Speeches recovered from the Conservative party’s online archive More…

Lidington: Enterprise and Environment - an alternative to 'anti-globalisation'

These days no summit is complete without its contingent of demonstrators protesting against the alleged evils of capitalism and globalisation. I must confess that when I see them on my TV screen, my first reaction is one of exasperation. The demonstrators seem to have adopted as their vision statement the title of an obscure British musical of the 1960s called "Stop the World, I Want to Get Off!"

But that is too easy a reaction. True, the protestors' slogans are naïve and the violence perpetrated by the extreme element is inexcusable. But what is also true is that the demonstrators are representative a much broader swathe of the electorate, especially in Western Europe, who share sense of disquiet about the future of the planet.

In part, this stems from a sense that politics can no longer make a difference. Power, it is argued, is shifting away from democratic institutions. Governments are helpless in the face of impersonal market forces and the hard-headed commercial decisions of multi-national companies. Political choices are made not as a result of open debate and democratic choice but after secret horse-trading in remote and unaccountable international bodies like the World Trade Organisation and the European Union.

Allied to that public mood is a recognition of the inter-dependence of life on earth. One of the most striking visual images of my lifetime is the photograph taken by one of the American Apollo missions which showed our planet as a small sphere of green and blue - a precious and vulnerable oasis in the black immensity of space. Go into any school in my parliamentary constituency, and you will probably find at least one class discussing climate change or marine pollution or endangered habitats and species. The mass media both reflect and strengthen this public concern. David Attenborough's award winning television programmes such as "Life on Earth" and "The Living Planet" reached audiences numbering many millions. The mass market tabloid newspapers in Britain regularly discuss the impact of environmental policy on people's everyday lives, from the relationship between climate change and skin cancer to the health risks or not of particular pesticides upon our food.

It would be wrong to dismiss this concern simply as an hysterical reaction to ill-founded scare stories. Of course some journalists are prone to hyperbole. Every politician knows that that is true and also that there is little point in complaining about it. And we do need to bear in mind the fact that some of the apocalyptic predictions of the 1970s, such as those made in the "Limits to Growth" study, have proved unfounded.

But the debate today is more mature than 30 years ago. I enjoyed reading Bjorn Lomborg's vigorous and optimistic polemic "The Skeptical Environmentalist" and it is good to be reminded that we have many reasons to be hopeful about the future of the planet. But Lomborg's caricature of environmentalists as irrational doom-mongers was over-egging the pudding. In my own country, organisations like Friends of the Earth, the Green Alliance, the Wildlife Trusts, the Worldwide Fund for Nature and the Royal Society for Protection of Birds are heard with respect and contribute positively to the debate on policy. Today, environmental organisations have influence when they argue their case on the basis of cogent evidence, when they acknowledge that scientific predictions must by definition be provisional and when they recognise that politicians face the challenge of identifying the best practical policy, but have to do so within the constraints imposed by imperfect evidence, competing arguments and a finite budget.

Politicians of the Centre-Right have too often been reluctant to engage with environmental arguments. As a result, environmentalism is often seen as a Left Wing concern. There is no reason why that should be so. In the English language, the two words "conservation" and "conservative" derive from the same etymological root.

I believe that free enterprise, capitalism and liberal democracy offer our species its best chance of overcoming the environmental challenges which face us.

Compare the environmental records of Eastern and Western Europe since the end of the Second World War and the advantages of an open society are clear. Western style liberal democracy, for all its shortcomings, is built on the belief that Government should be accountable and should be subject to the Rule of Law. As Chris Patten put it in his Reith lecture for 2000, it is laws "that entrench rights and ensure predictability and fairness in dealings between individual citizens, between individual companies or between citizens and companies on the one hand and the institutions of the State on the other". An independent judiciary, a free press and the right of the people to remove their Government are bulwarks against corruption and arbitrary rule. It was the absence of such checks, coupled with a blind faith in the virtue of central planning, which led to environmental disasters in the former Soviet Bloc such as the devastation of the Aral Sea. As Winston Churchill put it, democracy is the worst form of Government apart from all the others.

Nor would I claim that capitalism is perfect but it is the best system yet devised by man for creating wealth. Both commonsense and history tell us that when people get richer, priorities change. A man who is desperately poor worries how he is going to feed his family and how he can get a roof over their heads. With prosperity comes a greater concern for the environment. The argument that the only way to save the planet is to foreswear economic growth is not only absurd but, when it comes to the billions of poor people in our world, plainly immoral. What we have to do is harness the dynamism of modern capitalism to help deliver our environmental objectives.

