Long before 1987, however, a joint EC policy emerged. The official legal basis for actions was twofold (and clearly not foreseen in the Treaty of Rome).

· The first one is 'product harmonisation' in a view of diminishing the non-tariff barriers to interstate trade (Article 100)

· The second basis claimed was the Article 2 of the Treaty.

B - Policy developments

1 - Programs

Despite this lack of legal basis, an EU environmental policy emerged.

· 1971 : report from the Commission calling for a joint policy

· 1972 : First United Nations Conference on the Environment

· Oct 1972: the heads of governments of the EC-6 called for an EC environmental programme

· Nov 1973 : the First Environmental Programme 1973-78 is approved.

· 1987 : European Environmental Agency (Copenhagen) : monitors MS' environmental performances.

· The 5^th Programme covers the period up to 1997. 'Towards sustainable development'.

2 - Institutional dimension

· These programs contain policy intentions. They result in Council decisions, in the form of directives, regulation recommendation and non-binding opinions.

· Delayed and incomplete implementation is an important mechanism by which EU-level and individual MS interests are reconciled

3 - The scope

The EU has adopted a considerable number of biding and non binding acts, related to :

· Water quality (quality of drinking, bathing, ground and surface waters ; discharge standards)

· Air quality (concentration and emissions of pollutant)

· Wastes

· Chemical and dangerous substances

· Noise (maximum levels of emission

· Wildlife and country-side protection (regulation of trade in endangered species, protection of sensitive areas)

4 - the 'polluter pays principle' (PPP)

· The 'polluter pays principle'. Originally formulated in an EC Recommendation in 1975.

· At first, many commentators thought that it was an acceptance of the taxation approach, in which polluters pay taxes in unabated pollution.

· It was instead an agreement that governments should not subsidise firms for the costs imposed by anti-pollution regulations. Thus, the PPP is a way of making firms internalise the externality' Þ subsidy for pollution abatement are forbidden (even though transitional costs may be subsided).

· The true rationale for the PPP is fears of 'unfair competition' (since a subsidy per unit abated would achieve the same result as a tax per unit emitted).

C - The problem

1 - The rationale for an environmental policy is fairly clear

- environment is a political (emergence of Green movements) and economic (problem of sustainable growth) concern

- the market cannot deal with pollution, since it is an externality (Marginal Private Cost ¹ Marginal Social Cost)

- The Coase theorem approach (bargaining between agents who possess clearly define property rights) is subject to a set of constraints (legal problems and imperfection of markets) that makes it directly practicable only for states.

- Barraging between private agents supposes a set of public policies.

2 - Why a European policy ?

However, the question is why we should have European rather than national environmental policies ?

I - Why countries may want different national policies ?

A - Different preferences for environmental quality for cultural reasons

· For cultural reasons, different countries may have different perceptions of what is the appropriate level of environmental quality.

· Those differences are reflected in the different degrees of importance of Green movements.

· Germany and the Netherlands / the UK, or southern countries.

B - Different income levels

· Different levels of economic developments and income may affect the national priorities.

· For developing countries which priorities is the increase in GDP, environmental concerns are definitely secondary.

· Within the EC, it is well known for instance that southern European countries were not very keen on developing environmental standards.

C - Different assimilative capacity of their environments

· Different national environmental system may be more or less fragile, and more or less assimilative.

· In other words, a given EQS could be achieved in different countries with different emission standards.

· An example of this, it the UK, whose coastline and fast evacuating rivers make it easier for it to achieve of given EQS (c.f. debate in the 70s over UES v EQS)

D - Conclusion

Diversity in assimilative capacity, national preferences and national incomes leads to different levels of optimal pollution. All that calls for diversity in policy measures.

However, there is a case for a European co-operation due to 1) the transfrontiere nature of pollution flows 2) the completion of the common market (eliminate barriers to trade and prevent distortion of competition)

II - National policies entail barrier to trade (enforcing a common market)

A - Environmental norms can act as non tariff barriers to trade

1 - Environmental norms can act as non tariff barriers to trade

· Environmental norms can act as non tariff barriers to interstate trade.

· E.G. : norms on packaging solvents, car emission, food composition...

2 - The fundamental concern : an internal market

· The fundamental objective of the Treaty of Rome, as the ECJ regularly stated it, is the establishment and functioning of a common market.

· 'Hindrance to interstate trade' was thus the first legal basis ever used to justify some joint EC environmental standards. It was the original concern as well.

B - First environmental norms resulted from 'product harmonisation'

1 - Product harmonisation to establish the common market

· Article 100 is concerned with the approximation of law, regulation and administrative provisions of MS, with a view to the establishment and functioning of the common market.

· Article 100A.4 is concerned with MS who deem it necessary to apply national provisions : "the Commission shall ensure that MSs do not do it as means of arbitrary discrimination or a disguised restriction on trade".

2 - Product harmonisation and environmental norms

· It is therefore in the framework of 'product harmonisation' that the first EC environmental norms appeared.

· Joint EC standards were set up, as part of the program of product harmonisation, to prevent different national standards acting as a non tariff barrier to interstate trade.

