Economic Development and Environmental Gain: European Environmental Integration and Regional Competitiveness

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ECONOMIC DEVELOPMENT AND ENVIRONMENTAL GAIN

Fifteen minutes before, I’d been at the edge of space. And now - to me - I was in the Garden of Eden. W e really don’t appreciate what a beautiful planet we have USAF Colonel Joe Kittinger- ’first human in space’ - describing his return to Earth, after rising to 32 kilometres above the planet in a helium balloonin 1960

ECONOMICDEVELOPMENT AND ENVIRONMENTAL GAIN EUROPEAN ENVIRONMENTAL INTEGRATION AND REGIONAL COMPETITIVENESS

Keith Clement

OBIUCIIBBIBI Earthscan Publications Ltd, London

First published in the UK in 2000 by Earthscan Publications Ltd Copyright 0Keith Clement,2000

All rights reserved A catalogue record for this book is available from the British Library ISBN: 1 85383 300 2 paperback 1 85383 295 2 hardback Typesetting byPCS Mapping & DTP, Newcastle upon Tyne Printed and bound byCreative Print and Design Wales Cover design by Declan Buckley For a full list of publications please contact: Earthscan Publications Ltd 120 Pentonville Road London, N19JN, UK Tel: +44 (0)20 7278 0433 Fax: +44 (0)20 7278 1142 Email: [email protected] http:/ /www.earthscan.co.uk Earthscan is an editorially independent subsidiaryof Kogan Page Ltdand publishes in association with WWF-UK and the International Institute for Environment and Development

This book is printed onelemental chlorine-free paper

CONTENTS

List of Tables and Boxes Acronyms and Abbreviations Acknowledgements Foreword by Ludwig Kraemer, European CommissionDG XI

vii ix xi

...

x121

1

Economic Development and the Environment Characteristics of the Problem The Variety of Response Environmental Potentialof Economic Programmes Purpose, Approachand Structure of the Book

2

Environmental Gain Introduction Sustainable Development Ecological Modernization Environmental Gain The Hierarchyof Concepts Strategic Environmental Assessment Strategic Sustainability Assessment Conclusions

12

Environment in the European Union Introduction Institutions with Environmental Responsibilities Environmental Initiatives Environment and Economic Development Environmental Funding Programmes Conclusions

30 30

3

4 Inward Investment and Environmental Finance Introduction International Plant Location Factors The Industrial Flight Hypothesis Revisited Environmental Subsidies Conclusions

12 13 16 19

21 23 27 28

31 36 45

52 57

59 59 60 62 66 74

vi ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN 76 76 77 78 82 83 85 90 93 98

5

TheEuropean Union StructuralFunds Introduction Composition of the Structural Funds Development Objectives,1994-1999 Structural Funds Budget Rationalization of the Structural Funds from 2000 Programme Formulationand Implementation Environmental Impact Environmental Guidance Conclusions

6

Environmental Integration in Regional Programmes Introduction Programming Period1989-1993 Programming Period1994-1996: Ex-ante Evaluation Programming Period1994-1996: Ex-post Evaluation Programming Period1997-1999: Mid-term Evaluation Progress in Environmental Integration Conclusions

100 100 101 103 107 112 121 123

7

A Methodology for Realizing Environmental Gain Introduction Preliminary Considerations Programme Design Programme Management Programme Evaluation Conclusions

125 125 125 128 133 139 147

8

TowardsRegionalEnvironmentalCompetitiveness Introduction Key Points Environmental Regulationand Industrial Competitiveness Environmental Gainand Regional Environmental Competitiveness Beyond Competitiveness

149 149 150 152

Appendix 2 EU Environmental Legislation Relevant for Structural Funds Regional Development Programmes

Appendix 2 Structural Funds Support, 2000-2006 References Index

155 158

160 172

2 77 286

LISTOF TABLES AND BOXES

TABLES 2.1 Stages in integrating economic development and environmental management 20 hierarchy of concepts: comparative characteristics 21 2.2 The 25 2.3 Comparison of EIA and SEA Directorate-General XI 35 3.1 European Commission 4.1 Significance of plant factors location 61 4.2 State aid to manufacturing industry in the67EU 4.3 Environmental assistance tothe manufacturing sector, 1995-1997 68 70 4.4 Support for environmental technology in Europe 79 5.1 Objective 1regions’ population coverage, 1994-1999 80 5.2 Objective 2 regions’population coverage, 1994-1996 81 5.3 Objective 5b regions’ population coverage, 1994-1999 82 5.4 Objective 6 regions’population coverage, 1995-1999 83 5.5 Structural Funds contributions, 1994-1999 104 6.1 SPD information on the state of the environment, 1994-1996 6.2 SPD measures forenvironmental gain, 1994-1996 107 6.3 Environment in programme aims and objectives, 1997-1999 116 6.4 Index of environmental Integration in European programmes 121 7.1 Environmental considerations by stage of programme development 126 8.1 Stages in moving towards regional environmental competitiveness 156 A2.1 Objective 2population coverage, 2000-2006 174 A2.2 Structural Funds breakdown by Member State,2000-2006 175

BOXES 5.1 5.2 6.1 6.2

Structural Funds programmes: strategic priorities Structural Funds programmes: tourism priority measures Lacq P81e Environnement Krettsloppspark Centrum

87 87 109 111

viii ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN 6.3 6.4 6.5 6.6 6.7 7.1

7.2 7.3 7.4

7.5 7.6

Lahti Environmental Forum Measure-level assessment of environmental impact: Saarland A strategic approach to sustainable development: eastern Scotland Impact assessment insupport of target-setting: western Scotland Environmental progressin Poitou-Charentes Issue auditing within programmes Measure-specific guidance forSMEs in tourism and cultural industries Identifying environmental gain in project applications Programme-level environmental evaluation: key questions Project-level environmental evaluation: key questions Evidence of environmental gainin projects supported by EU Structural Funds

112 114 118 119 120

131 135 138 140 143 146

ACRONYMS AND ABBREVIATIONS

AG BPEO BMU CAB CAP CBA CEC CEE CI CSD CSF DATAR DETR DG DGXI DG XVI DOE DTA DTI EAGGF EAP EC ECJ ECSC EEA EEC EIA EIONET EIS EMAS ERDF ERM ERP ESDP ESF ETC EU

advisory group best practicableenvironmental option Bundesministerium fuer Umwelt county administrative board Common Agricultural Policy cost-benefit analysis Commission of the European Communities central and eastern Europe community initiative UN Commission on Sustainable Development community support framework Ddkgation a 1’Amhagement du Territoire Department of the Environment, Transportand the Regions Directorate-General (of the European Commission) Directorate-General for Environment, Nuclear Safety and Civil Protection Directorate-General for Regionaland Cohesion Policy Department of the Environment Deutsche Ausgleichsbank Department of Trade and Industry European Agricultural Guidanceand Guarantee Fund environmental action programme European Communities European Court of Justice European Coaland Steel Community European Environment Agency European Economic Community environmental impact assessment European Information and Observation Network environmental impact statement eco-management and audit scheme European Regional Development Fund Environmental Resources Management European Recovery Programme European Spatial Development Perspective European Social Fund European Topic Centre European Union

x ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN EURATOM FDI FFP FIFG GIS GDP GNP ICC IDA IEEA IPPC KFW LCA LIFE MEANS MEP NFP NGO NUTS OECD

or

PESCA PMC PPP

QMV

R&D RDP RECHAR RESIDER SAC SEA SEAct SEM SME SPA SPD SSA SWOT TEN UN UNCED UNCHE UNEP WCED WHO WICEM

European Atomic EnergyCommunity foreign directinvestment Fifth Framework Programme Financial Instrument for Fisheries Guidance geographic information systems gross domesticproduct gross national product International Chamber of Commerce Industrial Development Authority integrated economic and environmental accounting integrated pollution prevention and control Kreditanstalt fuer Wiederaufbau lifecycle analysis financial instrument for the environment methods for evaluating actions of structural nature Member of the European Parliament national focal point non-governmental organization nomenclature of territorial units for statistics Organisation for Economic Co-operationand Development operational programme diversification in fishing industries programme management committee polluter pays principle qualified majority voting research and development regional development plan reconversion of coal-mining areas reconversion of steel areas special areaof conservation strategic environmental assessment Single European Act Single European Market small- and medium-sized enterprise special protection area single programming document strategic sustainability assessment strengths, weaknesses, opportunities and threats Trans-European (Transport) Network United Nations United Nations Conferenceon Environment and Development United Nations Conferenceon the Human Environment United Nations Environment Programme World Commission on Environmentand Development World Health Organization World Industry Conference on Environmental Management

ACKNOWLEDGEMENTS

The idea to write this book occurred to me when my work on regional policy in the EU Member States was joined by a new professional interest in European environmental policy. After years of practice and research in regional planning and economic development, a broader perspective had opened to me, drawing together essential elements of economy and environment. With a background inboth fields, I had sympathy for the needs of each policy area, while at the same timeI became preoccupiedwith integrating environmental concernsinto regional development. During this period, various individuals influenced both the direction and the content of my plans for the book. My thanks are due to a number of former colleagues at the European Policies Research Centre, where I was first introducedto the EU Structural Funds ten years ago. I am particularly indebted to John Bachtler, whose enthusiasm and drive inspired my interest in regional policy researchand in the effectiveness of policy instruments designed to create balanced economic opportunity. I am also grateful to Ekos Economic Consultants, where my experience in comparative regional development was supplemented with a clearer understanding of howprogrammesandprogrammingpartnerships operate. Over the past year, John McCreadie’s expertise in evaluation and readiness to accommodate critical environmental appraisal have been encouraging. Throughout the writing of the book, other individuals have also been helpful. Arthur Keller and Joanna Douglas,of Scottish Natural Heritage and the Scottish Environment Protection Agency respectively, have allowed me to incorporate some of their ideas and quote from their work; Richard Cairns, of Strathclyde European Partnership, inspired my thoughts with his inventive approach to programme management; and Mark Poustie, of Strathclyde University LawSchool, has regularly clarified aspects of European environmentallaw. Richard Welford and Andy Gouldson also deservea mention, with my thanks for the initial encouragement to approach Earthscan and for the provision of published materials.

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Lastly, I must express my appreciation of Earthscan's seemingly limitless patience, as the book went through transformations to keep pacewith my evolving research interests,and for Akan Leander's consistently polite enquiries as to when the manuscript might finally be ready. Any inaccuraciesin the text are,of course, entirely my responsibility. Keith Clement Glasgow, December 1999

FOREWORD

Thirty years ago, when environmental policy first emerged in Europe, it was almost commonplace to consider economic development and environmental protection as mutually antagonistic: you could not have both. This assessment was particularly popular amongst adherentsto classical economictheory, who preferred to leave environmental(and social) problems to be resolved by the market. As the Chicago economists subsequently increased their influence on policy development in the Anglo-Saxon world, the idea prevailed - and still prevails - that environmental policy which was initiated, steered and enforced by public authorities could only hinder or upset market forces. No recognition was afforded to Scandinavian countries such as Denmark, Norway and Sweden, or to other countries such as Austria, Switzerland, TheNetherlands or even Germany, whichalready had - with considerable success- reconciled active environmental policies and continuous economic growth. This book explores opportunities for effectively combining economic development and environmental progress in the European Union (EU). Rather than pursuing political, economic and legal theories, it examines very pragmatically how development andthe environment can be integrated at regional and local level. This entails a description and assessment of European Community policies for regional development and the European Structural Funds, as well as other directly relevant themes such as environmental-economic planning at regional level. Principally directedat planners, local authorities, economists and ecologists, the text offers a number of new and very useful insights. The book concentrates on practice in the EU Member States, but the reflections on methodology for combining environmental and economic planning, on environmental gain and on programming, have a relevance that extends far beyond this geographic area. They could, mutatis mutandis, be equally appropriate for many other parts of the world where environ- and nowadays, there seems tobe no region without mental concerns exist environmental problems. Accordingly, I would recommend this book for consideration worldwide. Ludwig Kraemer European Commission Directorate-General for Environment, Nuclear Safety and Civil Protection(DG XI) Brussels

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1 ECONOMICDEVELOPMENT AND THE ENVIRONMENT

Economic development and environmental protection are not unalterably opposed to each other. On the contrary, more often than not, development and protection go hand in hand. Improving one enhances the other [and] environmentalists and economists, farfiom being natural enemies, are in fact natural allies (Schramm and Warford, 1989, p2). Written ten years ago, these insights offer both a positive philosophy and encouragement for effective integration between environmental protection and economic development. In the intervening years,the tensions between these two areas have increasingly been recognized, but progress in their reconciliation has been slow. Moreover,the emergence of fine distinctions, such as the relative merits of growth as opposed to development, have drawn attention to the ongoing needto assess carefully all policies that have the capacity toundermine rather than to secureour future. The key message inthe above quotation is that scope exists to influence outcomes. Economic development couldattempt to proceed with no regard for impactson the environment;but this is currently becoming much more difficult to justify.A more effective meansof moving forward is to develop the mutually beneficial interaction and teamworkto which Schramm and Warford are alluding, by replacing problems with solutions, replying to questions with answers, and assuaging interdisciplinary conflict with integrative methodologies. In practice, realizing theseaspirations amounts to no small task; however, they hold significant potential to contribute towards achieving the goal of sustainable development. This book is intended to serve as one instrument in the pursuit of that goal. CHARACTERISTICS OF THE PROBLEM