A capitalist system is far better equipped to deliver sustainable development than a system based on central planning and Government control of the economy. The competitive nature of a free enterprise economy means that there is continual pressure on companies to reduce their costs. The use of energy costs money. Saving energy saves money. We saw in the 1970s and 80s how enterprises responded to the rise in oil prices by investing heavily in measures to save energy. The operation of the price mechanism coupled with an awareness that bankruptcy or take-over faced those companies that failed to perform have helped drive the introduction of cleaner and more energy efficient technology.

Free enterprise is also by its very nature innovative and experimental. Those companies and indeed those countries that are first into the market for environmentally friendly goods and technologies can make a good profit through their initiative. A recent study by Britain's Department of Trade and Industry calculated that there is already a worldwide market in environmental technology worth no less than $515 billion. This is forecast to grow to $618 billion by 2010. The sadness from my point of view is that the United Kingdom's share of that growing market is less than 5%, compared to France's 7% and Germany's 11%. There are some lessons for British policy makers here.

The emergence of a global economy presents challenges. Change is both more rapid and more drastic than was the case even fifty years ago. But globalisation too can be the ally of sustainable development. The fact that technology today can be transferred on a computer disc or even via an email attachment gives, at least potentially, people in all parts of the world greater access to the fruits of research and development in North America and Western Europe. And it's frequently the much-maligned multi-national corporations who are the agents of technology transfer.

A decade ago, the oil industry was symbolised by the gas flares that shone above production platforms. Today the major oil companies have the technology to eliminate that practice almost entirely. Those new processes will both capture the gas for use and significantly cut carbon emissions into the atmosphere. Shell has calculated that its programme to end flaring in its Nigerian oil fields will reduce carbon emissions by about 80 million tonnes, roughly the same as the United Kingdom's entire commitment under Kyoto. Or look at a country like China, two-thirds dependent on coal, where the application of coal gasification techniques developed by multi-national companies could enable the Chinese people to exploit those resources at much less environmental cost.

I am not going to pretend that we can simply sit back and leave everything to the beneficent influence of Adam Smith's invisible hand. John Stuart Mill, 200 years ago in "The Principles of Political Economy" recognised that the protection of the environment was a key responsibility of Government. He wrote this: "Is there not the earth itself, its forests and waters, above and below the surface? … These are the inheritance of the human race … What right, and under what conditions, a person shall be allowed to exercise over any portion of this common inheritance cannot be left undecided. No function of Government is less optional than the regulation of these things or more completely involved in the idea of a civilised society."

Let me suggest four ways in which I believe that Government should be prepared to take action.

First, we will continue to need sensible regulations to establish legally enforceable limits to pollution and other environmental hazards. When I was a boy, Nelson's column and the Houses of Parliament, like all public buildings and monuments in Central London were sooty black - the legacy of a century and more of smoke and smog. The Clean Air Acts of the 1950s and 60s changed that. Regulation can work.

But regulations also impose costs on businesses, consumers and taxpayers. Compliance costs can be the last straw that prompts a company to take its investment and jobs away from Western Europe to some part of the world where the rules are less strict. So any proposal for new regulation needs to be tested against certain principles. It must be grounded on persuasive scientific evidence. We need to be as confident as possible that it will actually bring about a significant improvement in the environment. It must be subjected to rigorous cost benefit analysis. It's a truism, but one sometimes overlooked in environmental debates, that life can never be made entirely free of risk. While the precautionary principle gives policymakers a useful compass, it cannot provide certainty. Politicians and officials will still need to exercise judgement about the right balance between costs and benefits in any particular set of circumstances.

Second, Governments should use the price mechanism to help deliver their environmental policies. One way of defining pollution is as the consumption of a scarce resource, namely clean air, clean water or a pristine landscape. Fiscal measures -taxes and charges- and instruments like tradeable credits and quotas can be used to ensure that prices take account of the environmental harm done by a particular process and at the same time give polluters a direct financial incentive to clean up their act. There is already evidence that this approach can work. In the 1980s, reductions in the duty on lead-free petrol persuaded large numbers of motorists in Britain to switch to that cleaner fuel. In Germany today, the elimination of duty on bio-diesel appears to be having comparably beneficial results.

There need to be a couple of provisos. One is that that "green taxes" should be both transparent and revenue neutral, not a ruse to increase the total burden of taxation by stealth. A second is that fiscal measures should be well designed, so that they do actually deliver the environmental goods. Britain's Climate Change Levy is a textbook example of how not to do it. It is arbitrary in scope, imposes significant costs on businesses (costs that are not borne by all of Britain's European, let alone global, competitors) and will deliver only marginal environmental benefits.

