Economic Policy of Environmental Protection: Strategy and Challenges

Revaz Gvelesiani, Tbilisi State University, Full Professor; Georgian – German Institute for Economic Policy, Director

State economic policy on environmental protection and sustainable development implies the reduction of intensive usage of environment.

Attempts are made to use existing means of environmental relief and show some new ones by means of environmental protection policy tools. Accordingly environment policy tools cover the union of events applied by a state to reach environmental protection policy goals. The tools should coincide with the frameworks of existing social market economy order policy. Improvement of social framework should be implemented with the support of ecological framework that considers ecological as well as economic restrictions. Together with legal tools of traditional order stronger economic and market economy tools should be applied in the future. Effective implementation of environment policy goals is possible only with the combined application of legal and market economic tools of order. Due to collective product character of environment resources decentralized market will not lead us to success. It seems that state’s regulatory role is inevitable if it would like to implement environment protection policy goals. Systemization of environmental policy tools is made from different points of view. Besides legal and market economy tools of order the following issues are important:
(1) Which strategy is being implemented from economic point of view: quantitative or price fixing? Solving the issue from quantitative point of view (for instance: investment and licenses for environment) implies the restrictions on emission (execration and their eradiation) of pollutants, while state determines environmental resources worth (for example: expenditures) by means of price strategy. (2) Which environmental protection policy should tools be directed to? For example, licenses and investment for environment, as well as expenditures are subject to provoking principle; Direct state measures for protecting environment, supporting researches and development of environment are subject to common principle; field agreements – principle of cooperation. As for a prevention principle, it is an absolute necessity for all the tools having prevention character. (3) To what extent are these tools related to state revenues and expenditures (fiscal and non-fiscal). Fiscal tools cover environment licenses, environment expenditures (through state incomes), direct state protection of environment such as building roads proper to environment, water sanitation, communal service measures, financing institutional protection of environment such as state service for environment and other institutions (through state expenditures). Non-fiscal tools are the following: restrictions (full restriction on actions damaging environment), requirements (for example, defining the maximum limits on pollutant) changing legal framework conditions (for example, strict private legal liabilities or adapting environment protection liabilities).
(4) The tools influence the following segments of ecological and economic circulation system: a) using natural resources, b) execration of pollutants (emission taxation should be implemented directly – with environmental licenses or indirectly – with product norms or expenditures on products), c) natural regeneration of ecosystem d) reprocessing of old materials into new products, (Recycling).
These tools always show up no matter which context of systematization they belong to. The following issue remains to be clarified: which condition has more advantage. We have decided to use tools of legal and market economy order while analyzing selected tools of environment policy. Tools of legal and market economy order are traditional means of environment protection policy having the greatest importance nowadays. Their main advantage lies in a fact that they ‘make state responsibility and environmental policy success transparent’. As for their disadvantage, the first thing that we should mention here is insufficient dynamics of flexibility, small charm of innovation and expenditures as well. Legal measures of order do not often lead us to implementing advantageous expenditures of environment policy goals. Practice has created a great part of these tools. We can distinguish them through different criteria (such as intensity, key point, period of time).
The following are the major tools of environment protection policy: environment protection liabilities, norms, proposals, rules, restrictions, production standards, quantitative limiting etc. state influence is relatively great here. There are about 7000 legal acts on environment protection nowadays. They are based on provoking principles, external expenses should be decreased or avoided. Environment protection norms are tools on activity that make environment violators to reduce or cancel environment damaging activities. Environment damaging activates by economic objects are completely excluded during restrictions. Instructions point economic objects to the admissible effect level on environment. Requirements that set specific limits to the amount of pollutants that can be released into the environment.
