Financial support can enhance action across the science-policy interface, building information and monitoring mechanisms that bolster the capacity of scientific, technical, and policy communities individually and their ability to interact for science-based policymaking.
Such interactions, within government or among stakeholders more broadly, can be key to identifying emerging issues of concern and avoiding regrettable substitutions.
Learning lessons from the glimpses of success could help spur momentum for future financial support commensurate with the significant need to protect human health and the environment.
The sound management of chemicals and wastes requires addressing legacy problems while looking ahead to emerging areas of concern. As management needs evolve, predictable and progressive financial support becomes fundamental. Support can help developing countries meet their treaty and non-treaty obligations, but there are numerous other benefits at local, national, and global levels.
As new challenges arise, financial support can help enable timely action. Countries can improve their regulatory capacity and comprehensive risk management. They can implement pollutant release and transfer registers. Financial support can also catalyze effective communication and national coordination, which is required across government departments and agencies in charge of health, environment, agriculture, and customs. Communication is also key for identifying and discussing risks, especially with exposed communities. Financial support can enhance action across the science-policy interface, building information and monitoring mechanisms that bolster the capacity of scientific, technical, and policy communities individually and their ability to interact for science-based policymaking. Such interactions, within government or among stakeholders more broadly, can be key to identifying emerging issues of concern and avoiding regrettable substitutions. Given the global dispersion of some chemicals, local management has global benefits.
Despite these many benefits for the environment and human health, finance remains insufficient. This brief considers realized and potential sources of funding under the three components of the integrated approach: dedicated external financing; private sector involvement; and mainstreaming chemicals and wastes management into development planning. There are applicable lessons from other multilateral funding bodies that may help realize predictable funding streams for chemicals and wastes management.
Costs of Action and Inaction
There are currently no detailed financial assessments of the costs of implementing SDG target 12.4 (achieve the environmentally sound management of chemicals and all wastes throughout their life cycle). Yet, there are indications that the needs could be significant.
The Stockholm Convention on Persistent Organic Pollutants (POPs) conducts needs assessments for each Global Environment Facility (GEF) replenishment period. For the seventh GEF replenishment period (2018-2022), parties estimated the Convention’s funding requirements at USD 4.3 billion, which rose to USD 4.9 billion for GEF-8 (2022-2026).
The Stockholm Convention’s exercise highlights challenges with assessing developing countries’ needs. The estimates only address the POPs already listed in the Convention, not new POPs added at the COPs during GEF replenishment cycles. The assessment reports also highlight the limited information available on the extent of countries’ POPs stockpiles, particularly for polychlorinated biphenyls (PCBs) and new POPs. Support for completing national implementation plans could help with accurate assessments of the scale of support required. It seems a vicious circle: finance is required to get an accurate picture of how much finance is needed.
A similarly complicated picture emerges for estimating the financial needs for the sound management of waste. The Global Wastes management Outlook (GWMO) stresses the need to consider many factors when estimating “net” costs because the capital required for disposal facilities and technologies varies, as do the revenues earned from recovery operations. For example, the GWMO estimates the costs for collection and disposal using waste to energy incineration are 60-100 USD/tonne for upper-middle income countries and 40-100 USD/tonne for lower-middle income countries (Table 5.1).
These costs are substantial, but the costs of inaction are higher. There are direct costs, such as cleaning up contaminated sites resulting from poor chemicals and wastes management. For example, the US spends USD 1 billion annually to clean up hazardous waste Superfund sites. The African Stockpiles Programme estimates USD 150-176 million is required to clean up the 50,000 tonnes of obsolete pesticides in Africa.
There are also indirect effects, which can be difficult to monitor and measure. Health effects are perhaps the most significant. As the Lancet found in 2022, pollution is responsible for one in six deaths worldwide, and toxic chemical pollution represents a growing source of pollution-related deaths. Sub-Saharan Africa shoulders health-related costs due to chemical exposure, which the UN Environment Programme’s (UNEP) Costs of Inaction report estimated in 2013 would increase significantly, by approximately USD 97 billion by 2020. In the US, the annual cost of pollution-related disease in children totals USD 76.6 billion, and of occupational diseases and injuries – USD 250 billion. The EU’s median annual cost for diseases related to endocrine-disrupting chemicals is EUR 157 billion.
