Memorandum submitted by the Environmental
Industries Commission (EIC)
Thank you for the opportunity to provide evidence
to this inquiry.
1. THE ENVIRONMENTAL
INDUSTRIES COMMISSION
(EIC)
EIC was launched in 1995 to give the UK's environmental
technology and services industry a strong and effective voice
with Government.
With over 310 Member companies EIC has grown
to be the largest trade association in Europe for the environmental
technology and services (ETS) industry. It enjoys the support
of leading politicians from all three major parties, as well as
industrialists, trade union leaders, environmentalists and academics.
2. INTRODUCTION
EIC has been in dialogue with Cabinet Office,
Treasury, Defra and DTI over the past two years over the Regulatory
Impact Process and how it accounts for environmental issues.
We have expressed concern that the economic
costs of pollution, for example to the health service and to other
industries, are not properly included in cost benefit analysis.
We have also pointed out that the benefits to the environmental
industry, in driving innovation and exports, of the market created
by high environmental standards is rarely included in Regulatory
Impact Assessments.
EIC gave written and oral evidence to the previous
EAC inquiry into Regulatory Impact Assessments and we therefore
welcome this inquiry and the opportunity to contribute.
3. THE HISTORY
OF ASSESSING
THE ENVIRONMENTAL
IMPACTS OF
POLICIES
Since 1997, the Government has committed itself
to assess the environmental impacts of all new policies. The Prime
Minister stated that "Environmental issues must be integrated
into all our decisions.... They must be in at the start, not bolted
on later." (Speech to the UN General Assembly, 1997.)
The sorry history of the implementation of this
commitment was set out in the Environmental Audit Committee report
of April 2005 "Pre-Budget 2004 and Budget 2005: Tax, Appraisal,
and the Environment".
For example in 2001 Green Ministers Report stated
that "it is somewhat disappointing that, despite promotion
of environmental appraisal, inclusion in the Policy Makers Checklist
and screening systems put in place by departments, relatively
few departments beyond DETR have produced published environmental
appraisals."
Having failed to get departments to carry out
separate environmental appraisals, the Government instead suggested
that the emphasis was increasingly moving towards Integrated Policy
Appraisal (IPA). With no clarity as to who was responsible for
IPA it was not surprising that there was little take up and in
April 2004 the Government merged the IPA approach into the Regulatory
Impact Assessment. The RIA process has therefore become the primary
and indeed only vehicle for assessing environmental alongside
social and economic impacts of policies.
The National Audit Office published in May of
this year a report on progress with this new approach "Regulatory
Impact Assessments and Sustainable Development" which concluded
"Our review of 10 recent RIAs found that most did not handle
sustainable development concerns well. 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".
The failures of Regulatory Impact Assessments
in the UK with regard to sustainable development are mirrored
in the EU. The weaknesses in EU Impact Assessments were set out
in report published in 2004 by the Institute for European Environmental
Policy "Sustainable Development in European Commission Impact
Assessments in 2003".
4. INQUIRY QUESTIONS
Questions 1 & 4
"Should RIAs continue to be seen as
the key vehicle for appraising policies against sustainable development
principles, given the serious weaknesses that the National Audit
Office review highlights? Is there a better way to ensure environmental,
social and economic impacts are incorporated into policy-making?"
"How can the Better Regulation Executive
improve its scrutiny of RIAs to ensure that sustainable development
issues are adequately incorporated into each appraisal?"
Since the requirement to assess policies against
sustainable development principles was brought into RIAs it has
been done badly. However before that it was rarely done at all.
There is a danger, therefore, that taking it out of this process
will be a step backwards.
However, whether assessment of policies against
sustainable development principles is done in or out of Regulatory
Impact Assessments the key issue as to the level of compliance
is a clear and powerful champion within Government. EIC, therefore,
believes a Cabinet Office Sustainable Development Unit should
be established and given a remit to ensure compliance with assessment
of policies against sustainable development principles.
Question 2
"If RIAs are seen as the best solution,
what steps are being taken to address these weaknesses?"
Currently the new Cabinet Office proposals send
a signal that assessing the costs and benefits of the impact of
policies on the environment will be a low priority. This is despite
the political priority of these issues and National Audit Office
findings on the limitations of current approaches.
EIC recommends that the new Cabinet Office Regulatory
Impact Assessment procedure should place an increased emphasis
on assessing the costs and benefits of the environmental impacts
that will result from policy proposals.
To achieve this there needs to be clear guidance
for policy makers about how to go about including these costs
and benefits. The costs of pollution are a classic case of market
failure. Pollution costs are not borne by the polluter but by
other parts of society including the health service, the clean
up costs for other parts of the economy (such as the water industry
having to clean up water from watercourses for drinking water
supply), increased insurance premiums due to more extreme weather
events etc.
There is some guidance on cost benefit analysis
of environmental impacts in existing Regulatory Impact Assessment
guidance from the Cabinet Office. However if this is superseded
by the new system it is not clear what existing guidance will
be used to calculate these costs, or what new guidance produced
and in what format.
EIC recommends that the Cabinet Office provides
new guidance for assessing the costs and benefits of the environmental
impacts that will result from policy proposals.
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.
EIC recommends that the Regulatory Impact Assessment
procedure includes a requirement for an assessment of the impact
of the policy on carbon emissions and that is included in any
summary provided.
The Government's Sustainable Development Strategy
sets out five principles for the UK Government and states "These
principles will form the basis for policy in the UK. For a policy
to be sustainable, it must respect all five of these principles...
Any trade-offs should be made in an explicit and transparent way."
To fulfil this goal, in addition to assessing
the direct economic costs and benefits of policy proposals on
the environment, an Impact Assessment needs to provide a clear
review of how a policy measures up against these five principles.
EIC recommends that Regulatory Impact Assessments
include a specific requirement to assess all policies in clear
and structured format against the goals of the Government's Sustainable
Development Strategy and to summarise this on the one page summary
form.
October 2006
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