REGULATION AND ENVIRONMENTAL TECHNOLOGIES:
KEY ISSUES AND CHALLENGES
G. Bruce Doern
Professor, School of Public Policy and Administration
CarletonUniversity
A Paper prepared for the National Roundtable on the Environment
and Economy, Government of Canada.
August, 2004
CONTENTS
Page
Executive Summary 1
INTRODUCTION 3
CORE DEFINITIONS 4
THE CHANGING NATURE OF REGULATION
IN THE INNOVATION ERA 8
- Smart regulation
- Command and Control Versus Flexible,
Incentive-Based, and Performance-Based Regulation
- Multi-level regulation
- Complex regulatory regimes
- Risk assessment, risk management and precaution
in frameworks for science-based regulatory regimes
- Regulatory planning and priority-setting
- Regulatory anecdotes, data and information
ENVIRONMENTAL TECHNOLOGIES AND
REGULATORY INTERACTIONS 21
- Core environment-economy relations and effects
- Regulation as inhibitor versus promoter of innovation
and environmental technologies
- The concept of sector-specific, market-oriented regulation
- Illustrative examples of environmental technology issues
and regulatory interactions
CONCLUDING OBSERVATIONS
AND RECOMMENDATIONS 35
References 39
1
EXECUTIVE SUMMARY
The paper examines key current and emerging issues and ideas regarding the interrelationships between regulation and environmental technologies. The brief and stock-taking nature of the paper must be stressed. The paper highlights key issues but time and space has not allowed a full discussion of issues or of the myriad and dynamic relations involved.
The first section provides the core definitions for the paper. The second section deals with the changing nature of regulation in the innovation era and deals with both regulation as a policy instrument and regulatory governance. The third section examines environmental technologies and regulatory interactions drawing on some published literature and illustrative examples.
Five main concluding observations are presented.
The first and most basic argument to emerge from the paper as a whole is that regulation, depending upon its exact nature, can either foster environmental technologies and their adoption or it can harm and indeed prevent them. Much depends upon the exact design of regulatory programs and regimes and also the complementary use of other policy instruments, all aligned in such a way that environmental impacts are reduced but in ways that also align with basic incentives for efficiency and for political legitimacy and support. The paper also shows that environmental technologies are crucial to the capacity of the regulator to regulate and to monitor environmental impacts.
Second, the discussion of definitions and boundary problems suggests that both the notions of regulation and environmental technologies are not always clear-cut. Any further work by NRTEE on this pairing of concepts, issues and interactions will have to be carefully crafted and thought through. This is especially the case regarding the inclusion of environmental technologies which simply improve/reduce environmental impacts compared to those which are more profound technologies (e.g. the fuel cells versus oil sands illustration in the paper). But it is also the case regarding how to deal with the boundaries of regulation and regulatory governance itself as opposed to the broader combined use of other policy instruments such as taxation, spending and persuasion.
Third, the discussion of issues about regulation in the innovation era in the first half of the paper shows that there are a number of different entry points for thinking about, debating, and conducting modern regulation but these ultimately are all connected and a part of the current regulatory milieu. The issues of smart regulation, multi-level regulation, command and control versus incentive-based regulation, complex regulatory regimes, risk assessment processes and precaution, regulatory planning, and the role of regulatory anecdotes and information, are all a part the regulation-environmental technologies equation.
Fourth, the discussion in the latter half of the paper on environmental technologies
shows that there has been a learning curve in the broad trajectory of the studies from quite aggregate views of regulatory impacts (or feared impacts) on environmental technology to more particular notions as more studies were carried out of actual regulatory/policy experiments tried out by governments, leading to sector-specific market-based regulation. These studies also show that the analyses are often not just about regulatory links with environmental technologies but also about regulatory links to related issues such as investment, competitiveness and productivity.
Fifth, for NRTEE, the challenge is to find three or four areas in a complex field where it could advance practical understanding and debate. There will undoubtedly be different views of what these should be but the author suggests that four areas would make overall sense.
a) One area of work could be devoted to a better actual mapping of what the regulatory-environmental technology regime in Canada actually looks like. This paper has certainly not attempted this but it is a logical task to undertake in follow-up work by NRTEE. b) A further area of work is the development of a greater sense of the available global examples of sectoral regulatory market-based policies. The Jaccard paper discussed in the analysis, sampled only three but a larger sampling would be instructive especially if assessed against his four part test of policy relevance: efficiency, effectiveness; administrative feasibility, and political legitimacy. c) Another area of work would be for NRTEE to take on some greater exploratory work on a potentially profound technology such as fuel cells or biotechnology by assessing what kind of regulatory regime it would need both to foster them and to regulate them. d) A final area of work could be focussed on environmental technologies in regulatory tasks per se. The example of water monitoring in the paper suggests that there are areas where regulatory S&T is not fully appreciated but where environmental agendas are piling more and more commitments on environmental regulators requiring new or adapted technologies tied to testing and monitoring. In short, this is an area not where regulation leads to environmental technologies but rather where regulation (and regulators) need technologies to do their work in the public interest.
