Environmental governance in the European Union: strategies and instruments for absolute decoupling

Transcription

1 Int. J. Sustainable Development, Vol. 8, Nos. 1/2, Environmental governance in the European Union: strategies and instruments for absolute decoupling Stefan Giljum* Sustainable Europe Research Institute, SERI, Garnisongasse 7/27, A 1090 Wien, Austria Fax: stefan.giljum@seri.at *Corresponding author Thomas Hak Charles University Environment Center, U Krize 8, Praha 5, Czech Republic tomas.hak@czp.cuni.cz Friedrich Hinterberger Sustainable Europe Research Institute, SERI, Garnisongasse 7/27, A 1090 Wien, Austria friedrich.hinterberger@seri.at Jan Kovanda Charles University Environment Center, U Krize 8, Praha 5, Czech Republic jan.kovanda@czp.cuni.cz Abstract: The EU recently emphasised the need to speed up the pace of reforms to improve the state of the environment both in Europe and internationally. This becomes in particular challenging, as the Lisbon Strategy defines the general goal of an annual economic growth rate of 3%. Decoupling of economic growth from the use of natural resources and the production of waste and emissions is regarded as the core strategy to reconcile environmental protection and continued economic growth. However, measurable policy targets are to a large extent, missing. Furthermore, a comprehensive headline indicator for the evaluation of progress towards an absolute reduction of environmental pressures is missing in the Lisbon indicator set. We use the concept of societal metabolism as a framework for deriving priority environmental policy themes for decoupling efforts. A mix of policy instruments is suggested for achieving the overarching target of absolute decoupling through dematerialisation (quantity) and detoxification (quality) of production and consumption activities. Keywords: environmental policy; indicators; instrument mix; policy integration; societal metabolism. Copyright 2005 Inderscience Enterprises Ltd.

2 32 S. Giljum, T. Hak, F. Hinterberger and J. Kovanda Reference to this paper should be made as follows: Giljum, S., Hak, T., Hinterberger, F. and Kovanda, J. (2005) Environmental governance in the European Union: strategies and instruments for absolute decoupling, Int. J. Sustainable Development, Vol. 8, Nos. 1/2, pp Biographical notes: Stefan Giljum is Research Fellow at the Sustainable Europe Research Institute in Vienna. His work focuses on natural resource accounting and policies, economic-environmental modelling and sustainability indicators. Tomas Hak leads the unit of sustainable development indicators at the Charles University Environment Center in Prague. His work focuses on problems of aggregation of indicators in indexes and their use in sustainability assessments. Friedrich Hinterberger is the founding president of the Sustainable Europe Research Institute in Vienna. His research in the field of ecological economics focuses on dematerialisation and natural resource use policies. Jan Kovanda is a Research Fellow at the Charles University Environment Center in Prague. He is an expert in socio-economic metabolism issues, particularly economy-wide material flow analysis and material flow indicators. 1 Introduction The transition towards sustainable development is frequently described as a co-evolution of the economic, social, environmental and institutional (governance) systems (see the preface to this special issue). Within this concept, the environmental dimension plays a specific role, as the natural system serves as the surrounding medium, in which the social, institutional and economic systems are embedded. Maintaining environmental functions (such as the regulation of essential ecological processes and life support systems or the provision of natural resources) is crucial for long-term economic development and human wellbeing environmental governance thus must be regarded as one of the core elements in the broader identification of governance approaches realising sustainable development (EEAC, 2003). The global socio-economic system can only be environmentally sustainable, if the total volume of resources extracted does not overburden the environment, while being sufficient to maintain the functions of society and the economy. Flows of energy and materials activated for socio-economic activities together with intensive use of land represent the main anthropogenic pressures on the environment, entailing most environmental problems currently on the political agenda (for an overview see EEA, 2003). The EU recently emphasised the need to speed up the pace of reforms to improve the state of the environment, both in Europe and internationally (European Commission, 2003a). This becomes in particular challenging, as the Lisbon Strategy (European Commission, 2002) defines the general goal of an annual economic growth rate of 3%. Consequently, decoupling of economic growth from the use of natural resources and the production of waste and emissions is regarded as the overall goal of environmental governance and the core strategy to reconcile environmental protection and continued economic growth (European Commission, 2003b). From the

