Urban and Industrial Pollution Programs by lit14553


									               Urban and Industrial
               Pollution Programs

                   Chile Case Study


              Joseph M. Lieberson
              Gene M. Owens
              Mark G. Hodges

                                                    Working Paper No. 313
                                                          November 2000

Center for Development Information and Evaluation
U.S. Agency for International Development
Washington                                                       PN–ACG–618

Summary                                                                                                                  iii

1. Introduction and Background                                                                             1
     Urban and Industrial Pollution in Chile ............................................................. 1
     The Chile Environmental Pollution Prevention Project (EP3) .......................... 1

2. Program Elements                                                                                                      4
    Education and Awareness .................................................................................... 4
    Technological Change and Assistance to Industry ............................................ 5
    Economic Policies .................................................................................................. 7
    Government Regulations and Standards ............................................................ 8
    Institution Building ............................................................................................... 9

3. Impact                                                                                                               10
    Economic and Financial Impact ......................................................................... 10
    Environmental Impact ........................................................................................ 12
    Health Impacts .................................................................................................... 13

4. Program Performance                                                                                                     16
    Effectiveness ........................................................................................................ 16
    Sustainability ....................................................................................................... 17
    Prospects for Replication .................................................................................... 19

5. Lessons Learned                                                                                                       22

Annex A. Methodology                                                                                                     25

Annex B. Persons and Firms Contacted                                                                                     26

Annex C. Chilean Environmental Institutions                                                                              30

T    HE CHILE ENVIRONMENTAL       Pollution Pre-
      vention Project (EP3) was a $1.3 million,
three-year demonstration effort. It successfully
                                                   money while also reducing environmental

introduced the concepts of pollution prevention    In April 2000 a three-man team from USAID’s
and clean production to Chile’s industrial sec-    Center for Development Information and
tor. Nearly 2,500 people were trained in indus-    Evaluation (CDIE) completed an assessment of
trial-pollution prevention techniques, and 26      EP3. It found that EP3 was successful at selling
Pollution Prevention Diagnostic Assessments        the pollution-prevention message, but there
were completed at individual factories. The 26     were missed opportunities. The project failed
firms invested a total of $1.4 million, which      to institutionalize the effort. So once USAID fund-
generated annual savings of $1.9 million. The      ing ended, both sustainability and replication
savings continued every year for many of the       were serious problems. The effort also faltered
companies. They reduced their pollution emis-      because Chile lacked effective environmental
sion load by 32 percent. Compared with “end        regulations. Without the pressure of environ-
of pipe” pollution treatment, firms found that     mental fines, many firms were reluctant to make
with EP3 pollution prevention they could save      pollution-prevention investments.

  This Working Paper provides the complete analysis of the Chile assessment. A short summary of
  the assessment is also available in a November 2000 Impact Evaluation Report: “Reducing Urban
  and Industrial Pollution in Chile.” The Impact Evaluation (PN-ACG-619) may be accessed elec-
  tronically from www.dec.org/usaid_eval.
            1. Introduction and Background

                                                 strengthened. Even with new environmental
Urban and Industrial Pollution                   regulations, environmental quality did not im-
In Chile                                         prove. Real GDP growth averaged a remark-
                                                 able 7 percent a year from 1991 to 1997 and

      the Pinochet military regime in March
1990, ending years of authoritarian political
                                                 dropped to 2 percent during the recession of
                                                 1998 and 1999. With strong growth in output,
                                                 pollution increased at an even faster pace.
oppression. Political change and the emer-
gence of democracy were dramatic. There was    While the Chilean Government was slow to
also a major change on the environmental       respond to its environmental problems, it has
front. During the years of military rule, the  now moved forcefully to clean up years of ne-
government had little interest in the environ- glect. The next step might be a rationalization
ment. Environmental regulations and controls   of environmental laws and procedures. Chile
were almost nonexistent. Industrial invest-    did not create a U.S–style Environmental Pro-
ment and production were encouraged, with      tection Agency (EPA) to develop and enforce
hardly a thought given to the impact of the    regulations, but rather created CONOMA as a
rapidly rising pollutant level.                coordinator of pollution policies of govern-
                                               ment agencies that actually enforce the rules.
With the return of democracy things changed. By some estimates there are now over 1,000
Just as before, the people can see the bad air laws and regulations on the books and some
and taste the bad water. But now they realize 36 governmental organizations with a role in
the government can do something about it.      pollution control. So many laws and organi-
                                               zations (some with conflicting agendas) in-
They have pressured the government and it creases the potential for lack of focus,
has responded. An initial environmental law confusion and delay.
was passed in 1993. In that same year the
Commission for the Promotion of Municipal The Chile Environmental
Sanitation was established. In 1994 the “Char-
ter Law on the Environment” greatly strength-
                                               Pollution-Prevention Project
ened environmental standards. It provided a (EP3)
foundation for a system of environment stan-
dards and regulations. It also required envi- EP3 Chile was USAID’s first project in a nine-
ronmental impact assessment for all new country pollution-prevention program. As the
investment projects. This was a major change. first country, it identified problems and alter-
Previously anyone could build a factory with- native solutions. But being the test case does
out concern for the environment. Now they have drawbacks. Mistakes and problems pro-
have to do an environmental impact assess- vide lessons for other country programs, but
ment, which local and national government the Chile program bears the learning costs. In
agencies examine. In early 1995 CONOMA, the addition, it had a short project life—only three
National Environmental Commission, began years. It started in September 1993, slowly
operations as the coordinator of all govern- geared up, moved into rapid implementation,
mental policies and programs on the environ- and then closed down in October 1996, with-
ment. In 1997 the Charter Law was further out any follow-on program. This was because
Chile graduated from USAID assistance in As noted in the previous section, Chile began
1996, bringing EP3 to an end.                    to deal with its environmental problems only
                                                 recently. The first laws and regulations were
EP3 came to Chile when environmental con- passed in 1994 and it took several years to
cerns were just surfacing. The few pollution develop standards and enforcement mecha-
abatement efforts that existed focused on “end nisms. That had implications for the USAID
of pipe” treatment—reducing pollution at the project. When EP3 was being designed in 1992
smokestack or drainpipe. A different approach the Chilean Government lacked environmen-
is to prevent or reduce pollution at its source tal laws, regulations, and institutions. In many
by improving the production process. If the countries firms are encouraged to reduce pol-
production process is more resource efficient, lution by a carrot-and-stick approach. The
it produces less waste. EP3 used this approach carrot is cost savings and the stick is the threat
of pollution prevention, also referred to as of environmental fines or a plant shutdown.
waste minimization or clean production. In Chile the threat of punitive measures did
Firms that adopted resource-efficient produc- not exist. A decision was made to go the pri-
tion processes were able to reduce their costs vate sector route and to focus on cost savings
while reducing environmental damage and for firms, rather than attempting to meet en-
improving public health.                         vironmental regulations, which were not yet
                                                 in place.
The project was designed to reduce pollution
at its source by improving “industrial house- In contrast to some other USAID environmen-
keeping,” changing industrial production pro- tal projects, EP3 was not implemented directly
cesses, and reducing and reclaiming industrial with a government agency and there were no
waste: Water, dyes, and chemicals are recov- resident American project managers or engi-
ered and recycled back into the production neers. Chilean pollution engineers ran the
process rather than being flushed down the project with short-term temporary-duty assis-
drain. Electricity, steam, and raw materials are tance from U.S. experts. The American Chil-
used more efficiently, and improved process ean Chamber of Commerce (AmCham) was
controls reduce waste and improve product selected to implement the project but it had
quality.                                         management problems. After a year, imple-
                                                 mentation was moved to a private Chilean
To prevent pollution at its source, industrial pollution-consulting firm, which effectively
firms must be convinced that pollution pre- marketed and implemented the EP3 approach
vention pays—that it is financially beneficial. over the final two years of the project.
Industrial firms do not want to harm the en-
vironment, but they are in business to make a While EP3 organized and ran most of the
profit. They want to avoid fines and the pros- training, CIPMA, an environmental nongovern-
pect of being shut down by the government mental organization (NGO) and CONOMA, the
for causing excessive pollution. But they also Government environmental coordinator, as-
are motivated by positive incentives. If low- sisted in training. The training helped spread
cost, environmentally sensitive investments the pollution-prevention message and encour-
and changes in production processes will re- aged firms to participate in EP3 Pollution Pre-
duce costs and increase profits, they may take vention Diagnostic Assessments (PPDAs).
action. The motivation is profit, but the envi-
ronment simultaneously benefits. That was PPDAs are audits of a factory’s production pro-
the EP3 strategy.                                cess designed to identify cost savings that will

2                                              Urban and Industrial Pollution Programs: Chile Case Study
also have environmental benefits. The assess-      The 26 PPDAs generated estimated total an-
ment consists of several steps: an initial plan-   nual savings of $1.9 million from a one-time
ning phase; the assessment phase when a team       investment by firms of $1.4 million. The pol-
of U.S. and Chilean pollution experts spends       lution-prevention investment costs were re-
a week at the factory identifying specific pol-    covered in just 9 months. Pollution emissions
lution-prevention opportunities; an imple-         were reduced by 32 percent and annual wa-
mentation phase when local EP3 staff and           ter savings were 1.4 million cubic meters.
consultants work with the factory managers         Based on site visits of a sample of firms by
to implement the recommendations; and fol-         the assessment team, it is clear that many of
low-up over the next year until all recommen-      the firms continue to realize these savings year
dations are adopted.                               after year.

Introduction and Background
                         2. Program Elements

      prevention programs generally support
interventions in one or more of the following
                                                   mining, printing, tanneries, and textiles. The
                                                   third stage was based on thematic training,
                                                   outreach and awareness building to dissemi-
five areas: economic policy reform, environ-       nate lessons learned and to replicate the ex-
mental regulations, institution building,          periences among other industrial groups,
knowledge and awareness campaigns, and             supporting governmental institutions,
technology change. EP3 Chile concentrated on       academia, and NGOs.
technical assistance and training to build
knowledge and awareness of pollution pre-          Critical to this last stage of training was the
vention and to encourage the adoption of pol-      establishment of a pollution-prevention infor-
lution-prevention technology by industry. It       mation clearinghouse at CIPMA, a policy-ori-
did very little in the areas of policy reform,     ented NGO. CIPMA was also to serve as the
regulations, and institutional development.        locus for postproject training as well as the
                                                   repository for reports on industry-specific ap-
Education and Awareness                            plications, training materials, and EP3 reports
                                                   and case studies.
EP3 Chile faced a difficult task when it was
launched in 1993. Environmental regulations        Some 2,497 people were trained in industrial
were almost nonexistent or woefully out of         pollution-prevention concepts, pollution di-
date (e.g., one of the main laws, the Law on       agnostic methods, and the tools and skills
Liquids, was written in 1916). What little pol-    needed by pollution consultants: 1,061 from
lution knowledge existed was focused on end-       industry, 752 from universities, 309 from gov-
of-pipe treatments. The project took on the        ernment, 252 from NGOs, and 123 environmen-
task of educating industry, government, NGOs,      tal consultants. The train-the-trainers program
academia, and local consultants on a new con-      helped develop local capacity to extend the
cept—the value of pollution prevention. Since      training program to others outside EP3. A con-
pollution regulations were lacking, EP3 could      tinuing benefit has been the emergence of a
not count on the threat of fines as a motiva-      dynamic and viable environmental consult-
tional tool. It had to convince industry that it   ing industry. They are generally well re-
would save money through pollution preven-         spected by industry and are continuing to
tion. It also had to train local environmental     work on pollution-prevention engineering is-
consultants to implement the program and           sues.
carry it on after usaid assistance ended.
                                                   When EP3 was initiated, pollution prevention
Training and outreach to transfer industrial       was not a well-known concept in Chile. While
pollution prevention and environmental man-        it is hard to draw a direct causal linkage be-
agement skills was a central part of EP3. Ini-     tween the project’s knowledge and awareness
tially, the project concentrated on selected       efforts and pollution prevention, it is clear that
industrial groups to build interest in pollu-      the concept is now fully accepted by industry
tion prevention and to identify opportunities      and government. The project helped stimu-
for environmental audits. A second stage was       late the change through the pollution-preven-
aimed at specific sector training to develop       tion message it preached, the people it trained
interest among a wide range of industrial          and the strong cadre of pollution consultants
firms: chemicals, food processing, hospitals,      it helped create.
Technological Change and                                 its potential to increase operating profits in
Assistance to Industry                                   the short term.