If environmentalists and economists are natural allies, why should a book such as this be necessary? Theanswer lies in the conventional expectation

2 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN that economic development invariably leads to environmental degradation. The most commonly cited source promoting recognition of this problem was published at the beginning of the 1960s, when Silent Spring strikingly portrayed growth and environment as opposite forces (Carson, 1963). Its argument focused on the accumulationof environmental stress, namelythe limited capacityof the environment to assimilate waste - particularly chemicals - from the economy. This extensive testimony to ’man’s depressing record of destruction’ charteda level of degradation affecting air, earth, rivers and sea which was for the most part irreversible. From the protection of industry, attention was nowdrawn to the need to protect natural capital. Ultimately, economic activity depends upon naturalcapital, especially environmental resources such as soil, water,vegetation and climate. These resources are fundamental to the agriculture, forestry and fisheries sectors, and they are also directly linked toa wide range of other economic sectors including energy, constructionand waste treatment. In this context, ecological interactions become very important, with the recognitionthat immediate negative impacts canhave additional longer-term impactson natural interdependencies, affectingthe productive capacity of soil, inducing erosion or destabilizing natural cycles. Individual countries, and regions within countries, can have very different ecological characteristics and correspondingly different levels of sensitivity. However, at the macro-economic level, impactson the environmental resource base are rarely considered in a systematic and comprehensive manner,and conventional measuresof national income such as the ’blunt instrument’ of gross national product (GNP) per capita do not recognize or incorporate the loss of natural capital (Redclift, 1987, p15). Clearly, growth that relies solely on the consumption of finite resources cannot be sustainable, and a regional ornational economy’s total assets will decline as these resources are extracted or degraded. In 1974, the publication of The Limits to Growthstimulated a new awareness that exponential growth could not be sustained or adequately managed (Meadows et al, 1974). Theinvestigation was based on a world model built specifically to explore five majortrends of global concern: those of accelerating industrialization, rapid population growth, widespread malnutrition, depletion of non-renewable resources,and a deteriorating environment. The report presented an analysis of these interconnected trends, their influence on each other and the possible outcomes. It concludedthat if existing rates of growth continued, the physical limitswould be reachedwithin 100 years, prompting an immediate and uncontrollable decline in population and industrial capacity. If actions were taken to alter the growth trends, the report observed, a condition of ecological and economic stability could be established, compatible with long-term sustainability. However,its recommendations were not interpreted as discouraging development, and the pursuit of economic growth continued unabated.

ECONOMICDEVELOPMENT A N D THE ENVIRONMENT 3 In the subsequent decades, increases in energy generation, industrial production, transport, high-input agriculture and domestic consumption were paralleled by accelerating rates of deforestation, declinein fish populations, and extensive lossesof agricultural land, fresh water, habitats, species and biodiversity (Reid, 1995). Eventhough infrastructural improvements had resulted in reductions of sulphur dioxide and expanded waste treatment capacity, these were heavily outweighed by substantial increases in road traffic emissions, the volumeof waste produced and the accumulation of pollutants. Significantly, biodiversity suffered most in the countries making greatest economic progress (Janicke and Weidner, 1997). Specific public policy interventions have also been a direct source of environmental problems. Financial assistance to stimulate economic developmenthasfrequentlyencouragedinappropriate or unsustainable activities, while support for technological innovation has assumed an ambivalent role. In the latter context, it has been argued that modern societies do not yet have - and perhaps never will have - the capacity to recognize and respond to many of the increasingly complex risks associated with economic development:

Potentially the most fatal futility of technological development is its failure to ease the pressure exerted by humankind on the natural environment. Instead of preventing or, at least, slowing down the destruction of the natural environment, rapid technological progress exacerbates the problem (Braun, 1995, p198). In effect, rather than producing advances that assist the transition to a balance between economy and environment, technology has facilitated a growth in population anda greater negative impact on the environment through increased production, pollution, consumption and the generation of waste. As we approach the end of the millennium, rather than achieving net environmental gain,the dominant scenario remains oneof net loss. Annual reports on environmental trends from the WorldwatchInstitute record that ecosystems are still beingdegraded and fragmented, and the environmental ’goods and services’ rendered by thosehabitats are disappearing with them; forests are diminishing,particularly in tropical regions, with the associated extincfion of plant and animal species and loss of climate regulation; and harmful subsidies are still very widespread, with governments around the world spending at least US$500 billion each year in support of development activities that damage the environment (Brown et al, 1997;Maddison et al, 1997; Myers and Kent, 1998).

4 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN

THEVARIETY OF RESPONSE There has been a range of responses to the challenge raised bythe need to reconcile economic developmentand environmental protection. Thesehave included major conferences and reports, international strategies, policy initiatives and new institutions, amongst other factors. However, as one of the greatest problems currently facing mankind, this daunting task has no simple solution, and each individual response can form only part of the answer or serve to highlight areas for possible further exploration. The first majorattempt to organizean international response to environmental problems took placein Stockholm in 1972, with the United Nations Conference on the Human Environment (UNCHE).Attended by representatives of 119 countries and 400 non-governmental organizations, thereport of the conference contained a 'Declaration' and an 'Action Plan for the Human Environment'. The declaration called for integrated development, such that economic development could beused as a means to improve the environment; and the action plan contained an extensive listof recommendations, grouped into the functional categories of global environmental assessment, environmental management activities andinternational supporting measures. Within the recommendations for development and environment, theplan emphasized the need for 'encouraging the training of personnel in the techniques of incorporating environmental considerations into development planning, and of identifying and analysing the economic and social cost-benefit relationships of alternative approaches' (UN, 1973, p26). In terms of overall impact, the conference had a direct result in the formation of the United Nations Environment Programme (UNEP); however, agreement on a coherent global-resource management strategy was hindered by the different economic perspectives and development status of participating countries from theNorth and South. In 1980, the International Union for the Conservation of Nature and Natural Resources published its wide-ranging World Conservation Strategy, containing conservation objectives and priorities for national and international action. The objectives included maintaining ecological processes and life-support systems,preserving genetic diversity,and ensuring the sustainable utilization of species and ecosystems. The action priorities covered a number of themes, including a hierarchy of conservation strategies, capacity-building andeducation. The strategy statedthatits vision of conservation wasintended to be totally compatiblewith development, and one priority advocated integration at 'every stage of the conservation and development processes, from their initial setting of policies to theireventual implementation and operation', including cross-sectoral measures (IUCN, 1980, section 9). Nevertheless, development agencies perceived the strategy as being verymuch in the tradition of setting limits to development, and its

ECONOMICDEVELOPMENT A N D THE ENVIRONMENT 5 self-distancing fromthe political and economic changes needed to fulfil its aspirations drew criticism that it contained serious limitations (Reid, 1995). Perhaps the most famous response tothe perceived dichotomybetween environment and economy was delivered in 1987, whenthe World Commission on Environment and Development published Our Common Future (WCED, 1987).Often referred toas the Brundtland Commission after its chairman, thereport acknowledged that environmental problems frequently originate from a diverse range of economic activitiesincluding transport, agriculture, tourism and manufacturing. However, this outcome was not considered inevitable:

Economic and ecological concerns are not necessarily in opposition.. .but the compatibilityof environmental and economic objectives is often lost in the pursuit of individual or group gains,with little regard for the impacts on others (WCED, 1987, p62). Consequently, the Brundtland recommendations went beyond the conventional view of environmental policy to stress that effective environmental protection cannot be achieved simply by environment agencies implementing their own policies: I n the past, responsibility for environmental matters has been placed in environmental ministries and institutions that often have had little or no control over destruction caused by agricultural, industrial, urban development,forestry, and transportation policies and practices. Society has failed to give the responsibility for preventing environmental damage to the 'sectoral' ministries and agencies whose policies cause it (WCED, 1987,

P39). These sectoral specialists were now urged to recognize the environmental dimension in their work, with emphasis placed upon interdisciplinarity. The report also recommended that major central economic and sectoral agencies of governments should be made directly responsible and fully accountable for ensuring that their policies, programmes and budgets supported development that is ecologically, as well as economically,sustainable (WCED, 1987, p314). The idea of environmental integration was taken further at the United Nations Conference on Environment and Development (UNCED) held in Rio de Janeiro in 1992. Leaders from 160 nations attended this conference, described variously as the 'last chance to avoid ecological catastrophe' and the 'most important meeting in the history of humanity'. The immediate outcomes from Rio included an Earth Charter (also known as the Rio Declaration), agreementson specific legal measures for atmospheric protection, forests and biodiversity, and Agenda 21, a programme of action for

6 ECONOMICDEVELOPMENT A N D ENVIRONMENTALGAIN

sustainable development worldwide into the 21st century, setting priorities and targets and allocating costs (UN, 1992). Agenda 21 addressed the integration of environment and development in decision-making, particularly at the strategic level of policy, planning and management. Adopting a long-term perspective and cross-sectoral approach, the programme called upon countries to ensure a three-way (economic, socialand environmental) integration into decision-making at all levelsin all areas of government. Such a vision assumed transparency of - and accountability for- the environmental implications of economic and sectoral policies, advocating systems such as integrated economic and environmental accounting (IEEA) to encompass additional, non-financial areas in national accounts. UNCED has been both criticized and defended. The conference experienced practical problems, especially difficulties in organization and spiralling costs, and there were major conflicts of interest between the developed and the developing countries. The business community took a positive view of the outcomes, particularly the agreements on the potential role of market forces in furthering environmental improvement. The maininstitutional development from Rio was the formation of a new United Nations Commission on Sustainable Development(CSD), which was given the task of translating the principles of the Rio Declaration and Agenda 21 into action. Over the following five years,a host of additional related national and international initiatives were launched (Dodds, 1997). However, even though there had been institutional and legal achievements, the CSD was to report that considerable efforts werestill necessary:

The CSD assessment of the progress achieved after Rio acknowledges that economic growth has been associated with higher inequalities, with an increasing number of people living in absolute poverty, and with a progressive deterioration of the state of the global environment (Goria, 1997, p12). During the 20 years between the Stockholm and Rio conferences, the concept of sustainable development gained increasing exposure andstatus. Launched formally with the World Conservation Strategy, the Brundtland report contributed substantially to its momentum, describing it as offering:

...afrarnework for the integrationof environment policies and development strategies - the term 'development' being used here in its broadest sense (WCED, 1987,p40). Rather than rising and falling as a passing fashion,sustainable development further in Chapter 2 - has continued to filter through to even more aspects of life and work. The growth of concern is reflected most

- considered

ECONOMICDEVELOPMENT AND

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7

obviously in the steady increase of related legislation, policy initiatives, research programmes, sectoral codes of practice, corporate voluntary action, budget allocations, environmentaltraining courses and publications. Sustainable development has also been periodically revisited and subjected to critical analysis,with the positive purpose of adopting it as a basis to develop practical policy instrumentsand measurable policy outcomes. Inthis context, it has opened up a constructive dialogue between economic policy-makers and environmentalists, allowing more advantageous consideration of the physical environment and increasing scope for effective integration. Nevertheless,appropriate means of achieving sustainable development are still being defined, along with key related issues such as reducing resource use while increasing productivity,and encouraging a cultural change in industrial attitudes - to work within the external constraint of carrying capacity (Weizsacker et al, 1997). Clearly,to satisfy methodological demands within the necessary timeframe requires imaginative and persuasive solutions that maximize benefits and minimize disbenefits. Amongst international agencies involvedin the search for solutions, the Organisation for Economic Co-operation and Development (OECD) has been especially active. Focusing on integrating the economy and the environment, OECD research has reinforced the views that economic and environmental policies cannot be made and implemented in isolation, and that achieving compatibility betweenenvironmental and sectoral economic policies requires continual monitoring and evaluation. Reviewing progress in the 1990s, successes have been identified in 'decoupling' environmental degradation from economic development, especially in the energy sector; the establishment of environmental expertise within sectoral economic ministries was also considered tobe encouraging. However, assessmentsof negative environmental impact appear to have no significant influenceon the mainstreamof economic policy-makingin practice, and it is anticipated that the scale of new environmental problems will continue to outpace the benefits of technological change (OECD, 1996a, p8). As part of the constructive response to integration, the environment has also been promoted as a separate sector of development. In an attempt to change perceptions,this approach has encouraged the viewof environment not as a constraint on economic development, consuming funds that would otherwise have beeninvested in growth, but instead as an area of potential. Echoing views expressed by the initial UNCHE report, this represents a move beyondthe question of how best tosafeguard the environment to one of how best to use natural resources to further human welfare. Linkages between environment and employment have been examined in various studies in order to foster mutual reinforcement; as a result, the pursuit of environmental integration is now considered capable of creating positive net impacts on employment (eg OECD, 199713, p100; ECOTEC, 1994).

