EIC hits out at 'deregulation lobby'

The Environmental Industries Commission has launched an all out assault on what it calls the "deregulation lobby" in evidence to an inquiry by the House of Commons Environmental Audit Committee. Ministers are reluctant to sign off regulations, it said, because of the twin effects of scaremongering by trade associations and inadequate regulatory impact assessments (RIAs) which fail to identify the full benefits to business and the environment.

The session with the EIC came one week after Sir Digby Jones, chairman of the Confederation of British Industry, admitted to the same Committee that no British company had ever been driven overseas by environmental regulation (ENDS Report 360, pp 30-31 ). Committee chairman Peter Ainsworth had accused the CBI of "scaremongering" in its bid to water down the UK's national allocation plan on industrial carbon emissions.

Appearing before the Committee on 26 January, EIC chairman Adrian Wilkes, continued with the theme.

"This industry absolutely lives by what the Government does in terms of environmental protection policy measures, whether that is strict regulation, tax incentives, green taxes or indeed voluntary agreements with industry," he said.

Mr Ainsworth challenged his witness. "This is an odd thing to say, is it not, because it implies that your products bring no additional benefit to the people who buy them. In other words, that in a completely free market nobody would bother with them - that without Government intervention, regulation and so on you would not exist."

"The problem," responded Mr Wilkes, "is that actually the environment - water, beaches or whatever - has been a free resource to industry, in particular manufacturing industry, and, of course, indirectly their consumers. It has been free to pollute for a couple of hundred years, so if there is no price on pollution, there is no driver to actually limit it."

The session then turned to the theme of scaremongering. "We are very concerned generally that certain organisations such as, dare I say, the CBI do try to scare Ministers and policy-makers with startling figures," Mr Wilkes said. "After all, it is far cheaper to lobby than it is to buy pollution control technologies."

Examples cited in the EIC's written evidence include the EU environmental liability Directive. The CBI had claimed that the cost to British business would be £1.8 billion, but the Government now puts it at £18-52 million.

The EIC referred to last year's study by environmental group WWF. This described how the American Chemistry Council was spending $50 million lobbying against the EU's proposed REACH regime - work which has included an economic impact study to "dramatise" the potential impacts.

Responding to Sir Digby's admission that he could not name a UK company that had been driven overseas by environmental controls, the EIC said that it could, "in stark contrast, furnish the names of many air pollution control companies that have gone out of business because of weak air pollution regulation."

"The worst example of how the deregulation lobby damaged the UK's environmental technology industry concerns VOC [volatile organic carbon] emissions," the EIC said. "In 1994, an array of industries lobbied hard to get the Department of the Environment to postpone the implementation of controls...[at] some 3,500 factories."

"The original implementation deadline was postponed from 1995 to 1998 - this destroyed the business and investment plans of many small British air pollution control companies - but not their competitors from Germany and the USA."

The EIC also referred to the recent evaluation of the air quality strategy, which found that the costs of reducing air pollution are often significantly overestimated. Prior to implementation, measures to tighten vehicle emission standards for 1990-2001 were costed at £16.1-£22.8 billion - but the latest evidence puts the cost at only £3 billion (ENDS Report 360, pp 4-5 ).

"We believe that the Government's objective of evidence-based policy-making is being undermined by inadequate RIAs that fail to properly assess the economic benefits of environmental protection whilst giving undue weight to the scaremongering cost-competitiveness arguments from UK and EU industry," the EIC said.

"This has resulted in a widespread, but inaccurate, belief across Government, at the highest level, that environment and competitiveness are in conflict. There is a clear need for RIAs to be reformed and improved so that Ministers can make accurately informed decisions that result in a net benefit for the UK's citizens, environment and industry."

The EIC hopes to secure further changes to Cabinet Office guidance on RIAs. A revision in 2003 gave greater emphasis to the need to quantify the potential economic benefits of environmental regulation (ENDS Report 337, p 40 ). As well as assessing direct benefits - such as improved health and tourism - the guidance noted that regulations can sometimes encourage innovation or more efficient investment by firms "perhaps from greater resource productivity".

The EIC is now pressing for deeper reforms - to include an assessment of benefits to environmental technology and service providers. It says that the Environment Department (DEFRA) has been broadly supportive, but the Cabinet Office appears to be saying "no". The dispute relates to economic theory, and whether "benefits" to a supply industry can be taken as a positive that might be considered to offset the costs to the sector facing the increased costs.

At the very least, the EIC would like to see some discussion in RIAs of the benefits to the environmental sector, including increased employment and export opportunities. It is also pressing for the 2003 guidance to be applied more thoroughly.

On a positive note, EIC director Merlin Hyman gave the example of the RIA for the latest water industry investment programme which he described as "probably the leading piece of environmental economics done in the country. That, I think, gave [Environment Secretary] Margaret Beckett the ammunition to stand up within Cabinet and say to Mr Blair and Mr Brown, who were concerned inevitably about the political impact of rising water costs, we have got some really hard figures that stack up the costs and benefits."

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