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CHAPTER 7
ENVIRONMENTAL POLITICS
If the market can’t solve environmental problems by itself, what can? Externalities are issues that call for intervention by governments or other forms of governance.
Throughout history governments have imposed controls on pollution and the overexploitation of resources, but the scale and diversity of this intervention has exploded since the middle of the 20th^ century. In response to public concern, governments are continually bringing out tougher regulations to control pollution and other business practices that affect the environment. Incentives are provided to encourage people and companies to be more respectful of the environment. Disincentives against pollution, such civil and criminal penalties for breaking regulations are imposed to force them into compliance. Furthermore, almost all countries have committed substantial funding for Environmental Protection Agencies or Departments to provide research, policy advice, monitoring, and enforcement. All developed countries have increased the number of environmental regulations applied to business and expanded the number of industries and products to which they are applied. Furthermore, governments have increased the requirements for reduction in existing regulations and the penalties for lack of compliance. International agreements also bring pressure on governments to respect an environment that is shared by all on the globe. In this chapter we will look first at the diversity of ways that governments can intervene in the market to save the environment. This knowledge is crucial to companies because they must comply with these regulations or face fines, closure, or jail. Then we will look at how the concept of sustainable development is giving some direction to these environmental governance tools.
4.1 Government: Legal Governance and Guidance
Most governments will use a diverse assembly of legal governance and guidance. Legal (or binding) governance forces a business to follow rules under threat of government punishment if it doesn’t. Legal or binding governance comes in all sorts of forms, from fines to equipment specifications to emission limits. Guidance is where government or NGOs or industry associations try to convince companies to change. Guidance comes in many forms as well; from simple statements of concern, to descriptions of principles of practice to detailed research on better ways of running business. A government may combine different approaches to the same problem, for example, using moral suasion and taxes. A government may also use a tool, such as extended product liability, that can be both a legal requirement and produce market incentives. The following is a list of different legal governance and guidance practices used by governments (and to a certain extent by the NGOs and industry associations).
Moral persuasion: Governments, NGOs and industry associations try to move companies to better environmental performance by trying to convince them of moral and social duty to do so. This may come in the form of simple statements by or in the provision of guidelines and principles and principles that show them how to do it and make it plain to companies
and society that these policies are the correct ones to follow. That type of persuasion may be followed-up with purchasing products from companies that come closest to following environmental guidelines. Publicity that makes known both clean and dirty businesses is often the most effective form of moral persuasion. Generating bad publicity for a company is a favorite tactic of NGOs.
Command and Control (C&C): C&C has been the dominant form of government regulation and is primarily responsible for most environmental improvements undertaken by companies. The main forms of C&C are: o Bans on chemicals or materials (e.g. lead, asbestos) o Emission standards (e.g. limitations on sulfur from petrol) o Specifying equipment to cleanup pollution (e.g. waste water treatment); often requiring ‘best available technology’ (BAT) o Environmental impact assessments (EIAs)
Market Mechanisms: a) Monetary: The government has the power to change market mechanisms, that is it can change the signals in the market and create markets for products that will help the environment. There are several ways the government, and to a certain extent industry associations and NGOs, can do this. o Taxes are imposed for greater amounts of emissions, waste or resource use. o Subsidies are paid out to encourage the use of new technologies or undertake training for new practices. o Licenses to pollute or extract a resource are only sold only to a limited number of people thus encouraging substitution. o Deposits are required before an action is taken to make sure the remediation of impact can be paid for and to encourage recycling (e.g. bonds for land development or deposits on bottles etc.). o Quotas are sold to give a limited number of people the right to extract a resource and to trade the right, thus creating the private property conditions for maintaining the yield of the resource. o Emission trading rights or credits can be gained by firms under a regime set up by the government that limits the overall amount of emissions and the amount each firm is allowed to emit. o Deregulation of monopolistic or other controlled industries to encourage more competition and substitution.