8 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN

ENVIRONMENTAL POTENTIAL OF ECONOMIC PROGRAMMES National reactions and institutional responses to environmental problems indicate that economic growth will always be considered essential, and that no support wouldbe forthcoming for scenarios recommending a halt to development. Accordingly, ratherthancontinuing to seek a solution through directional change,an alternative approach can beadopted to influence procedural change. Conventional means of addressing environmental problems generally adopt one of two forms: either they utilize issue-oriented programmes that support projects with specific environmental objectives, such as reforestation or sewerage upgrading; or, alternatively, they seek to ensure that individual projects contain mitigating features to offset negative environmental impacts. These forms of intervention are important, but they are not enough on their own to reverse trends in environmental loss. A broaderbased, more strategicapproach is necessary:

By concentrating on curative piecemeal solutions, rather than on the underlying causes, the traditional approach.. .fails to confront the real issues. Environment-related behaviour and policy are in fact at the very heart of social, macro-economic and sectoral policies - especially those relating to agriculture, energyand indust y/domestic and foreign investment, fiscal, monetary and trade policies, income distribution, and regional planning (Warford, 1989, p8). To increase effectiveness, environmental improvement measures should be supplemented - as recommended in the various international initiatives by integrating principles of environmental management with instruments of economic policy.A prime target forsuch intervention would be economic development programmes or strategies that involve government agencies, public-sector partnerships and, ultimately, private-sector companies. During the 1990s, economic programmes have expanded in thematic coverage from predominantly physical infrastructure development to support a range of activities encompassing business practices, small firm formation, regional promotion and sectoral training, amongst others. Whereas these new multidimensional programmes contain even greater potential for environmental impact, this could be interpreted as offering increased opportunity to initiate and direct positiveenvironmental change. Within the European Union (EU), economic development supported through regional programmes has often been clearly at the expense of the environment, and examples from across the Member States indicate the capacity to exploit ratherthan to improve the environment during programme and project implementation. Over time, this consistent outcome

ECONOMICDEVELOPMENT AND

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has generated the expectation that environmental issues will always remain lower down the public-sector agenda than economic concerns, and the urgent drive for job creation which has gained such prominence in recent years - by common political consent- has reinforced this hierarchy in the minds of decision-makers. However, against the background of sustainable development debate, these programmes - as public-sector instruments providing cofinancing can and should be expected to deliver more than just environmentally neutral impacts or minimum environmental compliance. In practice, the scope to pursue environmental measures within this form of economic programme is determined by three key factors. Theseinclude political and legislative momentum to support environmental integration; the identification by programme decision-makers with the approach to environmental issues characterized by sustainable development; and - of greatest significance forthis book - the availabilityof methodologies or analytical tools to categorize and facilitate environmental improvement. In some European regions, innovative management of economic programmes can already be identified, and practical moves towards environmental integration have produced broadly beneficial outcomes. However, these initiatives have taken years to emerge, and the outcomes still vary in effectiveness. For instance, in certain cases regional programmes have shown promise at the design stage, but have failed to realize potenthis tial during implementation; others have encountered institutional or legislative constraints on integration,but have identified meansof working within the system to mutual advantage. In some of the best examples of good practice projects, the high degree of success has for various reasons not been paralleledwith wider integration of environmental principlesinto programme development. Nevertheless, the diverse approachesand environmental achievements across Europe reflect an innovative and dynamic context with transferable lessons for greater environmental integration both within and outside the EU. PURPOSE,

APPROACH AND

STRUCTURE OF THE BOOK

The purpose of this book is tocontribute to thecurrent momentum towards environmentally positive economic development. The specific objective is to change perceptions by illustrating how the conventional expectation of environmental loss within economic development can be transformed into a new perspective of environmental gain. By showing where opportunities lie, the bookis intended to offerinsights to assist policy-makers, researchers, academics and students to assess and improve upon existing methods of environmental integration.

10 ECONOMICDEVELOPMENT ANDENVIRONMENTAL GAIN

The approach of the book is to introduce and apply the concept of environmental gain, set within a framework of sustainable development, and with reference to the European context, to identify and analyse progress through the various stages of environmental management in economic programmes. Lessons from this review are combined with knowledge of successful practice to derive a methodology for realizing environmental gain, supplemented by discussion of the scope for generating regional environmental competitiveness. Following this introduction, Chapter 2 introduces environmental gain. Working downward in terms of scale, sustainable development, ecological modernization and environmental gain are each examined for their individual characteristics and interrelationships. Distinctions are then made in a sequence corresponding to environmental loss, environmental protection and environmental gainas a basis for policy analysis. The subsequent focus on strategic environmental assessment considers its current capacity and applications. Chapter 3 describes environmentin the European Union. Followingan introduction to selectedEU institutions with environmental responsibilities, important environmental initiatives are examined,in particular the series of environmental action programmes, state-of-the-environment reporting, and the proposed directive on strategic environmental assessment. This is followed by considerationof key European themes with direct significance for environment and economic development and a review ofEU environmental funding programmes. Chapter 4 focuses on inward investment and environmental finance. It examines the role of environment amongst international plant location factors, revisits theindustrial flight hypothesis to assess whether it may have new relevance, and reviews environmental assistance to manufacturing industry from EU Member State governments, especially those incentives designed to encourage the development of environmental technology. Chapter 5 concentrates on the EU Structural Funds. The composition and objectives of Structural Funds’ regional economic programmes are outlined, accompanied by information on the rationalization of the funds due to commence from2000. Aspects of programme formulation and implementation are consideredin detail. The environmental dimension of the funds is given special attention, ranging from their previous history of negative impacts through torecent developments in the form of European Commission guidance on integrating environmentand sustainable development. Chapter 6 adopts an empirical approach, reviewing the effectiveness of environmental integration in regional programmes. Using examples from a number ofEU Member States, a chronological analysis identifies the move away from the economic focus of programmes in the 1980s to the environ-

ECONOMICDEVELOPMENT AND

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mental integration characteristic of programmes in the late 1990s. The main themes include programme environmental impact, management and implementation, and monitoring and evaluation. The chapter concludes with the construction of an index of environmental integration. Chapter 7 details a methodology for realizingenvironmental gain in the design, management and evaluation of regional economic programmes. Initial considerationsinclude development interpretation, preferred formof integration and the role of environmental authorities. Thereafter, thechapter covers the design elements of environmental profiles, indicators, targets, impact assessment and strategy; the management elements of measurespecific guidance,application forms, advisory groups, project selectionand award discretion; and evaluation from the perspectives of programme performance and project performance. Chapter 8 begins with a summary of the key points emerging fromthe preceding chapters. It then considers evidence for the impact of environmental regulation on industrial competitiveness, followed bythe potential of environmental gain to generate regional environmental competitiveness. This would represent a fourth stage in environmental management and economic development. The book concludes with a brief insight into what might lie beyond competitiveness.

2 ENVIRONMENTAL GAIN

INTRODUCTION In conducting environmental appraisal of economic development, an analytical framework or methodological tool must be used to identify major characteristics and to present informationin a form that can readilysupport decision-making.A number of competing conceptsand techniques are available for this task, but their interpretation and usage varies between countries and between regions. In some cases,this breadth of scope can be useful,if viewed as flexibility; in other instances, it acts as a hindrance on progress, generating ambiguity rather than clarity. The theme explored in this chapter - environmental gain - is of fundamental importance to the discussionthroughout the book. The perspective it offers isused both to identify levelsand stages of effective environmental integration in policy initiatives and to categorize the scale of achievement with reference to broader concepts, such as sustainable development and ecological modernization. As a model to be followed,sustainable development attempts to bring together economic, social and environmental factors witha positive purpose, whereas ecologicalmodernization represents a theory of strengthening the links between economic development andenvironmental protection. Environmental gain complements these higher levels of analysis by providing a practical means of interpreting existing integration, as well as a method for progressively realizing greater integration. The chapter addresses each of these three themes individually, followed by a comparison of their characteristicsand interrelationshipsin the formof a hierarchy of concepts. Thereafter, consideration is given to the role and current application of techniques for strategic environmental and sustainability assessment.

ENVIRONMENTALGAIN 13

SUSTAINABLE DEVELOPMENT Since its launch with the World Conservation Strategy (IUCN,1980), sustainable development has steadily risen in status to assume a central position in writings and discussion throughout the 1990s. Applications and interpretations continue to emerge,but its evolution is attributed in particularto the efforts of the WCED, which providedtheubiquitousand influential definition:

Sustainable development is development that meets the needs of the present without compromising the abilityof future generations to meet their own needs (WCED, 1987, p43). The commission alsostated that sustainable development isnot a fixed state of harmony, but rather a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development, and institutional change are all made consistent with future as well as present needs (WCED, 1987,p9). Extending beyond economics to encompass ethical, societal, institutional and environmental dimensions, sustainable development is clearly very difficult to encapsulate in simple terms. Its initial appeal has been attributed to both its breadth and its vagueness, judged as 'palatable to everybody... radical and yet not offensive' (Skolimowski, 1995). However, there are many different interpretations, each relating to aspirations or visions people have forthe future:

Since the Brundtland report (re-)introduced the conceptin 1987, at least 40 working definitions of sustainabledevelopmenthaveappeared. Consequently, many different projects are furthered under the flag of sustainable development and quarrels have started to emerge about what sustainable developmentreally is (Hajer, 1995,pl). No consensus has yet emerged on a single, practical definition that might bring together philosophers, ecologists, economists, political scientists and others (Crabbk, 1997);but incremental refinements have drawn useful definitional distinctions. In particular, they have encouraged support for the idea that 'it is both morally and economically wrong to treat the world as if it were a business in liquidation' (Daly, 1992). Overarching themes are identifiable. Fundamentally,sustainable development is perceived as process-oriented - referring to the process of developing in a sustainable manner - and, within that process, as progressing towards a specific goal:

24 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN

Sustainable development is people-centredin that it aims to improve the quality of human life, and it is conservation-based in that it is conditioned by the need to respect natureS ability to provide resources and life-supporting services.I n this perspective, sustainable development means improving the quality of human life while living within the carrying capacity of supporting ecosystems (Reed, 1996, p5). In comparison, sustainability appears as the broad overriding concept within which sustainable development forms one component. The other features comprise sustainable resource use (in terms of ecological sustainability) and a state in which the goals of sustainable development have been achieved (Reid,1995, pxiv). Active reference to this framework implies and encourages a questioning and assessment of progress to attain both social justice and ecological health. At its simplest, sustainable development refers to maintaining and improving the well-being of people and ecosystems. The corresponding paradigm has three key components, those of economic sustainability, environmental sustainability and social sustainability (Khan, 1995). Economic sustainability encompasses growth, development, productivity and trickle-down effects; environmental sustainability includes ecosystem integrity and attention to carrying capacity and biodiversity; and social sustainability includes variables such as equity, empowerment, accessibility and participation. However, bringing these multifaceted elementstogether requires effectiveinstitutional change as well as interdisciplinary vision:

I f it is not to be devoid of analytical content, [sustainable development] means more than seeking a compromise between the natural environment and the pursuit of economic growth. It means a definition of development which recognizes that thelimits of sustainability have structural as well as natural origins (Redclift, 1987, p199). Consequently, realization of the new paradigm implies a major change in focus for institutions and the development of practical techniques, according to the following principles: In contrast to the conventional development focus on human-made capital, emphasis should be placed on natural capital as the main limiting factor. A sustainable development index should supersede the conventional indicator of GNP and measure development performance in the context of an integrative framework of social, environmental and economic sustainability. Intergenerational assumptionsshouldfeatureinthe assessment of resource availability.

