House of Commons - Environmental Audit

Select Committee on Environmental Audit Third Report

Coverage of Environmental Impacts

23. A particular problem affecting the adequacy of RIAs, both in general terms and from an environmental perspective, is limited scope. One factor affecting the general scope of an RIA is the extent to which the impact assessment is integrated into the policy making process. As we have already seen, the NAO found that "too often RIAs are used to justify decisions already made rather than an ex ante appraisal of policy impacts"[19] and it is hardly surprising that any RIA reflecting only the decided policy option will fail to address wider issues. One area in particular where impact assessment can play a pivotal role in investigating different policy options is the application of the UK RIA procedure to EU Directives. In this case the RIA can take advantage of the room for manoeuvre provided in certain Directives in order to explore and highlight the merits of different policy options for their implementation. However, several organisations providing evidence to us expressed regret that RIAs are not used in this manner as often as hoped,[20] leading to the neglect of opportunities that may arise from alternative implementation strategies.

24. Officials carrying out RIAs are currently required to assess the impacts of a minimum of three policy options: a regulatory option, a non-regulatory option, and a "do-nothing" option, the latter being intended to provide "a baseline to compare other options against and [to clarify] the implications of not acting".[21] However, the NAO's annual assessment of RIAs for 2005-06 found that these additional scenarios were often omitted, resulting in RIAs where it was difficult to appreciate the net impact of the regulation.[22] This is an especially worrying omission from an environmental perspective, as it is frequently only when the consequences of inaction are made clear that action which might otherwise have been considered optional is recognised as essential. We believe that an assessment of the "do-nothing" option, currently a recommended part of the RIA process, represents an essential baseline for measuring the likely effect of regulations.

25. The NAO reviews have also demonstrated that the scope of RIAs is often limited to very narrow aspects of a particular policy idea:

"Some of the RIAs in our sample had a narrow scope or definition, sometimes dealing with a technical detail rather than the substance of a new policy […] While it is good practice for RIAs to be clear, concise and specific […] if each RIA only deals with small aspects of a policy there is risk that the fundamental issues of a policy are never fully addressed."[23]

Such a shortcoming restricts the effectiveness of RIAs in general, but it is clear that sustainable development is particularly neglected whenever scope is limited in this way, especially the wider social and environmental impacts of the policy. Obviously, regulation and policy are conceived with clear objectives in mind, and it is only to be expected that impact assessments initially concentrate on those areas which relate most directly to these objectives. Similarly, certain RIAs will necessarily be required to assess a crucial technical point in some detail. However, it must be ensured that the impact assessment grows to encompass all relevant issues, beyond this initial, limited scope. The principle adopted by the Better Regulation Executive (BRE) that an RIA should be proportionate to the risk posed by the policy idea should not preclude a reasonable examination of all possible impacts. The unsatisfactory level of assessment of the fundamental issues behind a policy is of particular concern for us, as it is often in the wider context that the sustainable development strategy is best evaluated, and most frequently neglected.

26. The memorandum submitted to us by the Centre for Social and Economic Research on the Global Environment (CSERGE) at the University of East Anglia argues that the scope of RIAs is further restricted by a tendency to concentrate primarily on the areas of the impact assessment which relate closely to the work of the particular department, unit or official carrying out the RIA.[24] Although this is hardly surprising, it is another aspect which must be tackled in order to secure a wider and more balanced approach to impact assessment. Again, policy appraisal on environmental grounds is particularly at risk from such a trend: even though environmental problems and their consequences affect every aspect of government, responsibility for this issue is closely associated with a single department, DEFRA. CSERGE claim that this view of the environment as DEFRA's responsibility leads to a neglect of such issues in RIAs produced by other departments.[25] It is essential that all departments acknowledge and assess environmental concerns equally, in order for RIAs to fulfil their potential as instruments of integrated decision-making.

27. The NAO briefing on the use of sustainable development in RIAs presented a blunt verdict on the levels of inclusion of environmental issues. Its briefing, based on a review of ten recent RIAs which might have reasonably been expected to exhibit coverage of such issues, concluded that:

"Few identified all social or environmental impacts that they might have been expected to cover. Social and environmental impacts were often not analysed in sufficient depth. And the variable presentation of RIAs made it difficult to see if and how sustainable development issues had been considered."[26]

The same briefing also found that the sustainable development strategy was largely neglected by RIAs. From its selection of RIAs the NAO found that:

"None of the RIAs referred to the UK sustainable development strategy and none explicitly referred to cross-cutting sustainable development principles such as the 'polluter pays principle', the 'precautionary principle', taking a long-term perspective, and integrating social, economic and environmental benefits. Where a policy proposal implicitly took account of these principles, the RIAs in our sample did not always make clear whether the department had fully and systematically compared the options on this basis."[27]

We find it very disheartening that these factors were not discussed in these RIAs, as the RIA system should be one of the most valuable tools for integrating these sustainable development principles into policy.