b) Information: Information is crucial to making the market work and for making companies responsible to other stakeholders. o Product labeling requirements force companies in industries from chemicals to electronics to food to disclose the information such as types of materials, source of raw materials, toxicity, and other environmental characteristics. Some labels, such as Hong Kong’s eco-certification scheme tell consumers that the product has achieved higher levels of environmental performance. This information allows the public to make up its own mind and therefore change market conditions. Some NGOs publish this
have acted this way, especially in the developed world where they have more resources to bring laws into effect. Importantly, most of these laws have been brought in to address each problem as it arises and dealt with only direct and immediate threats to human health and some special ecological sites. Governments have accomplished this by forcing companies to stop their activity or to demand that companies use specific technologies to clean their activities to an acceptable level. They usually determined the standards needed on a scientific basis, created the regulations that were needed and imposed these on industry without much discussion. Companies then had to take action, often incurring significant expense. The creation of these environmental laws accelerated greatly during the last twenty years. In Hong Kong the acceleration began in the 1990s and is gathering greater force now. There has been, however, a shift in the type of laws brought in. Governments are increasingly favoring market-based laws over command and control laws. These are thought to be more efficient at creating the broader conditions and incentives to achieve environmental improvement. Overall, however, there was not much of a coherent attempt to look at the real causes of environmental degradation and their interdependencies. When people decided to do that they came up with the concept of sustainable development. Sustainable development, and its primary principles have created a holistic base for dealing with the root causes of environmental degradation.
As described in the economics chapter, companies are primarily interested in promoting flexible policies that allow them to deal with their environmental impacts in the most efficient manner according to their situation. Those conditions should still maintain fairness for all competitors. As described in the politics chapter, companies can best obtain these objectives by influencing government policy making and working with the organizations that help to shape policy making. The environmental governance necessary to industrial ecology can also be supplemented by other organizations. These organizations are environmental NGOs, industry associations, and certifying authorities.
7.2.ii Government: Policy Making
Companies can simply ignore the process of regulation creation and wait for them to happen. If they do, they are likely to incur substantial costs and miss opportunities to create value. The costs can be incurred by the fact that the regulations mean companies will have to comply to taxes, bans, standards, record keeping, and so on or pay fines, penalties, or directors even face imprisonment. On the other hand, companies and their associations can get involved in policy making to help shape market incentives and deregulation to make replacement regulations more efficient and fair. Thus while they may be forced to internalize externalities they can still help to create value opportunities for themselves at each stage of the product cycle. A company should be interested in helping to design phase-in periods, the content of regulations, the most effective regulatory process, and building trust with government officials. Companies should also be interested in obtaining the image building benefits that positive participation can bring. Participating in the policy making process, however, is not an easy task.
All government policy making is a combination of perceived needs, attempts to effectively respond to those needs and the influence activities of many actors outside the
government. More than most policy, however, environmental policy is driven by scientific identification and appraisal of problems. Thus, in theory at least, policy can be guided by science to a great extent. The attempt at rational policy making is, however, confounded by several factors. o The science of environmental impact assessment is imperfect. Not only is it difficult to unravel the interconnections between, for example, climate change and ecological change, but also there can be competing explanations of the problem or recognition that understanding of the problem is going to take a long time. o Coalitions of concerned people are usually needed to bring environmental problems to the attention of the government or public attention, which are focused on other concerns. o The vested interests of different groups of people are often threatened by the recognition of environmental problems and they will often work to protect their interests and block environmental improvements. o Not only must government mediate and respond to all these external influences, but various factions within government have their own interests, priorities and relationships with external actors that affect the policy making process. o Government resources are limited and therefore their capability to respond to environmental problems is limited. This is particularly true in government's ability to enforce environmental laws on thousands of different companies.
The policy making process therefore is unlikely to be a clean stepwise process, but rather a messy one that is a compromise among several viewpoints. Business has usually had a strong voice in this process, but often it has tried to confound and hinder environmental policymaking process. The primary reason has been the claim by business that environmental protection would impose too great of costs on the economy. Companies and industry associations with a more strategic and proactive vision try to get involved in the policy making process in a more positive manner. They do so to not only ensure that environmental protection doesn't cost them too much, but also to understand the inevitable changes they must deal with and to influence policy making so that they can gain a competitive advantage. In the following we will look at two examples of the policy-making process.
