WATER ENVIRONMENTAL REGULATION IN COLOMBIA

REGULACIÓN AMBIENTAL DEL AGUA EN COLOMBIA

David Tobón-Orozco

Carlos Andrés Vasco Correa

1 Universidad de Antioquia (Colombia). Correo electrónico: david.tobon@udea.edu.co

2 Universidad de Antioquia (Colombia). Correo electrónico: carlos.vasco@udea.edu.co

Abstract

Water resources are vital to life and economic development, but in Colombia they are under threat by negative

externalities from diverse economic sectors. Water resource protection depends fundamentally on the quality and

eectiveness of environmental regulation and Colombia seems to be an international reference point on environmental

institutionalization given its completeness and comprehensiveness. However, Colombian water resources have declined in

quality and availability over the last years. is reality motivated the development of an exhaustive analysis of Colombian

water environmental regulation with an economic perspective. is article includes a review of the characteristics of

these regulations concluding that the deterioration of water quality is not only the result of increasing population and

economic development, but also of regulatory shortcomings due to institutional weakness, lack of enforcement, and the

inuence of interest groups.

Key Words

Environmental regulation, water, command and control, economic incentives, enforcement.

Resumen

Los recursos hídricos son vitales para la vida y el desarrollo económico, pero en Colombia están amenazados

por externalidades negativas de diversos sectores económicos. La protección de los recursos hídricos depende

fundamentalmente de la calidad y efectividad de la regulación ambiental y Colombia parece ser un punto de referencia

internacional en institucionalización ambiental, dada su exhaustividad e integralidad. Sin embargo, los recursos hídricos

colombianos han disminuido en calidad y disponibilidad en los últimos años. Esta realidad motivó el desarrollo de un

análisis exhaustivo de la regulación ambiental hídrica colombiana con perspectiva económica. Este artículo incluye una

revisión de las características de estas regulaciones, concluyendo que el deterioro de la calidad del agua no es solo el

resultado del aumento de la población y el desarrollo económico, sino también de las deciencias regulatorias debido a

la debilidad institucional, la falta de cumplimiento y la inuencia de grupos de interés.

Palabras clave

Regulación ambiental, agua, comando y control, incentivos económicos, aplicación.

UNIVERSIDAD NACIONAL DE CHIMBORAZO

KAIRÓS, REVISTA DE

CIENCIAS ECONÓMICAS, JURÍDICAS Y ADMINISTRATIVAS

Vol. 4 (2021), No. 6, Primer Semestre (Enero - Junio), (82-96)

ISSN No. 2631-2743

DOI: https://doi.org/10.37135/kai.03.06.06

Recibido 09 de agosto de 2020; Aceptado 12 de diciembre de 2020

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Introduction

According to New Institutional Economics (NIE), institutions decide the functioning of a society, whether by formal or

informal rules, and its structures for compliance (North, 2008). Both requirements must be fullled since a formal rule

that is not carried out is simply a dead letter (Ostrom, 2009). Environmental policy is part of an institutionalization aimed

at regulating the behavior of actors in a market when their actions cause negative externalities for others, and the market

does not respond to it. In Colombia, this institutionalization has been envisioned in a decentralized, participative and

autonomous way, which would have certain merits: the aected parties have incentives to check its functioning and have

greater information on how resources can be better used; the regulations are clearer, more participative and eective,

and are not in conict with other levels of government (Ostrom, 2009). However, decision-making must be transparent

and democratic, and there must be clarity on the social cost of the agents’ economic activities (their externalities) and,

therefore, these agents must face exemplary sanctions.

Colombia has a complete environmental institutionalization, abundant natural resources, water resources, and an

increasingly vibrant market economy that is approaching the level of a medium-income country. However, among

rankings such as the Environmental Protection Index (EPI), Colombia was number 85 among 178 countries showing

an alarming trend in the deterioration of its ecosystems and human health (Yale University, 2015), as well as in the

extinction risk from climate change (Urban, 2015). It is therefore important to research the quality of these regulations,

which can be characterized as a hybrid of Command-and-Control policies (CAC) and environmental taxes.

Another characteristic of the country’s institutions is the asymmetry among them. ere are better institutional

allocations in the center and precarious allocations in the peripheries, as well as factors which are counterproductive to

their proper functioning, such as a complex geography, territories controlled by illegal armed groups, political cronyism,

and a socioeconomic context rife with income inequality (Rodríguez, 2012).

e aim of this article is to show the advances made in environmental regulation in an emerging country such as Colombia,

in which apparently there is a great regulatory development, and which is a model of institutional involvement for other

nations in the application of a hybrid between command-and-control standards and economic instruments. However,

according to the authors' criteria, this complexity does not guarantee shielding the protection of water resources since it

is dicult to enforce both for the regulator and the regulated.

Regarding the methods for regulating environmental externalities, it was believed that economic instruments (Pigouvian

taxes, pollution permits, payment for environmental services) were more proper than CAC (technical and quantity

standards) to adopt the social costs of pollution, encourage to reduce this pollution at eciency levels and adopt cleaner

technologies. ese economic instruments provide exibility to nd the best solutions for each agent's restrictions,

nding a lower tax payment or new market opportunities. However, these results are subject to the assumption of a

“rst best world” in which there are no additional failures such as: uncertainty and unequal distribution of information,

limited wisdom, capital restrictions, undesirable behavior by the regulator (shortsightedness, lack of commitment and

enforcement diculties, being subject to capture or corruption), heterogeneity and market power of regulated agents,

research and innovation activities with public-good characteristics, and dierent types of reduction technologies. For

example, Bergek et al. (2014) show that CAC are preferred for their political acceptability or when there is uncertainty

about the measurement of environmental costs; hybrid instruments are recommended as an immediate solution.