Pollution Prevention Diagnostic Assessments,             While acceptance of recommended changes
which recommended specific production pro-               averaged 40 percent, it varied greatly among
cess changes, were completed at individual               firms. Some firms accepted nearly all recom-
factories. USAID funded the costs of the audits          mendations while others adopted only a few.
and the costs of pollution-prevention invest-            The key to acceptance depended upon the
ments were the responsibility of the factory             quality and suitability of the audit recommen-
owner.                                                   dations, the size of the investment, the cost–
                                                         benefit ratio of the investment, and the skill
Recommended technologies ranged from low-                and business savvy of the owner and man-
cost and no-cost housekeeping, maintenance               ager. Surprisingly, some factory owners were
and process changes such as recycling rinse              reluctant to implement changes even when
water or recovering waste materials, to major            cost savings and all other indicators were
capital investments such as new production               strongly positive. This may have been due to
equipment. Government financial incentives               an unwillingness to experiment in an already
such as subsidies, tax relief or accelerated             marginal enterprise, or the firm was unsure
depreciation were not available. The attrac-             about the course of future environmental
tiveness of any measure was based solely on              regulations.

     Table 2.1. Examples of Successful Pollution-Prevention Measures
 Factory                            Measure                                     Benefit
 Cement                 Baghouses to collect fine particle   Reduced emissions of particulate matter.
                        emissions.                           Recovery and reuse of raw materials.
 Textiles               Conversion to natural gas for        Reduced emissions or particulate matter and
                        boiler fuel.                         Sulfur Dioxide. Increased Fuel efficiency.
 Tanned leather         Recovery of chrome-based             Reduced loss of chrome in wastewater from
 hides                  tanning solution.                    40 percent to 4 percent.
 Milk and cheese        Recovery of liquid waste from        Sale of liquid waste to swine farmers. Reduced
 products               cheese making processes.             biological oxygen demand of wastewater input
                                                             to river.
 Commercial printing    Collection and incineration of       Reduced odor and VOC emissions.
                        waste VOC and odorous gases.
 Metal electroplating   Reuse of rinse bath water and        Reduced water use and chromium discharge.
 Paint manufacturing    Recycle wash water, reduce           Save chemicals. Reduce wastewater load
                        evaporation of VOC.                  charges.
 Slaughterhouse         Burn noxious gases, collect          Reduce complaints from neighbors. Sell
                        grease and fats.                     grease and fats. Reduce wastewater sewage
 Primary healthcare     Water use reduction practices.       Minimal but measurable savings on water bills.

VOC = Volatile Organic Compounds

Program Elements
A typical case of a small, marginal enterprise        problem. For example, collection of organic
was an electroplating factory that faced              vapors by a wet scrubber results in a liquid
steadily declining sales because it had lost a        waste that must be reintroduced to the pro-
major production contract and did not adjust          cess or disposed of, and air stripping of or-
to new market demands. It was running down            ganics from water results in emissions of those
its equipment and slowly going out of busi-           organics to the air. One problem may simply
ness. Other factories were reluctant to imple-        be traded for another—but not identified in a
ment changes because the direction of future          program such as EP3 if the purpose of the
environmental regulations was unclear. They           program is exclusively pollution prevention.
were unsure what CONOMA would demand
in the near future in the way of pollution re-        The assessment team found these problems
ductions.                                             in Chile:

Implementation was further slowed by the n A cement company is removing fine par-
fact that in many instances it is less expensive      ticles from the air but is creating solid
to pay the disposal fees to the sewage utility        waste, which creates a new disposal prob-
or landfills than to install clean production         lem at the landfill.
technologies. This is changing, however, with
increased fees being charged for landfill dis- n A slaughterhouse is scrubbing organics
posal, special processing fees for hazardous          and particles out of its exhaust stack, but
or toxic wastes, and increased frequency and          now has created a new problem by dis-
size of fines for noncompliance with sewage           posing of those pollutants in its waste-
discharge standards. A summary of success-            water.
ful EP3 supported pollution-prevention mea-
sures are listed in table 2.1.                      n A metal plating company is putting less
                                                      chrome and copper waste into the sewer,
EP3 did not consider end-of-pipe (EOP) mea-           but is taking the solid waste and putting
sures or the effects of upstream production           it into a landfill which is probably unlined,
changes. These are important because EOP              and the leachate may eventually run into
technologies may be adversely affected or             the water supply.
need to be modified as a result of changes in
the waste stream caused by pollution-preven- n A hospital is burning its pathogenic
tion measures. Further, in most processes re-         wastes, rather than sending them to the
gardless of how clean or efficient, there will        landfill. However, if the burning is incom-
still be wastes to recycle, reclaim, treat, or dis-   plete, there will be airborne distribution
pose of.                                              of pathogens.

As regards EOP measures, many industries in           What is needed is life cycle analysis, an inte-
Chile have already invested in pollution-con-         grated approach that considers the industrial
trol equipment, such as baghouses, venturi            process from start to finish as well as product
scrubbers, flares, filters, and effluent neutral-     end use. The approach considers process in-
ization systems. These systems must be con-           puts, cost-effective pollution-prevention mea-
sidered and optimized as part of an integrated        sures, the sometimes necessary end-of-pipe
approach to pollution reduction. Cross-media          applications, and disposal or recycling of the
effects must also be considered. Solving a            product after it has been used. The desired
water-quality problem may result in the cre-          result is a cost-effective net reduction in pol-
ation of an air-quality or solid-waste-disposal       lutants.

6                                                   Urban and Industrial Pollution Programs: Chile Case Study
Economic Policies                                  eral key factors that influenced pollution-pre-
                                                   vention investments:
Key Chilean Government policy managers
were trained at the University of Chicago,         1. Firms that were successful at pollution pre-
which is noted for Milton Friedman and its         vention had physical plants that were clean
free-market approach to economic develop-          and well organized. Management was aware
ment. The Chicago-trained economists re-           of production costs, was developing new
made the Chilean economy into a free-market        products, was interested in innovations, and
model. Chile relies almost completely on pri-      was aware of what the competition was do-
vate enterprise and free markets to drive its      ing. In contrast, dirty firms had a chaotic fac-
economy. Government price and market con-          tory layout and were not on top of costs or
trols, incentives, and subsidies are almost non-   new product developments. The willingness
existent.                                          to adopt clean production measures is posi-
                                                   tively correlated with a prior history of good
World market prices prevail for virtually all      management practices. The good owners and
industrial inputs. The economy is free of price    managers are most likely to have a better and
distortions or subsidies that would encourage      more productive operation and clean produc-
environmentally harmful activities. On the         tion, and pollution prevention is a natural part
other hand, a result of such an approach is        of an efficient operation.
that pollution-prevention subsidies, con-
cessional loans, or investment credits do not 2. The assessment team was surprised at the
exist and are dismissed by both the govern- number of factories that were making pollu-
ment and industry as bad policy.                tion-prevention investments as a means to
                                                avoid future problems. Factory managers who
For industrial wastewater there is a pollution- expected the future cost of waste disposal to
prevention incentive. The Santiago water and increase were adopting such measures. An-
sewage utility (which is a private company) ticipated cost increases are due to more strict
imposes water charges based on the volume governmental regulations or expected in-
and concentration of wastes in the industrial creases in the cost of wastewater treatment or
effluent. There are also upper limits on key landfill disposal.
pollutants. Firms pay the sewage company for
the cost of receiving their wastes, which pro- 3. The adoption of pollution-prevention tech-
vides a strong incentive to reduce wastewa- nologies appears to be accepted when busi-
ter pollution.                                  nessmen believe that costs of noncompliance
                                                will be equitably imposed on others in the
The assessment team visited 18 firms, 10 that same business. In other words, action is con-
had received EP3 assistance and 8 that had ditional on there being no environmental “free
not. Basically, the economic foundations of riders” who might gain a competitive advan-
EP3 were sound; the market provided the fi- tage. This supports an industrywide approach
nancial incentives necessary for pollution pre- to the introduction of pollution-prevention
vention to succeed. The project showed that technologies and transparent environmental
firms were motivated to undertake pollution- regulations.
prevention actions to save money from in-
creases in efficiency, reduced waste, reduced 4. Most businesses that participated in EP3
input costs, improved product quality, recy- were owner-managed small or medium-sized
cling and by avoiding the costs associated firms. Being frugal managers they were re-
with excess waste disposal. There were sev- luctant to make long-term investments and

Program Elements
generally went with low or no cost pollution-     It formally created CONOMA , which was
prevention measures. These were all inter-        charged with coordinating the Environmen-
nally financed. Of the EP3 participants           tal Units of all other ministries. Enabling leg-
reviewed by the evaluation team, none cited       islation created Regulations for Establishing
lack of finance as a barrier to adoption of pol-  Standards of Environmental Quality and
lution-prevention measures.                       Emissions (1995), Regulations for the Creation
                                                  of Environmental Prevention and Decontami-
Since the end of the USAID project, a new fi- nation Plans (1995), and Regulations for the
nancing source has become available. Financ- Environmental Impact Evaluation System and
ing for higher cost pollution-prevention Participation of Citizens (1997).
measures or innovation and modernization of
industry to meet specific environmental ob- Zoning is another way to regulate pollution.
jectives is available through the banking sys- Industry wants to be in metro Santiago to have
tem at commercial rates. Firms and banks are access to labor, inputs and markets. The gov-
linked together by Chile’s Production Devel- ernment wants the most polluting industries
opment Corporation ( CORFO). CORFO can also to locate elsewhere and has adopted incen-
co-finance technical consultants on pollution tives to encourage them to move. Several of
prevention. The CORFO programs are new, and the small and medium-sized factories that
only two of the firms the assessment team met participated in EP3 are in residential areas.
had used CORFO assistance for an audit.           Governmental zoning regulations restrict new
                                                  investments by such firms. They can stay
Other CORFO instruments are available to pro- where they are but cannot expand production.
mote clean production among groups of simi- In the case of a tannery it had to use cleaner
lar industries. For example, this program has technologies, a less polluting process, and
provided group training and implementation move the dirtiest part of production outside
of environmental management systems and of Santiago.
certification of ISO 14000, as well as group pro-
grams for waste minimization, including the EP3 was by design an industry-oriented pro-
identification of waste recycling and the use gram with little emphasis on governmental
of waste by-products by others in the group. policy or regulatory development. As EP3
                                                  progressed, it became apparent that even
                                                  though the cost–benefit ratio for pollution-
Government Regulations                            prevention measures was strong, regulations
And Standards                                     were needed to spur industry interest. Unfor-
                                                  tunately, Chile’s environmental regulations
Chile’s environmental regulatory program were under development in parallel with EP3,
began to take form in 1990, with the forma- but received minimal EP3 input. Very little of
tion of the Special Commission on the Decon- the information developed under EP3 was
tamination of the Metropolitan Region used by the government as it developed its
(Santiago). This was followed closely by the regulatory framework. Only a portion of EP3
formation of the National Environment Com- information was forwarded to CIPMA, which
mission in 1990, which was to design and was nominally the EP3 information clearing-
implement environmental laws. In 1993 regu- house. CIPMA could have been an excellent
lations were put in place requiring an envi- source of public domain pollution-prevention-
ronmental impact assessment for all based solutions for environmental compliance
investment projects. In 1994 the General En- issues. The need for development of policies
vironmental Guidelines Law created a legal and regulations, the involvement of govern-
framework for environmental management. ment, and broad dissemination of results

8                                                  Urban and Industrial Pollution Programs: Chile Case Study
should have been recognized early in the EP3- little to institutionalize EP3 lessons in the
Chile project. The failure to take those actions emerging Chilean environmental agencies. As
reduced project effectiveness.                   a consequence, national institutions and policy
                                                 cannot be directly related to EP3. This is not
Institution Building                             to say that the concepts of pollution preven-
                                                 tion, waste minimization or clean production
The National Commission on the Environ- are not well known inside government circles.
ment (CONOMA) became fully effective after They are. What is important is that within the
EP3 ended in 1996. CONOMA serves as a coor- government’s own Public–Private Partnership
dinating body directed by a Board of Gover- for Clean Production, established in 1998
nors composed of 13 cabinet ministers. It sets scarcely two years after EP3, the assessment
policies but has no enforcement powers. The team met senior staff who have never heard
organizational framework is in line with the of EP3, its functions or what it accomplished.
overall strategy of strengthening key institu-
tional functions and appropriate units in the Now there are several dozen government, ngo
line ministries and not the replacement of their and private sector organizations dealing with
functions. CONOMA is expected to play a cata- the environment. During the time of EP3, only
lytic role in helping to define the broad policy a few were in place. In one sense EP3 was
framework and provide selected service func- ahead of its time and the institutions were not
tions (such as environmental data collection, ready to take on pollution problems. Some
analysis, and training in environmental im- might argue, though, that the inchoate nature
pact assessment) to the rest of the public sec- of environmental institutions in Chile during
tor. In theory, while it favors environmental EP3 made it difficult to identify which insti-
policies based on market-based instruments, tutions would develop and become effective.
in practice command-and-control regulation Such efforts might have diffused EP3 techni-
is still the most common approach. Regula- cal efforts that were raising pollution-preven-
tions are enforced mainly through the Minis- tion awareness in the private sector. On the
try of Health and the Superintendency of other hand, new institutions can often provide
Sanitary Services.                               new opportunities to exercise a positive in-
                                                 fluence. A more proactive effort to engage
During its implementation, EP3 focused al- government policymakers might have reaped
most entirely on the private sector. It did very benefits.

