EU-policies Regulatory Regimes and Policy Instruments for Environment and Energy Lecturers: Anders...

EU-policies Regulatory Regimes and Policy Instruments for Environment and Energy

Lecturers:

Anders N. Andersen

Søren Løkke

Trine Pipi Kræmer

Dorte Kardel

Carla K. Smink

Aim of the course

• To provide an understanding of the most common forms of the international conventions and organisations dealing with energy and environmental issues, with focus on the EU

2. A theoretical discussion of different approaches to policy design. + A lot of examples on specific use of different policy instruments within the field of energy and the environment

Timetable, parallel sequence

Mondays:• Course 6 –10, as

written in the study programme

Wednesdays• Course 1-5, as

written in the study programme

2 guest lectures:• Niels Meyer • Christina Grann (April 1, on Integrated Product Policies (IPP) in EU with focus on the electronic sector and the EuP directive)

Policy regimes and the use of different instruments – on

regulatory styles and policy regimes

Carla K. Smink

Environmental Management, 8th semester Spring 2005

Outline

• How to regulate society?– Public environmental regulations (March 14)– Market regulation (April 4)– Self-regulation (April 11)

• What is environmental regulation?

• Policy instruments

What is environmental regulation?

‘Environmental regulation aims to promote environmental friendly behaviour by making the environmentally friendly option seem more rewarding to the individual, in spite of his or her own short-sighted interests, and/or by facilitating the performance of environmental friendly behaviour’ (Thøgersen, 1999: 1)

Promotion of environmental friendly behaviour

Changes in technologies, aspirations and life-styles is needed

For example, coal, oil and gas will need to be progressively replaced by renewable energy sources, in order to achieve the policy objectives as agreed upon in for example the Kyoto protocol

What is regulation?

‘Environmental regulation aims to promote

environmental friendly behaviour by making the environmentally friendly option seem more rewarding to the individual, in spite of his or her own short-sighted interests, and/or by facilitating the performance of environmental friendly behaviour’ (Thøgersen, 1999: 1)

Making the environmental option seem more rewarding

• Carrot (economic incentives)

• Sermon (information)

• Stick (legal instruments)


‘Environmental regulation aims to promote environmental friendly behaviour by making the environmentally friendly option seem more rewarding to the individual, in spite of his or her own short-

sighted interests, and/or by facilitating the performance of environmental friendly behaviour’ (Thøgersen, 1999: 1)

Facilitating the performance of environmental friendly behaviour

An environment-friendly product is environmentally well throughout its life cycle:

– the raw materials used

– the manufacture of the product

– the product consumes little energy

– the product can be disposed of without significant environmental problems

Facilitating the performance of environmental friendly behaviour

• The raw materials used: how can we regulate this?

• The manufacture of the product: how can we regulate this?

• The product consumes little energy (consumer-phase): how can we regulate this?

• Product can be disposed of without significant environmental problems: how can we regulate this?

’Pure’ forms of environmental regulation

Public environmental regulation

Market regulation

Self-regulation



Market regulation

Self-regulation

14 March 4 April

11 April


• Strengths– Give an overview of

the theoretical strengths and weaknesses

• Weaknesses– Do not exist in reality

– Do not pay attention to time perspective

– Limited attention to interactions between actors in society

Mixes of environmental regulation


Market regulation

Self-regulation


• Strengths – Focus on role of

different actors in society

– ’Negotiating government’

– Focus on industry’s environmental performance

• Weaknesses – Imprecise

– Linguistic problem



Market regulation

Self-regulation

Policy instrument A

Policy instrument C

Policy instrument B



Market regulation

Self-regulation

Policy instrument ABCPolic

y instr

ument A

1

Policy instrument B1

Policy instrument C

1

What is environmental regulation?• Environmental regulation aims to promote

environmental friendly behaviour

• Making the environmentally friendly option seem more rewarding

• Facilitating the performance of environmental friendly behaviour

• Forms of environmental regulation: public environmental regulations, self-regulation and market regulation


Environmental regulation aims to:

• promote environmental friendly behaviour

• make the environmentally friendly option seem more rewarding

• facilitate the performance of environmental friendly behaviour


Forms of environmental regulation:

• public environmental regulations

• self-regulation

• market regulation

How to implement environmental regulation?

How to implement environmental regulation?

