In the 1970s, there was a heated controversy over whether the EC should define its policies by Environmental Quality Standards (EQSs) or Uniform Emission Standards (UESs) - with the latter defined as 'limit values' so as MS could have stricter emission limits if they wished.

This paper aims at showing what economic arguments can be used in such a debate. Is there a clear economic case for EOS or UES.

I Definitions

A - Various stages of pollution

· There are various stage of pollution. There is the initial emission at the point where pollution is produced.

· The pollution may then follow various media (wind, plants, eaten by animals we eat in turn...)

· The ultimate stage to be considered is where the pollution finally directly affects humans.

B - Environmental Quality Standards (EQSs)

1 - Definition

· Definition : EQS are EU standards defined for ambient level. The control the pollutant concentration in the medium that directly affects people.

2 - Variants

· EQSs are also called 'exposure standards' or 'primary protection standards'. These latter expressions are used when the standards concern the medium that directly affects people.

· e.g. concentration of lead particles in the air, of bacteria in bathing and drinking water.

C - Emission Standards

1 - Regulate the initial stage of pollution

· Standards may also be set at the initial emission stage.

· They are usually called 'emission standards'.

2 - Three levels of emission

· They encompass standards of :

- emissions due to the production process (factories...)

- emissions due to the consumption process (car emission, lawnmowers ...)

- emission due to potential misuse of products

II The economic case for QES

A - QESs fit the anthropocentric outlook of most economists

1 - What matters is not emission per se but damage to humans

· QESs take the view that what maters is not emission per se, but damage to humans. Since it is damage to human which is the problem, an EQS is what matters, not emission per se.

· From an economist's, anthropocentric viewpoint, the pollution matters in so far as it affects human beings.

2 - Therefore, only the level of pollution in the medium in contact with humans matters

· Typically, therefore, economists are concerned with the level of pollution, i.e. the concentration in the medium which affects health.

· From an economist's viewpoint, the relevant standards should be as far down the chain as it is technically possible.

· British statement : "There are not harmful substances, only harmful concentration".

B - QESs leave room for competition on the basis of comparative advantages

1 - Theory of comparative advantage applied to polluting industries

· One could apply the theory of comparative advantage to polluting industries.

· Indeed, countries which benefits from a less fragile environmental system (that, for instance, eliminates polluting substances faster than other) should be able to take advantage of it - economically speaking.

· In pretty much the same way as Italy benefits from its sunny weather (for agriculture, tourism...), it has been argued that the UK should be free to benefit from its coastline and estuaries which evacuate pollution more efficiently.

· Italy has a comparative advantage for sun-based tourism. The UK has a comparative advantage for polluting industries.

2 - EQSs allow economies to get benefits from these comparative advantages

· UESs prevent national economies from fully get advantage of their comparative advantage.

· EQSs allow the interplay of comparative advantages to take place.

3 - It is not 'unfair', but it is 'competition'

· This was the British argument in the 1970s.

· The UK was able to achieve a given EQS, with much higher emission standards than other European Countries.

· You cannot prevent countries to take advantage of the characteristic of their environment.

C - Defining the actual values of EQS : an uncertain political process

1 - The lack of scientific knowledge

· The lack of definitive scientific knowledge on the damage caused by different levels of pollution means that any standards adopted are done so largely by a political process

· This process is systematically disguised as a scientific one.

2 - A disguised political process

· Different groups put pressure on governments to be more or less lax. Groups always come up with 'scientific' studies pushing in their favour.

· Actually, a large number of medical scientists are doubtful that overall thresholds exist for many pollutants. The harmful level depends on the person affected.

III The economic case for UESs

A - The environmentalists' view

· The first argument is not an economic one.

· It simply consists in noting that UESs are traditionally more consistent with an environmentalist outlook, which values environmental quality for its own sake, and not exclusively insofar as human wellbeing is concerned.

B - Avoid 'unfair competition'

1 - Definition

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

· In the framework of the common market, this could be called a market failure.

2 - UESs prevent much more 'unfair competition'.

· Uniform Emission Standards would prevent this threat to competitiveness, by affecting equally Member States.

· The reason for the attachment of the Commission and other MS to was their fear of 'unfair competition', and among term distortion of the cost structure.

· The UK heatedly opposed the imposition of UESs.

· 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.

C - Better management of transfrontier pollution

1 - EQSs encourage free riders behaviours

· Upstream countries : Countries with shared river systems (as along the Rhine) would find it difficult to allocate individual emission levels to achieve an EQS: upstream countries would have little incentive to impose sever cutback on their industry.

· Upwind countries: The same can be said of the UK, which has the fortune to be mainly upwind of its nearest neighbours.

2 - UESs enforce co-operation

· By imposing a uniform constraint upon Member States, UES facilitate the management of joint problems - as transfrontier pollution.

D - Limit non-tariff barriers to interstate trade

· As we have seen there are three stages of emission (production, consumption and misuse of goods).

· Therefore, the last reason why UES makes a lot of sense in the context of a single market, is that, as far as the consumption of goods is concerned, UES amount to 'product harmonisation'.

· Thus, uniform emission standards (on cars for instance), prevent different national standards from acting as non tariff barriers to trade.

E -Defining the actual values of UES : importance of costs MS are ready to pay

1 - Best available technology

· Many member states were pushing for the approach of 'best available technology'

· It consists of pushing as far as technically feasible towards 100 percents abatement, irrespective of costs.

2 - The concern for costs

· We should not generalise. It is actually doubtful that the other states were completely unconcerned with costs.

· The new environmental title inserted by the SEA specifically refers to the need to take account of the potential benefits and costs of action or lack of action (Article 130R).

3 - Best practicable technology

· The UK advocated its traditional policy of 'best practicable means' of pollution control.

· The notion of practicable involves a weighing up of costs and benefits.

· The UK has now adopted the principle of BATNEEC, which stands for 'best available technology not entailing excessive costs'. But the NEEC implies that there has been no real change in the approach.

IV Outcome of the debate in the EC

A - A typical EC compromise.

· In the end a typical EC compromise was reached.

· Countries could choose either to accept UES in the form of limit values or to establish EQS, provided that they could show the Commission that the quality standard was being met.

· Only the UK chose EQS.

B - No consistent application

· Neither side was really consistent.

· The UK had in many case applied UES to whole industries (the best examples are its use of 'Best Practicable Means', and more recently 'Best Available Technology Not Entailing Excessive Costs' (BATNEEC).

· Conversely, other EU policies set EQSs without any fuss from the MS.

CONCLUSION

· Choosing EQS or UES depends on your priority.

· In the context of a single market, one can argue that there is a fairly clear case for UES, insofar as they are consistent with three key concerns :

- making sure that environmental standards do not constitute non tariff barriers to interstate trade

- fostering co-operative management of transfrontier pollution flows (EQS encourages free riders behaviours)

- limiting market failures related to unfair competition

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