Program Elements
                                      3. Impact
                                                    cubic meters. The average saving per facility
Economic and                                        was $72,000 with an average one-time invest-
Financial Impact                                    ment cost of $53,000. While the savings were
                                                    important to all of the factories, there were

T     HE BASIC CONCEPT UNDERLYING pollu- some big winners. Food processing and min-
      tion prevention is to generate less waste ing generated 91 percent of the investments
at the end of the pipe. Any in-plant practice and 91 percent of the savings.
that reduces or eliminates the amount or tox-
icity of pollutants before they enter the waste Site visits by the evaluation team to one third
stream will generate positive environmental of the EP3 participating firms found that they
benefits, improved health and safety for were interested in no- or low-cost investment
employees, and fewer environmental exter- because of: (1) small operating budgets, (2)
nalities. Just as important, the pollution-pre- short planning and accounting horizons, (3)
vention processes provide financial benefits unwillingness to move away from time-tested
to the factory. Financial returns are generated patterns of production or lack of knowledge
in three ways: first, by lowering operating or about new production technologies, (4) lack
input costs (through recovery of raw materi- of management resources to supervise new
als or increased efficiency in the use of energy, procedures, and (5) high risk aversion.
water, or steam); second, by reducing com-
pliance and enforcement costs (by lowering The greatest financial returns accrued to the
fees and penalties for contaminants dis- larger firms. These firms were willing to un-
charged); and third, through improved pro- dertake higher cost investments. Many had
cess efficiency (either through increased linkages to or were owned by foreign firms,
output or by recycling or recovery of what was which encouraged pollution prevention. For
formerly waste). In addition, financial returns example, among those receiving the greatest
may also accrue if the processes result in in- returns were a dairy, partially owned by a
creases in product quality, fewer rejects, French firm, and a fishmeal company with
greater productivity of workers, less down- linkages to Japanese aquaculture firms. Other
time from equipment repair, or less downtime successful participants, such as a tannery and
from safer operations.                              a textile firm, have moved into production for
                                                    export. What distinguishes these firms is not
Twenty-six Pollution Prevention Diagnostic that they readily implemented most of the EP3
Assessments (PPDAs) were completed cover- recommendations, but that they had the finan-
ing 7 industrial sectors: tannery (3), textile (3), cial capacity to shift their production either
printing (4), food processing (4), hospital (2), into a more diverse product line or invest in
mining (4), and chemical (6). About 40 per- newer, more productive technologies. A weak
cent of the EP3 recommendations were imple- market and increased competition from local
mented. These recommendations resulted in as well as international firms resulted in some
estimated total annual savings of $1.9 million firms abandoning pollution-prevention mea-
against total one-time investments by indus- sures previously adopted (a metal processing
tries of $1.4 million. The pollution-prevention company), or limiting production so severely
investment costs were recovered in just 9 that recommended pollution-prevention mea-
months. Pollution was reduced by 32 percent sures were no longer relevant (a chrome plat-
and annual water savings were 1.4 million ing company).
Table 3.1 summarizes costs and benefits, con-  As an example of cumulative financial sav-
servatively assuming that 40 percent of rec-   ings, it was reported by one of the tanneries
ommendations were actually implemented.        that water use was reduced by 40 percent for
These recommendations resulted in an esti-     a savings of about $4,000 per annum; de-
mated annual savings of $1.9 million. The      creases in the use of fuel saved about $2000 a
average savings per facility are $72,000 per   year, and an additional $30,000 per annum
year, with an average one-time investment of   was saved by decreasing losses from chrome
$53,000. Typical savings included reductions   tanning from 40 percent to a 4 percent loss.
in chemical use, improvements in raw mate-     Not included in the EP3 recommendations
rial recovery, energy savings, improved prod-  was an enzyme process for biological treat-
uct quality, and productive use of waste       ment of hides in lieu of increased use of chemi-
materials.                                     cal washing. Savings were $3,000 per annum
                                               with significant decreases in both COD (chemi-
Average annual financial returns were con- cal oxygen demand) and BOD (biological oxy-
servatively estimated at 5 to 20 percent by gen demand) in the waste stream. Clean
owners and plant managers of the one third production improved the quality of leather to
of the participating firms examined by the allow a higher grading which commands
evaluation team. On the other hand, masked about an 8 percent higher price.
in these averages are some postproject cost
savings resulting from waste management Given the small number of firms participat-
early in the industrial process and not at the ing in the project, and limited replication, one
end of the pipe. Decisions to introduce new cannot generalize from these data to assess the
methods of waste recovery at the dairy re- financial impact of EP3 on Chile as a whole.
sulted in avoided costs of approximately $1 Moreover, economic events (a major recession,
million by eliminating the need for construc- changes in market demand, etc.) appear to
tion of new primary sewage treatment facil- have had even greater impacts on profitabil-
ity.                                           ity than pollution-prevention measures.

                 Table 3.1. Costs and Benefits From Recommended
                           Pollution-Prevention Measures
 Sector    No. of  % of       % of       Annual     Investment Size (US$)          Annual Saving
           Firms Options    Pollution     Water
                  Imple-     Reduc-     Savings      Average        Total       Average         Total
                  mented      tion         (m3)     per Facility               per Facility
 Chemical     6     57         35        168,140         3,441       20,650          6,856      41,136
 Food         4     44         22        295,035        78,396      313,585        127,740     510,960
 Hospitals    2     37         40               0         n.a.          n.a.          n.a.          n.a.
 Mining       4     26         23        757,440      237,500       950,000       300,445     1,201,780
 Printing     4     18         16               0         818         3,275          1,987        7,950
 Tannery      3     48         49        107,500       29,066        87,200         32,050       96,150
 Textiles     3     50         22          91,440        1,187         3,563         7,044       21,132
  Total      26                         1,419,555                  1,378,273                  1,879,108
 Average            40         32                      53,010                       72,273

n.a. = data not available

An indication of the positive financial impact        spheric inversions are common particularly
of pollution prevention to the nation’s               during the winter months. An inversion takes
economy is indicated by the decisions taken           place when a layer of cool air forms on top of
by the Ministry of Economy together with              warm ground-level air, trapping suspended
CORFO, Chile’s Development Promotion Cor-             particles and gases. The polluted air is trapped
poration, to initiate its own Public–Private          and cannot rise or move out of the area. As
Committee for Clean Production. The mem-              these conditions occur most frequently dur-
bers have agreed upon a Clean Production              ing the Winter, air quality is worst during
Agreement—which outlines the common en-               April through July.
vironmental aims between industry and the
public agencies responsible for regulation, and       Air pollutants were not a significant factor in
commits both to achieving concrete environ-           most factories participating in EP3. Volatile
mental objectives through clean production            Organic Compounds (VOCs) were emitted by
processes. The Agreement calls for the estab-         some. A more important pollution source was
lishment of a network of Cleaner Production           the fuel used in the production process—
Technology Centers, which will establish a            wood, coal, or oil. A number of firms have
national system of technical certification of         switched to natural gas and are also burning
clean technology and environmental services.          VOCs in the exhaust stack. The switch was
The ultimate aim of the centers is to build a         driven mainly by the lower price of gas and
philosophy of industrial self-monitoring              to a much lesser extent to regulatory pressure,
whereby enforcement agencies will take up             and has resulted in lower particulate matter
new roles in counseling and advising busi-            and SO2 emissions.
ness in the search for economically sound en-
vironmental solutions.                                Based on 1998 data, the most notable improve-
                                                      ment has been in the reduction of ambient
                                                      sulfur dioxide (SO2). During 1998 emissions
Environmental Impacts                                 did not exceed of any of the Chilean Federal
                                                      standards, which are comparable to the U.S.
EP3 project managers estimated that pollu-            EPA and the more stringent California State
tion-prevention recommendations would re-             standards. This is due almost solely to indus-
duce pollution by 32 percent at the 26 factories.     trial conversion to natural gas and the use of
The problem is a lack of actual before and af-        natural gas for local power generation. The
ter pollution measurements. There were no             natural gas is delivered by pipeline from
baseline or postproject measurements of air           Argentina.
and water pollution emissions. While actual
net air and water quality improvements at-      Ozone (O3) is a photochemically formed oxi-
tributable to EP3 measures are not known,       dant implicated in respiratory disease. It oc-
based on the sample survey conducted for this   curs at moderate levels in the metropolitan
assessment of one third of the firms, the 32    Santiago area. Oxides of nitrogen NOX, pri-
percent pollution reduction estimate at these   marily as nitrogen oxide (NO) and nitrogen
firms appears reasonable.                       dioxide (NO2), are visible in the air as a brown
                                                haze. NOX is produced primarily by oxida-
Air Quality                                     tion of atmospheric nitrogen (N2) at high tem-
                                                perature (power plants and internal
Santiago is situated at the bottom of a topo- combustion engines). NOX is an important air
graphic bowl, or a deep and full ashtray of pollutant due not only to its own negative
polluted air, as it is locally described. Atmo- health effects, but also due to its role in pho-

