European Air Pollution Laws Shown Not to Harm Competitiveness

BRUSSELS, Belgium, May 6, 2004 (ENS) - There is virtually no evidence that air pollution legislation in the European Union has damaged the competitiveness of European industry, according to a consultancy study released by the European Commission's Enterprise Directorate. The study was ordered following an EU conference on industry's environmental performance last November, at which competitiveness concerns were a prominent theme.

Focusing just on air pollution legislation, the Commission's study picks apart the various ways in which it has been claimed that EU controls could be damaging industry and demolishes them.

Air pollution standards in the EU and in major trading partners the United States and Japan are broadly similar, although there are detailed differences.

European legislation tends towards "command and control" regulation more than America's, but in both regions there is a trend towards greater use of economic instruments, which tend to have lower costs to industry.

Emissions rise from an oil refinery in Teesport, England (Photo courtesy FreeFoto)

More important than the four-fold difference is the fact that all the costs are so small as to be unlikely to have competitiveness effects.

EU air pollution controls are indeed stricter - and more strictly enforced - than in trading partners such as China, that are not members of the Organization for Economic Cooperation and Development (OECD), the study concedes.

However, China does have a substantial body of legislation, in some cases comparable with that of the industrialized OECD countries, and there is growing pressure for air quality improvements in China.

Even allowing for lower air pollution standards in developing countries, there is no real evidence of industry relocation in response. In any case, it is clear that labor costs and access to market are much more important than environmental legislation, the study concludes.

In general, air pollution legislation costs less in practice than is predicted before it is passed, the study found.

And though there is some evidence of increased costs, these are usually small in relation to wider price effects or other factors. One example given is that whereas it was predicted that EU vehicle emission controls introduced since 1993 would boost new car prices by up to 20 percent, in practice prices fell by seven percent in real terms.

While attempting to set the historical record straight, the study suggests that the same arguments will have to be fought again over future air pollution changes. Specifically, it notes that the European Union is continuing to tighten its legislation, whereas there are no such plans in Japan, and draft U.S. policy would actually weaken controls in some respects.

EU Enterprise Commissioner Erkki Liikanen of Finland (Photo courtesy European Commission)

Next year, the European Commission is due to propose a new EU strategy on air pollution growing out of the Clean Air for Europe program. Taken together, these initiatives "are likely to have very large effects on future air pollution policy and EU industrial performance," the study notes.

At last November's conference, EU Enterprise Commissioner Erkki Liikanen said that an EU communication on sustainable production due out this year would recognize the need for better lawmaking, including independent, nonpolitical impact assessment of new legislative proposals.

Assessments would have to look at "real impacts" of laws on industry, including "cumulative costs" through extra human resource requirements, and the risks of new rules forcing delocalization of industry or even deindustrialization.

{Published in cooperation with ENDS Environment Daily, Europe's choice for environmental news. Environmental Data Services Ltd, London. Email: envdaily@ends.co.uk; Website: http://www.ends.co.uk }