Select Committee on Environmental Audit Minutes of Evidence


Memorandum from English Nature

1.  INTRODUCTION

  1.1  English Nature is the statutory body responsible for advising both central and local government on nature conservation and for promoting the wildlife and natural features of England. In fulfilling its duties, English Nature:

    —  Advises Ministers on the development and implementation of policies for nature conservation;

    —  Advises Ministers on other policies affecting nature conservation;

    —  Identifies, notifies and safeguards Sites of Special Scientific Interest (SSSIs);

    —  Establishes, maintains and manages National Nature Reserves;

    —  Provides guidance and advice on the principles and practice of nature conservation to a wide constituency; and

    —  Commissions and supports a wide range of research and other projects relevant to nature conservation.

  1.2  Through the Joint Nature Conservation Committee, English Nature works with sister organisations in Scotland, Wales and Northern Ireland to advise Government on UK and international nature conservation issues.

  1.3  English Nature supports the use of economic instruments for environmental policy, as part of a package of measures which should include a strong regulatory framework. However, it is important to assess whether such measures are likely to deliver environmental benefits and decide on a case by case basis. We take a pragmatic approach to the evaluation of economic instruments in terms of whether they will deliver benefits for nature conservation, setting our evaluation in the context of the following criteria:

    —  Objectives. Whether the objectives of the instrument are consistent with environmental priorities.

    —  Design. Whether an instrument can be designed effectively, and be sufficiently linked with indicators of environmental damage, to deliver the right response.

    —  Market circumstances. Whether the conditions (eg elasticity of demand) and structure (eg competitiveness) of the market is conducive to the positive transfer of economic signals to achieve environmental objectives.

    —  Use of revenues. Where design issues or market circumstances are likely to limit the direct environmental benefits from the instrument, whether there are any complementary proposals to increase funding for environmental purposes.

    —  Fairness. Whether there any problems relating to social priorities, international competitiveness, cross-sectoral fairness or implementation timescales.

  1.4  The remainder of this response concentrates on the three areas of interest identified by the Committee: pesticides, aggregates and the details of the climate change levy. However, English Nature is also interested in other areas where economic instruments may have the potential to help nature conservation objectives, including water abstraction, peat extraction and nutrient pollution. We note the DETR's ongoing research on water abstraction; however, little attention appears to be being devoted to the latter two areas. In neither of these areas has English Nature yet come to the view that economic instruments would be feasible or appropriate, but the concerns over impacts are sufficient to warrant further Government consideration of this options alongside other policy alternatives.

2.  PESTICIDES TAX

  2.1  We support the view, expressed in ECOTEC's report for DETR, that there are measured effects and risks to wildlife over and above those preventable through the current regulatory process. This suggests the existence of externality costs not covered by regulation and a clear requirement for further policy action. The ECOTEC research estimates £50-120 million per annum in clean up costs to the water industry, to meet environmental concerns and drinking water requirements, plus other costs elsewhere. We have recently advised DETR on the basis of current concerns in relation to wildlife; see the summary of this advice at Annex A.

  2.2  We believe that an economic instrument could provide useful signals to farmers and deliver some environmental benefits, as part of an overall package of policy measures. A well designed measure would support the Government's strategy to tax "bads" rather than "goods". However, it is important to note that the main objectives should be to promote wise use of pesticides rather than eliminate them altogether.

  2.3  Two important changes are needed to the implementation of such a mechanism to ensure that it delivers significant benefits for wildlife:

  2.3.1  Increased funding for complementary measures. Farmers' response to a tax may be modest at the expected tax rates. This is partly due to the effect of harmful subsidy payments, the removal of which can be expected to strengthen the price signal in the long term. However, the tax provides a great opportunity to increase public funding for environmentally beneficial measures, some of which could address the reductions in biodiversity brought about by the intensification in farming, including pesticide use. These should include:

    —  An enhanced and re-focussed agri-environment programme which would lead to direct environmental benefits. ECOTEC estimate that a tax at an average rate of 30 per cent would deliver £85-130 million per annum, at current prices and sales volumes. This is roughly equivalent to the current annual agri-environment programme in the UK. If the tax were accompanied by an increase in that programme it would make a very significant contribution to the delivery of the Government's objectives in the Biodiversity Action Plan. Since these environmental payments would be made to farmers, it would lessen the burden of the tax on that sector as a whole and could be used specifically to help vulnerable farms. Finally, it could be used to lever in further resources for the agri-environment programme by acting as "match-funding" for monies re-directed by modulating commodity regime payments under the Common Agricultural Policy.

