16 CONCLUSION

Can the problems associated with economic instruments and market­based environmental policies - that is, economics-based environmental policies - be fixed? Is it just a matter of making adjustments to take account of important environmental and social principles, or are these policies inherently faulty and incompatible with those principles? It seems likely that the problems outlined in this book are not a series of ad- hoc, incidental side-effects of policies that have yet to be perfected.

As discussed in the introduction, economics-based environmental policies were promoted by business at a time when public consciousness of environmental problems was high and demands for stricter regulation were growing. Business saw these policies as a way of avoiding the costs of stricter regulation and of maintaining autonomy over manufacturing and development decisions. They were also seen as a way of enabling industrial growth and economic development to continue in areas that were already polluted and degraded.

Economics-based environmental policies were thus primarily designed to achieve economic efficiency, facilitate economic growth, and allow businesses to decide how they would meet environmental expec­tations. Governments, particularly in English-speaking countries, believed that economics-based policies would allow them to set an envi­ronmental goal and let the market decide how it would be met.

The problem is that a great deal rides on exactly how an environ­mental goal is met.

When economic efficiency becomes the overriding concern a situa­tion develops where business rights are given priority over human rights. Human rights are supposed to be inalienable, which means they cannot be taken away, sold or given away. Yet economics-based environ­mental policies do just that. Access to environmental resources such as clean air and water, and to a healthy environment, become just more figures in the calculus of economics-based decisions. Whether it is gov­ernment economists working out a cost-benefit analysis or industry economists working out whether to buy emission credits or reduce pol­lution, human rights become tradeable elements that can be taken away and sold.

The economic efficiency focus of economics-based environmental policies means that the inequitable distribution of impacts that result is disregarded. Pollution is shifted around nations and offsets created around the world with little concern for the rights of those impacted or displaced. At best their plight will be recorded as a cost element in an economic analysis that weighs gains in wealth for individual companies against the injury and suffering of members of the community, as if such things are equivalent and interchangeable. The loss of environmental amenity, even the lives of future generations, is heavily discounted to reflect present monetary preferences.

Economics-based environmental policies perpetuate existing social and power relations. The wealthy are able to buy up entitlements, pay the highest charges, and exert most control over natural resources. The worst environmental burdens are further concentrated into areas that have poor populations and low property values, and the polluters in their midst are permitted to go on polluting through payments - for charges, credits and allowances - which seldom provide any compensa­tion for the community that is affected.

It matters how environmental goals are met. If they are met by pro­viding ways to make environmental protection profitable then the com­munity pays the price of those profits rather than polluters paying to prevent or clean up their pollution. While the polluters make profits out of shifting pollution and conservation areas around the landscape, poor communities suffer health effects, pay proportionately higher charges, and lose access to resources and environmental amenity. And those who profit increase their economic and political power and ensure that the system that benefits them will not change.

Economics-based environmental policies are designed to incorporate nature into the economic system rather than the economic system being designed to fit nature's constraints. Nature is commodified so that it can be bought and sold, so that it is subject to the market laws of supply and demand. But this assumes that parcels of nature can be bargained away like so many pork bellies without serious consequence.

While commodities in the marketplace are interchangeable and replaceable, and supply can be increased when demand increases, this is not the case with parts of the environment. Many aspects of the environ­ment cannot be 'manufactured' like other commodities. Once lost they are lost forever; and this means environmental losses are cumulative. Over time the cumulative degradation can threaten human health and wellbeing in a way that cannot be compensated for by the wealth which markets can sometimes create.

Economics-based environmental policies make assumptions about the capacity of the environment to deal with human impacts: it can take a certain amount of pollution; it can absorb a certain amount of carbon; it can recover from a certain amount of fishing; it can deal with a certain amount of water diversion; functions that have been lost can be recre­ated. In each case, the ability of the environment to rebound is highly uncertain. Yet its capacity to rebound is allocated in the form of relatively secure entitlements - rights and permits - which use up that unknown capacity in a way that allows little scope for adjustment as new informa­tion comes to hand.

Where an activity is likely to seriously or irreversibly harm the envi­ronment, highly uncertain assumptions about the capacity of the envi­ronment to rebound, or the ability of humans to reverse the damage, do not diminish the need for the activity to be avoided or minimised in the first place. Similarly, highly uncertain offset activities undertaken else­where do not diminish the need for the precautionary principle to be applied and the original activities to be avoided or curtailed.

It would be far more environmentally beneficial to design processes and products that are ecologically sustainable than to attempt to find ways to repair and replace lost environmental amenity and functions that are essential to life and wellbeing. Yet the priority currently given to short-term economic efficiency and economic growth stunts such endeavours by encouraging and facilitating the continuation of environ­mentally damaging practices.

The advantage of markets is supposed to be that supply and demand are automatically balanced over time, which thus removes the need for government planning. However, environmental markets are highly dependent on government oversight and monitoring to prevent fraud and cheating, and this can be very expensive. If monitoring is done prop­erly, costs escalate and economic efficiency is undermined. Therefore the policing of markets is seldom done properly.

A major attraction of economics-based environmental policies - to business leaders, bureaucrats and politicians - is clearly that they reduce political debate. Public debates over values, ethics, morals, social goals and priorities are reduced to debates about costs and benefits, as meas­ured by economists. Sometimes even these severely limited economic debates are bypassed, because economics-based policies increasingly turn environmental decisions into private and commercial decisions.

Baselines and caps and total allowable catches are decided by gov­ernment experts and adjusted under pressure from vested interests.

It matters how environmental goals are met because some methods will be more successful than others. Economics-based environmental policies are an indirect and ultimately ineffective method of achieving environmental goals. They are aimed at altering the conditions in which decisions are made rather than directly prescribing decisions. But regu­lators cannot be sure that the changed conditions will bring about the desired decisions.

If the precautionary principle requires that a threat of unacceptable harm be avoided, economic instruments do not offer sufficient confi­dence that the necessary level of protection will be put in place.