Environmental Engineering Reference
In-Depth Information
for instance, causes deterioration in the water resources quality, the two variations
will tend to compensate, reducing the payment derived from the COD scheme.
As such, the way to design the indicator becomes critical to ensure that the
incentives are inducing the right behaviour in each stakeholder. However, in most
cases the available information is not enough to build a formula that allocates the
right weight to each individual indicator. It may also be challenging the mere
exercise of selecting what indicators to combine. However, if there is suf
cient
understanding of some of the cause and effect interrelation between the different
elements that come into play, an initial formula could be proposed and a mechanism
for adjusting it could be set. This adjusting mechanism should be fed through
information gathered during the implementation of the different policies and
interventions derived from them in each speci
c subsector.
One of the important elements of the COD scheme is that it leaves up to the
government to decide the way the improvement in the indicator will be achieved;
however, it sets a clear incentive to move in the right direction. The strength of the
incentive would be a function of the associated funding committed by the devel-
opment institution, and of the economic bene
ts that could materialize from the
actions implemented towards improving the situation as measured by the indicator.
Provided that the adjustments to the indicator formula do not denaturalize the
concept behind the initial objective, the proposed scheme could provide some
continuity to the actions of successive governments. Maybe one administration
would put more emphasis on one of the subsectors while the next one will focus on
others but if the economic incentives are strong enough, the different administra-
tions will still focus on improving the overall result measured by the combined
indicator.
Using a COD scheme would provide the government with the
flexibility to set
the targets, if willing to do so, for each individual indicator and implement pro-
grammes and projects they consider most conducive to obtain the pursued results. It
will also tend to guarantee the funding agency that the government will have strong
ownership of the associated interventions in each subsector. However, to move
towards each target, the policies should translate into action at the right institutional
levels using similar or other RBF mechanisms as discussed in the next section.
4.2.3 Implications for Lower Implementation Levels
Although similar schemes could be set between the national and other levels of
government, the use of other RBF instruments could also be suitable in contributing
to the results pursued by the higher level scheme.
Output-Based Disbursement (OBD), could be used as a form of cascading
incentives between the national and lower levels of government. Combining COD
and OBD (or other RBF tools down the implementation chain) could make sense,
as it is most likely that a programme aimed at improving state/provincial govern-
ment performance throughout the country will improve the country
'
s performance
as a whole.
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