Key point in environmental protection norms is a production process, processing of industrial and consumption waste, using production etc. Which factors reflect the advantage of environmental protection policy norms? Their effectiveness, practical character are their general advantages. Norms are quickly put into motion that is especially important when there is a great danger. Besides they enable to realize emission goals. Pursuers should keep emission norms that lead us to direct reduction of harmful substances. Significant sanctions should be imposed while violations. Disadvantage of environmental protection norms first of all is a fact that reaching a goal is impossible with force and with low expenditures. Although pursuers have a free choice of avoiding harmful effects, but their activities’ expenditures are not taken into consideration. The above mentioned leads to a conclusion that reaching environmental protection goals is impossible with common low economic expenditures. In addition, we should not exclude violations during competitiveness. New scientific and technical achievements that are not administratively installed yet, are either used late or not used at all. This can lead us to building technical progress ‘safe for environment’. Changes in legal framework conditions, as well as environmental protection norms, can lead to positive effects on environmental protection policy. We should remember the following regarding it: control before starting activities effecting environment (admission, registration, application forms), necessary introduction of environmental security, rising private legal responsibility on environmental protection as well as environmental control and information maintenance. We can get significant environmental and political effects out of legal regulation of responsibility. For example, responsibility on danger, harmful effect no matter is has been caused or not, leads us to loss reimbursement. The letter can support avoiding environmental risks and reduction of environmental damaging activities. Legal tools of regulation will further effect environmental protection. They are absolutely necessary when dealing while fighting against important damages and losses. in spite of it, calling for using economic or market economy tools is more and more active. It in not that legal tools of regulation should be substituted by economic tools. The objective is to fill political tools of existing regulations that will be more considered form the effectiveness point of view. As we have seen, economic regulation policy tools (first of all environmental protection norms) lead to reduction of pollutants although the above mentioned requires corresponding expenditures. Besides, economic and market economy tools operate. It is related to efficient usage of expenditures on environment and licenses. Economic tools aim to preserve or get ecologically clean, high quality environment with minimum expenditures of by using limited financial sources for the measures that will give us big economic profit. Environmental expenditures are related to tool that promotes financial means to reach planned environmental policy norms and goals. Environmental taxes (Pigovian tax) and financial- economic discussion rule are worth noting here. The following terms are used in this case: Ecotax, environmental expenses and special environmental expenses. The difference among them is made through determining the goals of certain measures. The first thing that matters, is whether goal determination exists or not. Then, goal determination category is quite important (for common budget, common objectives and special purposes of environmental protection). Direct state interference, the way it happens with legal norms of regulations, is not related to environmental protection objectives. A pursuer should be indirectly missioner to treat environment right. The following make the basis of it: resources from other fields of economy, materials, production process (methods, technologies), production quantity and emissions. Major goal of expenditures is related to emission reduction: potential pursuer of environmental damage is forced to pay high price for using environmental products and decrease negative effect on environment. Therefore environmental products become additional expenditures. A pursuer can avoid it through reducing emission while it’s cheaper than paying expenditures. The following environmental policy conception is the basics of determining expenditures: emission cost is determined that is followed by its size determination, environmental expenditures are fixed at such high levels that is supports necessary measures of environmental protection. In case the goal is exceeded during the following period, or just opposite takes place, expenditures will relevantly correspond. The advantage of the approach is that environmental expenditures are economically effective. The fees related to avoiding or reducing environmental effects increase profit and support the environmental protection technical progress. Accordingly, competitiveness rises (market conformism). Anyway, we should note disadvantages related to solving expenditures’ issues. Expenditures’ size is a result of political decision processes. We can expect that some forces that will lead us to low expenditures will become active here. Besides, we should also expect resistance from payer’s side. In addition, while using environmental products in case of fixed prices, its size is depended on market. As a result, emission size is depended not only on expenditures’ share, but on economic development as well. Therefore we should entrust the final volume of emission to market. It meant that reaching environmental policy goals, both emission volume and environmental standards, can not be precisely managed (trial and error methods).