12                                                  Urban and Industrial Pollution Programs: Chile Case Study
tochemical reactions with organic compounds,      Water Quality
formation of O3, and its contribution to the
formation of nitrate aerosols which are fine       Industrial water pollution impacts are even
particles. They have adverse health effects and    harder to assess as regulations deal almost
contribute to reduced visibility.                  exclusively with discharge standards, not re-
                                                   sultant water quality. The wastewater treat-
PM-10 refers to particulate matter of less than ment companies that assess fees regulate
10-micron diameter, while PM–2.5 refers to industrial sewage loadings and fines based
particles of diameter less than 2.5 micron. on discharge loadings and exceedance of al-
Mass is proportional to the cube of the diam- lowable limits. Their concern with wastewa-
eter, therefore one 10-micron particle has a ter quality is the fact that they want to avoid
thousand times the mass of one 1-micron par- an upset of their wastewater treatment plant.
ticle. Consequently, a low mass loading of
small particles may actually represent a very No baseline effluent or water quality data was
high number of particles—and opportunities available for this study and probably does not
to enter and be trapped in the deep lung, caus- exist. It is estimated that 95 percent of all
ing long-term health problems.                     drinking water in the metropolitan area is
                                                   treated. The real problem is sewage. There is
Far more serious are PM–10 levels (particles very little treatment of municipal effluent
of a diameter of less than 10 microns) mea- (stated to be 5 to 15 percent nationwide), as is
sured at all sampling sites. PM–10 levels mea- evidenced by the open drainage canals run-
sured exceeded the Chilean (and U.S. EPA) ning through Santiago. As a result, fecal
24-hour average standard of 150 micrograms coliform levels downstream of discharge
per normal cubic meter from 8 to 51 days dur- points are quite high. This is very important
ing 1998. Values exceeded the more stringent as coliform is a major cause of diarrheal dis-
California state standard from 324 to 340 days ease (particularly dangerous to infants and
of the year. The formation and transport of children).
fine particles is a complex process. Based on
ammonia and sulfate analyses it is believed A second issue is industrial wastewater, which
that roughly 25 to 50 percent of the fine par- is typically mixed and discharged along with
ticles in the air of Santiago are a result of cop- municipal wastewater. Industrial wastewater
per smelting south (and upwind) of Santiago. includes a wide range of pollutants, includ-
The fine sulfate particles result from the oxi- ing organics, heavy metals such as mercury
dation of SO2 and subsequent reaction with and chrome, nickel, lead, cadmium, and many
ammonium to form ammonium sulfate aero- others. This is an important factor in excess
sol.                                               morbidity and mortality, as heavy metals are
                                                   known to cause a wide range of cancers and
Average air quality data does not always re- neurological disorders.
veal the true potential for adverse health ef-
fects. The 8- or 24-hour average standard may
be met but short term, and acute pollutant
                                                   Health Impacts
loadings may have adverse effects on human
health, particularly on the young, old, and Air and water quality standards are set pri-
those with respiratory or cardiovascular prob- marily to protect human health. EP3 helped
lems. In particular, young children in Santiago firms reduce their pollution discharges, meet
have a much higher rate of acute respiratory discharge standards, and thereby improve
illness than those outside the metro area.         human health. Primary and secondary (spin-

off) effects of EP3 contributed to improved        grinding processes and breakdown of larger
health of the general population. Proper dis-      particles produces larger particles. These par-
posal of industrial waste, including hazard-       ticles are trapped and removed in the nose,
ous and toxic compounds, will reduce               throat and upper respiratory tract. And fumes,
population exposures to air pollution, runoff      such as condensation of Volatile Organic Com-
to surface waters, and introduction of             pounds (VOC) form fine particles or metal
leachates to surface water, groundwater, and       fumes, or reaction of ammonia and sulfate or
aquifers. Improvements in worker health and        nitrate in the gas phase to form ammonium
safety have also occurred.                         sulfate or ammonium nitrate. The later pre-
                                                   dominate in the open atmosphere while the
Examples of air pollutants resulting from in-      former are more common in the industrial
dustrial operations audited by EP3, known          setting. In either case, smaller particles (less
health effects, and measures taken to reduce       than one micron diameter) enter the deep lung
emissions and exposures are shown in table         and remain there or are absorbed into the
3.2. As regards particulate matter (PM), note      blood in the alveolar sacs. The smaller par-
that it occurs in a range of diameters. Diam-      ticulate matter creates the greatest health
eter varies as a function of source. Primarily     threat.

        Table 3.2. Air-Pollutant Effects and Measures Taken Under EP3
 Industry                 Pollutants                 Health Effects                 Measures
 Tannery          l PM                            l Respiratory               l Baghouses
                  l VOCs                          l Respiratory,              l Evaporation
                  l Chromium                        cancers                     barriers, water-
                                                  l Cancers                     based dispersants
                                                                              l Recovery
 Printing press   l PM                            l Respiratory               l Change to natural
                  l VOCs                          l Respiratory,                gas firing
                                                    cancers                   l Reduced use of
                                                                                oil-based inks
 Hospital         l Pathogenic particles          l Spread of                 l Offsite incineration
                    from incomplete                 disease                     and disposal
                    incineration of wastes
 Electroplating   l PM from grinding and          l Respiratory               l Cyclones and
                    buffing                       l Respiratory,                baghouses
                  l VOCs                            cancers                   l Evaporation
                  l Chromium                      l Cancers                     barriers, water-
                                                                                based dispersants
                                                                              l Recovery
 Fish products    l PM                            l Respiratory               l Venturi scrubbers
                  l Odors                         l Nuisance                    and cyclones
                                                                              l Venturi scrubbers
 Textiles         l PM                            l Respiratory               l Baghouses and
                                                                                change to natural
                                                                                gas for boilers

PM = Particulate Matter VOC = Volatile Organic Compounds

14                                               Urban and Industrial Pollution Programs: Chile Case Study
Examples of water pollutants resulting from        water pollution emissions. Unfortunately,
industrial operations audited by EP3, known        baseline and post-EP3 air and water quality
health effects, and measures taken to reduce       data, and baseline emissions and effluent data
emissions and exposures are shown in table         necessary to estimate or quantify impacts are
3.3.                                               not available. It is therefore not possible to
                                                   quantify specific benefits for these factories
Going by the assessment team’s onsite visits,      or to estimate the overall impact on health of
it is clear that most firms are reducing air and   pollution-prevention measures in Chile.

     Table 3.3. Water-Pollutant Effects and Measures Taken Under EP3
 Industry                        Pollutants            Health Effects          Measures
 Tannery                l Chromium                   l Cancers           l Metals recovery
 Printing press         l Organics                   l Cancers and       l Venturi scrubbers
                                                       nuisance odors      and incineration
 Electroplating         l Chromium, nickel and       l Cancers           l Metals recovery
 Fish products          l Oily wastes                l Increased BOD     l Water use
                        l Organic matter                in receiving       reduction,
                        l Ammonia compounds             waters             recovery of oils
                                                     l Increased BOD     l Recovery of solids
                                                     l Nuisance odor     l Venturi scrubbers
 Textiles               l Organic fibers             l Increased BOD     l Filtration and
                        l Dyes                       l Cancers             recovery of fibers
                                                                         l Nontoxic dyes,
                                                                           reduced use
 Dairy and              l Organic matter             l Increased BOD     l Reduced water
 cheese                                                                    use, sale of whey
 Slaughterhouse         l Organic matter             l Increased BOD     l Unresolved
                                                     l Odors             l Wet scrubbers

BOD = biological oxygen demand

                     4. Program Performance

T    O BE JUDGED EFFECTIVE, the program and
     its pollution-prevention concepts should
gain sustained support from government and
                                                   Qualitek—were careful to disassociate their
                                                   technical pollution-prevention activities from
                                                   debates underway about how to establish and
industrial groups. Benefits would be sus-          organize governmental institutions to develop
tained after USAID funding ends, and benefits      and enforce environmental standards and
should be replicated beyond the project.           regulations. The failure to engage Chilean
Lastly, effective use of USAID assistance should   authorities in a policy dialog during EP3’s
generate a measurable impact on environmen-        early years is noted by some people as one of
tal quality.                                       its most significant weaknesses.

                                                   The quality of technical assistance was gener-
Effectiveness                                      ally highly regarded. Also, the technical ap-
                                                   proach of having one or two international
Effectiveness attempts to assess how appro-        experts working closely with Chilean environ-
priate the intervention was in meeting pro-        mental engineers on pollution audit teams
gram objectives. Was the program directed to       was effective in identifying appropriate solu-
the right group to meet program objectives?        tions for factories and providing a transfer of
Were the tools adopted relevant to the con-        technology to local environmental firms. The
text in which they were implemented? Was           weakness in the approach was that only a few
implementation consistent in its approach,         industrial firms were reached. Of roughly
and was the approach the best way to use           17,000 small and medium enterprises in the
USAID resources to get the job done?               Santiago area, 26 were chosen for environmen-
                                                   tal audits.
The host country implementing institution
first chosen to implement EP3 was the Ameri-       Effectiveness of technology transfer could
can–Chilean Chamber of Commerce                    have been improved if more attention had
(AmCham). It was selected because of its pri-      been given to up-front assessment of small
vate sector orientation, its understanding of      and medium industry requirements in the
the local economy, its political sensitivities,    Chilean context. While the Chilean owners,
and its ability to provided a forum to dissemi-    engineers and plant managers gave high
nate pollution-prevention success stories. As      praise to the U.S technical experts who as-
often happens, the choice of AmCham was            sisted in the environmental audits, their rec-
based on individuals at AmCham who were            ommendations sometimes exceeded the
very interested in pollution prevention. When      technical capacity of small firms. Also, tech-
they left the country, the program suffered.       nical choices were based on engineering prin-
Those that took over did not have the same         ciples that assumed much higher levels of
enthusiasm, and the project stalled.               automated processing than was the case in
                                                   Chile where manual labor is still cost effec-
In the second year, implementation was             tive. This proved to be the case in a milk-pro-
shifted from AmCham to a local environmen-         cessing plant where advice from an EP3
tal consulting firm, Qualitek, associated with     industrial engineer from India, familiar with
ERM, a U.S.–based environmental firm. Both         LDC operations, was more relevant than higher
implementing institutions—AmCham and               tech solutions. The pollution audit for the
slaughterhouse had similar problems. Lastly,         would have enabled establishment of an in-
many of the technical manuals on clean pro-          dustrial baseline, so that improvements, both
duction and pollution-prevention documen-            environmental and financial, could be quan-
tation from the EPA were in English. These           tified and valued. Also, it might have been
were of little value to participating firms, par-    useful to focus on a group of companies in a
ticularly their operations personnel.                single industrial sector, such as food process-
                                                     ing or metal finishing. This would allow the
During project implementation, enforcement           project to demonstrate the merits of clean pro-
of environmental regulations was negligible.         duction and make sure it was adopted by a
Thus, avoided costs from fines or higher costs       large number of firms producing similar prod-
of waste disposal were probably not impor-           ucts in one industry. The “wholesale” rather
tant motivating factors. More realistic is the       than “retail” approach would have enhanced
possibility that participants expected to get        replication. It might also have been more ef-
free technical advice and perhaps other goods        fective to start with companies that had
from the USAID program. The difficulty in            greater potential for success or with owners
measuring program effectiveness lies in link-        who were more influential within their trade
ing the economic gains to the EP3 approach.          associations.
The firms that appear to have benefited
most—such as a leather tannery, a dairy, a fish      To be balanced in this assessment, there were
meal plant, a printing company, and a textile        external factors that limited effectiveness. The
factory—are those that were dynamic and ca-          termination of USAID’s presence in Chile at the
pable of modifying their industrial processes        same time as the completion of EP3 meant
to take advantage of changing local and glo-         there was little residual institutional support
bal markets. It can be argued that those firms       beyond the life of the project. By mid-1995,
would have adopted (possibly several years           the concept of pollution prevention was
later) many of the pollution-prevention pro-         picked up and given financial support by sev-
cesses anyway. In fact, most introduced new          eral international and bilateral donors in
technologies and clean production practices          Chile. In some instances the projects of those
beyond those recommended by EP3.                     agencies were the direct institutional benefac-
                                                     tors of the initial awareness building started
Other small, less dynamic firms did not fare         by EP3.
as well. Due to a downturn in the local
economy during 1998–99, many held back on
the implementation of clean production rec-
ommendations. This finding flies in the face
of the potential financial returns and suggests      Sustainability of benefits is a key measure of
that technologies may not have generated as          success for a pilot project like EP3. Program
large savings as expected by EP3. It is likely       sustainability can be measured in part by
that smaller firms have different priorities, less   whether or not people can recall after several
capital, and are unsure of the financial merits      years the program and its objectives. The
of pollution prevention.                             evaluation team was often surprised at how
                                                     few environmental professionals, outside of
In sum, the effectiveness of EP3’s approach          those directly involved in project implemen-
was technically sound, but weak in both the          tation, knew about EP3, its objectives, or its
scope of coverage and its follow-up. Technol-        impacts. Lack of follow-up with industry, the
ogy transfer might have been improved by a           absence of policy dialog or establishment of a
more thorough investigation of the industries        strong relationship with government agencies,
prior to initiation of technical audits. This        and the failure to link lessons learned to dis-
Program Performance
semination and training efforts means that the Project planners and USAID can be given much
program had little long-term impact.              credit for recognizing an important develop-
                                                  mental need in Chile and responding early in
The philosophy of pollution prevention has an effective way. More attention to follow-up
been incorporated within the regulatory and formulation of a plan for sustaining the
framework and environmental standards program after its termination might have re-
adopted by CONOMA. The chief of CONOMA’s sulted in greater sustainability of EP3 benefits.
Pollution Control Department noted that the As one respondent noted, EP3 planted the
agency had adopted its own approach and seed for pollution-prevention programs, but
policy tools for clean production based on was not around to see the positive results from
universal models, but acknowledged the im- its efforts.
portant influence of EP3 early in the
policymaking process. Often it was the per- EP3 had an important role in helping to
sonal role of key EP3 individuals who were establish a viable local consulting services in-
cited as influential rather than the project as a dustry. As designed, the typical pollution-pre-
whole. While strong and competent individu- vention audit consisted of a U.S. industry
als are important, if institutional relationships expert, a Chilean pollution-prevention expert,
are not well developed sustainability of ben- and two or three Chilean consultants who re-
efits suffers.                                    ceived on-the-job training in the assessment
                                                  process. Local consultants were given addi-
The future of pollution prevention and clean tional training at the Environmental Research
production looks bright. Chile’s Ministry of and Training Center (CIPMA). Complement-
Economy has adopted a wide-ranging pollu- ing this was a “training the trainers” approach
tion-prevention program. The initial stage of which included short-term U.S.–based train-
its Public–Private Partnership for Clean Pro- ing for three individuals and industrial engi-
duction is to run from 1999–2001. The aims of neering expertise from EPA experts brought
EP3 have been institutionalized, and commit- to Chile for training sessions, also at CIPMA.
ments have been made to ensure that the pol- Nearly 2,500 persons received training.
lution-prevention concepts are sustained in
Chile. Can these very positive results be at- In part through EP3’s training efforts, Chile
tributed to the EP3 program? Again, the now has a cadre of trained industrial envi-
importance of individuals that participated in ronmental engineers working principally in
the program were cited as being influential the private sector and universities. Many have
in convincing the Ministry of Economy to progressed professionally to become manag-
adopt its clean production program. Chilean ers and heads of environmental agencies that
environmental engineers who participated in have important roles in pollution prevention.
EP3 were also influential in promoting the Several have established their own environ-
expansion of a government-initiated clean mental consulting firms. The environmental
production program. On the other hand, pol- services business started off with a burst in
lution prevention is a universal concept, and the mid-1990s but has been slow during the
can hardly be said to be “owned” by a project past few years due to a downturn in the
or program. Many other international and bi- economy.
lateral donors were active in providing pol-
lution-prevention services to Chile in the Early in the program CIPMA’s training func-
interim. They could also surely claim credit tions proved successful and useful. As a re-
for “sustaining” a program of clean produc- sult, CIPMA was selected by EP3 to serve as a
tion in Chile.                                    clearinghouse for pollution-prevention tech-

