Legislating for air pollution in the EU – Lessons learned

Peter Gammeltoft

Clean Air and Transport, DG Environment

Structure

1. Criteria and constraints

2. “Addressees” and conditions for change

3. Environmental Targets and Quality Regulation – examples

4. Performance Standards for Transportation

5. Industrial Performance Standards

6. Conclusions

1. Criteria and Constraints

Choice of instruments: Criteria• Objective: Environmental Quality, Cap on Pressure,

Environmental Performance, Other• Effectiveness in delivering objective• Technical feasibility• Cost-Effectiveness• Equitability and Proportionality• Feasibility for “final addressee”• Enforceability• Monitorability• Potential for support from key stakeholders

Political and Legal Constraints

• Subsidiarity: EU regulation only where EU measures achieve objectives better than national measures

• EU tax measures subject to unanimity among Member States

• Measures need to be explained to addressee sectors, particular effort needed for those dominated by SMEs with deeply rooted traditions

2. “Addressees” and conditions for change

Final “addressees” and beneficiaries for obligations

• Obligations for public authorities:administrative prescriptions, environmental targets and quality objectives

• Obligations for economic actors: environmental performance specifications and market based instruments

• Beneficiaries: “The public” and the environment

Economic actors – important parameters

• “Size” distribution

• Ownership structure

• Competition in sector

• Financing prospects

• Technical competence

• Readiness for change

• Number of actors in sector

All Sectors

• Change has to be financially and technically feasible

• Where necessary, accompanying measures may be implemented to facilitate change

• Ownership structures and lack of financial capabilities and technical competence may prove to be serious obstacles

All sectors (cont’d)

• Where many entities, monitoring and enforcement becomes an issue except where strict controls of inputs or outputs are possible

• Where measures are not technically feasible or where there is no competition, market based instruments are unlikely to lead to significant short term change in environmental impacts unless demand for output is very elastic. Conversely, they may have significant long term benefits.

• Commission DG ENTR study shows that environmental controls did not place European industry at a competitive disadvantage and that cost are often counterbalanced by concurrent improvements in technology

Conventional wisdom or popular prejudices ?

• Regulatory Instruments– Inflexible– Cost-inefficient– Enforceable

– Impacts offset by growth

– Level playing field

• Market Based Instruments– Flexible– Cost-efficient– Self-enforcing through

market– Allow for economic

growth without growth in pollution

– Reward innovation

3. Environmental Targets and Quality Regulation

Capping National Emissions• National Emission Ceilings EU Directive setting

national ceilings for 2010 for emissions of 4 pollutants – compatible with UNECE protocols

• Ceilings attributed on the basis of cost-effectiveness in achieving agreed targets for transboundary pollution (Ozone and acidification)

• Localisation of emissions in EU is important for efficiency of emission reduction measures

• Flexibility for Member States on how to achieve the reductions through regulation or market instruments or otherwise

• Compliance forecast: Problems with achieving required nitrogen oxide levels due to lack of national measures and technical dysfunctions (cycle beating in vehicles)

Air Quality Objectives

• EU Directive obliges Member States to monitor air quality, inform the public and to establish plans and programmes where necessary

• Effort is targeted in areas where it is needed• Compliance with standards in most areas• Where compliance problems, these are due to

– Lack of national or regional “bridging” measures between EU and local level

– Lack of compliance with other EU legislation– Technical dysfunctions in environmental performance

legislation, e.g. for vehicles (“cycle beating”)

4. Transportation Performance Standards

Vehicle emissions• Automobiles: Sector consists of a handful of large

and technically competent companies• Competition between manufacturers• Sector wants « level playing field » and little or no

flexibility and no « trading » between manufacturers

• Very technically oriented EU Directive emission standards based on type approval tests

• Increasing problems with mismatch between real emissions and test emissions (cycle beating, chip tuning)

Other Engine emissions (off-road)

• Sector as for vehicles, but with a large supplement of SMEs with limited market share

• Sector (SME segment) does not want « averaging and banking », Commission proposal to this effect was rejected by Member States and European Parliament