Prior to this paper, several studies have explored Colombian water legislation (Blackman, 2009; Kathuria, 2006; OECD,

2014; e World Bank, 1999) and argued that the eectiveness of environmental regulation is partially successful in only

some watersheds due to problems such as: limited implementation, widespread refusal by municipal sewerage authorities,

and a confused relationship between discharge fees and emission standards (Blackman, 2009); the need to make sectoral

ministries accountable for the environmental impacts of their policies and strengthen the system of environmental

management involving dierent levels of government and the environmental information system (OECD, 2014).e

combination of environmental policy instruments including license fees, standards, charges, and subsidies reinforced by

active enforcement led to an overall improvement in environment compliance (Kathuria, 2006).

is article provides an exhaustive review of Colombian environmental water regulation’s main characteristics and

a conceptual answer to the question of whether a broad combination of instruments helps or impairs the quality of

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regulations. It is based on the economics of regulation and environmental economy, as well as certain recent evaluations,

highlighting institutional weakness, enforcement diculties, and the generalized inuence of interest groups.

The complex regulatory institutionalism

In Colombia, laws are dened by Congress, are the general frameworks that dene environmental policies and are

subject to compliance as per the 1991 Political Constitution. e Presidency of the Republic has the power to issue

decrees as long as they are within the guidelines of the law. Ministries, which dene sectoral policies, are part of the

executive branch together with the Presidency and other government units at the regional (department) and local levels

(municipalities, districts, and metropolitan areas). e Ministry of Environment and Sustainable Development (MADS

for its acronyms in Spanish) oversees environmental regulation and is responsible for overseeing the management of the

environment and renewable natural resources. e 33 regional autonomous corporations (CARs) are responsible for

enforcing regulations, conducting surveillance and control activities, imposing nes and making investments to expand

or maintain the supply of natural resources for the provision of ecosystem and water services to feed the aqueducts.

Regional and local governments should support the functions of CARs (Tobón & Vasco, 2019). is organizational

model, which dierentiates those who design the regulation from the regulatory compliance ocials, is motivated by the

idea of reducing the capture and control of institutions by increasing the number of agencies that fulll the regulatory

task, specializing in each activity, and generating checks and balance sheets between them, even if the cost of regulatory

work increases (Kugler & Rosenthal, 2000).

e judiciary also supports environmental policy through the Public Prosecutor's Oce, together with the executive

(Presidency, ministries and regional government units) and legislative powers (Congress). Fiscal accountability also

includes valuation of environmental management and environmental costs and advancing processes of scal responsibility

for damages to natural resources.

In Colombia more agencies were created from the 1991 Constitution to support the three traditional branches of public

power, called autonomous bodies, complementing the work of CAR. e Comptroller general, in the exercise of his

work, ensures the scal and managerial accountability of the public agencies and of agents or entities that manage public

resources, and the Attorney general and the Oce of the Ombudsman should watch and support compliance with

environmental regulation.

e Ministry of Environment was merged with the ministries of Housing and Territorial Development in 2002 for "reasons

of scal austerity and administrative eciency" (Law 790 of 2002 of the Congress), reducing its management capabilities

by entailing a reduction of resources and personnel to fulll its environmental work, which is increasingly extensive and

complex. In 2011 the functions of Environment and Housing were again separated under the name of MADS (Law 1444

of 2011 of the Congress). e MADS's management of environmental licenses, permits and formalities was then split

to create the Environmental Licensing Agency (ANLA), as an autonomous and independent body (Presidential Decree

3573 of 2011). ANLA has become one of the most controversial institutions because it launched the licensing process

through "express licenses" and by generating the social belief that obtaining environmental licenses became a simple

requirement rather than a duty, and because of the extension of its functions, as well as the control and monitoring of

rms’ compliance with the management plans (Tobón & Vasco, 2019).

Other public bodies enter the scene of Colombian environmental regulation of water resources, considering that

the political decentralization established since the 1991 constitution also led to a decentralization in environmental

management, and that regulation begins with the establishment of information systems on the territory, its environmental,

economic, and social resources, development plans, land management and water uses. e above as a prelude to the

application of technical regulations on the quantity, quality, and price of water, which are grouped into CAC policies

and economic instruments. is is what is called the National Environmental System, to which the following entities

are added: e National Planning Department (DNP), corporations and research institutes on environmental issues

(IDEAM, Humboldt Institute, SINCHI, Invemar and IIAP), Colombian National Natural Parks, autonomous bodies

and environmental and ecological police, citizen environmental authorities and non-state actors such as NGOs,

environmental movements, and ethnic-territorial organizations.

e organization of special environmental areas involves the Ministry of Justice and the Constitutional Court, addressing

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conicts between the interests of various ministries, by setting up prohibitions or limits on mining activity. In addition,

environmental crimes were brought into such category in the reform of the Penal Code (Law 1453 of 2011). Some of the

exceptional areas are managed by Colombia's National Natural Parks while others are managed by regional governments.

Transfers from the electricity sector to regional local governments are some of the most signicant sources of income,

and they are a compensation for the opportunity benets of water uses by hydroelectric plants. ese transfers were

created in environmental law (Law 99 of 1993), but their interpretation and calculation are moderated by the Energy

and Gas Regulatory Commission (CREG). In the precision of CAC policies on the use and quality of water discharged by

agribusiness, there is a complementary or substitute role to the work of MADS and CARs of the ministries of health and

agriculture, and the body in charge of technical standards and quality certications —Colombian Institute of Technical

Regulations and Certication (ICONTEC) —.

While subsidy types are dened by Congress and range from better technologies and production processes to the

promotion of private initiatives such as payments for environmental services to those who protect environmental and

aquifer reservoirs, companies must be registered in the National Science and Technology System and subsidy caps are

set up by the Ministry of Finance.