3 Environmental governance in the European Union 33 perspective of an environmentally sustainable development, it is crucial to distinguish between relative and absolute decoupling. When relative decoupling occurs, economic growth is accompanied with lower growth in environmental pressures. Relative decoupling can be observed in Europe with regard to several categories of environmental pressures, such as material flows and energy use. Related indicators illustrate a positive trend, although the absolute amount of environmental pressure is stable or even increasing. Therefore, only in the case of absolute decoupling, environmental pressures are absolutely decreasing also in a growing economy. This requires that the decrease in material, energy and pollution intensity is higher than the economic growth rate (Spangenberg et al., 2002). Absolute decoupling refers to two linked strategies, tackling the two components of environmental pressure, overall volume (quantity) and biochemical impact potential (quality). The main goal of dematerialisation is to achieve an absolute reduction of the aggregated volume of resource throughput through changes in the metabolic efficiency of firms, sectors or regions, a more efficient management of resources as well as changes in consumer behaviour (for example, Hinterberger et al., 1997). Detoxification is focused on the reduction of negative environmental impacts of specific pollutants. From the perspective of the decoupling debate, this paper analyses current trends in governance of environmental sustainability in the enlarged EU. The paper is focused on the policy level of the EU as a whole and its member states, while recognising the increasing importance of actors other than governmental institutions, such as enterprises and non-governmental organisations. We expound that in order to reach environmental sustainability, decoupling must be achieved in absolute terms and provide suggestions for priority issues and instruments to reform current environmental policy strategies towards the realisation of this overarching goal. Section 2 provides a critical review of the status quo of EU environmental governance processes. In Section 3 we use the concept of societal metabolism as a framework for classification of environmental problems and derivation of priority decoupling themes. Section 4 defines general objectives, targets and policy strategies for absolute decoupling. In Section 5, we present a set of macro-economic and sector policy instruments to achieve these targets and present a headline indicator, which should be included in EU headline indicator sets. Section 6 summarises the main findings. 2 Status quo of environmental governance in the EU: a critical review The past 30 years saw a change in complexity and scope of environmental problems in industrialised countries. Up to the 1980s, environmental policy was mainly concerned with the reduction of local or regional environmental degradation through pollution of certain environmentally harmful outputs, such as air pollutants and hazardous wastes. Since the mid-1980s, another type of environmental problem came increasingly to the fore, associated with (global) changes in production and consumption patterns. These problems are typically of a highly complex nature, international or global in scope and with multi-dimensional cause-effect-impact relationships, often characterised by time-lags. Issues such as climate change, loss of biodiversity, unrelenting land use and high levels of energy and resource consumption are part of these new environmental problems. These environmental problems are more closely related to the overall volume

4 34 S. Giljum, T. Hak, F. Hinterberger and J. Kovanda (or scale) of economic activities than a result of the specific potential for environmental harm of specific substances (EEAC, 2003). Along with this trend, a change in the political and institutional framework of environmental policy-making took place in the European Union, characterised by two main features: a broadening of the spectrum of actors towards a multi-level, multi-actor governance system, with an increasing importance of levels of governance other than the nation-state, and a change in steering approaches away from a virtual monopoly of regulatory regimes towards a mix of policy instruments, including economic and voluntary measures (Hey et al., 2003). These trends are also reflected in the European Union s pillars for a renewed environmental policy (European Commission, 2003a), which comprise the integration of environmental concerns into all other sectoral policies on the EU and the national levels the development of a new approach of implementation, including the modernisation of the regulatory framework and fostering market-based instruments a wider dissemination of information of the environmental consequences of economic activities in order to foster behavioural changes. State-oriented command-and-control instruments, such as critical load assessment, pollution abatement legislation and spatial and regional planning, were the core strategy pursued at the beginning of environmental policy in the 1970s (and still play a significant role today, see Kraemer et al., 2002). With these types of instruments, local or regional environmental problems such as acidification linked to the emission of environmentally harmful air pollutants could be tackled successfully. For example, volumes of SO x and NO x emissions decreased throughout Europe, due to e.g., fuel switching in industries and the introduction of catalytic converters in cars (EEA, 2004). Along with the changing nature of environmental problems, these traditional approaches were complemented by economic and, more recently, by voluntary instruments. In several European countries, ecological fiscal reforms were implemented, aiming at internalising negative external environmental costs and shifting the tax burden away from employment towards environmental damage. However, this tax shift is, in general, taking place at a very slow pace, thus so far having limited effect in practice (EEA, 2003). Subsidies are in general falling throughout Europe, but many of them still have a damaging effect on the environment, in particular in the transport and energy sector (EPSD, 2004). Voluntary instruments (such as negotiated agreements, self-commitments and environmental management systems) have significantly increased in importance in the portfolio of environmental policy instruments of both government and firms in the past few years (Jordan et al., 2003). Today, several hundred of negotiated agreements are in force throughout Europe, focusing on climate-change abatement activities, reduction of air pollutants, and increase of recycled products and materials. Environmental and sustainability impact assessments and strategic environmental assessments represent the most recent developments of environmental policy tools, aimed at making policy development anticipatory and more coherent and effective. However, application of these new instruments is patchy and standardised guidelines for their coverage and use are still missing (EPSD, 2004).