    —  Other research, training, and other advisory measures to help decision making in relation to pesticides use.

  2.3.2  Better design of the tax bands. The tax banding needs to reflect better the indirect effects on wildlife, such as on food sources for birds. The banding also needs to reflect better the effects of pesticide persistence. A preliminary analysis by ourselves and the RSPB suggests that design improvements which take better account of indirect effects are feasible in principle. A tax base calibrated to doses rather than weight may also in practice provide a better link with environmental effects;

  2.3.3  If neither of these recommendations is implemented (namely additional resources devoted to accompanying measures or an improved banding system), then the scale of the potential benefits to farmland biodiversity would be uncertain.

  2.4  Controlling the way that pesticides are used is as important as controlling the products used and amount of use, and economic signals will have a limited. This underlines the need for complementary measures, including those specified in paragraph 2.3.1 above and other regulatory measures. We set these ideas out in detail in our response to the consultation exercise earlier this year.

  2.5  We also have strong concerns about the environmental effects of some veterinary medicines, particularly sheep dip, and recommend the development of measures to deal with these concerns. Such products are not currently within the scope of the tax and alternative policy measures need to be explored.

3.  AGGREGATES TAX OR PACKAGE OF VOLUNTARY MEASURES

  3.1  Mineral extraction has a wide ranging impact on nature conservation, in the form of primary habitat loss through extraction and secondary environmental effects such as noise, pollution and transport. However, mineral extraction also provides opportunities for Earth heritage conservation through the creation of geological exposures, and can provide opportunities to reverse the decline in wildlife habitats through after-care schemes. We believe that ensuring an environmentally sustainable approach to mineral extraction is an essential part of achieving better environmental quality. To be sustainable, the working of aggregates should minimise and mitigate for any impacts on nature conservation interests and maximise opportunities provided by restoration. Policies affecting aggregate extraction should therefore promote these objectives.

  3.2  We support the Government's recent budget statement to the effect that research shows that there is clear evidence of environmental "externalities" from aggregates extraction, and consequently a case in principle for the imposition of an aggregates tax. In practice the key issues are whether the tax can be designed effectively to achieve environmental objectives and whether it provides the best available policy mechanism for achieving these.

  3.3  The phase two research for DETR indicates that its measurement of externalities is likely to be conservative because of the methodology adopted and, importantly, because the research did not measure the effects on any special landscapes (such as wildlife habitats) outside National Parks. We also believe there are other methodological reasons, not stressed in the report, suggesting that the phase two research estimates are likely to be conservative.

The tax option

  3.4  In practice, designing a tax instrument that will deliver direct benefits for nature conservation is made difficult by the following factors: first, impacts are likely to be very variable depending on the location of the quarry. Secondly, actual impacts are likely to depend on operational conditions and the quality of after care. Consequently, a tax instrument banded simply by rock type is unlikely to be correlated with actual environmental impacts. The difference in tax bands indicated by the DETR research relates mainly to "nuisance" effects on residential areas but does not appear to be closely linked to impacts on nature. English Nature is disappointed that the possibility of different designs have not been explored further, although we recognise the problems involved. Therefore, we believe that the main contribution of the tax would be as a demand management tool, though the limited evidence available suggests that demand reduction will be small, at least on the modest tax rates envisaged. To achieve benefits for nature conservation, we would recommend most of the revenue collected needs to be devoted to environmental schemes. We note that the Customs and Excise consultation response highlighted the support for the use of revenues in this way.

The voluntary measures option

  3.5  English Nature has been closely involved in evaluating the alternative policy approach: a voluntary package of measures proposed by the Quarry Products Association (QPA). The package has the potential to tackle more issues than the tax. We welcome this initiative since we believe that partnership approaches with business and landowners are often the most effective way of discharging our duties and achieving wildlife gain. However, while we welcome some elements of the QPA's revised package of measures (July 1999), we are concerned that it falls short of delivering in some of the key issues that we have identified previously. We are especially concerned that the conservation of SSSIs has not been fully addressed. The commitments for SSSIs are weaker than those for the larger areas designated as National Park. The package remains an ideal opportunity for the industry to make the similar commitments on SSSIs. We are also looking for:

    —  A more specific commitment towards promoting biodiversity and earth heritage conservation;

    —  Clear performance targets in key areas which can be audited externally, including targets relating to SSSIs and rates of use of recycled/secondary aggregates.

