The meaning of BATNEEC: interpreting excessive costs in UK industrial pollution regulation

Journal of Environmental Policy & PlanningJ. Environ. Policy Plann. 4: 23–40 (2002)DOI: 10.1002/jepp.102

The Meaning of BATNEEC: Interpreting ExcessiveCosts in UK Industrial Pollution RegulationSTEVE SORRELL*SPRU, University of Sussex, Brighton, UK

ABSTRACT The paper examines how the concept of ‘excessive costs’ has been interpreted in the implementation ofindustrial pollution control in the UK. Since 1984, industrial air pollution regulation in the EU has been guided by theframework concept of Best Available Technology Not Entailing Excessive Costs (BATNEEC). With the introduction ofthe Integrated Pollution Prevention and Control (IPPC) Directive in 1996, this has been replaced by the concept of BestAvailable Techniques (BAT). Despite the absence of the NEEC qualification, IPPC BAT includes excessive costs in itsdefinition of ‘available’. Both concepts require interpretation and both devolve potentially controversial decisions to the levelof the individual site regulator. A central issue in interpreting ‘excessive costs’ is the relative importance of environmentalcost–benefit analysis versus the ability of a sector to ‘afford’ environmental improvements. Also important is how suchconcepts can be operationalized by regulators who lack resources and depend upon industry for information. The paperprovides a historical account of how these issues have been dealt with in the UK and argues that the key difficulties are farfrom being resolved. The paper concludes by assessing the implications for the future implementation of IPPC. Copyright 2002 John Wiley & Sons, Ltd.

Key words: industrial pollution control; implementation; integrated pollution control (IPC); Integrated Pollution Preventionand Control (IPPC); Best Available Technology Not Entailing Excessive Costs (BATNEEC)

Introduction

Since 1984, industrial air pollution regulation inthe EU has been guided by the framework con-cept of Best Available Technology Not EntailingExcessive Costs (BATNEEC). This was intro-duced by the 1984 Air Framework Directive(AFD) (Council Directive 84/360/EEC, OJ no.L 188, 16 July 1984, pp. 20–25) and applies toair pollution from large industrial installations. In1996, the AFD was replaced by the IntegratedPollution Prevention and Control (IPPC) Direc-tive (Council Directive 96/61/EC, OJ no. L 257,10 October 1996, pp. 26–40), which applies theframework concept of Best Available Techniques(BAT) to the integrated control of pollution to allthree media. Despite the absence of the NEECqualification, the concept of avoiding excessive

∗ Correspondence to: Environment Group, SPRU, University ofSussex, Falmer, Brighton, East Sussex, BNB 9RF, UK.Tel: +44(0)1273 877067; fax: +44(0)1273 685865;e-mail: [email protected]

costs is effectively absorbed in the definition of‘available’ in BAT (Skea & Smith, 1997).

Framework concepts such as BATNEEC requireinterpretation at the national, sector and site lev-els. Member states may take different approachesto the interpretation of BATNEEC as a resultof their varying regulatory traditions. Over theyears, the UK government and regulatory author-ities have paid particular attention to the meaningof ‘excessive costs’ in BATNEEC, and the intro-duction of IPPC has not significantly changed theissues involved. The UK debate on this topic isrelevant for the implementation of IPPC in allmember states as well as for the developmentof sectoral guidance on BAT at the EU level(the BAT Reference Documents, or BREFs).1 Thispaper, therefore, provides a historical accountof the interpretation of ‘excessive costs’ in theUK and examines the respective roles of envi-ronmental cost–benefit analysis and assessmentsof ‘sectoral affordability’. The implications of thisfor the future implementation of IPPC are thenassessed.

Copyright 2002 John Wiley & Sons, Ltd.Received 26 February 2001

Revised 3 December 2001Accepted 17 December 2001

24 S. Sorrell

The integrated pollution controlregime

The requirements of the AFD were transposedinto UK law by the Environmental ProtectionAct 1990 (c. 43) (EPA90), which introduced anew system of integrated pollution control (IPC)to be administered by Her Majesty’s Inspectorateof Pollution (HMIP) (Jordan, 1993). IPC appliesto the larger industrial sites, while local author-ities are responsible for regulating air pollutionfrom smaller industrial sites—with both regimesapplying the concept of BATNEEC. In 1996,HMIP was combined with the National RiversAuthority and the Waste Regulation Authoritiesto form the Environment Agency for Englandand Wales. In practice, the interpretation of BAT-NEEC by local authorities in the administration ofLocal Authority Air Pollution Control (LAAPC)has been very different from the interpretationby the Environment Agency under IPC—withthe former using the sector Guidance Notes in amuch more prescriptive manner (Flynn & Baylis,1996). In this paper, the discussion is confined toBATNEEC under IPC.

IPC is a cross-media approach to industrial pol-lution control, whereby releases to air, water andland are regulated together. IPC procedures aremore formal and transparent than the regulationsthat IPC replaced, and include a statutory require-ment for public information registers. Processesregulated under IPC must obtain an authorization,which contains legally binding conditions to:

• ensure that BATNEEC is used to prevent therelease of prescribed substances or, where this isnot practicable, to reduce releases to a minimumand render harmless any releases that do takeplace;

• where the process is likely to involve the releaseof substances into more than one medium,ensure that BATNEEC is used to minimizepollution to the environment as a whole, havingregard to the Best Practicable EnvironmentalOption (BPEO); and

• ensure compliance with obligations underEU directives and international law, togetherwith environmental quality standards and therequirements of any national plans establishing

limits or quotas for environmental releases(DoE, 1997).

Authorizations must therefore reflect the require-ments of two framework concepts: BATNEECand BPEO. The second only applies in thoseinstances where there are multimedia environ-mental impacts and where trade-offs are required.While BPEO embodies the integrated approachto pollution regulation, it is BATNEEC that hasplayed the dominant role in practice.

Authorizations contain release limits, moni-toring requirements and (for existing plants) atimetabled improvement programme. The last isa central feature of IPC and may either includeemission limits to be achieved by a target date inthe future, or a requirement for feasibility stud-ies. Authorization requirements are negotiatedbetween the regulator and the regulated com-pany at a site level, but may be guided by thenon-prescriptive standards in the relevant sectorGuidance Note.

What is BATNEEC?

The effectiveness of IPC hinges on the interpre-tation of BATNEEC. Like comparable conceptssuch as Reasonably Achievable Control Tech-nology (RACT),2 BATNEEC requires that tech-nological and economic feasibility be taken intoaccount when making regulatory decisions. Suchframework concepts can be appropriate where theregulatory target is complex, but they also devolvepotentially controversial decisions to the level ofthe individual site regulator (the ‘inspector’ in theUK).

BATNEEC can be viewed as a convergence oftwo European regulatory traditions:

• the emphasis on technical feasibility and ‘stateof the art’ technology in German pollutionregulation (BAT); and

• the emphasis on economic feasibility andpragmatic, case-by-case decision-making inUK regulation (NEEC) (Boehmer-Christiansen& Skea, 1991).

