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Nick Herbert: A new agenda for environmental regulation

I am very grateful to E3G for hosting this event today.

During the mid-1980s I accompanied a cross-party group of MPs on a visit to Norway and Sweden to witness the impact of acid rain on their environment.  I have never forgotten the pain in the faces of our hosts as they showed us their beautiful rivers empty of salmon and implored our country to do something about sulphur emissions from our power stations.

When we met Gro Harlem Brundtland, then Prime Minister of Norway, she urged on us the principles set out in her UN Commission's report and which still hold sway today: that development should be sustainable, meeting the needs of the present without compromising the ability of future generations to meet their own.

The international agreement that dealt with acid rain is one of the success stories of environmental improvement.  So, too, is action to prevent damage to the ozone layer.  Europe's rivers and beaches are cleaner.  Our air quality is better.  Natural habitats and wildlife have been protected.  The decades of an over-intensified farming are being replaced by a new focus on agri-environment schemes.

Significant specific environmental problems remain.  A number of countries are failing to meet air quality standards set by the EU.  Others have been slow to develop greener ways to dispose of waste.  There has been a disastrous failure to conserve fish stocks.  Some of these problems can be addressed through more effective national action.  Others, such as protection of fisheries, will require new policy instruments.  But to these we must now add a series of interrelated environmental challenges of a different order. 

At their heart is the threat of climate change which is a clear and present danger to the planet.  Related to the rise in temperatures, and combined with global population growth, is the prospect of water and food shortages.  The UK Government's Chief Scientific Adviser, Professor John Beddington, has warned of a "perfect storm" in just two decades' time of food shortages, scarce water and insufficient energy resources, threatening to unleash public unrest, cross-border conflicts and mass migration as people flee from the worst-affected regions.

Climate change will also impact upon the natural environment.  The President of the European Commission has already urged that "we need to be honest and to recognise that, despite our efforts, all the evidence is that the destruction of biodiversity is continuing".1  Commissioner Dimas has recognised that biodiversity loss is as significant a threat as climate change and that we have "a moral duty to act."2  Such action to protect eco-systems could, in turn, help to arrest climate change.  By contrast, the wrong action, such as deforestation, is accelerating it.

So today we face a resources crunch on two fronts.  The world's major economies are reeling from a collapse in credit and an economic challenge which we hope will be repaired in the short term.  But we are also facing an environmental resources challenge which in the mid-term could be just as damaging to our security and our standards of living.  In the words of Prince Charles in his recent Dimbleby lecture, "Just as our banking sector is struggling with its debts ... so Nature's life-support systems are failing to cope with the debts we have built up there too .... If we don't face up to this, then Nature, the biggest bank of all, could go bust."3

My argument today will be that we must learn the right lesson from the unsustainable consumption that precipitated the global credit crunch, and that if we are to rise to the scale of contemporary  environmental challenges we will need to look beyond the traditional regulatory approach towards a new and more effective set of policy instruments.

<h2>The new challenge</h2>

No-one can doubt the importance of leadership to tackle today's environmental problems, or the frequent need for international co-operation.

But in driving a regulatory approach, we have too often overlooked the nature of the environmental problems with which we are trying to deal.  Most are not god-given or external: they are man made.  The solutions, too, can ultimately only be affected by man's action.  As Shellenburger and Nordhaus argued in their controversial essay 'The Death of Environmentalism', the environment is not a 'thing', where all it takes is for damaging actions to be stopped.4  Today's environmental challenges are intricately interlinked. 

We can introduce a directive to set tough new standards for the quality of our rivers and streams, but if, through the implementation of those high standards, we require the carbon-intensive construction of carbon-intensive treatment works we can find ourselves undoing some of the progress towards carbon neutrality that government and industry has made.  And in the UK, where the marginal difference between our already high water quality standards and the standards set under the framework is slight, the high carbon and financial costs of improvement can seem burdensome and difficult to justify to a sceptical public.