ENVIRONMENTALGAIN 15 Waste absorption should be recognized as a major function of the environment and an important limitation to economic growth. Methodological tools should be developed to appraise programmes and projects and to assistinvestment and planning decisions by giving equal weight to economic, environmental and social variables (Khan, 1995). The subsequent stage of operationalizing sustainable development has significance not just for thosewho seek to demonstrate their environmental integrity, but also for decision-makers who would use the concept for policy design. Distinctions have been drawn between weak, strong and even ’absurdly strong’ sustainability,highlighting the scope for conceptual flaws at different levels of integration. Ethical dilemmas have also been anticipated, such as how to decide when trade-offs are feasible between an environmental satisfaction and a human satisfaction (Beckermann,1995). Evidently, sustainable development brings with it both problems and opportunities, but governments at federal, central and regional levels have most frequently focused on the problems. The resulting reactive measures have generally comprisednew regulations or ‘gentle coercion’ strategies to remove negative interactions and to shift the basis of development onto a stable ecological foundation. In practice, these approaches tend to obscure the opportunities that could arise from conversion to sustainable development, so that the scope for positive environmental impact is restricted or even lost. To recover and realize theseopportunities requires a fundamental change in attitude which reorients policy-makers’ assumptions in industrial and economic development. The World Conservation Strategy recommended the preparation of national strategies as a means of operationalizing sustainable development. Such strategies were described as essential vehicles for providing both a framework for analysis and a focus for debate, especially with regard to processes such as reorienting priority issues within institutions. In practice, the resulting documents have assumed various identities, appearing as conservation strategies, environmental action plans, environmental management plans, environmental policy plans or national Agenda 21s. Collectively referred to as strategies for sustainability, the more successful ones incorporate features that include improving the well-being of people and ecosystems; choosing overtly tactical and strategic objectives; generating a high level of participation; encouraging clear communication between participants; balancing the survey, planning and implementation stages; and integrating sustainable development priorities into existing decisionmaking systems (Carew-Reid et al,1994, p8). Nevertheless, in many countries, economic, social and environmental strategies remain uncoordinated,and in some cases theyoperate in parallel with each other. In comparison, the number of partially integrated strategies is seen to be growing as environmental strategies address economic

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and social concerns,and as development programmes give increasing attention to environmental factors. However, problemsof pursuing sustainable development through development programmes remain, particularly with regard to defining indicators which record or measure progress towards this integrated goal, and in adapting or ’greening’ regional or national accounts to bring in the additional features of environment and society. These tasks are perceived as unrealizable in the short term, compounded by difficult questions such as: who should be responsible forsustainable development, which of the three core themes should be given greatest responsibility and how can progress be measured centrally? Even in those countries where sustainable development is being given a prominent role, as a horizontal activity the scope is currently still limited. In summary, sustainable development exists as an aspiration orgoal that is intuitively understood and approved, but which as a complex concept evades precise definition. Certainly, at this period in the world’s history, such a goal is a necessary and welcome feature;but as can be seen, it has both conceptual and practical problems. The all-encompassing nature of sustainable development means that it is simultaneously inspiring and intimidating.

ECOLOGICAL MODERNIZATION Within the holistic approach characteristic of sustainable development, a separate and progressive theory on reconciling economy and environment has been advanced in the form of ecological modernization. This theory is presented as a means of encouraging the proactive perception of policy problems:

Through policy integration, ecological modernization seeks to provide an alternative to the antagonisticrelationship between economic development and environmental protection that has prevailed in developed economies (Gouldson and Murphy 1996). Whereas environmentalistsduring the 1960s and 1970s promoted the zerogrowth option - that lasting environmental protection could only be achieved through a reduction and possibly even a total halt to economic development - this stance was superseded in the 1980s. The new view to emerge was that a different form of interactive link could exist between economic development and environmental protection, one that could be exploited to mutual benefit. Rather than perceiving ecological considerations solely as a constraint on economic growth, they came to be seen as providing a framework for sustainable development and as a necessary precondition forgrowth (Weale, 1993).

ENVIRONMENTALGAIN 27 At the macro-economic level, ecological modernization represents a policy framework that promotes structural change away from resourceintensive industries towards knowledge-intensive industries. On the route to achieving this objective,it seeks to drive economic efficiencyand technological innovation,harnessing the forcesof entrepreneurship to reorient the economy onto a more environmentally benign path, while supporting economic development and employment creation. In common with sustainable development, a range of interpretations of ecological modernization exists in different countries and institutions (Hajer, 1995, p30). However, four themes consistently appear, thoseof integration, synergy, innovative policy measures and the central role of clean technology (Gouldson and Murphy, 1996). With regard tointegration, greater effectiveness would be achieved if environmental policy goals were integrated within other policy areas of government. This would require a realignment of policy goals in areas such as economics, energy and transport, so that environmental consequences were considered in decision-making. Adjustments would then be made during both plan formulation and programme implementation in recognition of these environmental implications. The positive view of this integration is that it should ultimately produce more efficiency and mutually supportive policies. With environmental issues, this becomes even more pressing, due to the complexity of problems and interlinkages between disciplinary approaches. Two extremes of integration as described are strong and weak (Baldock et al, 1992). Strong integration sees each government department or unit becoming committed to environmental integration and making corresponding changes to its priorities and working methods. A new environmental identity or even a new department may emerge. In comparison, weak integration, at the opposite end of the spectrum, might comprise only coordination or compliance, with a department refocusing someof its activities, but making no new commitments - neither values nor objectives would be subordinated to environmentalpriorities. Weak integration would not promote institutional innovation or policy change, and ecological modernization essentially requires strong integration with objectives realigned to become self-reinforcing, rather than conflicting. In the second theme, that of emerging synergies, policy-makers could clearly benefit from a move away from anticipating and managing conflict in order to gain advantage through positive interaction between environmental protection and economic development. As a central concept of ecological modernization,this theme advocatesthat policies to improve the environment can bring increased effectiveness to economicmeasures and can acceleratethe transition to sustainability,in practice becominga catalyst for economicdevelopment. The third aspect of ecological modernization relates to exploring alternative and innovative policy measures. 'Economizing' the environment

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would be an example, placing an economic value on nature to sit alongside the values traditionally placed on labour and capital. Another option includes the widespread realignment of fiscal structures to create environmentally benign, labour-intensive development paths, using economic rationality to enhance - not to undermine - environmental quality, while simultaneously reinforcing employmentopportunities. Lastly, the invention, innovationand diffusion of new clean (or cleaner) technologies is perceived as essential to improve environmental and economic performance. This represents a technological imperative within ecological modernization, designed to decouple economic development and negative environmental impact. In order to integrate these four themes, an evaluative methodology is required that will estimate a country’s capacity to incorporate ecological modernization and assess its ability to shift toan environmentally benign development path (Janicke, 1992). Part of the appeal of ecological modernization for policy-makersis the assumption that existing political, economic and social institutions can internalize care forthe environment. However, there is concernthat the positive scenario of its institutionalization may hold drawbacks. The prospect of government departments readily adapting to produce meaningful change may be lost, for instance,if the momentum generated is absorbed in other ways and becomes diffused. In such a case, the philosophy might be adopted overtly, but the physical and social sciences may focus only on preconceived, limited goals such as defining critical loads for pollution or identifying barriers to technology diffusion (Hajer, 1994). Nonetheless, evidenceof a conceptual shift to ecological modernization has been identifiedin the operations of UN and OECD policy-making institutions (Hajer, 1995, p29). Itspotential as a catalyst for policy reform is also considered to have found expression in the activities ofEU regional and industrial policies:

The concept of ecological modernization can be shown to be to be one of a number of important interrelated ideas within the goals of sustainable development and institutional capacity development, which are being developed to establish a more integrated approach to territorial management within theEU. In essence, ecological modernization isseen as a means of delivering the goals of sustainable development, especially through its application at the regional level (Jackson and Roberts, 1999, p61). In essence, this theory portrays environmental protection as offering a positive-sum solution, replacing the previous zero-sum problem (Hajer, 1995, p31). Ostensibly,the former threat is now converted into the meansof reconciliation. However,there are conceptual limits to ecological modernization in relation to its social perspective, or more precisely the absence of such a perspective. With its technological-institutional focus, it avoids

ENVIRONMENTALGAIN 19 addressing social inequities or contradictions, and in this sphere it is criticized for supporting both the existing capitalist systemand elements of the system that continue to be inherently wasteful and unmanageable.

ENVIRONMENTAL GAIN Moving from theory to practice, the concept of environmental gain is an analytical toolused to identify levels of environmental integration. In particular, it categorizes deliberate actionsthat not only protect the environment but also enhance environmental conditions. As indicated in Chapter 1,economic development has often been characterized as a contest between industrial development, job creation and improved material standards of living on the one hand, and environmental protection and conservation on the other hand. Caricatures of these two extremes have invariably identified them as very separate and incompatible alternatives: either option was available to communities, but not both at the same time. Althoughsuch stand-off situations still occur, typicallyin developing countries, this restricted view is rapidly diminishing in status. New scenarios present a broader and more optimistic perspective,and economic development in Europe is increasingly providing evidence of generating positive environmental impact, especially in the formulation and implementation of regional programmes. In previous years, the two choices availableamounted to eitherenvironmental loss or environmental protection (see Table 2.1). The first and most enduring image of environmental loss corresponds to a passive scenario in which environmental degradationthrough economic development is regarded as inevitable. The outcomes or characteristics of this phase comprise factors such as increased pollution and emissions to air, soil and water, the loss of habitats, plants and wildlife, the accumulation of wastes, and the blighting of aesthetic landscapes. This stage of economic development is associated with both developing and declining economies, urgently in need of inward investment and seeking means of alleviating high unemployment through the attraction of industry. The passivenature of this phase relates toa poorly organized oroverruled administrative capacity for protecting the environment. At this point, job creation and industrial development are the clear - and perhaps only - priorities. The second stage - environmental protection - is realized through reactive measures such as legislation, regulations and physical planning instruments, in which publicauthorities seek to safeguard the environment as much as possible. For example, this might involve retaining landscape features, using industrial zoning or planning conditions to direct development to less sensitive areassuch as brownfield sites, constructing sewerage or waste treatment facilities, or imposing charges on industries that create

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environmental pollution. This corresponds to the formulation of defensive strategies, responding to public pressure or imperatives based on the cumulative negative impacts of earlier physical developments. It is also a constructive phase in which obvious damage is repaired in attempts to return to the status quo, and land-use patterns are formalized in order to avoid orat least containfuture damage.

Table 2.1 Stages in integrating economic development and environmental management Environmental loss (passive phase) Habitat destruction Loss of plants and wildlife pollution Water Emissions to air Soil contamination Waste accumulation Aesthetic losses

Environmental protection (reactive phase) e 0

e

e 0

Planning conditions Retention of landscape features Environmental charges andfilter systems for industry Land-use zoning Brownfield sites Waste treatment Damage repair

Environmental gain (proactive phase)

e

e e

Land reclamation and decontamination Air and water purification Energy efficiency Waste reduction and recycling Creation of woodlands and wetlands

Recent developments in practice have now extended the continuum to include a third stage, incorporating a proactive response in the form of seeking environmental gain.This allows for positive, deliberateand directed actions in which individual economic programmes not only protect the environment but also - through policy integration - enhance environmental conditions. This is achieved, for example, by using regional economic programmes to reclaim derelictland; to treat contaminated land; to reduce baseline emissions levels into water, air or soil; to provide wetlands for wildlife sanctuaries; toplant new areas of woodland; tosupport production modifications or to assist building refurbishments which reduce energy consumption. As a course of action, this new perspective offers directly practical opportunities to utilize the momentum of economic development to improve environmentalconditions in a measurable fashion. This stage corresponds to the development of oflensive strategies, where authorities actively encourage and create opportunities for forward-looking measures,bringing broader benefits to economies and regions, both environmentally and in terms of sustainability. In comparison with environmental improvement or environmental benefit, the term environmental gain makes important distinctions that are

ENVIRONMENTALGAIN 21 more than just semantics. Environmental improvement is a very familiar term, associated mostlywith issue-based programmesrun, for example, by national environment ministries fordesignated areas, orby local authorities upgrading urban settings. In other words, environmental improvement may be classified as an activity that occurs separately from, or in parallel with, economic development. The notion of environmentalbenefit, by contrast, may be identified with direct or indirect effects of non-environmental initiatives. This might comprise positive impacts that improve environmental conditions, even though this outcome is not central to the main purpose of the initiative. Examples include measures to rationalize transportation systems to create more efficient networks. Environmental gain, in comparison, corresponds to deliberate actions with the specific objective of deriving positive environmental change, in this instance by integratingwith economic development activities. Consequently, the expectation isthat economic development brings environmental development. As equal components inthe new sustainable development paradigm, these distinctions will assume increasing significance. Understanding the differences in terminology is also important for achieving the transition between policy actions: a change in emphasis can lead to a change in thinking, with the ultimate goal of influencing working practices to give environment a fundamental and integrated status in economic development.

