House of Commons - Environmental Audit

Select Committee on Environmental Audit Eleventh Report

Introduction

1. The Environmental Audit Committee (EAC) set up a Sub-committee in February 2006 to examine concerns that trade, environment and development policies have sometimes been working at cross purposes, to the detriment of sustainable development. Our first inquiry examined the role of the Department for International Development (DfID) and how sustainable development and environmental issues are incorporated into its work.

2. This second inquiry was established with the intention of examining how international trade and World Trade Organisation (WTO) negotiations impact upon sustainable development and the environment in particular. The timing of this Report is significant in light of the current Doha Development Round of negotiations. This Round is important in that it was mandated for the first time specifically to address development and certain environmental concerns through the international trade system.

3. To date the Doha Round has proven fraught and many have become concerned that the ambitious pro-development and environmental objectives have been abandoned. This is due in part to bitter negotiations in the usual areas of contention such as the removal of agricultural subsidies. There are justifiable concerns that the negotiations will ultimately fail to deliver a sustainable pro-development outcome. We therefore hope that the publication of this Report will draw attention back to the aims of Doha, and help galvanise the political will required to move forward on those issues which will enable an ambitious sustainable pro-development outcome to be achieved.

4. In the course of this inquiry the Sub-committee, chaired by Colin Challen MP, received memoranda from Government departments, non-governmental organisations (NGOs) and business organisations. The Sub-committee also took oral evidence from Government officials and a range of organisations. We are grateful to all those who contributed to this inquiry.

5. We have not covered all aspects of the Doha negotiations and the myriad ways in which they might effect the environment; the length of the inquiry and the complex nature of the negotiations precluded this. Instead we have sought to identify some of the main sustainable development concerns, such as those caused by agricultural liberalisation, and how these might be better addressed in the Doha Round and wider international trade.

6. Throughout the Report we often highlight areas in which we have concerns about a development impact, rather than the environmental impacts which are our main focus. This is because we consider that poverty is in itself one of the main drivers of environmental degradation, and therefore helping to tackle poverty is part of a more sustainable solution to environmental problems.

The state of the global environment

7. The United Nations Millennium Ecosystem Assessment (MA) reported in March 2005; it made sobering reading. It concluded that of 24 ecosystem services[1] reviewed, including a stable climate, clean air and soil fertility, 15 are being degraded or used unsustainably. The report warned that this unsustainable use is increasing the likelihood of potentially abrupt ecosystem changes that will seriously affect human well-being. These changes included the emergence of new diseases, sudden changes in water quality, the creation of 'dead-zones' in the sea, the collapse of fisheries and shifts in regional climate.[2]

8. Table 1 gives the global status of the ecosystem services evaluated in the MA. The status column indicates whether the condition of the service has been enhanced (for example by an increase in its productive capacity), or degraded, in the recent past. There are interrelationships between ecosystem services so that an increase in one sub-category may be at the expense of other ecosystem services. For example, an increase in crops typically involves increased use of water and fertilisers and the expansion onto previously unfarmed land. This can lead to degradation of other services such as a decline in water quality and biodiversity loss.[3]

Table 1. GLOBAL STATUS OF PROVISIONING, REGULATING AND CULTURAL ECOSYSTEM SERVICES EVALUATED IN THE MILLENNIUM ASSESSMENT^a

Ecosystem service Sub-category Status^b Notes

PROVISIONING SERVICES

Food

Fibre

Genetic resources

Biochemicals, natural medicines, pharmaceuticals

Fresh water
Crops
Livestock
Capture fisheries
Aquaculture
Wild foods

Timber
Cotton, hemp, silk
Wood fuel

?
?
?
?
?

+/-
+/-
?

?

?

?

Substantial production increase
Substantial production increase
Declining production due to overharvest
Substantial production increase
Declining production

Forest loss in some areas, growth in others
Declining production of some fibres, growth in others
Declining production

Lost through extinction and crop genetic resource loss

Lost through extinction and overharvest

Unsustainable use for drinking, industry and irrigation; amount of hydro energy unchanged, but dams increase the ability to use that energy

REGULATING SERVICES

Air quality regulation

Climate regulation

Water regulation

Erosion regulation

Water purification and waste treatment

Disease regulation

Pest regulation

Pollination

Natural hazard

Global
Regional and local

?

