New Environmental Policy Instruments in the European Union

Politics, Economics, and the Implementation of the Packaging Waste Directive

Ian Bailey

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351914987
• Edition: 1
• Topic: Biological Sciences
• Subtopic: Environmental Science
• Index: Biological Sciences

The use of legislation by EU governments to define environmental standards for industry has been criticised for its poor track record in arresting the decline in the quality of Europe's environment. Environmental economists in particular have proposed that legislation should be supplemented or replaced by New Environmental Policy Instruments (NEPIs), such as eco-taxes, environmental charges, tradable permits and voluntary agreements. This book focuses on practical experiences with NEPIs in the EU and tests their application using the case study of the Packaging and Packaging Waste Directive. It traces the ways in which member states have adapted NEPIs to suit their preferred styles of environmental policy, then assesses their performance and how NEPIs have both assisted and hindered the EU environmental programme. It suggests options for ensuring that the environmental programme does not become fragmented by the use of NEPIs and discusses the implications of EU enlargement.

Chapter 1
Introduction

1.1 Implementing European Union Environmental Policy: Themes and Issues

The credibility of the European Union (EU) environmental programme must ultimately be judged in terms of the effective implementation of its policies in the member states (Collins and Earnshaw, 1993). Yet weak implementation has been a characteristic feature of the environmental programme since its inception in 1973 and has, according to many accounts, seriously detracted from the advances made in the scale and scope of Community environmental legislation (Lowe and Ward, 1998a; EUROP News, 2000). As far back as the Fourth Environmental Action Programme in 1987, the Commission acknowledged that the implementation of EU environmental policies was unsatisfactory in many member states (Commission of the European Communities (CEC), 1987). In 1992, Ken Collins, then Chair of the European Parliament Committee on the Environment, concluded that: 'We have now reached the stage where if we do not tackle implementation and enforcement properly, there seems very little point in producing new environmental law' (House of Lords, 1992: para. 67). And more recently, Ludwig Krämer (1996: 7), Head of the Sustainable Development and Policy Instruments Unit in the Commission's Environment Directorate noted that: 'there are only a few areas of Community law in which the difference between the written law and the practice is as great as in the case of Community environmental legislation.'

Whilst numerous factors have been implicated as contributing to these problems (see Jordan, 1999 for a useful overview), the implementation of any environmental policy can be broadly viewed as a series of technical and political challenges. On the technical side, implementing mechanisms are needed that are capable of controlling environmental degradation without placing unreasonable restrictions on economic development and other aspects of social well being (Segerson, 1996). The political challenges facing EU environmental policy are equally complex because decision-making and implementation take place within a supranational political system that possesses many agendas but whose capacity for autonomous action is severely constrained by its founding treaties (Jordan, 1999). First, agreement amongst the member states is required for each new EU environmental policy as well as on the form of action to be taken. Second, protocols are needed for reconciling environmental policy with other areas of EU activity and to resolve any conflicts of priorities that might occur. Finally, monitoring and enforcement procedures are required to ensure that EU policies are effectively implemented in the member states (Howe, 1996; Haigh, 1998).

In terms of policy instruments, most EU governments have traditionally relied on legislation as the principal means for defining clear environmental standards for industry and the general public. In recent years, however, this approach has been increasingly criticised for its poor track record in arresting the general decline in the quality of Europe's environment (Pearce and Turner, 1990; CEC, 1992). Environmental economists in particular have proposed that 'traditional' legislation should be supplemented or replaced by so-called New Environmental Policy Instruments (NEPIs), such as eco-taxes, environmental charges, tradable permits (collectively termed 'market-based mechanisms' or MBMs), voluntary agreements, and informational devices (Jones, 1999)¹.