5 Environmental governance in the European Union 35 The development of these new policy tools and instruments also reflects the increasing importance of new modes of environmental governance. In line with what is stated in the European Commission s White Paper on European Governance (European Commission, 2001), these new approaches aim at relieving the legislator by reducing the overall volume of legislation and at fostering participation and responsibility of new policy actors, based on principles of voluntarism and subsidiarity, thus shifting political authority away from the state to private actors. With regard to policy processes, current environmental policy at the EU level is characterised through several parallel strategies of relevance for the decoupling issue (see Hinterberger and Zacherl, 2003 for a critical review): the Sixth Environmental Action Programme (EAP) setting out guidelines for European Environmental Policy as well as defining the core environmental policy input to the EU sustainability strategy the Environmental Policy Assessment Process evaluating and reporting progress in the implementation of the sixth EAP in the context of the Lisbon Strategy the Cardiff Process describing the sectoral strategies for the integration of the environmental dimension into other policy areas the European Strategy for Sustainable Development (EU SDS), adopted at the European Council in Gothenburg along with the national sustainable development strategies, which are adopted within the Johannesburg Plan of implementation. The sixth EAP names four key environmental priority areas that require urgent action by the Community: climate change; nature and biodiversity; environment and health and quality of life; and natural resources and wastes. The goals of the sixth EAP are implemented through so called thematic strategies. While decoupling requirements are most explicitly addressed in the Thematic Strategy on the Sustainable Use of Natural Resources, they also have direct relevance for the policy areas of waste and climate change, and indirect effects on biodiversity conservation and health issues. The most significant deficit observed in the currently available background documents for the preparation of the thematic strategy (for example, European Commission, 2003b) is that decoupling targets are only very vaguely defined. It often remains unclear, whether the EU aims at relative or absolute decoupling, as quantitative and measurable policy targets are in general missing, in particular concerning material and energy inputs to economic activities. However, it is acknowledged that although relative decoupling is taking place with regard to e.g., material and energy use negative environmental impacts are still rising, suggesting that stronger efforts are necessary for an absolute reduction of impacts. The Cardiff Integration Process requested nine different councils, among them key sectors from the decoupling perspective, such as energy and transport, to prepare strategies for the integration of environmental concerns into their policy fields. The process has produced some positive results, such as raising the political profile of environmental integration issues and influencing some sectoral reforms, such as the recent reform of the Community s agricultural and fishery policies (EEA, 2003). However, no generally accepted understanding of environmental integration has been developed in the process so far; thus, individual sectoral strategies differ substantially

