Supplementary memorandum submitted by
the Environmental Industries Commission
1. [Q27] To what extent has the
UK Government specifically sought to weaken EU regulations or
directives? What specific examples would EIC cite? (Please provide
details in each case of the manner in which regulations were weakened.)
The conclusions of Regulatory Impact Assessments
on the net benefit of proposed new EU legislation play an increasingly
important part in Ministers' decision making on the UK position
in negotiations.
We consider, therefore, that an RIA which overestimates
costs, or underplays benefits will have an effect on UK negotiating
in the EU.
It is difficult, however, to relate the conclusions
of a UK RIA to specific clauses of EU legislation which are agreed
following negotiations between all Members States, the Commission
and MEPs.
One example where the UK negotiating position
was to weaken requirements was the WEEE Directive. The RIA published
by the DTI in March 2003 estimates the costs to be in the region
of 100 times the benefits. This would clearly have had an influence
on Ministerial decision making on the UK negotiating position.
The current initial RIA of the proposed new
EU emission standards for light duty vehicles (see attached EIC
response to the RIA, annex 1) provides an example of where, if
the RIA is not improved, Ministers will be presented with overestimates
of the cost figures and underestimations of the benefits.
2. [Q63-64] Please provide written
comments on the issue of gold plating.
EIC believes the UK should look much more
closely at the most economically advantageous way of implementing
EU environmental policy measures. At present the view is simply
that it must not be "gold-plated". This tends to mean
we do the least possible thing at the last possible minute, with
key detailed guidance coming out, at best, close to the wire.
By taking a more proactive approach to implementation
Government can enhance competitiveness in three ways:
(a) Innovation: it is widely accepted
the earlier it is clear to business exactly what it has to achieve
(in terms of environmental outcome), the more a regulation will
encourage innovation.
(b) Environmental Technologies: early
implementation of new environmental policies can give a first
mover advantage in developing solutions to UK environmental technology
and services providers.
An example where the UK has looked for first
mover advantage is in Emissions Trading by setting up a UK scheme
first. This approach was endorsed by a National Audit Office report.
An example of a major Directive currently being
implemented is the Water Framework Directive. This will create
demand for, inter alia: diffuse monitoring technologies; membranes
to remove organics and nutrients from sewage; and technologies
to deal with VOCs and PCBs. Those countries who start implementing
the "programme of measures" required under the Directive
earliest will get first mover advantage in these areas.
However the recent Periodic Review of water
prices explicitly ruled out investments which are specifically
towards meeting the requirements of the Water Framework Directive.
(c) Implementation of Further Measures:
there will be cases were a proper cost-benefit analysis will show
that setting higher environmental standards than the minimum in
an EU Directive will be economically beneficial. Currently it
is assumed anything more than the minimum would be negative for
the economy.
The consultations on implementing the Water
Framework Directive, for example, simply stated that the additional
measures listed in the Directive were gold-plating, rather than
analysing their cost benefit.
3. [Q69ff] On resource productivity,
does the EIC have a view on whether meaningful resource productivity
targets could be set at a national level or for particular industry
sectors, and whether this would be beneficial in terms of stimulating
the market for environmental technologies?
Please see attached EIC paper on Resource Efficiency
(annex 2).
4. [Q25] Please provide further
written information on the deficiencies in the Euro 5 Standards
for Passenger Cars RIA.
Please see attached EIC response to the
initial RIA of proposed new Euro standards for light duty vehicles
5. [Q35] Please provide some more
details on the Air Quality Assessment and the original forecasts
of compliance costs.
The Defra report "An Evaluation of the
Air Quality Strategy" published in December 2004 provides
extensive details. It concludes:
"It has often been suggested that in `ex
ante' studies, costs are systematically overestimated and the
benefits underestimated. The analysis here, summarised in the
table above, provides evidence to back this up for the two sectors
considered [electricity and transport]. The analysis of individual
ex ante and ex post costs has shown that in most cases, ex ante
costs were over-estimates. In many cases, these over-estimates
were very significant. Note this also leads us to the conclusion
that legislation itself acts as a spur to research and innovation."
For more detail see www.defra.gov.uk/environment/airquality/strategy/evaluation/pdf/exec-summary.pdf
6. [Q43] EIC agreed to let the Committee
know of any academic experts it was aware of in relation to RIAs
and the evaluation of environmental impacts.
RIA itself is too applied for most academics.
However there are many academics looking at whether and to what
extent environmental effects can be monetised.