Tradeable quotas and credits have the advantage of harnessing both the price mechanism and property rights to deliver environmental objectives. They encourage companies to identify and act first on those processes where it is most cost-efficient to reduce pollution. And they have one key advantage over "green taxes" in that a quota system quantifies the environmental target up-front, with prices needing to adjust to ensure that the target is reached. The criticism that quota trading favours the rich (whether countries or companies) has some point, and clearly it is important to get the initial allocation of quotas or credits right, but exactly the same criticism is true of taxes, charges and regulations. I believe that emissions trading should be a central part of both national and international strategies to reduce pollution.

Third, we should seek ways to empower consumers. People tell the opinion polls that they care about the environment. Let's take them at their word. A supply chain that insists on traceability, together with honest labelling, makes it possible for consumers to take environmental considerations into account when deciding what to buy. The Marine Stewardship Council operates a certification system whereby sustainable fisheries in any part of the world can have their harvesting practices vetted and, if they meet the certification criteria, can sell their mackerel or their shellfish with the MSC's logo on the packet. Comparable systems have been developed to identify timber and wood products taken from sustainable forests. A rigorous system of energy certification and labelling for electrical goods might be a way of signalling to consumers how they can help to limit carbon emissions into the atmosphere.

Fourth, we need effective international action. This week, we have once again watched gruesome television footage of oil-soaked beaches and dying seabirds. From our living rooms and offices, we have seen the shocked expressions of fishermen who face the destruction of their entire livelihood. Oil slicks do not stop at national frontiers. Nor does acid rain or particulate emissions.

International negotiations are always difficult and the outcome is always imperfect. But the success of the Montreal Protocol on CFCs or of the International Whaling Commission's ban on commercial whaling show that real progress is possible despite all the inevitable arguments and compromises along the way.

The subject of how to improve international cooperation to protect the environment is vast. Today, I want to comment briefly on just three aspects of that debate.

First, there should be continuing international pressure to remove market-distorting subsidies. Agricultural protection of the kind practised by the United States and the European Union impoverishes developing countries. Desperately poor people in desperately poor countries cannot afford to worry about global warming or atmospheric pollution.

And if we want to encourage poor countries to turn to renewable energy and embedded generation to fuel their development then we need to push ahead with the liberlisation of energy markets. If an African entrepreneur is going to invest in solar power, he needs the assurance that he will be able to sell the electricity that he has generated freely and for a fair price.

My second point is that national governments and international organisations must face up to the truth that there is an inherent tension between national environmental standards and global free trade. We have seen this even within the European Union. The decision of the European Court of Justice in 1988 to uphold the right of the Danish government to insist that beer and soft drinks be sold only in returnable bottles, with a compulsory deposit, was a major departure from the EU's traditional support for the free movement of goods and services within a single market. The 1988 ruling diluted the principle established by the Cassis de Dijon ruling in 1979 that a standard accepted in one EU country should generally be accepted in another.

Today there still exists clear tensions between the WTO emphasis on global free trade and the various Multilateral Environmental Agreements. The agreement within the WTO to categorize subsidies into red, blue or green boxes was an important step forward in trying to resolve those tensions but more work will be needed at future international gatherings.

International companies usually want free trade but regard different product standards in different countries as an irritant and an additional cost. It is actually therefore the multi-nationals that will often have a vested interest in trying to influence governments to harmonise product standards, including environmental standards, worldwide. Of course, it is necessary to enter a caveat. Long established, powerful corporations can see the imposition of demanding product standards as a way to shut out competition from new entrants to their markets. They are no different in this respect from the medieval guilds in Europe whose craft rules were drawn up to make life difficult for interlopers into their trade. But having made that point, it is right to acknowledge that the evidence of recent history is that support from major industrial companies can drive forward the achievement of good environmental policies. The support of industry, lead by companies such as Du Pont and ICI, for the Montreal Protocol was crucial for its success.

Third, I believe that international negotiators need to place much greater emphasis on implementing the agreements that they have reached. I found the outcome of the Johannesburg Summit disappointing. It was worth having international agreement to a target for sanitation but much of the rest of the Summit Declaration amounted to little more than a rehash of pledges already made. I would like to see some of the effort that goes into high sounding promises to be directed instead to the complex and unglamorous task of implementing those treaties, most obviously the Kyoto Protocol, that have actually been agreed.

We face a daunting environmental challenge but I remain cautiously optimistic about the future. In Britain during my lifetime pollution from power plants, industry and homes has fallen dramatically. Our rivers are cleaner. Our beaches are cleaner. We recycle far more.

Those achievements give no cause for complacency. Britain and the rest of the developed world can do much more. The whole community of nations needs to work together to enable the world's poor to enjoy the material prosperity that in the West we take for granted while at the same time protecting the bio-systems on which our species depends to live.

The answer to the anti-globalisation protesters is to show that enterprise, free markets and accountable government will not frustrate but will help to deliver a greener world.

Keyboard shortcuts

j previous speech k next speech