?
?

+/-

?

?

+/-

?

?

?
Decline in ability of atmosphere to cleanse itself

Net increase in carbon sequestration since mid-century
Preponderance of negative impacts

Varies depending on ecosystem change and location

Increased soil degradation

Declining water quality

Varies depending on ecosystem change

Natural control degraded through pesticide use

Low to medium certainty that there is a global decline in the abundance of pollinators

Loss of natural buffers (wetlands, mangroves)

CULTURAL SERVICES

Spiritual and religious values

Aesthetic values

Recreation / tourism
?

?

+/-
Rapid decline in sacred groves and species

Decline in quantity and quality of natural lands

More areas accessible but many degraded

^aThe provisioning, regulating and cultural ecosystem services are given here. Supporting services are not included as they are not used directly by people. ^b? = ecosystem services enhanced, ? = ecosystem service degraded, +/- = mixed trends. Table reproduced after Millennium Ecosystem Assessment Board "Ecosystems and Human well-being: Synthesis" Island Press (2005)

9. This unsustainable use of the world's resources led the MA Board to conclude that 'the ability of the planet's ecosystems to sustain future generations can no longer be taken for granted'.[4] The Board also highlighted the link between environmental degradation and poverty. They stressed that development policies aimed at reducing poverty may well be 'doomed' to failure if they do not adequately account for our impact on the natural environment, with ecosystem degradation being a major hurdle to achieving Millennium Development Goals to reduce poverty.[5] Without adequate consideration of the environment, gains in millennium development goals will be 'transitory and inequitable'.[6]

10. In reversing ecosystem decline, the MA concluded that significant changes in policies, institutions and practices could mitigate many of the negative impacts identified, although these changes are large and not currently underway. The changes required include substantial investment in environmentally sound technology, proactive action to address environmental problems before their full consequences are experienced, and action to eliminate poverty.

11. Economic activity, including trade, was identified as one of the five indirect drivers of the ecosystem changes identified in the report, as it in part 'influences the level of production and consumption of ecosystem services and the sustainability of production'. The MA acknowledged that actions to slow ecosystem degradation often do not address these indirect drivers:

For example, forest management is influenced more strongly by actions outside the forest sector, such as trade policies and institutions, macroeconomic policies, and policies in other sectors such as agriculture, infrastructure, energy, and mining, than by those within it.[7]

12. The report recommended that effective responses to these indirect drivers need to be adopted and must overcome a variety of hurdles including: weak systems of regulation and accountability; market failures and misalignment of economic incentives; underinvestment in cleaner technologies; and insufficient knowledge concerning ecosystem services and management. It also recommended a number of specific response options including increased coordination between multilateral environmental agreements (MEAs) and other international economic and social institutions.[8]

13. The Millennium Ecosystem Assessment shows that extensive environmental degradation has taken place which will have devastating impacts on the poor and vulnerable in developing countries. The Assessment is clear; concerted effort is required to address the root causes of such damage including tackling market failures, weak regulation and a lack of coordination between international organisations. The Department for Trade and Industry (DTI), Department for Environment, Food and Rural Affairs (DEFRA) and DfID all have a clear responsibility to ensure that messages from the Assessment are heeded and incorporated across all policies.

Does trade liberalisation result in environmental damage?

14. The process of trade liberalisation has been underway for a number of decades, both at a global level in the General Agreement in Tariffs and Trade (GATT) and the World Trade Organisation (WTO), and in many bilateral and regional trade agreements.[9] Trade liberalisation is in essence the removal of government-imposed barriers to trade so that goods and services can flow more freely between countries.

15. The Confederation of British Industry (CBI) told us that liberalisation can have positive consequences for the environment and that the current WTO negotiations will result in increased growth in developing countries, enabling them to pursue sustainable development more effectively. It also highlighted that trade liberalisation can lead to efficiency and productivity gains which in turn can help lower pressure on the environment. It provided the example of fisheries where government subsidies can encourage over-production and potentially lead to the depletion of fish stocks. Nevertheless, the CBI stressed the need to balance the needs of the environment while maximising the benefits of trade.[10]

16. The International Chamber of Commerce UK (ICC) agreed that liberalisation can lead to benefits to the environment, although it did stress that the opposite can be true where projects are 'poorly planned and executed and there is an inadequate framework or enforcement of environmental protection legislation, but the general relationship between trade, growth and environmental protection is very positive'.[11]