High profile and well respected ones include
David Pearce (UCL); Nick Hanley (Stirling); Kerry Turner (UEA);
Ken Willis (University of Newcastle); Anil Markandya (World Bank
/ Bath University).
7. [Q61] Please provide more details
of the DTI report alluded to [and any other relevant reports]
in relation to the UK share of the world market for environmental
technologies.
The two key reports are "Global Environmental
Markets and the UK Environmental Industry: Opportunities to 2010"
published by the DTI/Defra Joint Environmental Markets Unit in
2002 and "Mapping The UK Environmental Goods and Services
Sector: The Environmental Industry Unit's Analysis of the Sector
in 2004 in conjunction with the English RDAs and Devolved Administrations".
Both of these can be obtained from the DTI/Defra
Environmental Industries Unit.
8. [Q67] Could the EIC could confirm
whether or not Johnson Matthey is also a member of the CBI?
Johnson Matthey is not a member of the
CBI.
Annex 1
Chris Parkin
Cleaner Fuels and Vehicles Division
Department for Transport
Dear Chris,
Re: Initial Regulatory Impact Assessment
Issue 1a-29/10/04 on Emissions Standards for New Light Duty "Vehicles"
Thank you for the opportunity to comment on
the initial Regulatory Impact Assessment (RIA) concerning the
forthcoming proposal for a European Directive concerning emissions
standards for new light duty vehicles (Euro 5).
The Transport Working Group of the Environmental
Industries Commission (EIC) contains a number of companies actively
involved in developing emissions control solutions for light and
heavy duty vehicles, both for retrofitting to current in-service
vehicles and for use on new vehicles to help meet emissions legislation.
The TransportEnergy Programmes administered
by the Energy Savings Trust have, for the last several years,
been an important tool in the effort to achieve air quality targets
under the EU First Air Quality Daughter Directive. The funding
for these programmes has recently been cut. Given that the rationale
for this decision lay, in part, in the Department's commitment
to the use of emissions standards for new vehicles to help meet
air quality objectives, EIC Members are particularly keen to see
that the Department supports demanding emission standards. We
believe that a rigorous cost benefit analysis will show the net
benefit of high standards.
The initial RIA is very detailed and thorough
document and in many respects it represents a good example of
current practice in the implementation of RIAs across Government
Departments. However, EIC Members are concerned that the conclusions
and future action presented are conservative, do not fully represent
the severity of the environmental problems identified in the report
and believe that the RIA would benefit greatly from additional
analysis in line with the recommendations in EIC's recent "Position
Paper on Regulatory Impact Assessments".
Our recommendations and rationale follow, whilst
additional feedback on detailed aspects of the report are also
included for your information.
Yours sincerely,
Robert Evans, Chair
EIC Transport Pollution Control Working Group
RECOMMENDATION
1: A COMPLETE RIA SHOULD
TAKE INTO
ACCOUNT THE
BENEFITS TO
THE UK'S
ENVIRONMENTAL TECHNOLOGY
INDUSTRY OF
ENVIRONMENTAL PROTECTION
MEASURES.
The RIA notes that "medium size businesses
are likely to supply the technology to deliver the emissions control
necessary and a proposal could therefore be a positive advantage
for these bodies." However, it does not quantify these benefits,
or offset them against the costs it reports for the UK motor industry.
In recent testimony to the House of Commons
Environment Audit Committee, Treasury officials accompanying the
Economic Secretary to the Treasury clarified that RIAs must look
at the "net impact over the entire economy", and that
diversions from one industry sector to another that is less polluting
or has greater export potential should be regarded as positive.
RECOMMENDATION 2:
A COMPLETE RIA SHOULD
TAKE FULL
ACCOUNT OF
THE ECONOMIC
BENEFITS OF
HIGH ENVIRONMENTAL
STANDARDS TO
THE UK'S
HEALTH SERVICES
THROUGH REDUCED
HEALTH COSTS
AND TO
THE HEALTH
OF THE
WORKFORCE.
The RIA focuses on particulate matter (PM) and
oxides of nitrogen (NOx) as the two pollutants forecast not to
meet UK air quality targets. It includes a quantification of health
costs but has some specific exclusions that currently detract
from the RIA. These exclusions include:
— Chronic mortality health effects
from PM10 on children2
— Chronic morbidity health effects
from PM102
— Morbidity and mortality health effects
from chronic (long-term) exposure to ozone2
It is also disappointing that the cost
values for NOx do NOT include ozone formation and effects and
it is not clear as to how many of the health costs of ozone and
NO2 have been modelled.
