Preface

Environmental Agreements: Environmental Effectiveness

Environmental Issues series no. 3

Executive summary

Preface

The present report on Environmental Agreements, in conjunction with the report on "Environmental Taxes; Implementation and Environmental Effectiveness", published in 1996, (both undertaken following a request from the European Parliament in 1996) are two examples of the work of the EEA relating to the review and evaluation of environmental policy instruments.

The "mission" of the EEA includes the "provision of timely and targeted information". This report on Environmental Agreements is targeted at policy makers and the public and is timed to assist the European Parliament's debate on the European Commission's Communication on Environmental Agreements published in November 1996.

Both reports are part of the Agency's work which is intended to contribute to the best available information to policy debates. The reports are also intended to be accessible to non-experts so as to encourage the wider involvement of European citizens in policy development and implementation, thus enriching the "prior consultation" process requested by Parliamentarians.

Environmental Agreements are relatively recent in the policy arena so the available literature on the subject is scarce and consists mainly of theoretical studies with very little on the practical application of these instruments. In order to fill this gap this report examines 6 Agreements covering various countries and environmental issues, and tries to evaluate their environmental effectiveness.

Quantitative assessments of the environmental effectiveness of the case studies was hampered by lack of available and reliable information. The results of the analysis seem to show that some environmental improvement has been achieved during the period of some of the Agreements. However, due to a lack of monitoring and reporting it is not possible to establish well-founded causal relationships between this improvement and the Agreement. Other factors may have played a part, such as existing regulations or other policy instruments.

Qualitative evidence however seems to indicate other valuable benefits resulting from the Agreements, such as consensus building, sharing of information, awareness raising and an improvement of environment management in businesses. These are in line with the spirit of shared responsibility embedded in the Fifth Environmental Action Programme.

Parliament, NGOs and others have raised concerns about some aspects of the Environmental Agreements, such as their legal nature, transparency during the negotiation process, access to information on the agreements and their implementation, and compliance with the EU Treaty. Some of these issues are mentioned in the report, but an in-depth analysis is outside the scope of this study.

The report also includes a synthesis of a survey on Environmental Agreements undertaken by the European Commission during 1996 which shows that over 300 Environmental Agreements, are currently recognised by national authorities of the countries of the European Union. Given the growing enthusiasm for this instrument, and in particular the support it has gained from industry, it is important to make a joint effort to improve the design and implementation of Environmental Agreements in order to make it possible to monitor and assess their effectiveness vis-à-vis other policy tools.

The European Commission's Communication on Environmental Agreements provides guidelines on the improved use and implementation of Environmental Agreements. By providing practical information on the application and monitoring of a few Agreements and attempting to evaluate their environmental effectiveness the Agency aims to make a valuable contribution to the on-going debate, not only in the European Parliament, but also in national parliaments, in the Commission, and among the public in general.

The Agency produced this report based on an initial draft provided by ECOTEC Research and Consulting Limited. The project was co-ordinated and edited by Teresa Ribeiro (Project Manager). Kai Schlegelmilch made substantial contributions to the editing with some help from David Gee. Martin Büchele and Keimpe Wieringa provided support to the development of the project.

The report was reviewed by an Advisory Group consisting of Frank Convery (EEA Scientific Committee), Peter Dröll (EC- DGXI), Pedro Henriques (EC -DGIII), François Lévèque (CERNA, Ecole des Mines, Paris), Nicholas Ashford (Massachussets Institute of Technology, Boston), Peter Wiederkehr (OECD), Jan Willem Biekart (Netherlands Society, for Nature and Environment), Jan van den Broek (VNONCW/ UNICE), Mara Caboara (CEFIC/UNICE), and representatives of the Secretariat of the Committee on Environment, Public Health and Consumer Protection of the European Parliament. Philip Mellen and Daniel Puig (COWI Consulting) provided a valuable contribution to the discussion and selection of the case studies.

Additional technical consultation was undertaken with the EEA National Focal Point EIONET Group.

I would like to thank the EEA team and the other contributors for their efforts in producing this report.

Domingo Jiménez-Beltrán
Executive Director

Main Conclusions

1. Since the late 1980s, there has been increased use of Environmental Agreements (EAs) as policy tools in EU Member States, especially in industry and waste management. This approach to environmental management mirrors current trends of consensus-building and participatory processes in public policy and complements the traditional command-and-control approach. EAs reflect both the development of shared responsibilities and the integration of environmental considerations into company management structures.