18                                             Urban and Industrial Pollution Programs: Chile Case Study
nical information, for postproject training and       Also, because of their proprietary nature,
dissemination of information intended to sus-         environmental audits containing critical
tain the project’s work following termination.        technical information generated by the
However, for various reasons its effort to sus-       project were never turned over to CIPMA.
tain the activities of EP3 through establish-
ment of a clearinghouse function failed to All of these problems generated serious ob-
meet expectations. Some of the reasons for stacles to building awareness of the program,
failure include                                    and failed to establish the foundation for out-
                                                   reach and replication of EP3’s technical ap-
n CIPMA is primarily an environmental policy proaches.
   think tank and research organization. In-
   stitutionally, it had little credibility in the
   area of technical dissemination. Conse-
                                                   Prospects for Replication
   quently, its role in training for technical
   aspects of pollution prevention was often Replication is used in a narrow sense and re-
   overlooked by government and other agen- fers to the difficult process of extending project
   cies.                                           benefits beyond the original participating
                                                   companies to other companies within Chile.
n The clearinghouse function was perhaps
   too early. At the time of EP3’s termination EP3’s program management recognized that
   the environmental regulatory structure had in order to be effective industrial audits had
   barely been established. As a result, there to be customized to the needs of participating
   was little demand for documentation and firms. To overcome the reluctance of firms to
   case studies on pollution-prevention tech- divulge industrial secrets, agreements were
   nologies. As demand for technical input made with each participating firm to protect
   built up later on, technologies were out- proprietary information about that firm’s in-
   dated, and industry was no longer linked dustrial process and productivity. Information
   to CIPMA on pollution prevention.               and outreach about the pollution-prevention
                                                   processes adopted by firms faced two barri-
n Other donor agencies with slightly differ- ers: (1) the audits themselves were considered
   ent pollution-prevention approaches sub- proprietary information and could not be
   sumed the EP3 approach with new ideas shared; and (2) owners and plant managers
   and their own slightly different ap- were reluctant to share information about
   proaches. Industry groups generally gave pollution-prevention changes that resulted in
   more credence to the donor group in the cost savings. They wanted to protect their
   country at the time, and not to older project competitive positions.
                                                   The evaluation team found, however, that the
n It was difficult for CIPMA to interact with more influential the person involved in the
   the former host country manager after the PPDA (and also to some extent the more pros-
   project because his personal business in- perous and established the company), the
   terests could present potential conflicts of more likely the broad, nonspecific benefits
   interest.                                       were disseminated to others in the industry.
                                                   For example, the president of the Chilean Tan-
n CIPMA had difficulty managing the train- neries Association was a participant in an EP3
   ing functions and documentation. Much of audit. He continued to praise the results of
   the documentation was not in Spanish. EP3’s technical assistance to other members

Program Performance
of the association and pushed the lessons          recommended technologies. Promotion of U.S.
learned at industry meetings. Similarly, a         goods and services was an explicit objective
prosperous and well-established textile manu-      of EP3. However, few sales were generated.
facturer, who participated in an EP3 audit,
became a strong advocate of pollution-preven-   A more integrated approach would have ex-
tion audits within his industry, without di-    amined the total waste stream from prior to
vulging specific competitive benefits his       the time it reaches the firm through the pro-
company received. In these instances the repu-  duction process to end-of-pipe waste treat-
tation of participants enhanced replication of  ment alternatives. This approach might have
program benefits.                               focused on firms within an industrial sector
                                                or within a geographic area. Such an approach
An example of significant replication was the might have led to greater outreach and more
Valparaíso Hospital. As a public hospital, expansive coverage for industrial sectors, and
medical staff had little concern with the prof- integrated solutions to waste management.
itability of pollution-prevention measures.
They were concerned, however, with the im- Looking at replication from the firm’s perspec-
pact of pollution-prevention measures on the tive yields some interesting insights. In sev-
health of patients and staff, and the mainte- eral instances, ownership or management had
nance of environmental health and safety in changed hands. Still, in most cases clean pro-
the workplace. The audit led to greater man- duction techniques were still in place or had
agement coordination of medical services in been expanded. This was the case at both the
general. As a result, medical staff used EP3’s paint factory and the printing company. Both
audit procedures to develop a training and appeared to be successful, competitive enter-
outreach program for other medical services prises. For example, the printing company
at the hospital and for workshops in univer- manager noted that he provided incentives to
sity settings. The outreach had two purposes: plant workers to call attention to waste and
first, to highlight improved measures to to provide suggestions for pollution preven-
handle medical and toxic wastes, and second, tion. In general, successful pollution preven-
to share systematic measures to assess and tion was associated with good plant
improve hospital administrative procedures management. Good factory managers are
for greater coordination of services among those who understand costs, product devel-
medical staff.                                  opment, and marketing. They did well with
                                                pollution prevention.
There are many reasons why replication and
outreach were limited. The focus on specific On the other hand, industries and firms with
problems of individual firms meant that an severe pollution problems often had financial
environmental audit of one firm was not eas- problems due to weak management. They
ily transferred to other firms. Replication were producing the wrong product mix with
could have been enhanced if firms knew not inefficient machinery. In contrast, good man-
only what technologies to use, but also how agers saw pollution prevention as an integral
and where to install them, where to buy the part of efficient production. They adopted
equipment, and possible sources of financing. pollution reduction and waste minimization
Many recommendations were generic, and as a way to save money and improve product
(except in the case of no- or low-cost in-house quality. There is a tendency for pollution-pre-
process improvements) did not include spe- vention programs to focus on those firms with
cifics of how, where, and when to acquire the the worst pollution. That may be the way to

20                                               Urban and Industrial Pollution Programs: Chile Case Study
clean up the greatest amount of pollution, but vention efforts stand a better chance of suc-
it is probably not the best approach if the goal cess if they identify and work with the more
is to achieve a sustained impact. Pollution-pre- progressive and better managed firms.

Program Performance
                          5. Lessons Learned

T    HE CHILE ENVIRONMENTAL POLLUTION              project ends. That usually requires an institu-
      prevention project (EP3) was a $1.3 mil- tional structure with adequate funding and
lion, three-year demonstration effort. It suc- skills to maintain project benefits.
cessfully introduced the concepts of pollution
prevention and clean production to Chile’s in- 2. Replication. EP3 helped firms reduce pollu-
dustrial sector. Twenty-six Pollution Preven- tion, increase profits and improve their competi-
tion Diagnostic Assessments were completed tive position. But participating firms were
at individual factories. The firms invested a reluctant to share the newly learned techniques
total of $1.4 million, which generated annual with their competitors.
savings of $1.9 million. They reduced their
pollution emission load by 32 percent. Com- EP3 recognized that Pollution Prevention Di-
pared to “end of pipe” pollution treatment, agnostic Assessments had to be customized
firms found that with EP3 pollution preven- to the unique production process of partici-
tion they could save money while also reduc- pating firms. But each firm closely guards its
ing environmental pollution. Pollution production techniques, not wanting to help
prevention is now fully accepted throughout its competitors. Agreements were made to
Chile’s industrial sector. While EP3 was suc- protect this proprietary information. As a re-
cessful at selling the pollution-prevention sult there was limited dissemination to other
message and having 26 factory demonstration firms in the same industry. The exceptions
efforts, there were some missed opportunities. took place when the audit was done at a firm
The lessons that emerge from this assessment where the owner was an influential leader in
are summarized below.                              the industry trade association. Replication will
                                                   not take place if it is a trade secret. A project
1. Institutionalization. A pilot effort is an ex- needs to develop ways to replicate generic
cellent way to experiment and test ideas and meth- pollution-prevention approaches.
ods, but it should include a plan to scale up,
disseminate, and sustain successful approaches.    3. Which types of firms to focus on. Good fac-
                                                   tory managers are those who understand costs,
EP3 assumed that pollution-prevention tech- product development and marketing. They also did
niques, once adopted, would generate sub- well with pollution prevention.
stantial benefits and that firms would
recognize the value of the EP3 approach and In Chile, firms with severe pollution problems
it would be adopted throughout the economy. often had financial problems due to weak
EP3 was successful in creating a cadre of pol- management. They were producing the wrong
lution engineers and working with the pri- product mix with inefficient machinery. They
vate sector. But it did not extend its message were the losers. In contrast, good managers
throughout the industrial sector and failed to saw pollution prevention as an integral part
develop close ties with the government or of efficient production. They adopted pollu-
NGOs. There was no institutional arrangement tion reduction and waste minimization as a
to carry on the effort after USAID assistance way to save money and improve product
ended. Designers and implementers of pilot quality. There is a tendency for pollution-pre-
projects need to develop a sustainability plan vention programs to focus on the firms with
to ensure that benefits continue once the the worst pollution problems. That may not
be the best approach to achieve a sustained     Several years later, firms became interested
impact. Pollution-prevention efforts stand a    in clean production and pollution prevention
better chance of success if they identify and   when they faced the threat of pollution fines,
work with the more progressive and better       government sanctions, and penalties charged
managed firms.                                  by the wastewater authority. While both the
                                                carrot and stick (cost savings and regulations)
4. Timing. It is important to be “ahead of the are important in motivating firms to take ac-
wave,” but if a pollution-prevention program is tion, regulations and fines clearly focus the
too far ahead of a country’s environmental con- attention of factory managers and create de-
sciousness, benefits will be limited.           mand for pollution-prevention measures.