Transboundary effects are also excluded for
the RIA. This represents another notable omission. Exposure of
the population to NOx, PM and ozone pollution is a continuing
source of concern for environmental and health reasons. The UK
is not the only country in the European Union (EU) where the EU's
binding targets for these pollutants will be exceeded.
There is also concern about the rising levels
of tropospheric backgrouind ozone. The importance of this is that
there will be a time in the mid-term future when the background
level by itself will exceed levels currently considered to be
health thresholds. The principal driver for this will be NOx emissions
and early action on the major sources, including vehicles will
be the most cost effective response.
Road transport is the main or a major contributor
to the totals of these pollutants, within which the light-duty
vehicles sector (cars and vans) is a major contributor. Consequently,
the benefits of tougher regulations will be seen both in improvements
in local and national (via transboundary) pollution levels.
Recent trends in the vehicle parc include a
more rapid than expected growth in light duty diesel and in the
heavy passenger car, particularly Sports Utility Vehicles (SUVs).
These tend to exacerbate the problems with PM and, especially
NOx.
Further work on health costs needs to be undertaken
in further iterations of this RIA.
It should be noted that whilst the environmental
modelling used in the report is credible, it is based on a number
of assumptions and historic data that are no longer correct and
which have a significant effect on the severity of the predicted
outcome and, therefore, measures required to combat the effects.
Specifically, it uses out-of-date forecasts for diesel penetration.
This is critical because the population of diesels in the fleet
is growing rapidly with high rates of diesel penetration at Euro
III and IV. This is particularly critical given that diesels are
currently much higher polluters (for PM and NOx) than petrol equivalents.
To underestimate diesel penetration is to underestimate the health
costs from PM, NO2 and ozone.
RECOMMENDATION 3:
A COMPLETE RIA MUST
TAKE INTO
ACCOUNT THE
ECONOMIC BENEFITS
OF HIGH
ENVIRONMENTAL STANDARDS
TO THIRD
PARTY INDUSTRIES
SUCH AS
TOURISM, AGRICULTURE,
AND FORESTRY.The
NOx modelling assumptions do not take into account values for
the effect of ozone formation, or non-ozone effects on the ecosystem.
Key exclusions include the effects of pollutant
on:
— 3ecosystems (acidification, eutrophication,
etc)4
— 3cultural or historic buildings4
— 3change in visibility (visual range)4
— 3effects of ozone on materials, particularly
rubber4 5
— 3non-ozone effects on agriculture4
RECOMMENDATION 4:
A COMPLETE RIA NEEDS
TO MAKE
CLEAR THAT
INNOVATION CAN
HAVE A
SUBSTANTIAL DOWNWARD
IMPACT ON
COSTS OF
MEETING HIGH
ENVIRONMENTAL STANDARDS.
The scenarios modelled all assume costs are
zero or higher. EIC believes that maintaining NOx limits for petrol
cars at the current 80 mg/km would in fact result in negative
costs, recognising the motor and emissions management industries'
continual drive for resource productivity and innovation, directed
both at performance improvement and cost reduction.
Many motor manufacturers were able to move directly
from Euro II to Euro IV for petrol cars, clearly illustrating
the cost effectiveness of Euro IV compared with Euro III, as early
as 2000. It is inconceivable that the cost of Euro IV technology
will not be driven down further over the next decade, just as
it is inconceivable not to seek lower emissions from such a large
segment of the vehicle fleet between 2000 and 2015.
The RIA notes (page 21) that "the potential
for tightening the diesel NOx limit to levels as envisaged in
Scenarios C (ie 50% to 125 mg/km) may be feasible by 2010 and
one manufacturer maintains that it is; other manufacturers, however,
question this." EIC members join the manufacturer in believing
that 50% reduction in NOx emissions from diesel passenger cars
is feasible and believe this kind of target is required to drive
innovation.
Developments in cleaner diesels will occur to
some extent due to competitive forces and the wish by some companies
to pursue the sale of diesel engines into the US market where
emission regulations for diesels are already much more severe
than those proposed for the future in Europe. However, in order
to encourage development and to ensure European industry continues
to be competitive in the global diesel engine market, clear requirements
need to be set for low diesel NOx emissions in Europe.
EIC believes the report is generally too pessimistic
as to the capability of future NOx control technologies and uses
current cost estimates. For all previous European emission legislation
the predicted costs have always been too high and the technology
capability has always performed better than expected.
