THE ASSESSMENT: ENVIRONMENTAL POLICY--OBJECTIVES, INSTRUMENTS, AND INSTITUTIONS.

The article provides a critique of British environmental policy, focusing in particular on the role of sustainable development as an organizing principle, the use of cost-benefit analysis (CBA) and economic instruments, and the design of the institutions responsible for implementing policy. It is argued that, while considerable progress has been made in the theoretical literature to define sustainable development, successive governments in the UK have widened the definition to the point where it provides little guidance for policy. Obstacles to the use of CBA are discussed, as are the political constraints on implementing economic instruments--in particular, the income effect. Finally, it is argued that the institutional design of the Environment Agency and the Department of the Environment, Transport and the Regions partly explains the overwhelming reliance on command-and-control regulation.

I. INTRODUCTION

The current approach to environmental policy in the UK dates from the 1990 White Paper, This Common Inheritance, which set the prime objective as sustainable development. Though neither the concept nor many of the themes in the paper were new, it marked a significant break with the past, in that it recognized for the first time the pre-eminence of global pollution and, in particular, global warming and biodiversity loss. It also recognized that these `new' problems were of a different scale and importance. From 1990 onwards, governments would take environmental matters much more seriously.

Taking the environment seriously is a necessary but not sufficient step towards an environmental policy. To provide coherence, the policy requires clear objectives and targets that derive from them. It also requires an appropriate set of instruments and a set of institutions capable of implementing it.

In theory, the overarching sustainability principle provided a clear guide to policy formulation. All government policy was to be subject to this test, with the consequence that the piecemeal, ad-hoc treatment of each individual environmental problem which characterized the British approach for most of the century would be replaced by a tough, predictable, and measurable set of policies. Where there was scientific doubt, the precautionary principle dictated a risk-averse approach.

In practice, although there has been significant legislation, the impact of the sustainability policy has been somewhat muted. The recession of the early 1990s dampened political enthusiasm, and successive governments failed to give any precise definition to the concept. Targets were adopted without much regard to it, except by way of lip service, and many of these were relatively easy to achieve. The definition of sustainable development was widened, first by the Conservatives to include economic growth and development, and then by Labour to include social considerations, leaving the inevitable trade-offs with the environment ambiguous.

With the exception of the social component, the 1997 General Election has not yet fundamentally affected the broad thrust of environmental policy.(2) Of the major decisions facing the Labour administration in 1997 and 1998, four have illustrated the political and practical difficulties of applying the sustainability concept. The transport White Paper, A New Deal for Transport, Better for Everyone (DETR, 1998a) was perhaps the most environmentally driven, but had to balance the desirability of a switch to public transport against the practical obstacles to the use of hypothecated charges on roadusers to pay for it. The decisions on water quality (DETR, 1998b) required balancing perceived customer hostility to rising water bills with the costs of improving water quality and sewerage treatment, and signalling the need to conserve water resources through the price mechanism. Perhaps most difficult, the politics of coal led to explicit intervention to slow the decline of its market share through the energy White Paper, Conclusions of the Review of Energy Sources for Power Generation (DTI, 1998), despite the major environmental problems created by its mining and burning. Finally, the Department of Environment, Transport and the Regions (DETR)'s housing plans have had to reconcile the need to protect the green belt, while providing for changing social needs and economic development (DETR, 1998e). All are claimed to be examples of sustainable development in action, but just how these policies `protect and enhance our environment so that the country we hand on to our children and our grandchildren is a better place in which to live' (Labour's Manifesto, p. 29) has not been explained. Making sustainable development an operational concept which enables policy choices to be made requires these sorts of hard trade-offs. Such explicitness is already proving as hard for this government as for its predecessor, but a major new White Paper is due to be published in 1999.

There are problems, too, in implementing policy--in setting targets and choosing instruments. Economics offers tools to assist, but, as with the sustainability concept, there is a reluctance to use them. An example is provided by the commitment to a 20 per cent reduction in carbon-dioxide emissions from their 1990 level by 2010. While a tough target might be represented as `environmental leadership' in Europe and globally, just why this number is more sustainable than the Kyoto target (12.5 per cent of a basket of greenhouse gases) or some other number, say, 30 per cent, is far from clear. Although government is committed to taking account of the costs and benefits of environmental policy, for major decisions such as these, there is little evidence that it has done so.

On policy instruments, the 1990 White Paper again marked a turning point,(3) and both the Conservative and Labour governments in the 1990s have supported the principle of greater use of economic instruments, such as taxes and tradable permits, to ensure that the polluter pays. The current government has come forward with major new initiatives--on aggregates, pesticides, and energy--but formidable obstacles remain before they can be implemented, especially the last of the three.

