University of Bath Policy Seminar 16/4/08

1. University of BathPolicy Seminar16/4/08 John Harman

2. In reality, we haven’t 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

3. 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”

4. “If something is ecologically wrong it can’t be economically right” Commissioner Verheugen

5. 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”

6. 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

7. 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.

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

9. 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

10. ....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

11. 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

12. .....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

13. 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)

14. ....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 (Ecotec 2001)

15. 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