Theories on the use of MBMs and other NEPIs have developed at a remarkable rate in recent years with influential works such as Beckerman (1974) Baumol and Oates (1979; 1988), Pearce et al. (1989; 1993), Hahn (1989), and Tietenberg (1990). By refocusing traditional economics towards sustainability issues, environmental economists have proposed a range of fiscal mechanisms designed to promote effective and cost-efficient environmental policy (Repetto et al., 1992; Stavins and Whitehead, 1992; Bahn, 1999). They suggest that environmental degradation is largely caused by the failure of market systems to place an adequate value on public goods, such as clean air and water. As a result, such resources tend to be over-used or their upkeep neglected by corporations in search of private profit. Economists suggest that this misallocation of resources can be corrected relatively easily through the creation of internalising charges in the form of eco-taxes and environmental charges (Folmer el al., 2001). In simple terms, if pollution and resource depletion is made more expensive, polluters will be encouraged to adopt more sustainable patterns of production and consumption. Economists maintain that MBMs integrate environmental considerations more comprehensively into the economy than legislation, because the latter focuses principally on the creation of performance standards without giving sufficient consideration to the mechanisms and incentives needed for effective implementation. Furthermore, because MBMs are relatively non-prescriptive in terms of the types of action required, firms subjected to such instruments have greater flexibility in how they respond and are thus able to find cost-effective means of improving their environmental performance. Fiscal measures can also provide governments with additional tax revenue, which can be re-directed, or hypothecated, towards environmental or other re-distributive expenditures (Jacobs, 1991).

Tradable or marketable permits introduce a further innovation to market based mechanisms, the exchange of pollution rights between firms within statutory emission ceilings set by government. They are based on the notion that any increase in pollution from one source must be offset by an equivalent or greater decrease elsewhere (Barde, 1997). Under tradable-permit schemes, if a company wishes to expand its polluting activities, it can only do so by purchasing permits from other firms that hold permits in excess of their requirements. This encourages businesses with low marginal abatement costs to reduce their pollution further, funded by trading with those that find abatement prohibitively expensive. The result is lower overall pollution and the use of market forces to reduce abatement costs.

Finally, voluntary agreements seek to encourage constructive partnerships between industry and government in environmental policy (Lévêque, 1995; Whiston and Glachant, 1996). They allow measures to be agreed between regulator and regulated in advance of implementation as well as encouraging the exchange of information and expertise required to define technically complex environmental standards. In return, by negotiating rather than imposing standards and time frames, voluntary agreements provide industries with firmer assurances that policy-makers are not overlooking their interests during the development of environmental policies.

For a variety of reasons, many EU governments were initially reluctant to do more than experiment tentatively with NEPIs (Huppes et al., 1992; Howe, 1996; Helm, 1998). Also, many industry groups feared that NEPIs would add uncertainty and costs to their businesses and preferred the clear rules provided by command-and-control regulation. Progress was further inhibited by the legacy of existing regulation, which many politicians were reluctant to dismantle in order to experiment with 'new' instruments. In the United Kingdom (UK) in particular, powerful government departments like the Treasury eschewed such concepts as hypothecated environmental taxes because it was felt they increased the rigidity of the taxation system (Jordan et al., forthcoming). Finally, despite the rapid ascent of environmental economics as an academic discipline, gaining a foothold in policy-making circles has involved challenging unsustainable institutions and ways of thinking that have been forged over many years (Pearce and Barbier, 2000). Creating strong advocacy coalitions for NEPIs has therefore proven problematic. This situation provided relatively few opportunities to undertake detailed empirical assessments of NEPIs that had been developed through 'laboratory-style' theoretical reasoning (see for example, Pearce et al., 1989, 1993; Brisson, 1993; van den Bergh, 1996; Bohm, 1997; Ekins, 1997).

More recently, however, there has been a major increase in the use of NEPIs, particularly in developed countries. Pearce and Barbier (2000) note that the number of MBMs in the OECD (Organisation for Economic Cooperation and Development) countries increased from 100 to 169 between 1987 and 1992, with NEPIs being deployed to tackle such diverse problems as water and air pollution, waste management, fuel technology, energy consumption and air transport noise². Some of the most significant recent developments in NEPIs have resulted from discussions on the implementation of the Kyoto Protocol on global climate change (Grubb, et al., 1999). NEPIs under consideration as part of this programme include the Clean Development Mechanism, international emissions trading, voluntary agreements between the European Commission and automobile manufacturers, and the UK's Climate Change Levy (Keay-Bright, 2000).