The UK tradition included considerations ofaffordability or excessive cost through its reliance

Copyright 2002 John Wiley & Sons, Ltd. J. Environ. Policy Plann. 4: 23–40 (2002)

The Meaning of BATNEEC 25

on site-level negotiation and decision-making(Vogel, 1986; Smith, 1997). Regulators weretypically chemical engineers, sharing a similarbackground to industrial operators and ‘speakingthe same language’. Regulation was based onmutual trust and respect, and flexibility wasachieved through negotiation. The UK succeededin retaining this flexibility in the AFD by insistingthat the German requirement for BAT be qualifiedby the addition of NEEC.

In the early stages of IPC, BATNEEC wasan unfamiliar concept to both regulators andregulated. While Best Practicable Means (BPM)provided a precedent, BATNEEC appeared torequire more formal and transparent justificationof regulatory decisions, based on economicconcepts and information. As a consequence,the meaning of BATNEEC became a focus ofdebate. Ten years later, the tensions inherent inthe concept remain unresolved.

The debate over the meaning of BATNEEC hashinged around two key issues:

1. The meaning of excessive cost, and the relativeimportance of:• what gains in environmental quality can

be achieved compared to the abatementcosts—the environmental cost–benefit approach;or

• what an average company within a sector canafford—the sectoral affordability approach.

2. The process of assessing excessive cost, and theextent to which this should use:• economic information and formal analytical

techniques; or• expert judgement and negotiation with

individual operators.

The interpretation of these issues may differbetween:

• the development of new plant standards ver-sus the upgrading requirements for existingplants; and

• the development of IPC Guidance Notesversus the determination of individual siteauthorizations.

The following sections summarize the evolu-tion of this debate in the UK, including how

BATNEEC has been characterized in variousregulatory documents.

BATNEEC in official regulatoryguidance

BATNEEC in the AFD

The BATNEEC concept appears in three Articlesof the AFD. There is a general requirement inArticle 4, which states that an authorization mayonly be issued when the competent authority issatisfied that ‘all preventative measures againstair pollution have been taken, including theapplication of the best available technology,provided that the application of such measuresdoes not entail excessive costs’. This is amplifiedin Article 12, which states that:

The Member State shall follow development asregards the best available technology and the envi-ronmental situation. In the light of this examina-tion they shall, if necessary, impose appropriateconditions . . . on the basis of developments asregards BAT, and of the desirability of avoid-ing excessive costs for the plants in question,having regard in particular to the economic sit-uation of the plants belonging to the categoryconcerned.

The last sentence qualifies the Article 4 text witha somewhat ambiguous statement. For example,does ‘category’ mean the whole sector or specifictypes of plant within the sector? What does ‘haveregard to’ mean? The sentence is difficult tointerpret and bears the hallmarks of a fudgedcompromise. As such, it is typical of manyinternational environmental agreements where anattempt is made to find a form of words that isacceptable to all parties.

Articles 4 and 12 apply equally to new andexisting plants. Article 13 addresses the issue ofupgrading existing plants and states that:

In the light of an examination of developments asregards the best available technology and the envi-ronmental situation, Member States shall implementpolicies and strategies . . . for the gradual adaptationof existing plant . . . to the best available technology,taking into account in particular:


26 S. Sorrell

• the plant’s technical characteristics;• its rate of utilization and length of its remain-

ing life;• the nature and volume of polluting emissions from

it; and• the desirability of not entailing excessive costs for

the plant concerned, having regard in particular tothe economic situation of undertakings belongingto the category in question.

This leaves wide scope for interpretation, but isintended to prevent uneconomic decisions such asthe retrofitting of pollution abatement equipmentto a plant that is due to close within a coupleof years. ‘Excessive cost’ is again required to beassessed for plants ‘belonging to the category inquestion’.

BATNEEC in the Environmental Protection Act1990

The text of EPA90 largely repeats the wording ofthe AFD, except that it refers to best available tech-niques, rather than technology, where techniquesare interpreted to include staff training, staff super-vision, plant maintenance and other factors. Thisgives greater flexibility to the plant operator andrecognizes the importance of the managementand operation of the plant in achieving improvedenvironmental performance. It is borne out inthe authorizations under IPC, which give greatemphasis to operational measures.

BATNEEC in guidance to operators andinspectors

The generality and ambiguity of the BATNEECconcept made it necessary to provide additionalguidance on its interpretation. This is containedin chapter 5 of Integrated Pollution Control: A PracticalGuide, which was first published in 1991 (DoE,1997). BATNEEC for a particular process is tobe interpreted from the broad statements in thePractical Guide and the more specific guidance oneach sector contained in the relevant GuidanceNote. Some key features of this guidance aresummarized in Box 1.

Box 1 highlights issues that have been centralto the debate over BATNEEC, namely the

role of environmental cost–benefit analysis, theinterpretation of sectoral affordability, and theinformation required to determine affordability.These are discussed below.

Environmental cost–benefit analysis

The guidance suggests that determination ofBATNEEC requires both:

• an environmental cost–benefit test: a judgementon the extent to which the benefits tothe environment of using BAT outweigh thecosts; and

• a sectoral affordability test: a judgement on theextent to which the cost of using BAT canbe afforded without serious damage to thecompetitive position of a sector.

These tests are logically independent. There isno reason why the first should lead to the sameresult as the second. This raises the question ofhow the tests interrelate. Pearce & Brisson (1995)have strongly argued that the first test should takepriority. This is for three reasons: (a) applying thesectoral affordability test3 involves the regulatorin assessing socially acceptable rates of returnfor a sector, which is extremely difficult to do;(b) early legal opinion (Bingham, 1992) supportsthe priority of a cost–benefit interpretation(although other factors may still be relevant);and (c) this approach is more consistent witheconomic efficiency (Pearce & Brisson, 1995,p. 34). Pearce & Brisson advocate the use ofcost–benefit analysis, based on the monetaryvaluation of environmental damage.

This recommendation has two drawbacks. First,it takes little account of the practical realitiesof implementation. For many environmentalproblems, monetary valuation is likely to requireresources and skills that the regulator does nothave and is unlikely to obtain for the foreseeablefuture. Second, the results obtained from valuationstudies may lack political credibility. Not only arethe results highly variable (frequently differing byseveral orders of magnitude) but the monetaryvaluation of environmental damage has beensubject to a series of critiques, which areconsidered by many to have undermined its



Box 1. UK government guidance on the meaning of BATNEEC

NEECNEEC needs to be taken in two contexts,depending on whether it is applied to newprocesses or existing processes. Nevertheless,in all cases BAT can be modified by economicconsiderations where the costs of applyingbest available techniques would be excessivein relation to the nature of the industry and tothe environmental protection to be achieved.

New processesIn many cases, for new processes it is expectedthat BAT and BATNEEC will be synonymous.However:

• The cost of the best available techniquesmust be weighed against the environmentaldamage from the process. The greater theenvironmental damage, the greater the costsof BAT that can be required before costs areconsidered excessive.

• An objective approach to the consideration ofwhat is BATNEEC is required. The concern iswith what costs in general are excessive; thelack of profitability of a particular businessshould not affect the determination.

