforcement is likely to come at a cost. To fund extraenforcement resources, an increase in permit fees may be required, which would increasecosts for business but may potentially increase incentives to operate without a permit.Increased enforcement would probably need to prove a significant reduction inenvironmental damage from spills by non-permitted operators to justify the cost.

Some stakeholders suggested using transport permit fees as economic incentives toreduce the level of waste transported. However, the objective of permitting is to protectthe environment from a spill or accident during transport of waste rather than to reducethe amount of waste transported. Waste reduction is an objective of other strategies,such as industry waste reduction agreements and the landfill levy. These otherstrategies are the more appropriate instruments for encouraging waste reduction.

Recommendation 14: This restriction passes the public benefit test. The option ofmaking a permit part of a licence, therefore combining approval processes, should beexplored to help reduce administration costs. Greater use of electronic technologyshould be a high priority to reduce compliance and administration costs. Increasedlevels of enforcement, or periodic ÔblitzesÕ, should also be considered to monitorcompliance.

7.4 Industry Waste Reduction Agreements

EPA strategies to reduce waste require gaining agreement from industry to meet targetsfor waste reduction. The market does not provide adequate incentives to reduce wastewithout some form of government intervention. Furthermore, EPAÕs activities inpromoting Ôcleaner productionÕ overcomes the marketÕs failure to provide informationto producers on Ôcleaner productionÕ techniques.

While the Act sets out minimum requirements for protection of the environment, it alsoencourages industry to adopt best practice waste management, beyond compliancerequirements. In promoting these approaches, industry is encouraged to have input tothe determination of the most effective and efficient ways of reducing its waste.

Under section 51A of the Act, EPA may enter into an Industry Waste ReductionAgreement (IWRA) with any person or with any association representing an industry.Agreements must:

• identify the solid wastes that are likely to arise as a result of the activities of theperson or industry;

• set out what steps the person or industry will take to reduce, recover, re-use, orrecycle wastes, to reduce litter, or to safely dispose of wastes;

• specify targets to be achieved;

• provide an economic assessment of the market for the wastes to be recovered, andset out steps to ensure a stable and viable collection system for those wastes;

• prepare six month reports on the progress made with respect to the implementationof the agreement; and


60

• specify the period the agreement is to be in force.

Some agreements require companies or industries to provide funds to communitygroups that undertake clean up activities such as roadside waste and litter collection.

The Act specifies that an industrial waste reduction agreement is a legally framedagreement between EPA and an industry sector or an individual company. There havebeen no prosecutions to date for a breach of an agreement.

EPA is obliged to enter into an agreement with a person or industry that submits adraft agreement. This is intended to encourage industry to take a proactive approach towaste reduction and place its environmental efforts and intentions on the public record.

Alternatively, EPA can invite an industry to participate in developing an agreement. Ifan industry rejects EPAÕs invitation or the industry delays unreasonably, EPA haspowers under the Act to require the industry to draw up a draft agreement (a person whofails to comply with this requirement is guilty of an offence). However, EPA cannotforce an industry to sign the final agreement.

The industries selected by EPA so far to partake in agreements are predominantly thosethat produce recoverable waste (for example, paper, cardboard, plastic, aluminium, andconstruction and demolition waste). Industries are generally chosen to participate in anagreement based on an analysis of the main types of recoverable landfill wastes or mainsources of litter.

There are no known cases of an industry approaching EPA to enter into an agreement,but also no known examples of an industry refusing to sign an agreement.

There have been six IWRAs in operation in Victoria, though nearly all agreementshave expired, and only one is currently in force. Several agreements are undernegotiation. Both the National Packaging Covenant, which has recently been approvedby ANZECC and industry, and the associated National Environment ProtectionMeasure (NEPM) adopted by the National Environment Protection Council and thepackaging industry, will supersede some of the Victorian agreements. Other Victorianagreements not covered by the national agreement are likely to be renegotiated in thenear future.


To date, industries producing recoverable rather than hazardous or other wastes havetended to have been targeted by IWRAs. To the extent that agreements do not apply toall industries (assuming other regulatory tools are not applied, such as licensing), someindustries may enjoy some advantage from the absence of a waste reduction agreementby avoiding the cost of compliance with an agreement and the cost of undertaking theprocess of framing the agreement. By the same token, industries subject to IWRAs mayenjoy some benefits from community goodwill and better production processes.

The fact that not all industries had IWRAs was highlighted as a possible restriction oncompetition by one stakeholder:

EPA should be required to enter into IWRAs with all industries by 2005. Theseagreements must be funded by the industries themselves. The community should beinvolved in formulating minimum standards, and also in liaising directly with theindividual firms involved.



61

Of course, this has to be seen in the context that agreements are not mandatory, so it isnot appropriate to imply a legislative competition restriction. Nevertheless, EPA hasconsiderable powers under the Act to pressure industries of its choosing to enteragreements, and the costs to industry of not complying with EPAÕs requests to enterinto an agreement may include loss of public goodwill.

Presently, there is only one State agreement in operation (with the expectation of moreto follow), which initially suggests that this tool is underÐutilised. However, IWRAsare one of a number of instruments EPA has at its disposal to influence behaviour,including national agreements and industry codes, through to licence or noticerequirements. It is difficult to evaluate the effect of waste reduction agreements inVictoria purely by an examination of IWRAs because of the existence of these otherinstruments.

Section 51A of the Act requires an economic assessment of the market for waste to beundertaken prior to framing an IWRA. This requirement should adequately addressconcerns that IWRAs could lead to activities that are ÔuneconomicÕ. Such concern wasraised by one member of the Government subgroup who questioned the concept thatlandfill is ÔbadÕ, in comparison to other treatments of waste (ie, recycling, re-use), andsuggested that mandatory re-use (under the terms of an IWRA) is anti-competitive.

Another stakeholder commented on the alleged fallacy of only regulating offÐsite effectsof waste pollution.

There is a view that [waste reduction] can be left to economic forces if there are nooff-site effects. However, the utility of existing sites must be maximised becausethere are serious environmental and planning issues in developing new disposalsites. It is more efficient to develop recycling alternatives before existing sites arefilled.


In summary, there are no legislative restrictions pertaining to IWRAs because they areentered into voluntarily. However, competition policy principles suggest that IWRAsbe applied evenly across all eligible industries. Mainly due to the lack of IWRAscurrently in operation, there is no evidence of inappropriate IWRA development.

Alternatives

There are a multitude of options for reducing waste, ranging from command and controlmeasures to agreements and partnerships, to economic measures such as levies andtrading schemes. Some alternative or complementary approaches to IWRAs are:

• encouragement of industry codes of practice (for all industries) and other voluntarywaste reduction strategies;

• greater use of education and suasive tools, such as the ÒCleaner ProductionPartnerships ProgramÓ, which identify cost reduction opportunities to industry ofreducing waste;

• use economic tools to reduce waste, for example:

• impose levies on waste (such as the landfill levy) or on products for whichtheir production creates waste, to internalise the ÔexternalÕ environmental costsof waste;

• trading schemes may be a viable option for some types of waste to efficientlyallocate the right to produce waste and allow policy makers to control theoverall total amount of waste produced, though schemes can be costly toimplement; and


62

• container deposit schemes encourage recycling and re-use, though have hadmixed success in the past and can also be costly to administer.

• licences could include conditions for waste reduction. However, waste reduction isprobably better handled at industry level, as is currently the case with IWRAs,rather than at individual premises level to avoid inconsistency in licensingconditions across premises, and to allow industries to decide as a whole how bestto meet waste reduction commitments.

Use of voluntary initiatives toward waste management and reduction was supported byindustry groups.

The Discussion Paper was silent on voluntary initiatives eg responsible care.Voluntary initiatives should be considered where possible.

Industry subgroup


The alternative instruments listed above are useful to consider (some are already inplace), particularly for industries not covered by an IWRA or some other agreement (eg,national agreements). However, in most cases IWRAs are an appropriate tool for wastereduction. They provide clear performance targets, are subject to an economicassessment and facilitate discussion between industry and EPA. The public benefits ofwaste reduction programs are justified under the principles of Ôintergenerational equityÕand Ôpolluter paysÕ.

Voluntary initiatives and non-legally binding agreements should be considered insteadof legally binding agreements where possible. If agreements must be legally binding,they should be outcome-oriented to allow flexibility.

