This is a final version submitted for publication. Minor editorial changes may have subsequently been made.
In this paper I will be arguing that if legal environmental standards are easily met with existing technologies then there is little incentive to develop new waste disposal technologies or production processes which reduce wastes. Yet environmental standards are usually based on what can be economically achieved using existing technologies. Therefore environmental reform is almost always limited to what can be achieved by the enforced adoption of readily available technologies that are not too expensive.
This may have been enough in the past, but the continued degradation of the environment at both a local and a global level suggests that a new approach is necessary for the future. Standards need to be set which promote research and development in environmentally beneficial directions. I contend that such measures, far from imposing extra costs on industry, can actually promote technological innovation which is in the long term interests of industry as well as the planet.
Recent studies of technological change have revealed that technological change is not the inevitable result of random scientific discoveries but that technology tends to be far more shaped and directed than most people realise. There are an infinite number of problems in any industrial society which could be solved and even when these problems are limited to those that would make a profit, the diversity of research areas is overpowering.
The economist, Nathan Rosenberg, suggests that most firms will direct their research efforts towards parts of their operations which seem to pose the most restrictive constraints. These constraints may be created by a technical imbalance between interdependent processes so that an improvement in one part of a production line causes problems or bottle necks in other parts of the line or operation. Imbalances between rival firms is also a cause of innovation. Technical disequilibria can also be caused by the threatened withdrawal of labour which provides an impetus for research into labour replacing technology.(Rosenberg, 1976)
The category of situations which may encourage innovation, which is of interest here, is the "imposition of a previously nonexistent constraint". For example, legislation can impose constraints in this way and force a search for innovations in order to comply with the legislation. Such exploratory activities, Rosenberg points out, can confer advantage on those who were constrained by the legislation. He gives the example of Swedish chemical pulp producers who were forced by a Swedish law against stream pollution to work out new ways of utilizing their waste liquors. In doing this Swedish sulphate producers gained an advantage over their Canadian and American competitors when they developed a recovery process for waste sulphite liquor. (Rosenberg, 1976, p122)
Rosenberg refers to constraints which lead to innovation as inducement mechanisms or focusing devices,
The mechanisms examined here share the property of forcefully focusing attention in specific directions. They called attention decisively to the existence of problems the solutions to which were within the capacity of society at the time, and which had the effect of either increasing profits or preventing a decline that was anticipated with a high degree of probability. (Rosenberg, 1976, p123)
In many fields of public sector technology where competition and the quest for profits does not play a significant role in promoting technological change, the constraints supplied by legislation may be the only ones which can play this role of focusing or inducement. If, however, legislation does not offer effective constraints, then technology can stagnate.
In the next part of this paper I will consider the development of sewerage technology as an example of a field that underwent rapid and radical change prior to the universal adoption of effluent standards which could be easily met using existing technologies. The general acceptance of these standards allowed the field to consolidate yet also inhibited further innovation for seventy years.
I will then go on to consider the nature of pollution control legislation introduced into New South Wales in the last two decades and show that the fear of harming industrial competitiveness through the imposition of standards has meant that environmentally beneficial technological innovation by industry is not promoted. I will be arguing that such fears are misplaced and give numerous examples of situations where strict standards have induced technological changes which were both profitable to industry and good for the environment.
Sewerage and Effluent Standards
During the nineteenth century many engineers and government officials believed that sewage treatment could achieve purity of effluent. Various sewage treatment processes were advocated and the debates between the various advocates were fierce. The absence of standards and any accepted criterion for measuring performance of the various treatment methods, and also, one suspects, the desire to support a particular process, meant that there was a wide discrepancy in the statistics so that the merit of each method could not be agreed upon.
Despite these controversies, or perhaps because of them, the nineteenth century was a ripe time for invention and innovation in the sewerage treatment area in Britain, Europe and the United States. Various methods of sewage farming and biological filters were tried. Hundreds of chemical precipitants were patented and companies established on the basis of those patents. Septic tanks were invented and developed. In fact most of the processes used for sewage treatment today were discovered before the first world war.