Let us summarize the above given views: high ecological efficiency presents the positive sides of environmental protection norms. As for environmental protection expenditures, they give advantages from economic efficiency point of view. Positive and negative sides of environmental protection norms made environmental licenses (environmental certificates) more and more important. Environmental licenses – permissions on using environmental resources, also belong to market-economic tools. In this case state determines the level of using environmental resources (emission level, keeping environment quality standards). Therefore admissible effect level on environment is a political decision. Environmental certificates are issued by state. They may be purchased at a stock exchange. This is the way of creating market where price is regulated by supply and demand. The latter are directed to different expenditures of emittents to avoid effecting environment (avoiding expenditures). In case they exceed environmental licenses prices, then emittents have demand. In opposite case, they offer their certificates on market (on stock exchange). This causes the reduction of common economic expenditures together with keeping planned quality of environment. Advantage of this approach lies in economic as well as ecological efficiency and a significant market conformism. ‘Open market policy’ opportunity is worth noting here. It implies that a state should be able to increase or reduce licenses in case of demand. As for the negative side, first of all it lies in problems related to multi area practical application (imposing terms on certificates, free issuing of certificates, auction, setting boundaries among ecological regions etc). besides, licenses may create barriers while entering a market, that will be followed by developing concentration and monopolization trends (competition challenges). We should consider emotional argument while fighting against environmental licenses. It has been argued that one of our best and most significant values (products) should not be sold. It’s not taken into consideration that issuing each permission to a large industrial object puts bigger pressure on environment, emittant does not pay for that, accordingly there is no economic encouragement for reducing influence on environment. Despite the variety of certain market economic tools in environmental protection policy, they have common objective: creating stimuli – monetary or of any other kind – for economic objects within sustainable development. In addition, by means of Imposed regulations policy tools they are able to meet growing needs from expenditures point of view. According to rules of market economy, each person’s interests regarding environmental protection should be mobilized. Together with legal and market economy tools, there are number of additional environmental policy tools. Fiscal tools related to social expenditures bear the biggest importance. Besides direct protection of environment (principle of implementing common expenditures) it includes social and legal institutions (such as supporting the following measures: creation of heat system, building roads that preserve environment, improving waters and taking communal wastes away), creation of research and development projects for environment, financing environment’s institutional protection (feeder environmental service, environmental protection unions). Subsidies in the field of environmental protection are worth noting. State covers environmental protection expenses either totally or partly from state income. Political subsidies may be economically justified in exceptional cases (in case they implement private activities to improve environment). Although, as a rule, they are inefficient from market economy point of view. Organizational measures are of growing significance, that aim to realize environmental protection policy objectives in relation to production (production environmental management). On the one hand, it is related to creating organizational conditions at enterprise, that guarantee to observe legislation rules, such as instructions on private supervision, safety analysis, important processes for environment.
On the other hand, such organizational interventions should not include safety and preservation liabilities considered only by law. Enterprises should be encouraged to support environmental protection innovations. The following are the tools that serve environmental protection: liability of the authorized member in leadership, preparing documentation, complex balances of environment applied to whole energy and raw material consumption of an enterprise, partial balances (for example balance of wastes) and environmental auditing. EU has introduced environmental auditing, quantifying environmental performance and environmental position, as a new information and controlling tool. Although they are applied voluntarily, serve to self control and advertisement of an enterprise. Environmental auditing makes an enterprise to realize specific goals of environmental protection, to create a complex program of preservation and to implement environmental protection coordination measures. The tool may be first of all used for estimating enterprise’s environmental management. It can be less used for balancing own influence on environment ( especially in case of energy and raw material usage). Introducing an environmental ethics and ethical relationships with an environment is another thing. It can be reached by means of improved information on environment.
While Summarizing the above mentioned viewpoints, we see that together with basic principles within rational policy of environmental protection there are:
· Economic and ecological inventorying.
· Planning objectives of clearly formed, rational environment policy and putting them according to priorities.
· Using ecologically and economically effective legal and administrative tools to reach the goals in order to solve economic and political problems (employment, economic growth).