The principles on which IWRAs are implemented (ie, that waste should be re-used,recycled or reduced) should consider the economic cost of undertaking those activities.Sensible economic assessment of the costs and benefits of these waste reduction optionsshould continue to be a high priority for agreements. Section 51A provides for thisassessment, and the provision of an information bulletin to outline the type of analysisrequired is expected to be provided by EPA in the near future.

Recommendation 15: IWRAs are an appropriate tool for waste reduction and shouldcontinue to be developed where agreements currently do not exist at a state-level ornationally. Rigorous analysis of the economic and public benefit justifications forIWRAs should continue to be undertaken by both EPA and the industry.

7.5 Landfill Levy

The need to dispose of waste has created a market for the provision of waste disposal,or landfill sites. Properly operated landfill sites should not impose any external costson the environment. However, landfill is still seen as a Ônecessary evilÕ and EPA hasstrategies to limit waste going to landfill by adopting strategies to encourage reduction,re-use or recycling of waste. The landfill levy is designed to discourage disposal ofwaste at landfill.


63

The Environment Protection (Landfill Levy) Regulations 1992 require landfill operatorsto pay a levy on waste disposed at their premises.

34 According to EPA, the landfill

levy is designed to provide an incentive to reduce waste and is a source of funds forwaste management and waste reduction programs. The levy is currently set at $3 pertonne in metropolitan areas and $2 per tonne in rural areas.

35 This is a small

component of the cost of disposal of prescribed wastes to landfill, which was estimatedat $48 per tonne in 1996.

36

Where waste cannot be weighed, EPA has approved an alternative method ofcalculating the levy based on estimation of the volume of the waste.

There are two exemptions from the levy:

• material used to actually cover waste (as required by licence conditions); and

• privately owned landfills are exempt where they are only receiving substances thatwere already owned by the owner of the landfill before they became wastes.

Licensed landfill operators collect the levy from disposers of waste at the landfill. Thelandfill operator pays the levy to EPA quarterly and also supplies a report on tonnagesof waste disposed and any claims for waste not covered by the levy (ie, cover material).

Materials moved from the landfill site for recycling within twelve months of beingdeposited are subject to a rebate.

Funds from the landfill levy are deposited in the Resource Recovery Fund and arelargely distributed to EcoRecycle Victoria, a body corporate established by theEnvironment Protection Act which is responsible for facilitating achievement of wastereduction objectives.


The additional cost on industries that manage and/or produce waste is a restriction oncompetition that needs to be justified by a public benefit. The objectives of wastereduction and the polluter pays principle justify the imposition of the levy. (As adeterrent to disposing waste at landfill, however, the levy at its present level wouldprobably not have any significant effect on behaviour. It is set at a relatively small costas a proportion of landfill costs and total waste management costs.)

Further, competing players in the waste market, particularly those in the recyclingindustry, may argue that in the absence of a levy, environmental externalities associatedwith landfill (such as the opportunity cost of using of land for landfill and the loss ofpotentially reuseable materials, visual amenity, etc.) would not be borne by users oflandfill. In this sense, the levy is an important component of the total economic cost ofdisposing waste. However, it is difficult to assess whether the levy at its present levelsis set at an amount that correctly reflects those external costs.

Presently, the levy is applied unevenly, so that there is a distinction between the rateimposed on waste disposed at metropolitan and rural landfill sites. This is a smallanomaly in the pricing structure that needs to be justified.

34

The Environment Protection (Landfill Levy) Regulations 1992 prescribe Schedule Two premises for thepurpose of paying a landfill levy on waste deposited at the premises.35

ÔMetropolitan areasÕ include Metropolitan Melbourne, Mornington Peninsula, Greater Geelong,Greater Bendigo, and Ballarat or Golden Plains. ÔRural areasÕ are all other areas of Victoria. Impendingchanges to the metropolitan landfill levy will increase the rate to $4 per tonne for a three year period.36

EPA, Zeroing in on Waste: Pathways to Cleaner Production, Draft Strategy, October 1996, p 21.


64

Industry stakeholders did not raise any objections to the levy.

Alternatives

The objective of the levy to fund waste reduction strategies by EcoRecycle Victoriacould be strengthened by using alternative approaches to reduce landfill at the point ofdisposal. The small amount of the levy is unlikely to encourage waste reduction.Murray Raff Õs submission stated that Òthe practical alternative [to the levy] is todevelop a comprehensive recycling schemeÓ

37. Another view presented by the

community subgroup was for a higher levy to be applied to recyclable waste.

These suggestions may have some merit in some cases but would clearly be morecomplex to administer. There are likely to be more appropriate and effective means ofencouraging recycling such as industry waste agreements.


Ultimately, the financial cost of the levy is borne by waste generators, so that the levyis effectively taxing a particular activity, waste generation that is destined for landfill (asopposed to recycled or re-used waste). The justification is that there is a public benefitfrom reducing or reusing waste.

The levy was not raised as a competition policy issue by industry stakeholders. Thelandfill levy has a clearly stated link with EcoRecycle which appears to be satisfactoryto industry stakeholders. EcoRecycleÕs role is to address market failures relating towaste management objectives, so the imposition of the levy can be justified on publicbenefit grounds (ie, it helps to correct prices that do not include external social andenvironmental costs of landfills). The landfill levy is similar to the environmentprotection levy in that they are both specially legislated economic instruments.

There does not seem to be a clear rationale for the difference between metropolitan andrural levies. It may be a concession to the rural sectors for the greater costs of disposalto landfill in rural areas. Whatever the reason, the lower rural levy may lead to wastefrom metropolitan areas being disposed in rural landfill sites to access the cheaper levy.On the face of it, however, the difference in levies is not adequate to offset the cost oftravelling the extra distance. This is not a significant competition issue, but the reasonfor the difference should be clearly stated nevertheless.

Recommendation 16: The objectives of the landfill levy to reduce waste and providefunds for waste management and reduction processes should be made clearer in the Act.The economic justification for the metro/rural difference in fees, if any, should be madeclear in the Guidelines to the levy. If no such justification can be made, the differentialshould be eliminated.

37



65

Chapter Eight

Appointment of Auditors

8.1 Appointment of Environmental Auditors

Requirements in the Act for the undertaking of environmental audit have created amarket for the provision of environmental audit services. EPA accredits environmentalauditors for the purposes of undertaking EPA required environmental audit. The failureof the market to ensure that persons of proper qualifications and expertise are employedto undertake environmental audits is the justification for EPA establishing criteria foraccreditation.

Section 57 of the Act provides the mechanism for the appointment of environmentalauditors to carry out environmental audits for the purposes of the Act. There are twoclasses of auditor:

• Contaminated Land; and

• Industrial Facilities.

The Act provides criteria which environmental auditors must have regard to whenissuing a certificate of environmental audit. For example, an auditor must have regardto any guidelines issued by EPA; the beneficial uses that may be made of the relevantsegment of the environment; and any relevant SEPPs or IWMPs.

EPA issues every environmental auditor or analyst an authority in writing, which mustbe produced on request, when seeking admission to premises. Certificates ofenvironmental audit provide a general mechanism by which planning authorities,government agencies and the private sector can be authoritatively assured about thestatus of environmental issues such as land contamination.

The major purchasers of environmental audit services are companies who wish tocomply with the provisions of the Act. Some audit services are therefore purchased inresponse to EPAÕs requirements for audits, and sometimes because of a companyÕsmanagement decision to track environmental performance. When undertakingenvironmental audit, a company directly approaches an accredited Auditor to undertakesite assessment or to undertake an audit of compliance.

There are presently 36 accredited Environmental AuditorsÑContaminated Land and 41Environmental AuditorsÑIndustrial Facilities. Most EPA accredited environmentalauditors are professional engineers and members of professional bodies such as theInstitute of Engineers, Australia. There is no limit to the total number of auditors thatmay be accredited by EPA.

Appointment Criteria

EPA sets guidelines for the appointment of auditors. Formal appointments are made byEPA on the recommendation of a panel of experts appointed by EPA. The panel ischaired by the Principal Environmental Auditor (Contaminated Land) or the PrincipalEnvironmental Auditor (Industrial Facilities) and comprises at least three panellistsexperienced in the field of contaminated land or industrial facilities.