Tom Burke talked a decade ago about the transition from the "easy politics of the environment", where there were easily identified victims and villains, a clear case for action, and more winners than losers, to a "hard politics" where the case for action is less clearly perceived and there may be more losers than winners.5  More environmental regulation is likely to be both unpalatable and ineffective to change behaviour in these cases.  And as Tony Juniper has also argued, simply banning a particular chemical, protecting a particular piece of land, or regulating different industrial sectors won't be sufficient response to problems where the solution requires changes in individual behaviour.  In his words, "Aside from agreeing with new laws, most people didn't need to lift a finger.  Now it's different.  The climate, biodiversity and resource crunch cannot be solved by any one sector - all of us must play a part, including in how we live."6

Shaping policy to effect multiple changes in human behaviour, encouraging choices that will lead to sustainable consumption, will be less straightforward than in the era of blunt regulation.  It certainly won't be achieved by unpopular or painful proscriptions.  A new and more sophisticated approach to environmental protection will be required, where changes in behaviour are seeded so that they grow organically within families and communities.  As E3G puts it, "third generation environmentalism" recognises that the core challenges of the 21st Century - climate change, preserving ecosystems and ensuring the sustainable use of resources - will " ... only be successfully tackled if we work from within the existing systems and structures of today's society."7

<h2>The limits of regulation</h2>

It is important to recognise the role that environmental regulation plays.  By guaranteeing basic minimums it helps prevent harmful activities and when those regulations are properly enforced, ensures that those responsible are held to account for the damage they cause. 

There will always be a place for negative regulations that restrict what people and businesses - not to mention governments - are allowed to do with the environment and our natural resources.  Environmental regulations that ban, cap or restrict are by their nature blunt tools, but they are tools nonetheless and they have a role to play.

But regulation is not an end in itself.  The purpose of regulation is to achieve some greater good that would not otherwise be achieved, and it is (only) to ensure  better behaviour, that environmental regulation has value.  But regulation usually constrains rather than enables, and it almost always has a cost.  And if the negative regulatory approach does not deliver, those costs can themselves be damaging.

Regulation at EU level is no guarantee of success

Collaboration at the international level has delivered effective regulation in the past that has helped to improve our environment beyond anything that could have been achieved by individual governments acting alone.  But regulation at the EU level, while it may be more co-ordinated and able to deliver economies of scale, is no guarantee of success.  In some areas, regulation has persisted while the activity it seeks to control has harmed the environment on a massive scale.

EU treaties established fisheries as one of the Union's competences, and as a vital natural resource it was expected that the regulation under the Common Fisheries Policy would guarantee a sustainable future for our fish stocks.  But the CFP has been nothing short of an environmental catastrophe.  The Commission's green paper on fisheries admitted that the 2002 objectives for sustainable fisheries have not been met, but the truth is that for decades European fishing fleets have been over-exploiting our marine resources.

Against the scientific evidence that long-term damage was being done, systematic over-fishing - within the permitted parameters of the CFP - has been the principal cause of the collapse in fish stocks that we have witnessed.   The quota management system has failed to preserve fish stocks whilst simultaneously endangering the livelihoods of fishermen.  But it has also led to inefficiency, demonstrated by the grotesque practice of discards.  The result is that 88 per cent of European fish stocks are overfished, against a global average of 25 per cent.  Short-term objectives by national governments under pressure from their fishing communities have undermined the long-term sustainability of the industry which regulation at an EU level has not stopped. . 

The CFP tries to control fishing rather than taking responsibility for ensuring that fishing is a sustainable ecosystem service.  Its shortcomings have now been recognised by the Commission, and Conservatives are committed to ensuring that fundamental reform of the CFP, with much more focus on devolving power and responsibility, can be agreed.  But it serves as an example of EU-wide policy that has done real harm to our environment.

Costs of regulation must be assessed vs the benefits

Where regulations are authored at an EU level, they sometimes fall short because of a failure to cost the consequences against the proposed benefits.  For example, the proposed new Pesticides directive includes rules for Plant Protection Products that would classify some fungicides, which are crucial to wheat farming in the UK and other northern European countries, as hazardous, imposing large costs on farmers, and causing them, through certain 'cut-off criteria' to be swiftly removed from production. There was no European impact assessment carried out on the impact of the cut off-criteria, while member state impact assessments, including the British one, condemned the regulation as 'disproportionate.'

When EU regulation is devised, not only is it vital that a detailed assessment is made of the likely costs of the new rules, but that these costs are seen in the local context of where they will be applied.  Regulations may be EU-wide in application, but vary considerably in terms of the costs borne by different Member States.  A recent example to affect the UK is the proposals to introduce electronic identification of sheep - a policy devised to aid the tracking of flocks as an animal health safeguard.  This regulation was always going to affect the UK disproportionately - we have the largest sheep flock in Europe - but it was never assessed by the Commission before it was drawn up.  The UK's own cost/benefit analysis found that it was again, disproportionate, but by that time - helped by a lack of engagement from UK Ministers - it was too late to revise the regulation.  Our farmers are not dismissive of the need for effective animal health regulations - they know more than anyone the enormous costs that an outbreak can impose on the industry and their livelihoods.  But they do question, in my view rightly, the balance of costs of this regulation to them, against other measures that could be taken. 

