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Natural environment and climate change

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  The value in environmental valuation
Mallika Ishwaran, Jonathan Portes and Richard Price
The Guardian, August 2011

The UK has been at the forefront in using new techniques to shape policy decisions which affect the environment. On the publication of the UK's Natural Ecosystem Assessment, this article makes the case for valuing the environment as part of a better approach to informing policy decisions for environmental protection, reflecting the pervasive role the environment has to play in economic and social activity.

Link: Click here for the full article

  Resource efficiency: cutting waste raises competitiveness and helps preserve productive capacity
Richard Price, Europe's World special edition, June 2011

Businesses can take low-cost practical steps to reduce resource use, promoting economic growth and environmental performance.  By cutting costs, businesses get a significant pay-back in the short term, with innovation able to cut their costs further over time. Research by Defra finds that British businesses could save up to 23 billion a year by adopting energy, waste and water efficiency measures which pay back within a year.

Link: Europe's World special edition on resource efficiency  (PDF, 358 KB)
Link:
Defra research on rapid pay-back resource efficiency measures
 

 
  Green Growth: Selecting policy instruments
Richard Price, OECD Workshop on Green Growth, Paris, 8 February 2011

As part of its work for the G20 on Green Growth, the OECD held a workshop to discuss its Green Growth Strategy in February 2011, involving all OECD member states and a number of NGOs. The Strategy seeks to provide tools for a shift towards a more sustainable development path, while identifying economic opportunities and benefits of going in that direction.  Defra’s Chief Economist, Richard Price, was invited to lead the workshop session on policy instruments for green growth, and this paper set the context.

Link: Click here to download this paper from the Defra website (PDF, 800 KB)
Link:
OECD website:  www.oecd.org

 

 
 
  The environment, wellbeing and policy in the UK
Richard Price, Prime Minister's Wellbeing Conference, HM Treasury, London, November 2010
In a speech to the Prime Minister's Wellbeing Conference in November 2010, Richard Price explains the links between the environment and wellbeing, and how taking a consistent approach to understanding environmental costs and benefits across all policy areas can best safeguard the environment for this and future generations. Assessing environmental and social impacts on wellbeing is at the heart of policy design in the UK, is based on evidence and innovation, and makes a real difference to policy.

Download: Click here to download this paper from the Defra website (PDF, 220 KB)

 

     
 
Government Economic Service Review of the
Economics of Sustainable Development

Richard Price, Chris Durham and JY Chan; Defra/GES, London, July 2010

The Final Report of the Review of the Economics of Sustainable Development is now available. The Review proposes a working definition of sustainable development, identifies considerations that policymakers need to understand when assessing whether an individual project or policy is consistent with sustainable development overall and sets out the steps taken in the past year to implement these across government.

Download: Click here to download this paper from the Defra website (PDF, 707 KB)
 


Growth and the environment: opportunities and a warning
Richard Price, speech to the Annual Conference of the UK Network of Environmental Economists, The Royal Society, London, March 2010

In this speech Richard Price identifies opportinities for environmental economics to help raise economic and environmental performance, squaring aspirations for prosperity and growth with the importance of environmental assets; and warns against sloppy thinking on the challenges of growth.

Download: Click here to download this paper (PDF, 245 KB)
Link: UK Network of Environmental Economists (UKNEE webpages)
 


 

 
  Economic Growth and the Environment
Tim Everett, Mallika Ishwaran, Gian Paolo Ansaloni and Alex Rubin, Defra, March 2010

This paper explores the complex relationship between the natural environment and economic growth, including the importance of the environment in supporting and enabling economic activity and the different drivers that affect environmental quality as the economy grows.  It makes the case for sustainable economic growth, managing the use and provision of natural assets in a way that ensures their availability for future generations.  Finally, it identifies the range of policy responses the government can use to enable this shift to a sustainable economy, and the potential opportunities and economic impacts in the near- and long-term.

Download: Click here to download this paper (PDF, 400 KB)

 
 

 
  Adapting to Climate Change
Federica Cimato and Michael Mullan, Defra, February 2010

This paper sets out how a number of barriers to adaptation (market failures, behavioural barriers, adaptive capacity, natural capacity) may affect adaptation decisions, and provides a framework for considering the Government’s role and identifies implications for policy design. It also identifies the priority areas for future research on the economics of adaptation

Download: Click here to download this paper (PDF, 646 KB)
Link: Defra Economics and Analysis Series (Defra webpages)
 


 
  GES Review of the Economics of Sustainable Development: Interim Report
Richard Price and Chris Durham, Defra/Government Economic Service, October 2009

Download: Click here to download this paper (PDF, 498 KB)
Link: GES Review of the economics of Sustainable Development (Defra webpages)

This Review proposes a working definition of sustainable development. It also identifies considerations that policymakers need to understand when assessing whether an individual project or policy is consistent with the Government’s position on sustainable development. 

