Quality is the key

EIC chairman Adrian Wilkes on the clash of environment and economic development

It is time for an honest debate about environmental protection and international competitiveness. If the conclusion is, as the EU enterprise commissioner says, that "if something is ecologically wrong, it cannot be economically right", then we must focus on how to move industry to an eco-efficient future.

As resources become scarcer, and voters refocus on quality of life, pressures on politicians to restrict pollution are getting stronger by the day. British business cannot afford to bury its head in the sand, arguing that environmental protection is too expensive and that we do not really need to change.

Since the industrial revolution, industry has been allowed to pollute for free, because no one individual has legally recognised property rights to our beaches, rivers and air. Private costs are borne by the public. It is only government action that can correct this and ensure the polluter pays. But ministers will not act if they are given a distorted version of the facts - and, alas, they are regularly misled by scaremongering about the costs. As a result, inaction is hurting us all, British industry included.

The most-used tactic is, in the words of a chemical industry association, to "conduct and publicise an economic impact study to dramatise the potentially devastating impacts to industry and consumers". Such lobbying scares politicians with the threat of job losses and damage to competitiveness.

Polluter pay principle

So where is the hard evidence? The CBI told the Commons Select Committee in January that it did not know of any company that had left the UK because of environmental regulation. Certainly, companies incur a cost in buying pollution control equipment, but this is, rightly, in line with the polluter pay principle. And are such costs really so high?

The CBI's own report, Environment Costs, stated: "We found no strong evidence that environmental regulation destroys jobs and businesses... negative effects are most likely where a business is facing existing competitiveness weaknesses such as high labour costs, low capital investment and traditional technology, or is competing primarily on price and in local markets."

The CBI's 2004 report, UK Environmental Regulation, also accepted "UK business has incurred relatively low direct costs associated with regulatory compliance", while recognising "rigorous enforcement is desirable to ensure proper environmental protection". Yet a press release focused on "sloppy" laws "costing industry £4 billion a year".

Scaremongering is leading to policy errors that will undermine the UK's economy and its environment. It is time government economists assessed all the costs and benefits. Pollution imposes economic costs - it increases the burden on the NHS, drives up the cost of natural resources, yields from agriculture and forestry are cut, and a range of third party industries such as insurance and tourism are damaged.

New business opportunities

Conversely, there are business benefits from environmental protection, such as reduced insurance and easier recruitment. Most significantly, tackling environmental challenges also creates new business opportunities. The world market for environmental goods and services is currently estimated at US$515 billion. Some companies have established new ventures selling techniques they developed to solve their own pollution problems, but they are the exception. And there are the benefits of eco-efficiency - because waste production is only inefficient processing, environmental policy spurs innovation and waste minimisation/eco-efficiency.

Since the government started funding waste minimisation studies in the 1990s, it has become clear that when a polluting company examines its processes, "the financial case for adopting a philosophy of waste minimisation is so overwhelming that companies should need little further encouragement to save money and the environment".

Critical analysis

Sadly, polluting industry's scaremongering is not usually analysed critically. Defra's recent evaluation of the air quality strategy reveals the scale of the error. It concluded that the real costs of cutting air pollution from the transport and electricity sectors was £5,000 million - compared to original estimates they would be as high as £52,512 million.

EIC's advice to government is to unmask the the deregulation lobby through a full assessment of the benefits of environmental protection. Then we could focus on the real challenge - devising policies that will help British industry make the transition to an eco-efficient and competitive future.

EIC has long lobbied for investment incentives; for adequate levels of support for R&D and innovation; and for clearly defined regulatory timetables that tie in with an industry's investment cycle.

It is time for a shared vision - recognising that environmental quality is crucial to both competitiveness and our quality of life.


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