CONCLUSIONS
EIC believes the RIA is very conservative and
doesn't fully address the challenge of improving air quality such
that everyone in the UK can breathe healthy air.
The RIA concludes (page 11) that the reductions
in pollutant emissions "would not be fully realised until
some time after the new standards are introduced and would not
help attainment of air quality objectives in 2010. This is because
only new vehicles will be required to meet the tighter standards
and it will therefore take some years for these vehicles to permeate
the fleet." The RIA continues by noting that the scenarios
modelled are insufficient to ensure air quality targets will be
met by 2020.
There is already a significant "latent"
problem for the UK in not achieving national and EU 2005 and 2010
air quality targets, not helped by the Department for Transport's
decision to cut grant funding support for TransportEnergy programmes.
To set out to fail to achieve air quality targets out as far as
2020 shows a lamentable lack of ambition.
The EIC believes that more aggressive scenarios
should be modelled, especially for ultra low petrol NOx emissions,
in order to try to reach air quality targets.
EIC believes the RIA underplays the economic benefits
of emissions standards for the environmental industries sector.
There are a number of UK-based companies with
world-leading expertise in low emission vehicle technology, both
within the environmental industries sector and additionally with
the motor industry. The RIA doesn't quantify the economic benefits
to these industry sectors.
EIC believes the RIA underplays the cost to the
environment and health associated with not meeting tougher emissions
standards.
For diesel cars the RIA modelling is based on
out of date figures for diesel penetration and does not fully
quantify a number of environmental consequences associated with
NOx and PM emissions and additionally excludes other harmful pollutant
emissions (carbon monoxide and hydrocarbons) from the cost-benefit
analysis.
EIC believes the RIA overstates the difficulties
and costs to the motor industry of implementing the proposed emissions
legislation.
PETROL
The RIA concludes that "we are still considering
whether tighter petrol NOx limits are feasible and would deliver
cost effective, real world emissions savings."
For petrol cars, the RIA analysis should better
recognise the capabilities of lambda 1 gasoline engines for exceeding
Euro IV NOx levels at very low additional cost and to realise
these benefits during real driving.
For lean burn (PDI) cars the RIA argues that
low NOx levels aren't achievable when there is strong evidence
to conclude that they are.
DIESELS
Diesel cars are currently allowed to be higher
emitters than equivalent petrol equivalents (250 mg/km versus
80 mg/km NOx) and this gap needs to be closed in order to improve
air quality but not by holding petrol standards stationary.
The EIC rejects the RIA recommendation of "a
20% tightening of diesel NOx limits as an interim position."
This is a very conservative position, consistent with the RIA's
very pessimistic assessment of the capability of future NOx control
technologies, despite evidence from the motor industry arguing
to the contrary. It is also disappointing that the report favours
the use of current cost estimates rather than anticipating cost
savings potential.
EIC believes the cost effectiveness of fitting
diesel particulate filters is clear and welcomes the modelling
of scenarios that focus on low PM emissions consistent with fitting
diesel particulate filters.
For all previous European emission legislation
the predicted costs have always been too high and the technology
capability has always performed better than expected. Realisation
of these new technologies does, however, require a strong direction
from legislation to enable the levels of innovation and development
required from industry.
EIC believes the RIA underestimates the importance
of legislation as a driver for innovation.
The RIA's weak conclusions regarding reductions
in diesel NOx emissions do not provide a clear enough direction
for European companies to invest in engine development and design
and integration of emissions control devices. Without a clear
lead from the legislators the need to meet tough US levels will
dominate development programmes in companies trying to sell diesel
engines into the US market while other companies will develop
products purely for market competitiveness, rather than emissions.
A clear indication that low NOx diesel engines will be required
is needed to promote development to achieving this goal.
DETAILED FEEDBACK
PETROL EMISSIONS
CONTROL
EIC is disappointed that three of the four scenarios
modelled (A, C and E) do not require a reduction in petrol NOx
emissions. This runs counter to the evidence of air quality problems
associated with NO2. It is also a concern that scenario H combines
a reduction in petrol NOx emissions with the most challenging
scenario modelled for diesel emissions control. EIC believes petrol
NOx emissions is the most cost effective means of reducing vehicle
emissions and therefore the benefits of reductions in petrol emissions
should be modelled in scenarios C and E.
LAMBDA 1 PETROL
Three way catalysts with lambda 1 engines and
control systems are the most developed form of mobile source emission
control.