The British Royal Commission into Sewage Disposal (1898-1915) was a key event for sewerage engineering and to a large extent marked the transition from a phase of invention and rapid technological change to one of improvement and consolidation. The Commission was set up essentially to arbitrate between the Local Government Board, which insisted on land treatment as a condition to giving loans to local authorities for sewage treatment, and those same local authorities who often wanted to install artificial filters because suitable land for sewage farming was scarce or expensive.
The importance of the Royal Commission to the field of sewerage engineering world-wide has been noted by engineers in the field,
in a sense, the Royal Commission marked the transition from folklore to a scientific approach to sewage treatment practices and requirements and heralded the opening of an era of rapidly developing and increasingly sophisticated technology. (Sidwick, 1976, p199)
The Royal Commission did not recommend any particular method of treatment but rather outlined standards of effluent which should be met by whatever process was chosen. It was known that sewage used up oxygen dissolved in waterways when it decomposed and so it was decided that the amount of dissolved oxygen absorbed by a particular effluent in 5 days at 65ç Fahrenheit gave the best single test index of the polluting potential of that effluent. The BOD5 test, as it became known, is still used today and the 20:30 standard of BOD and suspended solids concentration which was recommended by the Commission is still used as a standard today.
The setting of these standards was extremely important to sewerage treatment technology. On the one hand it provided an authoritative criterion for assessing treatment processes and thereby settled many long standing disputes. On the other hand it was realised that the existing methods of treatment could achieve the recommended standards consistently so there was no reason to direct research into new processes.
Following the Commission, sewerage engineers gradually came to favour two or three of the processes approved by the Commission. The preference for sedimentation as a primary treatment and biological filtration or the activated sludge process as a secondary treatment still constitute the basis of primary and secondary treatments today. These were chosen, not because they gave better quality effluent than other methods available at the time but because they were the most economical and had been deemed to be 'good enough'. (Activated sludge treatment was developed towards the end of the period of inquiry by the Royal Commission.)
What the Royal Commission did was to define what was 'good enough' and in so doing, the search for the perfect treatment was abandoned once and for all. What's more the competition to find the 'best' treatment method lost its impetus since there was no point in installing a facility that did more than was necessary, was unproven and probably would have cost more as well.
The creative innovation which characterised the nineteenth century gradually faded and was replaced with good solid research and development aimed at improvement of existing processes. An engineer who wrote a series of articles in the 1970's outlining the history of sewage treatment was surprised at discovering how little had changed in the preceding seventy years and noted that
improvements have largely been refinements of existing practices rather than the creation of new practices. It may, of course, be that there are no new techniques to be discovered, but this seems unlikely. (Sidwick, 1976, p520)
The concensus amongst sewerage engineers which arose from the time of the Royal Commission was perpetuated through the education system and on the job training. It was reinforced by the growing number of treatment plants based on those standard treatment methods. Public health engineering, as sewerage engineering came to be known, grew on a foundation of traditional practices and conventional methods. An engineering paradigm had been established.
Once an engineering paradigm has been set changes in circumstances or gains in knowledge may not be enough to promote or restimulate innovation. Unlike a scientific paradigm which may be upset by anomalies between experimental data and theoretical conceptions, engineering paradigms are evaluated according to the performance of the solutions they engender. Environmentalists may judge the performance of a waste disposal system differently from the engineers who manage it. The judgement that carries most weight, however, is that of the regulatory agency using legally defined standards.
Legal standards are therefore central to the continued viability of an engineering paradigm and the technological system it is embedded in. Whilst waste treatment methods are able to meet legal regulations and standards there is little reason to ditch the paradigm or consider radical innovation.