THEHIERARCHY OF CONCEPTS If the three concepts of sustainable development, ecologicalmodernization and environmental gain are represented as a hierarchy, each level can be seen to have distinctive characteristics. In Table 2.2, the three levels are differentiated according to scope, purpose and operational time scale. Table 2.2 The hierarchy of concepts: comparative characteristics Sustainable Development

0 0 0

Ecological Modernization

0 0 0

Environmental Gain

Social, economic and environmental focus Normative model Long term Economic and environmental focus Theoretical discourse Medium term Environmental focus Decision-makingtool Short term

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Scope As a commonality, the environment gives all three concepts similar problems toaddress, such as the treatment of pollution and use of resources. Thereafter, the question of coverage is one of the clearer hierarchical elements, with an obvious narrowing of focus with each step down the table. Positioned at the top, sustainable development has the greatest breadth of concern, encompassing economic, socialand environmental dimensions. Its scope is holistic,in the senseof comprehensive coverageof issues and their interrelationships. Ecological modernization has a narrower focus, excluding the social dimension, which is to specialize in the economy-environment interaction with regard to policy style, for example in national institutions and international administration. Furthermore, the concentration on technological solutions as a catalyst for progressiveimprovement in these two sectors is specific to ecological modernization. In comparison, environmental gain is focused solelyon factors that are related to the physical environment, generally only reaching the other sectors when fulfilling the policy requirements of sustainable development.

Purpose Although all three concepts provide input towards the commonality of environmental protection and improvement, they have different purposes. Sustainable development is intended as a normative model, prescribinghow economies, governments and corporate organizations should be working to achieve a common goal. Sustainable development addresses needs, particularly those of the world’s poor, and issues a moral imperative to develop sustainabilityin all countries.In this role, it warns against resource exploitation, but it also tackles questions such as access to those resources, the distribution of costs and benefits, and equity across generations. In comparison, ecological modernization represents a theoretical discourse, not fashioned with the objective of reform ornormative purpose, but rather as a means of analysing activity to identifytrends and outcomes in the field of policy integration. As a concept, it can bring together the different strands of activity in an economy in order to demonstrate and clarify progress as one facet of sustainable development thinking. As an evolving theory of practice, its application relates principally to academic analyses, monitoring and assessing existing industrial and environmental interaction. Environmental gain has a more direct practicalpurpose, intended as a decision-making tool to facilitate distinctions between levels of environmental integration. It isa means of identifying, categorizingand measuring progress. Assisting public-sector decisions in specific institutional or proce-

ENVIRONMENTALGAIN 23 dural settings, environmental gain operates in the tradition of Bentham’s felicijk calcuhs, an instrument designed to help legislators recognize,understand and measure positive and negative outcomes of actions (Warnock, 1962). Ultimately,the purpose of environmental gain is to act in a similar manner, assessing the impact of previous decisions and forming a guide for future actions.

Time scale The comparisonof operational time scales reflectsthe hierarchy pertaining to scope,but onthis occasion is linked to realizability. Sustainable development, representinga long-term vision,is unlikely tobe realized in less than a generation, if indeed it is ever achieved. Instead, as an aspirational state, it is a distant prospect or aim,but one that must be set in motion immediately for the benefitof future generations. Withinour lifetimes, we maybe able to achieve only an approximation of sustainable development, but with a refined senseof direction. Ecological modernization requires a medium-term perspective, operating over yearsrather than over generations.To verify trends towards such a theory necessitates observation, monitoring of change and estimates of progress, both qualitative and quantitative. Further analysis of parallel changes may be required to reveal whether the directional change brings disbenefits outside the economy-nvironment nexus. In comparison, environmental gain is principally used as a short-term instrument. As such, it can support day-to-day decision-making,and it can clarify the characteristics of different policyoptions. However, in contributing to other levels in the hierarchy, its operation can also fulfil the normative demands of sustainable development, and it canprovide information to test the theory of ecological modernization for specific economic contexts.

STRATEGIC ENVIRONMENTAL ASSESSMENT Each of the concepts considered above assumes that environment has - or should have - a strategic role in economic development. However existing practice generally places environmental considerations at the end of the programming process, as part of project initiation and in the form of environmental impact assessment (EIA). EIA is defined as a systematic process that examines, in advance, the likely environmental consequences of development actions. Withan emphasis on prevention, EIAs are carried out according to a multidisciplinary method that may involve up to 15 steps, depending upon location and administration (Glasson et al, 1994,p4). Theresulting environmental impact statement (EIS) provides documented information and estimates of impacts

24 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN derived from the various steps in the process. Indicationof likely negative impacts could result in the cancellation, modification or mitigation of a project proposal. TheEIS has several components: a methods and key issues section,illustrating the approach taken; the background to the proposed development, containing a project description, baseline conditions, and characteristics of the proposed development; and an environmental impact assessment, according atoseries of topic areas, such as landscape, water quality, ecology, noise ortransport. EIA practice varies between countries, and between studieswithin countries, and there are nownumerous EIA systems in existence worldwide (Wood, 1995).Although they differ in detail, the basic principles of these systems are very similar,as is their purpose: EIA acts as an aid to decisionmaking, providing detailed information on the environmental implications of a proposed action. However,the application of EIA has remained limited, and its focus is restricted toindividual projects with little strategic impact. To expand the capacity of this technique and increase its potential input to major decisions, EIA has been raised to the level of policies, plans and programmes through the development of strategic environmental assessment (SEA). SEAhas been definedas follows: A formalised, systematic and comprehensive process of evaluating the environmental impactsof a policy, planor programme and its alternatives, including the preparation of a written report on thejindings of that evalu-

ation, and using the findings in publicly accountable decision-making (Therivel et al,1992, pp19-20). In comparison toEIA, SEA is the earlier application of a similar methodology at a more strategic level of the economic development process. Originally, EIA was intended to cover thesebroader dimensions and incorporate assessments from the strategic-programme level down to the project-specific level. However, in terms of feasibility and realizability, the differences between these levels are considerable, and in practice developers and policy-makers have restricted the application of EIA to project assessment, concentrating onthe more manageable features. There are several important differences betweenthe two techniques (see Table 2.3): EIA is reactive, responding to specific development proposals, whereas SEA is proactive,anticipating likely development applications. EIA generally focuses on one location or project,but SEA allows scope to consider alternatives.

ENVIRONMENTALGAIN 25 EIA is confined to immediate and discrete impacts of a single project, whereas SEA can incorporate cumulative effects. EIA occurs late in the development process and operates to a short time scale, thereby limiting the amount of data available; SEA, on the other hand, can be initiated early in the process, allowing a longer time scale for data-gathering and a better quality of analysis.

Table 2.3 Comparison of E I A and S E A Project EiA

PlanlProgramme SEA

Reactive

Proactive

Focuses on specific development proposals No alternatives

Anticipates development proposals

Late inprocess, short time scale

Early in process, long time scale

Ignores cumulative effects

Alternatives possible Incorporates cumulative effects

Accordingly, SEA is intended to consider the consequences of a range of actions, to choose the mostappropriate action on environmental as well as socio-economic grounds, and to minimize any remaining impacts. SEAs may take three forms:

spatial, assessing economic programmes or development plans set at national, regional or local levels; sectoral, for example focusing on transport plans or energy policies; or thematic, evaluating initiatives environmentally, for example in relation to researchand development (R&D) programmes or plans for the privatization of public sector industries. In terms of procedure, there aretwo distinctive types of SEA. The first form is known as incremental, and it basically expands the existing system of project EIA. Most SEAscurrently follow this incremental approach, which in practice means exploiting opportunities to introduce environmental policy considerations into plans and programmes to develop sustainable actions. To date, the SEA procedure has not been sufficiently extended to address policies on a regular basis, since these are the least tangible of its three targets. The alternative form is to use a trickle-down approach, which means making sustainable development a central objective of a policy, plan or programme. This isa much more ambitious task,and it is correspondingly more difficult to achieve. TheNetherlands is credited with developing the first trickle-down system, broadly integrating the central objective of

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sustainable development into policies, plans and programmes, and then using it toguide project implementation (Ministry of Environment, Housing and Planning, 1989). Thisapproach includes assessing all existinggovernment policies for effectiveness in achieving sustainable development, especially areas such as energy consumption, the use of renewables, the quality of manufacturing processes and associated products, and the quality and quantity of waste flowsand emissions. Inaddition, all proposed policies that might have an impact on the environment would be required to produce environmental impact information. SEA methodologies already include recognizable procedural stages, with feedback loops at different points. However, not every SEA involves every oneof these stages, nor would all the stages be carriedout in the same depth. The following steps describe the key featuresof the integrated SEA model used in current practice (Theriveland Partidario, 1996):

e

e 0

identifying objectives (explicit or implicit); generating alternatives; creating a framework of analysis (scoping theSEA); describing baseline conditions; predicting and assessing impacts; producing environmental statements and undertaking broad consultation; deciding between alternatives; mitigation; and monitoring and evaluation.

Publications and research reports on SEA highlight the growing interest in its potential and its increasing transfer into practice at a variety of spatial scales and sectoral contexts. These include, amongst others, development plans, economic programmes, forestry plans and traffic infrastructure plans. Formal SEA regulations existin very few countries, but a number have now issued guidelines on how SEAS should be carriedout. Nevertheless, given the scale of endeavour associated with SEA, there are technical and procedural limitations toits effectiveness (eg Kleinschmidt and Wagner, 1998; CEC, 1997a). These include potential analytical complexity and limited informationon the future, which meansthat impacts cannot be precisely estimated and neither can the scale or locationof future developments be known. Difficulties are also presented in assessing a range of alternatives, both in coping with the variety and scale of possibilities and in estimating the impactsof different hypothetical scenarios. Data requirements may also be overwhelming: qualitative rather than quantitative data may need tobe relied upon, and this could affectthe feasibility of achieving political agreement. In addition, policies may emerge incrementally within programmes, responding to development trends and

ENVIRONMENTALGAIN 27 making it impossible to foresee their environmental impacts at an early stage. Policy interpretation can also differ in implementation, so that predicted developments do not transpire and unexpected developments appear instead. Furthermore, in practice, SEA evidently means different things in different countries (eg Buckley, 1998; DETR, 1998; Therivel and Partidario, 1996; Glasson et al, 1994). It is offered as a process to be followed,as a technique to be applied, and as a set of principles to be integrated within existing practice. In some applications, it is presented as a one-off exercise at an early stage of a development, and in others as an ongoing procedure for continual cross-reference. Although SEA has risen substantially in status and reputation in recent years,it is still being held backa by range of conceptual and practical difficulties.

STRATEGIC SUSTAINABILITY ASSESSMENT In an attempt to support the application of SEA and extend the range of tools available to assist decision-making, a methodology known as strategic sustainability assessment (SSA) has also been explored (Partidario and Moura, 1997). SSA is understood as an integrative approach that aims to translate sustainability priorities and criteria into measurable indicators. However, its key issue is not the discussion of which indicators to measure, nor the measurement of those indicators. Such measurements would be carried out through, for example, cost-benefit analysis(CBA), geographic information systems (GIS) or lifecycle analysis (LCA). Instead, the objective of SSA is to discuss therange of values that indicators may adopt within a sustainability context, and to help establish the thresholds that those indicators should meet. The maximum value for an indicator would be the level or threshold point beyond which sustainability could no longer be expectedensured. or Accordingly, three kinds of threshold might then be identified for each indicator: sustainability (the target), the achievable threshold,and the critical level below or above which a strong impact would be expected. The difference between the actual value of the indicator and the sustainable value represents the effort that would be needed for a given technological or policy level to achieve sustainability. For a specific policy context,SSA would be used to define targets for environmental indicators and advise on the appropriate combination of indicators:

Integrating an approachsuchasstrategicsustainabilityassessment, supported by an arrayof tools such as sustainability thresholds and indica-

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tors, [means that] planning and decision-makingprocesseswould be contributing to an incremental approach in the clarification of issues and questions regarding carrying capacity (Partidario and Moura, 1997). While it is recognized that indicators are implied or defined by policy objectives or policy documents, it is also contended that they can help to define and mould policy aims. Consequently,in this interactive role, sustainability indicators could becomeinstrumental in defining sustainability or practical notions of sustainable development.