2. Some concerns have been expressed, however, about the rise of EAs as a new policy instrument, particularly by parties that are not involved in their negotiation, such as the European Parliament and NGOs. If EAs are to be used more widely, it is necessary to improve their credibility and accountability. This calls for the setting of clear targets, for greater transparency during the negotiation, implementation and evaluation of EAs and for the introduction of reliable monitoring and reporting arrangements. In the European Commission’s Communication on Environmental Agreements, guidelines were presented for the use of EAs, aimed at improving both their credibility among the various stakeholders and their effectiveness. These guidelines include: the setting of quantified objectives, the monitoring of results, periodic reporting, the verification of results, and provisions for access to information and for the accession of third parties.

3. Compared to other policy instruments, e.g. taxes, few evaluations of EAs, whether ex-ante or ex-post, have been made and there is little literature available on their use. The report aims to help fill this gap by trying to assess the environmental effectiveness of six different EAs. These particular EAs were selected in order to cover various countries, sectors and themes, and, being recent, they include more complete monitoring and reporting requirements.

4. In most cases it was not possible to make a quantitative assessment of the environmental effectiveness of the agreements due to the lack of reliable monitoring data and consistent reporting, which prevented comparisons being made between the current situation and what would most likely have happened if no agreement had been concluded (the 'business-as-usual' situation). Some wider benefits were found, however, including environmental improvements on the situation prior to the agreement and the encouragement of environmental management in business.

5. EAs appear to be of most use as complements to other policy measures, such as regulations and fiscal instruments, where they can make a valuable contribution, especially in terms of their ability to raise awareness, create consensus and to provide a forum for information-sharing among different parties. EAs also seem to be useful in improving environmental management in industry and business.

Key Points

Policy Context

The European Union's Fifth Environmental Action Programme (5EAP) is seen as part of the longer-term re-focusing of environmental policy in EU Member States and is aimed at integrating EU policy-making into a sustainable framework for economic and social development. Towards this end, the 5EAP highlighted the need for a broadening of the range of policy instruments to complement the regulations, including the increased use of economic and market-based instruments and those based on "shared responsibility", such as awareness raising measures, financial support mechanisms and voluntary environmental policy instruments.

On 9 December 1996, following the proposal from the Commission for a review of the 5EAP, the "Environment" Council reached a political agreement in view of the adoption of a common position on Article 3 relating to broadening the range of instruments. In relation to developing market-based instruments (including economic and financial instruments) at an appropriate level, it was decided that particular attention should be given to the use of Environmental Agreements, which pursue environmental objectives while respecting competition rules.

In this context and with a view to ensuring the proper implementation of Community environmental legislation, the European Commission recently produced the above-mentioned Communication on the use of Environmental Agreements, which concludes that:

"Environmental Agreements with industry have an important role to play within the mix of policy instruments sought by the Commission …. They can offer cost-effective solutions when implementing environmental objectives and can bring about effective measures in advance of and in supplement to legislation. In order to be effective, it is essential, however, to ensure their transparency and reliability."

Purpose of the Study

Aims and Objectives

The present report was produced following a request from the European Parliament for an overview report on ‘Voluntary Agreements’. It is part of the work currently being undertaken by the EEA on reviewing and evaluating environmental policy instruments, in conformity with Council Regulation (EEC) No 1210/90, which established the Agency, and sets out that one of the tasks of the Agency shall be:

"to provide the Community and the Member States with the objective information necessary for framing and implementing sound and effective environmental policies; "

(Art. 2 (ii))

Given that Environmental Agreements (EAs) are an emerging force in the policy arena, the EEA is interested in assessing how effective such approaches are. This task is, however, greatly hampered by the lack of empirical data, studies and literature available.

The present study builds on the survey of Environmental Agreements undertaken by the European Commission and focuses on their environmental effectiveness. Other important issues such as competition, legal status and involvement of third parties are outside the scope of this study. The aim of the study is to inform policy makers and the general public on the use of Environmental Agreements in the countries of the European Union by providing:

• a brief review of current application of EAs in Member States
• an overview of the current debate and positions of the various stakeholders
• a first assessment of the environmental effectiveness of a selected number of EAs
• recommendations on further work required in the area of EAs.

Definition of Environmental Agreements

There is no standard definition of ‘environmental agreements‘, which are also known as ‘voluntary agreements’, ‘negotiated agreements’ or ‘covenants’. The term covers different types of agreements, ranging from voluntary ‘codes of conduct’ to legally binding agreements. For the purposes of this study, Environmental Agreements (EAs) are defined as covering only those commitments undertaken by firms and sector associations, which are the result of negotiations with public authorities and/or explicitly recognised by the authorities. Other voluntary approaches, such as codes of conduct, fall outside the scope of the study.