Existing processes• In relation to existing processes, the Envi-

ronment Agency is concerned . . . with estab-lishing timescales over which old processeswill be upgraded to new standards, or as nearto new standards as possible, or ultimatelyclosed down.

• . . . the approach adopted in the EC AFD ishelpful . . . [Articles 12 and 13 are quoted]

PromulgationIt is the job of the individual inspector to decidewhat is BATNEEC in a particular instance andto translate that decision into conditions to beincluded in the authorization. However theremust be broad consistency in these decisions. . . It is important that BATNEEC is determinedand applied in a transparent, consistent andrational way.

Role of Guidance Notes• In the case of new processes, it is expected

that plant will be designed to achieve thestandards in the appropriate Guidance Note.

• For existing processes, inspectors will deter-mine a timescale on which it will generallybe appropriate to upgrade to new plantstandards. Inspectors will determine what isappropriate in each individual case, payingattention to variable factors, any directionsgiven by the Secretary of State, the sort ofconsideration listed in the AFD and the needto achieve BPEO.

• The Guidance Notes have no statutory force.They do, however, represent the view ofthe Agency on best available techniques forparticular types of processes and are thereforea material consideration to be taken intoaccount in every case.

Source: DoE, 1997. Crown copyright is repro-duced with the permission of the Controller ofHer Majesty’s Stationery Office.

theoretical basis (Vatn & Bromley, 1994; Foster,1997; Stirling, 1997a; Sagoff, 1998).

The problem of political credibility may partlybe overcome through the adoption of alternativedecision-making techniques, such as multicri-teria analysis. Depending upon how they areused, such techniques can overcome many of thelimitations of monetary valuation while still pro-viding a robust basis for decisions (DETR, 2000a).For example, Stirling (1997b) has developed an

‘multicriteria mapping’ technique that acknowl-edges the essential subjectivity of environmentalappraisal, while maximizing the transparency andaccountability of the decision-making process.Such techniques would still present a majorchallenge to regulators, as they require consid-erably more effort and resources than existingapproaches, as well as wider participation. Buteven if they are feasible, the use of alternativetechniques still leaves open the question of how


28 S. Sorrell

cost–benefit analysis and sectoral affordabilityshould interrelate.

While both HMIP and the Department ofthe Environment (DoE)4 were interested indeveloping a robust approach to evaluating BAT-NEEC, they had to recognize the drawbacksof monetary valuation and the complex reali-ties of policy implementation. The result was toadvocate a ‘pragmatic’ approach, in which muchreliance was placed on the professional judge-ment of the regulator and on comparisons withbest practice in the UK and overseas. This isthe traditional UK approach and continues to beapplied by inspectors today. But many within theDoE remained uncomfortable with this approachand desired a more formal approach to environ-mental assessment.5 This was tied up with broaderconcerns about how to operationalize BPEO andthereby make the ‘integrated’ approach to pollu-tion control more meaningful. This led ultimatelyto the BPEO methodology, described furtherbelow. But the methodology is a complex pro-cedure whose full application has been confinedto a subset of new plants or major investments thathave multimedia environmental impacts. It has notbeen regularly applied to BATNEEC assessmentsof the upgrading of existing plant. This means thepragmatic approach is still dominant in day-to-day Agency operations and is being carried overinto the implementation of IPPC.

Sectoral affordability

From the beginning, DoE guidance has stressedthat affordability should be assessed at the levelof the sector, rather than the individual firm.Hence, the Practical Guide states: ‘The concernis with what costs in general are excessive; thelack of profitability of a particular business shouldnot affect the determination’ (DoE, 1997). Theappropriate benchmark is therefore the averageprofitability of firms in a sector.

The notion of sectoral affordability has impli-cations that undermine economic efficiency andthat are of concern to some sections of govern-ment. In principle, it means that the stringency ofregulation will depend upon the competitivenessof a sector. Thus, it is possible to envisage two

similarly polluting industrial processes in differ-ent sectors where more demanding techniquesare required for one than for the other, reflectingtheir differing competitive positions. This meansthat a higher level of environmental gain couldbe obtainable for a given level of total investmentif that investment were to be distributed differ-ently. As the UK Environment Minister, MichaelMeacher, put it during preparation for the IPPCDirective:

Some sectors of industry make higher profits thanothers. Should those which make lower profitscontinue to be let off controls which apply in moreprofitable sectors of industry? And is it right to sayto a sector of industry ‘you could save five poundsworth of environmental damage by spending fourpounds, but we won’t make you do so because wethink you are too poor?’ (Meacher, 1997).

The DoE (later the Department of Environ-ment, Transport and the Regions—DETR) sawthe introduction of the IPPC Directive as anopportunity to weaken the public commitment tosectoral affordability in favour of environmentalcost–benefit analysis. The DETR claimed thatthis was possible because the definition of BATin the IPPC Directive had no equivalent to theAFD requirement to consider the ‘economic situ-ation of undertakings belonging to the categoryin question’ (DETR, 1997, p. 16).6 As arguedbelow, this interpretation of the intent of thedirective can be challenged, but the move reflectsthe long-standing discomfort with sectoral afford-ability within the DoE. In the first consultationpaper on IPPC, the DETR suggested that therequirement for sectoral affordability be droppedaltogether, with decisions being made entirely onthe basis of abatement costs and environmentalbenefits. Following industry opposition, the sec-ond consultation paper retreated somewhat: ‘theGovernment proposes that sectoral affordabil-ity should be phased out relatively gradually, asGuidance Notes are developed containing clearindicative standards based on an underpinninganalysis of the costs and benefits of differentmeasures in different sectors’ (DETR, 1998).

The rhetoric, therefore, is about a gradualmovement towards stricter regulation based onenvironmental cost–benefit analysis. The resultsof this analysis are intended to be reflected in the



Guidance Notes. However, this process seemsto be largely an issue of public presentation.There is a large gulf between official governmentpronouncements and the practical realities ofimplementing IPC at the site level.

The realities of implementation

In principle, the application of either environmen-tal cost–benefit analysis or sectoral affordabilitycould lead to a plant being closed. For closureto happen as a result of sectoral affordability,it is necessary that: (a) the plant is significantlyless profitable than the average within the sector,(b) the costs of the abatement measures requiredby the Agency are sufficient to put it out of busi-ness, and (c) the Agency has sufficient politicalauthority to carry this through. In practice, thishas never happened and there is little expectationthat it will happen.

The problem is that individual inspectors areunlikely to have sufficient authority to requirethe closure of a dirty but high-profile industrialplant on the grounds of a contestable conceptsuch as BATNEEC. While such an outcomecould be envisaged if a plant was violatingmandatory environmental quality standards oremission limits, in the majority of cases there isno such constraint. Instead, the inspector has tonegotiate issues of costs, benefits and affordabilityat the site level, in the context of limited resourcesand information asymmetry.