Common examples of the assessment criteria which refer to both types of auditors are:


66

• the applicant should be able to demonstrate experience and expertise in severalareas of expertise relevant to the position (either contaminated land or industrialfacilities inspection);

• the applicant must be able to demonstrate an understanding of relevant sections ofthe Environment Protection Act 1970, associated statutory policies, regulationsand guidelines;

• the applicant preferably should be a member of one or more relevant professionalsocieties, such as the Institution of Engineers, Australia or the Royal AustralianChemical Institute; and

• the applicant should be able to demonstrate up-to-date knowledge of relevantscientific, technical and regulatory literature.

Essentially, the assessment criteria are based on the expertise and qualifications of theapplicant. Membership of a professional body is not mandatory but is preferred.

Appointments are of two years duration. After two years, the Guidelines set out theinformation required from auditors applying for re-appointment. They include, whereapplicable: summary details of statutory audits undertaken and audits in progress sinceappointment; details of training undertaken; and a copy of the professional liabilityinsurance policy that is held by the applicant or on the applicantÕs behalf by thecompany employing the applicant.

Some auditors who have been appointed under the Victorian Act are based interstate.NSW has recently introduced a similar system for auditors of contaminated land. EPAis currently going through a process of establishing mutual recognition with NSWEPA to recognise contaminated land auditors appointed by NSW EPA and visa versa.

Penalties

There are penalties under section 57AA of the Act for the following offences by anenvironmental auditor:

• give false or misleading information to EPA; or

• issue a certificate of environmental audit or a statement of environmental auditwhich is false or misleading; or

• conceal any relevant information or document from EPA.

The penalties for breaching section 57AA are among the most punitive in the ActÑupto 200 penalty units or imprisonment for two years or both.


Occupation regulation is a topic that is raised in many national competition policyreviews. According to the existing Victorian GovernmentÕs NCP Guidelines,Ôoccupational regulationÕ refers to:

Éprovisions of certification, registration or licensing (referred to as licensing in ageneral sense unless a particular distinction is to be drawn) that [are required of]an individual, are non-transferable and are generally based on qualifications whichare reasonably proximate to the conduct of trade, profession or recognisableoccupational grouping.

Victoria Government NCP Guidelines, p 70


67

Considering this definition it is not correct to describe EPA accreditation asÔoccupational regulationÕ because the EPA does not strictly Ôcertify, register or licenseÕenvironmental auditors in a general sense. However, EPA does stipulate who can be anaccredited environmental auditor for the purposes of undertaking EPA required audits.EPA required audits are a significant source of business for some environmentalauditors. EPA accreditation may also give an auditor a competitive advantage inundertaking other environmental audit work not required by EPA, eg, some voluntaryaudits, because of the credibility of EPA accreditation.

Therefore, it is important that EPA adopt selection criteria that do not restrict marketentry on unjustifiable grounds. Selection criteria, such as the requirement for a suitablelevel of expertise, should pass a public benefit test. Furthermore, the selection andremoval process should be transparent and fair. The criteria in the Guidelines appear tomeet these requirements.

Stakeholders generally raised questions of probity and concern that the Act does notprotect against potential conflict of interest on the part of auditors.

There should be a public register of auditorsÕ financial interests. The problem that,as private consultants, they might act for industry one day and EPA the next, andthus the prospects of future engagement might affect their perception of an auditproblem, has to be addressed. This cosiness with industry has already beenidentified as a problem with public environment inspectors and the dangerousgoods inspectorate.

Murray Raff submission, pp 8-9

While the environmentally aware sector of the community is generally still notcompletely comfortable with the government being able to choose environmentalauditors (the independent overseer provides some confidence), any weakening ofthe minimum requirements would further erode public confidence that auditors arenot acting at the behest of industry.


The Government subgroup discussed whether tests for accreditation should be includedin the legislation, rather than in Guidelines. It was felt that the Act was Ôa bit vagueÕabout who qualifies as an auditor.

Members of the Institute of Engineers, Australia and other environmental auditrepresentatives were approached to comment on these issues. No competition policyissues were raised in these consultations.


The assessment criteria do not appear to impose any unjustifiable restrictions and theprocess for selection appears to be largely transparent.

While some aspects of the appointment of auditors are included in the Act, such as theprovision that allows for the appointment of auditors and penalties for providing false ormisleading information, there are no provisions in the Act that govern the appointmentprocess itself. This is more a regulatory design issue rather than a competition policyissue.

Recommendation 17: To ensure the present principles are observed in future, the Actshould be amended to include a provision for the appointment of auditors, which wouldset out general criteria for appointment and removal of accreditation, consistent withcompetition policy principles.


68

Some stakeholders suggested that the present appointment process does not adequatelyprotect against a conflict of interest. The requirement for auditors to reveal theirconflicts of interests would provide a clear benefit and meet community concerns interms of transparency. It would complement existing strong deterrents under the Act inthe form of severe penalties for which auditors are personally liable. This requirementwould probably be best placed in the Act. This is more a regulatory design issue ratherthan a competition policy issue.

Recommendation 18: There should be a requirement in the Act that auditors revealany potential conflicts of interest in undertaking an audit required by the Act.

8.2 Appointment of Motor Vehicle Testers

Under the Act, it is an offence to own or drive a vehicle which emits noise above theprescribed permissible level. Requirements under the Act for noise testing of motorvehicles has created a market for the provision of noise testing services. The failure ofthe market to ensure that noise testers are suitably qualified and use the testing correctequipment is the justification for accrediting providers of noise testing services.

Approved Noise Testers (ANTs) are appointed by EPA to test the following groups ofvehicles as defined in the Environment Protection (Vehicle Emissions) Regulations1992:

• passenger cars, their derivatives and motor cycles; and

• trucks and buses.

When noisy vehicles are detected on public roads (by the police or EPA), the ownersare required to have the exhaust system tested. If the vehicle fails the test, the owner isrequired to replace or repair the faulty system. Any person or company employee mayinstall or repair an exhaust system or components, but only an ANT may issue acertificate of compliance under the Act.

ANT applicants must meet a set of criteria prior to appointment by EPA. For example:

• ANTs must be capable of demonstrating their proficiency for undertakinginspection and testing, and an understanding of the relevant legislation;

• ANTs must be equipped with the equipment and instruments to conductinspections, measurements and tests on exhaust systems;

• testing facilities must be inspected and approved by EPA;

• the conditions also set out a list of examples where ANTs may have their licencerevoked; and

• a fixed fee of $25, set by EPA, is charged by the ANT for each test conducted.

There are 25 ANTs in Victoria (about half in Melbourne, half in rural areas); typicallythey are exhaust repairers or mechanics. This low number reflects the relatively highcosts of market entry (noise testing equipment cost is estimated at about $3,000 to$6,000) and a low number of notices (approximately 4,000 per annum). ANTs are notpermitted to collect a fee for a second test if they have undertaken repair on a vehicle.


69


Potentially, EPA accreditation could be a restriction on competition; however, thenumber of ANTs is not restricted by EPA, so applicants need only meet therequirements of EPA to become accredited. The main barriers to entry are the cost ofnoise monitoring equipment coupled with the relatively low number of notices issuedeach year.

No specific competition policy issues were raised by Victorian Automobile Chamber ofCommerce or any other stakeholders.

38


The appointment guidelines appear to be transparent and based on proper technicalrequirements. There is no limit on the number of ANTs that may be appointed (thelow number is probably attributed to the costs of entry and the limited number ofnotices).

There may be a perception of a conflict of interest when the assessor undertakes therepairs. However, it is only testing that is accredited, not repair. Therefore, there issome flexibility for vehicle owners to choose an alternative repairer.

No competition restrictions were identified.

38

Conversation with Victorian Automobile Chamber of Commerce.


70

Chapter Nine

Enforcement

9.1 Overview

This Chapter discusses the extent and type of enforcement of the EnvironmentProtection Act by EPA. From a competition policy viewpoint, enforcement should beadequate to ensure a high level of compliance with the Act, and also be done in a waywhich shows no favour. The guiding principles of EPAÕs Enforcement Policy are:

39

• enforcement of the mandatory and discretionary provisions of the Act will beundertaken in a fair, predictable and consistent manner;

• enforcement will be applied consistently to individuals, companies andgovernment agencies;

• enforcement will be undertaken using lawful procedures;

• the emphasis in administration and enforcement of the Act will be on prevention ofenvironmental problems;

• the assistance of all sections of the community will be sought in reportingenvironmental problems and suspected offences against the Act;

• within the limitation of resources available, EPA will endeavour to investigate allsuspected offences against the Act;

• the primary purpose of enforcement measures is to stop or prevent pollutingactivities, by making offenders accountable as a deterrent to those involved and toothers.