The increased popularity of NEPIs can be attributed to a number of factors. First, there has been a growing acceptance of the limitations of regulation as a means of achieving environmental objectives and renewed interest in more innovative regulatory devices. Second, there has been a strong trend towards economic deregulation in many developed countries, partly stimulated by the recession of the 1990s, which has made the use of flexible and cost-effective environmental policy instruments more attractive to policy-makers. NEPIs were also seen as more consonant with the political ideologies of neo-liberalism and free-market economics that gained ascendancy in the 1990s and which have been reinforced by international pressure from the EU and the OECD (OECD, 1994). These forces have in turn prompted a greater cultural receptiveness to the ideas of environmental economics, particularly within the USA and the UK, where much of the pioneering research took place (Jordan et al., forthcoming).

By corollary, the accelerated uptake of NEPIs has allowed greater assessment of their practical performance, particularly in the fields of waste management (Levenson, 1993; Fenton and Hanley, 1995; Defeuilley and Godard, 1997; Powell and Craighill, 1997; Sinclair and Fenton, 1997; Porter, 1998; Turner et al., 1998) and air pollution (Baranzini et al., 2000; Folmer et al., 2001)³. However, these studies have mostly analysed national policies where NEPIs comprise only part of the overall regulatory package and have not always distinguished clearly the effects of individual NEPIs on polluter behaviour. As the principal advantage of these instruments is their use of market-based incentives to regulate industry's environmental performance, this lack of empirical investigation at corporate level is a significant omission from the literature. There have been some notable exceptions, such as the 'Porter hypothesis', which suggested that environmental regulations do not inevitably hinder the competitive advantage of firms and can enhance it (Porter, 1990; Porter and van der Linde, 1995) and Labatt's examinations of producer responses to environmental charges on packaging waste (Labatt, 1991,1997a, 1997b). Nonetheless, the theoretical advances in this discipline have yet to be matched by comparable levels of empirical scrutiny.

Proponents of NEPIs have in fact themselves been at the forefront of acknowledging the theoretical bias in the discipline. Hahn (1989: 95), for example, confesses that the theoretical structure of environmental economics 'often emphasises elegance at the expense of realism,' whilst Jacobs (1991: 152) notes that the 'laboratory' models of NEPIs often: 'fail to represent the complexities of the real world, in which "institutional" factors crucially affect corporate and consumer decision-making.' More recent studies have also stressed the need for more applied work to inform theory and guide new policy initiatives (Baranzini el al., 2000; Kaufman, 2001; Markyanda, 2001).

Political and institutional issues have also strongly influenced the implementation of the EU environmental programme. At first glance, the benefits of a common environmental policy are compelling. Many environmental problems are intrinsically trans-national in character and demand an international response. By pooling resources and expertise, therefore, concerted programmes can be developed and additional support provided to states that possess important environmental resources or poorly developed implementation capacity.

However, the reality of EU environmental policy often falls short of this ideal. Although the Union aspires to far-reaching economic and political integration, it remains a grouping of sovereign states that have formally ceded, in confederal fashion, certain policy-making powers to the EU institutions while retaining others at a national level (Wise and Gibb, 1993; W. Wallace, 1996). At the same time, political actors or appointees from the member states populate its key institutions and, thus, a neat separation of the pursuit of national interest from the supranational quest for common EU policies is fraught with problems. This creates tensions between, on the one hand, the political imperative to agree on important matters and, on the other, the desire to defend sovereignty and to have national agendas promoted on the EU arena. This is further accentuated by the presence of well-recognised environmental 'leader' and 'laggard' member states. The leader states - notably Germany, the Netherlands and the Scandinavian countries - are seen as a major force for the forward momentum of EU environmental policy. According to Sbragia (1996), this occurs where leader states introduce stringent national environmental standards and are keen to have them adopted across the Union in order to protect the competitiveness of their industries in European markets. The laggards are generally either sceptical about the scientific justification for precautionary environmental policies or concerned about the economic impact of ambitious initiatives. Because the issues and allegiances change with each policy proposal, environmental decision-making within the EU defies any simple classification but veers between 'lowest-common-denominator' bargaining, where vague and unambitious agreements result from the need to gain consensus, and a more 'entrepreneurial' style of decision-making seeking greater integration and higher environmental standards (Vogel, 1997; Zito, 2000).