POLICY INSTRUMENTS

Definition of policy instruments

‘A policy instrument is a tool by which government tries to achieve its policy objectives’ (Neil Carter, 2001: 285)

‘The myriad techniques at the disposal of governments to implement their policy objectives’ (Jordan et al., 2000: 4)

Objectives of EU’s environmental policy

‘to preserve, protect and improve the quality of the environment, protect human health and utilise natural resources prudently and rationally’

Policy instruments

• Different types of policy instruments

• Different styles of enforcement

• Educative

Choice of policy instruments

• Policy instruments are often not purely ‘regulatory’, purely ‘economic’ or purely ‘voluntary’

• Often a single instrument does not operate in isolation; combination of different types of instruments work alongside each other to achieve a desired environmental objective


• Some combinations of policy instruments have an effect in the long run, others in the short run

• The composition of the package may need to change over time

Policy instruments


• Different styles of enforcement– differences between countries– differences between governments

• Educative

Policy instruments: differences between countries

‘The same type of policy instrument may be implemented differently as no two governments use the same policy tool in exactly the same manner’ (Hood, 1986: 106)

Policy instruments• Differences between countries

‘Americans rely heavily on formal rules, often enforced in the face of strong opposition from the institutions affected by them’

‘The British rely on flexible standards and voluntary compliance. They are reluctant to adopt regulations with which they cannot guarantee compliance. Regulations are formulated in such a way that officials can negotiate arrangements with firms that will not be disallowed by their superiors or the courts’

(Carter, 2001: 290-291)


• Example: voluntary agreements

EU: ‘agreements between industry and public authorities on the achievement of environmental objectives’

Voluntary agreement


Market regulation

Self-regulationVol

unta

ry a

gree

men

t


• The Netherlands:

VA are almost always legally binding agreements (‘covenants’)

• Germany:

VA are often negotiated ‘in the shadow of the law’. I.e. legislation will be drawn up otherwise and with the intent of pre-emting ‘the stick’

Example: voluntary agreements (VA)

Regulatory styles differ between countries

• The manner in which regulations are formulated and decided upon differs– impositional/adversarial way – to involve the subjects concerned; a consensual

style

• Influence behaviour through command and control regulations or self-regulation or market regulation

Regulatory styles differ between countries

• Global framework legislation versus detailed standards and procedures

• Differences in the preference for specific sanctions and incentives, such as the carrot, the stick and the sermon

• Differences in the way countries administer and enforce regulations

Regulatory styles differ between countries: problems in the EU

• Harmonisation of regulation is not easy, differences in:– population, political, legal and administrative

cultures– regulatory styles

• Harmonisation has been motivated by the need to prevent a regulatory ‘race-to-the bottom’ by Member States

Regulatory styles differ between countries: problems in the EU

• Harmonisation of the ‘law in the books’ versus harmonisation of the ‘law in action’

• Implementation and enforcement styles may have to become more similar:– harmonisation of implementation and

enforcement rules and procedures: how?– harmonisation of the institutions involved:

how?

Regulatory styles differ in EU: harmonisation is needed

• Some policy objectives cannot be achieved effectively by Member States acting individually– ex. Directive 2002/96/EC on waste electrical

and electronic equipment (WEEE)• national applications of the producer responsibility

principle may lead to substantial disparities in the financial burden on economic operators

• different national policies hampers the effectiveness of recycling policies



Market regulation

Self-regulation

Extended producerresponsibility

Extended producer responsibility

• Mix of public environmental regulations, self-regulation and market regulation

• Public environmental regulations:– mandatory take-back– minimum recycled content standards– requirements on the use of secondary materials– energy efficiency standards– disposal bans

Extended Producer Responsibility (EPR)

• Economic instruments:– disposal fees– virgin material taxes– deposit-refund system– waste removal premium

• Self-regulation/Market regulation:– information (different forms of labelling,

product environmental declaration)

Policy instruments



• Educative

Policy instruments• Differences between governments (within one

country)

Intermediary

InspectorExpert instructor

AdvisorProcess guide

Attention to the relationship withthe company

Attention to the environmental effectiveness

A littleA little

A lot

A lot

Policy instruments• Different types of policy instruments


• Educative:– Change the behaviour of target groups– Achieve the stated policy objectives– Help to spread environmental values throughout

society


• What factors are likely to influence the choice between different types of policy instruments?

• How is that choice likely to be affected by its institutional and political characteristics?