These principles are suitable for the enforcement of the Act under competition policy.

9.2 Infringement Notices and Prosecutions

A number of sections of the Environment Protection Act deal directly with elements ofthe environment such as clean air, clean water, control of solid wastes and pollution ofland. These sections state broadly that a person shall not pollute the particular elementof the environment to render it:

• noxious or poisonous;

• harmful or potentially harmful to welfare, safety or property of humans;

• poisonous, harmful or potentially harmful to animals, birds, fish, aquatic life,vegetation and other plants;

• detrimental to any beneficial uses made; and

• obnoxious or unduly offensive to the senses of humans (in the case of solid wastesand pollution of land).

For many cases, prosecution is EPAÕs only avenue to impose a penalty. In some cases,EPA can also issue notices in response to offences committed under the EnvironmentProtection Act. The main types of notices are:

• infringement noticesÑserved for offences committed against those sections listed inSchedule A of the Act, for example, excessive motor vehicle emissions andexcessive noise. Infringement notices impose a financial penalty on the guiltyparty. (These penalties range from $200 to $1,000).

39

EPA, Enforcement Policy, Publication No. 384, July 1993, p 1


71

• Pollution Abatement NoticesÑissued by EPA to either cease or modify an activitythat is causing pollution to the environment. EPA charges a Ôservice feeÕ of $320per notice for issuing pollution abatement notices. In all cases, a time forcompliance is specified in the notice. The minimum time a notice can specify is 30days after the date of service of the notice.

• Noise Control NoticesÑimposed to control noise emission. This section coversboth residential and industrial premises as well as noise from entertainmentvenues, motor boats and vehicles. Notices may be imposed by EPA on theoccupier of non-residential premises, whereas noise from residential premises isenforced by the Police and Local Government as per section 48A of the Act. Aservice fee is charged with the Notice.

Table 9.1 provides a summary of offences and prosecutions under the Act in 1997Ð98.

Table 9.1

Offences Committed under the Act Ð 1997Ð98

Offences Number of cases Yearly averagefor 3 preceding

years

Infringement notices

ÑIndustryÑWaste transportÑMotor vehiclesÑLitter

4280

1659

1,0103,096

3214

11519

11071973

Pollution Abatement Notices 92 97

Noise Control Notices 6 8

Clean up notices 14 31

Major prosecutions undertaken 38 NA

Motor vehicle prosecutions undertaken 5 NA

Source: EPA Annual Report 1997Ð98.

Under section 59 of the Act, enforcement of the Act is able to be undertaken by EPA ordelegates of EPA. Delegations are given to persons appointed by a municipal councilfor offences under Part IXB of the Act relating to the installation and operation of septictanks and for noise issues. The police also have some powers of enforcement under theAct, particularly for noise and public nuisance issues.


Neither the NCC Guidelines nor the Victorian GovernmentÕs Guidelines for the Reviewof Legislative Restrictions on Competition identifies ÔenforcementÕ as a purelycompetition issue. The NCC Guidelines only mention enforcement costs and if theylead to increases in levies to fund enforcement. So, in itself, the question of standing (iewho can enforce the Act) is not central to competition policy.

From the other perspective, under-enforcement could be seen to anti-competitive ifcertain industries are not being prosecuted for breaches of the Act. In terms ofcompetition policy, EPAÕs exclusive power to enforce the Act is primarily a cause forconcern if it is seen to be discriminatoryÑtherefore anti-competitive. Stakeholders didnot raise any examples where this was the case and there were no submissions fromindustry claiming unfair enforcement.


72

The issue of notices is a concern for competition policy if they are not served accordingto the principles outlined in EPAÕs enforcement policy at the beginning of thisChapter. The scope of this review does not include a detailed analysis of thedistribution of notices, or whether notices were not served when there was a case fortheir issue. Stakeholders did not raise this as a competition policy issue.

In the year 1997Ð98, there were 31 prosecutions under the Act.40

If EPA was seen to betargeting certain industries, or certain pollution types, we might expect to see animbalance in types of prosecutions recorded. The 31 prosecutions undertaken by EPAunder the Act in 1997Ð98 include:

• 1 government agency;

• 13 companies;

• 9 managers or directors of companies;

• 6 individuals; and

• 1 community group.

Of the 13 corporations prosecuted, the spread of companies covers multinationals andlocal small companies. This suggests that prosecution is not discriminatory accordingto size of company.

There were 51 charges laid under a diverse range of sections of the Act. Theprosecutions were in the following categories:

• air pollutionÑsection 41(1)(a);

• pollution of watersÑsection 39(1);

• pollution of waters so as to be harmful to aquatic lifeÑsection 39(1)(c);

• pollution of waters so as to be harmful to aesthetic enjoymentÑsection 39(1)(e);

• failure to comply with requirement to provide documentsÑsection 55(6);

• abandoning industrial wasteÑsection 27A(2)(a);

• dumping industrial waste at a site not licensed to accept industrial wasteÑsection27A(2);

• failure to comply with a clean up noticeÑsection 62A(3);

• failure to pay a service fee of clean up noticeÑsection 60C(3);

• pollution of landÑsection 45(1)(e);

• pollution of land (detrimental to animals)Ñsection 45(1)(c);

• occupier of a schedule 2 premises without a licenceÑsection 27(1)(a);

• breach of EPA licenceÑsection 27(2);

• cause an environmental hazardÑsection 27A(1)(c);

• breach of pollution abatement noticeÑsection 31A(7); and

• store waste without a licenceÑsection 27(1A)

An analysis of this information suggests that enforcement does not focus on a particulartype of industry or type of offence. The information is not readily available to say withany authority whether there may have been cases that could have been brought to thejustice system under the Act but were not. The review did not raise any cases and nospecific cases were mentioned by stakeholders.

40

By comparison, there were 16 prosecutions undertaken in 1996Ð97, 21 in 1995Ð96 and 26 in 1994Ð95.


73

Alternatives

The main alternatives to the enforcement restrictions under the Act would be to allowany individual or public body to institute criminal proceedings under the Act. Anotheralternative would be to allow accredited or authorised persons to institute proceedings(ie, an expansion of the practice of delegations such as those given to persons appointedby a municipal council for offences under Part IXB of the Act relating to the installationand operation of septic tanks).

In general, members of the Community subgroup favoured third party enforcement,while members of the Industry subgroup opposed it.

Third party enforcement is not supported as it could result in inconsistencies.Besides, it is too costly and difficult to prove.

Industry subgroup

Murray Raff suggests the possibility of Òselective enforcementÓ by EPA as the soleenforcer of the Act may be Òanti-competitiveÓ.

41 According to Murray Raff, the EPA

should not have a ÒmonopolyÓ power to enforce the Act:

Naturally EPA should continue to enforce the Act, but private citizens should alsobe able to prosecute and recover their expenses of doing so if they are successful.The Trade Practices Act 1974 is generally enforceable, and Section 114 of thePlanning and Environment Act 1987 allows Òany personÓ to enforce that Act.Apart from the desirability for certainty and consistency across environmentallegislation, breaking [EPAs] monopoly [of enforcement under the Act] is the mosteffective way to ensure the internalisation of environmental costs.


This suggestion was supported by Friends of the Earth and stakeholders in theCommunity subgroup:

Members of the public, and environmental organisations, need to be able to jointlyadminister the Act with EPA, and must have standing and funds to prosecutecompanies who are in breach of the Act. This requires broader rules of standing formembers of the public, and an open system of information and accountability fromEPA.


Third party enforcement has a deterrent effect; it is a watchdog role; provides a linkto information availability; and lifts the corporate veil.

Community subgroup

A member of the Government subgroup cautioned:

Because there is the potential for a big penalty, eg jail term, discretion is required,or at least delegated authorisation rather than open standing.

Government subgroup

Third party enforcement has been available in NSW for some time; however very fewcases have been brought. The main reason for a lack of third party prosecutions is thatthey are costly and often difficult to prove.

41

Raff, p 3-4.