6 36 S. Giljum, T. Hak, F. Hinterberger and J. Kovanda and are, in general, also missing quantified goals, timetables and indicators to monitor their implementation (European Commission, 2004a). In the Lisbon process, the dimensions of sustainable development are so far not on equal footing, as economic goals defined by the so-called Broad Economic Policy Guidelines (BEPGs) determine the process to a large extent and the social and environmental ones are added with the intention to make them comprehensive with the economic ones, rather than vice versa (EPSD, 2004). The unbalanced standing of the environmental dimension also becomes obvious regarding the EU structural set of indicators, through which progress of the Lisbon strategy and many other European policy processes are evaluated. In its proposal for the structural indicators to be used for the Spring Report 2004, the European Commission suggested the use of a shortlist of only 14 indicators for reporting. Within this shortlist, only three concern the environmental dimension: greenhouse gas emissions, energy intensity of the economy and transport volume relative to GDP. Only the first indicator can be understood as a real indicator of environmental pressure, while the other two are an interlinked economic-environmental indicator and an economic indicator. These three environmental indicators do not provide sufficiently comprehensive information on human pressures on the environment. In particular, no headline indicator measuring natural resource use is included, which does not allow appropriate assessment of decoupling on the input side of economic activities. However, decoupling on the input side is a necessary precondition for a reduction of negative environmental impacts, as we will set forth in the following section. 3 Societal metabolism: a framework for identifying priority decoupling themes As described above, current EU environmental policies and indicators focus mainly on a few selected environmental issues and therefore miss to take into account the complexity of economy-environment relationships. Environmental sustainability demands a comprehensive and consistent monitoring and management of environmental pressures across all economic sectors, including all environmentally relevant categories (resource use, maintaining of ecosystem functions, etc). Only thereby, shifts of environmental pressures from one environmental media to another (e.g., waste incineration instead of land fills), from one economic sector to another or from one country or world region to another can be captured. Comprehensive analysis is also a precondition for illustrating so called rebound effects, i.e., situations where efficiency gains on the micro level go along with an increase of the overall material and energy consumption on the macro level due to lowering of production costs and product prices, which show a stimulating effect on demand (Binswanger, 2001). The concept of societal metabolism is frequently applied as a comprehensive assessment framework of anthropogenic environmental pressures and used here as a theoretical starting point for identifying priority environmental themes for decoupling strategies.

7 Environmental governance in the European Union 37 Societal metabolism states that the socio-economic system behaves similar to a living organism. In order to maintain its functions, it absorbs materials and energy from the surrounding environment and transforms them into usable products, which are ultimately disposed back to the environment as waste and emissions (Ayres and Simonis, 1994; Fischer-Kowalski and Haberl, 1993). There are two main problems resulting from energy and materials use by the socio-economic system. The first one is the depletion of non-renewable natural resources and/or the loss of capacity to produce renewable resources. In case of non-renewable natural resources, this problem is crucial from the medium and long term sustainability perspective (European Commission, 2003b), whereas in case of renewable resources this type of problem has already come to the fore (e.g., fisheries) and will probably be intensified, e.g., due to the climate change impacts on agricultural production (Fischer et al., 2002). The second problem is the way in which resources are used. In particular disposals of waste and emissions (and also resource extraction activities) lead to a deterioration of environmental quality to an extent that threatens the ecosystem s ability to support human activities, which compromises future social and economic development perspectives. The level of environmental pressure is on the one hand related to the overall volume of resource flows on the input or the output side and on the other hand to the biochemical impact potential (e.g., heavy metals, toxic substances). Consequently, the (local or regional) environmental impacts are determined by a combination of resource use volumes, specific potentials for environmental pressure of different materials/substances and the (local or regional) sensitivity of environmental media. Societal metabolism acknowledges this perspective by providing information on the overall scale of anthropogenic environmental pressures and thus highlighting environmental issues, which would not be explicitly addressed in traditional toxicity-oriented policy approaches. Furthermore, it allows illustrating the links between inputs and outputs. As all inputs sooner or later are disposed back to nature, absolute reductions of material and energy inputs are a precondition for achieving absolute decoupling of negative environmental impacts on the output side. Extraction, production and consumption activities all contribute to negative environmental consequences. Environmental impacts of mining of metals, non-metallic minerals and fossil fuels are associated with structural changes to the landscape which cause harm to ecosystems and loss of biodiversity. Extraction activities also increase local demand for water and electricity and lead to contamination of surface and ground waters (Miranda et al., 2003). This aspect is in particular relevant with regard to Europe s global environmental responsibilities, as an increasing part of non-renewable resources is imported from other world regions (see also below). Concerning extraction of biomass, the main negative impacts stem from large-scale agro-industrial (and forestry) production, characterised by a significantly lower biodiversity than smaller-scale (organic) farming, maintained with the massive use of mineral fertilisers and pesticides. The release of residues (including heavy metals) leads to eutrophication and accumulation of toxic substances in food chains (for example, Tiktak et al., 2004). Concerning output flows from processing and consumption activities, climate change is the most prominent example of an environmental problem of the new type, which is related to the overall volume of emissions of greenhouse gases rather than their toxicity (IPCC, 2001). Climate change is likely to cause more extreme weather events (hurricanes, floods, forest fires) with severe negative implications for integrity of ecosystem functions (e.g., agricultural and forestry systems) and for quality of life