Since the 1991 constitutional reform in Colombia, both the regulations and the institutions in charge of the regulation of

the water resource have been increasingly expanded. e nancing of these organizations is limited by the growth of the

nation's overall budget; as the resources of these organizations do not depend on regulatory management, they must be

shared among all of them, and their tasks and technical complexity increase. As will be explained later, the taxes collected

by the application of all economic instruments are ridiculously small. Decisions on the strictness of the national water

environmental policy should strike a ministerial balance, as is the case with the ongoing feud between the Ministries of

Mines and Energy and the Ministry of Environment on issues such as mining exclusion zones, the Ministry of Finance's

support for obtaining scal resources in an emerging country that focuses on accelerated growth with pressing needs

such as poverty reduction, and the medium-term scal rule to be met (Wijen & Tulder, 2011). All this sets a limit to

environmental policy along with the pressure of stakeholders in the design of regulations and in the management of

the dierent regulatory and territorial bodies. e deterioration of strategic water resources has led the Constitutional

Court to mandate that these be dened as subjects of rights, ordering the various institutions to take coordinated action

to protect them (Sentence 622 de 2016).

Water environmental policy in Colombia

Water environmental policy can be analyzed based on the restrictions faced by rms that create impacts on water resources.

When water taken directly from natural sources is used in production, rms must allocate 1% of their investments for

recovery, preservation, oversight of the watershed and a closure plan. Although it is impossible to leave the site exactly as

it was found when the activity began, it should be le such that in a “reasonable” period, it will recover (Decree 1541 of

1978). In addition, rms must make compensation plans for one unit of new coverage for each aected unit and between

two and eight trees planted for each tree cut down following Resolution 1503 of 2010 by the Ministry of the Environment

and Sustainable Development (MADS), which presents the method to perform environmental impact studies, showing

that “in order to compensate for the impact generated, it is necessary to compensate an equivalent ecosystem.” And

while a rm must have an environmental license and there are various methodologies for that (Resolution 1478 of 2003)

(MADS, 2010), conict resolution by judicial organizations has not been possible given the lack of criterion unity, the

subjectivity of environmental evaluation, and implementation diculties.

Information systems and territorial organization

 Another limit is the scope of regulatory institutionality as there are ways of organizing water use and providing aqueducts. ese abound in rural areas and

coexist with agribusiness, and with public utility companies where these do not have coverage. ere is a tension between the state force that seeks to institutionalize

these ways that escape compliance with regulation and the market logic of giving water a price, and which can be more eective in achieving cooperative solutions

(community water self-management). Institutionality has made positive progress in universal access to the resource by ensuring a vital minimum and for the most

vulnerable not to be cut o when they do not pay; actions that have been promoted by citizen mobilizations (Water Referendum) (Moncada et al., 2013). However,

increasingly scarce water quality and quantity increase illegal and violent appropriations of the resource that violate the constitutional right to water use by anyone

who requires it (Guerrero et al., 2016).

 Also, anyone who does not comply with legislations in force incurs sanctions between 140 and 50000 legal minimum monthly wages, prison sentence of 55 to 112

months and additional administrative sanctions (article 34 of the Criminal Code – Law 1453 of 2011).

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From the regulator's perspective, the environmental policy can be classied in terms of information systems, CAC policies,

and economic instruments. e rst are the basis for both the knowledge of economic actors and the organization and

administration of a territory, as well as regulation and oversight, environmental auditing, and control. ey include the

Water Resource Information System (Decree 1323 of 2007), the models for classifying priority implementation zing

watersheds, and calculating groundwater scarcity, and actor registries (Decrees 303 of 2012 and 1324 of 2007).

ey

also include the limiting of riparian buer zones and protected areas or aerent conservation areas, watershed and

aquifer planning, policies and regulations on land use, control and monitoring systems on the quality of water for human

consumption, among others.

Water resource management has its origins in Decree 1381 of 1940, but it was made concrete through Decree-Law

2811 of 1974, which denes a watershed as a “special management area” and establishes that “watershed management is

understood as the planning of coordinated use of the land, water, ora, and fauna, as well as the execution of projects and

treatments.” rough Law 99 of 1993, which created the MADS as the body responsible for overseeing the management

of the environment and renewable natural resources, the National Environmental System (Sistema Nacional Ambiental)

was appointed to set guidelines for watershed management, as well as the scope of the CARs in managing the watersheds

in their authority. In 2010, the MADS issued the National Integrated Water Resources Management Plan (PNGIRH),

dening watersheds as special units in which water interacts with other renewable natural resources, ecosystems, and

anthropogenic actors (public organizations and residential, industrial, and commercial users)

Law 1523 of 2012, which adopts the “National Disaster Risk Management Policy” and establishes the National Disaster Risk

Management System (SNGRD), ordered that CARs must support territorial entities within their authority by integrating

them into the WMPs. Decree 1640 of 2012 implements the instruments for planning and managing watersheds, aquifers,

and others, supplying greater clarity in the CARs’ management and the dierent responsible entities and actors. In

addition, municipalities must incorporate the conditions of these WMPs into their LMPs.

Finally, Decree 3600 of 2007, which regulates Law 388 of 1997, considers restrictions on human settlements and the

possibility of urbanizing an area if it is protected as rural land (conservation and environmental protection areas,

agricultural and shing production, cultural heritage, public utility services, among others).

Table 1: Main instruments for managing renewable resources to be considered in WMPs

Source: (MADS, 2014)

In December 2015, the Law on Areas of Interest for Rural, Economic, and Social Development (ZIDRES) was approved.

 e demarcation of the Santurbán Moor stands out, as it is a point of reference for the declaration of other moors. Constitutional Court decision C-035 of 2016,

which prohibits mining in moor areas, and C-367 of 2011, which modied the Mining Code (Law 685 of 2001), extended mining exclusion areas (natural parks,

forest reserves, moors, and wetlands). Territorial entities must invest 1% of their income in increasing the oering of strategic areas (Decree 1900 of 2006) and areas

of interest for aqueducts (article 11 of Law 99 of 1993), along with the investments made by the CARs, which are territorial organizations responsible for applying

environmental regulations dened by the MADS at the central level. e serious problem is that other economic resources are required to the eectiveness of control

and management.

