The Role Of Regulation

Environmental regulation has traditionally played a major role in the policy framework which governments use to moderate industrial and consumer behaviour. Examples of environmental regulation include setting limits on emissions from industrial chimneys and pipelines; and banning the use of hazardous materials or their disposal in particular places. Because they are cast in terms of bans and limits, regulations are often seen as a rigid and sometimes inefficient way of achieving environmental protection. Generally speaking, regulation has gone hand in hand with the limited end-of-pipe approach to environmental protection.

But there are a number of other, more adventurous options open to governments using the regulatory framework. For instance, appliance and process efficiency standards can encourage technological improvement. Process standards can be related to bench-marking procedures, through which technology is continuously updated to improve environmental performance. Product standards could include requirements relating to modular design, component replacement and long life.

Flexibility can be built into these different kinds of regulation. The timescales over which they are to be achieved can be variable according to particular circumstances. And standards can deliberately be set—in advance—beyond current best practice, in order to encourage innovation.

There are other ways of encouraging and stimulating change without imposing inefficiencies on the system. Regulatory frameworks can be formulated which relate to operational procedures. In the United States, for example, the earliest formulation of toxics use reduction legislation required companies to audit their own facilities and produce their own targets for reduction. Another example from the US is provided by the Toxics Release Inventory (TRI). TRI legislation requires all companies over a certain size to provide annual data on emissions of a range of toxic and potentially toxic substances. Since the introduction of this legislation, many US companies have made increased commitments to reductions of TRI-listed emissions.

The formulation of product, process and material liabilities is another way of encouraging change in a flexible fashion through the regulatory framework. This has already been recognised, for instance by the EU's most recent environmental action plan. Recognising that 'it will provide a very clear economic incentive for management and control of risk, pollution and waste', the Community intends to establish an integrated approach to environmental liability, based in civil law. Traditionally, civil liability has been based on the need to prove fault, with a presumption in favour of the defendant. Increasingly, there is a demand for environmental liability to be based on a strict liability—independent of fault. Equally important, however, is the scope of liability legislation. Traditionally, environmental liability has applied mainly to damages caused as a result of industrial releases. There is now a rising demand for product liabilities. Usually these liabilities relate to defective products which either endanger health or do not perform as specified. Clearly, though, product liabilities could also relate to the environmental damage which products might cause, either during or after use. This kind of liability structure could be an extremely effective way of implementing the shift towards materials leasing. Users might lease material products from suppliers under certain conditions. But the suppliers would retain the ultimate responsibility for any materials supplied right through to the end of the product life.

In summary, then, regulations need not be seen as a set of draconian limitations on industrial activities, leading to inefficiency and loss of competitiveness. Rather there are a number of opportunities for creative intervention within a regulatory framework, through which governments can encourage and promote dematerialisation. In particular, the development of new concepts of liability could transform the structure of the market economy by shifting the basis of profitability towards the provision of services.

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