International Policy and Regulation
Perhaps the greatest environmental problem is the fact that while environmental problems are global in nature and all regional ecosystems are interrelated, there is no government that regulates the global environment with legal authority. The United Nations is a cooperative body, which cannot force any national government to follow its recommendations. It does, however, try to encourage national governments to participate in greater environmental cooperation. The end result of international cooperation has resulted in two basic forms of policies. The first of these are binding agreements, which governments sign and commit themselves to take specific actions or meet targets. The second is comprised of guidelines or principles of action. Binding commitments may be achieved either by a one step process where comprehensive laws or regulations are formulated (e.g. International Law of the Sea). Or they may be created in a two-step
Identification and definition of global or transboundary problems: Typically, the development of environmental problems is first recognized by academic scientists as they are entrusted with the role of investigating threats to society. NGOs have also assumed this role and devote great resources to monitoring environmental change. This process can take some time, however, before convincing scientific evidence of the problem and a scientific consensus can be established.
Politicization and agenda setting by national and international advocacy groups: Convincing the government, the public and companies that there is a problem, however, is not achieved simply by supplying evidence. Key individuals or organizations at national and international levels often draw attention to environmental problems. These individuals range from the scientists themselves, to people in the media, politicians, and entertainers. NGOs are the principle organizations that form advocacy groups dedicated to raising awareness and pushing for change. Often industry groups are the most powerful opposition to the scientists and NGOs. On the other hand, leading businesspeople can be powerful advocates of awareness and change.
Policy formation through negotiations: The policy positions are formulated at both the national and international levels. At the national level various opinions are listened to or ignored and ways of dealing with the problem are proposed. National government officials then take these positions to international meetings. NGOs and industry groups also influence these meetings through formal or informal attendance.
Establishment of binding agreements, conventions and protocols, action plans: The establishment of these agreements can be a lengthy process involving many steps where countries try to overcome their differences (while accommodating the interests of various parties within their country). Often agreements are achieved before official signing by politicians at international summits.
Implementation by national governments and third party monitoring: National governments are entrusted with implementing agreements. The UN cannot force countries to follow the agreements even if they have signed it. Implementation is easier for developed countries because of their greater resources. Often in the agreements, special arrangements are made to assist developing countries or allow them less strict targets or more time. The UN can withhold funds or other aid to developing countries to encourage them to sign and implement agreements. Developed countries simply do not sign initiatives that don't satisfy their interests. NGOs are the chief monitor of national compliance. Through exposure and drawing media attention to the performance of a nation or company they are also powerful enforcers of international agreements.
Examples of Hong Kong’s International Environmental Obligations:
o Montreal Protocol on substances that deplete the ozone layer o Convention on the control of transboundary movements of hazardous wastes and their disposal and its protocol
o Convention on Wetlands of international importance o Agenda 21 Action Plan
National (Hong Kong) Policy and Regulation
Hong Kong has dozens of laws and regulations governing environmental issues. Many of these are administered, monitored and enforced by the Environmental Protection Department (EPD), but many are also administered, monitored and enforced by other departments such as the police, agriculture and fisheries, and architectural services. An introduction to all these policies and laws can be found in the EPD’s annual report. The strength of these laws and how they are enforced, however, is dependent on the Hong Kong policy process. Hong Kong follows the same basic pattern of policy formation that occurs in the international situation. The process is open to the same types of public and corporate input; indeed this input is formalized to a great extent as advisory committees on the environment are established to advise the government on environmental policy (figure 7.ii).
Initiation: The 1990s saw a decade of rapid expansion of the university system in Hong Kong and also a rapid expansion in academics monitoring environmental degradation and the impact on human health. International environmental NGOs were the first organizations to raise public awareness but soon several grassroots groups developed to raise public awareness. Hong Kong's media has also served to raise public awareness. The EPD also plays an initiative role in researching Hong Kong's environmental problems and proposing policy solutions. Often it takes its lead from EPD practices in other countries or follows international agreements.
