Making Markets Work for Environmental Policies

Making Markets Work for Environmental Policies

Summary

Making the market work for environmental policies – achieving cost-effective solutions
The government intends to breathe new life into environmental policy. This report on “Making the market work for environmental policies” is an important step in this process. Making markets work for environmental policies is about making better use of market-based mechanisms to solve environmental problems and ensure that we achieve cost-effective solutions.

The guiding principle has to be free initiative. The government will set the framework for measures to protect the environment, so that the market can work out the best solutions for itself – from both an economic and an environmental perspective. The responsibility of residents and enterprises is an important driving force for environmental initiatives.

As far as possible, prices must reflect the socio-economic costs, including the environmental effects. Possible focus areas in making the market work for environmental policies include: restructuring environmental taxes to be more effective, tradable quotas, and a number of voluntary instruments such as eco-labelling and technological innovation.

An ambitious and responsible environmental policy will meet the environmental goals set – both nationally and internationally. A significant part of the environmental legislation in Denmark represents the implementation of EU or other international regulations.

In future, the government will let market-based instruments and the principle of improved cost-effectiveness guide its environmental policy. This report on making markets work for environmental policies is the beginning of a process, in which major environmental issues will be evaluated in turn, with the aim of changing tack. The “Climate Strategy” marks the beginning of this process, and other issues such as waste management, the aquatic environment, and pesticides are on the way.

Specific initiatives and environmental issues
The “Climate Strategy” is an example of what the government hopes to achieve by making the market work for environmental policies, and also illustrates how tradable quotas can be used in practice. Environmental goals must be achieved in a cost-effective manner, using the right combination of instruments.

In general, the government will seek to restructure taxes to be more environmentally and cost effective. The government will carry out regular evaluations of environmental taxes. A number of analyses are already under way. The government is also working towards the greatest possible level of international coordination for market-based instruments. Examples of this include the European Commission’s proposed directive on Environmental Liability and the EU’s Energy Taxation Directive.

The government will work for better documentation and information about cleaner products at European level, to inform the free choices of enterprises and consumers. The life-cycle perspective is crucial.

Innovative environmental technology is crucial in achieving cost-effective solutions to env ironmental problems, and is also a growth area in the knowledge-based economy. The government has presented a “Knowledge Strategy”, which aims to enhance the transition to a knowledge society. Improved cooperation between knowledge institutions and enterprises can promote the formation of competitive networks in the environment sector.

Environmental policy initiatives must be based on scientific and socioeconomic analyses, for example, cost-benefit analyses.

Five central environmental challenges are discussed in this report on making the market work for environmental policies: climate change, the aquatic environment, waste, chemicals and products, and nature and forests.

Regarding climate, Denmark is obligated to fulfil the requirements of the Kyoto Protocol and internal burden sharing in the EU. The most important future instruments will be the use of flexible mechanisms and the EU’s Emissions Trading Directive. Reductions to greenhouse gas emissions must be achieved in the most cost-effective way possible.

Clean surface and ground water is an important resource. It is the government’s intention to create clear incentives to encourage cost-effectiveness and greater competition in this area. Further contamination of the aquatic environment must be prevented and the environmental and health impacts from earlier contamination must be reduced. A restructuring of the EU’s Common Agricultural Policy subsidy schemes has high priority and will lead to a reduction in environmental impacts.

The issue of waste management is characterised by too little competition and too much bureaucracy. The government wants to see a more efficient and cost-aware waste management sector, with a high environment profile. This goal is to be achieved by simplifying regulations, increasing fee transparency, outsourcing, and producer responsibility.

The government’s most important goal with regards to chemicals is that by 2020 there should no longer be any products or goods on the market containing chemicals with particularly problematic health or environmental impacts. The most important measures being considered, both nationally and in the EU, are knowledge-building and analysis, information and producer responsibility.

The nature area must be regulated in a socio-economically reasonable manner. The rationalisation of resource utilisation through financial partnerships and joint local influence, ensuring a balance between the desires of the population and conditions for site owners and business, are important measures.

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