74

Another issue of concern is the potential for third party prosecutions being sought forprivate or political purposes. In Brown v Environment Protection Authority, a case inthe NSW Land and Environment Court involving discharges into the ShoalhavenRiver brought to court by a third party, claims of the politicising of the process werediscussed by the Judge, M L Pearlman:

There has been much publicity, in the media and elsewhere, about this case, andthat is not unusual nor of any concern. But the Solicitor-General has pointed to thefact that, in his public utterances, the applicant has said he does not wish to closethe paper mill down, and he sought, as I have earlier said, to have certain orderssuspended whilst the alleged contraventions were rectified. That showed, so theSolicitor-General claimed, that the true motivation of the applicant was to score apolitical point and the orders he sought should be refused as an abuse of process.In view of the conclusions I have reached, it is not necessary for me to make afinding on this aspect, but because of its seriousness and the fact that it was madeby the Solicitor-General, I feel obliged to comment upon it. There was, in myopinion, simply no evidence from which I could draw any real conclusion aboutapplicant's motives in bringing the proceedings. Certainly the case was presentedbefore me by the applicant's solicitor and counsel without in any way raisingpolitical issues. Public cases draw political comment. I put it no higher than thatin this case, and I do not make any finding on the issue.

Alexander Jonathon Brown v. Environment Protection Authority [1992] NSWLEC103


Analysis of the issue of infringement notices does not raise any competition policyissues. Notices are an appropriate means for enforcing the Act without undertakingcostly prosecution.

Though there was no formal submission made by industry on the topic of third partyenforcement of the Act, a recent study by The Allen Consulting Group is relevantwhich warns of possible consequences of open standing.

42 On the law of standing, the

report comments:

A broad and liberal rule of standing will not necessarily safeguard the publicinterest and carries significant negative effects. A recent study by the AmericanConference Board illustrated the social, legal and economic impacts. It was foundthat under the banner of environmental litigation, only about 15 per cent of thetotal costs go to addressing the real problem.

The appearance of interest groups before the courts is fraught with difficulties as i tcannot be assumed that they necessarily represent the social or economic interestsof those whom they purport to represent.

Standing rules provide an effective mechanism for restraining the volume oflitigation and warrant strict interpretation.

The Allen Consulting Group, Avoiding a More Litigous Society, 1998, p 18

An alternative view has been put by the Australian Law Reform Committee (ALRC):

The public has an interest in ensuring that government decision-makers areaccountable and that their decisions are made in accordance with the law. Thepublic also has an interest in ensuring compliance with legislation that createspublic rights and duties. These are interests which must be capable of protection,when necessary, through litigation.

Yet under current Australian law it is not open to any member of the public tocommence litigation to enforce that accountability or compliance. A person musthave 'standing' to commence proceedings of this kind. There are various tests usedto determine whether a person has sufficient standing. In many cases a personal or

42

ÒTrends in the Australian Legal System: Avoiding a more Litigious SocietyÓ, The Allen ConsultingGroup, 1998.


75

'special' interest of some kind is required. In some cases specific statutoryrequirements apply.

É the Commission recommends that these complex restrictions should be removedin favour of open standing. A new, and simple, standing test should be adopted.Any person should be able to commence proceedings having a public elementsubject to only two limits - a person should not be able to commence theseproceedings if

¥ the relevant legislation provides otherwise, or

¥ the litigation would unreasonably interfere with the ability of a person havinga private interest in the matter to deal with it as he or she wishes.

The Australian Law Reform Commission, ÒBeyond the door-keeper: standing tosue for public remediesÓ, ALRC 28

If companies are obtaining an unfair advantage from ÔselectiveÕ enforcement of the Act ora general lack of enforcement of the Act, then it may be suitable for third partyprosecution or some other response such as increase in funding for prosecutions byEPA. Third party enforcement may also free up EPA resources dedicated to prosecutionand ultimately reduce the costs of EPA. It should be noted that no examples ofselective enforcement were provided by stakeholders.

However, there may be good reasons for discretion on prosecution. For example,instead of undertaking a costly prosecution of a company in breach of their licence, areminder to the company and a little leniency may be far more effective and efficientmethod to achieve the desired environmental outcome. More formal remedies wouldclearly be considered for repeat offenders or particularly serious offences. (Indeed, underits enforcement policy, EPA adopts this strategy by increasing the severity of theenforcement instrument from notices for first offences to prosecution for repeats or majoroffences.)

If the present enforcement of the Act is found to be adequate, by prosecution or otherjustifiable, subtle means, then there is less likely to be a need for introducing thirdparty enforcement.

A potential risk of third party enforcement is that EPA may become more litigiousitself. Knowing that if it does not take action, then others will, EPA may be forced tomake more prosecutions. This could be extremely costly to all involved when there areless costly and more effective avenues for enforcing the Act.

Another problem with third party enforcement is that there can be problems with co-ordinating multiple prosecuting parties rather than a co-ordinated prosecution from asingle party. Also, there are risks of higher transaction costs from third partyenforcement.

Recommendation 19: The availability of third party enforcement is a policy decision forgovernment rather than a competition issue. There does not appear to be significantevidence from the review that the current approach is not effective.


76

Chapter Ten

Regulation of Septic Tanks and SewageTreatment

10.1 Regulating Alternative Waste ManagementProducts and Systems

The market for systems to treat sewerage, usually household sewerage, includes theprovision and maintenance of septic tank systems and an increasing number ofalternative systems, such as composting toilets. The failure of the market to ensure thedesign and operation of systems does not result in environmental damage is therationale for regulation in this market.

Septic tank systems are designed to manage and dispose of sewage in areas where thedensity of development does not justify the provision of reticulated sewerage. There aresome 200,000 septic tank systems in use in Victoria, the majority of which are locatedin urban residential areas.

The installation, alteration and use of sewerage treatment is regulated by Part IXB ofthe Act to help avoid the impacts of system failure, which can be due to the selection ofinappropriate systems for particular allotments, or poor maintenance and managementpractices.

EPA approves the types of sewerage treatment systems which may be used, subject tospecific on-site approvals by municipal councils. Local municipal councils havedelegated responsibility for:

• issuing permits to install or alter sewerage treatment systems;

• issuing certificates to use sewerage treatment system after inspection;

• ensuring compliance with conditions on permits and certificates; and

• the submission of an annual return to EPA containing information on seweragetreatment system approval and inspection programs.

A permit must be obtained from the local municipal authority before installing, alteringor using any sewerage treatment system. The Act also states that sewerage treatmentsystems must be properly maintained in accordance with the requirements in thepermit.


Stakeholders have raised concerns that providers of some alternative products to septictanks, such as composting toilets and grey water systems, cannot compete because,though they can be approved for use, there are no clear guidelines for their use inspecific applications. The issue of councilsÕ unfamiliarity with alternative systems andthe competitive implications for those systems was raised by Friends of the Earth:


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Current regulations are confusing. There are clear provisions for how septic tanksystems may be used and their history of use has made them familiar to allregulatory authorities. Such clarity and acceptance does not exist for alternativesewage systems. There is no clear regulatory framework that specifies howcomposting toilets and sullage water can be used. There are clear EPA approvalsfor specific products, but there is no overview or guidelines.


The absence of such guidelines has acted effectively as a barrier to entry because localcouncils tend to be unwilling to issue permits if they are uncertain about theinstallation, use and maintenance of alternative systems.

The Department of Natural Resources and Environment submission raised acompetition issue surrounding the potential conflict of interest of incorporatingregulatory and provider powers in the water authorities under the Water Act 1989.

Part IXB of the Environment Protection Act deals with the specifications,installation and modification of septic tank systems. Currently, water authoritieshave power under the Water Act 1989 to both build reticulated sewerage systemsand to require properties to be connected to them. This has been construed by someto be contrary to competition principles and will be the subject of review in thecourse of the NCP review of water legislation.

To separate the regulatory and service provision functions, the power of waterauthorities to require connection of properties could be removed. However,because of the significant public health and environment issues associated withsewerage, the regulatory function will need to be retained to make sure alternativesewerage systems meet a required health and environmental standards over thelong term. For example the regulatory function could remain with local government,where it presently resides, or be allocated to EPA.

Department of Natural Resources and Environment submission, p 1


The ability of alternative systems to compete is not a competition issue under the Act,because EPA does authorise competing systems where they comply with therequirements of Part IXB. EPA should continue to set standards for septic tanks andsubstitutable sewerage treatment systems so as not to restrict alternative systems fromentering the market. The advantage of standards for allowing flexibility to adopt newtechnologies is recognised in the Victorian GovernmentÕs NCP guidelines (Box 10.1).

