Calculator shows natural capital approach is going mainstream

Jamie Carpenter: The launch of a natural capital calculator to ‘monetise’ the impact of water pollution incidents underlines how the approach is moving from policy into practice, but also demonstrates that its practical application may not prove straightforward

Jamie Carpenter, editor, ENDS Report
Jamie Carpenter: the big question now is what sort of use the calculator gets

Environment Agency chair Emma Howard Boyd has returned to the thorny topic of how to hold water companies to account for pollution incidents on several occasions over recent months. She has made it clear that she believes that existing penalties are not sufficient to make water company boards take environmental risk seriously.

The agency has two main methods of penalising water firms for breaches of environmental regulations. In more serious cases it can take companies to court, while for less serious infringements it may use enforcement undertakings, whereby the company at fault agrees to financial contributions to charities to make amends.

Howard Boyd’s recent comments related largely to the penalties issued by the courts - she wants to see fines made proportionate to the turnover, or operating profits of companies. But changes to the way enforcement undertakings can be calculated - introduced this week - are also part of the picture.

As part of its new enforcement and sanctions policy the agency has launched a water pollution natural capital calculator, which it wants water firms to use when they make voluntary enforcement undertaking offers following a pollution incident. It believes that the environmental harm from water pollution could currently be undervalued.

The calculator’s values are based on impacts to fish, invertebrates and plants as well as the loss to society measured by a pollution incident’s severity, scale, duration and location.

Its introduction underlines how the natural capital approach - a concept that featured heavily in the recent 25-Year Environment Plan - is moving from policy into practice. But it also demonstrates that getting the concept to work in practice may not prove straightforward.

An Environment Agency document setting out responses to a consultation on the proposals revealed that the plan to adopt the calculator had “given rise to the most mixed set of responses in the consultation”. While the overall message from respondents was positive, a number had raised technical questions concerning the detailed operation of the model. Some felt that the approach was too simplistic and in some cases overstated the costs.

The calculator is now live, but the Environment Agency’s consultation response document makes clear that its workings could change. The agency intends to hold a workshop with stakeholders “to work through the assumptions and choices in the model so that we can adapt and refine it”. “Our plan will be publish the model and then improve it,” it says.

The big question now is what sort of use the calculator gets. The use of the model will not be mandatory, so water firms - which already shell out substantial amounts of cash through enforcement undertakings - will be free to choose whether to stick with the existing approach to calculating sanctions, or twist and face potentially steeper penalties.

The agency says its experience of enforcement undertakings is that some companies offer the “absolute minimum”. Having opted to make the use of the calculator voluntary, the agency could now have its work cut out to convince them of the merits of signing up to an approach that could see them paying more.

Jamie Carpenter

Editor, ENDS Report

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