EU-policies Regulatory Regimes and Policy Instruments for Environment and Energy

1
EU-policies Regulatory Regimes and Policy
Instruments for Environment and Energy

• Lecturers
• Anders N. Andersen
• Søren Løkke
• Trine Pipi Kræmer
• Dorte Kardel
• Carla K. Smink

2
Aim of the course

1. To provide an understanding of the most common
   forms of the international conventions and
   organisations dealing with energy and
   environmental issues, with focus on the EU

1. A theoretical discussion of different approaches
   to policy design. A lot of examples on specific
   use of different policy instruments within the
   field of energy and the environment

3
Timetable, parallel sequence

• Mondays
• Course 6 10, as written in the study programme

• Wednesdays
• Course 1-5, as written in the study programme

• 2 guest lectures
• Niels Meyer
• Christina Grann (April 1, on Integrated Product
  Policies (IPP) in
• EU with focus on the electronic sector and the
  EuP directive)

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Policy regimes and the use of different
instruments on regulatory styles and policy
regimes

• Carla K. Smink
• Environmental Management, 8th semester Spring 2005

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Outline

• How to regulate society?
• Public environmental regulations (March 14)
• Market regulation (April 4)
• Self-regulation (April 11)
• What is environmental regulation?
• Policy instruments

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What is environmental regulation?

• Environmental regulation aims to promote
  environmental friendly behaviour by making the
  environmentally friendly option seem more
  rewarding to the individual, in spite of his or
  her own short-sighted interests, and/or by
  facilitating the performance of environmental
  friendly behaviour (Thøgersen, 1999 1)

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What is environmental regulation?

• Environmental regulation aims to promote
  environmental friendly behaviour by making the
  environmentally friendly option seem more
  rewarding to the individual, in spite of his or
  her own short-sighted interests, and/or by
  facilitating the performance of environmental
  friendly behaviour (Thøgersen, 1999 1)

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Promotion of environmental friendly behaviour

• Changes in technologies, aspirations and
  life-styles is needed
• For example, coal, oil and gas will need to be
  progressively replaced by renewable energy
  sources, in order to achieve the policy
  objectives as agreed upon in for example the
  Kyoto protocol

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What is regulation?

• Environmental regulation aims to promote
  environmental friendly behaviour by making the
  environmentally friendly option seem more
  rewarding to the individual, in spite of his or
  her own short-sighted interests, and/or by
  facilitating the performance of environmental
  friendly behaviour (Thøgersen, 1999 1)

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Making the environmental option seem more
rewarding

• Carrot (economic incentives)
• Sermon (information)
• Stick (legal instruments)

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What is environmental regulation?

• Environmental regulation aims to promote
  environmental friendly behaviour by making the
  environmentally friendly option seem more
  rewarding to the individual, in spite of his or
  her own short-sighted interests, and/or by
  facilitating the performance of environmental
  friendly behaviour (Thøgersen, 1999 1)

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Facilitating the performance of environmental
friendly behaviour

• An environment-friendly product is
  environmentally well throughout its life cycle
• the raw materials used
• the manufacture of the product
• the product consumes little energy
• the product can be disposed of without
  significant environmental problems

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Facilitating the performance of environmental
friendly behaviour

• The raw materials used how can we regulate this?
• The manufacture of the product how can we
  regulate this?
• The product consumes little energy
  (consumer-phase) how can we regulate this?
• Product can be disposed of without significant
  environmental problems how can we regulate this?

