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Its the ecology_ stupid


									University of Bath
Policy Seminar

John Harman
 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
 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”
 “If something is ecologically wrong it can’t
  be economically right”
           Commissioner Verheugen
 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”
 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
 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.
The regulatory toolbox

    Permits, licences, inspections
    Registration and enforcement
    General legal obligations
    Fiscal incentives
    Market instruments (eg trading)
    Education/awareness (eg EMAS)
    Voluntary agreements
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
  Top countries to do business regulate for high env
   standards but do it at lower cost – World Bank, Doing
   business in 2005 fact, quite the opposite

  Strong correlation between the competitiveness of
   nations and their environmental regulatory regimes
  Strong correlation between levels of economic
   development and environmental performance

       Porter & Esty
       WEF Global Competitiveness report 2001-02
Industry estimates of the costs of
environmental protection are consistently
  SMEs spend less than 2½ hrs/person/month on all
   regulation & paperwork (Hampton report) and less than
   20% of this relates to environmental requirements
  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
.....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
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)
....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)
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

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