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is law looks to develop areas that demand inated costs for productive adaptation, have low population density and

extreme poverty rates, and lack transportation and product commercialization infrastructure, such as waste-land areas.

ese projects must be registered in the MADS and follow LMPs and Basic Land Management Plans (PBOTs) with

property productive and social management criteria dened by the Agricultural Rural Planning Unit (UPRA). is has

created some controversy since, in addition to promoting land concentration, if the projects do not follow these plans,

environmental sustainability can be aected due to the fragility of some areas such as high plains and the large-scale

projects being promoted (El Espectador, 2015).

Water Use Tax (WUT)

e WUT is charged for the use of water from a natural source and is subject to a water concession (Decree 2811 of

1974). It is a management instrument for conservation and ecient water use, and a nancial source of investments to

guarantee its renewability.

e value to be paid (

) is calculated as:

Vp FopWUT v= ..

(1)

where

Fop

is a factor of opportunity cost,

is the volume of water; in turn, the WUT is dened as follows:

WUTFTRM

(2)

Min

is the minimum tax dened by the MADS,

is a regional factor calculated by the respective RAC.

FCkCeCsR  



(3)

where Ck is an investment factor, which should add the total costs of the LMP and the WMP not included in the

Min

and the largest limit of seven to twelve for groundwater and surface water, Ce is the scarcity index of the watershed, and

there is a socioeconomic factor (Cs), calculated using the Unsatised Basic Human Needs (UBN).

However, Decree 4742 of 2005 established that for 2006

WUTT USD

Min

= = $

0 00016.

 arguing a foundation in

Resolution  of  “based on an estimated average per cubic meter of the annual investments in which the competent

environmental authorities have participated in the last three  years for the effects of preventing or controlling

depreciation of the resource” and for  it defined the Unit Tax for water use UT Unit Tax instead of the WUT

Water Use Tax as follows:

UT UT XIPC

 

11

11.( ).

()

(4)

where

WUT



 1

1 2017,t

is a factor of real increase calculated as follows:

WUT



 1

1 2017

and

WUTFTtR

Min



1 .

(5)

Finally, beginning in 2017, the

UT WUTtt=

. e Fop considers whether the user creates opportunity costs for consumers

downstream (Decree 155 of 2004) and is calculated as follows:





for those who return the water to the same

watershed or hydrological unit.

, in other cases.

e Fop

∈

(0,1) and relates only catchment volume (Vc) and discharged volume (Vv). In addition, a consumer can stock

from multiple sources and discharge in a single source, which would express that Vv > Vc, with an extremely low Fop

and a lesser value to be paid. It is also probable that the consumer may have been granted several water catchment and

 As Cs = (100-UBN)/100 it would attract consumers of water that would encourage employment in less developed areas.

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discharge permits, which imply a dierent cost, but make it possible to add up all catchment and discharge costs and

nd a single Fop. It is also possible that some discharge volumes may not be declared, or that groundwater catchment is

carried out with no later discharge in watersheds, causing changes in the value to be paid. And, unfortunately, the Fop

is unrelated to the use made of the resource or the opportunity cost of not having it. As a result, in Colombia, negligible

amounts are charged for water use, although new regulations are expected to increase its value.

Electricity Sector Transfers (ESTs)

Electricity Sector Transfers are a tax for water use which substitute payment of WUTs by hydroelectric power generators

with an installed capacity greater than 10000 kW (Article 45 of Law 99 of 1993 and Decree 1933 of 1994) and are equal

to 6% of gross electricity sales, the result of multiplying the amount generated by the block sales rate calculated by

the Gas and Energy Regulation Commission (CREG). ese transfers are distributed among the municipalities that

provide or hold a reservoir (3%) and the CARs in authority (3%)

e former must be earmarked for projects

including priorities of basic sanitation and environmental improvement in their development plans; only up to 10%

should be assigned to functioning

CARs contributions are allocated to environmental protection and defense of

the watershed and the hydroelectric project’s area of inuence.

Debates on this tax suggest it should be extended to hydroelectric plants with a capacity between 500 and 9999 KW,

which should pay 5% of their gross sales; the National Parks should receive the income given that in their jurisdiction

there are also supplier watersheds; and the tax should be raised to 7%. While gross sales are an amount that discounted

from the transfer of some payments made by the generators for the price of nancing equity funds in the electrical sector

and the administration and regulation of the electrical system, there is an even greater dierence between the spot price

of electricity and the gross sales value, where the opportunity benets for water use are not transferred, especially when

the spot price increases abruptly in anticipation of situations of water scarcity.

CAC Policies

Some indices have been developed to reduce the lack of available information and gure out a way the identify of changes

in water quality in cases of discharge. e National Sanitation Foundation Water Quality Index (NSF-WQI) presented

by Brown et al. (1970) suggests that 9 of 44 substances should be included in it.

Despite the ease of using an index, the

non-specicity of components leads to mistaken conclusions. For example, if eight obtain scores greater than zero but

the pH obtains an extremely low value, the global index will be “good,” but a body of water with an extreme pH value

will not be able to support certain forms of aquatic life or productive and recreational activities (Wills and Irvine, 1996).

In Colombia, CAC policies include some of the NSF-WQI and Pratti Index

components such as BOD5, pH, temperature,

and TSS (Total Suspended Solids). e others are subject to analysis and report by the CARs. ese norms date from

Decree 1594 of 1984 and were updated by Resolution 631 of 2015 of the MADS.

is decree set up discharge limits

as a total percentage of pollutants (Table 2). It also distinguished between new and existing users, being laxer with the

latter, and determined xed values for cyanide, mercury and lead, among others. e percentage removal of 80% is not

arbitrary but follows a technical study that showed if an environmental tax of USD$100/ton were set up, industries would

seek to reduce their discharge by 80% (e World Bank, 1999).