Box 10.1

Rules vs. Standards

Prescriptive rules encourage certainty, particularly in the short term, and may be justified forissues for which there are limited alternatives available to achieve the objectives of theregulation. However, prescriptive rules can limit flexibility in meeting regulatory objectivesand can retard innovation, whereas standards maintain the opportunity for innovation inprocess. Governments will often have poor information about emerging technologies andtheir potential for innovation and market change. Prescription can also encourage wastefulby-passing activity.

Source: National Competition Policy Guidelines, Victorian Government, p 81.

However, there are restrictions on competition where local councils do not issuepermits because they do not have guidelines or procedures for their installation, use andmaintenance, and therefore do not have understanding of such systems of maintenance.

Recommendation 20: EPA should expand its role to assist local councils, as thedelegated authority, to better understand alternative systems to septic tanks.


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Provisions under the Water Act permit water authorities to require premises to connectto sewerage systems constructed by those authorities (and even make a capitalcontribution towards those systems). These provisions will be the subject of acompetition review of the Water Act to be undertaken in 1999. It has been suggested byone stakeholder, the Department of Natural Resources and Environment, that EPAcould assume responsibility for this regulatory function.

Recommendation 21: The suggestion to place the regulatory function with the EPAwould sit well with existing regulations for septic tanks and should be considered bythe NCP review of the Water Act. It is not perceived that the regulatory function wouldlead to any competition issues under the auspices of the EPA because the EPA is not aprovider of sewerage systems.


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Chapter Eleven

Overlapping with other Regulation

In addition to the protection of the environment and public health from hazardouswaste, there are also similar regulations concerning occupational health and safety, suchas dangerous goods regulation. The total compliance costs on industry of allregulations is a significant addition to costs, especially where regulations seem toÔoverlapÕ. For example, an industry may be required to obtain more than one permit toundertake a single activity because it may be threatening to both the environment andto the wellÐbeing of employees.

Similarly, for some companies, complying with different regulations acrossjurisdictions is a costly exercise. The most efficient regulatory framework in Victoriawill improve Victorian companiesÕ competitiveness relative to those of other states andcountries.


Overlapping regulation can impose direct and compliance costs. Interstate differences inregulation also add to direct and compliance costs. Often these costs are proportionallygreater for small businesses, and may even constitute an effective barrier to entry.Sometimes, overlaps are necessary to ensure protection of employees, the environmentand the community. However, where possible, streamlining of regulations should beconsidered. This is a broader regulatory design issue rather than a competition policyissue.

Possible duplication was raised by one stakeholder:

consideration could be given to identifying an approach that would ensure thatmatters that are adequately covered in other statutory approvals processes are notalso included in similar processes under the Environment Protection Act.


Some of the confusion arising as a result of different forms of legislation was raised byanother stakeholder:

A major inefficiency in the operation of the legislation is the indistinct line drawnbetween environmental regulation and dangerous goods administration.


The accumulative cost of complying with several regulations, some similar in theirintent, was raised as a competition issue, particularly for small companies:

Small companies recognise the need to meet the requirements of regulations, butfind the range of regulations particularly costly. For example, small companies haveto comply with the requirements of licensing as well as dangerous goodsregulations, and occupational health and safety regulations. Therefore the overallregulatory burden is particularly costly for small businesses. There appears to besome duplication and some streamlining would help to alleviate the regulatoryburden.

Conversation with Victorian Employers Chamber of Commerce and Industry


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The Department of Natural Resources and Environment provided a submission inrespect of the different licences that cover different discharges and emissions under otherActs. In one case, a mining works approval by EPA included noise and fugitive dustemissions, even though:

discharges and emissions of this type are dealt with under the conditions of therelevant licence or authority under the Mineral Resources Development Act(MRDA) or the Extractive Industries Development Act (EIDA).



Development of environment protection regulation should clearly consider otherexisting regulation. If an existing regulation already achieves the same objectives, thereshould be a good justification for the need for the additional regulation.

The problem with relying on regulation created under the auspices of another authorityis that there is a loss of control, say, in a case where a regulation is changed orrepealed. To overcome this, there would need to be a good working relationshipbetween the regulatory bodies in charge of the regulated activity.

In some areas, there has been some progress. An example is the arrangement wherebybusinesses that handle dangerous goods and are subject to Schedule Four licensing byEPA are exempt from the dangerous goods licensing processes (they are included underthe EPA licence). Also, in 1993, EPA amended the Environment Protection (ScheduledPremises and Exemptions) Regulations to remove licensing from dredging operations(replaced with a Ôbest practiceÕ approach through the dredging protocol).

The Regulatory Reform Task Force in the Department of State Development recentlycompleted a review of regulation of VictoriaÕs aquaculture industry.

43 In the course of

the review, industry groups raised competition issues with respect to the complexitiesfor industry of dealing with several regulatory authorities and the overall level ofgovernment fees and charges. Some aquaculture companies operate scheduled premisesthat discharge waste water and therefore require an EPA licence. To reduce theregulatory burden on industry, the Task Force recommends Best Practice EnvironmentManagement (BPEM) Guidelines be developed for the industry and then attached to thecurrent aquaculture licence issued by Fisheries Victoria (located within DNRE) underthe Fisheries Act 1995. Subsequently, the Environment Protection (ScheduledPremises and Exemptions) Regulations would be amended so that an EPA dischargelicence is no longer required. According to the report, EPA advised the Task Force thatthis approach will save the industry around $40,000 per annum in EPA licensing fees.

Review of the overall regulatory framework to remove unnecessary overlaps andstreamline regulation is a major task, one that is not within the terms of this review.The NCP legislative review process itself is in effect an attempt to undertake a majorsystemic review of regulation on a national basis, albeit with a particular basis. Thistask is taking place over a number of years and involves significant resources fromgovernment and stakeholders.

Recommendation 22: The impact of new regulations on the overall regulatory burdenshould be assessed, where appropriate, under EPAÕs Protocol for the Development ofRegulations and the Preparation of Regulatory Impact Statements.

43

Regulatory Reform Task Force, Review of Regulatory Arrangements in the Victorian AquacultureIndustry: Final Report, Department of State Development, Victoria, 1999.


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Chapter Twelve

The Litter Act 1987

12.1 Overview of the Legislation

Litter is generally an item that has been consumed (eg a newspaper) or an item that aidsconsumption (eg packaging) which no longer has any use to the consumer. Where themarket does not provide an incentive to dispose of litter in an appropriate place, the Actregulates proper disposal.

In recent times, markets have been created for the recycling of litter. Present dayrecyclers generally rely on peopleÕs goodwill rather than providing commercialincentives to dispose litter in recycling receptacles. The Act does not express anyrequirements for litter to be recycled.

The Litter Act 1987 has the stated purpose of prohibiting and regulating the deposit oflitter in the environment of Victoria.

The Act states that litter includes:

• any solid or liquid waste from either a domestic or commercial source; and

• any material, substance or thing that detrimentally affects the use of a place due toits size, volume, shape, nature or disorderly placement.

This definition does not cover gases, dust, smoke or any waste matter produced oremitted as a result of the mining, building, manufacturing or primary industry.

12.2 Offences and Penalties

The Act states that a person should not litter unless:

• the place is designed for the disposal of litter and is appropriate for the size, shape,volume and nature of the litter;

• the litter is in a place owned or controlled by the depositor and the litter cannotleave this place without human assistance;

• the person is authorised to deposit litter under an Act or if the litter is anunavoidable consequence of legal activity; and

• the deposit was accidental and every reasonable attempt was made to retrieve thelitter.

If a person is found to deposit litter that involves:

• the deposit of glass, metal, earthenware;

• the intentional deposit of litter resulting in a danger to any persons, animals, land,water or vehicles; and/or

• the intentional deposit of litter in, on, from or towards any vehicle,

they may be convicted of aggravated littering.

The Act notes that the owner, driver and all other authorised users of a vehicle aredeemed guilty of an offence if litter is deposited from a vehicle. Some exceptions to thisexist including:


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• if it is not practical to discover who deposited the litter, charge and successfullyprosecute them; and

• if the vehicle is a train, tram, bus, ferry etc, being used for public purpose, wherethe litter was deposited by a passenger of the vehicle.

The Act allows for the general public to report litter offences. Information that must besupplied with a report includes the date, time, location and nature of the offence and anyevidence to the identity of the person committing the offence.

The Act allows for a number of penalties to be handed to a person convicted of litteringincluding fines, notices and possibly a jail sentence. The Act in turn details anextensive appeals process that a person accused of a litter offence may undertake via anindependent arbiter. In 1997Ð98, 3,096 infringement notices were issued and 17littering prosecutions were undertaken.

