NOTES

1. Monetary externalities are not considered externalities for the purpose of this discussion.

2. Most legal regimes assign property rights to sufferers. Actually, lack of enforcement makes these regimes look as if the polluters were the ones with property rights.

3. The US$80/inhabitant could be translated into US$6.8/inhabitant-year assuming a 20 year horizon and a 10% interest rate.

4. Network expansion tends to be cheaper, as these projects rely on existing components of the system. Topography and other local factors such as population density also affect costs.

5. Ardila, Quiroga, and Vaughan (1998). This study reviewed 13 sewerage projects and 15 projects on improving ambient water quality.

6. Based on a long list of parameters including physical and chemical properties, and maximum concentrations of toxics, coliforms, biochemical oxygen demand (BOD) and others.

7. BOD removal was set above 30% for existing domestic discharges and above 80% for new ones. Industrial polluters were required to remove more than 20% of BOD (existing) and more than 80% (new). The removal of dissolved solids was set at above 50% for existing effluents and above 80% for new.

8. A maximum of 54 months for all stages was set in the decree.

9. This section draws heavily on a 1992 report issued by the National Department of Planning: “Contaminación Industrial en Colombia,” by Ernesto Sánchez and Eduardo Uribe.

10. Departamento Nacional de Planeación. Diagnóstico y Control de la Contaminación Industrial, Santafé de Bogotá, July 1993. The agricultural sector produces the largest amount of BOD with 4,000 tons/day, followed by cattle-raising areas, and urban and industrial sectors. The industry is responsible for about 500 tons of dissolved soils per day.

11. It is assumed that credit from Findeter (a public financing fund) and commercial banks will be repaid by public utilities with their internal revenues.

12. This lag is defined as the difference between the long-run average costs of service (LRAC) and current tariffs. The LRAC consist of capital costs, operating costs, and administrative costs. Capital costs include a weighted average of investments needed to expand coverage and depreciation costs for existing infrastructure.

13. Currently US$140.

14. The basis for the estimation of the charge is “the depreciation of the resource.” The Ministry is supposed to redefine the computation every year on the basis of an evaluation of the social and environmental damage and the costs of maintaining the renewability of resources and ecosystems. To measure environmental damage the Ministry should assign quantifiable variables to each type of damage, and each variable should be weighted, with weights varying by region according to resource availability, absorptive capacity, pollutants involved, socioeconomic conditions of affected populations, and opportunity costs of the resources affected.

15. This section draws heavily from Leida Mercado, “Diagnóstico Ambiental de Venezuela,” Washington, D.C., Inter-American Development Bank, 1998.

16. The source of water for Caracas.

17. The organic load comes from residential and agricultural sources (equivalent to 3 million people), and industrial sources (equivalent to 3 million people).

18. Established in the 1960s to cover part of the construction costs for municipal wastewater treatment plants. By 1990, when it was replaced by a financing mechanism, it was providing up to 75% of construction costs.