1 Dependent on the nature of the problem which is addressed– mandatory EMS is useful where a general

improvement in environmental performance is desired. For example Danish car-dismantling trade

– banning the use of a particular substance is useful where it can be demonstrated that an immediate cessation in use is essential for environmental protection and alternatives are available at reasonable costs


2 Costs and benefits of the options– the ‘best’ instrument will have the highest

environmental benefits for the lowest cost of implementation and compliance

For example CO2 allowances

CO2 allowances

• Draft bill on CO2 allowances* (February 2004):

The objective of the law is to bring about a cost-effective reduction of the greenhouse-gas CO2 by means of a system of negotiable allowances

* legal authorisation to emit a ton of CO2 in a given period


2 Costs and benefits of the options– the ‘best’ instrument will have the highest

environmental benefits for the lowest cost of implementation and compliance (CO2 allowances)

3 All policy instruments have strengths and weaknesses

4 Policy instruments have their intended ‘main’ effect and have positive and negative side effects

Selection of policy instruments

• Economic criteriae.g. economic efficiency, cost-effectiveness

• Environmental criteria e.g. dose-response relationships, irreversibilities

• Technological criteria e.g. feasibility, incentives for innovation

• Political criteriae.g. equity, precaution, acceptability

Public environmentalregulations

Self-regulation

Market regulations

Self-regulationSelf-regulation



Market regulations

Market regulations

1970s 1980s 1990s

Developments in environmental regulations (1970 – 2000) in industrialised countries

Example: Kyoto protocol

An international environmental agreement, accepted by a large number of countries who have committed themselves to reduce their CO2 emissions for the sake of the global climate

Which policy instruments can be used to implement the Kyoto protocol?

• Problems because sustainable reduction in global greenhouse gas emissions requires internationally co-ordinated policy action

Example: Denmark

• Energy consumption in Denmark– Consumption of energy after source– Consumption of energy after fuel

Problems

• Different interests of sovereign states

• Are reductions equitable in the burden that it imposes on individual countries?

• Risk of ‘free-riding’

• Costs involved

• Efficiency

• Enforcement

Policy instruments: Kyoto mechanisms

To reach their emission targets under the Kyoto Protocol, industrialised countries can use domestic policy instruments. They can also use four ‘Kyoto Mechanisms’ to co-operate with other countries

Which policy instruments can ‘solve’ these problems?

• Domestic policy instruments?

• (Flexible mechanisms?)– Bubbles– Joint Implementation (JI)– Clean Development Mechanism (CDM)– International Emission Trading (IEM)

Kyoto protocol: Denmark’s commitment

• Reduction of CO2 emissions with 21% by 2012 (1990 basis year)

• Reduction of SO2 (sulphur dioxide) emissions with 30% by 2010 (1998 basis year)

• Reduction of NOx (nitric oxides) with 45% by 2010 (basis year 1998)

Energy consumption in Denmark (1988-2001)

-100

100

300

500

700

900

1988 1990 1996 1997 1998 1999 2000 2001

Total energyconsumptionOil

Natural gas

Coal

Renewable energy

Import of electricity

Energy consumption by sector (DK)

Two examples:

• Households

• Transport sector

Energy consumption households

Source: http://www.energioplysningen.dk/English/EnCo.htm

Electric devices in households

(Source: ENS, 2001:17)

Energy consumption in households

• Which policy instruments can be used to influence the environmental behaviour of households?


• Which policy instruments can be used to influence the environmental behaviour of households?

Policy instruments that provide information


• Which policy instruments can be used to influence the environmental behaviour of households?– Activities concerning use of electric devices– Energy labelling – Stand by campaign– Lightning

Energy consumption in the transport sector (DK)

Source: http://www.energioplysningen.dk/English/EnCo.htm

Energy consumption in the transport sector (EU)

Source: EEA, 2002

Energy consumption in the transport sector

• Biggest energy-consuming sector (appr. 30% of final energy consumption)

• Energy consumption in transport, close link between:– Transport volumes– Economic development

Energy consumption in the transport sector

• High growth in GDP high growth in energy consumption (ex. Malta, Cyprus, Poland, Slovenia and Turkey)

• Decline in energy consumption decline in economic growth (ex. Lithuania, Estonia, Bulgaria and Romania)

Changes in total energy consumption (1990-2000)

Source: IEA, 2003

Policy relevance

• EU/Denmark committed themselves to the greenhouse gas targets agreed upon in the Kyoto protocol

• Transport biggest energy-consuming sector, but no specific targets have been set to address energy consumption

Policy relevance

• EU intends coming forward with proposals to set a compulsory minimum rate of new and renewable energy – ex. biofuel consumption should increase to 6% in the

year 2010

• Reducing energy use per transport movement– improvement energy efficiency, less energy

consuming modes of transportation such as rail, public transport and shipping)

Policy relevance

• Increasing the share of alternative sources of energy– ex. biofuels, wind and solar energy

Policy relevance

But: by means of which policy instruments? – the stick, the carrot or the sermon?– National initiatives?– International initiatives?

Policy relevance But: by means of which policy instruments?

– the stick, the carrot or the sermon?

• Lecture 2 (March 14): Public environmental regulations and its appearances

• Lecture 3 (April 4): Market regulation and its appearances

• Lecture 4 (April 11): Self-regulation and its appearances

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