The paper also suggests some sources of expertise and research which NRTEE could draw on. The National Research Council has done work on technology forecasting and its institutes have varied research capacities on particular environmental and related technologies. The same is true of several of the federal government labs, especially in Environment Canada and Natural Resources Canada. Other policy research units such as the Institute for Governance, the Carleton Research Unit on Innovation, Science and Environment (CRUISE)and the International Institute for Sustainable Development (IISD) could also be consulted or utilized. Individual authors cited in this paper could also be consulted including Mark Jaccard,Nancy Olewiler and others.
INTRODUCTION
The purpose of this brief issue exploration paper for NRTEE is to examine key current and emerging issues and ideas regarding the interrelationships between regulation and environmental technologies.[1] Central to the analysis is an effort to discuss the key links and interactions between regulation and environmental technologies in contexts where: a) strong regulation may create opportunities for such technologies to flourish; b) where excessive regulation may prevent such technologies from developing; and c) where regulators themselves need appropriate new or adapted technologies to monitor activity and to ensure compliance. The paper relates these issues to debates and policies on: smart regulation; command and control versus incentive regulation; multi-level rule making; complex national and international regimes of regulation including trade regimes; risk-benefit frameworks and precaution; regulatory planning and priority-setting; and the role and limitations of regulatory anecdotes, information and data.
In addition to examining these issues the paper suggests possible areas of research/analysis and discussion which might be especially amenable to a value-added contribution by NRTEE in its future work. It also suggests areas/organizations where complementary or related research can be drawn upon.
It must be stressed that the paper is very much of a stock-taking nature. It highlights key issues but time and space did not allow a full discussion of issues which are complex, to say the least, and where interactions are myriad and varied. It draws on selected and illustrative published literature and government reports and on the author’s own research and research experience in the study of regulatory governance.
The structure of the paper reflects the basic tasks at hand. The first section provides the core definitions for the paper. The second section deals with the changing nature of regulation in the innovation era and deals with both regulation as a policy instrument and regulatory governance. The third section examines environmental technologies and regulatory interactions drawing on some published literature and illustrative examples.
CORE DEFINITIONS
Two core definitional and boundary realms require discussion: regulation itself and the broad nature of environmental technologies.
Regulations are rules of behaviour, backed-up by the sanctions of the state (Doern, Hill, Prince and Schultz, 1999). But such rules can take many forms including:
-constitutional or quasi-constitutional rules;
-rules embedded in statutes and laws;
-delegated legislation or "the regs"
-guidelines;
-standards and codes;
As one moves across these modes and levels of rule-making, the extent and nature of the sanctions by the state (from strong to virtually non-existent) is wide and of course the range is itself fought over by stakeholder interests, NGOs, governments and citizens (Solomon, 2002; World Bank, 2004; Howlett, 2000, 2001). In this paper, it is necessary to err on the side of breadth in defining regulation largely because political and legal reality across countries requires such a multi-level approach.
Though the paper must err on the side of breadth, it is important to realize that a logical and eventually empirical conundrum arises. The wider regulation is defined to be, the more it becomes equated with government and governance as a whole. But at some point governance is not just regulation and the state is more than just a regulatory state. It also involves taxation, spending, persuasion and other ways of trying to ensure that diverse policy goals and values are implemented in democratic life (Palast, Oppenheim and MacGregor, 2003; Doern, 1999).
The two main elements of regulation also need to be kept in mind: regulation making; and compliance and enforcement. To be credible, regulations and rules must be made in a legitimate fashion and enforced or carried out in an effective, efficient and fair manner.
Regulation making processes are the processes through which regulations are promulgated in the first place and also amended. Firms and other stakeholders have concerns about how speedy and effective such processes are. But such processes immediately raise concerns and values about: who the regulators are (e.g. arms-length commissions; ministers, a “statutory person”); which interests are represented in a regulatory body; and the accountability and transparency of such regulatory agencies and their processes (Heritier and Thatcher, 2002; Flinders, 2004).
The second element of any regulatory system is the compliance and enforcement process. This also involves issues regarding how stringent such enforcement is and how one assembles national and international data on stringency. The compliance and enforcement process includes: effective and fair actions regarding the education of persons affected by the rules in question; the provision of incentives to comply; and the actual application of penalties and sanctions, based on some system of inspection by regulators or self-policing and auditing (Sparrow, 2000). Compliance also includes the processes for handling license applications and renewals (or equivalent activity) and the approval of products subject to regulation. It also covers the handling of consumer and citizen complaints and appeals and the development of regulatory service standards.
