Environment and how its issues should be tackled through public policy

A fruitful and conducive dialogue with a view to creating proper awareness of the use of environment must be followed on between the action groups and the environmental authorities    

It is necessary, first, to recognise and appreciate the role played by action groups, however much such actions represent illogically driven extremist biases, and then move for capacity building in these groups, so that their intervention would be a responsible and informed intervention for the common good of the society. The new challenge faced by public policy authorities on the protection and the development of environment is, thus, the most difficult and complex phase of the evolution of the environmental policy action by them

In the previous part

In the previous part1, we discussed how environment is used by everybody to dump the waste-matter that is essentially produced as a byproduct of all the economic activities, namely, production, distribution, and consumption. This waste-matter is an undesired product called ‘bads’ compared to the desired products called ‘goods’. In this sense, environment is the fifth factor of production because without environment, no economic activity could be undertaken. However, unlike other factors of production, environment is freely available for dumping since there is no one holding property rights over it and impose a price for its use. 

The tendency is to use environment to the maximum point until it becomes a nuisance. Given this situation, public action in the form of the production of a public good is needed to regulate environment so that society at global, regional, and local levels could reach the optimal level of using environment. To address the issue of the absence of property rights, sovereign governments have chosen to ‘nationalise environment’ and regulate it through their public policy arms.

We continue from this point.

Society’s objective

Society’s objective of exercising collective control over environment would have been not merely for the imposition of a penalty system but using its scarce resources for upgrading the environmental quality as well. Hence, the nationalisation of environment by the state did not serve society the way it would have done. A second deficiency in this approach was that bureaucracies failed to understand why they were created to manage environment. The basic complementarity between human action and environment requires the understanding that environment should be used for the benefit of the mankind. 

If society’s objective has been to raise production, create wealth, uplift the well-being of members, alleviate poverty and move forward in the development path along with the rest of the world, a greater demand for using environment as a dumping ground of the resultant waste-matter is needed. This necessitates the authorities to draw a compromising line between the use of environment and the attainment of society’s objectives. Hence, rather than viewing everyone who uses environment as offenders who should be penalised, authorities should function as facilitators of the development momentum.

Public policy evolution

In the evolution of public policy, a multitude of policy action was taken by environmentally concerned authorities. They included the following:

(a) Prohibition of the use of environment with respect to certain activities – e.g. timber harvesting, protection of fauna considered as endangered species, etc.

(b) Granting limited licenses in certain identified areas to prevent over-exploitation – e.g. river sand mining, elephant taming and culling, gem mining and mineral prospecting, etc.

(c) Setting standards for the use of environment in cases where citizens are permitted to use environment either under the licensing system or otherwise – e.g. waste disposal standards applicable to industries, public health standards for foods and drugs, etc.

(d) Introduction of approval systems for ordinary economic activities to address environmental concerns – establishing the need for obtaining an approval from an environmental authority.

Weaknesses of bureaucracy

All the above methods had the general weakness of imposing a bureaucratic role over the citizens leading to several implications.

First, the bureaucracy which is vested with absolute discretionary powers will suffer from what economists call the ‘rent seeking syndrome’ – desire to use the discretionary power to maximise personal utility function rather than maximising the objective function of the bureaucracy. This creates a significant divergence between what society envisioned to attain and what the bureaucracy attains in the field, leading to public dissatisfaction, criticism, fault-finding and eventually ridiculing an organisation set up with noble objectives. The result is the proliferation of corruption on the one hand and opening opportunities for those who are willing to pay rents to escape environmental protection rules and laws, on the other. Thus, the availability of this other path would make the legal structure for the protection of environment impotent.

Second, with a high level of corruption and inactivity in environmental protection, governments, misdiagnosing the ailment, may tend to tighten both the environmental and the anti-corruption laws, thereby raising the cost of enforcement, an additional burden on society. For this purpose, a series of bureaucracies over the existing bureaucracies need be set up, such as mobile squads, anti-corruption bodies, special courts and legal systems etc. Thus, instead of using the scarce public resources for protecting environment, the public policy will waste away resources for the institution and administration of systems which do not serve the purpose. The experience world-wide in this respect has been that the authorities would move away from the initial target by trying to rectify one mistake by making another mistake, eventually ending up with a series of mistakes.

Third, an implication arising from the high enforcement costs would adversely interfere with the proper resource allocation function of the economy. Environment, like any other resource, should be subject to the same cost-benefit laws to use resources which have other alternative uses, optimally. The tendency with a growing bureaucracy is that the cost factors are relegated to a secondary consideration. Accordingly, instead of deciding on the level of expenditure by comparing with the underlying benefits, the public policy may choose to spend an infinite volume of resources for the protection of environment. No society can afford to go by this rule, since resources are scarce and the use of all the resources for environmental protection would leave the society without any prospect for advancement.

Remodelling public policy

In view of these deficiencies, public policy was re-modelled to move away from the bureaucratic discretionary rule and introduce market simulation tactics. The advantage of the market simulation has been that it does not generate rents for the bureaucrats, but for the society, as it does not adversely interfere with the resource allocation function and thereby minimises the costs bringing in a greater cost-efficiency. The underlying rationale behind this approach is that environment need be used for the benefit of society, its objective should be to keep the pollution levels at an optimal level rather than at a minimum level, and the users of environment should pay a price, determined competitively, for using the same.

Methods of public policy

Thus, the new public policy took the following form:

(a) Auctioning of environmental rights at competitive public auctions, so that the users would pay the price determined in the market. This also leads to politically popular, but illogical solutions such as the call for banning the use of polythene which ignores the cost of the alternative, viz., the use of paper, at the expense of trees, risk of deforestation and other associated implications and having to bear high costs. The issue of polythene is not polythene per se, but bad polythene disposal methods. Other examples of using the market method are the auctioning of the gem/other mineral mining rights, elephant capturing rights, etc. Here, the bureaucracy simply functions as an auctioneer on behalf of society, and its role constitutes the mirror image of procuring for the government at the lowest cost, (i.e. in the mirror image, selling public property at the highest price).