· Some of these directives predate the proposal for an EC Environmental Programme. Directives on :

- noise

- emissions from vehicle

- packaging solvents

C - The role of this concern today

1 - Sometimes, conflict arise between legal basis

· Today, conflicts arise over whether particular directive should treated as relating to product harmonisation. or as an environmental protection

· Product harmonisation is dealt with by the Article 100A. It imposes majority voting.

· Environmental protection is dealt with by Article 130S (introduce by the TEU). It imposes unanimous agreement.

2 - But this concern is limited to a small number of environmental measures

· The small group of environmental standards that can lead to barriers, could be dealt within under the procedures on product harmonisation.

· Why, then, did the environmental legislation go further. What other motives are behind ?

III - National policies are not optimal in dealing with transfrontier problems

A - Environmental concerns are transfrontier

Pollution can have an international dimension, because :

· pollutant may be mobile across national boundaries (e.g. acid rain)

· pollutant my cause global common problems (e.g. ozone depletion)

B - Advantages of co-operation in managing transfrontier problems

When the pollution problems are global, international co-operation is indispensable for

· sharing the costs

· eliminate the 'free rider' behaviour on the pollution abatement policies

· efficiency of policies

C - European Nations are small Þ extra incentive to co-operate

· European nations are small (geographically speaking) compared to other major economic powers. An environmental US policy makes sense since the US have the size of a continent.

· The nation is simply not the appropriate scale. What is the use of a dioxide reduction policy if only applied in one country (let us say Luxembourg).

IV - National policies entail distortion in competition : 'unfair competition' (enforcing a common market)

A - National policies entail different cost development

1 - Environmental standards : a political necessity (Germany, Netherlands)

It was clear to governments in MS that they would have to respond to the public pressures over pollution and environmental preservation. This was especially true of the German and Dutch governments among the original six. However, the others were not immune either.

2 - Increase in the production costs

Many of the measures which would be required were likely to raise production costs (new equipments, more expansive fuels to limit emissions...).

3 - The internal market made necessary the maintaining of competitiveness

· All governments are not subject to the same political pressure. Some governments subject to a strong political pressure in favour of environmental measures (in Germany, Netherlands).

· Given the setting up of a common market, those same governments were not ready to accept a major distortion in production costs. This could have affected the long-run competitiveness of their economies.

B - European standards to avoid 'unfair competition'

1 - Uniformity equalises production costs

· If some countries were to have tighter standards than others, then firms would face 'unfair competition' from firms that have lower production costs - just because they were located in different countries that had laxer requirements on pollution abatement.

· There was a desire of governments for joint EC environmental policy which would affect all MS equally. Uniform Emission Standards would prevent this threat to competitiveness.

2 - Avoid 'Delaware effect' and factor migration

· Discourage factor migration to region of lower environmental standards to take advantage of lower production costs.

· Only co-operation and harmonisation can prevent governments from acting unilaterally and

- either restrict imports from low standard countries

- or start a race to the lowest standard possible ('Delaware effect' - as opposed to the 'California effect').

3 - Key argument in the debate EQS v UES

· In the 1970s there was a heated controversy over whether the EC should define its policies by EQSs or UESs. T

· The reason for the attachment of the Commission and other MS to UESs were partly explicable in terms of one of the motivation for having a joint EC policy at all : the fear of 'unfair competition'.

4 - The British stance

· On the question of unfair competition, the UK government said that it was not more unfair that the united kingdom should benefit from its coastline and estuaries (that make it easier to achieve any EQS, as opposed to UES) than that Italy should benefit from its sunshine.

· It would be absurd to require the Italians to grow tomatoes in greenhouses just to stop them having an 'unfair' advantage over the Dutch.

· Although not stated in those terms, the British stance was an application of the theory of comparative advantage, applied to polluting industries.

V - Political and institutional factors

There was also a set of political reasons in favour of the setting up of a European environmental policy.

A - Political will to modify the public perception of the EC

1 - Give a concrete dimension to the EC in order to gain public support.

· Convince the public that the community was relevant to them and responsive to their worries. Way to identify the EC in the mind of the public with issues with which they are concerned.

· If there were to be public support for the European ideal, the EC should be identified in the minds of the public with the issues with which they were concerned.

2 - Getting out of the 'boring technical issues'

· A way not to limit the scope of the EC to 'boring technical issues'. Issue which had recently become the focus of much media discussion Þ joint policy on such an issue would help to convince the public that the community was relevant to them and responsive to their worries.

B - Institutional dimension

1 - The Commission

MAJONE

·The role of the Commission. Wants to increase the scope of its competences.

·Use of regulatory instruments because they do not entail budgetary problems (c.f. PPP)

·Takes into account diffuse interests (large number of beneficiaries, small number of losers - therefore better organised to lobby).

2 - The Parliament

· Very active in this field (c.f. imposed tougher car emission standards than the Council wanted)

· Importance of Green movements

· Popular field of action

CONCLUSION

The economic rational for an EC environmental policy is threefold : avoiding barrier to trade, management of transfrontier problems, fear of unfair competition.

However, there were other factors (institutional as well as political) that played a role.

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