When EP3 was launched, environmental                6. Wholesale versus retail. A project cannot
awareness and interest by the government and        hope to reach all firms directly but needs an inter-
industry had just begun to grow. Chile had          mediary to spread the message.
almost no environmental regulations in place.
The law requiring Environmental Impact As-            There are 17,000 small and medium-sized in-
sessments, the start of enforcement of pollu-         dustrial firms in the Santiago metro area. EP3
tion regulations and the establishment of the         realized it couldn’t reach all directly, so it
government environmental agency (CONOMA)              worked with industry groups and trade as-
all took place as the project was coming to an        sociations. In some cases the associations were
end. Without regulations, or enforcement, the         quite active and involved all members. How-
project focused on selling pollution preven-          ever, such efforts had limited success. The EP3
tion directly to industry as a cost-saving mea-       approach of providing general public train-
sure. That proved to be a difficult task. If          ing sessions and dealing with one factory at a
pollution laws are not in place, a pollution-         time did not succeed in reaching very many
prevention program may need to work with              firms. A project cannot hope to succeed with
a country to develop its environmental poli-          a retail approach. Impact will be greatest when
cies and regulations, before trying to convince       an institutional structure (such as an indus-
industry to adopt pollution-prevention mea-           trial trade association or a clean-production
sures.                                                center) exists to actively disseminate pollu-
                                                      tion-prevention findings throughout an indus-
5. Regulation. Cost savings alone may be an in- try.
sufficient incentive to convince firms to adopt waste
minimization and pollution-prevention programs. 7. An integrated approach. All pollution prob-
                                                      lems cannot be solved solely by clean production
Until the early 1990s, pollution laws were few and pollution prevention.
and enforcement was rare. In addition, Chile
had a history of a strong central government Many industries have already made capital
with the military in control until 1990. Busi- investment for pollution control equipment.
ness leaders and the government still had an These systems must be considered and opti-
ingrained command and control mentality. mized as part of an integrated approach to
With little concern about pollution and the pollution reduction. Cross-media effects must
absence of regulations, the project had diffi- also be considered. Solving a water pollution
culty convincing a large number of firms to problem may result in the creation of air qual-
adopt clean production measures. Many firms ity or solid waste disposal problem. One prob-
viewed pollution prevention as a cost that lem may simply be traded for another. Such
might not generate any return on investment. problems will not be identified if the program

Lessons Learned
focus is pollution prevention exclusively in       to another sector of the economy. A balanced
one area. A life cycle analysis should also be     approach that considers integration of the in-
performed on the input materials, as well as       dustrial process, from start to finish , must be
the products. Change in input materials may        employed. The approach must consider inputs
reduce process wastes but may also increase        and their origin, cost effective clean produc-
or decrease environmental impacts associated       tion and pollution-prevention measures, and
with production and delivery of input mate-        sometimes end-of-pipe applications, and a
rials, or may shift the environmental burden       reasonably complete life cycle analysis.

24                                               Urban and Industrial Pollution Programs: Chile Case Study
       Annex A. Assessment Methodology

      1993 through October 1996 the USAID
                                               completion. To assess the quality of training
                                               from the perspective of those who use envi-
Chile Environmental Pollution Prevention ronmental engineers, the team interviewed 30
Project (EP3) trained 2,497 people, provided factory managers and government officials to
technical assistance to industry, completed 26 obtain their judgement of the value of the
Pollution Prevention Diagnostic Audits training, the quality of environmental consult-
(PPDAs), and disseminated findings within ants in Chile, and their experiences using EP3
Chile.                                         trained consultants.

A three-person assessment team completed an        To assess dissemination of EP3 findings
in-country assessment during the period 15         throughout Chile, the assessment team used
March through 9 April 2000. The team mem-          its 18 factory site visits along with visits to
bers included an economist (the team leader),      government agencies, NGOs, trade associa-
an environmental engineer, and an environ-         tions, and other donors to determine the
mental economist. The team used two care-          sustainability and replication of EP3 efforts.
fully tailored interview protocols: one for data
collection at factories and a different protocol To assess the impact of PPDA audits, the team
for data collection from industry, trade asso-   made site visits to 10 of the 26 firms that were
ciations, government, NGOs, and other donors.    audited. The team analyzed whether the fac-
It interviewed more than 65 people and col-      tories had used the audit recommendations,
lected data in Santiago, Valparaiso, Concep-     what their experience had been, whether they
tion, Coronel, and Talcahuano.                   continued to maintain PPDA recommenda-
                                                 tions, and whether they instituted new pollu-
To assess the impact of training, the assessment tion-prevention measures after EP3 ended. As
team identified 25 trainees and interviewed a control, the assessment team visited 8 facto-
12 of them. The team assessed the value of ries that did not receive EP3 audits. This pro-
their training based on how they had used it vided a comparison and contrast of those who
during the period of EP3 implementation and were in the program and those who were not.
how they had applied their skills since project

  Table A.1. Assessment Team Visits to Factories That Had a PPDA and
                        Factories That Did Not
 Sectors                     Number of              PPDA Site Visits          Non-PPDA Site
                              PPDAs                                               Visits

 Chemicals                        6                        3                         4
 Food Processing                  4                        3                        2
 Hospitals                        2                        1                        —
 Mining                           4                        —                        1
 Printing                         4                        1                        —
 Tannery                         3                          1                       1
 Textiles                        3                          1                       —
 Total                           26                        10                       8
   Annex B. Persons and Firms Contacted

USAID Project Personnel                   Industrial Firms
Gilbert Jackson, LAC/RSD–E                Eduardo Brenner G, 3/21
Environmental Officer for Latin America   Manager, Galvanoplastia
Responsible for EP3 activities            Soc. Crom – Niq LTDA.
                                          Electroplating company that received a
James Gallup                                PPDA
Previously USAID EP3 Project Manager
Currently with U.S. EPA                   Gonzalo de Camino Ferrario, 3/23
                                          Manager, Jorge de Camino Ferario
Keith Forbes                              A leather tannery that received a PPDA
Environment and Pollution Analyst         Jorge de Camino Gili, 3/23
                                          Ownerr, Jorge de Camino Ferario
Deborah Hanlon                            A leather tannery that received a PPDA
Formerly USAID EP3 Project Manager
  Managed EP3 Knowledge and Awareness     Rodrigo Maturana Correa, 3/23
  Programs                                Manager, Metal Bras LTDA
                                          A waste recyling firm that received a PPDA
Marlou Thompkinson–Church
Former USAID EP3 Project Manager, WEC     Fuad Garib, 3/24
  Training. Presently with the Nature     Manager, Hitega S.A, Hilados Y Tejidos
  Conservancy                               Garib
                                          A textile firm that received a PPDA
David Gerber
USAID EP3. Responsible for linkage of     Jose Miguel Perez de Castro Z, 3/27
  Chilean firms to U.S. environmental     Director of Administration and Finance
  technology. Presently with EPA Global   Soquina Paints
  Technology Network                      A paint firm that received a PPDA

Betsy Marcotte                            Pedro Gac Vega, 3/27
Hagler Bailly Services, Inc.              Chief Engineer, Soquina Paints
Hagler Bailly EP3 Contract Director.      A paint firm that received a PPDA

Diana Page                                Jose Linj Navarin, 3/27
Economics Officer                         Manager,Curtiembre Etalfa
American Embassy; Santiago, Chile         A tannery that did not participate in EP3

Isabel Margarita Valenzuela R.            Andres Valenzuela Del Valle, 3/27
Commercial Advisor                        Owner, Curtiembre Etalfa
American Embassy, Santiago, Chile         A tannery that did not participate in EP3
Carmen Gloria Araya R., 3/28                 PETROX SA. A petroleum refinery
Director, Mineral Environmental              Did not receive EP3 assistance
Sociedad Nacional de Mineria                 Marco Antonio Leiva A.,4/3
A mining firm that did not participate in    Director, Los Fundos
  EP3                                        A dairy and cheese factory that received a
Pedro Moral Lopez, 3/28
Director of Operations, Morgan Impressions
A printing firm that received a PPDA
                                             Pollution Engineering
Carlos Fuentes B., 3/29
Chief of Maintenance, AASA                   Jose Luis Kofman, Director General, 3/15
Agricola Industrial Lo Valledor AASASA       Bechtel Chile, Ltda.
A slaughterhouse that received a PPDA        Bechtel Andean Region

Francisco Javier Urrutia H., 3/29            Jorge Castillo, 3/16
Director of Administration and Finance       General Manager, AQUA Laboratories
Aguas Manquehue                              Chairman of the Pollution Prevention
A private water and sewage company that      Group of the Association of Sanitary
  did not receive EP3 assistance               Engineers
                                             Environmental engineer trained under EP3
Alvaro Sola Alcazar, 3/29
Chief Engineer                               Dolores Rodriguez, 3/16
Aguas Manquehue                              Environmental Pollution Consultant
A private water and sewage company that      Environmental engineer trained under EP3
  did not receive EP3 assistance
                                             Francisco Acuna Carter, 3/17
Jorge Urrutia, 3/31                          Director of Development
General Manager                              AMG Bioingenieria, Ltda.
Del Cabo SA, Cornel                          Trained under EP3; did pollution audits
Fish Mean Processing Factory that did not      under EP3
  receive EP3 assistance
                                             Lorena Munoz del Campo, 3/17
Ruben Andrade Toro, 3/31                     Project Director
Chief Engineer                               AMG Bioingenieria, Ltda.
San Jose Fish Factory, Talcahuano            Trained under EP3; did pollution audits
Received a PPDA                                under EP3

Edurado Hillerns Larranaga, 3/31             Juan Carlos Diaz Saenger, 3/17
Chief of Environmental Matters               Director of Human Resources and
Compania Siderurgica Hachipato, SA             Environment
A steel mill that did not receive EP3        Cemento Melon
  assistance                                 EP3 Manager

Victor Aranciba Burr, 3/31                   Rodrigo Mayo, 3/17
Director of Environment                      Pollution Engineer, Ecosystems Company
                                             Worked on EP3 training programs
Annex B. Persons and Firms Contacted
Roberto Lastrico, 3/24                          The NGO that handled EP3 training and
General Manager, Environmental Manager          dissemination
Geotecnica Consultants
Worked on EP3 PPDAs                             Alicia Barcena, 3/28
                                                Director of Environmental Affairs
                                                Chief, Environmental Division, CEPAL
Organizations                                   Guillermo Garcia Cornejo, 3/28
                                                President of the Environmental Committee
Denise Recule, Director AEPA, 3/16              Sociedad Nacional de Mineria SONAMI
Associacion de Empresas y Profesionales         The trade association for mining companies
  para el Medio Ambiente
Chilean Environmental Association               Jay Ewald, 3/28
                                                Chairman AmCham Environmental
Anibal Mege Thierry, 3/20                         Committee
Environmental Director                          AmCham managed EP3 during the first year
SOFOFA, Chilean Chamber of Industries
                                                Eduardo Bitran C., 3/29
Ana Luisa Covarrubias P–C, 3/20                 Director, Fundacion Chile
Principal Investigator
Environmental Programs                          Macarena Ortega Granella, 3/29
Institute for Liberty and Development           Agriculture and Environment
                                                Fundacion Chile
Javier Hurtado Cicarelli, 3/20
Executive Director                              Patricio Riquelme, 3/30
Institute for Libery and Development            Director of Laboratory Operations
                                                Valparaiso Hospita, Valapariso
Rolando Chamy Maggi
Director, School of Biochemical Engineering     Luis Felipe Moncada, 3/31
Catholic University, Valparaiso                 Director, ASIPES
                                                Association of Fish Processin Industries
Rolando Chamy Maggi
Director, School of Biochemical Engineering     Rolando Castaneda, 4/5
Catholic University, Valparaiso                 Environmental Director
                                                InterAmerican Development Bank
Fernando Acevedo Bonzi, Professon,
School of Biochemical Engineering               Governmental Organizations
Catholic University, Valparaiso
                                                Jessica Ulloa, 3/16
Jose Jara Ormeno, 3/27                          Servicio Salud Metropolitano del Ambient
Project Director                                Health Ministry, Santiago Environmental
Consejo de Las Americas                           Services
                                                Environmental engineer trained under EP3
Nicola Borregaard, 3/28
Executive Director, CIPMA                       Patrica Matus Correa, 3/17
Centro de Investigacion y Planificacion de      Chief, Pollution Control Department
Medio Ambiente