Formulation: The EPD is the government's primary capability in environmental research, monitoring and enforcement, and also in policy-making. The EPD, however, is under the direction of the Environment, Transport and Works Bureau; to which it gives policy guidance and from which it also receives instructions. Several other bureaus and departments are involved in creating or implementing policy measures which affect the environment. These include the land bureau, agriculture and fisheries and so on.
Selection: The chief executive, Exco and Legco decide with external input from the public, the private sector and NGOs. Legco has a committee on the environment. Until recently Hong Kong also had its own version of a green party, and still has several Legco members with a strong interest in the environment. The Advisory Council on the Environment is the institutionalized unit for bringing external voices into the decision making-process. It is comprised of industry, NGO, academic, legal, and other appointees either concerned with the environment or concerned about how environmental protection will impact them. Recently Hong Kong has established another advisory committee on sustainable development and it is supposed to determine the sustainability of government projects. Much of the influence on environmental policy comes from trade groups and environmentalists who try to lobby the various members of government and administration. In the past various industry groups have blocked environmental initiatives (the most blatant example being the transport industries struggle against cleaner air regulations),
assumed consequence of efficient performance. Companies, as a result were forced to make small modifications in the way they did business. It is only recently that efforts have been made to integrate environmental protection into how an economy and society function. The new approach to integrating environmental protection into economy and society is called sustainable development. The promise of sustainable development is not only a healthier environment, but also an improved quality of life. And achieving sustainable development requires not only a broad transformation of society and economy, but also each company becoming a sustainable business.
7.2.iii Non-governmental Organizations (NGOs)
In the last few decades the proliferation and growth of NGOs has been one of the most important developments affecting political and economic governance within countries and amongst them. NGOs are generally non-profit organizations that seek to fulfill those roles which governments and private companies neglect or are unwilling to fulfill. Their activities range from simply raising awareness of an issue to researching the causes of a problem to taking action to solve the problem. Environmental NGOs usually make greater demands for improvements in environmental performance than does the government. Often they simply demand the stopping of activities such as nuclear power, whaling, production of pesticides, use of genetic engineering, use of packaging and so on. NGOS work to expose the bad environmental practices of companies and have often succeeded in damaging the reputation of a company. For most of the history of NGOs they have been in direct conflict with companies. Often NGOs have been in conflict with governments as well because they believe that governments let companies get away with too much environmental damage and also because they believe that the government itself does not take enough interest in protecting the environment. In their watchdog role environmental NGOs have certainly played a crucial role in changing the attitudes of business and government towards the environment. Importantly, NGOs are the primary voice of social movements. Social movements are the collective activities of people attempting to have their (environmental) concerns addressed. Although they may initially represent a small fraction of society, their activities often initiate greater changes that business has to respond to. The two basic types of NGOs are international and grassroots organizations.
International NGOs, which although founded in specific places (e.g. Greenpeace in British Columbia), have developed complex and sophisticated global organizations staffed with fulltime researchers, activists and money raisers. They draw attention to both global and local issues and the interrelations between the two. Generally, their values are post-materialist; in other words they argue that humanity must act as steward of the environment rather than treat it as just something to be used. The international NGOs are also concerned with grassroots issues both for the role that local environmental impacts have on the global environment and the role that global activities have on local environments. Grassroots NGOs usually develop out of concern for how pollution or other problems affect livelihood or damages local quality of life. Grassroots organizations range from movements that address single issues and are short lived to more comprehensive and
sustained organizations. Some of the various international and grassroots NGOs in Hong Kong are listed in table 7.i.
Table 7.i Hong Kong’s NGOs
International Grassroots Friends of the Earth Green Peng Chau Greenpeace HK Marine Conservation Assoc. World Wide Fund for Nature Green Lantau Conservancy Association Tsing Yi Concern Group Green Power .
While the international NGOs may have depth of expertise and international reputations behind them, the grassroots organizations have high levels of connection and credibility with local people. In Hong Kong, especially initially, there was also a difference in the expatriate-local membership in the two types of organization, but this difference has diminished recently.