 In Ecuador $0.11009 is charged per m3; in Peru, USD$ 0.01573; and in Brazil, USD$ 0.17300 (2015 COP).

 ermoelectric plants are charged 4% of electricity sales, distributed into 2.5% for the RAC and 1.5% for the municipality where the plant is located.



It has been found that municipalities allocate many of these resources for other purposes including fiscal consolidation public debt electrification and others;

they are diverted for councilor pay life insurance fuel and automobile fleet maintenance Recommendations include applying management indicators associated with

environmental results and basic sanitation and making municipal fiscal effort a condition for access to the ESTs Hernández et al  Decree  of  dictates that

municipalities must allocate these resources to investments that counteract and mitigate disaster situations and social economic and ecological emergency situations

caused by winters that lead to the intervention by the central government.

 The components and their weights are: O  fecal coliform  pH  day biochemical oxygen demand BOD  Nitrate NO  phosphates 

temperature  turbidity  and total suspended solids TSS 

 The Pratti Index requires dissolved oxygen as a crucial parameter in water selfpurification and it is made up of pH O BOD Chemical

Oxygen Demand (COD), TSS Ammonia NO and Chlorine

 Previously Decree  had been modified by Decree 3930 of 2010 of the Presidency and Decree 4728 of 2010 of the MESD

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Table 2: Parameters for discharge into supercial bodies of water

Source: article 72 of decree 1594.

In general, Decree 1594 allows discharge of liquid waste that does not correspond to the set of the characteristics of water

bodies, such as ow rate and volume, but the pollutant change taken on by a water body, and it is incomplete since it does

not set global maximum pollutant loads. Resolution 631 tried to resolve these issues, but it also has several problems:

1. e majority of parameters are subject to analysis and report, such that lower costs are incurred when each of them

are specied, though the polluting actor must be the one to report information to the environmental authority, and the

latter must input it in the Water Resource Information System or WRIS); 2. It also does not contemplate maximum loads,

so, it is possible to discharge as many liters of water as are desired, as long as the parameters per liter are complied with;

it is therefore important to review the possibility of establishing global limits. 3. Since micrograms per liter (mg/l) are

regulated, the restrictions can be followed by diluting the pollutant load in a greater quantity of water, which motivates

greater water use. 4. e parameters are not comparable with earlier regulation, which set up a discharge percentage

(80% on the average) instead of absolute values. e latter are more restrictive for large polluting rms (Peláez, 2015).

However, in general equilibrium exercises, it has been concluded that if these values are not reviewed over time, they will

be more permissive than the earlier regulation (Tobón et al., 2018).

Regarding discharge of combined waste from two independent activities, agriculture and shing, with the most

restrictive values being applied to each reference; pollutant control for agrochemical use. In addition to complying with

the measures demanded by the CARs, it prohibits: 1. eir manual application within a buer of three meters measured

from the shores of any body of water and 2. eir aerial application within a buer of 30 meters is also measured from

these shores. Regarding pesticides, the contents of Decree 1843 of 1991 of the Ministry of Health are considered.

For land agrochemicals, Colombian Technical Regulation (NTC) 5167 of the ICONTEC establishes that compost must

not be used for agricultural purposes since its components are bio accumulative and soak the soil, unless they follow

the parameters approved. is standard sets the criteria for controlling supercial water discharge from agricultural

activities, supplying a list of 21 parameters that are not comparable to the earlier norm except for pH, which follows

Decrees 1594 of 1984 of the Ministry of Agriculture and 631 of 2015 of the MADS. In addition, the NTC suggests

evaluating other substances, such as phosphorus and nitrogen, bases for the component's phosphate and nitrate, which

are suggested in the NSF-WQI.

Regarding the progressive deterioration of water resources (IDEAM, 2014), Resolution 631 of 2015 was passed to regulate

article 28 of Decree 3930 of 2010 and update Decree 1594 of 1984, modifying measurement of pollutant discharge and

specifying parameters per economic activity (73 activities and 8 sectors).

Measurement must be completed in terms of

the number of pollutants per liter of water discharged, considering pH, COD (Chemical Oxygen Demand), BOD5, TSS,

sediment solids, and fats, oils and grease. e concentration of polycyclic aromatic hydrocarbons must be less than or

equal to 0.01 mg/L, and for some economic sectors exist additional parameters. For temperature, the criterion of 40°C is

kept, but requirements are extended since the dierence in values between the mixing area and the body of water before

discharge must not be greater than 5°C.

Finally, according to the Contraloría General de la República (2015), Resolution 631 is not as strict as others worldwide.

Recommendations include implementing measurements for types of water ows based on the Brazilian experience since

smaller rms have greater BOD5 and COD levels and could support a greater quantity of TSS or creating a hybrid

in percentage and xed terms with a maximum supercial water discharge concentration and a minimum reduction



Given that agricultural activities are partially considered by Decree 631 (it only includes agroindustrial activities), they must be regulated by the Ministry of

Agriculture and the technical standards of ICONTEC mentioned above.

 This regulation also includes total hydrocarbons orthophosphates and others.

 Of the 9 parameters suggested in the NSFWQI, only  are considered and their weights are not significant on the index

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percentage and considering the location of the discharge site into water bodies, as in the European Union.