17. Although the Royal Society for the Protection of Birds (RSPB) and WWF agreed that trade liberalisation can have positive outcomes for the environment and development, they raised grave concerns about the extent to which negative consequences are occurring. Dr Paul Jefferiss of the RSPB said that although in theory liberalisation can lead to environmental benefits such as increased trade in low environmental impact technologies:

... the evidence seems to suggest overwhelmingly that on balance and in practice the effects on the environment are actually negative and those effects can take the form of habitat loss, … natural resource degradation, resource depletion, biodiversity loss, …air and water pollution, waste generation and probably of most concern climate change.[12]

18. These issues were referred to in the Government's evidence to the Sub-committee. It asserted that there are both positive and negative impacts on the environment likely as a result of trade liberalisation, although it is impossible to quantify the exact impact of these. Positives include enhanced trade in new environmental technologies and the encouragement of more efficient resource use. Negative consequences might result from the increased resource demands of additional production and consumption and increased environmental degradation from the expansion of crops into natural areas.[13]

THE IMPORTANCE OF FLANKING MEASURES

19. Flanking measures are measures that are adopted alongside trade liberalisation in order to prevent or mitigate its negative impacts on the environment or society. A study commissioned by DEFRA found that trade liberalisation had negative environmental and social impacts in a large number of cases where environmental and social protection measures were 'insufficiently effective'. It came to the conclusion that flanking and other supportive measures could assume a 'pivotal role' if trade liberalisation is expected to contribute to sustainable development.[14]

20. A further DEFRA-commissioned study on potential flanking measures anticipated that, 'given sufficient political will, many of the expected environmental impacts of trade liberalisation can either be dealt with by existing measures (such as EU agri-environment measures) or are most readily addressed by regulations or other measures at the national level in third countries'.[15] It also concluded that a longer term flanking measure might be to work at an international level to improve compliance with existing multilateral environmental agreements and to negotiate new agreements.

21. The Government accepted the need for flanking measures, which are 'crucial in order to maximise the possibility of environmental gains'. It said that the European Union Sustainability Impact Assessments (EU SIAs) would identify such measures, and that it strongly supports the use of such assessments.[16] The Government has also commissioned research to, inter alia, identify what capacity building and flanking measures are in place in order to assist developing countries to construct and implement measures to deal with the environmental impacts of trade liberalisation.[17]

22. Indeed, the EU SIA recognises the limitations of liberalisation as a policy:

"Trade liberalisation per se is not the main driver for a more sustainable development. It may however, be one of several policy mechanisms that can, under appropriate circumstances, contribute to growth on a more sustainable basis. Other economic and developmental reforms and measures that are tailored to the specific requirements of each developing country would need to be implemented alongside greater trade liberalisation".[18]

23. It is clear that the relationship between trade liberalisation and the environment is an uneasy one. It appears that the main international focus has been on the liberalisation of trade, with the benefits that this may bring, while failing to recognise the full environmental or social impacts that this liberalisation may have. It is paramount that, where liberalisation is pursued, effective accompanying measures are adopted to prevent or limit the environmental and social impacts. Without such measures, international trade liberalisation is only likely to add to environmental degradation.

Government policy on trade and environment

24. The cross cutting issues of trade, environment and development mean that a number of departments share responsibility, with the DTI, DEFRA and DfID all being involved. In evidence to the Sub-committee, the Government stated that it was committed to 'ensuring consistency between trade, international development and environmental policies and programmes. This is essential to ensure that economic growth occurs in a manner that limits adverse social and environmental consequences'.[19] A number of policy documents of relevance to this inquiry are referenced throughout this Report, but those of most relevance include:

DTI White Paper, Making globalisation a force for good (2004)
DfID White Paper, Eliminating World Poverty: Making governance work for the poor (2006)

25. The Government Trade and Investment White Paper Making Globalisation a Force for Good (July 2004), established how the Government would seek to protect the environment from the negative consequences of international trade by identifying a number of key priorities for action, including:

Support for relevant international institutions such as the United Nations Environment Programme (UNEP) and the Organisation for Economic Co-operation and Development (OECD)
Support for the development and promotion of EU Sustainability Impact Assessments of trade negotiations
Support for special incentive arrangements which form part of the EU Generalised System of Preferences.