Regulation making and regulatory compliance and enforcement have both been greatly influenced in the last decade or more by efforts to "reinvent" government, which, in regulatory realms, has often meant the greater use of softer compliance activities and approaches and economic or incentive-based regulation (such as tradeable pollution permits, pollution taxes, and the greater use of voluntary codes (Anderson and Sprenger, 2000; Hood, Scott, James and Jones, 1999; Webb, 2004). Both elements of regulation have also been influenced by debates about the role of science-based regulation and “sound science”, the basic norm in international trade agreements, compared to principles such as the precautionary principle emanating from international and national environmental agreements and protocols (Doern and Reed, 2000). These issues are highlighted further below.
Because of the need for breadth in defining regulation and because of the need to deal with both the elements of regulation sketched above, there are difficult empirical problems in assessing regulation and in comparing regulatory outputs and effects among countries and among levels of government within countries and at the industrial sectoral level. (see more below).
The second core definitional realm centres on environmental technologies. These are normally thought of as technologies which will help reduce adverse environmental effects (effluents, pollutants, emissions) and/or promote and foster sustainable development and sustainable production, in part through approaches which prevent adverse environmental effects from occurring in the first place (Toner, 2004; Jaccard, 2004; Gray and Shadbegian, 1998; Gruber et.al, 1999). Technologies in this context can refer to new products, production processes, construction approaches, and mechanisms of measurement and monitoring. But technologies are always embued with values and social and cultural constructions, meanings and effects (Hughes, 2004; Fukuyama and Wagner, 2001). Environmental industries are often seen as a key feature of the new economy in that they consist of firms which develop and supply such technologies or which put them into effect in their own operations. A key implication of such definitional treatment is that such technologies can be environmental technologies even if they only improve a given environmental situation as opposed to fully “solve” it at some deeper ecological and inter-generational sense of sustainable development (see later discussion of the oil sands).
As with regulatory definitions there are boundary problems in how one conceptualizes environmental technologies. For example, health effects and environmental effects may overlap significantly, a feature that accounts for the many ways in which regulators such as Health Canada and Environment Canada must jointly regulate aspects of a given hazard or product/production processes. In short, environmental technologies may simultaneously or at earlier or later stages also be health technologies and also occupational health technologies. Boundary problems also occur around how one differentiates between technologies and science. The “S” and the “T” are often entwined. Indeed, in the realm of government science, differences are drawn between research and development (R&D) and “related science activities” (RSA), the latter being closer to “regulatory science” and to complex science and technology-based monitoring activities. Monitoring technologies can easily be important environmental technologies (see discussion below of water monitoring).
Another boundary issue occurs with regard to the notion of so-called enabling or transformative technologies. These refer to periods of time and development where economies and societies are transformed by new underlying technological changes such as theintroduction of steam power, electricity, the internal combustion engine or nuclear power (Woodley, 2002). Such technologies spawned a debate about how and whether government’s can practice rational forms of technology assessment and engage in technology foresight processes. The issue of transformative technologies is of key importance in the current era for the simple reason that it is frequently seen as an era when new transformative technologies
are emerging and, equally important, are interacting. These include technologies such as information and computer technology, biotechnology, and nanotechnologies, all of which havelinks to, and potential for, environmental technologies (Fukuyama and Wagner, 2001; Seeman, 2004; Science and Technology Foresight Pilot Project 2003).
Thus both key concepts for the paper have a definitional core that is valid but they also have, almost immediately, realms of collision and overlap with immediately adjacent realms, values and activities in the real world and as seen by elected governments, stakeholders and the public in debates about regulation and environmental technologies.
THE CHANGING NATURE OF REGULATION
IN THE INNOVATION ERA
With these crucial definitional realms as a foundation, we now turn to key issues in how regulation has changed in the innovation era. The innovation era is defined roughly as the era from the late 1980s on when governments increasingly have based their micro economic and competitive policies in the context of an innovation policy paradigm. Such a paradigm involves ideas about continuous product and process innovations encourages and nurtured by national and local institutional systems of innovation (Canada 2002; Doern and Levesque, 2002). The key issues highlighted are: smart regulation; command and control versus incentive-based regulation; multi-level regulation; complex regulatory regimes (especially trade-centred and trade related); risk-benefit assessment and management concepts and related issues centred on the precautionary principle; regulatory planning; and the role of regulatory anecdotes, information and data. Each are discussed very briefly and again there are key links among them to keep in mind because each are partial and limited entry points for the discussion of regulation in the innovation era but they usually each lead to, and may collide with, other ways of thinking about and reforming regulation as a central role of government and governance. Table 1 previews the discussion by providing some core definitions of each.