Environmental policy inevitably involves difficult trade-offs
20 October 2021
SUGGESTED
Transport
18 October 2021
Economic Theory
Government and Institutions
The UK’s record on biodiversity is poor. 15 per cent of all species in our country are threatened by extinction, and it ranks both as the G7 country with the lowest remaining biodiversity and one of the most nature-depleted countries in the world. With regards to relative progress in the past few decades, the picture is somewhat more mixed. In 2020, the Department for Environment, Food and Rural Affairs (Defra) found that out of 42 measures of biodiversity assessed in the long term, 23 showed improvement. However, this progress is a far cry from the UK’s international commitments. Of the 19 Aichi biodiversity targets our country had promised to meet by 2020, at least 14 were missed.
This raises the question of what, if any, government action should be taken to ameliorate this situation. Some measures have been put in place. 25 per cent of England’s land is protected as part of its 34 Areas of Outstanding Natural Beauty (AONB) and its ten National Parks. By 2030, this number is set to rise to 30 per cent. A higher percentage of protected land is, of course, not per se a good thing, but AONB and National Parks are, at least, genuine environmental designations – unlike Green Belts, a designation which bears no relation whatsoever to the environmental quality of the land.
At the heart of the Government’s biodiversity policy is Natural England, the Government’s statutory advisor on the environment and a non-departmental body sponsored by Defra. Established in 2006 as the result of a merger between three different public agencies, it has the power to define ancient woodlands, award grants, designate AONBs and Sites of Special Scientific Interest (SSSIs), and manage reserves as well as human access to the environment, for instance by providing or withholding hunting licences for certain species. Most notably, it advises planning authorities on the environmental effects of new development and must be consulted on developments in or affecting SSSIs, as well as non-agricultural developments on highest-grade agricultural land. As such, it exemplifies the trade-offs inherent to environmental policy.
There are significant positive externalities associated with maintaining the natural environment. We can identify at least six ways in which the latter is valuable: First, in terms of human lives saved (for instance because it functions as a carbon sink); second, in terms of its contribution to human health (for instance as a source of medicine); third, through its contribution to human enjoyment; fourth, its use value as a production factor (for example the aid pollinating bees provide to agriculture); its existence value (the mere fact that, for instance, gorillas exist, whether or not we can visit them); and finally, its intrinsic value as a moral good. Note also that the externalities associated with the environment are compounded by the fact that the damage wrought on nature is partly irreversible, for example when species go extinct. Furthermore, the loss of biodiversity affects future generations, adding a potentially infinite number of stakeholders.
England’s protected land exhibits some of these advantages. Taken together, National Parks and AONBs attract 260 million visitors each year, are home to many species threatened by extinction and store the equivalent of England’s annual CO2 emissions. However, these undeniable benefits do not by themselves tell us whether current policy is, on balance, the optimal approach. That is because it also comes at a cost. Imagine a scenario in which a landlord wishes to extend a building to provide additional affordable flats. The responsible planning authority consults Natural England, which advises that the project should go ahead only if the applicant undertakes measures to compensate for the damage the extension could wreak on adjacent woodland. Among others, this means she would have to hire a professional ecologist, draft a compensation plan, go through another consulting period involving Natural England to have the new plan approved, purchase additional land, and pay for whatever work needs to be done on it to render it suitable and maintain it in the long run. Given this, she may well choose to not carry out the extension at all. There are, thus, trade-offs between protecting the environment and important goods such as providing adequate housing to everyone in this country. This is not to say that these goals are mutually incompatible, but pursuing one can negatively affect our ability to fulfil the other.
To properly evaluate the most sensible policy approach to the environment, we need an idea both of its costs and benefits. Especially the latter is hard to do. We might be able to produce rough estimates of the economic benefits of having an intact natural environment, but who could possibly estimate the intrinsic or moral value of nature in monetary terms? Moreover, just as with climate change, there is the unsolved question of whether and how to apply a discount factor to our present valuation of the environment’s benefit to future generations, for instance because technology may allow them to repair woodlands. Finally, ecology’s complexity is not currently well-understood. We are far from having a precise picture of how the loss of any given species may affect an ecosystem. In fact, some species might even benefit from urbanisation. On the one hand, all this severely complicates policymakers’ work. On the other hand, it creates incentives for rent-seeking. It is well-known that local councils are prone to deny the authorisation of new developments if there is political resistance to them, thus compounding the UK’s housing crisis. Protecting the natural environment may hand them another justification for doing so. For instance, Natural England has an explicit mandate to protect the beauty of natural sites by preventing developments that block visitors’ ability to enjoy pretty views. In practice, this cannot happen without a degree of arbitrariness.