The report mentions real world operating conditions.
Current VCA data shows both a significant number of gasoline cars
being certified at emission levels significantly lower than Euro
IV requirements. Recent data presented by the Association of Emissiions
Control by Catalyst (AECC) indicates that these vehicles continue
to be low emitters over more transient cycles such as those developed
in the Artemis programme. This is in direct contrast to diesel
vehicles using EGR to meet NOx emission requirements where vehicle
emissions are very test cycle specific. In our view there is little,
or no doubt that further limit reductions in NOx from this sector
would result in real world emission savings and that this is the
most proven, and cost effective method currently available to
help reduce road transport NOx emissions.
PETROL DIRECT
INJECTION
EIC does not agree with the RIA's assertion
that "for petrol direct injection (PDI) vehicles the NOx
limits would probably be difficult or impossible to achieve."
For NOx, current experience shows that with the latest generation
engines and emission control Euro IV petrol levels are achievable,
with the appropriate safety margin. It is reasonable to assume
that with a further period of development further NOx reductions
would be possible.
These vehicles run lean at speeds up to around
90 kph and are essentially equivalent to lambda 1 vehicles for
gaseous emissions at higher speeds. When operating under lean
conditions, our experience with current engines indicates that
these vehicles may have difficulty meeting more stringent hydrocarbon
limits due to high engine out levels and relatively lower exhaust
temperature, compared with lambda 1 engines. These engines, especially
in lambda 1 form, are currently under development at all major
European motor manufacturers and we might expect some progress
in decreasing engine emission levels to be achieved in the next
few years. The development of the lambda 1 form of these engines
is due to the increase power available from direct injection allowing
either "sports" type vehicles, or, increased fuel economy
through use of a smaller PDI engine to replace a conventional
(lambda 1) petrol engine with the same power output. Due to the
absence of tax incentives for CO2 emissions over the drive cycle
through most of Europe and little customer benefit obtained by
running lean at low speeds, vehicles with lean running calibrations
are only in limited development. Keeping both Euro V hydrocarbon
and carbon monoxide levels equivalent to Euro IV for petrol vehicles
would encourage lean PDI vehicle development.
Particulate emissions from PDI engines in the
lambda 1 mode are essentially equivalent to conventional petrol
engines. When running lean we have measured values between 14
and 4 mg/km with the current particulate mass method. This would
appear to present a difficulty in meeting a 2.5 to 5 mg/km standard,
but a number of factors should be taken into account. Firstly,
that the range of values measured from current lean vehicles,
and the different composition of the particulates between engines,
suggests that differing combustion technologies give different
results, for example air guided or wall guided spray systems,
side or top mounted injectors. Secondly, in the lower particulate
emitting engines the particulates have a relatively high VOC fraction
that may decrease the value when using the Particulate Measurement
Protocol (PMP) mass measurement method. The PMP method also typically
returns a lower mass value than the current method. Further developments
of these engines may allow power particulate levels to be achieved.
DIESEL EMISSIONS
CONTROL
EIC welcomes the RIA's conclusions in favour
of stringent controls on PM emissions but additionally believes
that low diesel NOx emissions are achievable.
Certification data suggests that small and medium
diesel vehicles can, today, meet a NOx emission value of around
150mg/km, at a competitive CO2 level. Further developments in
injection technology, some Homogeneous Charge Compression Ignition
(HCCI) operation and trade-off associated with fitment of a particulate
filter indicate NOx emissions approaching 100mg/km are not unreasonable
for a number of vehicle types by 2010. This leaves only a small
requirement for post combustion emission control through hydrocarbon
SCR, NOx traps, urea Selective Catalytic Reduction (SCR) or some
other form of NOx emission control to meet a 80mg/km NOx emission.
While these technologies are currently in the development stage,
this low level of conversion will be available by 2010 if development
is encouraged and at a low risk if the system fails. Also, if
NOx sensors are fitted, emission control malfunctions will be
easily detected. Then by 2015 technology will have been developed
with operating experience enabling robust systems to be used to
decrease diesel NOx emissions further through post combustion
emission control, perhaps enabling further benefits in fuel economy
through engine calibration. With this in mind we feel the case
for NOx abatement is understated and the difficulties overestimated.
EIC members also feel that the use of catalytic after-treatment
for emissions control would result in additional benefits by ironing
out the real-world variability in the diesel NOx emissions clearly
illustrated when testing current diesels on the artemis, as compared
with the current MVEG test cycle.
