Regulatory cost: How to calculate the fee for issuing environmental permits?

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Publishing date: Tuesday, 08 December 2020
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The regulation of economic activity is applied by the state in order to reduce any potential negative effects it may have on the population and the environment. In the Republic of Moldova, economic activities, including the ones with impact on environment, are regulated by authorization - a procedure that involves issuing permits that grant the applicant a number of rights and imposes certain obligations.

The specific features of the permits are mentioned and described in detail in various special laws, depending on the environmental component to which they refer. In addition, most of them fall under the provisions of Law no. 160/2011 on regulation of entrepreneurial activity by authorization. Thus, the Classification annexed to the law mentions the list of permits, the manner of issuing / re-issuing / suspending and withdrawing the permit, the related fees as well as the principles of state control necessary for issuing the permit.

Permits in the field of environment are stipulated in several laws, depending on the category of the agent to which they relate. The classification of permits related to Law no. 160/2011 mentions a number of 17 permits in the field of environment, of which 15 are issued by the Environmental Agency and 2 by the Agency for Geology and Mineral Resources. However, these are not the only permits in the field of the environment, since the state seeks to regulate other activities with potential negative impact on the environment, which are not necessarily entrepreneurial. These are various permits granted to individuals for fishing and hunting activities, or permits issued to different entities for scientific, cultural, educational, tourist, health, aesthetic or sport purposes. Also, the process of allocating the subsoil areas for use provides for specific regulations, including the issue of various documents for carrying out activities in the field.

Obtaining of permits frequently involves certain compliance costs in line with environmental protection requirements. Currently, the classification and full estimate of such costs is carried out by authorities, as issuance fees are not based on a clear calculation methodology. For example, according to Law no. 160/2011 we deduce that the approval of fees for issuing permits is the responsibility of the Parliament, which can lead to financial losses when updates are carried out at long intervals. On the other hand, a large number of permits are granted either free of charge or on the basis of fees totally unrelated to the costs incurred by the issuing authorities in the issuance process.

This study aims to evaluate the way of establishing fees for issuing permits in the field of environment, including the ones stipulated in the Classification related to Law no. 160/2011. The aim is to identify and describe a rational mechanism for setting fees based on provisions of the current regulatory framework and the government's commitments in this respect. As a result of this analytical exercise, a series of proposals and recommendations were formulated in the study, which, when used in a systemic way, can justify the application of a reasonable level of such fees, from the perspective of covering both the effort made by authorities and the compliance costs for beneficiaries. Also, the proposed mechanism can be extended to all permits in the field of environment, taking into account that the process of issuing any such permit is based on the provision of a public service by a state authority.

The document is structured in five chapters, as follows:

Chapter I. It establishes the general framework of environmental economic instruments applied in the Republic of Moldova with emphasis on permits. In addition, Chapter I presents the concept of regulating entrepreneurial activity and the vision of the state in the field.

Chapter II. It analyses the conceptual framework of the costs needed for regulating entrepreneurial activity. This chapter presents the classification of regulatory costs as well as models for calculating the fees for issuing permits. In addition, the Standard Cost Model for the evaluation compliance costs of the business environment with the regulatory provisions is presented.

Chapter III. It presents the current process of issuing permits in the field of environment and establishes the optimal mechanism for determining the issuance fees. This chapter focuses on different components of the regulatory costs incurred by issuing authorities.

Chapter IV. It evaluates the current process of issuing permits that does not necessarily refer to the activity of the respective entrepreneur and are not mentioned in the Classification annexed to Law no. 160/2011. This chapter establishes the optimal mechanism for calculating fees for permits issuance.

Chapter V. It presents a number of recommendations to be pursued by authorities with competences in the field of environmental protection in order to implement a rational, balanced and fair fee setting mechanism for issuing permits.

The study presents a conceptual approach related to estimating fees for issuing permits in the field of environment, which requires an additional effort to determine the amount of the fee for each separate permit.

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