Water Pollution in New South Wales
The Clean Waters Legislation in New South Wales was instituted after much public pressure due to the gross pollution of Sydney's water ways and beaches, a crisis in the disposal of industrial waste and a Senate Select Committee Inquiry into Water Pollution in Australia which pointed to the failure of existing legislation and control mechanisms. (Senate Select Committee, 1970) They said
We have relied largely upon private conscience, rather than upon public action, to preserve our waters. This, of course, has failed. (p91)
The government of the time was careful to ensure that the legislation would "cause minimum hardship to industries and services which need to use areas of water for waste disposal." (Sydney Morning Herald, 12/3/69)
where a degree of pollution is unavoidable because of the need to dispose of sewerage and industrial wastes, it is permitted in a controlled fashion designed to meet the needs of the community as a whole. (Legislative Assembly, 27/3/69)
The responsible Minister was careful to point out that the concept behind the legislation was that it should be "administered with an educative and persuasive approach rather than a punitive approach." He wanted a distinction made between those who polluted because there was no reasonable alternative available to them and those who polluted because it was the easiest and cheapest thing to do. (Legislative Assembly, 4/11/70)
Industrial dischargers were to be given two years grace, during which they could continue to discharge their wastes. During this time they were supposed to install treatment plants or divert their wastes to the sewers. It was acknowledged that extensions to the two years would be necessary.(Legislative Assembly, 12/4/69)
Each waterway was to be classified according to the use it would be put to. For each classification there would be a standard of water quality set which would imply acceptable pollution levels for that waterway. An appeals procedure would be put in place for those who objected to a particular classification. A polluter would require a licence to discharge into a classified waterway. The licence would specify the nature, quality and quantity of wastes that could be discharged.
Classification determined the degree to which a body of water could be polluted. The degree of pollution allowed depended very much on the judgement, made by the regulating authority, about amenity values, water use, costs, benefits, equity and reconciliation of conflicting interests. Rather than control pollution by insisting that industries install the "best practicable technologies", the N.S.W. approach was to allow industries to take advantage of the "relative assimilative capacities" of different waterways and use lesser technologies wherever possible. (Joy, 1978)
The Clean Waters Act, in aiming to clean up waterways without harming industry, was careful to minimise the economic penalty that would be suffered by industry and was unwilling to set down hard and fast standards for effluents that industries might not be able to meet using cheap and readily available technologies. By placing public standards on the water ways and negotiated, unpublished standards on each waste discharge via the licence conditions, the regulatory agencies were able to be more flexible about what they required of particular industries and could take account of what each firm argued that they could or could not afford to do.
The emphasis on classification central to the Clean Waters Act was gradually eroded during the 1970's. In 1975 regulations were introduced to make a licence necessary for discharge into waterways, whether those waterways were classified or not. By the end of the 1970's classification of waterways had virtually ceased and the Clean Waters Appeals Board disbanded although some of Sydney's major waterways remained unclassified including the ocean outfall waters, Parramatta River, Botany Bay and Sydney Harbour. It was argued that classification had become unnecessary because licensing didn't depend on the waters being classified.
Classification had been the means of publicly applying specific standards. Without classification the pollution licensing procedure is not based on legally set standards but is based on the judgement of officers of the relevant regulatory authority. The opportunity for the public to have a say in the setting of standards was therefore reduced and the discretion of the regulatory agency became paramount.
The regulatory agency responsible for setting licence conditions for discharge into N.S.W. waterways is the State Pollution Control Commission (SPCC). It was argued at the time of its establishment, that the SPCC, the SPCC's technical advisory committee and the Clean Waters Advisory Committee, which was to advise on the Clean Waters Act, were all overly dominated by representatives of industry and government authorities; organisations which were responsible for the pollution in the first place. (Legislative Assembly, 4/11/70; 19/11/70; 24/11/70)
Another limitation on the SPCC, which is common to many regulatory bodies, is the tendency for employees to subscribe to the prevailing engineering paradigms. The regulatory body reflects in microcosm the ideas, values and professional attitudes that operate in the wider technological system which they are regulating. Typically the collective background of personnel in the regulatory body gives a shared framework of orientation and appraisal of the larger system or network.(Bodewitz et al, 1987)
Pollution control authorities employ and are advised by engineers who inform them of what can technically be achieved and what can not; in other words pollution control authorities will usually base their standards on what can be achieved by the existing paradigm. Therefore the only mechanism that exists for evaluating the performance of the paradigm - legislation and regulation - becomes a tool for perpetuating the paradigm if standards are based on "best practicable technology" or less.
Although N.S.W. legislation is based on water quality rather than "best practicable technology", regulatory authorities in N.S.W. will rarely impose restrictions on polluters beyond what they feel can reasonably be expected and in practice "best practicable technology" is the most that will be insisted upon in setting licence conditions. This means that the level of existing technology and the ability of the firm in question to be able to pay for it are prime considerations.
