Environmental Affairs

Lesson 4: Linkages between environment and economy –

Tools and instruments, there for the taking

Sustainable production and consumption means using, disposing and transforming resources in a way that minimizes harm to the environment while supporting the well being of people. Equitable and productive economic development requires democratic institutions to guide and structure its contribution to society. Governments that recognize the connectedness between meaningful economic progress and sound environmental management, will rely on a series of instruments to allow their economies to advance and prosper while at the same time being capable of generating and sharing surpluses while ensuring sustainable environmental interactions.

Tool Box of Economic Instruments

o Fiscal Instruments (local and national)

o International fiscal measures (i.e. Tobin tax on financial transactions/speculation) Pollution Taxes Input Taxes Product Taxes Land Use Taxes Tax Differentiation Royalties and Resource Taxes Investment Tax Credits Accelerated Depreciation Other Tax Exemptions/Allowances Subsidies

o Charge Systems Emission/Effluent Charges Recycling incentives

o Depletion Charges Input Charges Product Charges User Charges/Fees Access Fees (i.e. to nature reserves) Fuel surcharges, Road Tolls

o Taxation of flight fuel

o Market Creation Tradeable Emission Permits Tradeable Catch Quotas Tradeable Water Shares Tradeable Resource Shares

o Property Rights Land Titles Water Rights Use Rights

Source: http://www.iisd.org/susprod/ --------------------------

An Assessment of the instruments OECD countries have successfully used a range of regulatory instruments to reduce pollution and natural resource use. But these instruments have become less effective and more costly as our attention has shifted from large and well-identified pollution sources to smaller and more diffuse ones. The challenge is to change the set of incentives facing millions of individual producers and consumers, so that they take due consideration of the damage they impose to the environment in their daily decisions. In many cases, what this requires is a greater and more consistent use of economic instruments such as taxes, subsidies and tradable permits.

Many of the options are well known, and have proved their value in improving environmental outcomes in a cost-efficient way: taxation of fuels according to their carbon content; tradable permit schemes for fish catches, air pollutants and water use; support programs targeted to the achievement of environmental gains rather than supporting output levels. But despite evidence that they work, progress toward their use remain insufficient. Even in countries where economic instruments are used, they are seldom based on an explicit assessment of external costs. As a result, most OECD countries impose no or small taxes on coal and coke, as compared to higher taxation on cleaner alternatives such as natural gas; and impose higher taxes on petrol than on diesel, despite the second being more polluting. The application of economic instruments is also riddled with exemptions, most often granted to some of the largest producers, which severely reduce their environmental effectiveness.

More extended and coherent use of economic instruments to correct for environmental externalities is a key element for making markets work for, rather than against, sustainable development. But they are not a “single bullet” and they are not the instruments of choice when environmental problems have acute and locally differentiated effects, and where results have to be achieved rapidly. Hence the need to complement them with a range of other measures in the science, technology and governance fields.

Indicators for Environmental Performance Organisations create environmental impacts at various scales, including local, national, regional, and international. These occur in relation to air, water, land, and biodiversity resources. Some are well understood, while others present substantial measurement challenges owing to their complexity, uncertainty, and synergies.

Environmental reporting has evolved over the last 20 years and has reached a level of emerging common practices based on a shared understanding of environmental processes. At this time, the repeated appearance of certain environmental categories, aspects and indicators provides a foundation for a common information base. Nonetheless, organisational differences remain and are reflected in the variety of indicators used by reporting organisations.

Two types of performance indicators can be distinguished: generally applicable and organisation-specific.

Generally Applicable Indicators

Generally applicable indicators are relevant to all organisations. In the interest of comparability, information, regardless of sector, location, or other attributes of the organisation is collected.

Organisation-Specific Indicators

Organisation-specific indicators are those that, while critical to an understanding of the performance of the organisations to which they apply, may not be relevant to all organisations. These indicators derive from attributes such as the organisation’s industry sector and geographic location, and from the concerns of stakeholders.

Some organisation-specific indicators (such as fuel consumption by fleet vehicles) are applicable to many organisations but may be of key relevance to only a few organisations (e.g., package delivery and logistics companies). Other organisation-specific indicators are of key relevance for a particular organisation but are not widely applicable. Examples of such indicators include forest stewardship (for a forest products company), animal testing (for a cosmetics company), or noise (for an airline or airport operator).

Organisation-specific indicators emerge from consultation with internal and external stakeholders and should reflect the organisation’s key economic, environmental, and social issues. These, in turn, are associated with operations, products and/or services, and include indirect and supply/service chain impacts.

  1  2  3  4  5