Annex 2
DRIVING RESOURCE EFFICIENCY
1. INTRODUCTION
1.1 The Policy Background
In May 1999, the UK Government published A
better quality of life, a strategy for sustainable development
for the UK. This set the aim of meeting four objectives at
the same time:
— social progress which recognises
the needs of everyone;
— effective protection of the environment;
— prudent use of natural resources;
and
— maintenance of high and stable levels
of economic growth and employment.
Key to any hope of reconciling these objectives
is major improvements in the efficiency with which we use resources.
There are initiatives at global, EU and UK level
to improve the efficiency of resource use. At a global level the
World Summit for Sustainable Development (WSSD) held in Johannesburg
in 2002 agreed that countries should start work on sustainable
consumption and production strategies.
At an EU level eco-efficiency is seen as an
important key part of the EU's core Lisbon strategy and the Dutch
Presidency has led the start of an initiative on a "Clean
Clever Competitive Europe" to promote eco-efficient innovations.
In the UK the Government published in September
2003 "Changing Patterns: UK Government Framework for Sustainable
Consumption and Production".
Whatever the terminology, there is clearly
widespread agreement on the objective—we must gain more
economic benefit from less environmental/resource input.
1.2 The Environmental Industries Commission
(EIC)
EIC was launched in 1995 to give the environmental
technology and services industry a strong and effective voice
with Government.
With some 240 Member companies EIC has grown
to be the largest trade association in Europe for the environmental
technology and services industry. It enjoys the support of leading
politicians from all three major parties, industrialists, trade
union leaders, environmentalists and academics.
EIC Members in the environmental consultancy
sector led the way in the 1990s on pioneering projects on waste
minimisation. This started with the famous Aire Calder project
which concluded that when a polluting company expertly examines
its process efficiency "the financial case for adopting a
philosophy of waste minimisation is so overwhelming that companies
should need little further encouragement to save money and the
environment".
2. OPPORTUNITY
FOR RESOURCE
EFFICIENCY
There is a great deal of evidence of the opportunities
for resource efficiency—and the benefits it can bring to
businesses. Just a few examples include:
In 1998 the book "Factor Four: Doubling
Wealth, Halving Resource Use" detailed many case studies
of businesses cutting the amount of resources they used whilst
increasing profits.
In the UK the Government funded Envirowise best
practice progamme has helped business save £800 million through
resource efficiency.
And in April 2003 a study from the Environment
Agency "The Benefits of Greener Business" concluded
that £2-£3 billion is lost each year by manufactured
industry in wasted natural resources—equivalent to about
7 per cent of total manufacturing industry profit.
3. GOVERNMENT
INITIATIVES TO
DRIVE RESOURCE
EFFICIENCY
There are already a number of legislative and
fiscal drivers towards resource efficiency.
— Integrated Pollution Prevention and
Control Directive.
— Producer responsibility requirements
including packaging; WEEE, RoHS, ELVs.
— Landfill Tax (which increases the
cost of waste).
There are also a number of Government-funded programmes
attempting to drive resource-efficiency, many funded by the revenue
raised from the Landfill Tax, for example:
— WRAP Waste Minimisation initiatives,
with a focus on real nappies, home composting and retailer innovation
in packaging and other goods and services.
— The National Resource and Waste Forum,
Household Waste Prevention Toolkit for Local Action.
— Envirowise extended services for
SMEs and support for regional business programmes, made possible
through £12 million of Defra funding for 2005.
— Carbon Trust activities, including
ActionEnergy support for business, climate change agreements and
tax breaks (ECAs).
— The Constructing Excellence programme
for the construction sector.
— The Market Transformation Programme
initiative on product improvements and other product policy activities
within Defra (eg ACCPE) and the Environment Agency.
However it is clear that improvements in resource
efficiency are much slower than required to tackle challenges
such as climate change and the every growing amounts of waste
produced by society.
For example the Government's "Changing
Patterns" report concluded that "In terms of energy
required and waste produced, the UK is significantly less efficient
than some of its key trading partners".
4. AN AGENDA
FOR DRIVING
RESOURCE EFFICIENCY
Making progress on this huge agenda requires
not just one or two policies but a wide ranging strategy. As noted
above there are many existing Government policies and initiatives
in this area.
However progress is slow and there is an urgent need
for an acceleration of these policies.
4.1 Indicators
In order to be able to monitor the success of
policy measures we need to be able to measure resource efficiency.