The site-level implementation of IPC isdescribed in Smith (1997), Fineman (1998),Gouldson & Murphy (1998) and Sorrell (2001).These show that, while inspectors need detailedtechnical and economic information to set autho-rization requirements, they are largely dependentupon industry for this information. In this context,inspectors aim to build a relationship of trust andcooperation with industry. The meaning of BAT-NEEC is determined locally on a site-specific basisthrough a process of negotiation. The emphasis ison flexibility, discretion and a search for consen-sus. Trust is placed in the confidential informationsupplied by the company, and there is a reluc-tance to use sanctions. Thus: ‘regulation involvesa mutual exploration of what is possible . . . it isa process of discussion and learning’.7 While this

process can have several benefits, it clearly createsthe risk that the stringency of regulation may bewatered down (Gouldson & Murphy, 1998, ch. 5).

In practice, BATNEEC negotiations are domi-nated by debate on abatement costs and environ-mental benefits. Inspectors lack the competenceand the information to explore questions ofaffordability in a formal way. But this does notmean that questions of affordability are ignored.Instead, affordability seems to be treated in a tacitand implicit way, with the profitability of the individualcompany defining the boundary of the possible. For exam-ple, in the refinery sector the difficult economicsituation of individual refineries is acknowledgedas a severe limitation on what can be achieved, butthere is no explicit analysis of the potential impactof abatement measures on refinery profitability:

We don’t have detailed economic data. It is onlysince the Foster Wheeler8 study came out . . . and if[an Agency employee] has any economic data thathe’s putting in the new Guidance Note. They arethe only official benchmarks that we have. In theabsence of those, I’ve always looked at things likethe cost per tonne of pollutant abated . . . I’ve neverbeen able to argue about profit margin with therefineries because they say there isn’t a profit marginat the moment.9

Refineries have resisted abatement measures byarguing that they are on the borderline ofprofitability and that abatement measures aremerely a cost (Sorrell, 2001).10 Inspectors haveused cost–benefit arguments to encourage low-cost measures that are acknowledged to havesubstantial environmental benefits (such as lowNOx burners). But where the investment costs arehigh (such as with selective catalytic reduction forNOx) or where the environmental benefits are lessapparent (such as with measurement of volatileorganic compounds emissions), it is difficult forinspectors to argue that the desired changesrepresent BATNEEC. As a consequence, theimpact of IPC in oil refineries has been confinedto improved monitoring and low- or zero-costabatement measures. Furthermore, there appearsto be substantial differences in the stringency ofrequirements between refineries (Sorrell, 2001).Operators acknowledge that this has been totheir benefit:


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If you take a societal view, you can truly recognizethat over the long-term ‘grandfather-type’ plantsdon’t have the right to exist. That BATNEEC shouldbe a sector thing—so you should be assessingall refineries equally. I fully recognize that. But Idon’t think to date that has happened. I think allthe discussions that we have had are about localBATNEEC—which has suited us very well, mademy job easier and in terms of saving investment forthis refinery, it probably has helped.11

Not only is affordability inherently difficult toassess, but the process of regulatory decision-making is clouded by commercial confidentialityand the dominance of informal, unminuted nego-tiations (Smith, 1996, 1997; Sorrell, 2001). Thismakes assessing the importance of affordabilityconsiderations in regulatory outcomes very dif-ficult. But the strong impression from existingstudies is that the context of site-level negotiation,information asymmetry and a culture of cooper-ation all contribute to making the affordabilityof abatement by individual firms a more impor-tant criterion than abstract notions of sectoralaffordability. As Fineman notes:

The public credibility of regulation hinges uponits impartiality and independence of the regulator.There is evidence that this is a wistful ideal . . . Thepreferred collaborative style of many Inspectors lentitself to mutual capture (Fineman, 1998, p. 971).

Determining affordability

Whether determined at the sector or firm level,the concept of affordability implies analysis ofabatement costs and financial performance. Inearly guidance to inspectors, the DoE recom-mended that affordability be assessed in terms ofthe effect on the cost of a sectors’ products, tak-ing this as a measure of competitiveness (HMIP,1991a). But while the regulator may be able toestimate the impact on production costs, this isnot the same as the impact on product prices. Theextent to which costs can be passed on to productprices depends upon the market situation of thefirm (Pearce & Brisson, 1995, p. 32). In competi-tive markets, the firm may be a price taker and costincreases must either be passed on to suppliers orabsorbed by lower returns. Hence, in addition to

determining abatement costs, the regulator mustassess the economic situation of supply markets,the overall profitability of the sector and theextent to which costs can be passed on to productprices. This is a tall order, and requires both ahigh level of competence in economic analysisand comprehensive economic information abouteach regulated sector.

When IPC began, the 400-strong staff of HMIPdid not include a single economist. The dominantprofessional culture was chemical engineering,reflecting the industrial background of the major-ity of inspectors. The level of competence ineconomic analysis was consequently very lim-ited. It was obvious, therefore, that HMIP lackedthe capacity to evaluate BATNEEC in the man-ner recommended by the DoE. This led to theappointment, in 1993, of an economist, TomGameson, who was given the task of provid-ing guidance on the economic assessment ofBATNEEC.

Gameson produced a draft report on economicevaluation in 1993, although this was neverofficially published (Gameson, 1993). The reportdescribes an elaborate and sophisticated approachto evaluating excessive costs that was intendedto be employed during the development of theGuidance Notes. The analysis splits into twoelements: estimating abatement costs at the plantand sector level, and estimating the economicimpact of those costs.

The first stage is a straightforward applicationof engineering cost analysis—which is not to saythat it is easy to do, owing to major difficultieswith obtaining accurate data and allowing forsite-specific factors (Van Seters, 2000). Gamesonrecommends evaluating at least four levels ofemission abatement. Estimates are required forcapital costs, operation and maintenance costs,installation costs, and operating life, togetherwith internal benefits such as reduced energyuse. Annualized cost curves for a single plantcan be derived and then aggregated to the sectorlevel. These can be expected to show major breakpoints, where large increases in costs yield littleimprovement.

The second stage is more elaborate, moredifficult and unlikely to be familiar to regulators. Itattempts to estimate how increases in productioncosts will be distributed between increases in



product prices, passed back to suppliers orabsorbed as lower profits. This requires ananalysis of the structure of product markets,including competitiveness, demand elasticity andthe import–export balance. Gameson developsa model to project possible plant closures, andrecommends the use of financial ratios to assessthe impact on the viability of the firm. Healso describes a much simpler approach, whichdoes not attempt to determine the impact ofpollution control costs, but merely providesbenchmarks of a sector/company/plant’s ability toafford pollution control costs. This uses standarddata from company reports to produce ratios thatare familiar measures of financial performance,including liquidity, solvency and leverage.

Soon after the report was completed, HMIPwere caught up in the preparations for the Agency,which may be one reason why it had little impact.But more importantly, the recommendationswere over-ambitious and proved impractical toimplement given the limited information andresources available at the time to either HMIPor the consultants employed in developing theGuidance Notes. A consultant’s report on therefinery sector from 1994 is a good example (ERM,1994). This was intended to feed into the secondseries Guidance Note and to use the Gamesonmethodology to assess affordability. But the reportemployed a much simpler methodology, confinedlargely to annualized cost estimates for individualabatement options. Even the simple financial ratiotest was eschewed because: ‘[ratios] will be specificto the individual company and, since refineriesare often part of larger operations, they are notnecessarily applicable’ (ERM, 1994, p. 3).