There are economic losses from poor management. The Lancet argues that the economic costs of disease and deaths from pollution are substantial. Around 1% of GDP is lost from premature death and disease from “modern pollution” in China, India, and Nigeria, defined as including ambient ozone pollution, ambient particulate matter pollution, lead exposure, occupational carcinogens, occupational particulate matter, gases, and fumes. Ineffective pest management practices can increase pesticide resistance and agricultural costs. For example, in Mali, such challenges were estimated to cost over USD 8.5 million per year, for cotton alone. Supporting sound chemical and wastes management now is a strong investment that can save money in the future. The Global Chemicals Outlook II (GCO-II) estimates the benefits of action to be in the high tens of USD billions annually.
Three Components of the Integrated Approach
The UNEP Governing Council agreed to the integrated approach to long-term funding of the chemicals and wastes agenda in 2013, after a consultative process. The approach aims to increase sustainable, predictable, adequate, and accessible financing for the chemicals and wastes agenda. It was partly a response to the Quick Start Programme, which, despite its successes, raised only USD 41 million over ten years. The Programme’s experience highlighted the need for adequate and sustained finance, a broader support base that includes industry, and heightened political support for chemicals and wastes management. The integrated approach introduces a commitment to pursuing three simultaneous methods of funding chemicals management:
- Mainstream chemicals and wastes management into existing national budgets and development plans.
- Dedicated external financing, where donor countries can prioritize chemicals and wastes management in existing funding mechanisms and increase their contributions to those mechanisms. This can help provide predictable support and bridge gaps in national plans and industry finance.
- Private sector involvement, where governments are encouraged to define how industry and government will share responsibility for the costs of chemical and wastes management. Innovative finance options could further help increase industry involvement in finance.
These three components are complementary and interlinked. Some external sources co-leverage private finance. Mainstreaming chemicals into policies can set a regulatory framework for economic instruments that can leverage private finance. Industry involvement, aligned with the polluter-pays principle, can provide finance that can strengthen mainstreaming efforts. While the integrated approach to financing has mobilized significant resources, the GCO-II stressed that it has not met the needs of developing countries and economies in transition.
Dedicated External Financing
There are three multilateral funds relevant to MEAs for chemicals and wastes and/or to SAICM: the GEF; the Special Programme for Institutional Strengthening in the Chemicals Cluster; and the Multilateral Fund. For each, the scale of support falls short of the parties’ estimated needs. The table below outlines the Funds’ mandates and support they currently provide to chemicals and wastes.
Source: Author’s calculations
GEF support for chemicals and wastes has progressively increased with each replenishment period. During the GEF-7 period, USD 599 million was allocated to the chemicals and wastes focal area. GEF-8 represents a USD 200 million increase, now sitting at USD 800 million. Overall, the chemicals and wastes focal area will receive 15% of the GEF-8 allocation, nearly matching the 16% allocated for climate change mitigation.
Over time, the GEF has moved to a more integrated approach that brings together its work to support the relevant Conventions and SAICM. During GEF-4, POPs and ODS were addressed in separate focal areas. Projects were also chemical-specific. Since GEF-5, the GEF has supported approaches that focus on sectors or supply chains. The three Conventions’ work is integrated into agricultural, industrial, and pollution control mechanisms at the national level. Projects focused on the artisanal and small-scale gold mining (ASGM) sector and the textiles supply chain include multiple chemicals and mercury. Similarly, the Implementing Sustainable Low and Non-Chemical Development in Small Island Developing States (ISLANDS) programme integrates work across the Conventions.
The Special Programme is different. It is a voluntary fund with a broader donor base. Governments, the private sector, and others in a position to do so are encouraged to contribute. To date, the majority of finance contributed is from governments. Eligibility criteria prioritize countries with special needs and least capacity. In 66 projects totalling over USD 17.8 million, 17 were in least developed countries and eight were in small island States.
Source: SAICM Presentation: Overview of the Special Programme
A Midterm Evaluation found that the Special Programme is punching above its weight, meeting or exceeding its goals. However, there are concerns about sustainability of the projects, including the need for cost-recovery mechanisms or other financial assistance to continue to realize the project’s benefits.
The Multilateral Fund supports developing countries working to meet their obligations to phase out ODS by the agreed schedules. Its replenishment cycle is two years. From 2006 to 2014, the Fund was set at USD 400 million. With the adoption of the Kigali Amendment to reduce the consumption and production of hydrofluorocarbons (HFCs), the Fund’s replenishment increased. The Amendment was adopted in 2016 and entered into force in 2019. In 2017, the Fund’s replenishment was USD 500 million and in 2022, it was increased to USD 540 million.
