UNEPGEO-2000 Next: Industry and new technologies -->
Previous: Laws and institutions 
Contents 
Chapter Three: Policy Responses - Europe and Central Asia

Economic instruments

Direct instruments

The aim of direct economic measures in policy making is to encourage responsible use of natural resources, avoid pollution and waste, and make prices include environmental costs. The application of market-based instruments that affect costs directly is encouraged by the 5th EAP but is still rare at the European Union level. Progress in increasing civil liability has been slow. A draft Directive concerning waste has been stalled, while a more general White Book on civil liability is still forthcoming. Energy or carbon taxes which may help decrease energy or carbon use have been discussed for several years without much progress. In some countries, eco-taxes are being added to fuel and other energy products but their effects can be offset by increasing energy consumption if adequate policy responses are not in place. There is a reluctance to apply the tax instrument in other areas. An additional complicating factor is the general need for unanimity in the area of taxation. However, tax instruments appear to be effective in, for example, Belgium, Denmark, the Netherlands and Sweden.

Fees and fines are applied across the region, levied on polluters and users of the environment and through the stricter implementation of standards and regulations, primarily targeting the private sector. In general, they succeed when they address specific environmental issues and do not threaten the competitiveness of key sectors.

The European Union does not impose fees or fines directly in the environment area but they are used in some member states. In spite of the positive approach in the 5th EAP, the European Union is more a barrier than a help in this area. It is extremely difficult for member states to focus national measures on products since the European Union is adamant in defending the open market. If states do apply discouraging economic instruments, their scope is usually limited because stringent national measures would distort international competitiveness. In 1997, the European Commission formulated its view in Environment taxes and charges in the single market (EC 1997).

The implementation of fees and fines in Central and Eastern Europe and in Central Asian countries is limited by weak enforcement, large differences in levels of modernization and profitability between enterprises, and the rapidly growing number of small and medium-sized enterprises. In Hungary and Latvia, product charges are being imposed on manufacturers of goods, such as packaging or batteries, which can be recycled or alternately disposed of, encouraging private investment. The striking differences between imposed charges and fines and the amount actually paid suggest an inability and in some cases an unwillingness on the part of enterprises to pay, a lack of adequate sanctions against non-payment, and a lack of institutional capacity to collect fees (REC 1998). Furthermore, inflation - relatively high until 1995 - had the effect of eroding the value of fixed charge and tax levels (REC 1994a).

Indirect instruments

Several indirect initiatives combine elements of awareness-raising with improving market position through better environmental performance, such as the Eco-Management and Audit Scheme (EMAS) and the (later) ISO 14 000 standard. Participation is voluntary although both have the status of formal legislation. Participating industries undertake to install environmental management systems and produce environmental performance reports that must be verified by a certified environmental auditor. If standards are met, the industry can market an approved label in its advertisements and other promotion schemes.

The European Union's eco-label (92/880/EEC) is another instrument that can be awarded to products that meet certain European Union standards, in anticipation that consumers will prefer those products. Unfortunately, there is disagreement about the form the label should take and several member states have maintained or threatened to develop their own labels.

In some countries, businesses have negotiated voluntary agreements with governments to meet certain environmental targets within a given time span. In the Netherlands, such agreements, or 'covenants', have been widely used and they are being given increasing attention in France, Germany and other countries (EEA 1997). Because the application of this instrument may interfere with competition requirements and anti-cartel legislation and with the duty of member states to implement European Union Directives by means of formal, national legislation, the European Commission has entered the debate by publishing basic rules in a Communication on Environmental Agreements (97/C321/02).

Fair market conditions and competition are also promoted by the strict implementation and enforcement of legislation. As a rule, this is the task of the individual member states. However, the Commission has also played an active role as 'prosecutor', taking member states to the European Court for non-compliance. Until recently, these legal actions bore no financial consequences. However, on the basis of Article 171 of the Maastricht Treaty, penalties for non-conformity with European Union environmental legislation may be imposed.

During the 1992 Dutch presidency of the European Union, the Environment Inspectorate of the Netherlands ordered a report on the state of enforcement in the European Union (ERM 1991) and invited their European Union colleagues to discuss it. Since then there have been regular meetings between the national enforcement agencies and the European Commission.


UNEPGEO-2000 Next: Industry and new technologies -->
Previous: Laws and institutions 
Contents