POLICIES

Environmental legislation

The first wave of environmental legislation effectively reduced many of the most obvious sources of pollution in developed nations, and many of the most environmentally insensitive developments.

Each year another 6 million hectares of productive dryland turns into worthless desert... More than 11 million hectares of forests are destroyed yearly. In Europe, acid precipitation kills forests and lakes. The burning of fossil fuels puts into the atmosphere carbon dioxide, which is causing gradual global warming. This 'greenhouse effect' may by early next century have increased average global tem­peratures enough to shift agricultural production areas, raise sea levels to flood coastal cities, and disrupt national economies. Other industrial gases threaten to deplete the planet's protective ozone shield to such an extent that the number of human and animal cancers would rise sharply and the oceans' food chain would be dis­rupted. Industry and agriculture put toxic substances into the human food chain and into underground water tables beyond reach of cleansing. (WCED 1990)

The shortcomings of the first wave of legislation were partly due to the unwillingness of governments to risk economic growth and confront business. Enforcement of environmental legislation and standards in most nations had been particularly weak and regulatory agencies poorly resourced and staffed (Gunningham & Sinclair 2002: 31).

Industry in many countries opposed environmental legislation, claiming the costs involved hindered economic development and detracted from the ability of private enterprise to operate efficiently and effectively. However, Douglas Costle (1981), an administrator of the US Environment Protection Agency (EPA) in the 1970s, found that both industry and the EPA tended to overestimate rather than underestimate the costs of complying with environmental regulations. He tells of how the chemical industry overestimated the costs of a proposed vinyl chlo­ride standard by two hundred times, and how the automobile industry overestimated the cost of a shoulder harness in a car by five times.

There was also little evidence that environmental regulation had an adverse effect on the economy in general. The Pearce Report (Pearce et al. 1989: 26) found it difficult to locate examples of cases in which envi­ronmental regulations had hurt the competitive position of a country. Some business people admitted that environmental protection could bring benefits to industry by reducing costs for raw materials, energy, water and waste disposal.

Nevertheless, most governments went out of their way to accommo­date business interests. For example, when water pollution legislation and standards were established in New South Wales the government was careful to ensure that the legislation would 'cause minimum hardship to industries and services which need to use areas of water for waste dis­posal' (Sydney Morning Herald 12/3/69). There was, therefore, no goal of ridding the waterways of pollution - rather, the strategy was to keep pol­lution 'to a level where it will cause the least possible harm'. In intro­ducing the legislation the Minister said: 'Where a degree of pollution is unavoidable because of the need to dispose of sewerage and industrial wastes, it is permitted in a controlled fashion designed to meet the needs of the community as a whole' (Jago 1969).

Environmental concern peaks

Worldwide, when public concern about the environment rose in the late 1980s, reinforced by scientific discoveries regarding phenomena such as ozone depletion and weather patterns that seemed to indicate that global warming had already begun, the obvious solution was to tighten envi­ronmental regulations.

A1989 New York Times/CBS poll found that 80 per cent of people sur­veyed agreed that 'protecting the environment is so important that stan­dards cannot be too high and continuing environmental improvements must be made regardless of cost'. Greens parties in Europe attracted 15 per cent of the vote. Sixteen per cent of Canadians surveyed said the environment was the most important problem in Canada - more impor­tant even than unemployment - and most people felt that solving environmental problems required government action. A poll in 1990 found that 67 per cent of Australians thought the government should 'concentrate on protecting the environment even if it means some reduc­tion in economic growth' (Doern & Conway 1994: 118; McIntosh 1990; Rowell 1996: 22; Winward 1991: 107).

The heightened public awareness of global and local environmental problems in many countries drew attention to the inadequacies of existing political, economic and regulatory structures. There were increasing demands from environmental and citizens groups for tight­ened environmental standards and for increased government control of private firms and corporations. Greens political groups challenged tradi­tional political parties with varying degrees of electoral success.

In response to this public pressure, regulatory agencies in various countries got tougher and new laws were enacted. In the USA, environ­mental convictions recorded by the EPA reached a new peak in 1989, with half of those convicted receiving jail sentences. Environmental indictments by the Justice Department increased by 30 per cent in 1990 over the previous year (Harrison 1993: 6).