8 38 S. Giljum, T. Hak, F. Hinterberger and J. Kovanda (e.g., health), leading to a significant increase in the resulting economic and social costs (European Commission, 2003a). The second important issue regarding output flows is solid waste generation, which is expected to increase over the next decade, concerning household, industrial and municipal waste (EEA, 2003). The necessity of waste treatment influences negatively both ecosystems and human environment in residental areas due to leaching of toxic substances into soil and water from landfills, or emissions from combustion of waste. To summarise, the priority environmental issues on which decoupling efforts in Europe (in its global context) should focus are mining of non-renewable raw materials (contamination of surface and ground waters, loss of biodiversity), extraction of biomass in large-scale agro- and forestry ecosystems (loss of biodiversity, eutrophication, accumulation of toxic substances in food chains), supply of fossil energy (global climate change) and waste generation (toxic emissions from leaching of dumps and combustion of wastes). Consequently, key economic sectors to be involved in decoupling strategies are mining and industry, construction, energy, transport and biomass extraction sectors (agriculture, forestry, fishery). 4 Goals and strategies for absolute decoupling A growing number of empirical studies suggests that current levels of natural resource use are not sustainable on a global level (for example, UNEP, 2002; WWF et al., 2004). Although a rapidly increasing share of global environmental pressures is generated in newly industrialising countries, in particular in East and South Asia (Myers and Kent, 2003), rich industrialised economies are still responsible for the major part of natural resource consumption and waste and emissions production. Thus these countries hold a special responsibility for innovating products and technologies delivering long-term quality services with significantly reduced inputs of materials, energy and land and less polluting disposals into nature. This transformation is urgently needed, not least as an example for the rest of the world that alternative and environmentally benign production and consumption patterns are economically feasible. Considering the fact that current human pressures on the environment are already beyond sustainable levels, at least in the affluent Northern countries, relative decoupling, as achieved in Europe with regard to e.g., material inputs and energy use (EEA, 2003), is not enough. Economic growth offsets efficiency gains and negative environmental impacts are therefore still on the rise (European Commission, 2003a). Therefore, the overarching goal of environmental policies must be defined as absolute decoupling, thus decreasing total environmental pressures in absolute numbers (Spangenberg et al., 2002). Concerning the material and energy metabolism, a reduction by a factor two globally, and a factor ten for industrialised countries within the next 50 years have been formulated as overall targets, in order to achieve the necessary decrease of negative environmental impacts (Schmidt-Bleek, 1994). This reduction of material and energy resources should go along with a de-intensification of land use. These overarching goals must be transformed to refined targets for specific environmental themes, such as those identified above, and relevant material categories (e.g., fossil fuels, renewable energies, greenhouse gases, solid wastes, etc) (see Bringezu, 2002 for German examples). Unfortunately, the existing policy commitments at the European level are, in general vague and do not provide good