Approach

The present assessment is based on a review of the available literature (limited as it is), the inventory of EAs prepared for the Commission and the detailed investigation of six EAs. These EAs were selected to demonstrate the range of national and economic contexts and different approaches and, more particularly, to include both 'target-setting EAs' and 'implementation EAs'. The former agreements occur where negotiation determined the environmental policy targets, such as in France and Germany; the latter are found where negotiation was directed to implementing policy targets determined outside the EA, as is the case in Denmark, the Netherlands, Portugal and Sweden.

Particular attention was given to establishing a baseline against which to measure environmental effectiveness. The difficulties in establishing this baseline are well known and affect all policy evaluations.

Main Findings

The use of EAs

By 1996 more than 300 EAs had been concluded at the national level in the EU. This figure is deceptively low because it excludes EAs that have been concluded at the sub-national level. A few agreements have been in place for over two decades but it was only in the late 1980s that there was a noticeable increase in their use; since then, the number of EAs concluded per year has increased steadily over time. National trends show a less uniform picture.

All EU countries are reported to have EAs. The Netherlands leads the way in the development of EAs with over 100 in place and the Netherlands and Germany account for approximately two thirds of the EAs surveyed. There are a higher number of EAs in some smaller countries, such as Austria, Belgium, Denmark and Sweden, than in the larger countries of France, Italy and the UK. This may indicate that EAs are used more often in countries where environmental policies have matured and where there is a tradition of decentralisation, consensus-building and negotiation in decision-making processes.

Other non-EU countries, such as the USA, Japan, Canada and New Zealand, have also applied agreements as environmental policy tools.

In some countries which are more advanced in the use of EAs, such as the Netherlands, agreements have been concluded in almost all the environmental policy areas identified under the 5EAP. Furthermore, in a large number of the countries where EAs are evident, a range of 5EAP themes have been covered. All countries with EAs have agreements operating in the waste management sector. Many of the EAs implemented in the Member States to date are found in those sectors where most pollution occurs - such as metals and metal finishing, chemicals, energy, transport - with more than 20 % of the total number of EAs operational in the chemical sector.

Many of the agreements surveyed in the EU do not include monitoring and reporting requirements, which poses the following problems : a) it damages the credibility of the instruments; b) it denies their accountability; and c) it makes it extremely difficult to conduct ex-post evaluations of their effectiveness. However, the most recent agreements incorporate some monitoring and reporting requirements.

Environmental effectiveness

It is difficult to draw general conclusions about the environmental effectiveness of EAs because of the small number of case studies assessed in this report. The variations between EAs in terms of their objectives and approaches, as well as variations in the cultural, political, economic and environmental contexts in which they are negotiated and function also make it difficult to generalise on the effectiveness of EAs.

Ideally, the environmental effectiveness of a policy instrument should be assessed against an alternative policy scenario. Such assessments are normally speculative as there is usually no data to back up these alternative policy scenarios. A second option is to use a 'business-as-usual' scenario against which to compare the current situation, whereby one assumes, having determined the changes that would have happened in the absence of the instrument, that any additional changes are attributable to the EA. If this is not possible due to lack of data, then all that can be done is to compare the situation with that prior to the agreement, but without being able to attribute any environmental improvement to the EA.

Problems encountered in trying to assess the environmental effectiveness of the six EAs in question relate to:

• the general absence of a quantitative baseline ('business-as-usual' scenario) against which to assess effectiveness of the EA
• a lack of quantitative data on the reference situation, prior to the agreement
• a lack of quantitative data on the current situation.

The definition of the 'business-as-usual' scenario is essential for any ex-post evaluation of the instrument’s effectiveness. This problem, coupled with the related difficulty of disentangling the effect of the different instruments of a policy package, is also faced when trying to evaluate other policy instruments such as regulations or taxes. However, evaluating EAs is made more complicated since: they are relatively new in the policy arena and relevant theoretical and empirical analysis is scarce; their targets are often expressed in terms of percentage reductions of unspecified quantities (e.g. emissions levels when the agreement was established); and, unlike other instruments (e.g. taxes), they have not hitherto been the object of evaluations (whether ex-ante or ex-post).

Main findings on the case studies

The following table summarises the assessment of the environmental effectiveness of the six EAs. The main findings are that:

• generally, there have been environmental improvements since the EAs were signed, although these cannot be conclusively attributed to the EAs. However, since they were part of a policy package one can expect that EAs played some part in this improvement;
• due to the lack of reliable and consistent data, conclusions on the environmental effectiveness (assessment against the 'business-as-usual' scenario) of the EA cannot be drawn; only in the case of the Netherlands was data partially available indicating some environmental effectiveness;
• technical change (the adoption of environmental management measures at corporate level) occurred as a result of the agreement, in the case of France, the Netherlands, Portugal and possibly Denmark;
• in the case of the Netherlands, Portugal, Sweden and Denmark, EAs have been applied as a supporting measure, following or complementing other instruments (regulations);
• strong incentives (subsidies, or the threat of regulation, taxes or penalties) accompanied the negotiation of the six EAs surveyed.