26. This White Paper stressed the need for trade liberalisation although it recognised that this may have negative implications for the environment. Critics of the Paper felt that it was too focused on trade liberalisation as a cure-all and criticised a lack of concrete actions to be taken to address the negative environmental consequences identified.[20] Friends of the Earth asserted that the White Paper gave 'superficial treatment at best' to environmental protection.[21]

27. Of specific concern to this inquiry is a paragraph which states that the environmental negotiations in the current Round of WTO negotiations are an 'important contribution', but that 'environmental issues cannot be resolved solely within the WTO'.[22] It did not go on to consider the ways in which the WTO might be used to even partly resolve environmental issues.

28. These criticisms are similar to those the Sub-committee recently levelled at the DfID White Paper (2006), in our last Report, which expressed concern that development policy has neglected to integrate fully environmental considerations.[23]

29. Research conducted by DEFRA in order to ensure that the DTI White Paper was developed within a 'sustainable development framework', stressed the 'pivotal role' that flanking measures have on the sustainable outcome of trade liberalisation.[24] Although research commissioned by the Government highlighted the importance of flanking measures, the fact that the 2004 DTI White Paper neglects to consider explicitly the role that these may play suggests that the DTI has failed to get to grips with sustainability issues in trade.

30. We commend the Government's support for international environmental organisations. We are nevertheless concerned that there is a clear lack of consideration as to how trade and environmental policies can be made mutually supportive. This must include specific commitments in UK policy that the impact of trade on the environment will be fully considered, and effective flanking measures to offset the negative impacts of trade introduced. Although the Government alludes to the consideration of such impacts through its support for EU SIAs in the White Paper, this issue is too important for it not to be expressed specifically as Government policy; the Government must set out how it will seek to address the environmental impacts of trade.

Public procurement

31. In the 2005 Sustainable Development Strategy, the Government committed itself to making the UK a leader in the EU in sustainable procurement by 2009.[25] The Government concluded that this would have wide benefits including the avoidance of adverse environmental impacts and the stimulation of a market for more sustainable goods.[26] The scale of the impact of improved public sector procurement could be considerable, with around £150 billion being spent annually.[27]

32. It was acknowledged by an earlier EAC report, and a National Audit Office review, that sustainable procurement in Government is unsatisfactory. The Government established a Sustainable Procurement Task Force to devise a National Action Plan to enable it to deliver its 2009 goal. This National Action Plan was published on 12 June 2006.

33. In evidence to the Sub-committee the Government asserted that public procurement is one of the main ways in which trade can be used to ensure the alleviation of poverty and the sustainable use of natural resources.[28] WWF also made the point to the Sub-committee that sustainable public procurement policy could contribute to building trust between ourselves and developing countries that sustainable development is a key priority of the Government. It also argued that creative use of such policies involve sourcing sustainable goods and services preferentially from developing countries.[29]

34. We look forward to the Government's formal response to the Sustainable Procurement Task Force National Action Plan. We trust that the Government will take a positive stance on the document. We hope that sustainability will be the driving force of procurement policy and adequately take account of climate change and other global environmental threats.

1 An ecosystem service is the benefit that people derive from an ecosystem such as food, water or climate regulation Back

2 "Experts say that attention to ecosystem services is needed to achieve global development goals", Millennium Ecosystem Assessment, 30 March 2005, www.maweb.org Back

3 Millennium Ecosystem Assessment Board, "Ecosystems and Human Well-being: Synthesis ", Island Press (Washington DC, 2005), p6 Back

4 Millennium Ecosystem Assessment Board, "Living beyond our means; Natural Assets and Human Wellbeing; Statement from the Board", Island Press (Washington DC, 2005) Back

5 ibid Back

6 ibid Back

7 Millennium Ecosystem Assessment Board, "Ecosystems and Human Well-being: Synthesis ", Island Press (Washington DC, 2005) Back

8 ibid Back

9 Institute for European Environmental Policy, "The environmental impacts of trade liberalisation and potential flanking measures", Institute for European Environmental Policy (2005), p12 Back

10 Ev49 Back

11 Ev41 Back

12 Q48 [Dr Jefferiss] Back