9 Environmental governance in the European Union 39 guidance on actual decoupling targets (see Giljum et al., 2004). On the contrary, in Japan, a number of quantitative targets for indicators based on material flows have recently been agreed to in the national plan for a recycling-based society (Government of Japan, 2003). On the input side, resource productivity calculated as GDP per Direct Material Input should achieve 390 thousand yen per ton in 2010 (about 40% improvement compared to 2000), while on the output side, the final disposal of solid waste is to be reduced to 28 million tons (almost 50% improvement compared to 2000). The implementation of such long-term environmental policy targets is a necessary precondition for achievement of absolute decoupling, as investments in innovative eco-efficient technologies require predictable future market framework conditions (EEAC, 2003). At the same time, policy strategies should give freedom to market processes to perform the necessary processes of innovation and structural change with minimum costs (Hinterberger et al., 1996). Traditional environmental policy has focused on detoxification on the output side of the economy. However, as explained above, environmental policy strategies should acknowledge that the most pressing current environmental problems are to a large extent related to the overall scale of resource use and that a more systemic view on the economy-environment relationship is required. Thus, input-oriented policy strategies, such as the concept of dematerialisation, should be further supported, as they tackle problems at the source and intend a reduction of the potential of environmental harm according to the precautionary principle, rather than only combating symptoms. Furthermore, they are often characterised by higher cost effectiveness and allow achievement of targets with less effort in control compared to output-focused strategies. This results from the fact that on the input side, only about 150 abiotic materials are extracted from the natural system, whereas on the output side, about 100,000 substances from the chemical industry alone have to be handled, which interact with both the ecosphere and other substances in various ways. In addition, the number of entry points for abiotic raw materials (metals, minerals, energy carriers) are limited compared to the numerous exit points (Spangenberg et al., 1999). It is recognised in Europe and internationally that decoupling should be achieved through shifting towards sustainable production and consumption patterns (European Commission, 2004b). These strategies focus increases in the resource efficiency of production and consumption activities, the development of new materials, increasing durability and recycling rates of goods, implementation of product-service systems and new resource-extensive lifestyles (for example, Bartolomeo et al., 2003; Røpke, 2001; Spangenberg and Lorek, 2002). With regard to EU policy initiatives, the Cardiff integration process could be one core strategy to foster decoupling efforts at the European level and thus contribute to the implementation of the EU SDS, as it involves a number of key economic sectors responsible for large shares in EU natural resource and energy consumption and generation of waste and emissions. However, as the European Commission (2004a) states in its recent stocktaking, the Cardiff process needs clearer signals of leadership by the European Council, in order to be pursued with more vigour. It needs to be revived and re-tuned, focusing on increasing coherence of objectives and linkages between the different sectoral strategies. Furthermore, the development of clear operational policy targets, a consistent set of indicators and binding time frames are required, along with regular monitoring, review mechanisms and enforceable deadlines. Environmental policy integration should also be promoted at the level of the member states, within the

10 40 S. Giljum, T. Hak, F. Hinterberger and J. Kovanda framework of a harmonised reporting system and other modes of information exchange in order to foster trans-national policy learning and ensure a long-term and stable integration process (Kraemer et al., 2002). Finally, a crucial point refers to the international dimension of EU environmental policies (see the paper by Ruddy in this special issue for more details). In the EU SDS, the European Council states that production and consumption activities within the EU borders have impacts on other parts of the world and increase the pressure on the environment (particularly in developing countries). Thus the links between trade and environment and problems related to emissions with global environmental impacts (such as CO 2 ) have to be taken into account in order to guarantee that the goal of achieving sustainability within Europe fosters sustainability on a world-wide scale at the same time. This becomes particularly relevant, as recent studies analysing the external trade relations of the EU from a biophysical perspective revealed that physical imports and associated indirect material flows are growing and increasingly substituting domestic material extraction; in particular with regard to fossil fuels and metal ores (Schütz et al., 2004). This implies that an externalisation of environmental pressures through international trade is, to some extent, taking place, helping Europe to achieve relative decoupling in terms of natural resource use, while shifting negative environmental consequences to other parts of the world. European environmental governance should fully integrate the demand of the EU, that a transformation of EU production and consumption patterns towards decoupling must go along with positive impacts on transitions towards sustainability in all other world regions (EPSD, 2004). This international dimension should be recognised in the evaluation of the Lisbon strategy through the Spring Summit Synthesis Reports, and the set of EU structural indicators should be amended accordingly. 5 Instruments and indicators for absolute decoupling As described above, EU environmental policy is increasingly focusing on voluntary (and market-based) instruments. If these trends continue, this shift bears the threat of leading to the domination of a new single form of environmental governance, which alone would not be capable of solving the large variety of unresolved and persistent environmental problems. What is needed is the continued application of the whole range of steering mechanisms ranging from voluntary de-centralised solutions to traditional regulations through democratically accountable nation-state institutions, depending on the environmental problem to be tackled (Hey et al., 2003). This pluralistic approach becomes particularly relevant in the light of the EU enlargement, as it will be essential to draw upon a diverse range of policy tools to address the widening spectrum of environmental problems associated with the enlarged EU (EEAC, 2003). Furthermore, a multi-dimensional approach is demanded, acknowledging that apart from DG Environment a number of other DGs in the EU Commission (such as agriculture, transport and energy) hold competences, which have close relation to environmental issues. With regard to the overarching policy goal of absolute decoupling in terms of quantity and quality and the required shift towards sustainable production and consumption patterns, which type of instrument should be implemented for which aspect of the problem? Traditional regulation is best implemented for environmental problems,