The Act allows EPA to direct a person, who is believed responsible for the deposit oflitter, to remove that litter. This can occur if the Authority believes that the litter is, oris likely to become, detrimental to the health and safety of members of the public,hazardous to the environment and unduly offensive to the senses of human beings. TheAct also allows for the recovery of costs for the removal of litter from a personresponsible for the deposit of the litter.

The Act allows for an authorised officer (generally a relevant council, police, EPA, landand water management or public transport officer) to require information from certainpeople who an officer believes had possession of particular litter at some time in thepast. This information can be verbal but may also be required in writing.

The Litter Act specifies a number of miscellaneous offences including:

• not removing litter when directed so by an authorised officer;

• defacing or setting on fire a litter receptacle provided by a public authority;

• requiring a person to move a vehicle without providing sufficient means to securethe load;

• not ensuring that a load on a vehicle is secured in such a way so as to prevent theloss of litter; and

• the posting of advertising material, including placing advertising material onvehicles.

The Litter Act states that unsolicited advertising material must not be placed:

• anywhere in a property other than a receptacle for the deposit of mail, newspapersor underneath the door; or

• in or on any vehicle.


UnderÐenforcement of the Act may be construed as anti-competitive if certainindividuals or companies are not being prosecuted for breaches of the Act.

Some provisions of the Act, such as those that prohibit placing advertising leaflets onmotor vehicles, may also be seen to be placing competitive restrictions on smalleroperators who cannot afford mainstream media advertising campaigns.

The effectiveness of the Act was questioned:


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The Litter Act is an important piece of legislation for the amenity of both public andprivate properties. I believe that its general objective, that is, the prevention oflittering in public places, is fairly well known by the public, however the level oftheir knowledge of the extent to which the Litter Act can apply is low and thislimits its effectiveness.

The current exclusion of any waste matter which is produced or emitted during oras a result of any of the normal operations of the mining, building or manufacturingindustry or of any primary industry from the definition of litter is not appropriate.

Trevor Ryan submission, p 1

Possible Reforms

In general, stakeholders commented on ways to make the Litter Act stronger bysuggesting the inclusion of activities that are not covered by the Act. Submissions werein favour of expanding the purpose of the Act to encourage recycling of litter.

This Act should be the leading edge of a recycling system as it is in Germany.


Rather than an offence of not lodging material in a receptacle, there should be anoffence of not lodging it in the correct recycling receptacle.

Environment Victoria submission, p 11

It is also suggested that the misuse of rubbish bins be explicitly prohibited under theAct.

The depositing of household or business rubbish in a public place litter bin is, Iam led to believe a littering offence. Unfortunately I cannot find any reference tothis in the latest versions of either the Litter Act or the Environment Protection Act.As the misuse of litter bins to dispose of household or business rubbish is acommon concern to municipal councils the legislation should be clarified and madereadily available to all concerned.


With respect to distribution of advertising material, one stakeholder suggests that theAct does not go far enough, and that it should be an offence on the part of leafletdistributors to ignore private notices advising that unsolicited material should not bedelivered (Òno junk mailÓ signs).

The provisions of Clause 6A in the current Act do not address the situation wherethe occupier of a property has placed a notice on their letter box advisingdistributors that unsolicited items of a commercial nature should not be delivered.

The Code of Practice adopted by members of the Australian Catalogue Associationsupports the right of residents to not accept unsolicited advertising material andthe inclusion of a similar right in the Litter Act would not therefore be out of place.



Stakeholders generally made suggestions that would make the Litter Act a more forcefulpiece of legislation. This is more an issue of regulatory design rather than competitionpolicy. Some of these are justified to meet the legislative objectives to reduce litter.

Some possible amendments to the Litter Act include:

• significantly expand the purpose of the Act beyond prevention of litter to includeprovisions that encourage recycling and even make failure to recycle an offenceunder the ActÑalthough this could be very costly for some wastes and could beconstrued as anti-competitive;.


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• greater use of economic measures to reduce litter such as product charges, legislateddeposit refund schemes, although in the past these schemes have not been verysuccessful; or

• consider repealing the Litter Act and incorporating all the provisions of the LitterAct in the Environment Protection Act (this option has been considered in the pastbut has not yet been implemented by government).

Restrictions on advertising and leaflet distribution were not raised by stakeholders.While limits on advertising placement are a clear restriction on competition, theÔvisualÕ pollution as well as other costs such as when litter enters waterways etc andcosts of collecting litter all arguably outweigh any commercial benefits of advertising inthis manner. The restriction is consistent with the objectives of the Act and shouldremain in force. There do not appear to be any other restrictions on competition in theAct that restrict a specific activity.

The incorporation of the Litter Act into the Environment Protection Act has beenconsidered previously. In the EPA Annual Report it is stated that:

Due to other legislative priorities, consideration of a proposal to repeal the LitterAct 1987 and to re-introduce its key provisions into the Environment ProtectionAct 1970 has been deferred until 1998Ð99.

EPA, Annual Report, 1997Ð98, p 42

It has also been suggested by stakeholders that it would to be a sensible thing to givecontrol of litter more force. However, given that the Litter Act appears to be effective inits present form (with an increase in infringement notices in recent years), incorporationis not a priority, but should be undertaken at an appropriate opportunity in the future.Incorporation would also help to remove any confusion over the regulation of somecommercial wastes.

There are many similarities between the Environment Protection Act and Litter Act thatgive the option for consolidation much credibility. As many of the waste managementstrategies in the Environment Protection Act impact on the effectiveness of the LitterAct, incorporation of litter provisions under the Act would be expected to lead tobenefits in terms of regulatory efficiency.

Recommendation 23: Proposals to strengthen the Litter Act to meet the objectives ofthe legislation are sensible. The proposal to incorporate the Litter Act in theEnvironment Protection Act is supported. The new provisions should be subject to acompetition policy test and allow EPA to employ economic measures to limit litter inVictoria.

Suggestions for prohibiting the misuse of litter bins and the delivery of advertisingleaflets to letter boxes which are clearly marked that the owner does not wish to receiveunsolicited mail are worthy recommendations that should also be considered by EPAfor inclusion in the Act. There are no foreseeable competition restrictions that wouldresult from this practice that could not be justified.

The net public benefit of the suggestion that the Act should encourage recycling needsfurther analysis. Resources may be better directed toward other strategies that aim toreduce litter.


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Chapter Thirteen

Concluding Remarks

The discussion in this document surrounds the major issues that arose in stakeholderconsultations. One stakeholder queried the absence of discussion of some parts of theAct:

The discussion paper summarises selected parts of the Environment Protection Actwithout making the reasons for selection clear. For example, the EnvironmentalProtection Act (Vehicle Emissions) Regulations include a number of potentialrestrictions on car manufacturing and the car repair industry. The many regulationsinvolving noise pollution also come under the Environmental Protection Act. Thefinal report should clearly state the reasons for not including major supportingelements of the Act in the NCP review process.


The Environment Protection Act is a very large piece of legislation, that regulates manyactivities. Analysis of the legislation focussed principally on areas highlighted ashaving potential competition restrictions.

Judging by the number and content of responses from stakeholders to the review, thereare few serious issues of competition to arise from a review of the present environmentprotection regime in Victoria.

This review was designated a Model 4 review which, according to the VictorianGovernmentÕs Guidelines for the Review of Legislative Restrictions on Competition,does not require public consultation. Nevertheless, it was considered that the reviewshould consider the opinions of stakeholders. Some stakeholders remarked that theconsultation period was not long enough and not widely advertised. The review teamnotes that substantial efforts were made to involve stakeholders in the review:

• the Discussion Paper was posted to over 30 stakeholders, who were also invited toattend roundtable consultations (about 50 per cent attended);

• release of the Discussion Paper was advertised in The Age newspaper;

• the Discussion Paper was available on the EPA website; and

• roundtable consultations were held with industry, environmental and communitygroups.

In summary, there were not a large number of clearly anti-competitive provisionsidentified under the Act or subordinate legislation. The main issues and conclusionsfrom a competition policy perspective to arise from the review are:

• the need to provide clear objectives for the Act itself, and for each of the policyinstruments used;

• the need to address a perceived focus on point source rather than diffuse sourcepollution;

• the need to continue to provide assurance that all regulation is designed incompliance with requirements for public input, an examination of alternatives, andcost benefit analysis, and a public benefit test;

• the need to ensure that EPA has access to all instruments under the Act,particularly economic instruments. When using these instruments, their creationshould be subject to the disciplines outlined above;

• evidence of a non-discretionary and extensive enforcement practices that ensurepolicy instruments are being complied with;

• the calculation of some fees, eg works approvals fees, should be reviewed;


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• the ALS needs to be reviewed to make it more attractive to smaller companies.