The refinery sector is not unique in the diffi-culty of obtaining financial ratios for the relevantregulatory unit. Furthermore, sectors may poseadditional problems in the form of multiple prod-uct markets. In the chemicals sector, for instance,one process may be part of another process, orit may produce multiple products in differentmarkets. Some of these markets may be compet-itive, others monopolistic. It would be practicallyimpossible to explore the implications of abate-ment costs for product prices in such a situation.

The Gameson report clearly demonstrated thedifficulties inherent in assessing sectoral afford-ability and the inadequacy of earlier injunctions

to use a ‘cost of products’ test. It seemed thata robust methodology for assessing affordabilitywould require a highly detailed assessment of theeconomics of each sector, based on informationthat was very difficult to obtain. But, despite thesedifficulties, HMIP and the DoE still wanted toestablish some economic guidance for inspectors,since the first round of Guidance Notes containedno economic information at all. This was subse-quently given in the BPEO methodology and thesecond series Guidance Notes.

Excessive costs in the BPEOmethodology

BPEO is a framework concept that aims at an opti-mum solution for the environment as a whole. Forprocesses that are likely to release substancesto more than one medium, EPA90 states that‘BATNEEC should be used for minimizing thepollution which may be caused to the environ-ment taken as a whole, having regard to theBPEO’.

The apparent absence of an integrated approachin the early authorizations led to criticism ofIPC, and HMIP spent much effort attemptingto operationalize the BPEO concept through thedevelopment of formal techniques. In April 1994,it published a consultation document outlining aproposed methodology for assessing the overallenvironmental impact of abatement options,together with their annualized costs (ENDS Report,1995a, pp. 22–25).

The proposed methodology came under somecriticism for being overly mechanistic, for tryingto reduce multifaceted environmental impacts toa single index, and for excluding numerous off-site and indirect impacts (Hartnell et al., 1994;ENDS Report, 1995a, pp. 22–25). The revised ver-sion, published in 1995, went to some lengthsto emphasize that it was not prescriptive (EA,1998). Instead, the methodology was merely anaid in the process of determining the BPEOand was not meant to replace expert judgement.The methodology contains guidance on assessingthe costs of abatement options, which resemblethe procedures in the first half of the Gamesonreport. However, there is no reference to eco-nomic impact, affordability or cost of products


32 S. Sorrell

tests. Instead, the aim is to compare abatementoptions in terms of: (a) total annualized costs,(b) incremental costs compared to incrementalenvironmental effects, and (c) incremental costscompared to the option with the greatest envi-ronmental effects. The BPEO is then:

. . . the option which provides the most benefit forthe least damage to the environment as a whole, inthe long term as well as the short term, at a costthat is not excessive . . . In a practical sense theoption which is the BPEO could be regarded as the‘break point’ where the marginal costs of furtherreductions in pollution start to rise significantly. . . By reference to this methodology and by theapplication of professional judgement, the Agencybelieves that operators should be able to identify andjustify the BPEO (EA, 1998, p. 32).

Hence, the document concerns itself solely withcomparing environmental impacts in differentmedia and assessing abatement cost curves. TheBPEO is determined by combining the results withprofessional judgement, focusing in particularon break points in the cost curve. But despitethe reference to excessive costs, BPEO is notsynonymous with BATNEEC. While the BPEOmethodology provides important guidance onthe cross-media comparison of environmentalimpacts and on the evaluation of abatementcosts, it has nothing to say on affordability. Tothe extent that BATNEEC requires considerationof affordability in addition to considerationof cost–benefits, the BPEO methodology onlyaddresses a portion of the problem. In support ofthis, the document states that the methodology isto be complemented by other work, including theprovision of economic information on industrysectors in the revised Guidance Notes.

The BPEO methodology now sits alongsideIntegrated Pollution Control: A Practical Guide and therelevant Guidance Note as being important ref-erence sources for individual authorization deci-sions. However, the methodology is complex12

and its use has largely been confined to new plants,or major modifications to existing plants, and tothose processes having multimedia impacts. It isnot used for the majority of authorization deci-sions, where negotiation and expert judgementcontinue to play a more important role. Also,while the guidance on assessing abatement costs

is undoubtedly useful, there is still a gap onassessing affordability.

BATNEEC in the revised IPCGuidance Notes

The IPC Guidance Notes provide guidance toinspectors on the processes used in differentsectors and the emission standards and abatementtechniques that should be taken into accountwhen assessing individual applications. The Notescarry no statutory authority and are merely a‘material consideration to be taken into account’in determining individual authorizations (DoE,1997).

The first series of Guidance Notes werepublished six months prior to the beginningof the application period for each process typeand were based on consultants’ studies of eachsector, known as BAT reviews (Smith, 1997,pp. 140–146). The original intention was torevise the Guidance Notes every four years,although this timetable has frequently slipped.The ‘second series’ Notes began appearing in1995. Future Notes will be linked to the BATReference Notes (BREFs) being developed underIPPC.13

As Smith has demonstrated, the consultantsconducting the original BAT reviews lackeddetailed information on industrial processes,environmental emissions and abatement options(Smith, 1997, pp. 140–146). While they werereliant on industry to supply that information,they lacked the legal resources to obtain it.Furthermore, industry itself frequently lackedthe required information owing to inadequatemonitoring of environmental emissions. Theresult was that the first Notes did not containthe simple presentation of abatement options,environmental performance and costs that HMIPdesired (Smith, 1997, p. 145). Instead, theycontained qualitative descriptions of processoperations and abatement techniques, with fewquantitative standards. Those standards that wereincluded were based on previous regulations,individual inspector experience or similar sources.Economic information on abatement costs or theability of the sector to afford those costs wasentirely absent.



The wording of the first few Notes implied thatquantitative standards and upgrading timetableswere mandatory (HMIP, 1991b). This prescrip-tiveness was heavily criticized by industry andwas difficult to defend given the wording ofEPA90 (Smith, 1997, pp. 146–147). The sub-sequent history of the Guidance Notes has beenone of retreating from such prescriptiveness andincreasing the emphasis on site-level negotiationof standards. This applies as much to new plants asto the upgrading of existing plants. Thus, secondseries Notes contain the following caveats:

[New plant] The concepts of BATNEEC and BPEOexpressed in the EPA90 and associated Regulationsare site specific. This Note cannot take into accountsuch site-specific considerations. Thus . . . thebenchmarks should not be applied as uniform releaselimits. They are indicative, but not prescriptive, fornew processes (EA, 1996a).

[Existing plant] Whilst it may be possible to makeimprovements to existing processes . . . the state anddesign of some existing plant may prevent operatorsfrom achieving the release levels given in this Note,even with improvements . . . Improvement plans area site-specific issue therefore no target dates areincluded in this Note (EA, 1996a).

[Quantitative standards] The levels given are achiev-able release levels and are not emission limits (EA,1996a).

