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OECD Conference on Economic Aspects of Environmental Compliance Assurance:
Incentive Framework For Firms To Comply With Regulations
Closing Statement
Dirk Hazell, BIAC Environment Committee
(Chief Executive, Environmental Services Association)
Paris, 2-3 December 2004
On behalf of BIAC, I would like to thank the OECD for the opportunity of representing business at this conference. The presentations have ranged from the practical to the analytical and it was very useful yesterday to hear of the OECD’s current work.
Yesterday we also heard a very substantial presentation from the US EPA which emphasised how environmental protection can be combined with economic understanding. This is the most important priority of the Conference and it is the one to which I return in a moment. But before leaving this theme I would like to say that my employer is delighted with the approach being taken by the European Commission to align economic and environmental objectives. I would also commend the intervention this afternoon by the European Commission implicitly recognising the need to reduce compliance costs for business: achieving low compliance costs for business will help to secure environmental success.
There has been quite a lot of discussion about penalties and access to justice. I think from a business point of view appropriate transparency is more the key priority. Regulators have a duty to educate businesses about their duties and this particularly applies to SMEs. There was an important intervention this morning from the US EPA, in the chair, about the EPA’s own work on transparency and ESA appreciates the Environment Agency’s acknowledgement that ours is the leading sector on transparency in the UK. More generally, I think we were all very interested in Indonesia’s presentation on transparency and would welcome receiving their PowerPoint presentation by email: all of us, I am sure, would like to study PROPER.
Regulators heard over the last two days of a shared frustration of business and NGOs: the failure of regulators to catch criminals. I have listened carefully to comments over the last two days and have formed the conclusion that most of the regulators in this room could usefully develop a clearer distinction between legitimate regulated business on the one hand and criminals on the other.
Where I think a clearer consensus did emerge was on the issue of corruption:- it is a clear priority that this be eliminated.
There has been debate about voluntary instruments: this is a subject on which BIAC has very strong views which my own employer also shares and my presentation yesterday gave a clear and specific example. The right voluntary agreements manifestly do work. They should not be dismissed by regulators: they are an effective means to an end.
I think there was agreement with a number of comments about the need to get the laws right. On behalf of BIAC, I think this means shifting to risk-based and outcome-focussed regulation with much greater use of economic instruments. India rightly made the point yesterday that developing countries need to master regulation of process. However, both developed and developing countries share a strong interest in successful cap and trade mechanisms to regulate, for example, emissions of global warming substances. It is the best way forward for all of us.
I do want to pick up a comment made by Mr Ruffing, not to be pedantic but to make a substantive point. It is very important not to include fiscal instruments in broad references to economic instruments. Fiscal and economic instruments have different characteristics and do different things. It is important to maintain transparency on this point and not simply to end up with a position where business is presented with tax increases following imprecise debate on economic instruments. As I said yesterday, fiscal neutrality is an important objective of the work we have been discussing and we need to debate separately fiscal and economic instruments.
The move to economic instruments will result in a fundamental change in the character of environmental regulation: there will be a progressive shift from physical inspection of facilities to auditing operators’ own compliance systems. There will need to be a qualitative shift in the quality of data maintained by environmental regulators, with much more intelligent use of information technology.
If we all succeed in our common objectives the result will be to avoid environmental standards becoming an excuse for protectionism and instead securing a position where the financial services sector invests most routinely in well run businesses with good environmental standards. That has got to be good news for all of us.
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