In future, it should be a cardinal rule of EU regulation that proper assessments are made of the costs they will impose in the real world far in advance of their implementation - and not just modelling the impact in one Member State, but in all the places across the Union where the regulations will be in force.

Regulation cannot be divorced from wider objectives

Regulation can also fall short when becomes detached from wider environmental or social objectives.  A key example is the Pesticides Directive.  It did not just lack a proper impact assessment, it was judged by those countries that performed their own to be without scientific basis and at risk of creating serious problems for agricultural production in Europe.  Despite this, this new regulation has been adopted by Member States and is now being implemented across Europe. 

So an environmental regulation designed to achieve soil improvements and limit the harmful use of some pesticides could now have the unintended - but foreseen - consequence of threatening food production more generally.  The regulation is therefore divorced entirely from the objective of food security which in itself is a vital part of Europe's environmental agenda to reduce our reliance on imports, encourage more local food production and cut down on food miles.

Regulation must be driven by science, not pressure or fads

In a related way, environmental regulation must properly grounded in science, and drawn up in a way that respects what the scientific data tells us, even if this is inconvenient.  The shape and nature of the regulation we devise must be driven by science, not by political fashion or the influence of lobbyists.   Where this has failed in the past, it has had wider consequences. 

Take biofuels - an example of a rush into regulation that was not supported by science.  The aim was straightforward - to support an industry that could reduce greenhouse gases while increasing Europe's fuel security.  Biofuels could also create a new EU based green industry that would help support rural economies and promote economic independence in developing countries.  But this was all set against the fact that once Indirect Land Use Change was taken into account, the green house gas emissions savings evaporated, with multiple studies all concluding that large scale biofuel use would actually increase emissions.  Coupled to this was the fact that the directive's sustainability conditions were deeply flawed, with no social criteria included, no requirement to protect soil, water or air, no safeguard to protect savannahs or secondary forests in third countries, and no meaningful verification scheme, with the biofuels 'verification' based on self-reporting.

But on the back of intense industry lobbying the biofuels regulation went ahead, mandating a target for the use of biofuels across the Union, distorting production and contributing to increased global food prices. This has now been corrected by the Renewable Energy Directive,8 which replaced a specific biofuels target with a target requiring ten per cent of all transport fuel used to be renewable.

Regulation must have democratic support

Because regulations by their nature restrict activity and impose controls, the benefits that derive from them must be clear to those who bear the costs.  However, frequently EU regulations have not been seen as cost-effective and have therefore lacked democratic support.  And only if regulations are seen as fair and necessary, will they ultimately be effective.  Regulations that work  have caused widespread behavioural change, not necessarily because the sanctions for breaching the regulations were harsh, but because they were widely seen as justified and proportionate in themselves. 

Democratic support for regulations can be difficult to achieve when the costs are in the present and the benefits are only realised in the long-term, but it is the responsibility of politicians in these instances to make the case to a sceptical public.  Sometimes the public's objection to regulations is because of a flaw in the regulation itself, and the plans for sheep EID in the UK would fall in this category.  But at other times, it results from individual Member State governments failing to  scrutinise regulations properly, examine their rationale, and explain to the public their purpose and costs.  This process of democratic oversight and endorsement for EU regulations happens too infrequently in Britain.

Regulation should not be default position

Just as it is important to appreciate when regulation is appropriate to protect the environment, it is also important to recognise the limits of regulation, and for politicians not to resort to regulation as a default option.  Often there are less costly and intrusive ways of changing behaviour.

In the area of waste management, there have been important EU wide regulations in recent years that have set benchmarks for reducing waste, improving disposal and encouraging recycling.  Regulation that mandates a certain industry objective will always have a role.  But regulation alone is not always the best or only way to proceed if we want large scale advances that happen quickly and do not impose new costs.  Responsibility deals in the waste sector are one example where companies voluntarily agree to a new approach to reduce the waste packaging from their products.  This manages resources more effectively, reduces the impact on the environment, and saves on costs - and all without prescriptive regulation.

