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The PPP as a Concept

What is the Polluter Pays Principle (PPP) and how does it work?

Quite simply, it amounts to the use of financial incentives to persuade polluters to pollute less. Operating as a market mechanism, the PPP factors the hidden costs of polluting into the price of the product or service. These hidden costs include damage from air and water pollution, waste disposal, soil and species loss, climate change and health costs. Through a range of possible measures, including pollution taxes and charges as well as subsidies, producers and consumers alike are given a financial incentive to reduce pollution and to make good use of natural resources. As polluters are given a ‘choice’, whether to ‘pollute and pay’ or ‘abate and save’ the principle offers an efficient way of reaching environmental goals. It can also offer a ‘double dividend’ of generating revenues that potentially could be steered back into environmental improvement. The PPP uses the market to simultaneously benefit the economy and the environment. It is fair in that it ensures that polluters pay rather than imposing the cost of a polluted environment on society at large.

Has the PPP ever been applied in Malta?

Malta's environmental aims are ambitious. The use of economic instruments which implement the PPP provides a means of reaching these goals in a manner that complements traditional "command and control" measures and other measures such as education and voluntary approaches.

Actually, the PPP already features in Maltese environmental law. When you pay for your water and electricity bill, your car fuel, and main sewer and street contributions you are part of the PPP as put to practice. The PPP is also at work when you take advantage of government incentives which save you money and protect the environment. When you receive a refund on the purchase of a solar heater or an electric car, when you use public transport (which is subsidised) and when you save excise tax of 20% on the biodiesel you consume, you are actually getting the benefits of the PPP in practice. When you sell photovoltaic energy from your home to Enemalta, when you receive money for returning an LPG cylinder, you are engaged in the implementation of the PPP.

These are all financial measures already in place in Malta which encourage citizens to protect the environment and reap financial benefits for themselves.

How did we get to the Polluter Pays Principle?

At an EU level, there is a clear drive to apply the PPP. The EU’s Sixth Environment Action Programme mentions “the promotion of the ‘polluter pays’ principle, through the use of market-based instruments” as one of the strategic approaches to implement EU environmental policy. Nationally, the principle is enshrined in environmental legislation and in various environmental policy documents. In its Pre-Budget Consultation Document 2006 – 2010, the government has now set out a more comprehensive approach towards “a shift from direct taxation to environment-related taxation”. The scope is not to increase government revenue but as “a re-engineering of direct taxation revenue streams which would introduce concepts based on the polluter-pays-principle”.

Is the PPP applied the same around the world?

No, not all. It is a principle which is adaptable to a country’s economic, social and cultural values as well as its national financial practices and institutions. In fact, the wide range of possible economic instruments derived from the PPP, makes it possible to avoid the pitfalls of the one-size-fits-all character of other instruments.

Four money-saving tips for your everyday life

Many studies have shown that with small changes in your behaviour, you would save money, natural resources and protect the environment. In a nutshell, this is what the PPP is all about. Here are 4 tips on how to make the PPP work for you and your bank account.

1. Turn off the lights when you leave a room or a corridor. Using energy-saving devices in your home and at work also helps a lot.

2. Do not leave tap water running while you brush your teeth or while checking the cooking pot. Fix leaking pipes and taps. And use a water bucket to wash your car, not a hose pipe.

3. Drive efficiently by turning the car engine off when you pop into the corner store to buy bread. Give a regular service to your car. Try to form a carpool to go to work and come back.

4. To reduce packaging and waste less, use reusable containers for your kids' lunch. And, of course, this saves you money.