While the second series Notes emphasized theimportance of site-level negotiation, they alsobegan to include economic information to assistinspectors in determining excessive costs. ThePetroleum Process Guidance Note was one of thefirst to be revised and HMIP employed consultantsto evaluate the economic implications of variousabatement options (ERM, 1994). It was expectedthat this would lead to guidance on affordabilityin the Note, or that the study would be publishedas an annex to the Note (ENDS Report, 1995b,pp. 30–31). In the event neither occurred, dueto dissatisfaction within HMIP over the contentsof the study and concern about the reaction ofthe petroleum industry.14 As a consequence, theNote was published without any reference toeconomics.

Despite this experience, the newly formedAgency persisted in seeking improved economic

information, and the November 1996 GuidanceNote on Incineration was the first to include a sec-tion on financial implications (EA, 1996b). Thiswas based on a BAT study of the sector (EA, 1995)and included guidance on the state of the indus-try and the cost of different abatement options.The financial section takes up only two pages ofa 70-page document and provides relatively littlenumerical guidance. But it reiterates commitmentsto both environmental cost–benefit analysis andsectoral affordability, and indicates that an assess-ment of product markets is a necessary part of aBATNEEC judgement:

. . . there are two elements to the ability of arepresentative operator in any industry to bearextra abatement costs. One relates to the financialresources typically available for capital expenditure. . . The other depends on the extent to which costscan be passed on to customers, passed back tosuppliers, or absorbed by lower returns within theindustry (EA, 1996b).

The reaction of industry to these first tentativeattempts at financial guidance was hostile. TheEnergy from Waste Association (EWA) saidthe assessment was complacent, simplistic andincomplete (ENDS Report, 1996a, pp. 38–40).EWA disputed HMIP’s conclusion that, becauseenvironmental controls amount to only 15%of capital costs, regulation was unlikely toinhibit incineration in favour of landfill. EWAargued that this did not take into accountplant size, type of ownership and operatingcosts. This was one of a number of commentsthat misunderstood the meaning of sectoralaffordability. For example, the Water ServicesAssociation (WSA) argued that:

. . . BATNEEC should be about value for money interms of environmental improvement—not whethera particular industry can afford to pay . . . Theissue as to whether the water industry is excessivelyprofitable is one for OFWAT,15 not HMIP (quotedin ENDS Report, 1996a, pp. 38–40).

The WSA represented a profitable industry thatwas trying to avoid extensive environmentalregulation ‘just because it could afford it’. TheWSA preferred a sole reliance on environmentalcost–benefit analysis, in contrast to the EWA,


34 S. Sorrell

who wanted individual firm affordability tobe considered. The scope for confusion wasconsiderable given that, on the one hand, theNote stated that BATNEEC was site specific,while, on the other, it asserted the importance ofsectoral affordability.

The same pattern of hostile industry reactionto relatively limited guidance on affordability wasrepeated for subsequent Notes. Also apparent wasthe difficulty of obtaining sufficient informationwith which to evaluate affordability. For example,the Guidance Note on lime kilns described prob-lems of over-capacity and threats from imports inthe industry, but was unable to put a figure onthe level of investment a typical operator couldafford. Instead, it concluded that ‘in general . . .the industry should be able to afford to improve itsoverall environmental performance’ (EA, 1996a).

The most recent updates to Guidance Noteswere in 1999, before UK guidance becameexplicitly linked to the BREFs under IPPC. The1999 Notes include more coverage of economicissues, but this is still patchy and largely non-quantitative. For example, the Guidance Note onlarge-volume organic chemicals emphasizes that,owing to site-specific factors and the ‘variation inthe business background of different productionprocesses’, it is not possible to provide quantitativeguidance on excessive costs (EA, 1999). Similarly,the first Note to be linked to the BREFs containsonly one page of economic information, confinedto rough estimates of abatement costs for a subsetof techniques (EA, 2000b).

The evolution of the Guidance Notes, there-fore, reflects two partially contradictory trends.The first is a retreat away from prescription and anemphasis on site-level negotiation of standards.The second is an attempt to introduce more eco-nomic information, both to inform inspectorsabout the economics of abatement options andto encourage the use of sectoral affordability asa benchmark. Economic information is still verylimited in the majority of Notes and is very muchsecondary to the technical description of industryprocesses and abatement equipment. While thetext of the Notes acknowledge that the deter-mination of affordability implies assessing theability of a sector to pass on costs, the infor-mation provided is never sufficient to achievethis. While this is partly due to the inherent

difficulties of economic analysis and of obtainingeconomic information, it also reflects a continuingbias within the Agency towards expert judgementby technologists rather than formal methods ofeconomic analysis. This in turn has influencedthe Agency’s spending priorities in commission-ing BAT studies and consequently the content ofthe subsequent Notes.

IPPC: from BATNEEC to BAT

IPPC is likely to have less impact in the UK thanin other member states due to the similaritiesbetween IPPC requirements and the existingregime (Skea & Smith, 1997). Nevertheless, theintroduction of IPPC has required new legislationand stimulated a variety of initiatives.

The definition of BAT under IPPC effectivelysubsumes both BATNEEC and BPEO. Instead ofthe NEEC qualification, BAT includes economicconsiderations in its definition of ‘available’:

. . . developed on a scale which allows implementa-tion in the relevant industrial sector, under econom-ically and technically viable conditions, taking intoconsideration the costs and advantages, whether ornot the techniques are used or produced inside theMember State in question, as long as they are reason-ably accessible to the operator (in Council Directive96/61/EC).

Here, ‘costs and advantages’ can be relatedto environmental cost–benefit analysis, while‘economically and technically viable conditions’can be related to sectoral affordability (Gislev,2000). The following quote from the Headof the European IPPC Bureau confirms thisinterpretation:

Implementation under economically viable condi-tions seems to imply, amongst other things, somesort of ability of the operator to afford the technique. . . For the former, we may want a cost per unitof product . . . However, the Directive definition of‘available’ does not seem to require that the tech-nique has to be economically and technically viablefor every installation in order to be economicallyand technically viable for the sector (Litten, 2000).

Hence, contrary to the statements made by theDETR during consultation on implementing the



directive, IPPC does not imply the abandonmentof sectoral affordability. This is acknowledged inthe first UK Guidance Note under IPPC, whichmakes reference to affordability: ‘At this nationallevel, techniques which are considered to be BAT. . . should normally be affordable without makingthe sector as a whole uncompetitive either on aEuropean basis or world-wide’ (EA, 2000b).

While this seems reasonable, it means that thepractical difficulties of assessing affordability arecarried over into the implementation of IPPC. Aswith IPC, the guidance to date has been domi-nated by discussion of abatement techniques. Thefirst Guidance Note under IPPC relies heavilyon the corresponding BREF and neither docu-ment gives any useful guidance on determiningaffordability (CEC, 2000; EA, 2000b). Also, thereliance on expert judgement seems to be giveneven greater emphasis than before. Thus, in apaper describing proposed revisions to the BPEOmethodology, Maleham et al. note: ‘the variabilitybetween one situation and another and the uncer-tainties involved led us to consider replacing [theIntegrated Environmental Index] with a final stepof ‘expert judgement’ to decide how to balancethe various, individually quantified impacts andcosts (Maleham et al., 2000, p. 8).

