University of Bath Policy Seminar 16/4/08

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University of BathPolicy Seminar16/4/08

• John Harman

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• In reality, we havent escaped the gravity of
  life at all. We are still beholden to ecological
  laws, the same as any other life form. The most
  irrevocable of these laws says that a species
  cannot occupy a niche that appropriates all
  resources .......any species that ignores this
  law winds up destroying its own community to
  support its own expansion.
• Janine Benyus

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• Economic logic requires that we maximise the
  productivity of the limiting factor in the short
  run and invest in increasing its supply in the
  long run. When the limiting factor changes, then
  behaviour that used to be economic becomes
  uneconomic. Economic logic remains the same but
  the pattern of scarcity in the world changes,
  with the result that behaviour must change if it
  is to remain economic. Instead of maximising
  returns to and investing in man-made capital (as
  was appropriate in an empty world), we must now
  maximise returns to and invest in natural capital
  (as is appropriate in a full world). This is not
  new economics but new behaviour consistent with
  old economics in a world with a new pattern of
  scarcities.
  
• Herman Daly,
  Beyond Growth
  

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• If something is ecologically wrong it cant be
  economically right
• Commissioner Verheugen

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• At present we the private sector and governments
  are caught in a Catch-22 situation with regard
  to tackling climate change. Governments tend to
  feel limited in their ability to introduce new
  policies for reducing emissions because they fear
  business resistance, while companies are unable
  to take their investments in low-carbon solutions
  to scale because of lack of long-term policies

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• UK social/environmental agenda seen as a
  regulatory burden. Govt responds with reviews
  (Haskins, Hampton), establishes the Better
  Regulation Executive, and brings out new
  legislation
• Burgeoning social expenditure squeezes other
  spending and makes Govt risk averse to anything
  which might be seen to reduce short term economic
  growth and tax revenues

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• EU also concerned about low growth, and in face
  of Asian competition and increasing social burden
  (eg pensions) questions the affordability of EU
  environmental standards
• Environmental protection policy is becoming
  bigger relative to the economy as populations
  and their expectations grow thus seen as more of
  a problem.

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The regulatory toolbox

• Permits, licences, inspections
• Registration and enforcement
• General legal obligations
• Fiscal incentives
• Market instruments (eg trading)
• Education/awareness (eg EMAS)
• Voluntary agreements

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Good environmental regulation does not harm
competitiveness

• Higher environmental standards in industrialised
  countries have not tended to lower their
  international competitiveness World Bank, 1994
• No evidence that industries affected by
  regulatory costs do poorly in international
  markets World Resources Institute
• BAT measures generally improve competitiveness.
  Early adopters not disadvantaged DG enterprise
  2001
• Top countries to do business regulate for high
  env standards but do it at lower cost World
  Bank, Doing business in 2005

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....in fact, quite the opposite

• Strong correlation between the competitiveness of
  nations and their environmental regulatory
  regimes
• and
• Strong correlation between levels of economic
  development and environmental performance
• Porter Esty
• WEF Global Competitiveness report 2001-02

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Industry estimates of the costs of environmental
protection are consistently exaggerated......

• SMEs spend less than 2½ hrs/person/month on all
  regulation paperwork (Hampton report) and less
  than 20 of this relates to environmental
  requirements (OECD)
• Chemical industry claimed that the phase out of
  ozone depleting substances would entail excessive
  cost and drive SMEs out of business. The actual
  costs were minimal, with no competitive
  disadvantage (Intl Chemical Secretariat Cry
  Wolf, 2004)
• CBI claimed that Env. Liability directive would
  cost UK business 1.8bn. Final cost under 50m

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.....and the benefits often unaccounted for

• The value of eco-system services in Scotland is
  around 22bn euros about ¼ of Scottish GDP
  (Williams et al 2003, 2004)
• Climate Change Programme Review estimates that
  recent energy efficiency interventions in the UK
  have had a NPV benefit of 80bn

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Good eco-efficiency is good business for the
individual firm

• A review of 60 recent studies of companies,
  sectors or pension funds found a link between
  environmental and financial performance in 51 of
  them (EA 2004)
• A study of 5 major international companies
  undertaking active greenhouse gas reduction
  policies found a total of 6bn euros in savings
  (The Climate Group 2004)
• There is a small but positive correlation between
  env. and financial performance and markets
  punish bad env. performance (Metroeconomica, 2006)

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....and for the economy

• Waste minimisation could yield over 4bn euros to
  the UK manufacturing economy energy efficiency
  2.7bn euros. Typical payback period for waste
  investments is 12 months. Agriculture could save
  over 1bn euros through better environmental
  management
• (Cambridge Econometrics/AEA 2003)
• Net impact of env regulation on employment is
  neutral/slightly positive. By 2001 Env service
  products sector in EU15 employed over 2m FTEs
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Good regulation drives innovation

• The costs of addressing env. regulations can be
  minimised, if not eliminated, through
  innovation..
• Porter Van der Linde 1995
• EU Chemicals regulation is likely to promote
  innovation as firms substitute risky chemicals,
  with a competitive advantage arising from the new
  products
• Berkhout et al, WWF, 2003