In 2001 the Prime Minister's Strategy Unit (then
called Performance and Innovation Unit) produced a report on "Resource
Productivity: Making More with Less" which called for indicators
and indicative targets on resource productivity.
Alongside the "Changing Patterns" report
the Government produced a consultation on indicators on sustainable
consumption and production.
However there is still no framework for measuring
progress towards resource efficiency.
Once such a framework is in place it is then
possible to set targets for resource efficiency. EIC considers
these would be more meaningful if done on a sectoral basis, rather
than an overall target for the economy.
RECOMMENDATIONS:
THE GOVERNMENT
SHOULD PUT
IN PLACE
A FRAMEWORK
OF INDICATORS
ON RESOURCE
EFFICIENCY, INCLUDING
INDICATORS FOR
EACH INDUSTRIAL
SECTOR.
The Government should introduce sectoral targets
for resource efficiency to give industry clarity as to the ends
Government wishes to achieve.
4.2 IPPC Directive
The EU IPPC regime puts obligations on regulated
installations to use Best Available Techniques to minimise the
environmental impacts of their process—this includes resource
efficiency. By 2007 it will apply to some 5,000 installations
in England and Wales.
A recent review by the EA of IPPC as a driver
for resource efficiency measures recommended increasing the emphasis
on resource efficiency in the licensing and inspection processes,
through better staff training and improved guidance.
RECOMMENDATIONS:
THE GOVERNMENT
SHOULD ASK
THE EUROPEAN
COMMISSION TO
INSURE THE
IPPC BEST AVAILABLE
TECHNIQUE REFERENCE
DOCUMENTS (BREFS)
DRAWN UP
IN SEVILLE
BENCHMARK RESOURCE
USE FOR
EACH REGULATED
SECTOR.
The Government should require the Environment
Agency to put a high priority on resource efficiency under IPPC—and
to publish a regular report on the resource efficiency gains achieved.
4.3 EMAS
When the EU Eco-Management and Audit Scheme
was first proposed MEPs called for a mandatory scheme which would
have required companies to do eco-audits which would have identified
resource efficiency opportunities. The voluntary scheme actually
put in place has achieved very limited take up across the EU and
improvements in resource efficiency have been patchy.
The current Dutch Government focus on eco-efficiency
provides an opportunity to look again at mandatory mechanisms
for pushing resource efficiency out beyond a relatively few business
leaders.
RECOMMENDATION: THE
UK SHOULD PRESS
THE EU TO
LOOK AGAIN
AT WAYS
OF REQUIRING
LARGER COMPANIES
TO DO
AUDITS OF
THEIR RESOURCE
USE. ONE
POSSIBLE WAY
OF STARTING
THIS WOULD
BE TO
PUT GREATER
FOCUS ON
RESOURCE PRODUCTIVITY
UNDER THE
IPPC DIRECTIVE.
4.4 OPERATING
AND FINANCIAL
REVIEW
New changes to company law will require the
largest public companies to publish an Operating and Financial
Review.
Currently the draft Regulations leave this up
to companies to decide if environmental issues are significant
to the company and, should, therefore, be reported on.
RECOMMENDATION: THE
GOVERNMENT SHOULD
REQUIRE REPORTING
ON ENVIRONMENTAL
ISSUES IN
THE OPERATING
AND FINANCIAL
REVIEW AND
INCLUDE RESOURCE
EFFICIENCY AS
ONE OF
THE AREAS
THAT MUST
BE REPORTED
ON.
4.5 Landfill Tax
The scheduled increases in Landfill Tax are
forcing companies to give increasing priority to waste reduction
measures by increasing the cost of waste disposal. The Landfill
Tax is set to increase by at least £3/tonne/year until it
reaches £35/tonne. A faster rate of increase would be a more
powerful driver for waste reduction as well as for the development
and deployment of technologies that divert waste from landfill.
It would also raise more revenue to recycle into schemes to encourage
and support resource efficiency.
RECOMMENDATION: THE
GOVERNMENT SHOULD
INCREASE THE
LANDFILL TAX
BY £5 A
TONNE A
YEAR UNTIL
IT REACHES
£35 A TONNE
(WHEN THE
IMPACT OF
THE RATE
SHOULD BE
REVIEWED).
4.6 SUPPORT
AND ADVICE
The Government funded Envirowise programme has
already had considerable success in promoting resource efficiency.
The scheme is an important complement to the stick approach of
regulation and fiscal measures. The Government has recently announced
an increase in funding as part of the recycling of Landfill Tax
receipts. However to penetrate more than a small proportion of
business the programme needs expanding further.