The gulf between the potential for greater use of economic techniques and current practice provides a major opportunity to improve resource allocation and hence achieve environmental goals at lower cost. But there are considerable barriers to further take-up of such opportunities. Some of these are technical, many of which can be overcome. Some are political, and need to be explicitly incorporated into policy design, if there is to be any significant progress. First-best economic policies rarely pass such tests, especially when there are significant distributional consequences. Finally, there are institutional barriers, which need to be addressed if the environmental concerns are to be fully incorporated in policy design. This article provides a critique of current environmental policy and considers the scope for improving resource allocation.

II. THE SUSTAINABILITY OBJECTIVE AND THE GLOBAL CONTEXT

(i) The Origins of Sustainability

While the concept of environmental stewardship has a long history, rooted in agricultural practices before the age of artificial fertilizers, herbicides, and pesticides, as the 1990 White Paper recognized, the modern idea of `sustainability' has grown out of concerns about global environmental pollution and degradation. In its simplest form, sustainability is a recognition that without intervention, the global environment will not be able to provide a reasonable standard of living for future generations. In the now famous Brundtland definition, sustainable development is `development that meets the needs of the present without compromising the ability of future generations to meet their own needs' (World Commission on Environment and Development, 1987).

That definition has a `warm glow' to it, which helps to explain why so many governments and individuals have felt able to sign up to it and why it has been so effective as a means of rallying public support for environmental causes. It can be made to fit with a wide range of ethical standpoints on rights, equity, and (possibly) efficiency. To it have been married a number of subsidiary notions--the use of `best science', the precautionary principle where uncertainty arises, and the `polluter pays' principle in assigning costs.(4) All find ready political and public approval, but the relationship between the general good intentions and the specific implications is less clear.

The reasons for this divergence are multiple, but two broad difficulties can be identified. First, the science remains far from settled: the global problems and their consequences are only weakly understood. Scientists cannot tell us with much precision what levels and types of economic activity are `sustainable', because the global environment and its reactions to pollution are of immense complexity and the interdependency between its constituent parts poorly understood. `Best science' is therefore a very uncertain basis for policy. Second, the politics and economics are hotly contested: the trade-offs between economic growth and development now, and the environment now and in the future, are hard to define, given that there is no consensus about whether economic growth is consistent with environmental protection and, if so, in what form and at what level, and because the political process is inherently more short-termist than the scale of environmental problems.

(ii) The Global Problem: Biodiversity, Global Warming, and Population Growth

Recognizing the uncertainty of scientific evidence is important in policy design. As we learn more, policy can be better directed. But there is a cost to waiting, and the trade-off depends very much on the sources of the uncertainty. It is, therefore, helpful to set out some of the broad parameters--or what economists might describe as stylized facts--upon which sustainability is to be grounded. First, on biodiversity, the total number of known species of plants, animals, and micro-organisms is estimated to be of the order of 1.4 million, give or take 100,000 (Wilson, 1992, pp. 124-5), but the total is likely to be many times greater. Thus it is hardly surprising that, if most species are not even yet known, the rate of species loss is very uncertain. Wilson has suggested that by 2022 `a 20 per cent extinction in total global diversity, with all habitats incorporated, is a strong possibility if the present rate of environmental destruction continues' (Wilson. 1992. p. 226). It is thought that this rate of species loss is sufficiently fast to rank among the four or five great species extinctions of geological history. The recovery times from previous extinctions are estimated to be in the range 10-100 million years: new species creation, notwithstanding advances in genetic engineering, is not relevant to human historical time spans.

On global warming, a few scientists still dispute the direction of temperature change, but an element of consensus has been built up around the work of the Intergovernmental Panel on Climate Change (IPCC), which suggests that, in the absence of any intervention, global temperature would rise between 1 degree and 3.5 degrees Celsius by the end of the twenty-first century. The UK Climate Impacts Programme (UKCIP, 1998) reports for the UK an 0.5 degrees Celsius warming in the twentieth century, and presents four scenarios of climate change for the next century, with rates of warming between 0.1 and 0.3 degrees Celsius per decade. Its main findings are that warming will be greater in the south-east, with wetter winters in all regions, and that changes in climate variability and extreme events are likely to be more important than simple changes in average climate.(5)

Biodiversity loss and climate change are linked by a more fundamental trend--the growth of the world population. Cohen (1995) summarizes the statistics as follows. Until 1750, global population growth rates never exceeded 0.5 per cent per …