Policy instruments for environmental protection René Kemp Presentation 9 Environment and Sustainable Development course UNU-MERIT PhD programme

Environmental policy instruments

Varieties of policy instruments

US SO2 “Acid Rain” Trading Began in 1995 Significant emissions reduction with > 30% savings vs non- flexible methods US NOx Trading Programs California “RECLAIM” SO2 & NOx, began 1994 Northeastern states, began 1999 Texas began 2002 Expansion of NE states program (NOx SIP Call) to Midwest & SE, 2004 UK ETS Began in 2002 Chicago Climate Exchange Voluntary GHG trading system; began late 2003 EU ETS Began January, 2005 Emission trading in operation

Carbon trading in the EU

Acclaimed advantages of economic instruments Static efficiency Informational economy Government revenue possibilities Incentives for environment-saving technical change Self-reinforcing

Common problems with economic instruments Poor monitoring Many companies not invoiced Of the invoiced, many do not pay (especially state companies) Fees set at a low level for political reasons Fees been given back to polluters in the form of subsidies to pollution control Often better to pay the fee that do something

“... Environmental policy implementation is often difficult given the lack of appropriate control, monitoring and start-up mechanisms. In some cases the legal framework for environmental management is diluted in numerous legal texts and throughout diverse institutions, and environmental matters are often delegated to several public institutions at different political levels. The creation of new policies and institutions does not always include a revision of previous legislation” (UNEP, 2000, referring to Latin America)

A 3-stage model for environmental policy One possible path would begin with a technology requirement - - all sources in a certain industry would be required to install a particular technology. This is easy to monitor and can be done when technology costs are not prohibitively high. As discharge monitoring capability and general civil service morale increased, the technology requirement could be translated into a technology-based discharge standard, as in the U.S. water pollution control system permits. Finally, the permits could be made marketable when the information and record-keeping infrastructure was judged ready to support the move. For water pollution, effluent charges can be used. Source: Russel and Vaughan, forthcoming

Clean development mechanism Its stated objectives: Give industrialised nations flexibility to meet emission reduction obligations (by investing in projects in the South and taking climate credits in their balance sheet) and Promote sustainable development in developing countries. Emanated from Brazil proposal (pressure from India for equitable climate treaty)

CDM projects over the world

Conclusions There is no universally right choice of instrument Instruments need laws, procedures, agencies (staffed and funded), technology for monitoring, and very important an ethos of responsibility and compliance Incentive systems are often perverse