<h2>More effective scrutiny of regulation</h2>

Where EU-wide regulation is necessary, it is essential that it is scrutinised properly and implemented sensibly.  Over the past ten years, British Ministers have too often left the cut and thrust of European debate to officials, while other member states send senior politicians to vital Council meetings.  During vital discussions about the electronic sheep tagging regulations, the relevant British Minister missed three consecutive council meetings, even though British government trials of the system 'indicated that the costs outweighed the benefits.'  We need to review carefully whether we give sufficient priority to the early assessment and monitoring of EU legislation in government departments such as Defra where EU involvement is substantial.

By contrast, when EU legislation is passed, Britain has developed a damaging tendency to 'gold-plate' it.  Our own officials turn recommendations into requirements, placing further burdens on hard-pressed small businesses and increasing resentment against the EU.  As Commissioner Fischer Boel has said, "there are some Member States that are over implementing."  Britain's own House of Lords EU committee agrees, concluding that Britain is one of the "culprits."

Finally, if our executive has been insufficiently involved, so has our legislature.  The British Parliament needs to be more effective and resolute in scrutinising EU legislation.  The Conservative Party has proposed that each of our Parliament's specialised 'select' committees includes a new staff member to dedicated to EU affairs.  We will make the scrutiny reserve power of the Westminster Parliament statutory, which would give it the same powers as the Swedish and Austrian Parliaments to give ministers 'mandates' for negotiations in the EU council.   And we will ensure that the EU Scrutiny Committee sits whenever EU institutions are in session.

<h2>A modern agenda to protect the environment</h2>

But it will not be enough that EU legislation is more considered and better scrutinised.  Political action needs to move beyond devising new rules for the State to enforce.  Regulation has a role to play in protecting the environment, but is not enough.  European history, particularly in the continent's Eastern half, teaches us that a system that relies on top-down instructions from the State wastes so much human potential.

Rather than a narrowly focused approach to implementation which uses sticks to force participants to fix problems after they have happened, we should be thinking about how to incentivise the right behaviour in the first place.  So, rather than mandating water companies to clear rivers of diffuse pollution, we should instead incentivise polluters to turn away from their polluting behaviour. Instead of building ever-more works to remove nitrates from our waterways, it may be more cost-effective for everyone if a system of incentives could be found to remunerate farmers for using less fertiliser in areas which are likely to have a high impact on our water.

We need to make a philosophical shift, away from telling people not to do things that are bad for the environment, towards giving them positive incentives to protect it.  Since the Millennium Ecosystem Assessment was carried out by the United Nations, the idea of placing an economic value on ecosystem services has started to gain currency.  As its report concluded:

 "Economic and financial interventions provide powerful instruments to regulate the use of  ecosystem goods and services."9

 A free natural resource can be consumed or abused freely, except where it is protected by regulation.  But a resource that is valued will be protected.  Putting a price on nature would be controversial.  But the consequences could be hugely positive for conservation.

For instance, a system of habitat banking or conservation credits could give landowners new and powerful incentives to invest in new habitats for wildlife.  In the United States, 'Endangered Species Banks' have linked developers and conservationists in new efforts to preserve habitats.  Instead of opposing each other they negotiate and co-operate on the shared improvement of their community.  There are over 65,000 hectares of land protected by these kinds of arrangements. 

I have established an online forum - Future Countryside (www.futurecountryside.com) to promote this kind of new thinking.  Unless we adopt a new approach, we risk the continuing decline in biodiversity as existing policy instruments prove ineffective.  Creating markets to allow payment for ecosystems services would enable an important change in the role of government in protecting natural systems.  Government would set the rules and specify the outcomes.  It may also fund the service.  But it would measure the outcome, not the delivery, because it is the outcome that matters.  And that would have hugely beneficial effects in reducing the burden of bureaucracy on land managers.

The shift from rules to incentives is embodied in the later phases of the EU Emissions Trading Scheme.   Just as biodiversity was made into a valuable resource that developers had to acquire in order to build, so carbon emissions are being converted from a side-effect of industrial production to a limited resource that has to be bought as part of the production process.  We support the Commission's Environmental Action Plan Mid-Term Review's decision to:

" ... focus on strengthening the better regulation agenda in environment policy making by: using the market to deliver environmental results ...."10

These markets do not just work in the short term.  They have extremely important long-term effects. By creating the framework for innovation that will spur the development of new green technology, and the low-carbon economic growth that will employ our next generation.  As Commissioner Dimas has said:

 "Fostering eco-innovation is essential if we are to successfully tackle these issues as well as  the other environmental challenges we face, such as pollution of our air and water, waste  generation and unsustainable use of resources.  Real progress will only be feasible if new  environmental technologies are developed and promoted throughout the EU."