CONCLUSIONS At present, policy-makersin environment and economic development have a range of innovative concepts and decision-making tools from which to choose. Each system has different strengths and weaknesses, as well as a different applicability - for example, in terms of the scale of coverage or feasibility of achieving solutions within measurable time scales. Sustainable development has an obvious attraction as a guiding principle, given its wide-ranging andvisionary content, and its synthesis may represent a major evolutionary shift in mankind’s self-awareness. However, recognition and realization represent different stages in the forward momentum, and there is still a considerable distance to go in refining and interpreting this concept. How much information is necessary, and how precise must it be, beforea multidisciplinary consensus is generated? If such convergence remains unattainable,sustainable development may forever be confined to the role of an aspirational state. Nevertheless, such a target is useful, even if never fully met, both to allow the measurement of progress and to provide a widely recognized theoretical foundation to direct development. In practice, tangible progress may be achieved through related techniques. In bridging the gap between the economic and environmental disciplines, ecological modernization offers another vision of harmonious development. As an interpretative theory, it can be used to identify, create and draw onsynergies in policy development, in the process reconciling conflicts and potentially stimulating new interactions. This aisvery positive perspective as a basis forintegrating environment and economy, and innovative measures and technological solutions may fit easilyas components of this concept. However, the subtle nature of activities associatedwith ecological modernization may prove to be a hindrance to its realization as a practical methodology,in contrast toits explanatory power as a theory. Acknowledging the framework and conceptual strengths of sustainable development and ecological modernization, environmental gain has been introduced here as a more specific and immediate tool to measure

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and deliver environmental integration. Addressing problems at a local or regional level by using familiar terminology, it offers scope to differentiate between phases and characteristics of integration, and highlights means of directly enhancing environmental conditions through modifying economic development activity. In this sense, it may produce quicker returns and bring mutual strategic advantage through the decisionmaking process. In comparison, the valuable emerging technique of SEA - potentially supported by SSA - represents a more finelytuned strategic instrument, but it requires further methodological development before gaining wider acceptance. The resourceimplications and breadth of interpretation in SEA can appear overwhelming, and partly in consequence SEA'S applicability appears currently to bea medium-term rather than a short-term option.

3 ENVIRONMENT IN THE EUROPEAN UNION

INTRODUCTION The European Union (EU) comprises 15 countries or Member States. These consist of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Swedenand the United Kingdom. In total,the population of the region now exceeds370 million people,and the EU territory stretches from Crete to the Arctic Circle. Future enlargement is envisaged eastwards with the potential accession of ten central and east European countries, those of Hungary, Poland, the Czech Republic, the Slovak Republic, Bulgaria, Romania, Slovenia, Estonia, Latvia and Lithuania, and Cyprus has also started accession negotiations (CEC, 199%). With regard to the EU’s evolution, the European Coal and Steel Community (ECSC) was formed in 1952, followed in 1957 by the Treaty of Rome, which established both the European Economic Community (EEC) and the European Atomic Energy Community (EURATOM). Themotivation was essentially political and economic: to integrate existing communities and to guarantee peace within Europe through trade and political stability. In 1967, these three communities merged to become the European Community (EC). The six original members of the Common Market, as it became known, were Belgium, France, West Germany, Italy, Luxembourg and The Netherlands. In 1973, they were joined by Denmark, Ireland and the United Kingdom,in 1981by Greece, and in 1986 byPortugal and Spain. Lastly, in 1995 Austria, Finland and Sweden became members, bringing the total toits current 15. In the earlystages of the EU’s formation, environmentwas not a priority, and it was excluded from the original Treaty of Rome. It was not until October 1972that a conference of heads of state or government insistedthat a common policy on environment was needed; since then, various instruments have brought forth policy and legislation. During the 1970s and 1980s,

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these actions were aimed mostly at setting emissions limits, for example for exhausts, gasesand industrial plant. However, bythe mid 1980s, it was clear that a broader strategy was needed, one that would address the consumption of natural resources. This began to emerge during the 1990s in the form of ’horizontal directives’,regulating environmentally sensitive activities, yet still allowing flexibility the for individual Member States to implement them according to local conditions. This chapter reviews environmental aspects of the EU significant for understanding its involvement in economic development. Firstly, the roles and environmental responsibilitiesof five EU institutions are identified, those of the Councilof Ministers, the European Parliament, the European Court of Justice, the European Commission and the European EnvironmentAgency. This is followed by consideration of three EU environmental initiatives comprising environmental action programmes, state-of-the-environment reporting and a proposed directive on SEA. The chapter then focuses on European activities where environment and economic development meet, including the Single European Market (SEM), the treatiesof Maastricht and Amsterdam, the European Spatial Development Perspective and regional policy. Lastly, information is provided on a range ofEU environmental funding programmes.

INSTITUTIONSWITH ENVIRONMENTAL RESPONSIBILITIES Council of Ministers The Council of Ministers adopts two different formats. The higher of the two is the European Council, essentially a council of prime ministers or has a rotating presidency, heads of governments of the 15 Member States. It in a particular sequence, with each country’s term of office lasting six months (January-June or July-December). In the European Council, the Member States legislate forthe union, set political objectives, coordinate their national policies and resolve differences between themselves and with other institutions. The European Council meets at least twicea year, mostlyin Brussels, but with a European Summit held in the country of the current presidency towards the end of its sixmonth tenure. At the second level, the Council of Ministers holds different types of meeting. These change according to nature the of the matter being discussed - such as transport, industry, environment, economyand finance - and the appropriate ministers from each Member State attend. Meeting perhaps two to four times a year, some matters in the Council of Ministers can only be decided by unanimity (taxation, energy supply and land use), whereas others can be resolvedthrough qualified majorityvoting (QMV), including

32 ECONOMICDEVELOPMENT AND ENVIRONMENTAL GAIN environmental measures. Weightings are used for QMV by council, generally allocatinga greater proportion of the votes tothe larger economies. Responding to proposals and ongoing work from the European Commission, the Council of Ministers tends to be reactive in its operation. Ministers from related areas such as environment and energy canbe brought together in informal joint councils, but there is still concernthat the vertical organization of this institution may hinder the effective integration of environmental considerations acrossthe main policy sectorsof the EU. In comparison,the European Councilhas a broader overview, and it has increasingly set corporate priorities for the EU, establishing frameworks within which the Council of Ministers and the European Commission can work. For example, the Finnish presidency (for the latter half of 1999) pressed ahead with a number of environmental initiatives. These included a proposal for new measures to boostthe use of renewable energy;an action plan for energy efficiency;integrating environmental concern within every area of EU policy-making; carrying outan assessment of the Fifth Environmental Action Programme (EAP); and focusing attention on the environmental aspects ofEU enlargement. In addition, Helsinki extended the work completed since the 1997 Kyoto climate change conference by mapping out a route for the EU to meet its commitments to cut emissions (Cordes, 1999).

European Parliament With 626 members (MEPs) and 15 national delegations, the European Parliament is the largest multinational parliament in the world.It holds elections every five years, and the most recent took placein 1999. In its activity of passing laws and scrutinizing the use of power, the parliament meets in Strasbourg for plenary sessions and in Brussels for committee work. The parliament’s secretariat is based in Luxembourg. Much of the administrative work of the parliament is carried out through its specialist committees, which cover all areasof the EU’s affairs. The permanent Committee on Environment and Consumer Affairs is recognized as one of the most active and influential (Earnshaw and Judge, 1996, p119; Kunzlik, 1994, p5). The Single European Act and the Treaty of European Union have extended the powers of the parliament from consultative to cooperation and codecision (with the council)in adopting and amending legislation. In instances where an issue has been decided byunanimity in the council, the parliament is consulted, but its opinions are not binding. In comparison, if the council has decided an issue byQMV, then the parliament may propose amendments. Community law takes two principal forms: regulations, which are directly applied without the need fornational measures to implement them;

ENVIRONMENTINTHE EUROPEAN U N I O N 33 and directives, which bind Member States to the objectives while leaving national authorities to choose the form or means of their implementation. There are also decisions, which are binding, and recommendations and opinions, which arenot binding. The parliament has a role in defining policies, and therefore both an opportunity and an obligation to secure environmental integration. In the past, the parliament has been perceived as more environmentally radical than other EU institutions. QMV and the codecision procedures now involve the parliament even more in environmental initiatives, from general environmental action programmes through to specific research programmes, the Single European Market and Trans-European Networks (TENS).

European Court of Justice Based in Luxembourg, the EuropeanCourt of Justice (ECJ) is the final arbiter of the EU treaties and EU legislation. It consists of 15 judges and nine advocates-general, each appointed for six years by common agreement between the Member State governments. Since 1989, its work has been supported by a Court of First Instance to allow more rapid progress with the volumeof cases arising. The ECJrules on the legality of acts of the European Community’s institutions, on interpretations ofEU law referred fromnational courts, and on cases wherea Member Statehas been referred for failing to comply with EU legislation (Hewett,1995, p25).In this activity, it is responsible for maintainingthe balance between the respective powers of the community institutions, and between the powers transferred to the community and those retained by the Member States. The court may settle questions of a constitutional nature or of major economic significance. With regard to environment, studies carried out by the commission have revealed that a range ofEU directives are not being implemented by the Member States. As this problem has been increasing over the years, the European Parliament called for greater emphasis in the Fourth EAP on implementing community law in this area. Infringements can be divided into three categories: partial compliance, where measures introduced at national level do not fully incorporate community law; non-notification, where Member States have failed to notify the commission of their national measures; and poor application, relating to shortcomings in implementation (Collins and Earnshaw, 1993, p216). In most cases, infringement proceedings do not get beyondthe notification stage, sincethe Member State responds to the reasoned opinion from the commission. However, in other cases, even following decisions of the ECJ acknowledging an infringement, the Member States do not comply with the judgement. In such circumstances, the commission may referthe matter

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back to thecourt with the recommendation that the Member State be fined a penalty payment. The decisionon whether to imposea fine, and the level of the fine, lies within the discretion of the court (Johnson and Corcelle, 1995, p485).

European Commission The commission is the EU executive, essentiallythe European civil service. Based in Brussels, it has 16,000 staff in 24 different Directorates-General (DGs), eachof which isheaded by a director-general. The president of the commission is chosen by the European Council after consultation with the European Parliament. The new president from 1999 is Romano Prodi. There are also 20 commissioners with specific remits, each of whom must be nominated by the 15 membergovernments in consultationwiththepresident. Thechoices must be acceptable to all the government leaders of the Member States.A new commission is appointed every five years (in the months following the European Parliamentary elections). Theconventional distribution of commissioners comprises two from France, Germany, Italy, Spainand the United Kingdom, and one from each of the other Member States. A new commission started work in September 1999. Accountable to the European Parliament, the commission meets once a week to initiate legislation,launch proposals and oversee administration. It also monitors the implementation of treaties and subsequent legislation. However, its proposals, actions and decisions are scrutinized by the other EU institutions, and it does not take main decisions on union policies and priorities - this is the prerogative of the European Council and, in some cases, of the European Parliament. In principle, the commissioners are in a strong position to ensure the integration of environmental factors within EU decision-making, on the basis that they can coordinate the work of all directorates. In practice, however, this task becomes more difficultthan in most other organizations since the commission is very compartmentalized in its operations, in effect hindering integration. Within the commissionadministration,DG XI is the Directorate-General for Environment, Nuclear Safety and Civil Protection. Itis divided into five separate directorates responsible for different areas of environmental policy. In addition to these directorates, there are two units that report directly to DG XI’S director-general and deputy director-general. The activitiesof the different directorates areoutlined in Table 3.1. In July 1999, the new president initiated an overhaul of the commission. A detailed blueprint for reformset out how the number of departments was to be reduced from 42 to 36, and how staff were to be reassigned to policy areas in greatest need. Within the environment directorate, a new Nuclear

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Table 3.1 European Commission Directorate-General X I Directorate GeneralA: General and International Affairs Information policy in the field of environment Communication with main target groups Development and promotion of environmental protection at international level Directorate B: EnvironmentalInstruments Economicandenvironmentalanalysis Promotion, adoption and implementation of (legislative, economic and voluntary) means of action best suited to achieve theaims of environmental and sustainable development policies Directorate C: Nuclear Safetyand Civil Protection Environmentalcontrolofindustrialinstallations Security of nuclear installations and management of radioactive waste Civil protection Directorate D: EnvironmentalQuality, Natural Resourcesand Global Issues Nature protection, coastal zones and tourism Air quality, noise, transport and energy Global environmental issues of climate change, geosphere and biosphere Directorate E: Industry and Environment Promotion and integration of environmental protection requirements within industrial, internal market and consumer policies Coordination of policies and activities in the field of environmental control of industrial installations and their emissions Industrialproductsandbiotechnology Waste management Source: CEC, 199913; Hewett, 1995

Control Office now deals with nuclear safeguards and radiation issues, while nuclear policy has become the responsibility of the energy directorate (DG XVII) (Taylor,1999, p2). The European Parliament voted on the proposed commissioners at its plenary session in September 1999, and the new environment commissioner is Margot Wallstrom, formerly a culture minister and social affairs ministerin Sweden.