The continuing neglect of formal economicanalysis is also apparent in the first round ofoperator applications under IPPC. A DEFRA-sponsored survey of 40 applications conducted inJuly 2001 found very large differences in qualityand length, with most operators failing to justifytheir operations or improvement plans as BAT(ENDS Report, 2001, p. 8). Applications werelargely confined to technical descriptions, withmany operators simply asserting that their plantwas BAT. This was exactly the pattern observedin the first round of IPC applications, nearly 10years previously (Allott, 1994).

The Agency has begun some initiatives toimprove the level of economic informationavailable to inspectors. For example, a pilotcost database is being developed for use inbenchmarking, which includes a full breakdownof cost components, together with qualitativecontextual information to ensure its effectiveuse (Pollard, 2000). At present, this database isconfined to techniques for NOx abatement andhas not been widely used. If developed, it could

provide a useful tool for improving the qualityand consistency of regulatory decision-making.However, the Agency still lacks a rigorous basisfor assessing affordability.

One important respect in which the IPPCDirective goes beyond IPC requirements is inits inclusion of energy use, waste and resourceefficiency. Some commentators see this as anopportunity to reflect wider sustainability con-cerns in IPPC decision-making (NSCA, 2001). Inpractice, however, this appears unlikely to occurand it is not clear that site-specific determinationby an under-resourced inspector is the best way todeal with regional and global environmental prob-lems. What is clear is that the inclusion of thesewider considerations highlights the importance ofthe relationship between IPPC and other environ-mental instruments and objectives. Cost–benefitassessments, environmental targets and policyinstruments for issues such as resource efficiencymay best be developed at a national rather thana local level. This issue is particularly importantfor carbon dioxide emissions, where the Agencyis currently seeking to clarify the role of IPPCalongside an energy tax, negotiated agreementson energy efficiency and emissions trading (EA,2001; Sorrell & Smith, 2001).

Conclusions

Framework concepts such as BATNEEC cannotbe reduced to simple rules. Instead, their meaningmust be interpreted by the regulator at a sectoror site level in the context of severe resourceconstraints and endemic information asymmetry.The 10-year history of applying BATNEEC in theUK has generated valuable experience, but somekey questions remain unresolved. These includethe following:

• how can environmental cost–benefit analysisand sectoral affordability be operationalized inan effective manner?

• what should be the balance between theseapproaches in regulatory decision making?

• what should be the role of formal analyticaltechniques, as compared to expert judgement?

A tension is apparent between public pronounce-ments, such as the proposed ‘abandonment’ of


36 S. Sorrell

sectoral affordability under IPPC, and the real-ities of site-level implementation. Inspectors arenot trained in economic analysis and are severelylacking in suitable guidance on both the cost ofabatement options and the economic situationof industrial sectors. Most regulatory decision-making pays little attention to sectoral afford-ability and assesses abatement costs and environ-mental benefits in a relatively informal manner.While the rationale for decisions is often hard toassess, it seems likely that an implicit criterion ofindividual firm affordability has frequently playeda decisive role.

The introduction of IPPC does not substantiallyalter the nature of these problems. However,the activities associated with implementing IPPCshould offer an opportunity to address the issuesin a more robust way. Recent developments thatmay assist in this include:

• the process of developing the BREFs at an EUlevel (Emmott et al., 2000);

• the proposed revisions to the BPEO methodol-ogy, which aim to make it more accessible andto ensure its more widespread use (Malehamet al., 2000);

• the increasing inclusion of economic informa-tion in the UK Guidance Notes;

• the recent attempts at economic training forinspectors;

• the moves to strengthen the role of individ-ual sector groups within the Agency, therebyencouraging information sharing and consis-tency (Sorrell, 2001); and

• the development of a database on abatementtechnologies and costs (Pollard, 2000).

These initiatives are encouraging, but there is along way to go before ‘excessive costs’ begin to beaddressed in a more formal, effective and trans-parent way. Moreover, information asymmetry,resource constraints and the inherent difficulties ofeconomic analysis will always circumscribe whatcan be achieved. While there is no space hereto provide detailed recommendations on the wayforward, four broad principles may be suggested.

Economic information and tools

It is essential that more extensive informationbe provided to inspectors on economic assess-ments, abatement costs and affordability. Whileacknowledging the inherent difficulties of eco-nomic appraisal, the total absence of such infor-mation from much regulatory guidance is notdefensible. In this context, the adoption of stan-dardized tools for economic assessment may beuseful. For example, the MIOW+− partial equi-librium model developed by the Flemish Institutefor Technological Research has been applied toBAT assessments in the Netherlands (Van derWoerd, 2001). This uses a simplified version ofGameson’s approach, including indicators of theaverage economic strength of firms in a sectorand an assessment of their ability to pass costson in product prices. As this paper has argued,such tools have severe methodological and datalimitations. Nevertheless, they can provide a start-ing point for affordability negotiations, and if theirstructure, assumptions and sensitivities are madepublicly available they can offer a greater degreeof transparency in decision-making. The onuswould then be on the operator to provide reasonsfor departing from the recommended BAT, or rea-sons why the model results are flawed. Using themodel in this way, the discussion can be focusedfrom the beginning on sectoral, rather than indi-vidual firm, affordability. The application of suchtools in the development of BREFs and sectoralGuidance Notes should therefore be considered.

Participation

Since the process of environmental appraisalis inherently subjective, decision-making proce-dures must be transparent and, where possible,open to participation. At present, too muchreliance is placed on ‘expert judgement’, which issimply shorthand for the exercise of value judge-ment by a professional (Hartnell et al., 1994).Alternative decision-making procedures are avail-able that include subjective weighting scales fordifferent types of environmental impact, togetherwith the use of sensitivity analyses (Stirling,1997b). These should be considered in anyfurther development of the BPEO (now BAT)methodology. Similarly, experience has shown



that the public information registers are a passiveand ineffective means of encouraging partici-pation. While extensive public consultation isclearly inappropriate for the minutiae of site-leveldecision-making, there should be scope for moreactive participation in the development of assess-ment tools, Guidance Notes or major processapplications.

Consistency

A serious attempt should be made to improve theconsistency of regulation, both within sectors andbetween sectors. Empirical studies suggest thatthe present context of site-specific determinationsleads to considerable inconsistency in regulatoryrequirements between plants in the same sector(Sorrell, 2001). Furthermore, the absence ofcentralized records, the lack of publicly availablecost information and the diversity of means bywhich regulatory requirements are expressed,16 allmake the comparative evaluation of the stringencyand cost effectiveness of regulation very difficult.While site-specific considerations will always leadto differences in requirements, efforts to achieveconsistency will help counter the suspicion thatindividual firm affordability continues to play thedominant role.