Environmental compensatory tax

is tax complements the CAC policies, and therefore there is a hybrid system in Colombia: a tax is levied on some

regulated discharges, founded in Law 99 of 1993 in article 42 as follows:

Direct and indirect use of the atmosphere, water, and land in order to introduce or dump refuse or agricultural, mining, or

industrial waste, wastewater, or sewage of any origin, smoke, fumes, and harmful substances resulting from anthropogenic

activities or activities created by mankind, or economic or service activities, whether for prot or not, shall be subject to the

payment of environmental taxes for the harmful consequences of the said activities

e goal is to give cues to change consumption and production patterns and make decisions following the social and

environmental costs of pollution, as well as to incentivize changes toward cleaner technologies. Its background includes

Presidential Decrees 2811 of 1974 and 1594 of 1984. It was centered only on for-prot activities, excluding public utility

services for aqueduct and sewer rms in nancial trouble, and payment depended on the cost of the monitoring and

control programs for the CARs. Aer Law 99 of 1993, the tax was transformed by a clearer economic incentive (Restrepo,

et al, 2007).

For each of the seven parameters subject to taxation, the CAR should set up an environmental compensatory tax rate

which is the result of multiplying the smallest rate (Tm) by a regional factor (FR):

MP Tm FR C

i



(5)

where:

MP: Amount to be paid 

Cí: Pollutant load from parameter i

e Tm was set up by Resolution 273 of 1997 and updated by Resolution 372 of 1998 of the MADS. However, there are

only two parameters subject to charge; TSS and BOD5 and it must be updated with the annual CPI (Consumer Price

Index).

Decree 2667 of 2012 of the MADS establishes that the following parameters must also be checked: temperature, COD,

dissolved oxygen, fecal coliform, and pH. is choice is taken from the NSF-WQI and some rms have made complaints

about it and the respective caps, arguing that the method applies to the characteristics of water bodies and rivers in

the United States in the 1970s without an understanding of the particularities of Colombia (Consejo de Estado, 2007).

However, neither a Tm nor an FR has been set up for these new parameters. It is also important to mention that according

to the NSF-WQI, dissolved oxygen is more important than BOD5, and sand turbidity is more important than TSS

(Abbasi and Abbasi, 2012).

e FR aims to multiply the smallest Tm rate such that it represents social and environmental costs of discharge. is is

calculated by the CARs according to global and individual quality goals and was proposed by the rescinded Decrees 901

of 1997 and 3100 of 2003. Its evolution has been as follows:

Article 9 of Decree 901 proposed that the CARs must see an increase in the FR “until reaching a regional rate level that

causes a reduction in the total pollutant load that meets the pre-established level for the reduction goal” and beginning at

1 and increasing 0.5 each semester. e CARs stopped increasing the FR as goals were reached. e clarication of article

10 states that, in any case, the amount to be paid: “includes the value of depreciation of the aected resource, considering



See decrees 901 of 1997 and 3100 of 2003 of the MESD (modified by Decree 3440 of 2004) which regulated levying of environmental taxes

and set the procedure for the minimum rate regional factor reduction goals taxable entities collection mechanisms oversight and control and

complaints

 The allocation of these payments shall be up to % to RACs to cover costs of tax implementation and monitoring and the remaining % for

investment projects in water decontamination and monitoring water quality Of the 9 parameters

suggested in the NSFWQI, only  are considered and their weights are not significant on the index

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the social and environmental costs of the damage stated in the pollutant load reduction goal. Likewise, the costs of

resource recovery are reected in the minimum rate (Tm).” Despite its conception within the decree, the environmental

compensatory tax abandons the spirit of Law 99 since in its regulatory evolution it has moved away from the concept of

social and environmental costs.

Five years later, Article 15 of Decree 3100 of 2003 updated the Fr method beginning with a value equal to one, adjusting

it annually beginning at the end of the second year and applying the following to actors who did not meet the goal:

FR FR

CC CCM

CCLt CCM





 1

()

(6)

where:

FR FR

CC CCM

CCLt CCM





 1

()

: Adjusted regional factor.

FR FR

CC CCM

CCLt CCM





 1

()

: Previous year’s regional factor.

FR FR

CC CCM

CCLt CCM





 1

()

: Total pollutant load received by the river, water body or section in kg/year.

FR FR

CC CCM

CCLt CCM





 1

()

: Global pollutant load goal in kg/year.

FR FR

CC CCM

CCLt CCM





 1

()

: Total pollutant load in kg/year.

At the end of the ve-year period, if the goal was reached, FR begins at 1; if not, it begins at the value at which it ended

the earlier ve-year period. In any case, 1 ≤ FR ≤ 5.5. Formula (6) would be evaluated again at the end of the second

year of the new ve-year period, updating the variables CCL and CCM.

Finally, Decree 2667 of 2012 changed the formula for FR as follows:

FR FR

CCM

 1

(7)

e global goals require a consultation for BOD5 and TSS as follows: baseline, projections of user load and quality goals

in force at the end of the ve-year cycle, the body of water’s ability and execution of works included in the Sanitation

and Discharge Management Plan (Discharge Permit, and Plan for Reconversion to Clean Technology and Discharge

Management, goals per user based on their own loads, and global goal). In addition, group goals may be dened for users

who share or do not share the same economic activity.

Article 184 of Law 1607 of 2012, which changes the Colombian tax code, obligated state institutions to perform a study

on the eectiveness of these taxes, as well as the identication and viability of new taxes. It is worth noting that during

2008-2012, the 39 CARs levied environmental compensatory taxes, either with only Tm (57.9%) or applying the FR

(44%), and 43% were implementing the process of calculating FR for 368 water bodies (52.6% of the total). Of 21.2% of

the water bodies in which the environmental tax with FR was charged, it was above 1.00, which shows global goals for

pollutant load are not followed, while 20.9% of these show compliance (FR = 1) (Contraloría General de la República,

2014).

Recommendations include strengthening charges since collection is less than what is billed; and improving information

given that it is not only incomplete, but also incorrect for many of the CARs. e environmental compensatory tax

also requires updates in all the parameters presented by the new regulations and the specication for goal loads for the

regional factor, which are lesser or equal to those set up in the regulation.