European Environment Agency In 1994, a new European Environment Agency (EEA)was established (CEC, 1990). The agency’s tasks include helping Member States to develop and monitor environmental policies, encouraging accurate methods of data collection, providing Member States with comparable environmental infor-

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mation, and producing regular state-of-the-environment reports. isItneither a policy-making nor a regulatory body. Based in Copenhagen, the agency’s current executive director is Doming0 Jimknez-Beltrh. In terms of decision-making, theEEA is steered by a management board that includes one representative from each Member State, two from the commission, and two scientists appointed by the European Parliament. A scientific committee of nine members also advises this board. In practice, the agency acts as the control point for a European Information and Observation Network (EIONET), for which the existing national networks form the component parts. As part of this framework, each country has a National Focal Point (NFP), usually based in the environment ministries. Inaddition, organizations across the communityhave been designated as European Topic Centres (ETCs), to carry out research projects for the agency. These centres may represent a consortium of national research institutes, government agencies, survey units and other specialist departments in universities. Their reports relate to air quality, emissions, inland and marine water quality, land cover, soilconditions and forest cover, amongst other themes. The EEA’s work programme is basedon the FifthEAP, and its first major report in 1995 was the Dobris Assessment, an appraisal of the state of the European environment and an analysis of pressures caused byhuman activities. The EEA is now committed to producing three-yearly state-ofthe-environment reports, and Europe’s Environment: The Second Assessment was published as part of this series in 1998. Thiswas followed in 1999 by a separate report on Europe’s environmentat the turn of the century.The EEA is currently developing a new series of annual ’environmental signals’ reports, based on key environmental indicators. Intended to support integrated assessment, thesereports will coverthe driving forces, pressures, state, impactsand societal responses tovarious environmental issues

ENVIRONMENTAL INITIATIVES Environmental Action Programmes Environmental integration as an EU objective was first introduced through the Environmental Action Programmes (EAPs). Over a period of 25 years, these policyinstruments have progressivelypromoted environmental policy as a positive contributor towards solving economic issues such as unemployment, economicgrowth and job creation (Hildebrand, 1993). The EAPs have also beena source forEU environmental legislation, with innovative ideas being subsequently realized as directives or even new EU institutions. There have been five EAPs since the early 1970s, each covering approximately a five-year period. The Fifth EAP is of greatest sigruficance,

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buttheprevious programmes also contributed to the environmental momentum. The early programmes were reactivein nature. The First EAP ran from 1973 to 1977, setting out the objectives of EC environment policy and listing the remedial actions required. Its approach was totackle environmental problems after theyhad happened (CEC, 1973). The Second EAP, from 1977 to 1981, essentially updated and extended the first programme, but it also added a practical emphasis, namely the need formeasures of environmental impact assessment(CEC, 1977). From the Third EAP onwards, a different approach was adopted. The Third EAP ran from 1982-1986 and was not a list of measures, but rather an attempt to establisha framework to move EU environmentalpolicy forward. It recognized environmental impact assessment as essential, and it called for a strategy to integrate environmental policywith socio-economic development - in other words, environmental concerns were to be integrated with agriculture, industry, energy, transport and tourism. It was also optimistic, stating that environmental policy should be pursued regardless of ups and downs in the European economy, and it acknowledged that sustainable development was fundamental to economicgrowth:

The resources of the environment are the basis of - but also constitute the limits to -further economic and social development and the improvement of living conditions (CEC, 1983). Nevertheless, the Third EAP was not successful in achieving integration within other EU policy areas. The Fourth EAP, from 1987-1992, was more forceful, emphasizing the need forimproved enforcement and for better interactionbetween economic and environmental policies: As a key factor in economic decision-making, environmental protection

policy and strict environmental protection standards optionalextrabut a sinequa non forthequality Community’s citizens expect (CEC, 1987).

are no longer an of lifethatthe

It further stated that environmental integration with other European Community policies should be a central part of the commission’s efforts. This was to be applied first in EU policies, then in Member State policies, and then more generally in all social and economic developments in both public and private sectors. It identified a number of areas in which the environment should be integrated, andit indicated that the commission would produce internal procedures to ensure this integration took place, as well as working on guidelines for the Member States’ procedures.

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Until this point, there had been strengths and weaknesses in policy development. Positive attributes included the adoption of new legislation and the achievement of environmental improvements; negative elements included the realization that the instruments and approaches used were inadequate to accommodatethe extent of environmental problems. With the SEM approaching, there seemed even less chance that existing methods would cope further. Accordingly, another approach was needed. The Fifth EAP relates to the period 1993-2000, and it directly emphasizes environmental integration within sectoral and economic policies (Johnson and Corcelle,1995). Entitled Towards Sustainability, the fifth programme focuses on global concerns, yetis seen as a significant step in developing a long-term European strategy for sustainable development (CEC, 1993d). Inbroad terms, the Fifth EAP is trying to achieve four objectives: Change current practices, by removing those ones that are bad for the environment. Achieve societal changeby involving all sectorsof society, industry and government, and encourage an attitude of shared responsibility. Broaden the range of instruments used, supplementing regulatory measures with market-based instruments. Target measures on a sectoral basis, rather than aim at environmental issues in general. In contrast to the previous programmes, Towards Sustainability advocates proactive measures - tackling problems before they occur. In this connection, four keyprinciples are embodiedin the Fifth EAP: the prevention principle, preventing damage before it occurs, in preference to remediation after the event; the precautionary principle, which states that authorities should act to avoid the possibility of environmental damage where scientific evidence is inconclusive,but where the damage would be significantand difficult to reverse; the polluter pays principle, which states that the full environmental costs of pollution should be borne by thosewho cause damage;and the proximity principle, which states that, as far as possible, regions and countries should be self-sufficient, generating their own raw materials and products and disposing of wastes. In addition, the programme seeks to raise public awareness, to change attitudes and behaviour towards environmental issues, and to integrate environmental considerations within other policy areas, especially the five key sectorsof manufacturing, agriculture, energy,tourism and transport.

ENVIRONMENTINTHE EUROPEAN UNION 39 In the mid 1990s, the European Commission published an interim review of the Fifth EAP, a progress report appraising developments since 1992, and an action plan that set out the priorities for the yearsahead (CEC, 1994 and 1995a). The actionplan maintains the focus on the five key target sectors becauseof their continued disproportionate contribution to current problems. Of these sectors, manufacturing industry received a favourable review, having made the greatest progress towards sustainable development. It was given future goals inthe form of improved resource management and the provision of better information to facilitate more environmentally friendly consumer choice. The commission also indicated plans for stricter standards for products and production methods; and it was hoped that the enforcement of best available technologies would enable European companies togain a competitive advantage in world markets. For the energy sector, the main objectives were given as improved energy efficiency and the use of fewer carbon-intensive energy sources. This is an attempt to reduce the consumption of non-renewable resources as well as emissions of gases that contribute to a range of environmental problems. However, the EU-wide approach favoured by the commission - the introduction of a combined carbon/energy tax (CEC, 199213) - was rejected by the Council of Ministers. With regard to the transport sector, in spite of progress in vehicle emissions, fuel qualityand technology, medium-term forecasts show rapidly rising traffic volumes,so that environmental problems caused by pollution that is linked to congestion will become increasingly urgent. The EU’s carbon dioxide reduction targets are also endangered by these transport developments. Accordingly, the commission seeks to balance public and privatetransport, alongside improvements to the European railway network, intermodal cooperation, and stricter measuressuch as road pricing or increasesin fuel prices. In agriculture, the key elements of the commission’s strategy to achieve harmonious coexistence of agriculture and the environment comprise stricter controls overthe use of pesticides, herbicidesand fertilizers, as well as financial incentives to encourage more environmentally friendly farming practices. Nevertheless,in the nearfuture the most significant developments in this sector will stillpredominantly reflect the evolution of the Common Agricultural Policy (CAP). Lastly, in tourism, the diversification of tourism activities and the promotion of environmentally friendly sustainable tourism are seen as remedies for developments often associated with severe negative environmental impacts. This relates especially to sensitive areas such as the Alpsand other favourite destinations of mass tourism, mainly in the Mediterranean regions.

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State of the Environment Reporting In 1995, the European Environment Agency published Europe’s Environment: the Dobris Assessment. This major survey - the result of more than three years’ work - had been requested at the conference of environment ministers at Dobris Castle, near Prague, in 1991. Its goals were to adopt a comprehensive view of the European environment, to provide a basis for effective measures, strategies and policies to address environmental problems nationally and regionally, and to inform the public and raise awareness about the common responsibility for the environment. Thereport was to be seen as a baseline and reference point for the European environment cooperation process andan important factual basis to aid decision-making (EEA, 1995). The report was divided into four tasks: Assess the state of the environment with regard to air, inland waters, seas, soil, landscapes, nature and wildlife, the urban environment and human health. Analyse the pressures on the environment caused by human impact, such as population growth, production and consumption, the exploitation of natural resources, emissions, waste, noise and radiation, chemicals and genetically modified organisms,and natural and technological hazards. Prepare a sectoral analysis of pressures, looking at impacts, outlooks and driving forces. Theeight sectors comprised energy,industry, transport, agriculture, forestry, fishing and aquaculture, tourism and recreation, and households. Identify and resolve environmental problems. Twelve key problems were highlighted, focusing on their causes as well as goals and strategies for their resolution. The categories were climate change, stratospheric ozone depletion, loss of biodiversity, major accidents, acidification, tropospheric ozone and other photochemical oxidants, management of freshwater, forestdegradation, coastal zonethreats and management, waste production and management, urban stress and chemical risk. The report findings confirmed the poor quality of the European environment, especiallyin parts of central and eastern Europe (CEE). Threats to the environment, natural resources and human health were identified, and the report adopted a global perspective, setting European problems in context and advocating an integrated approach. Although environmental improvements were being achieved in cases suchas emissions controls, these actions were often insufficienton their own to achieve recoveryand improvement of natural resources and environmental quality.

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Significantly, environmental threats were identified as linked principally to economic development. This referred to increases in waste, transport, energy use and physical development, especially inthe economies in transition. The major findings of this 1000-page document can be summarized as follows. For air quality, sulphur dioxide still exceeded World Health Organization (WHO) guidelines for 24 of 61 cities surveyed, and critical levels for acidificationwere exceeded in 60 per cent of Europe. For inland water, groundwater was overexploited in 60 per cent ofEU urban and industrial areas, and nitrate levels were continuing to rise in most rivers. Soil erosionwas seen to bean increasing problemwith 115 million hectares affected. Similarly waste generation was increasing at an average rate of 3 per cent a year in western Europe, and disposal was mostly in landfills. For energy, there were large gains in energy efficiency in western Europe, but little or no progress in CEE. Lastly, transport accounted for 25 per cent of the energy-related carbon dioxide emissions in Europe, 45 per cent of the nitrogen oxide emissions, and up to 90 per cent of carbon monoxide emissions in some countries. The report also had its limitations. Clearly, it was not always possible to obtain appropriate data or data of sufficient quality, and the compromise was to produce a report of best available data. This means that the European coverage is less detailed for certain areas, and significant gaps makeit difficult to drawauthoritative conclusions. There arealso problems of comparability between countries, through differences in methods of data collection, the terminology used and the relative degree of transparency. Europe’s Environment: the Second Assessment was published by theEEA in 1998 to report on progress regarding the environmental problems identified in the first assessment. The aim of the second report was to provide the information needed for framing, implementing and developing European environmental policy. In comparison with the previous report, data coverage was more complete for central and western than for eastern Europe, and data on some environmental topics such as waste, chemicals and soil degradation were still lacking or of poor quality. This report made it very clear that policy measures taken had not yet produced a significant improvement in the state of the environment overall. Reactive measures such as end-of-pipe technologies havenot been enough to cope with increasing infrastructure development, productionand consumption. It repeated that environmental impacts come mostly from economic activity, and that positive environmental change and progress towards sustainable development will have to come from changes in economic activity. Consequently the absence of a proactive approach was noted critically, especially in relation to countries seeking accession to the

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European Union;questions were raised concerningwhy the CEE countries seemed to be following the western development model, even to the point of making the same mistakes. The report concluded with an assessment of integrating environmental policies and actions within economic sectors, drawing on information presented in earlier chapters. It indicated that the focus of efforts toimprove the environment was now switching from the environmental problems to the causes of the problems, to identify where more cost-effective action could be taken:

Just as earlier ‘end-of-pipe’ environmental actions are being replaced by cleaner production and greener design actions, so the policy-making focus is shifting from ’end-of-pipe’ environment ministries to ’driving-force’ sector ministries (EEA, 1998, p283). With reference to the FifthEAP, the Environmental Programme for Europe, and Agenda 21, the report compiles criteria for assessingthe integration of environmental action within sectoral policies. Theten criteria include EIA for projects, SEA for policies, plans and programmes at different spatial levels, and eco-efficiency targets and indicators to monitor progress. Acknowledging that the information needed to apply the criteria isnot yet available, thereport still makesan initial attempt to summarize progress. It records that greatest progresshas been made in identifying and quantifying impacts, and this was principally in western Europe; policy action and policy implementation received similar ratings, again with the best results occurring in western Europe (EEA, 1998, p285). In 1999, the EEA published another report, Environment i n the European Union at the Turn of the Century. This document confirmed that the unsustainable development of some economic sectors is the major barrier to improvement. Interms of what has been achieved, itreports some progress, but with poor results overall. In current pressures, it indicates positive development onlyin ozone depletion;in none of the other14 categories did it record positive development, but instead mostly insufficient or unfavourable development. Taking the question of integration forward, the report draws attention to the need for ’market integration’ through the use of prices, taxes and subsidies, and ’management integration’through EIAs, management systems and product policies. With regard to eco-efficiency gains, it warns against displacement of industry to countries outside the EU: in these cases, the lower eco-impact per unit of output in the EU may be misleading, since global environmental impact be may increasing, highlighting the need to achievean absolute reduction (EEA, 1999).