Strategic context

Finally, the role of IPC/IPPC within the broaderframework of environmental regulation should bereassessed. In a context of multimedia environ-mental impacts, complex and diverse industrialprocesses and varying geographical sensitivity toenvironmental damage, a site-specific approachbased on negotiated environmental standardsclearly has an important role. But in the absenceof mandatory environmental standards, the com-bination of information asymmetry, resourceconstraints and the contestable nature of BAT pro-vides very strict limits on what can be achieved. Asa consequence, the impact of IPC has been largelyconfined to low-cost, incremental improve-ments in environmental performance, with littleprospect of encouraging radical technical andstructural change in the long term (Sorrell, 2001).

This situation has led a number of commen-tators to argue that IPPC must be reinforced

by a comprehensive framework of environmen-tal targets, standards and performance measures,developed at a sectoral and national level (NSCA,2001). For example, Gouldson & Murphy (1998)use the experience of the Dutch National Envi-ronmental Policy Plans to argue for the greater useof sectoral negotiated agreements. These wouldcontain environmental targets and performancestandards that may be devolved to the site leveland embodied in individual authorizations. Forpollutants with a regional or global environmentalimpact, there may be scope to add flexibilitythrough emissions trading.

The existence of such a framework would giveinspectors greater authority in site-level negotia-tions, while the development of such standards ina more public arena could improve the trans-parency and legitimacy of regulation. Insteadof inspectors negotiating BAT with individualfirms, the debate on costs and benefits wouldbe conducted at a sectoral or national level,including considerations of equity, competitive-ness and affordability. Such an approach mayonly be appropriate for a subset of pollutantsand/or industrial sectors, and would open up arange of issues regarding allocation of targets,legal compatibility with BAT and the incentivesfor trade associations and companies to adoptenvironmental targets (Glachant, 1994; Sorrell,2001; Sorrell & Smith, 2001). But it could alsogive much-needed strategic direction to IPPC,and may have the potential for encouraging moreradical technical change in the long term. As anillustration, radical, ‘clean technology’ solutionssuch as residue gasification at oil refineries couldnever be achieved through IPC alone,17 but maybe driven through a combination of pressuresincluding top-down targets for aggregate sulphuremissions negotiated at the EU and UNECE levels(Sorrell, 2001).18

Changes such as those indicated above require acombination of adequate resources and sustainedhigh-level political support. This remains prob-lematic where regulation involves a perceived oractual conflict between environmental and com-petitiveness concerns. Such a conflict is impliedby the very concept of ‘excessive costs’ and theevidence suggests that, despite the rhetoric onecological modernization, this remains the domi-nant theme in UK regulatory practice.


38 S. Sorrell

Acknowledgements

Research used in this paper formed part of the‘Technology and Environmental Policy (TEP)’project (PL 970779), funded by DGXII of theEuropean Commission under the Framework IVEnvironment and Climate Programme.19 Theauthor would like to thank the many individualsfrom the Environment Agency and regulatedcompanies who gave up valuable time to beinterviewed for this project. Thanks also to RonanPalmer and Tom Gameson for comments on anearlier version of this paper. The usual disclaimersapply.

Notes

1. The European Commission is producing guidanceon BAT for each industrial sector in the formof BAT Reference Documents (BREFs). Thesewill not prescribe the technology to be used inspecific cases since, in the final analysis, BAT musttake into account ‘the technical characteristicsof the installation concerned, its geographicallocation and the local environmental conditions’(in Council Directive 96/61/EC, Article 9(4)).Copies of the BREFs and related information areavailable on the website of the European IPCCBureau at: http://eippcb.jrc.es

2. RACT was introduced into US pollution regu-lation by the 1977 amendments to the CleanAir Act.

3. Pearce terms the sectoral affordability approach as‘corporate burden’, and the cost–benefit approachas ‘national economic burden’.

4. The UK Department of the Environment (DoE)was combined with the Department of Trans-port in 1997 to become the Department of theEnvironment, Transport and the Regions (DETR).Further reorganization in 2001 led to the Depart-ment of the Environment, Food and Rural Affairs(DEFRA) and the Department of Transport, LocalGovernment and the Regions (DTLR).

5. Personal communication with former DoE civilservants.

6. An earlier interpretation along these lines is givenby Emmott & Haigh (1996, p. 306).

7. Interview with Agency Inspector, November 1999.8. This refers to a technical and strategic review

of the oil refinery sector, commissioned by theEnvironment Agency and conducted by FosterWheeler in 1999 (EA, 2000a).

9. Interview with Agency Inspector, November 1999.10. Oil companies make the bulk of their profits

upstream, from exploration and production. Thedownstream refining sector suffers from over-capacity, with consequent low or negative returnson capital employed. The two sectors are treatedseparately for tax purposes.

11. Interview with refinery environmental manager,December 1999.

12. The revisions currently underway to the method-ology aim to reduce this problem (Maleham et al.,2000).

13. Full details on the guidance being produced bythe Agency is available on the Agency websiteat: http://www.environment-agency.gov.uk/epns/package.html

14. Interview with Agency employee, November1999.

15. OFWAT is the economic regulator for theprivatized water industry in the UK.

16. For example, regulations on sulphur emissionsfrom the ‘sulphur recovery unit’ at oil refineriesare variously expressed as a concentration limit(mg/m3), a short-term mass limit (kg/h), a requiredsulphur recovery rate (%) or as part on anoverall annual emission limit (tonnes/year) for thewhole refinery (Sorrell, 2001). In addition, theproportion of sulphur-containing streams that areactually fed to the unit is not specified, and crucialrequirements on reliability are frequently omitted.The fact that authorizations undergo ‘variations’at different points in time further complicatesanalysis, as does the practical difficulties ofobtaining the relevant paperwork, which is onlyavailable in the public register nearest to therefinery site. In sum, the available informationmakes it extremely difficult to compare thestringency of regulation between refineries. Similarconclusions apply to other process types.

17. The differential impact of negotiable (i.e., BAT-NEEC) and mandatory requirements is alreadyapparent—mandatory requirements on the sul-phur content of fuel have led to much larger andmore strategic investment by oil refineries thanhave IPC requirements (Sorrell, 2001). Indeed,compliance with IPC has been greatly assistedthrough investments or operational changesundertaken for other market or regulatory reasons(Sorrell, 2001).

18. Regulatory pressures include the United NationsEconomic Commission for Europe’s 1999 Gothen-burg Protocol to Abate Acidification, Eutrophica-tion and Ground-Level Ozone (Multi-PollutantProtocol), revisions to Large Combustion PlantDirective (Council Directive 88/609/EEC, OJ no.



L 336, 7 December 1988, p. 1), the EU NationalEmissions Ceiling Directive (OJ no. C 56 E, 29February 2000, pp. 34–39), the Directive on theSulphur Content of Liquid Fuels (Council Direc-tive 1999/32/EC, OJ no. L 121, 11 May 1999,pp. 13–18), the UK National Air Quality Strat-egy (DETR, 2000b) (which includes a stringent15-minute standard for SO2) and proposed restric-tions on the sulphur content of bunker fuel. Marketpressures include a collapsing market for heavy fueloil and increasing dependence on higher sulphurcrudes from the Middle East.

19. Full results from the TEP project are availableon the MERIT website at: http://meritbbs.un-imaas.nl/tep/

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The meaning of BATNEEC: interpreting excessive costs in UK industrial pollution regulation

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