• education of local councils is required to ensure they are familiar with the types ofalternative waste management systems permitted under the Act;

• efforts to reduce overlap with other regulation should continue; and

• the provisions of the Litter Act should be strengthened by consolidation with theEnvironment Protection Act.

Some issues that encompass wider policy issues than competition policy were raisedby stakeholders, such as the question of third party enforcement. These issues areworthy of wider debate than their relation to competition policy. It was perceived bysome that it may be time for a more comprehensive review of the Act.

It is time for a comprehensive review of the Act. We do not believe that a review toÔbring the Act in line with competition policyÕ can be done in isolation fromassessing the whole Act.


In future, provisions of the Act (and new provisions) should continue to be monitoredfor adverse competition effects, and the Victorian approach should continue to bebenchmarked against developments in other jurisdictions.


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Appendix A

Terms of Reference

A.1 Government of Victoria Ñ National Competition PolicyReview of Legislative Restrictions on Competition Ñ Review ofEnvironment Protection Act 1970 and Subordinate Instruments

The review of the Environment Protection Act 1970 and its subordinate instrumentshas been commissioned by the Minister for Conservation and Land Management inaccordance with the Victorian Government Timetable for the Review and Reform ofLegislation that Restricts Competition, determined in accordance with NationalCompetition Policy.

Legislation to be Reviewed

The review will examine the case for reform of legislative restrictions on competitioncontained in the Environment Protection Act 1970 and its subordinate instruments(regulations, State environment protection policies and industrial waste managementpolicies), in accordance with the Victorian GovernmentÕs Procedural andMethodological Guidelines for the Review of Legislative Restrictions on Competition.

In particular, the review will provide evidence and findings in its report in relation tothe following:

• clarify the objectives of the legislation;

• identify the nature of the restrictions on competition;

• analyse the likely effect of the restriction on competition and on the economy ingeneral;

• assess and balance the costs and benefits of the restriction; and

• consider alternative means of achieving the same result including nonÐlegislativemeans.

Reform Options

The Review should specifically address the appropriateness of:

• provisions for appointment of environmental auditors and analysts by theAuthority;

• provisions to require occupiers of certain premises to apply for and Act inaccordance with works approvals and licences issued by the Authority;

• provisions for the Authority to charge and collect levies;

• provisions which allow the Authority to require persons or firms to enter intowaste reduction agreements;

• provisions for the appointment of approved testers of motor vehicles by theAuthority;

• requirements for transport certification for some wastes; and

• requirements for approval of septic tank systems.

Review Arrangements

This review is to be established and conducted in accordance with the review model 4(complexÐminor) contained in the Guidelines.


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A.2 Government of Victoria Ñ National Competition PolicyReview of Legislative Restrictions on Competition Ñ Review of LitterAct 1987

The review of the Litter Act 1987 has been commissioned by the Minister forConservation and Land Management in accordance with the Victorian GovernmentTimetable for the Review and Reform of Legislation that Restricts Competition,determined in accordance with National Competition Policy.

Legislation to be Reviewed

The review will examine the case for reform of legislative restrictions on competitioncontained in the Litter Act 1987 and its subordinate instruments (regulations, Stateenvironment protection policies and waste management policies), in accordance withthe Victorian GovernmentÕs Procedural and Methodological Guidelines for the Reviewof Legislative Restrictions on Competition.

In particular, the review will provide evidence and findings in its report in relation tothe following:

• clarify the objectives of the legislation;

• identify the nature of the restrictions on competition;

• analyse the likely effect of the restriction on competition and on the economy ingeneral;

• assess and balance the costs and benefits of the restriction; and

• consider alternative means of achieve the same result including nonÐlegislativemeans.

Reform Options

The review should specifically address the appropriateness of removing restrictions onleaflet distribution.

Review Arrangements

This review is to be established and conducted in accordance with the review model 4(complex minor) contained in the Guidelines.


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Appendix B

Policies and Regulations

This appendix lists policies and regulations under the Environment Protection Act.

Policies

• State Environment Protection Policy (The Waters of Western Port Bay andCatchment) No. W-28, 9/2/79 (Gazette 9/2/79)

• State Environment Protection Policy (Ambient Air Quality) 9/2/99 (Gazette9/2/99)

• State Environment Protection Policy (Air Quality Management) 27/7/81 (Gazette13/7/81) - as varied 4/11/81 (Gazette 4/11/81), 17/2/82 (Gazette 17/2/82), 16/6/82(Gazette 16/6/82), 24/11/82 (Gazette 24/11/82), 27/9/83 (Gazette 28/9/83), 17/5/88(Gazette 6/6/88) 18/7/89 (Gazette 31/7/89) and 9/2/99 (Gazette 9/2/99).

• State Environment Protection Policy (The Waters of the Western District Lakes)No. W-34B, 11/2/82)

• State Environment Protection Policy (The Waters of Lake Colac and Catchment)No. W-34A, 18/2/82 (Gazette 18/2/82)

• State Environment Protection Policy (The Waters of Lake Burrumbeet andCatchment) No. W-36A, 28/6/83 (Gazette 28/6/83)

• State Environment Protection Policy (The Waters of the Yarra River andTributaries) No. W-29, 30/4/84 (Gazette 30/4/84)

• State Environment Protection Policy (The Waters of Far East Gippsland) No. W-21, 26/2/85 (Gazette 6/3/85)

• State Environment Protection Policy (The Waters of the Wimmera River andCatchment) No. W-15A, 23/4/85 (Gazette 20/5/85)

• State Environment Protection Policy (The Waters of the Dandenong Valley) No.W-28A, 23/2/88 (Gazette 24/2/88)

• State Environment Protection Policy (The Waters of Victoria) 23/2/88 (Gazette26/2/88) - as varied 6/2/90 (Gazette 21/3/90), 22/10/96 (Gazette 22/10/96:insertion of Schedule F5 - Latrobe and Thomson River Basins and MerrimanCreek Catchment) and 26/8/97 (Gazette 27/8/97: insertion of Schedule F6 - Watersof Port Phillip Bay)

• State Environment Protection Policy (Control of Noise from Commerce, Industryand Trade) No.1 16/5/89 (Gazette 15/6/89) - as varied 15/9/92 (Gazette 23/9/92)

• State Environment Protection Policy (Control of Music Noise from PublicPremises) No. N-2 18/7/89 (Gazette 3/8/89)

• State Environment Protection Policy (Siting and Management of LandfillsReceiving Municipal Wastes) 28/5/91 (Gazette 5/7/91) - as varied 15/7/92 (Gazette15/7/92)

• State Environment Protection Policy (Groundwaters of Victoria) 16/12/97 (Gazette17/12/97)

• Industrial Waste Management Policy (Waste Minimisation) 23/10/90 (Gazette29/10/90)

• Industrial Waste Management Policy (Control of Ozone-depleting Substances) No.IW-IB 27/11/90 (Gazette 29/11/90) - as varied 23/1/96 (Gazette 29/2/96)

• Industrial Waste Management Policy (Waste Acid Sulfate Soils) 25/08/98 (Gazette27/08/98)


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Regulations

• Environment Protection (Vehicle Emissions) Regulations 1992 SR No. 127/92 asamended by SR No. 293/92

• Environment Protection (Fees) Regulations 1991 SR No. 228/1991 as amended bySR Nos.239/92, 307/92, 206/93 and 172/94

• Environment Protection (Prescribed Waste) Regulations 1998 SR No. 95/98

• Environment Protection (Scheduled Premises and Exemptions) Regulations 1996SR No 66/1996

• Environment Protection (Residential Noise) Regulations 1997 SR No. 120/97

• Environment Protection (Control of Ozone-depleting Substances) Regulations1989, SR No. 153/1989

• Environment Protection (Organotin Antifouling Paint) Regulations 1989 SR No.123/1989

• Environment Protection (Purchase and Sale of Products containing Ozone-depleting Substances) Regulations 1990 SR No. 54/90

• Environment Protection (Landfill Levy) Regulations 1992 SR No. 268/92

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