Since the Tm was approved in 1998, the value has barely surpassed the negligible threshold of USD$0.03145 per kg of

pollutant load (BOD5). e Tm for 2015 is USD$0.03864/kg for DBO5 and USD$0.01653/kg for TSS (MADS, 2015). In

addition, of the seven parameters to be measured, only TSS and DBO5 are charged, leaving out critical variables such as

temperature, pH, dissolved oxygen, and turbidity.

e CARs' behavior can be explained by the funding sources since the environmental tax is the one that generates the least

 Not every year, as currently occurs in accordance with Decree 2667 of 2012.

 Not including the reduction goal of sewerage firms

 This limit is due to a technical issue regarding the assimilation capacity of bodies of water for discharges (Uribe, 2016; Naranjo, 2016).

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income (0.03% of total income on the average). Other sources such as participation in property taxation (environmental

surcharge), electricity sector transfers, issuance of environmental licenses and the imposition of nes generate a large part

of their income (Sánchez, 2011). Finally, there exists the possible interference of interest groups, particularly polluting

rms, in the social agreement required by the goals, and of political parties in the makeup of the CARs.

Payments for environmental services (PES)

Another economic instrument is PES, which can be understood from dierent viewpoints ranging from environmental

to ecological economy, from paying for the opportunity cost of the individual that oers them to a symbolic value

when the service is considered a social contribution (Tacconi, 2012). e main problem lies in calculating that range

of value and the social utility generated by said services. In addition, payments tend to be limited to one of the several

environmental services provided by a natural system; for example, when only CO2 catchment provided by a forest is paid

for, there is another benet of water regulation that is not being paid for.

Another problem with PES is their nancing as public goods since those who pay for them help other users who do

not have to pay. erefore, there are incentives to free-rider behavior and the resulting allocation will be smaller than

socially desired. erefore, since PES are private initiatives, there are intentions to increase them through public policy.

For example, in Colombia, tax subsidies are awarded to those who demand them or substitute closure plans that must

be prepared by rms that have an impact on the environment (see Decree 1007 of 2018 of the MADS and 953 of 2013

of the Presidency).

It is common in Colombia to sign contracts with the provider of an environmental service for up to ve years, in which

awareness is raised to keep habits of environmental protection. From the outset of the contract, the oeror is notied

that he or she will receive an economic incentive for practices that he or she should already be undertaking given that

many are approved by environmental regulations but are not enforced by the regulator, for example, respecting 15 meters

around bodies of water. erefore, another characteristic of these services in Colombia is that they help with compliance

with environmental regulations, which are not followed due to the technical diculties and the costs of carrying out this

function. At the end of the ve-year period, an evaluation is made of whether the practices are sustainable or whether

the economic incentive is still necessary, and if so, the contract is renewed for a reasonable period.

Examples of PES include rural aqueducts, in which beneciaries nance the protection of water reservoirs, and the

Ecoversa and Patrimonio Natural funds, which negotiate directly with the owner of the service site, such that a minimum

value is paid to him or her. In the case of the fund BanCO2 for Eastern Antioquia, rms and even consumers may pay

for the service of CO2 catchment achieved by strategic forests, and the product of each tree and the number of trees per

hectare are valued as shown by the global carbon market. In addition, the program is reinforced by the environmental

corporation CORNARE since it is a substitution mechanism to compensate for trees cut down, giving rms corporate

social responsibility certicates. As of 2015, USD$62.9 are paid per hectare, although the payment has a limit of USD$188.7

independently of the number of hectares and for an unlimited time. In addition, it is concentrated in a special population

such as those with extremely low income or those displaced by the armed conict. is type of mechanism is also being

applied in the RioGrande watershed in northern Antioquia through the Cuenca Verde initiative, in which the owners

of the lands reserve an area for protection or reforestation and are compensated with technical aid, the installation of

wastewater treatment plants, the building of restraining walls in threatened areas, the installation of energy saving stoves,

the building of orchard sheds and reforestation on the banks of water bodies.

Tax incentives

rough the approval of Law 99 of 1993, the Ministry of the Environment is in charge of promoting plans for industrial

restructuring  as well as the economic instruments analyzed. ese actions have been included in international

initiatives such as the global carbon market whose goal is to help mitigate climate change. Another action is the creation

of Green Markets, which seek to attract demand with environmental sensitivity. A rm considered to be green is certied

through the ICONTEC, which shows that the rm sustainably uses resources, renewable energies, recycling policies, and

cleaner technologies. ey are also subject to tax benets.

 This is what is known in the literature as changing the production process, contrary to the use of end of pipe technologies in which the production process is

maintained but filters or treatment plants are added at the end of the production process The former is more efficient for achieving environmental goals but is more

costly and provides uncertain results.

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Tax exemptions and exclusions applicable to the acquisition of reduction technologies and investment in research that

favors innovation in clean production processes fall within the framework of tax legislation (Law 6 of 1992 of Congress),

article 123 of which sets up deductions for investments in control and improvement of the environment. Article 158

and the following articles of the Tax Code establish that “legal persons who make direct investments in control and

improvement of the environment shall have the right to annually deduct from their income the value of said investments

which have been made in the respective tax year. e value to be deducted for this reason shall in no case exceed twenty

percent (20%) of the taxpayer's taxable income determined before subtracting the value of the investment.” In addition,

deductions are granted on income taxes for investments in research, technological development, and innovation, as well

as control and improvement of the environment. For example, projects carried out through research and technological

development entities recognized by the Ministry of Science and Technology may deduct from its income 175% of the

investment in said projects with a limit that may not exceed 40% of taxable income determined before subtraction of the

investment.

