5. Environmental Mechanisms

5.1 As well as considering policy in particular sectors of the economy, the Round Table has been keen to look at ways of putting sustainable development into practice. It has examined four such "mechanisms": the use of economic instruments; environmental auditing and environmental management; the proposal for environmental trusts, to be funded by means of the landfill tax; and indicators of sustainable development.

Economic instruments

5.2 The Round Table considered some general issues related to the use of economic instruments. In setting policies, the first step should always be to define aims: these should encompass environmental goals as well as other aspects of sustainable development and need to distinguish between local, regional and global problems. Where markets do not produce sustainable outcomes, for example because of a failure to price environmental externalities, additional mechanisms are needed. These could include regulation, economic instruments (including taxes), voluntary agreements or other means. In general a package of measures will be more powerful than a single solution.

5.3 Economic instruments can have important advantages, not least in that they enable costs to be more transparent. But they are not necessarily to be preferred to regulation (for example where it is regarded as important to reduce emissions below a certain level); nor do they necessarily establish the correct prices to be used, particularly where they are being used primarily as revenue-raising devices.

5.4 Many other issues also need to be considered. Economic instruments can give rise to important distributional effects, in terms of geography as well as type of organisation or person affected; and some instruments can have unpredictable or even perverse effects. The question of revenue-raising by economic instruments is a particularly difficult one. While some taxes clearly have revenue-raising as a main aim, this might be merely a byproduct of other instruments. There are strong presentational arguments for revenue neutrality where this is possible.

5.5 The Round Table decided that it would consider further the use of different mechanisms in the context of its studies in the transport and energy sectors.

Environmental management and audit

5.6 To contribute fully to sustainable development, organisations of all sizes and in all sectors need to implement effective environmental management systems. There has been a good deal of advice on this subject in recent years. The introduction of a British Standard (BS 7750) in 1994 and the launch in 1995 of the EC Eco-Management and Audit Scheme (EMAS)¹⁰ provide possible frameworks for assessing environmental performance.

5.7 As part of its study, the Round Table consulted organisations in different sectors to determine the extent of good practice and to seek views on obstacles to improvement. Among large private sector firms, there is increasing evidence that environmental management systems are being put in place. However, take up of BS 7750 and EMAS has so far been slow and the Round Table is concerned by reports from several organisations committed to environmental management that they do not see benefit in seeking accreditation under these schemes. Smaller firms are often less well-equipped to put systems in place, even when there would be financial advantage to them in doing so. They may respond to pressure and help from other companies through the supply chain. One general advantage of wider use of these schemes would be to provide assurance that suppliers meet certain minimum standards of environmental performance.

5.8 Government Departments and local authorities must not only take into account their own direct impacts on the environment but ensure that sustainable development is reflected in the policy decisions they take. In local government, there is a high level of commitment to putting Local Agendas 21 in place by the end of 1996 and a significant proportion of authorities are taking up EMAS although other authorities are not at the same stage. Among Government Departments, several initiatives have been launched, and advice has been published¹¹, but there is still a long way to go in bringing together the results and having targets against which to measure achievements.

5.9 Environmental education and public expectations can encourage organisations to deal more effectively with their impacts on the environment. In particular, organisations find it easier to obtain support for improvements in environmental performance if their employees at all levels have a good general understanding of environmental issues.

5.10 The full text of the Round Table's initial report on environmental management and audit is set out in Section II. The recommendations made were as follows:

Landfill tax and environmental trusts

5.11 The Round Table has noted the Government's proposals, first set out in the 1994 Budget and confirmed in the 1995 Budget, for a landfill tax and, specifically, for environmental trusts. Such trusts are to be financed through reclaimable rebates of up to 20% of landfill tax, plus a contribution of 10% from landfill taxpayers (ie landfill site operators). Their income is to be spent on approved purposes related to sustainable waste management.

5.12 The Round Table supports the principle of the landfill tax which will help to ensure that the price of landfill reflects environmental externalities and meets the "polluter pays" principle. Environmental trusts are a welcome innovation that should benefit sustainable development. However, to succeed the trusts must be made attractive to landfill site operators and the rules governing them should take account of the objectives of sustainable development.

5.13 The Round Table's recommendations on the Government's initial proposals were:

Sustainable development indicators

5.14 The Department of the Environment gave a presentation to the Round Table in September 1995 on the work in progress within Government to develop a preliminary set of sustainable development indicators. A meeting was subsequently held with a subgroup to discuss the proposals in more detail.

5.15 The Round Table's preliminary views were that:

• the indicators should include social trends as well as economic and environmental indicators;

• the indicators should include measures reflecting the impact of the United Kingdom on sustainable development overseas; and

• it should be possible to aggregate the national indicators with local indicators being prepared under Local Agenda 21 by local authorities and others.

5.16 The Round Table also suggested that further consideration should be given to:

• the way in which the indicators were presented;

• the need for different sets of indicators for different audiences;

• the thresholds below which particular indicators should not be allowed to fall without corrective action; and

• the areas where the indicators had been constrained through lack of data, and the selection of new information that should be collected.

5.17 The Government has now published its set of indicators. The Round Table will consider later in 1996 how to contribute further to the debate on this important topic.