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Pure forms of environmental regulation
Self-regulation
Public environmental regulation
Market regulation
15
Pure forms of environmental regulation
Self-regulation
11 April
14 March
4 April
Public environmental regulation
Market regulation
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Pure forms of environmental regulation

• Strengths
• Give an overview of the theoretical strengths and
  weaknesses

• Weaknesses
• Do not exist in reality
• Do not pay attention to time perspective
• Limited attention to interactions between actors
  in society

17
Mixes of environmental regulation
Self-regulation
Public environmental regulation
Market regulation
18
Mixes of environmental regulation

• Strengths
• Focus on role of different actors in society
• Negotiating government
• Focus on industrys environmental performance

• Weaknesses
• Imprecise
• Linguistic problem

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Pure forms of environmental regulation
Self-regulation
Policy instrument C
Policy instrument A
Policy instrument B
Public environmental regulation
Market regulation
20
Mixes of environmental regulation
Self-regulation
Policy instrument A1
Policy instrument C1
Policy instrument ABC
Policy instrument B1
Public environmental regulation
Market regulation
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What is environmental regulation?

• Environmental regulation aims to promote
  environmental friendly behaviour
• Making the environmentally friendly option seem
  more rewarding
• Facilitating the performance of environmental
  friendly behaviour
• Forms of environmental regulation public
  environmental regulations, self-regulation and
  market regulation

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What is environmental regulation?

• Environmental regulation aims to
• promote environmental friendly behaviour
• make the environmentally friendly option seem
  more rewarding
• facilitate the performance of environmental
  friendly behaviour

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What is environmental regulation?

• Forms of environmental regulation
• public environmental regulations
• self-regulation
• market regulation

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How to implement environmental regulation?
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How to implement environmental regulation?

• POLICY INSTRUMENTS

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Definition of policy instruments

• A policy instrument is a tool by which
  government tries to achieve its policy
  objectives (Neil Carter, 2001 285)
• The myriad techniques at the disposal of
  governments to implement their policy objectives
  (Jordan et al., 2000 4)

27
Objectives of EUs environmental policy

• to preserve, protect and improve the quality of
  the environment, protect human health and utilise
  natural resources prudently and rationally

28
Policy instruments

• Different types of policy instruments
• Different styles of enforcement
• Educative

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Choice of policy instruments

• Policy instruments are often not purely
  regulatory, purely economic or purely
  voluntary
• Often a single instrument does not operate in
  isolation combination of different types of
  instruments work alongside each other to achieve
  a desired environmental objective

30
Choice of policy instruments

• Some combinations of policy instruments have an
  effect in the long run, others in the short run
• The composition of the package may need to change
  over time

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Policy instruments

• Different types of policy instruments
• Different styles of enforcement
• differences between countries
• differences between governments
• Educative

32
Policy instruments differences between countries

• The same type of policy instrument may be
  implemented differently as no two governments use
  the same policy tool in exactly the same manner
  (Hood, 1986 106)

33
Policy instruments

• Differences between countries
• Americans rely heavily on formal rules, often
  enforced in the face of strong opposition from
  the institutions affected by them
• The British rely on flexible standards and
  voluntary compliance. They are reluctant to adopt
  regulations with which they cannot guarantee
  compliance. Regulations are formulated in such a
  way that officials can negotiate arrangements
  with firms that will not be disallowed by their
  superiors or the courts
• (Carter, 2001 290-291)

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Policy instruments differences between countries

• Example voluntary agreements
• EU agreements between industry and public
  authorities on the achievement of environmental
  objectives

35
Voluntary agreement
Self-regulation
Voluntary agreement
Public environmental regulation
Market regulation
36
Policy instruments differences between countries
Example voluntary agreements (VA)

• The Netherlands
• VA are almost always legally binding agreements
  (covenants)

• Germany
• VA are often negotiated in the shadow of the
  law. I.e. legislation will be drawn up otherwise
  and with the intent of pre-emting the stick

37
Regulatory styles differ between countries

• The manner in which regulations are formulated
  and decided upon differs
• impositional/adversarial way
• to involve the subjects concerned a consensual
  style
• Influence behaviour through command and control
  regulations or self-regulation or market
  regulation

38
Regulatory styles differ between countries

• Global framework legislation versus detailed
  standards and procedures
• Differences in the preference for specific
  sanctions and incentives, such as the carrot, the
  stick and the sermon
• Differences in the way countries administer and
  enforce regulations

39
Regulatory styles differ between countries
problems in the EU

• Harmonisation of regulation is not easy,
  differences in
• population, political, legal and administrative
  cultures
• regulatory styles
• Harmonisation has been motivated by the need to
  prevent a regulatory race-to-the bottom by
  Member States

40
Regulatory styles differ between countries
problems in the EU

• Harmonisation of the law in the books versus
  harmonisation of the law in action
• Implementation and enforcement styles may have to
  become more similar
• harmonisation of implementation and enforcement
  rules and procedures how?
• harmonisation of the institutions involved how?