How are we supposed to protect biodiversity effectively? Authors on this blog have repeatedly argued that we should not turn the environmentalist cause into a vehicle for unrelated demands. We also need a level-headed understanding of biodiversity’s state – including conservation success stories. Finally, as this article has argued, protecting biodiversity comes at a cost. There are no perfect ways of resolving this trade-off. But it is essential to be aware of it.
This raises the question of what, if any, government action should be taken to ameliorate this situation. Some measures have been put in place. 25 per cent of England’s land is protected as part of its 34 Areas of Outstanding Natural Beauty (AONB) and its ten National Parks. By 2030, this number is set to rise to 30 per cent. A higher percentage of protected land is, of course, not per se a good thing, but AONB and National Parks are, at least, genuine environmental designations – unlike Green Belts, a designation which bears no relation whatsoever to the environmental quality of the land.
At the heart of the Government’s biodiversity policy is Natural England, the Government’s statutory advisor on the environment and a non-departmental body sponsored by Defra. Established in 2006 as the result of a merger between three different public agencies, it has the power to define ancient woodlands, award grants, designate AONBs and Sites of Special Scientific Interest (SSSIs), and manage reserves as well as human access to the environment, for instance by providing or withholding hunting licences for certain species. Most notably, it advises planning authorities on the environmental effects of new development and must be consulted on developments in or affecting SSSIs, as well as non-agricultural developments on highest-grade agricultural land. As such, it exemplifies the trade-offs inherent to environmental policy.
There are significant positive externalities associated with maintaining the natural environment. We can identify at least six ways in which the latter is valuable: First, in terms of human lives saved (for instance because it functions as a carbon sink); second, in terms of its contribution to human health (for instance as a source of medicine); third, through its contribution to human enjoyment; fourth, its use value as a production factor (for example the aid pollinating bees provide to agriculture); its existence value (the mere fact that, for instance, gorillas exist, whether or not we can visit them); and finally, its intrinsic value as a moral good. Note also that the externalities associated with the environment are compounded by the fact that the damage wrought on nature is partly irreversible, for example when species go extinct. Furthermore, the loss of biodiversity affects future generations, adding a potentially infinite number of stakeholders.
England’s protected land exhibits some of these advantages. Taken together, National Parks and AONBs attract 260 million visitors each year, are home to many species threatened by extinction and store the equivalent of England’s annual CO2 emissions. However, these undeniable benefits do not by themselves tell us whether current policy is, on balance, the optimal approach. That is because it also comes at a cost. Imagine a scenario in which a landlord wishes to extend a building to provide additional affordable flats. The responsible planning authority consults Natural England, which advises that the project should go ahead only if the applicant undertakes measures to compensate for the damage the extension could wreak on adjacent woodland. Among others, this means she would have to hire a professional ecologist, draft a compensation plan, go through another consulting period involving Natural England to have the new plan approved, purchase additional land, and pay for whatever work needs to be done on it to render it suitable and maintain it in the long run. Given this, she may well choose to not carry out the extension at all. There are, thus, trade-offs between protecting the environment and important goods such as providing adequate housing to everyone in this country. This is not to say that these goals are mutually incompatible, but pursuing one can negatively affect our ability to fulfil the other.
To properly evaluate the most sensible policy approach to the environment, we need an idea both of its costs and benefits. Especially the latter is hard to do. We might be able to produce rough estimates of the economic benefits of having an intact natural environment, but who could possibly estimate the intrinsic or moral value of nature in monetary terms? Moreover, just as with climate change, there is the unsolved question of whether and how to apply a discount factor to our present valuation of the environment’s benefit to future generations, for instance because technology may allow them to repair woodlands. Finally, ecology’s complexity is not currently well-understood. We are far from having a precise picture of how the loss of any given species may affect an ecosystem. In fact, some species might even benefit from urbanisation. On the one hand, all this severely complicates policymakers’ work. On the other hand, it creates incentives for rent-seeking. It is well-known that local councils are prone to deny the authorisation of new developments if there is political resistance to them, thus compounding the UK’s housing crisis. Protecting the natural environment may hand them another justification for doing so. For instance, Natural England has an explicit mandate to protect the beauty of natural sites by preventing developments that block visitors’ ability to enjoy pretty views. In practice, this cannot happen without a degree of arbitrariness.
How are we supposed to protect biodiversity effectively? Authors on this blog have repeatedly argued that we should not turn the environmentalist cause into a vehicle for unrelated demands. We also need a level-headed understanding of biodiversity’s state – including conservation success stories. Finally, as this article has argued, protecting biodiversity comes at a cost. There are no perfect ways of resolving this trade-off. But it is essential to be aware of it.
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