Environment in emerging and transition economies

Economics of Compliance Assurance


Empirical data and analysis in EECCA and other regions have shown that inadequate environmental compliance and enforcement can result in significant costs for individuals and companies and increase public spending without bringing expected results.
However, economic and financial implications of compliance assurance policies and institutions are rarely quantified. Although information exists on the incentive structure for environmentally- responsible business conduct in OECD countries, direct comparison between OECD and transition or developing countries is not possible due to the significant differences between economic incentives for firms’ performance and overall business environment. In order to advance policy analysis in this field, a OECD Conference on Economic Aspects of Environmental Compliance Assurance, 2-3 December, 2004, Paris, France .

This conference enabled an open dialogue between enforcement practitioners and economists, and between countries at various stages of economic development. The participants called for continuation of this dialogue, for more empirical analysis, and the identification of best practices that can help countries to enforce compliance with environmental requirements, to focus scarce resources where they are most needed and where they have the greatest effects, as well as to limit regulatory dealings and other forms of corruption. The Conference Proceedings include a background paper, articles by the participants, meeting agenda, and the list of participants.

In response to requests from EECCA countries to help improve their approaches of estimating budgets and ensuring financing for regulatory and compliance assurance needs, was carried out. The review discusses the application of cost-recovery, polluter pays, and other principles of sound public financing and suggests tools to improve budget planning and allocations, and tackle budget gaps. The report called for reform that should aim at improving, and diversifying where feasible and appropriate, the funding basis of environmental regulatory agencies and inspectorates in order to enable allocation of resources that would be sufficient to carry out statutory functions while avoiding conflicts of interest and preventing corruption.