Whilst these complexities pervade all aspects of EU policy, the tension between national and collective action is particularly apparent in the implementation of the environmental programme. For example, the European Commission is responsible for proposing new legislation to promote European integration and the specific objectives of the EU's Environmental Action Programmes (EAPs) but there are distinct limitations on its involvement in practical implementation. Under the Treaty, this remains the preserve of the member states, with the Commission serving an over-arching monitoring role. Thus, implementation is generally carried out at arm's length from the legislative process (Demmke, 1997; Haigh, 1998).

EU environmental law is usually enacted as a two-stage process. Assuming the member states can agree that European regulation is more appropriate than national action, the Council of Ministers and European Parliament must first approve the measures. Environmental legislation is then normally enacted in the form of directives, which are so-called because they 'direct' states to achieve particular objectives. Directives are therefore restricted to prescribing the obligation to act, the standards to be achieved and the time frame for compliance (Jordan, 1999). The member states then transpose the directive into national law and devise implementing mechanisms. Importantly, directives do not prescribe the methods national authorities must use to implement the policy. Whilst this arrangement is preferred by most member states because it makes EU law more sensitive to national circumstances and implementation capabilities, it has led to frequent disputes on the precise timing and extent of implementation required (Krämer, 1991). Moreover, because each state has its own perspective on how environmental policy should be prioritised and conducted - even within groups of states nominally classified as environmental leaders or laggards - the system has created considerable disparities in the way EU law is applied (Scott et al., 1994; Knill and Lenschow, 1998).

This multi-level system of governance, with its intricate division of responsibilities and jurisdictions, has served to deeply politicise environmental policy in the EU. Although disputes over policy formulation most frequently grab the headlines, this politicisation also pervades the selection and deployment of instruments to implement EU policies. It should be said that these pressures are not unique to EU, as most political groupings are forced to confront similar issues when defining how policy goals should be pursued. However, they are certainly amplified by the supranational character of the EU and the distinctive policy processes that have emerged to manage the process of European integration. Often these political realities sit uncomfortably with the basic notion that, on virtually all accounts, the EU exists to solve problems that cannot be resolved at the level of the nation state (Weale, 1996). Similarly, EU activity is not restricted to environmental policy but spans a range of areas, including the Single Market and monetary union and, again, tensions are created because the boundaries of environmental policy are extremely difficult to define. In short, all forms of economic activity and development inevitably have some environmental consequences (Blacksell, 1994). The result is a highly complex and intriguing policy dynamic but one in which the interests of environmental protection are not always best served.

1.2 Aims and Objectives of the Book

Whilst there has been a great deal of academic interests in NEPIs and the environmental politics of the EU, the slow uptake of NEPIs by European governments means that a great deal of empirical scrutiny of their practical performance is still required. It must also be acknowledged that even the most sophisticated of theoretical models cannot to capture the full range of factors that influence market behaviour and, therefore, developing effective NEPIs is by necessity an iterative learning process. There has been a tendency for academic analysis to separate the normative economics of market behaviour somewhat artificially from the politics of environmental policy. However, within most political structures and in the EU in particular, these two dimensions are intrinsically linked. A key challenge for research, therefore, is to ...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Tables
• List of Figures
• Preface
• Chapter 1: Introduction
• Chapter 2: EU Environmental Policy: Political Processes, NEPIs and Policy Implementation
• Chapter 3: The Packaging Waste Directive
• Chapter 4: Recycling Infrastructure in Britain and Germany
• Chapter 5: Corporate Responses to Environmental Taxes and Charges
• Chapter 6: NEPIs and EU Environmental Policy
• Chapter 7: Conclusions and Prospects for the Future
• Bibliography
• Index