11 Environmental governance in the European Union 41 which require reduction of specific substances with high potential for negative environmental impacts (quality aspect of decoupling), e.g., by posing a direct and immediate threat to human health or the natural environment (air pollution, toxic substances). In comparison to market-based instruments, however, these instruments are possibly economically inefficient and thus likely bear high costs in implementation and control. Additionally, they do not provide incentives to decrease environmental pressures beyond the agreed critical loads. Market-based instruments provide price incentives and disincentives and allow private and public economic actors to achieve environmental objectives in a cost-effective way, including flexible adaptation according to people s behaviour and self-interest. Compared to traditional regulation, market-based instruments are drivers for technological innovation, as within a redesigned framework of taxes, subsidies and certificates oriented towards a reduction of natural resource use and related emissions investments in higher eco-efficiency are economically rewarding, even beyond fixed limits. These instruments are the preferred choice for pursuing absolute decoupling of environmental pressures and economic development, in particular if charged at the input side of the economy (i.e., in energy consumption, material use and land use) (see also European Commission, 2003a). Voluntary instruments can contribute towards the overall decoupling goal, as enterprises are encouraged to take economic advantage of environmentally benign behaviour, e.g., through cost reduction or positive marketing implications. Also information and education instruments, such as eco-labelling, play an important role in changing consumers attitudes towards a higher awareness of environmental issues (European Commission, 2004b). However, missing of environmental policy targets (e.g., reduction of greenhouse gas emissions or reduction of resource use) is a clear threat, if no effective monitoring processes are in place and sanction mechanisms exist in the case of non-compliance. Thus, voluntary and education instruments are recommended to complement legislation and market-based instruments rather than to substitute them. Generally, the most effective approach in environmental protection is based on the use of a mix of the available policy options. The well-balanced mix should secure keeping the basic principles of good environmental governance: making decisions at the appropriate level, providing access to information and participation, and integration of environmental aspects into all decisions (WRI, 2003). This requires diverse types of instruments to work alongside: newly introduced market-based instruments together with traditional ones, with some of them having an effect in the long run, others in the short run. It also is likely required for such a policy-mix to change over time. The suitable mix of instruments should be the result of a political process, taking into account environmental, as well as economic and social objectives. A well designed strategy for absolute decoupling needs to include policy instruments on different governance levels and must address all key economic sectors (see also Giljum et al., 2004). Table 1 depicts the cornerstone elements of such a policy instrument mix.