28. It is apparent that environmental concerns are particularly vulnerable to problems of restricted scope. One reason for this is the fact that many negative environmental impacts result not directly from the policy or regulation itself, but from the additional measures taken by companies and other bodies in order to implement the policy. Jean Spencer of Anglian Water explained to us that the effects of implementation can even contradict the intentions of environmental regulation:

"What we are seeing is a vicious cycle: we see new regulations that require us to put in technological solutions which require intensive energy, chemicals, transport, that in themselves then cause the effects we are having to address in terms of water and environmental quality. All of those things have to be brought together."[28]

Such an experience betrays a lack of consideration at RIA level of impacts beyond the immediate objectives and consequences of a policy. The situation described by Anglian Water, where a policy with an ostensibly environmental objective actually inflicts further environmental damage as a consequence of the unanticipated and unassessed measures required to achieve this aim, is unsustainable and self-defeating in environmental terms. It also reveals the complexity of factors that must be considered when tackling environmental issues. The impacts that result directly from a policy are undoubtedly the easiest to identify, and it is undeniably the case that as a policy appraisal moves into the realm of second and multiple order impacts these effects become not only harder to analyse and quantify, but also harder even to envisage, such can be the extent of the knock-on effects of a policy. However, in this speculative realm of second and multiple-order impacts, the manner in which companies may implement a policy and the consequences of this is one aspect that can be researched and established through consultation. It is therefore disappointing that this area which does indeed lend itself to a more thorough and accurate analysis does not seem to receive the attention it merits. Effective consultation, at the appropriate stage of the RIA process (i.e. when the policy is sufficiently clear for implementation procedures to be accurately envisaged and assessed) is the key point at which successfully to overcome these obstacles. In this way the many influences and constraints affecting the implementation of a policy can be understood, and its true impact better assessed.

29. Where environmental impacts are assessed, we are concerned that a lack of awareness of issues leads to the full weight of impacts being under-assessed, and some topics neglected entirely. A particularly crucial and topical area for all these considerations is the assessment of carbon. There is no doubt regarding the current prominence of carbon emissions over other environmental impacts, in the media and the political sphere, especially following the attention paid to this area by the Stern Review. Procedures and techniques for evaluating the extent and impact of carbon emissions are also relatively advanced in comparison with many other environmental impacts, and it is certainly one of the areas that lends itself more easily to quantified analysis, notably due to attempts to establish a valid carbon price through carbon trading schemes. Methods such as the social cost of carbon are recommended by the Treasury Green Book for policy appraisal, which directs officials to Treasury and DEFRA sources providing help to officials in calculating this value.[29]

30. As such, carbon is among the most accessible of environmental impacts for analysing and assessing in monetary terms, and perhaps one of the best understood. The April 2005 report of our predecessor Committee recommended that the impact on greenhouse gas emissions should be clearly highlighted and prioritised in impact assessments, in view of the urgent and extremely challenging situation with regard to cutting carbon emissions.[30] We continue to support this view. The EIC in particular expressed its support for a requirement for an assessment of the impact of the policy on carbon emissions, stating in its memorandum to the inquiry:

"Clearly a key part of an assessment of costs and benefits of the environmental impacts of policy proposals will be their impact on carbon emissions. It is inconceivable that Ministers and Parliament should not be presented with a clear assessment of the impact of a policy on the issue that they have identified as the most important challenge we face."[31]

31. However, we remain wary that the prominence of carbon and climate change in the public and political consciousness and the relative ease of calculating carbon impacts could lead to carbon being considered a catch-all environmental assessment whose inclusion in an RIA avoids the need to tackle other, less notorious issues, or those which prove trickier to calculate. While a carbon assessment figure will indeed represent the results of numerous different environmental impacts, it will not by any means represent all environmental impacts, nor will it demonstrate the full range of their consequences. Other impacts, including those such as biodiversity which are particularly difficult to quantify, must be assessed with due attention and accorded proportionate weight. Dr Michael Warhurst, Senior Campaigner at Friends of the Earth, expressed particular concern that the tendency to focus on the carbon and climate impacts of policies neglects their other environmental consequences and leads to final figures for environmental assessment that lack the necessary weight to convince policy makers.[32]

32. We call for each RIA to include a compulsory assessment of the carbon impact of the policy concerned.[33] This figure should be clearly displayed on the summary sheet for each RIA, and the document should make clear the context in which the significance of the figure should be gauged. However, we do not view an assessment of carbon emissions alone as an adequate illustration of the complex and wide-ranging field of environmental impacts, and call for guidance and training to make clear to officials the need to analyse and assess environmental impacts of all kinds, beyond the concerns of carbon and climate change.

33. It must also be ensured that the consequences of environmental costs are understood, rather than viewed in general vague terms as something undesirable but of little consequence to the overall picture. All relevant environmental impacts must be identified and assessed within an RIA, including the economic and social costs of environmental damage. Environmental impacts cannot continue to be regarded as an isolated concern. Regulatory Impact Assessments must acknowledge that environmental damage has consequences for all spheres of development, and ensure this is presented clearly. The ultimate approval of a Regulatory Impact Assessment currently requires the responsible minister to sign the final RIA declaring "I am satisfied that the benefits justify the costs". Without a full assessment of the environmental costs and benefits the final summary could present the minister with an erroneous picture, whereas an assessment covering all relevant environmental impacts and their consequences across sectors could tip the balance in favour of a more accurate decision closer in line with the principles of sustainable development.