Read the interim report (PDF, 498 KB)

Most of the Interim Report’s recommendations focus on giving policymakers better tools to assess the impacts on their policies/projects, and what they can do about them. These tools supplement the approach to cost-benefit analysis used across UK government (as set out in the Treasury’s ‘Green Book’). 

Our emerging recommendations focus on:

  • what to do when policy options have large, non-marginal or irreversible impacts;
  • taking social impacts into account more systematically;
  • dealing more transparently with the consequences of policy for future generations; and
  • improving the way we value externalities (such as damage to environmental assets) and environmental limits.
     

Sustainable development: what does it mean, how can it affect decision-making, and can economics help?

Richard Price, speech to Government Economic Service seminar, HM Treasury. April 2009

Download: Click here to download this paper (PDF, 480 KB)
Link: GES Review of the economics of Sustainable Development (Defra webpages)

In this paper, Richard Price examines the roots of sustainable development, and questions the usefulness of the many definitions and uses of the concept that have sprung up since the 1970s.  He finds that the concept is often unhelpful in addressing policy questions, and that it is undermined by a lot of well-meaning but flawed thinking.  He explores how the concept might be tightened up to give a useful guide to the choices faced when using environmental assets to deliver policy objectives.   The paper sets the context for his review of the economics of sustainable development for the UK's Government Economic Service.

 


     
 

Making the right choices for our future: An economic

framework for designing policies to reduce carbon emissions

Mallika Ishwaran and Federica Cimato, Department for the Environment, Food and Rural Affairs, and Department for Energy and Climate Change, March 2009

Download: "Making the right choices for our future: An economic framework for designing policies to reduce carbon emissions" (PDF, 1600KB)

Link: Defra Economics and Analysis Series (Defra webpages)

“Making the right choices for our future” consolidates government thinking to date. It builds on the UK Treasury’s 2002 paper which set out the Government’s principles for environmental policy more generally, in the new context of the carbon budgets introduced by the UK's Climate Change Act.

“Making the right choices for our future” set out the approach used to consider the Government's options in responding to the advice of the Committee on Climate Change on the level of the first set of legally-binding carbon budgets and how they might be met. It helps policymakers to make sure that the our approach to tackling climate change goes hand in hand with a strong economic recovery in  the UK, and with sustained, low-carbon growth in the coming decades.

The paper discusses principles for choosing the range of instruments available to tackle climate change and how they might best be used together to achieve our goals.  Designing climate change interventions to be as cost effective and efficient as possible is always essential – as the Stern Review demonstrated – and never more so than at a time of global macroeconomic challenges.  Delivering mitigation potential at least cost to the economy requires a credible, effective, and well considered policy framework to deliver the required emissions reductions.

 


     
  Cutting carbon and sustaining growth:
the importance of valuing and trading carbon

Richard Price, March 2008

Download:  Click here to download the full text of this speech

This speech - to the
UK Network of Environmental Economists' Annual Conference (at The Royal Society, London, March 2008) - sets out the links between the economics of climate change and UK policy.  It argues that it is nonsense to treble the current value of the shadow price of carbon, as some have argued, as the arguments for doing so effectively assume that the UK will act alone in tackling climate change. It also points to the creation of global markets in carbon, including the use of international credits towards UK emissions goals, as an imperative to generate capital flows to finance low-carbon technologies around the world on the scale required to avoid dangerous climate change.


     
  The social cost of carbon and the shadow price of carbon:
what they are, and how to use them in economic appraisal in the UK

Richard Price, Simeon Thornton and Stephen Nelson, UK Department for Environment, Food and Rural Affairs, December 2007

Download: Click here to download this paper  (PDF, 745kb)
Link Click here to see the UK Government's new guidance on using the shadow price of carbon

This paper significantly increased the value attached to carbon emissions and savings from all new policies and projects across government in the UK.  It brings the value of carbon used in government decision-making into line with the Stern Review – increasing it by 17 per cent for emissions in 2020, 32 per cent in 2030; and 67 per cent in 2050, compared with previous guidance. The level of the shadow price is set at £25.50 per tonne of CO2 in 2007, and is on a rising profile.  Equivalent values apply to other greenhouse gases.

The higher level of the shadow price means that, wherever new policies or projects have a significant impact on emissions, advice to Ministers will take greater account of the carbon impact.  That includes not just environmental measures, but applies across government – including for example transport, construction and infrastructure projects.  It will make sure that lower-carbon options are recommended wherever they are economically and socially justified.

