Making privatization work for the environment

May 1, 1997

Dear Friend:

Canada’s sewage system is a disgrace. Hundreds of thousands of Canadians dump their sewage, untreated, into our coastal waters. Over a million more contaminate our lakes and rivers with raw sewage. Sewage treatment plants, in desperate need of repair and upgrading, regularly violate provincial and federal laws. In Nova Scotia and British Columbia, non-complying plants are the norm. Six dozen plants in Ontario, and over four dozen in Quebec, exceed their discharge limits. Across the country, sewage pollution contaminates beaches and harbours, puts shellfish grounds off limits to harvesters, and kills fish.

Meanwhile, provincial regulators refuse to enforce the laws designed to keep our waters clean. Neither Nova Scotia nor Quebec has ever prosecuted a polluting sewage plant. In Ontario or British Columbia, you can count the prosecutions on one hand.

Our governments’ reluctance to curb sewage pollution is hardly surprising. After all, it is they who would have to fund many of the required improvements. And the bills could be in the billions of dollars. As tax dollars grow ever more scarce, governments, despairing of finding money for their sewage systems, are turning to the private sector. Ontario is talking of selling the agency that operates many of the province’s sewage treatment plants. A debate about privatization rages through Quebec. Several other provinces are beginning to experiment with public-private partnerships.

Privatization can be disastrous: It can protect polluters from public scrutiny and enshrine the de facto pollution rights now enjoyed by our publicly owned water and sewage companies. Alternatively, privatization can work wonders: It can encourage long-delayed investment and restore the accountability of those treating and disposing of our sewage. For simple financial reasons, many of our sewage treatment plants will be privatized in the coming years whether we like it or not. It is up to us to turn this change to the environment’s advantage and to ensure that the profits of the newly private companies do not rest on their being able to pollute with impunity.

Whether privatization helps or harms the environment will depend on the expectations established before privatization and on the effectiveness of the regulatory bodies set up to oversee privatized companies. Just how important these factors are has been demonstrated in England and Wales, where, in 1989, the government privatized the companies responsible for water supply and sewage treatment.

In England and Wales, despite various problems, privatization has benefited the environment enormously. Coastal waters have seen dramatic improvements. Before privatization, only 66 percent of Britain’s bathing beaches met European standards; last year, over 89 percent complied. Privatization has also reversed the deterioration that plagued rivers and canals throughout the 1980s. Within six years of privatization, the quality of some 3,000 kilometres of inland waters had improved significantly, while about 225 kilometres had deteriorated.

What explains this striking turnaround? First and foremost, privatization enabled the government to become a tough regulator. Before privatization, conflicts of interest prevented it from effectively regulating sewage treatment and disposal. As Britain’s Secretary of State for the Environment explained, in a publicly owned system, the government acts as both “gamekeeper” and “poacher,” or as both regulator and polluter. Who really expects a regulator to crack down on pollution caused by its own government? And if a government won’t regulate its own pollution, how effectively can it regulate pollution from industry?

A related factor in England’s and Wales’s success with privatization has been the private companies’ investment of vast sums in cleaning up sewage effluent—an investment that the government, when owner of the sewage companies, had been unwilling to make. The government had other spending priorities. And it didn’t want to take the political flack for the price hikes that large capital investments would have necessitated. Freed from such political constraints, the newly privatized companies have invested a whopping $19 billion in sewage collection and treatment. They have repaired sewers, modernized plants, and constructed treatment facilities where none existed before. But even these billions have been insufficient to undo the damage caused by decades of government neglect: The new companies plan to invest another $33 billion in improving their sewage systems over the next eight years.

It hasn’t just been the British government that has encouraged the companies’ unsurpassed investment in cleaner rivers and seas: Public pressure has been equally relentless. The public is involved as never before. Discharge records, concealed for decades from public scrutiny, are now widely available. One environmental group publishes a guide on how to spot and report river pollution. Another monitors and rates beaches, applying stricter standards than does the government. Still another, through persistent and highly visible pressure, has persuaded several water companies to install sewage treatment technologies far more advanced than those required by government regulations. The public clearly holds private operators to higher standards than it did their public predecessors.

Privatization in England and Wales has not been without its critics. Some complain that the water companies aren’t moving fast enough to stem pollution. Others resent company layoffs and the high salaries commanded by company managers. Others, quite rightly, object to water rate increases in the absence of meters that would enable those who save water to reduce their bills. Still others point to lingering regulatory problems, ranging from the low fines resulting from prosecutions for pollution to the political pressures to keep prices—and thus investment—down. But even the harshest critics agree that the environment has benefited and admit that such progress was unheard of under the former regime.

Experience in England and Wales demonstrates that privatization—if done right—can help check the pollution of lakes, rivers, and seas. Our challenge here in Canada, then, is to get it right. Please send us a generous donation to help us make privatization work for the environment. With your help, we will strive to ensure that privatized companies find the money for long-delayed investments and that our provincial governments, as newly uncompromised regulators, enforce long-ignored standards, making our waters swimmable and fishable once again.

Sincerely,

Elizabeth Brubaker
Executive Director

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