Mainstreaming the sound management of chemicals and wastes is the responsibility of all countries. Developing countries integrate chemicals and wastes management into their development planning. Developed countries likewise integrate these issues into international development assistance, including country assistance plans, and multilateral and bilateral agencies. Under the integrated approach, mainstreaming also involves actions that are relevant to finance such as:
- undertaking analytical and diagnostic work to increase awareness of the benefits of the sound management of chemicals and wastes at all levels;
- promote overall engagement, coordination, and partnerships in respect of international financial institutions (such as Bretton Woods), regional development banks, and other financial institutions; and
- promote efforts to ensure buy-in to mainstreaming chemicals and wastes into budgeting and planning processes.
Communication is important to mainstreaming, according to a report synthesizing the lessons learned from mainstreaming efforts, including:
- Staff involved in managing chemicals and wastes called for training on the language and processes of developing planning and finance.
- The benefits for the sound management of chemicals and wastes could be communicated in economic terms.
- Consultations with finance and planning agencies helped improve their understanding of chemicals and wastes issues.
The report identifies benefits of interagency coordination, including through formalized mechanisms.
In terms of leveraging finance for chemicals and wastes management, there are a wide range of policy options available. The Organisation for Economic Co-operation and Development (OECD) suggests grants, loans, and tax exemptions are a key part of the overall policy mix for wastes management. Some examples involve direct funding, such as funding pilot projects. Others focus on the institutional conditions to finance chemicals and wastes projects, such as establishing clear liability rules under the polluter-pays principle, or a database of potentially contaminated sites. The level of investment varies across OECD states, as does the share of public finance.
International Development Finance
International development finance through the multilateral development banks (MDBs) and other channels has neglected chemicals and wastes issues. Pollution and biodiversity support in MDBs remained consistent from 1995 to 2020, while support for climate change increased. Between 2015 and 2020, household air pollution and water pollution received more attention from MDBs than ambient air pollution or chemical pollution.
While the level of attention may be consistent, there seems to be little mainstreaming in MDB decisions. The 2015 GWMO report notes that the sound wastes management represented just 0.3% of total international development finance. Of that available funding, between 2003-2012, two-thirds were allocated to ten middle-income countries. The report also notes that 70% of MDB support for sound wastes management takes the form of loans, amounting to USD 2.8 billion over the same 10 years.
Box 1: Lessons from other MEAs: Mainstreaming and Finance
Private Sector Involvement
Given the need to scale up financial resources, many have looked to industry as a source. The vision is that the private sector internalizes the costs of complying with regulations, which could include economic incentives such as taxes or subsidies. So far, as the GCO-II report stresses, “the vast majority of human health costs linked to chemicals production, consumption, and disposal are not borne by chemicals producers, nor shared down the value-chain.” It seems the aspirations of this component of the integrated approach have yet to be translated into concrete implementation.
Private Sector involvement faces several challenges:
- identifying the relevant actors and their roles at different stages of the lifecycle of chemicals and wastes;
- achieving clarity on what constitutes private sector involvement;
- monitoring progress;
- promoting accountability; and
- conducting further analysis of the effectiveness of various instruments for chemicals and wastes management, and of the costs of perverse incentives such as subsidies.
Due to these challenges, it has proved difficult to leverage the potential of the private sector. Reviews of SAICM and the Quick Start Programme showed that private sector involvement was common, although often limited to information provision. There has been a 10% increase in private sector finance evident in SAICM progress reports between 2009-2010 and 2011-2013.
Market-based instruments provide a price incentive for companies to act. They can complement regulatory approaches such as bans or restrictions, by creating cost-effective reasons for companies to innovate. Market-based instruments can increase the price of using a chemical. Some market-based instruments directly affect the price, such as taxes and levies. Subsidies and tradable permits are indirect methods.
The use of such mechanisms is increasing at the national level. A thematic report for GCOS II found increased use of taxes on pesticides and inorganic fertilizers, chlorinated solvents, and phthalates and brominated flame retardants. It also found increased use of refund schemes for batteries, electronic equipment, and vehicles. These measures are primarily found in high-income countries, including the use of risk-based taxation of pesticides in Denmark, Norway, France, and Mexico. Middle- and low-income countries use these tools less often.
