Publications·December 31, 1993
This GTZ Pilot Programme volume examines how economic (market-based) instruments can strengthen environmental management in Thailand, with an applied focus on water resources (freshwater allocation and wastewater control) and an institutional scan of what technical assistance is most useful. It is organized as two complementary case studies:
Economic Incentives in the Water Resources Management of Thailand (Bizer & Ewringmann), which develops a staged implementation framework for pricing and permitting both freshwater use and wastewater discharges, and then maps Thailand’s early-1990s practice against that framework; and
Market-Based Instruments in Environmental Management: Institutional Structures and Scope for Technical Assistance (Limvorapitak & Phantumvanit), which identifies legal, administrative, and data prerequisites and priority capacity-building needs.
The three-stage framework (how to phase in economic instruments)
The authors argue that market tools work best when introduced sequentially, each stage laying the institutional groundwork for the next:
Stage I — Property rights & permits (and enforcement).
First, define, allocate, and enforce rights to use freshwater and to discharge wastewater. In legal terms this means permits/licenses that are clear, exclusive, enforceable, and secure, coupled with monitoring and penalties for non-compliance.
For wastewater, emission standards should ultimately be ambient-quality–based (linked to the river stretch’s uses), not just uniform end-of-pipe norms.
For freshwater, permits should specify source, location, duration, and volume, preferably administered by a single, empowered agency per source (surface water or groundwater).
Stage II — Fees to recover private infrastructure costs.
Introduce cost-recovery fees for water supply (dams, canals, intakes, pipes) and wastewater services (sewers, treatment plants).
Fees are not environmental prices; they finance O&M and investment so systems function and expand.
Implementation requires: (i) organizational readiness (utilities/reclamation agencies able to meter, bill, and collect); (ii) legal empowerment of local entities to charge and earmark revenues; (iii) monitoring (meters/estimation) and penalties for illegal connections.
The report highlights distributional concerns: water and sewer fees can be regressive, so phasing and social policy design matter (e.g., stepwise introduction; avoiding simultaneous fee hikes; avoiding distortive progressive fee schedules that blunt efficiency signals).
Stage III — Incentive instruments: tradable permits/licenses and charges.
With Stage I & II in place, add resource-use prices to internalize scarcity/externalities:
Freshwater: tradable withdrawal permits or a user charge set to balance supply and demand; auctioning vs. grandfathering for initial allocation has different equity impacts (auction = revenue but burdens incumbents; grandfathering = windfalls to current users, esp. farmers).
Wastewater: tradeable discharge permits (subject to trading rules that protect ambient standards) or effluent charges (ideally tied to permitted loads or measured emissions where feasible).
The authors warn about thin markets for trading (geography, pollutant specificity, hotspot constraints) and emphasize the need for monitoring capacity and clear legal foundations so permits have predictable value. For charges, rates must be high enough to change behavior; otherwise they become mere revenue instruments.
Thailand’s water management in the early 1990s—what the report found
Context & pressures. Thailand’s rapid growth (late 1980s–early 1990s), monsoonal climate, regional interdependence of northern headwaters–central plains–Bangkok basins, and deforestation raised the stakes for managing seasonal scarcity and rising pollution. Water had long been treated as a free/abundant good; the policy turn is toward managing demand and controlling discharges using economic tools within a credible legal regime.
Institutions (freshwater).
Royal Irrigation Department (RID) manages irrigation water and surface withdrawals in designated irrigation areas.
Metropolitan Waterworks Authority / Provincial Waterworks Authority supply municipal drinking water.
Groundwater extraction is licensed within declared Groundwater Areas. The legal regime blends public domain/state ownership traditions (e.g., surface water, run-off) with permit systems; clarity and coherence are uneven across sources and regions.
Institutions (wastewater).
Municipal sewerage and treatment capacity was limited; where it exists, fee systems and industrial pretreatment rules are needed so plants can run sustainably and indirect dischargers are properly costed.
Ambient-quality planning for river stretches is needed to translate uses into emission limits and then into permits/charges/trading rules.
Where Thailand sits on the “stages”.
Stage I elements are partially in place (laws, permits, standards), but enforcement and data systems need strengthening; property rights across water sources require clarification & consolidation.
Stage II: user fees are uneven and often below full cost recovery, jeopardizing O&M and expansion; metering/billing/collection systems require investment and governance improvements.
Stage III: pilot feasibility exists, but scaling charges or trading demands prior fixes—ambient standards, monitoring, registries of users, and trusted institutions—plus careful design to avoid hotspots and address equity.
Practical guidance and technical-assistance entry points
The second case study distills “where help helps most” for donors and government partners:
Legal/institutional codification of water rights. Unify and clarify permits/entitlements across surface, groundwater, and discharges; define durations, transferability conditions, and sanction regimes; align with ambient standards for each river stretch.
Cost-recovery finance with social safeguards. Build utilities’ capacity for metering, tariff design, billing & collection, and earmarking; stage tariff reforms to protect the poor without blunting efficiency; integrate industrial pretreatment rules to lower treatment costs and improve effluent quality.
Data systems and monitoring. Establish user registries, water accounts (abstractions/returns), and ambient monitoring; support QA/QC, laboratory capability, random sampling protocols, and the use of proxy/permitted-load charges where continuous monitoring is impractical.
Design and piloting of incentive instruments.
For freshwater: consider basin-level caps with tradable withdrawal permits (or scarcity charges) once rights are defined; test allocation mechanisms (auction vs. grandfathering) mindful of political economy.
For wastewater: introduce effluent charges (starting with large direct dischargers), or tradeable discharge permits with trading ratios/zone rules to protect localized water quality.
Build administrative tools: permit registries, billing engines, dispute resolution, and public reporting to improve trust and compliance.
Sequencing & communication. The report urges phasing (Stage I → II → III) to manage resistance and equity concerns. Communicate that fees ≠ fines (they fund service reliability) and that charges are about scarcity and fairness—paying for the environmental space one uses—while trading minimizes total societal cost to reach shared goals.
Why this still resonates
Many cities and basins in the region are now where Thailand was in the early 1990s: rapid growth, stressed water, limited sewerage, and fragmented authorities. The report’s insight is that market instruments aren’t plug-and-play: they need rights, monitoring, and cost-recovery plumbing first. Do that, and prices and permits can deliver bigger, cheaper, fairer improvements than command-and-control alone—especially when ambient standards and social safeguards are integrated from the start.
Keywords
Economic instruments; water pricing; effluent charges; tradable permits (withdrawals/discharges); property rights & permits; ambient standards; cost-recovery tariffs; metering & billing; monitoring & penalties; thin markets; equity/regressivity; institutional capacity; Thailand; river-basin management.