RECOMMENDATION: THE
GOVERNMENT SHOULD
USE THE
RECEIPTS FROM
A FASTER
INCREASE IN
THE LANDFILL
DIRECTIVE TO
INCREASE FUNDING
TO ENVIROWISE.
4.7 TAX
INCENTIVES
The Enhanced Capital Allowance (ECA) Scheme
to incentivise energy efficient technology has now been running
for some time. EIC was instrumental in promoting the introduction
of fiscal incentives for companies purchasing environmental technologies.
The Government has widened the scheme to water
saving technologies and has announced it will consult on extending
to waste minimisation and recycling technologies.
While the scheme has had some success, there
are several problem areas: the incentive amounts, in monetary
terms, to only about 7% of the cost of the product, which can
be significantly higher than less efficient models. The chain
of authority in purchasing decisions can by long and convoluted,
and the procurement decision maker can be some distance from the
person claiming tax credits. As it is based on a tax break, the
ECA scheme holds no incentive for non-tax paying bodies, particularly
the public sector, which is a major purchaser of energy-using
equipment.
RECOMMENDATIONS:
THE GOVERNMENT
SHOULD INCREASE
THE ALLOWANCE
FOR THE
MOST ENVIRONMENTAL
PRODUCTS TO
150%. THIS WILL
UNDOUBTEDLY STIMULATE
END USERS
MUCH MORE
TO INSIST
ON ECA LISTED
EQUIPMENT BEING
USED.
The Government should provide an Inland Revenue
certificate to accompany sales of ECA registered equipment to
be sent to the building owner in order to address the problem
of information being transferred along the sales chain by simplifying
the documentation required.
The Government should incorporate a requirement
to use the ECA registered equipment (where relevant) into public
procurement policies.
4.8 ENERGY
EFFICIENCY POLICY
A key Government scheme to encourage energy
efficiency is the Climate Change Levy and the associated Climate
Change Agreements (CCAs) which set sector-by-sector targets for
energy efficiency gains. EIC welcomed the announcement that the
Agreements will be extended to other energy intensive sectors.
However our Members consider the levels at which they are set
is too weak.
The new EU Emissions Trading Scheme also has
potential to drive energy efficiency. In this context it is extremely
disappointing to see the weak National Allocation Plan which the
UK is proposing.
RECOMMENDATIONS:
THE GOVERNMENT
SHOULD TIGHTEN
CCAS TO
PROVIDE A
REAL DRIVER
TOWARDS ENERGY
EFFICIENCY
The Government should abandon efforts to submit
a weakened National Allocation Plan to the European Commission.
4.9 INNOVATION
POLICY
Government puts significant levels of support
into innovation by business—for example through the Technology
Strategy. This gives it leverage to encourage innovation in resource
efficiency.
RECOMMENDATION: THE
GOVERNMENT SHOULD
REQUIRE ALL
PROJECTS APPLYING
FOR SUPPORT
UNDER ITS
TECHNOLOGY STRATEGY
TO DEMONSTRATE
A CONTRIBUTION
TO RESOURCE
EFFICIENCY AND
USE THIS
AS PART
OF ITS
SELECTION CRITERIA.
4.10 PUBLIC
PROCUREMENT
A wide range of Government and stakeholder reports
have set out the huge potential of public procurement to play
a leading role in sustainable development in general and resource
efficiency in particular.
Government policy has responded slowly to this
challenge. However in 2003 the Government published the "Report
and Recommendations of the Sustainable Procurement Group"
and followed this with a revised "Joint Note on Environmental
Issues in Purchasing" and a list of "Quick Wins"
issued by the Office of Government Commerce (OGC). There has also
been a handbook developed by the European Commission to clarify
EU rules in this area.
EIC, therefore, considers most of the required
policy is in place. However the problem is with implementation
which is still very patchy.
In particular our Members report that equipment
purchased in PFI projects is still overwhelming specified on least
capital cost rather than whole life costing.
RECOMMENDATION: THE
GOVERNMENT NEEDS
TO GIVE
POLITICAL MOMENTUM
TO INTEGRATING
RESOURCE EFFICIENCY
CONSIDERATIONS INTO
PUBLIC PROCUREMENT.
The Government should urgently undertake an
audit of energy efficiency in recent PFI projects and issue clear
instructions that all PFI projects must meet high resource efficiency
standards in the future.
February 2005
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