Trading schemes allow companies to buy and sell emissions allowances on a market. For example, the costs of substituting a chemical may vary among companies, creating the opportunity to buy and sell credits. Tradeable permit systems were used in the US to phase out lead in petrol and in New Zealand to reduce nitrogen pollution from agriculture.
Overall, the use of market-based mechanisms for chemicals remains low, particularly compared to energy-related policies. There is uncertainty and a lack of data on context-specific factors, such as price elasticities, market structure, and costs of substitutes that may help set up market-based mechanisms. There is a need to study which policy instruments – regulation or markets – could be more effective for addressing different chemicals and wastes, considering different exposure effects, and substitution costs.
Box 2: Emissions Trading: Experiences from other MEAs
Source: Emission reduction targets and outcomes of the Clean Development Mechanism (2005-2020)
Extended Producer Responsibility
Extended Producer Responsibility (EPR) refers to policies that hold producers responsible for a product’s entire lifecycle. In theory, such policies can generate finance for wastes management. EPR creates incentives for producers to reduce waste generated by a product and to improve product design to ease recovery and reuse efforts. In general, EPR policies are more developed in Europe and Canada than in the US, although it varies by state. In Canada, producers pay a fee to stewardship organizations for the sound management of hazardous waste. Roughly half of US states have EPR policies.
Developing countries have significant interest in implementing EPR policies. China and India have EPR policies in place for e-waste. Following the ban on plastic bags in 2017, Kenya introduced two voluntary EPR schemes, focusing on PET plastics and bread bags (LDPE). Based on this experience, Kenya is setting up regulation for more companies to increase their responsibilities of their products, including new EPR regulations currently in development. The products subject to EPR are: packaging for hazardous and non-hazardous products, e-waste, end-of-life motor vehicles, and non-packaging items.
These efforts face additional complications. There is often a large informal sector that dismantles and recycles waste. Developing countries also receive hazardous waste from developing countries, including through illegal trade. There may be a need for a global notion of EPR, given the global trade of hazardous wastes.
Box 3: The Financial Sector: Experiences from other MEAs
Sources: GFANZ About Us, Glasgow Financial Alliance for Net Zero, GFANZ ‘quiet quits’ the UN’s Race to Zero Campaign – Reclaim Finance
World Bank Unlocking Private Finance for Nature
UNEP FI Report Financing Circularity: Demystifying Finance for the Circular Economy
The Way Forward Under the Integrated Approach
There is more work to be done under each component of the integrated approach. Financial support has so far been insufficient, prompting new ideas as countries look ahead to the new SAICM beyond 2020 framework. The African Group has proposed a globally-coordinated fee on the sale of basic chemicals and chemical feedstocks, as well as an international fund dedicated to chemicals and wastes. Iran and the International Conference of Chemical Associations (ICCA) suggested a global matchmaking platform to help build capacity in developing countries. Both of these ideas are in the current consolidated text under negotiation. Among the many outstanding issues in these negotiations, there are calls for scaling up support under each component of the integrated approach and finding innovative ways to increase finance for chemicals and wastes.
Dedicated external finance has increased, which provides some hope for the future. Unlocking private finance has proved difficult in biodiversity and climate governance too, and it remains so for chemicals and wastes management. But there are policy lessons on some price mechanisms that can be effective. Adequate attention for chemicals and wastes management is another reason to heed calls for MDB reform as part of a broader environmental mainstreaming effort. Learning lessons from the glimpses of success could help spur momentum for future financial support commensurate with the significant need to protect human health and the environment.
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This document has been developed within the framework of the Global Environment Facility (GEF) project ID: 9771 on Global Best Practices on Emerging Chemical Policy Issues of Concern under the Strategic Approach to International Chemicals Management (SAICM). This project is funded by the GEF, implemented by UNEP, and executed by the SAICM Secretariat. The International Institute for Sustainable Development acknowledges the financial contribution of the GEF to the development of this policy brief.
This Policy Brief is the fourth in a series featuring cross-cutting topics relating to the sound management of chemicals and wastes. It was written by Jen Allan, Earth Negotiations Bulletin (ENB) Strategic Advisor. The series editor is Elena Kosolapova, Senior Policy Advisor, Tracking Progress Program, IISD.