By Maka Chitanava and Norberto Pignatti

The ISET Economist, a blog about economics in Georgia and the South Caucasus by the International School of Economics at TSU (ISET)

As economic development progresses, air pollution and the lack of green spaces have become increasingly painful issues for Tbilisi citizens. In our previous blog, Breathing in Tbilisi, we discussed the negative outcomes, in terms of air pollution and tree-cutting, generated by the actions of self-interested developers facing an inert civil society and a local government that is unwilling and/or unable to protect green public spaces. While that is a classic example of market failure, today, we will focus on a different type of failure, also contributing to worsening air quality and the shrinking of green areas in Tbilisi: regulatory failure. We have a regulatory failure when, instead of helping, public regulation makes things worse. To better illustrate the concept, we will share with you a very interesting story which adds an additional (and quite significant!) perspective to the picture.                 

We focus on the story of a company owner because Tbilisi City Hall takes care of dead trees on private land, but not on land owned by legal entities. Imagine that your firm owns a plot of land with trees on it in Tbilisi. Assume one of your trees has dried out and is about to fall. Can you guess how much time, energy and money it would take to have it cut and disposed of? The box presents all the details of the process that a company owner, who had to cut a cypress on his firm’s land, had to go through.

He had to pay GEL 1770, and spend a notable amount of time and effort to get rid of one dead tree.

It is not clear how Tbilisi City Hall uses the fees collected in this way, therefore we cannot exclude the possibility that the municipality uses them to finance, at least in part, “green programs.” What is clear, however, is that to our main character the recoverable amount - GEL 1300 - was just a fee for a permit, on top of other non-negligible expenses (in addition to time and energy lost in the process). Tbilisi City Hall did not provide any additional service in exchange for the fee (not even removing the tree when asked, as they would normally do for private individuals). Initially, our entrepreneur intended to plant a new tree, but after going through this ordeal his good intentions vanished. What if this new tree dried? No, better to avoid the risk of going through all of this again!

So, Tbilisi City Hall is currently collecting a (high) fee for a permit, without providing any service in exchange (no botanist, no workers to cut and/or remove the tree, no new plant). The costs that legal entities face to cut (and dispose of) a dead tree are substantial. The local government does not provide any incentive to firms to plant new trees in place of the ones removed.

What are the predictable outcomes of this state of things? At the very least, these two: First, legal entities will postpone (sometime indefinitely) cutting dead and sick trees to avoid the very high costs of cut and disposal. This can have deleterious consequences. Examples abound. For instance, one of the big developers in Tbilisi, which owns a large green space with a lot of sick pinus brutia (eldaris pichvi), is not cutting them (the recoverable amount rate for pinus brutia is GEL 100 per annual ring - approximately GEL 4000 per tree), which is causing the disease to spread to nearby trees. Second, legal entities will not replace the dead trees with new ones after they cut them.

Both outcomes are hardly satisfactory if the goal is, at least, to maintain existing green areas.

Could the local government do better? And how?

High recoverable amounts have a rationale. They work as disincentives (together with administrative fees and criminal charges) to cut or damage existing trees purposefully (perhaps to get rid of them in order to use the land for an alternative purpose). In reality, even the current level of cutting fees is not high enough to stop businesses that are really determined to cut trees (and expect to profit from this). Evidence shows that these firms are cutting trees anyway (recall the Kazbegi Street example from the Breathing in Tbilisi blog). Whenever the municipality is not prepared to accept the elimination of a green area “at any cost,” it should simply prohibit this and oblige legal entities owning the land to plant a new tree of the same species to replace the dead one, eliminating the possibility of getting rid of the tree through the payment of a recoverable amount.

In all other cases, the recoverable amount, calculated properly, should probably be kept. However, asking the same recoverable amount of all legal entities wanting to remove a dead tree, regardless of whether they intend to replace it or not, is not the best solution. A system like the current one discourages businesses that would like to plant new trees from doing so. A smarter solution could be to keep high (or even increase, if necessary) fees for damaging and cutting trees, while rewarding “good behaviors” such as planting new trees. For example, in our case, the “environmentally friendly” company owner could have been offered a substantial discount on the fee, and/or the municipality could have taken upon itself the burden (and the costs) of the entire procedure if the company owner had agreed to have a new tree planted to replace the dead one.

 Unfortunately, but understandably, our blog character decided to plant flowers instead of a new cypress on his land. He hopes that one day this inflexible regulation will change, and he will be free to plant a new tree without additional worries, and to fulfill an old Georgian proverb: “a man has to have a child (he has already three), build a house and plant a tree.”

Maka Chitanava is a Senior Researcher at the Energy and Environmental Policy Research Center, ISET Policy Institute.

Norberto Pignatti is a Professor at ISET and Head of the Energy and Environmental Policy Research Center, ISET Policy Institute.