28                                            Urban and Industrial Pollution Programs: Chile Case Study
CONOMA,  Comision Nacional Del Medio         Marcela Lara M., 3/21
 Ambiente                                    Director Clener Production Technology
National Commission on the Environment       Corporation to Promote Production
                                             Ministry of Economy
Mario Guevara E., 3/17
Assistant, International Cooperation         Ignacil Olaeta, 3/29
CONOMA, Comision Nacional Del Medio          Chemica Engineer, SESMA
  Ambiente                                   Air Pollution Monitoring Department
National Commission on the Environment       Environmental Health Services for the
                                               Metropolitan Region
Veronica Diaz Dosque, 3/20
Chemical Engineer                            Jacqueline Peillard Garcia, 3/30
Environmental Health Services                Executive Secretary, Natural Resources
SESMA–PROCEFF                                Commission and Environment
                                             Chamber of Deputies, Chile National
Veronica Diaz Dosque, 3/20                     Congress
Industrial Solid Waste Unit, SESMA
CONOMA, Environmental Health Services        Hugo Rojas, 3/31
Ministry of Health                           Director of Air Quality, Talcahuano
                                               Health Services
Andres Martinez, 3/20                        Ministry of Health
Industrial Solid Waste Unit, SESMA
CONOMA, Environmental Health Services        Jaime Diaz, Director, 4/1
Ministry of Health                           CEPRI Ambiente

Gonzalo E. Velasquez C., 3/21
Chief, Industrial Coordination Solid Waste
  Unit, SESMA
CONOMA, Environmental Health Services
Ministry of Health

Annex B. Persons and Firms Contacted
        Annex C. Chilean Environmental
        Institutions That Support Clean
      Production and Pollution Prevention

I   NCLUDED IN THIS ANNEX are summary de- Production Development Corporation
    scriptions of several institutions that have
as central objectives the support of pollution-
                                                 (Corporación de Fomento de la Producción,
prevention technologies, methods, and tools.     CORFO–FAT, Fund for Technical Assis-
New institutions have emerged over the past        tance (Fondo de Asistencia Tecnica)
few years following the enactment of Chile’s     CORFO–PREMEX , Program to Support
Framework Law on the Environment (Law              Management of Export Industries
19.300) which took effect on March 9, 1994.        (Programa de Apoyo a la Gestion de
These institutions complement others, both         Empresas Exportdoras)
public and private, that have been instrumen-    CORFO – PROFO , Project Promotion
tal in promoting sound environmental man-          (Proyecto de Fomento)
agement in Chile for more than 20 years. The     CORFO– FONTEC, National Fund for De-
institutions fall into two groups: governmen-      velopment of Technology and Inno-
tal and nongovernmental. However, with the         vation (Fondo Nacional de Desarrollo
growth of privatization in areas such as wa-       Tecnologíco y Productivo)
ter supply and sanitation, governmental enti-    CORFO –CREDITOS , Financial Interme-
ties such as the Production Development            diation
Corporation (Corporación de Fomento de la Chilean Corporation for Technical Research
Producción, CORFO) have begun to assume im-      (Corporación de Investigación
portant roles in the interface between public    Tecnologíca, INTEC–CHILE)
entities and the private sector. The major Chil-
ean environmental institutions summarized Nongovernmental
in this appendix include:
                                            Chilean Environmental Association (Aso-
Governmental                                      ciación de Empresas y Profesionales par el
                                                  Medio Ambiente, AEPA)
National Commission on the Environment      Environmental Planning and Research Cen-
      (Commissión Nacional del Medio              ter (Centro de Investigación y Planificación
      Ambiente, CONOMA)                           del Medio Ambiente, CIPMA)
Environmental Health Services for the Met-
      ropolitan Area (Servicio de Salud National Commission
      Metropolitano del Ambiente, SESMA)
Ministry of Economy, Environment Unit
                                            On the Environment
      (Ministerio de Economía, Unidad (Commissión Nacional del Medio
      Ambiental)                            Ambiente)
Executive Secretariate for Clean Production
      (Secretaría Ejecutiva de Producción The National Commission on the Environ-
      Limpia)                               ment (CONOMA) is a stand alone government
                                            agency that was given a permanent organiza-
tional framework under Chile’s Basic Law on              n    Fund environmental protection activi-
the Environment, approved in early 1994.                      ties
CONOMA is directed by a Board of Governors
composed of 13 cabinet ministers. The Board              n    Assist authorities in formulating and
is chaired by the Secretary General to the Presi-             implementing programs designed to
dent, an official of cabinet rank. CONOMA is                  educate the public on environmental
expected to play a catalytic role in helping to               protection, nature preservation, and
define the broad policy framework and to                      environmental asset conservation issues
provide selected service functions (such as en-
vironmental data collection, analysis, and               An Advisory Council provides consultation
training in environmental impact assess-                 and support to the Board of Directors and the
ments) to the rest of the public sector. CONOMA          Executive Office of CONOMA. It is composed
has a coordinating role. It does not develop             of two university scientists, two academicians
or enforce environmental laws or regulations.            from independent organizations, two business
The organizational framework is in line with             representatives, two representatives from non-
the overall strategy of strengthening key in-            governmental organizations, and one repre-
stitutional functions and appropriate units in           sentative of the president of the republic. It is
the line ministries and not the replacement of           presided over by the minister president of
their functions.                                         CONOMA. This council is also established in a
                                                         similar manner at the regional level, but is
CONOMA   is now emerging as an effective or-             presided over by the regional superintendent.
ganization for coordinating the nation effort
on environmental policies and issues. It has             CONOMA is decentralized territorially through
four technical departments: Environmental                Regional Commissions for the Environment
Impact Evaluation; Decontamination Plan-                 (COREMA). Each COREMA has a Regional Su-
ning and Norms; Natural Resources; and En-               perintendent and five ex-officio members
vironmental Economics. Consistent with its               from within the region. A Technical Commit-
legal mandate, its major functions are to                tee has also been established to assist each
n    Propose environmental policy to the
     president                                           Environmental Health Services
n    Operate the Environmental Impact
                                                         for the Metropolitan Area
     Assessment Review system                            (Servicio de Salud Metropolitano del
n    Coordinate the issuing of new environ-
     mental standards                                    The fundamental aim of SESMA is to protect
                                                         the health in Santiago of all persons currently
n    Formulate pollution prevention and                  at risk due to the environment. This objective
     clean production programs                           is achieved through the following efforts:

n    Coordinate environmental tasks among                Preventative Enforcement
     government ministries, bodies and
     agencies                                            Through requirements placed on the owners
                                                         of productive activities that are subject to
n    Operate the National Environmental                  health requirements, by means of authoriza-
     Information System, now open to the                 tions and resolutions that impact on the op-
     public                                              eration and/or expansion of their

Annex C. Chilean Environmental Institutions That Support Clean Production and Pollution Prevention     31
establishments, in order to safeguard in this       the establishment of CONOMA with the aim of
way the health and security of workers, the         dealing with the development of a national
neighboring community, the environment and          institutional framework for environment
the population in general.                          within the industrial sector. Initially, its actions
                                                    were directed toward studies aimed at the for-
Command and Control Measures                        mulation of policies for the control of indus-
                                                    trial contamination and assessment of the
To be accomplished by regular inspections in        contribution of the industrial sector to overall
accordance with technical priorities or as re-      environmental contamination in Chile. At the
quested by the community, in accordance with        end of 1996, the Environmental Unit was sub-
SESMA ’s responsibility under the Sanitary          sumed within the Ministry’s Division for the
Code, that allows it to function as the Primary     Development of Production and its principal
Health Tribunal.                                    activities are now directed toward formula-
                                                    tion of new initiatives in the promotion of
Environmental Awareness and Prevention              clean production.

To promote an increased awareness concern- At present, its principal objectives are
ing sanitation and healthier living conditions
in the community, through education, em- n To establish and coordinate strategies
powerment of community organizations,            and policies that contribute to sustainable
and increased social participation.              development by bringing together pub-
                                                 lic and private sectors in order to stimu-
Interagency Coordination                         late the introduction of technics and tech-
                                                 nologies that simultaneously increase ef-
Through the formation of strategic alliances     ficiencies within companies and mini-
between public and private agencies, that        mize environmental harm.
would be united in order to establish priori-
ties for the protection of individual and com- n To support public and private sector
munity health.                                   initiatives oriented toward promotion of
                                                 efficient and effective environmental
Risk Assessment                                  management, consistent with the indus-
                                                 trial development policies of the Minis-
Efforts will be taken to inform and educate      try of Economy
the community, in order to warn, prevent or
instruct them concerning the best practices to n To oversee technical support and to
undertake in order to avoid health risks.        coordinate the activities of the Ministry
                                                 of Economy with respect to environmen-
Ministry of Economy,                             tal issues
Environment Unit                                    n    To support the activities of the Division
(Ministerio de Economía, Unidad                          for the Development of Production with
Ambiental)                                               studies and technical analysis, specifi-
                                                         cally with reference to productive devel-
The Environmental Unit of the Ministry of                opment and its relationship with environ-
Economy was created in 1995, shortly after               mental issues

32                                                Urban and Industrial Pollution Programs: Chile Case Study
Ministry of Economy,                                     Production Development
Executive Secretariat for                                Corporation
Clean Production                                         (Corporación de Fomento de la
(Secretaría Ejecutiva de                                 Producción)
Producción Limpia)
                                                         CORFO   was created in 1939, as an entity of the
The Executive Secretariat for Clean Produc-              Chilean state charged with promoting na-
tion was created in March 1998 as the execut-            tional productive activities. Initially, it ap-
ing arm of the Ministry’s Policy for the                 proached this mission by creating industries
Promotion of Clean Production. Its main goal             considered essential for Chile’s economic de-
is to provide secretariat functions in support           velopment. Today, it has assumed a broader
of the Public–Private Committee for Clean                role of giving support for the modernization
Production. The Committee is composed of                 of private companies by assisting them in ob-
both public and private agencies directly in-            taining those key elements needed to increase
volved in the production, management, over-              their productivity, thereby strengthening the
sight and regulation of industrial waste.                capacity of the country to confront on an equal
Working together, the members of the                     footing the challenges of a global market and
Committee have mutually agreed upon a                    accelerated technological change.
document—the Clean Production Agree-
ment—which outlines the common environ-                  At present, CORFO’s activities are directed to-
mental aims between industry and the public              ward the following activities:
agencies responsible for regulation of the en-
vironment, and commits both to achieving                 n    Innovation and technological develop-
concrete environmental objectives through the                 ment;
implementation of clean production pro-
cesses.                                                  n    Modernization of companies to increase
                                                              their competitiveness;
In addition, the Ministry of Economy has
launched together with support from CORFU,               n    Improvements in company management;
a National Center for Clean Production. The
initial stage, which is to run from 1999-2001            n    Financing and the development of finan-
calls for the establishment of a network of                   cial instruments in order to meet com-
Cleaner Production Technology Centers,                        pany requirements for growth and invest-
which will be directed toward the establish-                  ment
ment of a national system of technical certifi-
cation of clean technology and environmental             n    The promotion of private investments in
services. In a second stage which is to be sup-               special zones
ported by foreign donor assistance, the
Cleaner Production Centres are to expand                 Although CORFO’s role in providing incentives
their services to regions outside Santiago and           for industrial development has not been di-
help both public and private organizations               rected specifically toward a solution for envi-
build their clean technology skills. The ulti-           ronmental problems, many of its financial
mate aim of the centers is to build a philoso-           instruments can be adapted to applications in
phy of industrial self-monitoring whereby                this field. Consequently, these are of great util-
enforcement agencies will take up new roles              ity to small and medium industries that want
in counseling and advising business in the               to increase their capacity to comply with en-
search for environmental solutions.                      vironmental regulations, but lack sufficient

