Philsophical Basis Establishing the Environment Protection Authority in a Property Rights Environment John Niland (Chair of NSW EPA) The property rights paradigm is based on the premise that the existence of well defined and transferable property rights will create an economy in which individuals and firms have the proper incentives to operate efficiently, including in their use of natural resources. Increased government intervention would lead to more, not less, inefficiencies. However, the transfer of the application of property rights from the more tangible natural resources, such as fisheries or forests, to the more intangible air quality or water quality area has created more difficulties. Further, as Pearce and Turner note, "overall, property rights paradigm supporters would probably concede that markets are imperfect", but equally "they would emphasise that their failings do not automatically imply that collective action is superior. The market mechanism is then judged to be superior to any other practical alternative." (p.19) This may be the case in some situations, but it certainly does not apply to others, where the regulatory mode is more appropriate given goals set.
A basic tenet behind both established regulatory and newer economic measures for environmental protection has been the polluter-pays principle (PPP). Recommendations on PPP were approved by OECD member countries in 1972 to the effect that polluters should, subject to certain exceptions, bear the full costs of pollution-reduction measures decided upon by public authorities to ensure that the environment is in an acceptable state (OECD, 1972). More recently, the PPP has been extended to accidental pollution. There should be little quarrel with this. To analyse environmental problems in terms of property rights suggests that the role of government is to establish clear, transferable property rights to environmental resources. The question is, how far should this go? Some would argue for private ownership of national parks, for example, as a means of providing protection for these assets. A less direct, and perhaps less contentious, approach is to create tradeable permits to use an environmental resource, as for example with tradeable emission permits which establish rights to the assimilative capacity of air or water or land. There are other circumstances where it is not feasible to create property rights to an environmental resource at all and in these cases economists have turned to price-based mechanisms including charges and deposit-refund schemes to internalise environmental externalities. The main competing paradigm is that the environment should be protected to a much higher standard than that implied in the idea of property rights to be traded, with preference for stern regulation based on the idea of non-tradeable or inalienable rights. But where does society want the balance to lie between the interests of the environment and the interests of the economy? This will be one of the two or three most contentious public policy issues in the decade ahead, perhaps longer. The issue of sustainable development is central to the debate. Sustainable Development The debate on sustainable development has, more than any concept in recent times, brought to the fore the competing paradigms in economic analysis. To date, the most commonly used definition of sustainable development comes from the Brundtland report as "development that meets the needs of the present without compromising the ability of future generations to meet their needs" (WCED, 1987). Considerable intellectual capital in Australia and elsewhere is being invested in determining what sustainable development really means for future strategies of resource use and environmental protection.
A major contribution to the sustainable develop- ment debate has come from Professor David Pearce in his book BluePrint for a Green Economy and other publications. Pearce sees sustainable develop- ment as "about being fair to the future" (1989:1). He argues for a narrow interpretation of sustainable development, where total environmental capital is not to be decreased from generation to generation. This position is based on: • the irreversibility of some environmental damage; • uncertainty about how environmental impacts will manifest themselves in the longer term; and • the lack of substitutes for many environmental assets. Consideration of sustainability has also highlight- ed the need to consider intergenerational equity. Many economists would argue that the use of nonrenewable resources will be limited by the operation of the market through the pricing mechanism. Others would suggest that sustainable development implies no further use of non- renewable resources and a non-degradation approach to all environmental assets. The concept of sustainability and its centrality to any stance on environment protection, understandably has brought contributions from competing vantage points. Little has been resolved yet which would provide practical guidance to the policy maker or environmental regulator, but the debate is seen as a worthy one, and therefore lines of commun- zication between different perspectives have been opened. Also, the sustainable development debate has brought to the fore and legitimised the crucial concept of intergenerational equity. Inescapable is the need to fully cost the environmental impact of productive activity. Thus, the question is not whether economic instruments are significant in the protection of the environment, but rather which instruments should be invoked, how they are to be used and within which paradigm. The selection of paradigm, in the final analysis, is a matter for public policy determination. Ref: John Niland, Establishing the Environment Protection Authority in a Property Rights Environment, paper prepared for the Conference on "The New Environmentalism: Applying Economic Soluons in the Real World" sponsored by the New South Wales Cabinet Office, Sydney 18-19 March1991, pp9-10.  |
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