Sydney Water Board Policy
Although the implementation of the Clean Waters Act forced some industries to install rudimentary pretreatment equipment the main accomplishment of the Clean Waters Act was the diversion of industrial wastes from Sydney's rivers to its sewerage system. The rivers were therefore cleaned up at the expense of the ocean and bathing beaches. The greater use of the sewers for industrial waste was intended by the legislation as can be seen by the parliamentary debates (Legislative Assembly, 4/11/70) The responsibility for monitoring most of Sydney's liquid industrial waste has therefore become that of the Sydney Water Board.
The Sydney Water Board has taken a similar approach to that of the Clean Waters Act and to the SPCC in trying to minimise the impact of their regulations on the industrial polluter. In 1970 a Water Board Trade Waste Committee recommended that the Board be able to exercise discretion in authorizing departures from standards of acceptance to the sewers, because some industries might have trouble meeting them. (Killmier, 1972) And in 1972 two Water Board representatives told a meeting of the Royal Chemical Institute,
where unfavourable reaction in the sewer can be kept within acceptable limits it is clearly in the community interest that a partial relaxation of the standards be granted. (Pierce & Ralph, 1972, p12)
The Water Board introduced strength charges that same year to recover the costs of dealing with high strength industrial wastes and to provide a financial incentive to industry to reduce the strength of its wastes. (Killmier, 1972) The strength charges were brought in slowly to allow industry time to adjust. The strength charges, based on concentrations of contaminants, in conjunction with low charges for water encouraged a heavy use of water for dilution and carriage of wastes. (Hickson, 1978)
Strength charges allowed a degree of flexibility in applying acceptance to sewer standards as well as a financial incentive to industries to install on-site treatment facilities. Standards were enforced where these facilities could be economically installed. The term "economically" seems to have been a negotiated one with the result that waste reduction was confined to rudimentary pre-treatment such as dilution, neutralisation, settlement or precipitation.
The Sydney Water Board brought out a new Trade Waste Policy in 1988 which they claim is a radical departure from their previous policy. However it is based on a similar philosophy. It attempts to provide a service to industry whilst limiting the contamination of discharges through strength charges rather than through absolute limits or effluent standards.
The Policy aims to encourage industry to improve pretreatment of wastes, towards 'domestic' quality. At the same time, the Board will be providing a commercially oriented liquid waste disposal service to industry, and recovering some of the special treatment costs that the discharge of pollutants impose on the whole community. (MWS&DB, 1988, p1)
Charges will still be based on concentrations of contaminants in the effluent entering the sewerage system. Waste quality targets will be negotiated with each firm. Under this system, if the polluter is able to install treatment equipment for a lower cost than they would otherwise have to pay to the Water Board to discharge their untreated wastes then there is a financial incentive to do so. The question is, are financial incentives and negotiated standards as effective at inducing innovation as absolute standards?
Rosenberg notes that in a production process any change which reduces costs would be welcome, not just those changes that are associated with rising costs. One could concentrate on reducing labour costs, reducing material costs or reducing processing costs. (Rosenberg, 1976) Rising waste disposal costs may be counteracted with the installation of treatment equipment if this is easy to do or profits could be maintained by making savings elsewhere in the plant. For some firms profit levels may be maintained by passing the cost on to the consumer, especially where a whole industry is hit with the new charges.
Whilst the extra revenue may be of use to the Water Board the financial incentive approach is not one that will force technological changes that will reduce waste generation. The charging mechanism is not specific enough. It still leaves a substantial amount of choice in the hands of individual firms who have no special interest in protecting the environment. Standards of effluent are specific and if rigidly enforced are more likely to force technological change in the right directions.