41
Regulatory styles differ in EU harmonisation is
needed

• Some policy objectives cannot be achieved
  effectively by Member States acting individually
• ex. Directive 2002/96/EC on waste electrical and
  electronic equipment (WEEE)
• national applications of the producer
  responsibility principle may lead to substantial
  disparities in the financial burden on economic
  operators
• different national policies hampers the
  effectiveness of recycling policies

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Mixes of environmental regulation
Self-regulation
Extended producer responsibility
Public environmental regulation
Market regulation
43
Extended producer responsibility

• Mix of public environmental regulations,
  self-regulation and market regulation
• Public environmental regulations
• mandatory take-back
• minimum recycled content standards
• requirements on the use of secondary materials
• energy efficiency standards
• disposal bans

44
Extended Producer Responsibility (EPR)

• Economic instruments
• disposal fees
• virgin material taxes
• deposit-refund system
• waste removal premium
• Self-regulation/Market regulation
• information (different forms of labelling,
  product environmental declaration)

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Policy instruments

• Different types of policy instruments
• Different styles of enforcement
• differences between countries
• differences between governments
• Educative

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Policy instruments

• Differences between governments (within one
  country)

Advisor
Process guide
A lot
Attention to the relationship with the company
Intermediary
Expert instructor
Inspector
A little
A little
A lot
Attention to the environmental effectiveness
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Policy instruments

• Different types of policy instruments
• Different styles of enforcement
• differences between countries
• differences between governments
• Educative
• Change the behaviour of target groups
• Achieve the stated policy objectives
• Help to spread environmental values throughout
  society

48
Choice of policy instruments

• What factors are likely to influence the choice
  between different types of policy instruments?
• How is that choice likely to be affected by its
  institutional and political characteristics?

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Choice of policy instruments

• Dependent on the nature of the problem which is
  addressed
• mandatory EMS is useful where a general
  improvement in environmental performance is
  desired. For example Danish car-dismantling trade
• banning the use of a particular substance is
  useful where it can be demonstrated that an
  immediate cessation in use is essential for
  environmental protection and alternatives are
  available at reasonable costs

50
Choice of policy instruments

• Costs and benefits of the options
• the best instrument will have the highest
  environmental benefits for the lowest cost of
  implementation and compliance
• For example CO2 allowances

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CO2 allowances

• Draft bill on CO2 allowances (February 2004)
• The objective of the law is to bring about a
  cost-effective reduction of the greenhouse-gas
  CO2 by means of a system of negotiable allowances
• legal authorisation to emit a ton of CO2 in a
  given period

52
Choice of policy instruments

• Costs and benefits of the options
• the best instrument will have the highest
  environmental benefits for the lowest cost of
  implementation and compliance (CO2 allowances)
• All policy instruments have strengths and
  weaknesses
• Policy instruments have their intended main
  effect and have positive and negative side
  effects

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Selection of policy instruments

• Economic criteria
• e.g. economic efficiency, cost-effectiveness
• Environmental criteria
• e.g. dose-response relationships,
  irreversibilities
• Technological criteria
• e.g. feasibility, incentives for innovation
• Political criteria
• e.g. equity, precaution, acceptability

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Developments in environmental regulations (1970
2000) in industrialised countries
Self-regulation
Self-regulation
Self-regulation
Public environmental regulations
Market regulations
Public environmental regulations
Public environmental regulations
Market regulations
Market regulations
1970s
1980s
1990s
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Example Kyoto protocol

• An international environmental agreement,
  accepted by a large number of countries who have
  committed themselves to reduce their CO2
  emissions for the sake of the global climate

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Which policy instruments can be used to implement
the Kyoto protocol?