Table 1: SUMMARY CONCLUSIONS ON THE ENVIRONMENTAL EFFECTIVENESS OF ENVIRONMENTAL AGREEMENTS

+/++/+++ = slightly positive/positive/ very positive
0 = absent or negligible
? = uncertain outcome (no data available, unknown effect)

Concluding Observations

The study provides an overview of the current use of EAs and the debate surrounding them and investigates a small number of EAs in some detail. Bearing in mind the wide variation in the nature and focus of EAs and the wide range of views on their effectiveness, the following observations could be made:

• 'implementation EAs' can be useful and complementary environmental policy tools, as long as they follow the type of guidelines set out in the EC Communication;
• 'target-setting EAs' are much more difficult to assess in terms of their role and performance and raise wider questions concerning the role of Government and other stakeholders in the formulation of environmental policy;
• EAs which are currently in operation provide a testing ground for the development of transferable models and for establishing good practice; however, replication needs to be driven by the interests and objectives of the parties concerned in a given situation;
• the independent verification of EAs raises political and practical questions which need to be addressed if the credibility and accountability of EAs is to be improved.

The case-study research also indicates that EAs have the potential to contribute to the achievement of policy goals. In particular:

• EAs provide a basis for environmental policy where regulatory or fiscal instruments would be difficult to administer; 'implementation EAs' essentially complement regulatory policy and rely on regulatory (and often fiscal) sanctions or the threat of alternative instruments as a backup;
• EAs provide a framework for pro-active environmental management, for awareness-raising on environmental issues and for testing new policy responses;
• EAs can facilitate flexible responses and the identification of new mechanisms by improving information flows and promoting awareness of new technical and management practices;
• evidence suggests that EAs may contribute to the overall improvement of the environment; if more stringent targets are necessary, however, EAs will have to be used as part of a broader package of policy instruments.

Future implementation of EAs should take into account key requirements for the improvement of their effectiveness, most importantly the establishment of reliable and verifiable monitoring and reporting mechanisms and the setting of clear targets.

The table below illustrates some of the requirements for the improved use of EAs.

• pro-active industries or businesses

• small number of partners or high organisation level of signatory partners

• production of goods (i.e. industry)

• sectors which have matured and face limited competition (i.e. where there are few opportunities for 'free riders')

• environmental problems of limited scale (national and regional environmental problems)

• limited number of sources of pollution

• long-term targets (early signal).

• clear targets are set prior to the agreement

• the agreement specifies the baseline against which improvements will be measured

• the agreement specifies reliable and clear monitoring and reporting mechanisms

• technical solutions are available in order to reach the agreed target

• the costs of complying with the EA are limited and are relatively similar for all members of the target group

• third parties are involved in the design and application of EAs.

Recommendations for further work

Listed below are a number of suggestions for areas for further work related, firstly, to the continued research into the operation of EAs and, secondly, to the assessment of their impact:

• assessment of the synergies and counteractions between the operation of EAs and other policy instruments;
• empirical research into the relative effects of EAs and alternative policy instruments on the behaviour of individual companies, including their impacts on market structure and competition issues;
• appraisal of the role and motives of governments in EAs which are used to negotiate targets;
• investigation into the suitability of targets set through EAs, including comparisons with alternative ways of target-setting by the government;
• independent empirical research into the evolution of 'target-setting EAs', regarding the respective roles of those directly involved in their negotiation and of those effectively excluded from this process;
• investigation into the most appropriate operational structure for EAs, according to their specific application (e.g. in relation to EAs at different geographic levels);
• examination of the effect of the EA process (incl. information exchange) on technical change, innovation and the integration of environmentalmanagement into sector and corporate activity;
• investigation into why similar activities (e.g. information exchange) had not been launched prior to the EA, including a 'barrier analysis'; or investigation into the best practices of such activities, where they did occur in advance of the EA, or where no EA was applied at all;
• consideration of the methods and resources needed for EAs to encourage local public participation and dialogue;
• review of the links between the operations of different environmental management systems and the reporting and information requirements under the EA;
• further independent research into the environmental (and cost-) effectiveness of EAs and their ability to promote sustainable development (by encouraging systemic behavioural and technological change), in comparison with other policy instruments;
• development of guidelines for standardising EA monitoring and reporting requirements in order to improve the data available and allow for comparable and reliable environmental assessment.