34. It is clear that the current requirement to assess environmental issues is not sufficiently demanding to ensure a full and thorough analysis of these impacts, nor does it ensure that those issues which are considered are adequately presented in the RIA, if at all. There are a number of ways in which this requirement could be strengthened. In oral evidence to us Ofgem made it clear that its statutory obligation to include environmental appraisal in its impact assessments had a significant effect on its perspective of RIAs and the impacts it considered. Sarah Harrison, Managing Director of Corporate Affairs at Ofgem, agreed that a similar arrangement for government departments would have a "part to play" in focusing policy makers on the importance of sustainable development issues.[34] The Sustainable Development Commission proposed more directly in its memorandum to us that government departments should be given an overarching sustainable development objective that is actively linked to their PSA targets, in order to provide a "clear line of accountability" for meeting sustainable development aims.[35]

35. We support the recommendation of the Sustainable Development Commission that the Public Service Agreement (PSA) targets of Government departments should include an overarching sustainable development objective. We feel that this would increase the prominence of sustainable development objectives throughout departments, and focus attention on RIAs as a means to ensure these aims are achieved. This would ultimately lead to improved systems and methods for taking account of sustainable development concerns as they came to occupy a necessarily higher-profile position within the decision-making process.

36. In its briefing document the NAO suggests that a null response should be required if the policy is deemed to have no social or environmental impacts:

"Although the RIA process should not become a 'tick box' exercise, the final RIA document is more transparent if it includes enough information to explain when an RIA has considered environmental and social impacts but not included them because it considered them to be immaterial or irrelevant. Also, the discipline of explicitly stating a null response encourages departments to think about the completeness of their analysis."[36]

The sample of RIAs examined in the NAO's briefing demonstrated that it was very rare for such a null response to be included in RIAs which did not discuss environmental impacts.[37] This is hardly surprising given that such an approach is not included in the guidance provided by the BRE. We support the NAO's suggestion of requiring a null response for the assessment of environmental impacts to be included in each and every RIA. We feel that this will lead to a more complete standard of analysis and a culture whereby environmental impacts are viewed as an essential component of any assessment.

37. Both the NAO and Ofgem expressed concern about the quality of response that would emerge from an imposed requirement to consider environmental issues. Steve Smith, Managing Director of Markets at Ofgem, expressed particular concern in oral evidence that any compulsory section on sustainable development "will only be as good as the effort and energy that is put into doing that assessment" and reiterated the need for clear guidance coupled with a stronger commitment from above to ensure that officials possess the will and support to provide an assessment of value.[38]

38. There is admittedly a risk of developing a 'tick-box' mentality if officials are faced with seemingly superficial requirements, even though we do not consider a strict requirement for environmental assessment would be viewed in this manner. We believe that it is better to have a requirement of this type and risk encountering this kind of attitude, than for environmental assessment to remain marginalised or even neglected entirely. We also believe that with the appropriate training, guidance, support and leadership this requirement can play a pivotal role in establishing the full assessment and presentation of environmental impacts as an integral aspect of RIAs. It would also be vital to have a stricter review process to ensure that this requirement is adequately fulfilled.[39]

19 National Audit Office, Regulatory Impact Assessments and Sustainable Development - Briefing for the Environmental Audit Committee, May 2006, paragraph 5. Back

20 This point was made variously by: the EIC (Qq 29-30); Anglian Water (see Q 38 [Ms Spencer, Mr Gibbs] and Ev 13); and Ofgem (see Q 100). Back

21 Cabinet Office guidance for officials on Regulatory Impact Assessments, Chapter 4: Options http://www.cabinetoffice.gov.uk/regulation/ria/ria_guidance/options.asp Back

22 National Audit Office, Evaluation of Regulatory Impact Assessments 2005-06, HC 1305 of session 2005-2006 paragraph 2.7 Back

23 National Audit Office, Regulatory Impact Assessments and Sustainable Development - Briefing for the Environmental Audit Committee, May 2006, paragraph 1.13 Back

24 Ev 39 Back

25 Ev 39 Back

26 National Audit Office, Regulatory Impact Assessments and Sustainable Development - Briefing for the Environmental Audit Committee, May 2006, paragraph 6. Back

27 Ibid. paragraph 1.30 Back

28 Q 36 Back

29 See the Treasury Green Book, Annex 2, Evaluating Environmental Impacts,available at http://greenbook.treasury.gov.uk/annex02.htm#valuing-The associated footnote for the Social Cost of Carbon directs officials to the Treasury working paper Estimating the Social Cost of Carbon Emissions (which can be found at http://www.hm-treasury.gov.uk/media/209/60/SCC.pdf) and advises that "Defra can provide an associated guidance note on how to use these values in policy appraisal". Back

30 Environmental Audit Committee, Pre-Budget 2004 and Budget 2005: Tax, Appraisal and the Environment, paragraph 55. Back