12 42 S. Giljum, T. Hak, F. Hinterberger and J. Kovanda Table 1 Policy instruments for absolute decoupling Level/sector of implementation Macro-economy/ consumer-oriented Mining and industry Mining and industry Construction Energy Transport Agriculture Targets (quality or quantity aspects of decoupling) Reducing consumption of material-intensive products Increasing material- and energy-efficiency and recycling in mining and industrial production processes Change of material base from non-renewable towards bio resources Reduction of materialintensive and non-recyclable construction minerals and of built-up land areas Reduction in overall (in particular fossil) energy use and increasing share of renewable energy resources Reduction of freight transport and shift towards environmentally benign transport modes Decrease of (over) production volumes; increase of organic production and production of energy and bio material crops Source: Adapted from Giljum et al. (2004). Instruments Implementation of a labelling system for life-cycle wide material inputs for all consumer products Extension of eco-audit schemes to include dematerialisation aspects Technical standards for material and energy efficient technologies and products Full implementation of the concepts of Integrated Product Policy and Extended Producer Responsibility Public support of R&D activities for development of new technologies (e.g., micro technologies) Eco-efficiency standards in public procurement Material input tax on metals and industrial minerals Removal of subsidies, e.g., in coal mining sector Public support of R&D activities for development of new industrial materials Urban planning instruments (including standards for resource extensive construction and waste minimisation) Funds and subsidies supporting the development of new eco-efficient and renewable building materials Material input tax on construction minerals Green public procurement in public construction Levy on new built-up land European-wide harmonised energy taxes Removal of subsidies of environmentally harmful energy sources (e.g., coal) Active support for renewable energies (small-scale water power plants, wind, biomass, photovoltaic) Reduction of subsidies for road and air freight transport Road pricing systems Public support for investments in infrastructure for public transport and for railways and inland waterways Further removal of subsidies based on production volumes Grants dependent on multi-functional use of agricultural land Public support for organic agriculture

13 Environmental governance in the European Union 43 The evaluation of success or failure of such a mix of policy instruments requires appropriate indicators. In Europe and internationally, decoupling indicators are used to assess a broad spectrum of environmental issues. The OECD (2002) has proposed a set of 31 decoupling indicators 16 indicators relate to environmental themes such as climate change, air pollution, or waste disposal, and 15 indicators focus on specific sectors such as energy, transport or agriculture. Furthermore, these decoupling concept and related indicators are also part of many national strategies and policies, such as the Netherlands National Environmental Policy Plan, which formulates concrete decoupling goals for different sectors, such as the transport sector (VROM, 2003). The EU follows a headline indicator approach in its set of structural indicators. This set comprises two decoupling indicators: Energy intensity of the economy and Volume of inland freight transport relative to GDP. As already stated in Section 2, these indicators do not allow sufficient assessment of decoupling processes, as the focus is only on selected issues, which, in the case of transport volume, illustrate an economic driving force rather than an environmental pressure. Furthermore, the decoupling indicators, as such, do not inform about progress towards reduction of environmental pressures in absolute terms. We argued above that the focus of environmental governance strategies should increasingly be on the input side of the economy, as a prerequisite to achieve substantial progress towards reduced negative environmental impacts. Therefore, the set of structural indicators should be extended by an indicator capturing the overall level of natural resource use of a country or world region. From the existing indicators which can be derived from national material flow balances (see EUROSTAT, 2001 for details on the methodology), the indicator of Total Material Consumption (TMC) would be most suitable. TMC describes the consumption of materials in a comprehensive manner, comprising domestically extracted and imported materials, including their so called ecological rucksacks, i.e., material and energy that were required abroad in order to produce imported goods. TMC is also additive across countries, as exports are subtracted from the national material balance. The most important shortcoming of this indicator is the still limited data availability for its compilation, in particular, concerning the ecological rucksacks of internationally traded products. In order to improve the data situation, an ongoing European research project (Modelling opportunities and limits for restructuring Europe towards sustainability, MOSUS) performs calculations of ecological rucksacks of European imports in a global economic-environmental modelling framework (see for more information on this project). 6 Conclusions Although EU environmental policy emphasises decoupling of environmental impacts from economic growth as the key strategy to achieve environmentally sustainable development in Europe, environmental policy processes are to a large extent missing measurable decoupling targets. Therefore, a crucial next step in the elaboration of implementation strategies, such as the thematic strategies within the sixth EAP, is the formulation of concrete reduction targets, such as recently adopted in the Japanese plan towards a recycling based society. We argued that, in order to achieve reduction of negative environmental impacts, absolute decoupling is necessary and efforts should focus on the input side of economic activities. Achievement of absolute decoupling requires ambitious action across a large number of economic sectors and coherence of

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