David Miliband has suggested that climate change "challenges conservatives' attachment to free markets."11 In fact, the opposite is true: we will need to harness markets if we are to meet the challenge.  The Foreign Secretary has sought to build public support for deeper EU integration by labelling the EU  "the environmental union":

"... the EU thrives on big projects: peace and reconciliation after the Second World War, the single market, the euro and enlargement. The next big project for the EU - the environmental union - is to be the catalyst for a world beyond carbon.'12

But Europe should be focusing on climate change for the environment's sake, not because the institution requires a new raison d'être.  And the projects Mr Miliband described were all European in scope, but climate change is global.  An agenda that focuses inwardly on institutions, on deeper integration, is not one that will help us deal with climate change.  The EU accounts for just 14 per cent of global carbon dioxide emissions, so cannot counteract it on its own.   As David Cameron said in his speech in March 2007 to the Movement of European Reform Conference, March 2007, "the EU should be focusing on the environmental challenge of climate change".  It has an important leadership position, and as the largest economically integrated area in the world, it will play an equally important part in the transformation to low carbon economy.   But we need to look further outwards, and put in place an international agreement.

The negotiations leading up to the Copenhagen summit are crucial.  Only yesterday, Britain's Meteorological Office warned that the "severe scenario" of a temperature rise of 4 degrees centigrade was "looking more plausible".  We will need to negotiate a deal that addresses climate change, and provide a sustainable route for developing countries to grow economically.

<h2>The importance of green growth</h2>

For years we have become accustomed to a debate in which environmental protection and economic growth are seen as opposites.   Yet growth is also the mechanism that creates jobs, and allows entrepreneurs to take advantage of opportunities.  An unsustainable dash for growth - what President Sarkozy called 'GDP fetishism'  - will lead us to an environmental crunch just as unsustainable consumption fuelled the credit crunch, but the vision of 'Prosperity Without Growth' - to borrow the title of Britain's Sustainable Development Commission report - is as naïve as enjoyment of ever-rising property prices.

We need to move beyond these old political terms of debate, and promote socially responsible, sustainable economic growth, where the potential of green technology is unlocked.  New sources of power, more efficient wind turbines; better, lighter batteries for electric cars; new genomes for advanced biofuels; new crops producing higher yields in drier climates, and creative ways of absorbing carbon from the atmosphere all offer the opportunity of growth which can be shared across the planet.  As E3G have said in their mini manifesto:

"Humanity is not fundamentally short of the resources, technology and capital to deliver security and prosperity to all of the eight billion people that will soon share our planet.  We know now how to do this without irreparably degrading the environment which supports all our livelihoods."

<h2>Conclusion</h2>

As we all know, today's environmental challenges are broader in scope, greater in number, and more serious in impact than those we faced before.  Just as the unsustainable consumption boom produced the credit crunch, where we failed to live within our economic means, we now face a resources challenge where we have living beyond our environmental means.  Living within these means is not so much about consuming less, as consuming differently, and putting economic growth on a low carbon path to sustainable development.

Conventional regulation has played an important part in tacking environmental problems so far, and subject to proper cost-benefit analysis and proper democratic scrutiny, it will continue to do so in the future.  But contemporary challenges demand that we develop new policy instruments that do not limit themselves to imposing rules.  We need to harness market mechanisms that make protecting the environment pay, and take social responsibility to address the problems where so many of them occur - at the local level.

Regulation works best when it focuses creative energy and innovation on real problems; when the rules are used to generate competition for reward and to stimulate the striving for success.  The current wave of innovation on the back on renewable energy, and the recycling of materials is an example the environmentalist and conservationist might follow.  What I would like to see is the design of regulation that focuses not on constraint, but on the liberation of new approaches and ideas.  A process of regulation that does not try to tell people what they cannot do, but sets them goals to achieve.  A clarity to regulation that assumes positive intent on the part of those who steward our natural resources and provides them with the rewards for doing the right thing.

We have spent the last few decades trying to stop people and businesses from doing things that damage the environment, but today, facing unprecedented challenges, we need them to start going green.  To end with E3G's words: we must be environmentalists for solutions rather than against problems.

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