Several companies in Hong Kong have felt the power of NGOs, most notably when NGOs raised enough opposition to the KCR's extension through the Long Valley to bring about a negative EIA judgment and when they used legal means to stop development in Sha Lo Tung. International NGOs have also had dramatic successes. Clear cutting practices by British Columbia companies brought about an effective boycott in Europe. Also in Canada, the plans to dam rivers and sell hydroelectricity from Quebec to the Northeast American states were stopped by an alliance of Canadian aboriginal people and NGOs. Another notable examples of NGO successes are the successful forcing of Shell to abandon dumping its oilrig in the North Sea and the boycott against fish caught using drift nets that drowned dolphins.
The interactions between businesses and NGOs range from direct confrontation and mutual hate to close working relationships. Many NGOs developed specifically to oppose business. They play an important role in providing society with an alternative view of business activity and especially in helping people and ecologies that do not have the means to defend their interests. Many NGOs have, however, swung over to cooperation with businesses. The Environmental Defense Fund, perhaps, has been the most proactive of international organization in working with companies. It claims to have had success in changing the practices of McDonalds and General Motors. Greenpeace has advertised for some companies (e.g. a German refrigerator manufacturer) that produced environmental friendly products. Hong Kong's NGOs have for the most part formed cooperative relationships with businesses. The FoE has worked with companies such as Cathay and the Hotel Nikko. Indeed HK FoE's activities are so business friendly that it split with its parent international organization. The reasons why companies and NGOs develop mutually beneficial partnerships are listed below. These NGOs must be careful that they do not become to cozy or dependent with companies and lose both their essential meaning and their credibility.
All these environmental laws cause them to buy new equipment, train people, keep records, buy permits, pay fines and legal fees, and deal with the red tape of different government agencies. They also are distracted from their main goal of making money. For these reasons businesspeople have often reacted negatively or minimally to government demands to improve their environmental performance.
On the other hand, companies know that many environmental problems have to be dealt with and that if they don’t deal with them their company and industry will become distrusted by the public, a target of environmental NGOs, and likely face governmental regulation. Furthermore, companies within an industry may be concerned that the actions of some firms may damage the image of all firms and the industry may face heavy regulations and costs. But even when they recognize the necessity of change and of some sort of regulatory system, a common complaint of businesses is that government regulations are not made well. Even companies that want to be environmentally responsible and that believe regulation of environmental impacts are necessary often believe that regulations are inefficient. Companies complain that the government imposes costs on companies that may make them uncompetitive with companies in other place that don't face the same regulations. They want regulations that level the playing field and that reward companies that innovate to reduce pollution. The solution often taken is for industry to regulate itself and set up their own systems of governing the business-environment relationship. Most of the time this is done through an industry association or it is done by another type of third party.
7.2.v Industry Associations: Companies belonging to specific industries usually form industry associations that represent their collective interests to government, to create common standards etc. Creating common environmental standards has become a recent thrust of these associations. The chemical industry as one of the world's greatest polluters felt the need to improve its image early in the development of environmental awareness (see its Responsible Care principles below). Its association established a set of guidelines for companies to follow and also establish a network of expertise amongst companies so that they can share information. A company cannot be a member of the international or national Chemical Industry Associations if they do not sign onto these principals. Many industries have developed similar activities. Presently, computer manufacturers in the US are collaborating on a system to recycle the estimated 20 million computer discarded per year because their fear the government will impose an inefficient system. As with international environmental governance most of these guidelines, regulations, and recycling systems are voluntary, although industry associations could possibly expel non-compliant firms from the association and thus reduce their public image. In Hong Kong Cross-industry associations are associations that establish guidelines for industry as a whole. The most famous of these is the International Chamber of Commerce (ICC) Business Charter for Sustainable Development that has become the standard in devising corporate environmental policy and strategy (a copy of these is in your notes on Sustainable Development). Local chambers of commerce and other similar organizations perform similar informational and guidance functions. In Hong Kong, the Green Restaurant Association, the Construction Association, Hong Kong Productivity Council,
the Clean Production Centre, Business Environment Council, the Legal Profession, the Engineers, and the Environmental Contractors all have environmental guidelines, policies, committees and other activities.