Decree 722 of 2014 of the Ministry of Finance, which updates the goods excluded from the VAT tax, previously

established by Laws 1607 of 2012 and 223 of 1995 of the Congress and the Tax Code, sets up a competitiveness factor

in the production sectors, such as food with agricultural origins and its production inputs. e tax code shows that

importation of machinery not produced in Colombia for the following activities does not incur sales tax: garbage and

waste recycling, wastewater purication and treatment, atmospheric emissions or solid waste, river recovery and basic

sanitation, as well as importation of equipment for environmental control and monitoring included in the Montreal

Protocol on substances that reduce the ozone Layer. is imported machinery must stay during its service life unless it

is transferred to a leasing company.

ese incentives promote importations that will help move toward cleaner production and the exportation of goods with

an added value. However, rms show their contempt for being subject to the implementation of environmental goals

agreed upon with the Ministry of the Environment and the plans and programs of the Ministry of Mines and Energy,

which are, in turn, subject to budget availability in the Medium-term Fiscal Framework and other restrictions reported

by the Ministry of Finance. e above causes high uncertainty: for example, regarding some plans such as the one for

energy and environmental eciency administered by the Mining Energy Planning Unit (UPME), which is part of the

Ministry of Mines and Energy, only 50% of the projects presented were approved (UPME, 2015). In addition, rms that

belong to the small and mid-sized sector do not pay high income taxes, so they could not take advantage of discounting

those investment payments made for pollution reduction technologies (Supersociedades, 2015). Finally, accessing these

incentives is exclusive of rms formally set up, which can imply greater costs that could not be justied by the expected

benets.

Discussion and nal remarks

In Colombia, there is progressive deterioration of water resources resulting from growing population and economic

dynamics. However, there are also failures in the regulation of water production and consumption activities. Commitment

to have more legislation is the most common response but also the most ineective. Since it has been shown that the

normative architecture to regulate water resources is comprehensive, Colombia should not follow the easy route of

redening goals or new regulations; the better path is to improve or enforce existing regulations. Hybridization between

CAC policies and economic incentives has another attribute that makes them more eective in the current circumstances

where there is an increasing political and social sensitivity to economic adjustment measures in emerging countries

(Monahan, 2019), because it has greater social approval given the xed part of the regulation (CAC policies), which has

the attribute of ensuring minimal protection of water resources, albeit with higher costs of regulatory intervention.

 Technical regulations mainly include sector orientations and the National Centers for Cleaner Production and Environmental Technologies (CNPMLTA).

 The goal agreed upon in the COP 21 (December 2015) of increasing temperature by °C, and the additional efforts to try to limit it to °C, depend on the

implementation of the Paris Agreement in 2020. All the signatory countries must limit their greenhouse gas emissions although developed countries will have to make

a greater effort and mobilize at least USD$100.000 million annually to contribute to an adaptation and energy conversion fund for developing countries and those

most vulnerable to climate change. Colombia’s position is complex given that it has gone from being an underdeveloped country which could previously sell emission

reduction efforts below the MDL, to being one with a medium income and which must comply with environmental goals of reducing emissions by % in  based

on pollution levels in 2010. In addition, it is on the list of most vulnerable countries to climate change meaning that the establishment of goals and carbon taxes are

required, but that it also hopes to benefit from said fund.

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Some suggested improvements to the set of CAC policies may be: land use management should consider information

restrictions and the priority of water resources; water use taxes should be similar to those in other countries in the region

or be related to the benets of using the resource, as occurs with the signicant income transfers made by hydroelectric

producers; environmental compensatory taxes should abide by the spirit of Law 99 of 1993 and be comparable in their

parameters to the new discharge regulations such that this hybrid environmental policy can function as a safeguard

against the risk of greater environmental deterioration and provide minimal signals to modify patterns of consumption

and production, and economic decisions should be made according to the social and environmental costs of pollution;

changes should be incentivized toward cleaner technologies; or greater use should be made of tax subsidies to consider

the option of a nancial sustainability in the sense that subsidies should come in some percentage from the collection

of environmental taxes. ere should also be private mechanisms like PES, although so far, they have been incentivized

by public policy, their scope is limited, and payment made for them does not compensate for the opportunity cost of the

various ecosystem services that can be preserved.

Adjusting water use and environmental compensatory taxes would be expensive, and most agricultural production

has a remarkably high subsidy implicit to the use and contamination of water. General equilibrium models applied to

Colombian water resources estimate that adjusting countervailing rates to the social cost of pollution would signicantly

increase environmental compensatory taxes, causing higher prices on essential foods such as milk (Tobón, Molina &

Vasco, 2018). Under current and medium-term conditions, where there will be other priorities such as poverty alleviation

and economic growth recovery, it will be more dicult to resort to the use of economic instruments. It is therefore

recommended that tax adjustments supply a minimal sign of scarcity, such as that needed for the operation of regulatory

bodies.

In any case, this institutional adjustment must consider the inuence exercised by interest groups and the administrative

and technical capacities of the regional corporations (CARs) to apply regulations, which means increasing their

autonomy and their access to greater resources, for example by limiting the inuence of political parties in their makeup,

making their budget more dependent on the collection of environmental taxes, and requiring that monitoring and

control of compliance with regulations be nanced by regulator actors. e budget exibility of these bodies should

also be considered since they have xed income regardless of eciency in their regulatory management, in addition to

assigning regulatory management costs to regulated rms as the tasks of regulatory bodies are increasing, making them

impossible to accomplish given the limited resources they have.

Finally, the regulation of water and other environmental goods and services is intricately linked to that of greenhouse

gases. And facing climate change implies a more comprehensive regulatory evolution in terms of CAC policies,

promotion of unconventional energy sources, rational and ecient use programs, tax benets and carbon markets. is

regulatory evolution is linked to the commitments that Colombia must meet under the Kyoto Protocol. As there are

complementarities between reducing GHGs and ecient use of water resources, water regulation is expected to be part

of a large umbrella program that has as its central focus the ght against climate change.

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