· Measuring successfully implemented measures and their contribution in other political (economic) goals.
Special challenge lies in a fact that number of problems related to environmental protection has gained international or global character. Air, water pollution does not cover only national borders. Damaging resources require international efforts to solve growing problems. Universally acknowledged standards and norms that will be active, are quite necessary. Although, this remains a weakness of international environment policy. There is no authorized and competent international policy maker to introduce a global environmental policy. It’s also true that there are more than 180 international agreements on environmental issues. Their major weakness is that they are mainly directed to selected aspects of environment. They lack precondition of integration. Besides, as it was shown at KYOTO environmental protection conference, there is a tendency of weakening environmental standards (low standards, special statements and exception rules). Sanctions are either not imposed on violations or they are quite insignificant. Therefore effectiveness of agreements depends on governments’ will. Conflict between international trade and environmental protection is an exceptional challenge. The newest international political conventions on environment include trade limitations as a way of protection against damaging environment (such as restrictions on dangerous substances’ export, import, wastes and technologies). This action, when a third state (the one that does not sign a contract) is damaged partly opposes WTO statements. WTO agreement is not drawn up from environmental protection point of view that causes a significant deficit. For example restriction on import that is related to specific products’ norms of environment is possible without any problem according to WTO. The only precondition is that causing damage to a human being, animal or plant can be proved only scientifically. But this is not connected to process standards (type of production). It seems that amendments in international trade is a necessity in order to strengthen relation between ecology and economy. Implementing a long term environmental protection policy is in close connection to national economy (conflict between ecological and economic interests). Within the problems of unemployment, financing social security systems, growing net domestic product, financial expenses directed to environmental protection are less taken into consideration. Although environmental protection policy has an equal significance to other social tasks, but it still faces troubles while strengthening positions. It is absolutely necessary that separate fields of politics (such as growth and employment policy, development, trade and environmental policy) act together. One of the major problems is the political decision making process on national as well as international levels. The way that environmental protection will choose for reaching political decisions is also a significant matter. Quite often environmental catastrophes or political pressure caused by public discussions for example in mass media cause reaction of decision makers. This will not assist the policy directed to environmental protection. Selective environmental policy built on certain events is less capable of solving everyday problems. Institutional framework, especially on international level can not support the rational environmental policy development. Just on the contrary. For example, a decision making process within EU is less transparent, social control and monitoring on decision is almost impossible. Therefore legal bases of European environmental protection policy is partly vague and difficult. This estimation leads to more institutional publicity requirements, opportunities of better participation and more democratic legitimating. The following is considered to be an admissible measure: giving more rights to European Parliament (active participation in decision making process, EU commission accountability to Parliament), changing the decision procedure of Ministers’ council (limiting Veto rights), strengthening general board and department of environment in other general directions, open EU committee for environmental protection union. Precondition for implementing strong measures in environmental protection policy is the ecological and economic inventorying by means of indicators. Due to insufficient, scientifically poor calculations about pollutants emissions and environment damage indicators do not give the necessary information that is required to environmental protection policy. Besides, environmental policy indicators should be directed to environmental policy goals. As the latter are the outcomes of decision process full of compromises, major damaging spheres may be ignored. Problems may emerge in connection with measuring and controlling emission. Although they seem technically quite solved, but a question rises: are politicians and society itself ready for sharp problems, can they create personal and financial leaders to overcome the challenges?
Finally, we should point at ethical dimension of environment. Current environmental situation shows us that ‘modern society with its practice lacks behind nature’. Yet, not only should a state environmental protection policy be blamed in it. Environmental protection success is directly connected to formation of social understanding. Checking own behavior and readiness for changing it should not depend on legal statements and economic promotion. Each person should check his/her own activities with the environmental protection goals. Each person is responsible for protecting environment. This is not a strange ideal to reality. According to Max Weber, responsibility implies to make a unity of reason and liability (optimization of activity as possible) a basis of our action.

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