The Cost to Industry
The usual argument against rigidly enforced absolute standards are that they destroy the competitiveness of industry and thereby harm the environment. This is partly because compliance costs are often exaggerated. The experience of the U.S. Environment Protection Agency (EPA) offers many examples of this. It was found that both the EPA and the industry concerned tended to overestimate compliance costs. Between 1974 and 1977 it was estimated by the EPA and the petroleum refining industry that pollution control would cost $1.4 billion. The actual cost was between $550 and $750 million. For iron and steel plants the EPA estimated they would have to spend $830 million during the same three years, and the industry estimated $1.6 billion. The actual cost was between $470 and $630 million.(Costle, 1981)
In 1978 the U.S. Occupational Safety and Health Administration proposed a standard to control carcinogenic beryllium dust and fumes . The industry estimated that it would cost $150 million and would close down plant vital to national security. It was later conceded by the Department of Energy that the cost was more likely to be $4.6 million. Similarly a chemical industry estimate of the cost of complying with a proposed vinyl-chloride standard turned out to be inflated by 200 times. (Costle, 1981)
In fact in many cases the innovations forced upon industries by legislation have benefited those industries. The U.S. textile industry had to get rid of much of its old inefficient machinery because of government regulations on exposure to cotton dust. The investment they were forced to make onto modern processing equipment allowed them to produce better quality materials more quickly. (Dickson, 1984)
And obviously the requirement for firms to install pollution control equipment benefits the companies that produce that equipment and encourage their research and development efforts. In the United States, Union Carbide told its shareholders that the tighter government standards had "significantly increased air pollution control markets". (Dickson, 1984)
In the United States stricter standards, not based on available technologies, have resulted in new technologies. Lawsuits, regulations and the threatened ban on PCB's forced PCB users to develop product alternatives. Most of these substitutes are cheaper than the PCB's they replace. (Ashford et al, 1985; Caldart & Ryan, 1985)
Bans on CFC's in aerosols have resulted in two innovations; a non-fluorocarbon propellent was developed using carbon-dioxide and a new pumping system was introduced that did not depend on propellents and actually turned out to be cheaper than CFC propellents. (Ashford et al, 1985)
Wastewater pretreatment standards proposed for effluent from the electroplating industry were predicted to force a closure of 20% of electroplating job shops. A research and development project following this announcement produced a new rinsing method, the "Providence method" which reduced water consumption by one third and cut hazardous waste production by 50-70%. (Caldart & Ryan, 1985)
In Australia, one of the only categories of waste products which is prohibited from sewers, waterways, public treatment facilities and land fill dumps are the so-called intractable wastes. The resulting constraint on ICI Australia which generates most of Australia's intractable wastes has lead to their investment of funds to find ways of reducing or recycling their wastes. Until the mid-1970's ICI Australia directed this research and development towards recycling liquid wastes from its Ethylene Dichloride (EDC) Plant. By 1977 2400 t/year of liquid organochlorine compounds from the EDC plant were being recycled which would otherwise have joined the stockpiles of intractable wastes. Further research lead to the establishment of a heavy ends treatment plant in 1977 to recycle the liquid portion of the waste from the solvents plant and in 1983 a thin film evaporator facilitated the recycling of a further 350 t/year of liquid waste. (Cumming, 1986)
All of these cases show that constraints on industry are not necessarily detrimental to their viability. Charles Caldart, of the Centre for Technology and Industrial Development, M.I.T. and William Ryan of the Massachusetts Public Interest Research Group have expressed the conviction that regulatory approaches
must not be bound by existing technologies and existing economic conditions. Rather, public policy must encourage the type of innovation that can spur technological breakthroughs and alter economic circumstances. In short, we believe it is possible to change production technologies. (Caldart & Ryan, 1985, p310)
Legislation and regulation is most effective where it acts as an inducement for technological change. Environmental legislation and standards which are based on existing technologies and the economic circumstances of individual firms may impede technological advance in directions which can be both environmentally and economically beneficial.
Radical innovation in sewage treatment technology came to a halt after the British Royal Commission recommended standards which were adopted by most government authorities in the Western world. These standards affirmed existing technologies as adequate.
Recent environmental legislation and control in NSW has been careful not to disadvantage local industries by making waste disposal expensive. Yet examples abound, both in Australia and overseas, that advantages can accrue to industries forced to adapt to seemingly harsh regulation.
If the Federal Government was really serious about improving the Australian environment it would foreshadow the introduction of nationwide environmental standards that were not negotiable and thereby prompt the research and development that is necessary in this area.
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