  3.6  A summary of our response to the specific parts of the package is set out in the attached annex B.

  3.7  Evaluating the potential of the aggregates tax against that of the voluntary package is difficult in the absence of any indication about the use of revenues under the tax scenario. However, our preliminary view of the relative merits of the alternative policy measures, based on the current situation, is as follows:

    —  The package of voluntary measures has the potential to address impacts on nature more sensitively than is likely under the tax. We find the package disappointing and insufficient, especially as a result of the lack of substantial measures for the protection of SSSIs. However, if the package is enhanced to deal with the suggestions made by English Nature, this is likely to be the preferred alternative for nature conservation priorities;

    —  The benefits of a tax alternative are more likely to be related to a general decrease in demand for primary aggregates, though it seems that will be small, at least on the modest tax rates envisaged. Even if a suitable package of voluntary measures is agreed, we recommend that the Government state an intention to keep alternative policy options, including the tax, open for the long term. These additional policy measures may be necessary if demand levels accelerate so steeply as to compromise sustainable development objectives or if the voluntary package fails to deliver the intended benefits.

4.  THE CLIMATE CHANGE LEVY

  4.1  Given the Government's stated commitment to introduce the Levy, our response is concerned with the implementation details. There is general consensus that the imposition of a "downstream" tax makes it more difficult to design incentives for switching to environmentally preferable forms of energy use. Having made this decision, we believe that the remaining elements of tax design need to be focused on ways in which the environmental benefits can be maximised. While efforts to reduce the compliance costs should be applauded, the primary objective of the design should be to achieve the maximum feasible reduction in emissions. We believe that opportunities have been missed in the current proposals, especially in respect of the choice of energy unit as the tax base, and the treatment of cleaner energy sources.

  4.2  Given the current proposal to impose the tax "downstream", it is essential that maximum opportunity is provided in other ways to encourage the use of environmentally preferable methods of electricity generation. We also note that the proposal to base the whole of the tax on energy inputs means than it is less well correlated with emission levels than if it had been based on carbon content.

  4.3  Renewables. The Marshall Report suggested the possibility of a number of measures, including:

    —  Tax relief in relation to carbon reductions to suppliers of renewable energy where this is provided directly to the final customer;

    —  Where renewable energy is not supplied directly to the final customer:

    —  Establishment of suitable green business electricity contracts and tax relief for energy suppliers under these contracts;

    —  Assuming feasibility, direct incentives to renewables generators on the basis of approximate percentage of electricity coming from renewable sources. We recommend that the feasibility of this option is fully considered; and

    —  Tax credit schemes or hypothecated revenue to encourage investment in renewable provision.

  English Nature supports the need to consider these fully, but has no view on the feasibility of specific measures.

  4.4  While we support the development of renewable sources of energy on the basis of climate change objectives, we are also concerned about the direct impacts of the establishment, operation and decommissioning of such schemes in relation to sites of high nature conservation value. It is important, therefore, that policy approaches providing additional incentives for renewables are accompanied by research and development programmes focusing on the assessment and mitigation of impacts.

  4.5  Other "cleaner" sources. Ways should also be found to provide incentives for switching towards other forms of "cleaner" energy use, in addition to renewables. These might include combined heat and power schemes, low NOx combustion techniques, flue-gas desulphurisation and, importantly, carbon sequestration to reduce climate forcing. Incentives could include the following, subject to further consideration for their feasibility:

    —  Direct or indirect Climate Change Levy reliefs, based on carbon content. These should include the development of "green" business electricity contracts including "cleaner" sources other than renewables;

    —  Tax credit schemes for investment in "cleaner" technologies;

    —  Further incentives for combined heat and power (CHP). As we understand the current proposals, they aim to remove any penalties on combined heat and power in the form of double counting of energy production. However, the proposals do not appear to include any positive incentives for this efficient form of energy production.

  4.6  Use of revenues. We welcome the consideration being given to the use of revenues to encourage better practices. However, it is important that the fund is sufficient in size to be able to make a significant contribution to the UK climate change targets.

  4.7  UK climate change targets. We appreciate the need to lessen the immediate burden for energy intensive industries. It is important, however, that the overall rates of tax set are sufficient to help achieve the UK climate change targets. We also recommend that clear arrangements are put in place to monitor the effect of the tax on the achievement of the UK targets. We recommend a clear policy signal in advance to the effect that the tax rate, and the reductions involving the energy intensive sectors, will be adjusted if necessary in order to achieve the targets. We also note the exemption of the domestic sector, and suggest this may need to be reconsidered in the longer term, using mechanisms which provide the necessary incentives while avoiding adverse social consequences.

September 1999


 
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