The paper received good press coverage in the UK, including the main front-page story in The Guardian on Saturday 22 December 2007: Link: Ministers ordered to assess climate cost of all decisions 

An article in the ENDS Report in January 2008 interviewed Richard Price, explaining the significance of the shadow price of carbon:  Download: Nicholas Schoon: Daylight falls on the shadow price of carbon, ENDS Report 396, January 2008.

 

     
  Climate Change Instruments: Areas of overlap and options for simplification
Mallika Ishwaran and Federica Cimato, UK Department for Environment, Food and Rural Affairs, December 2007

Download: Click here to download this paper from the Defra website

This paper reviews the three major policy instruments operating in the UK to tackle carbon emissions – EU Emissions Trading Scheme (EU ETS), Climate Change Agreements (CCAs), and the Carbon Reduction Commitment (CRC), and aims to identify ways of eliminating avoidable overlap, simplifying existing regulations, and ensuring that the regulatory burden on the economy is kept to a minimum.
 

 
  An introductory guide to valuing ecosystem services
Helen Dunn, Department for Environment, Food and Rural Affairs, December 2007

Download: Click here to download the Guide from the Defra website (PDF, 463 KB)
Download: Click here to read Richard Price's comments at the launch of the UK Government's Ecosystems Approach Action Plan.

Major policies have both positive and negative effects on different aspects of the environment, and policy makers need to make difficult trade-offs between economic, social and environmental priorities. That means we need analysis which takes into account:

• how our existing use of environmental assets degrades their condition; and how far consistent over-consumption might jeopardise our ability to benefit from the services they provide into the future - such as clean air and water, temperature regulation, water management and biodiversity;

• the cumulative, complex and interacting pressures we put on the natural environment – recognising the interdependencies between different parts of ecosystems; and

• allows us to take account of the full value of the benefits ecosystems provide when assessing the costs and benefits of policies.  

The Guide is intended to engage policymakers, economists and scientists across government and agencies to help them to take better account of the value of ecosystem services in policy appraisal.  It sets out steps that can be applied in any policy context; a checklist of ecosystem services, and advice on which techniques can be used to value them.   

     
Quantifying and valuing ecosystem services
Prashant Vaze, Helen Dunn and Richard Price, UK Department for Environment, Food and Rural Affairs,  September 2006

This paper sets out the rationale for assessing the impact of improvements and degradation of environmental assets on our ability to consume the services they provide - affecting for example health, flood risk, and broader economic activity.  It is the basis for Defra's underlying approach to ecosystems services.

Download: Click here to download this paper (PDF, 626 KB)

Link: Defra Economics and Analysis Series (Defra webpages)

 

     
  The economics of the water environment and river basin management: implementing the EU Water Framework Directive
Richard Price, London, June 2006

The implementation of the EU Water Framework Directive rests much more heavilly than previous EU regulation on the assessment of costs and benefits of different options for raising the quality of inland waters. The Directive comes at a time when both the UK and across the EU greater emphasis is being placed on minimising the administrative burden of regulation, and also making sure that compliance costs are justified in terms of the benefits we get in return.  It is therefore critical to us that we understand fully how we maximise the benefits and minimise the costs.  Economic evidence is critical to the UK’s approach to interpreting and implementing the Directive

This paper was the basis for a keynote address at the Defra-Environment Agency (UK) collaborative research programme workshop on river basin management economics. 
 
 
     
  Evaluating the costs of implementing the European Commission’s proposed solvents directive and the scope for using economic instruments
Bill Baker, Richard Price, Rebecca Reehal, Katy Anderson,  NERA/Aspinwall, London, 1996.

Commissioned by the UK Department of Environment, this study examined the costs of compliance with the European Commission's proposed Solvent Emissions Directive. It looked in particular at the potential for economic instruments to reduce the cost of compliance compared with a more traditional command and control regulatory approach.

Weighing the likely cost savings against the practical drawbacks, the study concluded that a tradeable permit system was promising. Though an upstream tax was found to offer large resource cost savings, it was recognised that a tax would impose substantial new financial burdens on some firms. Moreover likely difficulties in preventing tax evasion and with designing a workable system of exemptions and refunds made it problematic in practice as a sole instrument for Directive compliance. However, a lower-level tax in combination with regulatory controls might offer some benefits.

The process of designing economic instruments, which included analysis of the drivers of compliance costs, also suggested that large savings could be achieved by reconsidering the focus of regulatory control; ie: by making IPC-type regulation more cost-effective.

The large potential for resource savings suggested that compliance cost analysis within an economic instruments framework would be usefully extended to other areas of pollution control.

The full paper is not available online, but can be obtained from NERA Economic Consulting in London - details at: www.nera.com 
 


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