Sustainable financing of institutional capacity
Sustainable financing of national legal frameworks and related institutional capacity for management of chemicals is necessary for the sound management of chemicals. There are different models for financing to achieve a sustainable institutional capacity. Sustainable financing is here defined as sources of financing that are reliable, secure, and predictable.
To establish and develop a national preventive chemicals control, a legal framework for chemicals management is necessary, as well as the related basic national administration.
The national administration must have adequate institutional capacity to perform its assigned tasks and fulfil its responsibilities. The establishment of sustainable financing of national legal frameworks and related institutional capacity for the management of chemicals is therefore one of the cornerstones for the sound management of chemicals.
Defining responsibilities is key
National legislation is necessary to provide for the sound management of chemicals. Such legislation must define the activities that need to be carried out. It is, therefore, important that the legislation clarifies the division of responsibilities for these activities between industry on one hand and the government on the other. When allocating responsibilities, the costs associated with carrying out the responsibilities will also be allocated. The first measure to manage the costs related to chemicals management is, therefore, to ensure a clear division of roles and responsibilities for the legally defined activities involved.
If an allocation of roles and responsibilities is not defined in legislation, often all the responsibilities by default fall on the government. With the widespread use of the many chemicals that exist in most countries, the government will not have sufficient resources for all these tasks. If all tasks for chemicals management are to be carried out by the government, the administration will be very extensive and costly at the expense of other prioritized areas. A requirement placed on industry to carry out most of the main chemicals management activities significantly lowers the costs for national administrations. This then makes sustainable and long-term funding of the national administration more feasible.
Allocation of tasks and related costs
It is reasonable that the main responsibilities should lie with the chemical producers and importers for the risks that could emerge from the chemicals they produce and import as they receive their revenues from producing, importing, or selling chemicals. By developing legislation that places clearly defined responsibilities on companies to carry out certain chemicals management activities the related costs will be internalized.
Governments have an important role to play in establishing, maintaining, and further developing legislation and ensuring compliance with the legislation. There must be sustainable financing for the activities carried out by the national administrations.
Find out more in our guidance on Sustainable financing of institutional capacity for chemicals control, were you can read about:
- allocations of different tasks and related costs, in chapter 2.2, and
- economic arguments related to the division of responsibilities, in chapter 4.
Models for financing of national adminstrations
How to finance national administrations’ work on chemicals management is an issue for national deliberation. In our guidance document, several options are presented and discussed. Examples range from completely tax-based, to partly fee-based financing. The two general main options are national budget allocation and cost recovery fees. These different funding options can be mixed in several different ways.
The funding of national administrations for chemicals management could come from the state budget, either in whole or in part. Some important activities ought to be covered by the state budget, for example when it is hard to argue that an activity should be covered by a fee. This can be the case when the link between an activity and the service in return from the government to the companies can be considered too weak to cover the cost by fees, or where the collective of companies concerned cannot be sufficiently defined to charge fees.
Such activities could include establishing, maintaining, and further developing the legal frameworks, ensuring a dialogue with stakeholders outside the sphere of the companies paying fees, regional and international collaboration, and national work related to chemicals in articles etc.
It is important that the chemicals management scheme is mainstreamed in the national budget and planning processes.
Cost recovery fees can finance tasks that are defined as services for those paying the fees. They can for instance cover costs for inspections and for providing and maintaining registration, licensing, and authorisation systems. They could be designed either as annual fees or fees per service. Examples of fees per service are fees for authorisation (for example of pesticides), fees for inspections and fees for import licences. Annual fees could for instance cover maintenance of registers of producers and importers and the chemicals they place on the market, help desk services etc. It is advisable that a fee should be kept as low as possible while still covering the costs of the services performed.
Comparing funding options
The financing of a national chemical management system could be a mix of the above options. Governments must discuss what might be the best way considering already existing budget systems and industry activities.
Read more about the different options for financing of national administrations, and how to compare and consider them in our guidance on Sustainable financing of institutional capacity for chemicals control, chapter 3.
Designing a financing system
Both taxes and cost recovery fees require a legal basis and an institutional organization that oversees effective implementation.
In the national legislation related to financing of chemicals management activities, answers to the following questions should be included:
- Which companies should be covered?
- Which chemicals (substances and mixtures) should be subject to fees?
- Should there be different levels depending on volume, number of chemicals etc?
- Should the fee be paid on an annual basis or per service?
- Should there be some exceptions?
Read more about how to design a financing system for national chemicals management in our guidance on Sustainable financing of institutional capacity for chemicals control, chapter 5.
Integrated approach to financing
An integrated approach to long-term funding has been developed internationally with three mutually reinforcing components for the sustainable financing of the sound management of chemicals and waste; mainstreaming, industry involvement and dedicated external financing.
Sound chemicals management should be mainstreamed into national development priorities, processes and budgets. To ensure that industry involvement becomes an effective component, the integrated approach proposes that governments develop legislation which clearly defines the sharing of responsibilities between governments and industry and includes appropriate cost recovery systems. The external funding dedicated to support the development of a sustainable institutional capacity, in the integrated approach are from the Global Environment Facility and also the UNEP Special Programme on Institutional Strengthening for the chemicals cluster.
Guidance on sustainable financing of institutional capacity for chemicals control
The purpose of this guidance document is to give support to low and middle income countries that want to establish a sustainable financing for institutional capacity and for other tasks directly linked to preventive chemicals control.
The guidance covers the following areas:
- What is to be financed, what is institutional capacity?
- Options for financing of national administrations - how to choose?
- Arguments for financing preventive chemicals control
- Designing a financing system
- Further resources
This guidance complements the UNEP Guidance on the Development of Legal and Institutional Infrastructures and Measures for Recovering Costs of National Administration for Sound Management of Chemicals (LIRA Guidance), and UNEP Guidance "National Authority for Chemicals Control: Structure and Funding".
As part of the SAICM (the Strategic Approach to International Chemicals Management), a document with guidance on how to achieve sound management of chemicals has been developed.
Overall Orientation and Guidance for acheiveing the 2020 goal of sound management of chemicals (PDF, 330 kB) External link.
Illustrations by Maja Modén.