Annex C. Chilean Environmental Institutions That Support Clean Production and Pollution Prevention      33
resources. Summarized below are the main n Consolidation of Waste Management
financial instruments of CORFO that can be            among Similar Industries or in Common
used in support of improved environmental             Areas.
management, their principal characteristics
and common applications in Chile.               Program to Support Management of Export
                                                Industries (Programa de Apoyo a la Gestion de
Fund for Technical Assistance (Fondo de Empresas Exportadoras, PREMEX)—The PREMEX
Asistencia Tecnica, FAT)—The FAT provides is focused on improving the competitive po-
companies with funds to enable them to sition of export industries, by introducing
cofinance the hiring of technical consultants management changes in order to improve
who can assist in the introduction and inte- both productivity and product quality
gration of modern technologies. Technical as- through “one shot” management consulting
sistance can be made available either for a aimed at diagnosing managerial deficiencies
single company or for a group of companies. and proposing short-term interventions. The
Technical areas covered under the assistance consulting intervention is usually less than
can include: quality assessment, design, fi- two months. PREMEX supports 60 percent of
nance, production, marketing, strategic plan- the cost of the consultancy up to a fixed level.
ning and organizational development, envi- Environmental applications include:
ronmental management, or other specialized
sectoral inputs. The aim is to optimize the The introduction of environmental manage-
company’s managerial and productive capac- ment systems (EMS), in anticipation of future
ity to enable it to compete on a global basis. requirements for exporting of goods requir-
                                                ing “green labeling”. Support can also be pro-
The terms and requirements for using the FAT vided to carry out the diagnosis and then
are circumscribed to ensure that the firms ac- outlining steps required for planning and
cessing the Fund are firmly committed to implementing an EMS in order to achieve cer-
modernizing their productive processes, are tification under the ISO 14000, if this is required
willing to make a significant personal com- by the company’s overseas clients; other ap-
mitment to the modernization effort, and are plications include the certification of food pro-
aware of the risks associated with the pro- cessing plants according to Hazard Analysis
posed investment. While much of the invest- Critical Control Point criteria required in vari-
ments are directed toward new plant and ous export markets, especially in Europe and
equipment to facilitate exports, it can also be North America. This application is aimed spe-
directed toward environmental improve- cifically at ensuring the health and safety of
ments. FAT has been used for the following food products, since this is so closely linked
environmental applications:                     with the high quality environmental manage-
n Diagnosis and Environmental Audit for
     Clean Production                           Another important application is the conduct
                                                of life cycle analysis of a given product in or-
n Technical and Economic Studies to Design der to identify new, and cleaner products and
     Solutions for Environmental Problems       processes. Life-cycle analysis may be required
                                                by some countries in order to ensure that the
n Preparation of Environmental Impact overall process of design, extraction, trans-
     Statements                                 port, processing, use and disposal of a prod-
                                                uct or material is carried out in an
n Planning Studies for Retrofitting, Con- environmentally sustainable manner.
     version and/or Relocation of Industries

34                                             Urban and Industrial Pollution Programs: Chile Case Study
Project Promotion (Proyecto de Fomento,                       introduce new process changes at these
PROFO)—PROFO is aimed at the promotion of                     sites
associations among companies that produce
similar or complementary products or are lo-             n     Group associations also look for and test
cated in the same area. The objective is to as-               the efficiency of new environmental tech-
sist them in the search for common solutions                  nologies, and work together to identify
that can be achieved by working together as                   the best providers of technical inputs
associations to increase their participation and
competitiveness in the market. The instrument            National Fund for the Development of Tech-
is especially geared to potential beneficiaries          nology and Innovation (Fondo Nacional de
in the small and medium enterprise sector.               Desarrollo Tecnologíco y Productivo, FONTEC)—
Activities and results from this instrument of           This agency of CORFO has as its objective to
CORFO include supporting payments to man-                promote, direct, finance and underwrite the
agers of PROFO associations; seminars for tech-          execution of technically innovative projects,
nology transfer; consultations; trips;                   the transfer of associated technologies, imple-
acquisition of books and specialized maga-               mentation of technical infrastructure, and in
zines; studies; and acquisition of minor equip-          general, promotion of all of the developmen-
ment, among others. This program has had                 tal steps required to increase the scale of pro-
several environmental applications. Some ex-             ductivity and marketing of projects linked
amples include                                           to innovative processes.

n    Group programs for training and imple-      It is envisioned that new industries, new prod-
     mentation of environmental management       uct lines and new technologies for a global
     systems and certification of ISO 14000      economy will generate new types of environ-
     (and also ISO 9000)                         mental problems. FONTEC recognizes that the
                                                 solutions to environmental problems from
n    Group programs for waste minimiza- these new industries have to be covered by a
     tion, including the identification of waste line of finance from FONTEC in order that the
     recycling and the use of waste by-prod- environmental solution is linked to the tech-
     ucts by others in the group                 nological innovation. Some examples of how
                                                 such investments might be used to address
n    Establishment of common sites for the environmental issues include
     collection and treatment of wastes. This
     has proved especially useful given the n Process changes in order to reduce the
     limited economies of scale of some small           generation of wastes through the intro-
     industries. Common treatment facilities            duction of new technologies, automation,
     have lowered costs significantly                   and the like

n    Collective programs for conversion and n                 Development of innovative systems for
     retrofitting industrial processes. Groups                the recovery and treatment of effluents
     often work together to identify viable                   and waste streams
     technical solutions to adapt their pro-
     cesses to meet environmental require- n                  Creation of a new product by internal
     ments in order to avoid relocation                       recycling wastes from the process

n     Group programs for the consolidation n                  Creation of new, more environmentally
     and relocation of industries. Groups of-                 friendly products, based on life-cycle
     ten associate to look for new sites and to               analysis

Annex C. Chilean Environmental Institutions That Support Clean Production and Pollution Prevention    35
n    Creation of third-party services for recy-     Chilean Corporation for
     cling and reuse of the waste stream
                                                    Technical Research
Financial Intermediation (Creditos)—To              (Corporación de Investigación
achieve its commercial and environmental            Tecnologíca)
objectives, CORFO has established a program
to provide medium and long term credit              INTEC–CHILE   is a not-for-profit, private cor-
through commercial banks. These credit lines        poration that performs a public role in facili-
are oriented especially to small and medium         tating, motivating and increasing the level of
enterprises and to nontraditional exports. Fi-      technology transfer among public and private
nancing is available for investments of all         companies and organizations. It was created
type: for machinery and equipment, installa-        by the Production Development Corporation
tion, construction, civil works, plantations,       (CORFO) in 1968.
cattle, engineering, and accounting services,
including working capital. The credit line is The objectives of INTEC–CHILE are to transfer
available for investments in waste reme-      technology to those productive sectors that are
diation and improvement of the environment.   involved in managing technical projects that
                                              have a significant national impact. It provides
Major characteristics of CORFO credits are    training to improve technical management of
                                              industrial sectors that are producing goods
n They are multisectoral, and can be used and services. This is achieved through tech-
    for investments in industry, agriculture, nology transfer by means of the following
    ranching, silviculture, fishing, minerals activities:
    exploitation, tourism, education and
    health                                    n Introducing new technologies, including
                                                   the identification and realization of de-
n There is great flexibility in the loan con-      mand to meet new technical require-
    ditions: with payback period from 2 to         ments, as well as evaluation, adaptation
    10 years, and grace periods of up to 24        and diffusion of emerging technologies
    months, thus allowing the structuring of       and best practices;
     repayment to meet the needs of each type
     of investment                            n          Managing technically innovative projects
                                                         that have significant national impact;
n    There is the option to repay in either
     Unidades de Fomento (UF)—a Chilean cur- n           Promotion of consultants and training of
     rency unit—or in U.S. dollars at a fixed            companies and consultants working with
     or floating rate                                    small and medium enterprises (SMEs);

n    The credit line is oriented to companies n          Creation of strategic alliances among na-
     with annual sales up to US$30 million.              tional and international companies;

n    The amount of the loan can be up to n               Support to governmental organizations
     US$5 million, with no more than 30 per-             in the formulation of policies and the set-
     cent intended for use as working capital.           ting of standards along lines that are con-
                                                         sistent with INTEC–CHILE.

36                                                Urban and Industrial Pollution Programs: Chile Case Study
INTEC–CHILE ’s   Division of Environmental               n    Companies offering environmental ser-
Technology has as its principal objective the                 vices and equipment
transfer of environmental technologies to na-
tional companies in order to fulfill its public          n     Professional consultants
role as the principal arbitrator in the supply
and demand of technologies. Its actions are              n     Chilean environmental authorities
centered around the following issues: envi-
ronmental management; clean production;                  n    Relevant environmental and eco–eco-
recycling and reduction of wastes; control and                nomic studies carried out in Chile
treatment of liquid and solid wastes; atmo-
spheric emissions; strategic alliances between           Several of the environmental services offered
Chilean companies and foreign companies                  by AEPA include
providing environmental technologies and
services, among others.                                  n    Bimonthly publications pertaining to
                                                              current environmental questions
Chilean Environmental
                                                         n    Organization of round table presenta-
Association                                                   tions, seminars, and so forth
(Asociación de Empresas y
Profesionales par el Medio Ambiente)                     n    Market research concerning the demand
                                                              for environmental services
AEPA was founded in February 1999, by a
group of companies offering environmental                n    Market studies on the supply and de-
goods and services whose major aim was to                     mand for clean technology in Chile
respond to the government’s new policies that
would tend to bring about cleaner production             n    Promotion of technical tours and busi-
processes. The Association’s stated objective                 ness missions
is “To promote application of the concept of
sustainable development in the governmen-                n    Organization of a permanent training
tal, corporate and social spheres as a whole,                 facility for the organization’s members
in order to strengthen prevention, control and
decontamination of productive activities.”               n    Dissemination of technical, market and
                                                              environmental information
Activities and services of AEPA are geared to-
ward the development of partnerships among               A working committee of AEPA has established
industrialists and those authorities and agen-           ProChile–AEPA which aims to promote the ex-
cies involved with the environment in order              port of Latin American environmental prod-
to achieve progress consistent with environ-             ucts and services originating from Chilean
mental policies. AEPA aims to create a mem-              environmental companies. The same group
bership registry as a means of promoting                 also intends to obtain new technologies from
environmental services and bringing groups               abroad in order to induce technology trans-
together through meetings of national inter-             fers and the promotion of “green marketing”
est. AEPA offers an environmental database               in Chile.

Annex C. Chilean Environmental Institutions That Support Clean Production and Pollution Prevention   37
Environmental Planning and                      approaches. Research themes have included
                                                international trade and the environment, the
Research Center                                 use of economic instruments in environmen-
(Centro de Investigación y Planificación        tal policy, public–private collaboration in en-
del Medio Ambiente)                             vironmental policy, and participation by
                                                citizen groups, and resolution of environmen-
CIPMA is a nonprofit organization for research, tal conflicts.
information, dissemination, and dialog in the
area of environmental policy. It was founded The courses offered by CIPMA have been at-
in 1979 and accredited as an “independent tended by staff of government agencies, en-
academic institution” by the Chilean National trepreneurs, academic and research staff, and
Council for Science and Technology. CIPMA’s other professionals. Typical training topics
funding derives from national and interna- have included clean production, pollution
tional organizations, and from public and pri- control, and environmental management.
vate corporations who provide grant support Most courses have been undertaken through
for research. Its main objectives are           contracts with international or bilateral orga-
                                                     nizations such as the Inter-American Devel-
n    To contribute to national dialog on for-        opment Bank and the U.S. Environmental
     mulation of national environmental              Protection Agency. Training sessions are
     policy integrated with economic, social         complemented by Seminars and Workshops
     and cultural development of the country         aimed at disseminating research results and
                                                     to obtain feedback from the diverse sectors
n    To undertake research that provides the         concerned with the environment. Themes
     technical foundation for dialog and con-        addressed by these groups have included:
     tributes to design and improvement of           Mercosur and the environment, economic in-
     policy instruments for sustainable devel-       struments in environmental policy, and im-
     opment                                          proving the quality of life.

n    To facilitate collaboration among the vari-     CIPMA   publishes a range of publications and
     ous social actors in the search for im-         occasional papers on topics related to its re-
     proved environmental management                 search and training programs, primarily in the
     through consensus and for processes for         areas of environmental management, sustain-
     resolving environmental conflicts               able development and pollution control, as
                                                     well as books, reports and proceedings from
CIPMA’s  activities include research, training,      seminars and scientific symposiums. Under
seminars, and working groups on various              an agreement signed in 1997, the Association’s
environmental topics. More recent research           database—which comprises over 14,000 na-
has focused on the interrelationship between         tional and international publications on envi-
development and the environment, and the             ronment—was recently transferred to the
formulation of government policy and envi-           Document Center of CONOMA, and is avail-
ronmental management in the various sectors          able to the public.
of society with an emphasis on participatory

38                                                 Urban and Industrial Pollution Programs: Chile Case Study

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