(b) Creating a secondary market for environmental rights, so that primary owners could exit the right if it proves to be unprofitable with a minimum loss or gain a capital profit if the initial right proves the opposite. The well-ordered secondary market leads to further sophistications such as the development of derivative products adding value to the market activities. In this case, public policy will be confined to enforcing contractual arrangements, prudential regulations and oversight of the market activities.

(c) Creating a separate market for positive contributions made towards the development of the environment or the reduction of the pollution levels. As argued earlier, the present policy package does not consider the beneficial action by individuals/corporates for the development of environment. Since this generates substantial external benefits, both locally and globally, there is no incentive for such action. The market simulation model requires the bureaucracy to give patent rights to such developers, enforce legal rights and facilitate the trading of such rights for personal benefits.

Thus, though the market simulation models are better approaches for societies to handle the environmental issues, the bureaucracy, due to lack of awareness, training and above all, the reluctance to lose the rent-earning opportunities, have kept a blind eye on its beneficial contributions.

If society’s objective has been to raise production, create wealth, uplift the well-being of members, alleviate poverty and move forward in the development path along with the rest of the world, a greater demand for using environment as a dumping ground of the resultant waste-matter is needed. This necessitates the authorities to draw a compromising line between the use of environment and the attainment of society’s objectives. Hence, rather than viewing everyone who uses environment as offenders who should be penalised, authorities should function as facilitators of the development momentum

Dissatisfaction about public intervention

The result of this has been that the emergence of a growing dissatisfaction in society about the action taken by public authorities to handle the environmental issues. It has led to a further undesirable corollary in the form of militant action by voluntary groups, by assuming responsibility for protecting the environment. These action groups which hold such extremist views as given below have become a hindrance to continued economic advancement of societies.

(a) They believe that any disposal of waste-matter to environment leads to environmental pollution and therefore it should be stopped at all costs. (This view is based on a lack of awareness of the Nature’s assimilative role and that economic activities, producing both goods and waste-matter as a package, require the use of environment as a dumping ground).

(b) They hold the view that the cleanliness of environment should be maintained at 100 percent level (or conversely, pollution at zero level) and for that purpose, the society should spend an infinite quantum of resources. (This arises from a misunderstanding that resources are available to a society in plenty and there is no need for making careful choices among alternatives).

(c) They also tend to give a good certificate to themselves as responsible users and protectors of environment, while condemning the rest in society as abusers and offenders. Hence, the use of violence on others is justified for their noble crusade. (This arises out of the ignorance that environment must be used by everyone, irrespective of any social division, and all are responsible individually and collectively, if there is degradation in its quality, threatening the existence and survival of species).

Demand for denationalisation

The corollary of this new development has been that a demand for the denationalisation of environment in favour of these action groups, indicating a reversal of the earlier policy of nationalising environment by the state. The imminent danger of such a policy, if acceded to, is the illogical and irresponsible protection of environment to the detriment of economic activities, well-being of the citizens and, in the developing world, poverty alleviation and opening of new opportunities for the less-privileged classes. While the inherent shortcomings of the bureaucratic policy action can be successfully addressed, handing over the responsibility of protecting environment to action groups would take the societies backward along the poverty paths.

Hence, it is necessary to re-orient the public policy to co-exist with pressure groups, while still maintaining a sound and viable environmental policy that would continuously bring benefits to everybody in society. The issue at hand is how, in democratic societies, to accommodate the concerns of the citizens in public policy actions, while at the same time, managing and developing the environment responsibly, without hindering the economic growth momentum being pursued by societies. A fruitful and conducive dialogue with a view to creating proper awareness of the use of environment must be followed on between the action groups and the environmental authorities.

For this purpose, it is necessary, first, to recognise and appreciate the role played by action groups, however much such actions represent illogically driven extremist biases, and then move for capacity building in these groups, so that their intervention would be a responsible and informed intervention for the common good of the society. The new challenge faced by public policy authorities on the protection and the development of environment is, thus, the most difficult and complex phase of the evolution of the environmental policy action by them.

Summary

The purpose of this paper was to identify the economic rationale of using environment and assess and review the main issues relating to the public policy on environment. It was shown in the paper that environment could be regarded as the fifth factor of production necessary for all the major economic activities. This arises from the fact that economic activities give rise to, as a package, both goods and bads and environment must be used as a dumping ground of the bads.

Given Nature’s assimilative capacity, dumping of waste-matter to environment does not necessarily lead to environmental pollution. It arises only when Nature’s assimilative capacity is over-stretched. This occurs due to the absence of both the property rights over environment and, therefore, a pricing system for its use. The initial public policy action towards environment has been the establishment of bureaucratic authorities over environment, an action akin to acquiring property rights over environment by nationalising the same.

However, the bureaucratic authorities which basically functioned as penal institutions failed to deliver the main purpose for which they were set up. The growing dissatisfaction in society about the performance of these authorities has led to the emergence of environmental action groups calling for permitting them to act for the protection of environment. This call can be termed as a call for denationalising environment in their favour, so that they could do a more honest and responsible job. The new challenge of public policy authorities is, therefore, how to co-exist with such pressure groups, while at the same time, ensuring a responsible management of environment. 

Footnote:

1https://www.ft.lk/columns/Environment-and-how-its-issues-should-be-tackled-through-public-policy/4-779827

(The writer, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at [email protected].)