In New South Wales, an Environmental Offences and Penalties Act, introduced in 1989, provided for jail terms and million-dollar fines for senior executives of polluting companies.

The perceived environmental crisis brought with it calls for a new environmental ethic and changes in the moral values that govern the rela­tionship between nature and humankind. It appeared as if the free market economic system was unable to provide economic growth and environ­mental protection. Business leaders feared that the environmental benev­olence of the profit motive itself would be questioned, and that the corporations responsible for pollution would be labelled as villains.

Economic instruments

It was in this political context of demands for a new environmental ethic, political change and tighter environmental regulations that business groups and economists looked for market solutions to environmental problems that would accommodate economic growth, harness and exon­erate the profit motive, and avoid further legislation and regulation.

They saw economic instruments as meeting these requirements. There are two main types of economic instrument. There are those that use prices to provide an incentive to reduce environmental impact, by way of imposing fees, charges and taxes. And there are those that create property rights for the use of environmental resources and a market in which those rights can be traded.

Governments have traditionally favoured legislative instruments over economic instruments for achieving environmental policy. Economic instruments were at first thought to be too indirect and uncer­tain because they are aimed at altering the conditions in which decisions are made rather than directly prescribing decisions. Governments also believed that additional charges would fuel inflation and might have the undesirable distributional effect of most severely hitting low-income groups. They were additionally concerned that the public might see charges as giving companies a 'right to pollute' because they had 'paid' to do so.

Businesses had also preferred direct regulation, partly because they feared that charges would increase their costs, and partly because of the perception that they would have more influence on legislation through negotiation and delaying tactics. The threat of a new wave of environ­mental regulations in the early 1990s caused businesses to rethink this preference, however.

Business-funded conservative think tanks in the USA and other English-speaking nations, which were pro-market and anti-regulation, disparaged environmental legislation - labelling it 'command and control' - and recommended using the market to allocate scarce environ­mental resources like wilderness and clean air. They argued that legis­lation should be replaced with voluntary industry agreements, reinforced or newly created property rights, and economic incentives. The Washington-based Cato Institute, for example, stated that one of its main focuses in the area of natural resources was 'dismantling the morass of centralized command-and-control environmental regulation and substituting in its place market-oriented regulatory structures...' (Cato Institute 1995).

According to the Heritage Foundation's policy analyst, John Shanahan (1993), the free market is a conservation mechanism. He urged the use of markets and property rights 'where possible to distribute envi­ronmental "goods" efficiently and equitably' rather than legislation, arguing that 'the longer the list of environmental regulations, the longer the unemployment lines'.

Think-tank economists emphasised the importance of market processes in determining optimal resource use. Anderson and Leal (1991) argued that the political process is inefficient, that it doesn't reach the optimal level of pollution where costs are minimised:

If markets produce 'too little' clean water because dischargers do not have to pay for its use, then political solutions are equally likely to produce 'too much' clean water because those who enjoy the benefits do not pay the cost.

Under pressure from business groups and influenced by think tanks, various governments began to reassess the use of economic instruments as a supplement to direct regulation. They were concerned that tighter pollution control measures might inhibit economic growth. They believed that economic instruments could achieve environmental goals at less cost, providing new sources of finance and allowing industry to find its own cost-effective ways of reducing pollution. Another reason was dissatisfaction with the effectiveness of direct regulation and a per­ception - promoted by business groups - that industry would not stand for stricter regulations (OECD 1989: 24-5).

The changing consensus wrought by conservatives meant that eco­nomic instruments, once associated with market economists and conser­vative bureaucrats, became widely accepted. Government sustainable development policies today embrace economic instruments and market policies. Such thinking has spread throughout the world.

Over the last decade and a half, environmentalists in a variety of non-governmental and governmental organizations, multilateral financial institutions, and corporations have sought to fashion and to implement a new family of environmentalism based on markets, commodity flows, incentives, and the idea that people are funda­mentally economic creatures. (Zerner 2000: 3)

But how well do these economic instruments and market-based policies fit with the basic environmental and social principles that have been developed over the last 50 years? This book seeks to examine these poli­cies and evaluate them in terms of the six widely accepted principles described.