Responsible Care Principles of the International Chemical Industry Association
- To seek and incorporate public input regarding our products and operations.
- To provide chemicals that can be manufactured, transported, used and disposed of safely.
- To make health, safety, the environment and resource conservation critical considerations for all new and existing products and processes.
- To provide information on heath or environmental risks and pursue protective measures for employees, the public and other key stakeholders.
- To work with customers, carriers, suppliers, distributors and contractors to foster the safe use, transport and disposal of chemicals.
- To operate our facilities in a manner that protects the environment and the health and safety of our employees and the public.
- To support education and research on the health, safety and environmental effects of our products and processes to foster the safe use, transport and disposal of chemicals.
- To work with others to resolve problems associated with past handling and disposal practices.
- To lead in the development of responsible laws, regulations and standards that safeguard the community, workplace and environment.
- To practice Responsible Care by encouraging and assisting others to adhere to these principles and practices.
7.2.vi Certifying authorities: In order to improve the environmental performance of companies and to increase the credibility of firms, certifying authorities are used to impartially judge the performance of companies. Companies that meet the standards of these authorities are given a certification and ability to use a label on their products and advertisements. The most powerful certifying authority is ISO and its environmental management standard (ISO 14000) is rapidly becoming a requirement in many industries. Other certifying authorities deal with organic foods and agriculture, hotels, etc.
7.2.vii Putting It All Together: Public-Private Agreements
The previous discussions of the international and national policy making process and how they can work with others such as NGOs, industry associations and certifying authorities shows the potential of companies engaging in the governance process. To a large extent, however, this engagement still occurs on a case-by-case and often antagonistic basis. Public-private agreements are designed to create more comprehensive and synergistic approaches and to break down the antagonism between different stakeholders. Public-private agreements bring together stakeholders from different areas of society—business, government, environmental groups, local community—to design a collective plan to deal with environmental problems. The agreements are reached through discussions which look at the problem from the many different perspectives of the stakeholders with the objective of finding a solution, that may a compromise, but is
target groups are agriculture, traffic and transportation, manufacturing industry, energy, refineries, building trades, and consumer and retail trade. The major common problems that they have to solve are identified and called themes. Agriculture, for example, has the themes of acidification, eutrophication, and toxic substance dispersion. Indicators are chosen to allow the severity of the problem (theme) and advances in solving it to be measured accurately and concisely. The indicators for agriculture are, respectively, ammonia emissions for acidification, phosphate emissions for eutrophication, and pesticide use for toxic substance dispersion.
Covenants: The national government brings together provincial and municipal governments, business representatives, industry association representatives, environmentalists and occasionally labor to discuss the severity of the problem and what needs to be done to solve it. Improvement targets and timetables are established. These targets and timetables are set for short, medium and long-term efforts because the changing the system requires incentives and deadlines that allow firms to realistically achieve the improvement goals. Companies are expected to put action plans into effect, monitor the results and make the information open to the public.
Market and technology: The covenant approach works so well because it allows the market to motivate companies to improve their environmental performance and to innovate in the design or use of environmental technologies. The targets allow the companies to plan for the future in their own way and are not forced to adopt existing technologies. Therefore, not only do they not have to change technologies and practices all the time as regulation become tougher, but also can devise technologies and practices that actually give them an advantage over the competition. In this way a company is motivated to find both the most advantageous environmental technology and to do it in the most efficient manner for their business.
Product Life-cycle Policy: Convenants are encouraged to provide information about each product as it moves through the lifecycle. In this way companies at each stage of the product cycle has improved information about how to design and use products received from downstream. The Netherlands have to balance this policy with the fact that are a small trade dependent country selling and buying goods from many countries that have less strict regulations than them, but also selling and buying goods to countries like Germany and Sweden which in some sectors will have tougher environmental regulations.
Program Evaluation: The programs are evaluated on an ongoing basis by the national government, paid consultants and environmentalists. The program is also more thoroughly reviewed on 5 and 10-year intervals to point out significant problems.