• Potentially same issues as for vehicles

Automotive Fuel Quality

• Sector dominated by a handful of large, technically competent companies

• Competition ?• « One size fits all » type standards in EU Directive

to match all engines and achieve required engine emission levels and well functioning vehicles

• Climate change has provided a wake-up call for the business and is changing attitudes

Automotive Fuel Taxation

• Long standing tradition of fuel taxation, essentially for revenue purposes

• Impact on fuel consumption levels (fuel demand and vehicle levels)

• Minimum taxation levels required by EU Directive, Member States may increase levels

• Tendency to tax diesel less than petrol

Air Pollution from Ships• Sector dominated by large ship-owners, but there

is a large SME segment• Localisation of emissions matter for

environmental effect and reductions are very cost-effective

• Much competition, sometimes to the detriment of safety and environment

• International regulation – IMO – makes adoption of rules and their enforcement and monitoring extremely difficult

• EU Directive under negotiation setting standards for sulphur content of marine fuels

5. Industrial Performance Standards

Large industrial installations• EU Directive on Integrated Pollution

Prevention and Control (IPPC) harmonises procedures in EU Member States for environmental permitting of large polluting enterprises

• All forms of pollution

• Alignment of effort across the EU ?

• Alignment with need for effective solutions to regional and European issues ?

Power Generation and other Large Combustion Plant

• Sector dominated by a handful of large producers• Moving from a monopoly to a competitive

situation (market liberalisation)• Impacts on environment at regional and European

scale• Emission standards EU legislative regime in place• For older plants flexibility in the form of

possibility of a capped equivalent bubble covering all plants with Member States deciding how to distribute effort, including possibility for trading if Member States decide so

Waste incineration

• Specialised industry, several hundred incinerators across Europe

• Competition• Very strict technical performance standards

required by EU Directive• Justified by the possibility of emission of highly

toxic pollutants• Little or no flexibility due to health concerns

Industrial Solvents Use

• A mixed group of industries, many units, large and small

• EU Directive regulating more than 20 categories of industrial installations above certain thresholds

• Detailed technical performance standards for each installation by type

• Flexibility through possibility for Member States to create capped equivalent bubbles for all installations concerned

VOC emissions from petrol storage and distribution

• Essentially large Oil companies with some supplement of smaller independent petrol distributors

• Technically competent and capable of investment, except for small distributors

• Simple technical measures required by EU Directive to reduce emissions of petrol vapour

• Little flexibility

Solvents from paints

• A few very large producers and in some parts of the Community a large SME segment with important market shares

• EU Directive setting maximum solvent content for different kinds of solvent and water based decorative paint products

• SME segment has difficulties in readjusting production due to lack of access to finance and technology as well as lack of know-how

6. Conclusions

What did we learn ?• Environmental controls did not place European industries

at a competitive disadvantage• Not all requirements have yet been implemented and there

will therefore be a need for continued ex-post assessments• Environmental measures need to well prepared and

feasible, in technical and economic terms, and they need to be equitable and proportionate

• They need to be enforceable and monitorable – we should avoid approaches that will require excessive monitoring or enforcement effort

• There is no silver bullet – neither traditional regulatory instruments nor market based instruments provide a guarantee for efficiency and cost-effectiveness – both can prove to be straight-jackets under the wrong boundary conditions

What did we learn (2) ?

• When considering new measures, both regulatory and market based measures need to be considered and assessed

• There needs to be more cross-fertilisation between traditional regulatory approaches and market based instruments to reduce efficiency losses inherent in both types of instrument under real conditions

• Member States need to profit from the flexibility in the EU framework to go further than EU legislation to reach agreed targets and objectives

What did we learn (3) ?

• EU legislation so far mainly addressed large scale industries, does the EU need to go further and regulate in the SME segment ?

• Environment measures directed at SMEs are inhomogeneously distributed across Member States and there may be significant scope for further efficient and cost-effective measures in this segment

• Our analysis seems to indicate e.g. that measures to bring down agricultural emissions are now highly desirable

What did we learn (4) ?

• When targeting SMEs we need to consider whether special measures are necessary to facilitate the required changes – we need to analyse barriers to progress and how to overcome them

• WE STILL HAVE SCOPE FOR DOING BETTER !!!