• Problems because sustainable reduction in global
  greenhouse gas emissions requires internationally
  co-ordinated policy action
• Example Denmark
• Energy consumption in Denmark
• Consumption of energy after source
• Consumption of energy after fuel

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Problems

• Different interests of sovereign states
• Are reductions equitable in the burden that it
  imposes on individual countries?
• Risk of free-riding
• Costs involved
• Efficiency
• Enforcement

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Policy instruments Kyoto mechanisms

• To reach their emission targets under the Kyoto
  Protocol, industrialised countries can use
  domestic policy instruments. They can also use
  four Kyoto Mechanisms to co-operate with other
  countries

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Which policy instruments can solve these
problems?

• Domestic policy instruments?
• (Flexible mechanisms?)
• Bubbles
• Joint Implementation (JI)
• Clean Development Mechanism (CDM)
• International Emission Trading (IEM)

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Kyoto protocol Denmarks commitment

• Reduction of CO2 emissions with 21 by 2012 (1990
  basis year)
• Reduction of SO2 (sulphur dioxide) emissions with
  30 by 2010 (1998 basis year)
• Reduction of NOx (nitric oxides) with 45 by 2010
  (basis year 1998)

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Energy consumption in Denmark (1988-2001)
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Energy consumption by sector (DK)

• Two examples
• Households
• Transport sector

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Energy consumption households
Source http//www.energioplysningen.dk/English/En
Co.htm
64
Electric devices in households
(Source ENS, 200117)
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Energy consumption in households

• Which policy instruments can be used to influence
  the environmental behaviour of households?

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Energy consumption in households

• Which policy instruments can be used to influence
  the environmental behaviour of households?
• ? Policy instruments that provide information

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Energy consumption in households

• Which policy instruments can be used to influence
  the environmental behaviour of households?
• Activities concerning use of electric devices
• Energy labelling
• Stand by campaign
• Lightning

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Energy consumption in the transport sector (DK)
Source http//www.energioplysningen.dk/English/En
Co.htm
69
Energy consumption in the transport sector (EU)
Source EEA, 2002
70
Energy consumption in the transport sector

• Biggest energy-consuming sector (appr. 30 of
  final energy consumption)
• Energy consumption in transport, close link
  between
• Transport volumes
• Economic development

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Energy consumption in the transport sector

• High growth in GDP ? high growth in energy
  consumption (ex. Malta, Cyprus, Poland, Slovenia
  and Turkey)
• Decline in energy consumption ? decline in
  economic growth (ex. Lithuania, Estonia, Bulgaria
  and Romania)

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Changes in total energy consumption (1990-2000)
Source IEA, 2003
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Policy relevance

• EU/Denmark committed themselves to the greenhouse
  gas targets agreed upon in the Kyoto protocol
• Transport biggest energy-consuming sector, but no
  specific targets have been set to address energy
  consumption

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Policy relevance

• EU intends coming forward with proposals to set a
  compulsory minimum rate of new and renewable
  energy
• ex. biofuel consumption should increase to 6 in
  the year 2010
• Reducing energy use per transport movement
• improvement energy efficiency, less energy
  consuming modes of transportation such as rail,
  public transport and shipping)

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Policy relevance

• Increasing the share of alternative sources of
  energy
• ex. biofuels, wind and solar energy

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Policy relevance

• ? But by means of which policy instruments?
• the stick, the carrot or the sermon?
• National initiatives?
• International initiatives?

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Policy relevance

• ? But by means of which policy instruments?
• the stick, the carrot or the sermon?
• Lecture 2 (March 14) Public environmental
  regulations and its appearances
• Lecture 3 (April 4) Market regulation and its
  appearances
• Lecture 4 (April 11) Self-regulation and its
  appearances