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SEA Directive From the perspective of economic development and environmental gain, the proposed directiveon SEA merits specialattention here. Other European directives with relevance for economic development are outlinedin Appendix 1. In 1985, EU directive 85/337/EC on EIA came into force (subsequently amended through 97/11/EC). This was originally intended to encompass policies, plans and programmes, but its state of methodological and procedural development meant that, in practice, it became restricted to projects only (Hamblin, 1999, p4). In response, the Fourth EAP stated that EIA, in addition to focusing on projects, should be extended to cover policies and policy statements, plansandplan implementation, procedures and programmes. The Fifth EAP reiterated this aim, while also drawing attention tothe need for assessmentin sectoral and spatial planning. In parallel, DG XIof the European Commission had prepared an internal proposal for a draft SEA directive and circulated it as a full proposal in 1992. However,a number of Member States successfully opposed its realization (Wilson, 1993).Countries such as the UK took the view that there was no specific point at which largepolicy, plan and programme decisions were made, and instead the reality was a series of small decisions. Other opponents of the directive considered the variety of types of decisions and the uncertainty surrounding decision-making to be too broad for the SEA technique to accommodate,requiring a new expertise. More recently, the commission has adopted a proposal for a council directive on assessing the effects of certain plans and programmes on the environment (CEC, 1996a). The objectiveof the proposal is to provide for a high level of protection of the environment by ensuring that anenvironmental assessment iscarried out, and that the results are taken into account during the preparation and adoption of environmentally significant plans and programmes. Modifications to the original draft, to gain acceptability, mean that the draft directive does not apply to policies. Although envisaged as an important step towards securing sustainable development and environmental integration across the community, the proposal is currently restricted totown and country planning. It focuseson plans and programmes that define the use of land and contain provisions on the nature, size, location or operating conditions of installations or activities in sectors relevant totown and country planning (notably agriculture, energy, industry, transport, tourism, water resources and waste disposal). Nonetheless, the obvious benefits of moving towards SEA are highlighted in that the decision-making body would be better informed before making its decision. The draft SEA directive requires impact assessment for the proposed option and for its main alternatives. In summary, the recommended SEA approach requires discussionof the following elements:

44 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN the contentsof the plan or programme and its main objectives; the environmental characteristics of any area likely to be significantly affected; existing environmental problems, especially if linked to protected or sensitive areas; environmental protection objectives established at international, European Community or Member State level relevant tothe proposed action; likely significant environmental impacts of implementing the plan or programme; alternative means of achieving the objectives, and any mitigation measures envisaged;and difficulties encountered in compiling the required information (CEC, 1996a, p23). The Member States would take individual decisions on the appropriate form and extent of public consultations. It is planned that the operation of the directive would be reviewed five years after coming into force. In terms of SEA theory, the approach of the draft directive corresponds to the incremental modelof working from EIA upwards. However, it does not yet extend farenough to apply to the policy levelof decision-making at the top of the hierarchy. In future, it seems likely that the European Commission will considerbringing in a policy dimension,when its acceptability seems more feasible. Recent criticismsof the draft directive have included the absence of the policyfocus, and the lack of specificity regarding which plansand programmes would require SEA (Hamblin, 1999, p7; Karrnarv, 1997, p80). Whereas the policy weakness is perhaps an inevitable and pragmatic compromise at this stage, the minimalist approach of broadly addressing land-use initiatives means that indirect impacts of other programmes that affect the environment- such as infrastructure, agriculture or forestry- may be missed. Other criticisms have focused on the consideration of alternatives, where there is no requirement to identify and implement the best practicable environmental option (BPEO),as well as the restrictionof public consultation tothe period after theSEA report has been completed, and the matter of assessing the quality of SEA reports produced. With the exception of the policy question, these concerns were addressed by the European Parliament Environment Committee, which forwarded recommendations for modification to the European Commission (Gahrton, 1998).

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ENVIRONMENT AND ECONOMIC DEVELOPMENT Single European Market In 1987, the Single European Act (SEAct) cameinto force. Itspurpose was to remove barriers to trade and promote a closer economic interactionthrough the creation of an internal market. To this end, 300 measures had already been published in a White Paper (CEC, 1985),envisaging an area without internal frontiers in which the free movement of goods, persons, services and capital would be ensured in accordance with the provisions of the Treaty of Rome (as amended). The Single European Market (SEM) was formally launched in 1993. The SEActset out objectives for five policy areas, those of economic and social cohesion, economic and monetary cooperation,environmentalprotection, science and technology, andhealthand safety. In the area of environment, it basically restated the principles of the EAPs up to that point, emphasizing that preventative action should be taken, damage should be rectified at source, and that the polluter should pay. It also amended the Treaty of Rome with the introduction of Article 130r(2):

Environmentalprotectionrequirements Community’s other policies.

shall be a component of the

Following this, all DGs of the European Commission were under a legal obligation to consider the integration of environmental matters, with environmental protection formally recognized as an EU objective. In addition, the SEAct indicated that individual Member States could introduce environmental measuresthat were stricterthan the corresponding EU legislation, as long as they remained compatible. Other procedural changes brought in by the SEAct to accelerate community decision-making included that the Council of Ministers could now adopt legislation by qualified majority, except for fiscal, social and environmental policy, which needed unanimity. The European Parliament also gained increased power through a cooperation procedure that afforded it limited rights to amend legislative proposals. A special task forcewas commissioned in 1987 to lookat the potential environmental consequences of the forthcoming SEM. This created a unique opportunity for a very substantial SEA. Thetask forcewas brought in to the process at a late stage, suggesting that environmental integration was an afterthought, but it still followedthe thinking of ecological modernization, stating that theenvisaged economic development could be turned to the advantage of environmental protection.

46 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN The negative aspects identified by the task force included that an increase in production meant an increase in waste, with point-source reduction more than outweighed by increases in volume, while the removal of border controls could mean that freight traffic would increase by 30 to 50 per cent. Tax harmonization might eliminate some of the tax advantages that environmentally friendlyproducts currently had in the Member States, and the removalof technical barriers might also cause problems,as governments would be unable to stop lower-quality products being sold in their country (CEC, 1989). Criticisms of neglect in the SEM programme included that the examination of effects on the road-haulage sector looked at economic savings and operating efficiencies, but did not consider the environmental impactof the increased traffic orthe scope forpotential environmental gain. With regard to public procurement in building andcivil engineering, no examination had been made of environmental impact, and the industrial case studies made no reference to environmental standards. The intellectual assumptions were describedas conventionally narrow,with no allowance made for valuing environmental goods such as clean air and biodiversity. Lastly, the steering committee for theSEM project comprised mostly economists,and in practicalterms there wasno representation fromDG XI.

Treaties of Maastricht and Amsterdam In 1992, the Maastricht Treatyof the European Union added further environmental objectives into Articles 130r, 130s and 130t of the Treaty of Rome. Strengthening the earlier phrasing from the SEAct, the Maastricht Treaty stated that:

Environmental protection requirements must be integrated into the definition and implementation of other Community policies. It contained further statements that environmental protection should be placed on an equal footing with economic development, and that international environmental measuresshould be promoted to dealwith regional or worldwide problems. EU policy was to aim for a high level of environmental protection, to rectifyenvironmental damage at source, and to be based on taking preventative actionand making the polluter pay. The 1992treaty also approved the use of QMV as a standard procedure for environmental protection measures, and it introduced a new codecision procedure, affording greater power to the European Parliament to block legislation that it considers unacceptable (Verhoeve et al, 1992, p29). It also introduced as a treaty principle the concept of sustainable growth that respects the environment. A new fund, designed to accelerate the process of redistributing wealth from the richer to the poorer EU countries, was also agreed as part of the

ENVIRONMENTI N THE EUROPEAN UNION 47 Maastricht Treaty. The EUCohesion Fund cofinances projects in the fieldsof environment and transport in Member Stateswith a per capita GNP below 90 per cent of the EU average. The eligible countries currently comprise Greece, Spain, Portugal and Ireland, but the commission proposes to conduct a mid-term review of the GNP criterion in 2003. Finance from the Cohesion Fund is expected to support development in all of the countries that become EU Member States in future, especially with regard to infrastructure, the environment, theproductive sector and human resources. In 1997, the Treaty of Amsterdam further supported the environment by amending Article 6 of the original treaty and elevating environmental protection to the status of a guiding objective of the European Union. With regard to the various decision-making procedures involving cooperation, codecision and consultation, the Amsterdam Treaty simplifies the arrangement by replacing cooperationwith codecision. Withn the new framework, Member States can still maintain or introduce national provisions distinct from EU harmonization measures, for example based on new scientific evidence relating toenvironmental protection or a problem specific to that Member State. In such cases, the Member Statemust notify the commission and explain the grounds for these actions. The Amsterdam Treaty also formally acknowledges environmental integration as a contributor to promoting sustainable development. The treaty entered into force on 1 May1999, representing a new stage in European integration.

White Paper on Growth, Competitivenessand Employment The economic initiative of the White Paper on Growth, Competitiveness and Employment also had environmental significance (CEC, 199313). The principal focus was the economic and sustainable development of the EU Member States, with a mission to create 15 million jobs by the end of the century and to resist international competition. In general, the document addresses the interdependenceof economies rather than the interdependence of economy and environment, with the consideration of environment restricted to how jobs could be created through environmental protection. The White Paper also introduced the prospect of a new development model. Acknowledgingthat the conventional measurementof gross domestic product (GDP)had decreasing relevance for future policy design, the new development model sought to reverse the negative relationship between growth and pollution. It would directly tackle the structural links between environment and employment - such as the inefficient or excessive use of natural resources in the community- that represent hidden welfare losses.In keeping with the principles of ecological modernization, clean technology would be seen as a key to decouple the negative economy-environment relationship, promoting longer-life products, increased efficiency, recycling

48 ECONOMIC DEVELOPMENT AND ENVIRONMENTALGAIN and reduced production of waste. In this scenario, rather than focusing on outputs such as cleaning up waste, new technology was envisaged as the primary and most important input. The anticipated secondary benefits included improved competitiveness and the demonstration of how sustainable development could be put into practice.

European Spatial Development Perspective Another policydocument that promotes a new development path or model is the European Spatial Development Perspective (ESDP) (Ministers for Spatial Planning, 1997). The ESDP was drawn up by the EU Member States andthe European Commission, in consultation withthe European Parliament, the Committee of the Regions and the Economic and Social Committee, amongst others. The decision prepare to the ESPD was taken in 1993, it was actioned in 1994, and the document was adopted in May 1999 (CEC, 1999c,pl). The basic goals of the ESDP are to achieve economic and social cohesion, sustainable development and a balanced competitiveness withinthe European territory. These three goals are to be pursued in combination, with careful attention given to how they interact:

Development alone means the victoryof the strongest,balance alone makes the weakest more dependent and the strongest weaker in a global context, protection alone contains therisk of sclerosis and stagnation - the combined goal is efective, balanced and harmonious spatial development (Ministers for Spatial Planning,1997, p5). The competition to attract economic activities, jobs and infrastructure is perceived as one of the main forces driving spatial development. However, not all territories are equally competitive, and unrestrained competition can produce inefficiency and result in the dispersal of effort and investment. The ESDP seeks to redress this imbalance and steer Europe towards its optimum level of competitiveness. Rather than proposing combinations of policies for the different areas of Europe, the document proposes a framework, a methodology and a process for the integrated spatial application of thematic options. In this sense, the approach is indicativeonly, not prescriptive, but it is intended as a stimulus for action. The emphasis is on cooperation and partnership, and territory becomes the subject fora new type of social contract. The major part of the ESDP is a strengths, weaknesses, opportunities and threats (SWOT) analysis, identifying major trends, including long-term environmental issues, and drawing partly onthe first Dobris assessment. The analysis points out dangers from increased transport, carbon dioxide, nitrogen oxide emissions, the fragmentation of landscapes, higher noise

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levels and other environmental problems. It suggests that the real environmental costs of transport must be reflected in prices, and recommends rail-based infrastructure as a way forward. The SWOT analysis also looks at the continuing pressure on Europe’s flora, fauna, land and water. Significantly, negative trends outweigh the progress made over the past 30 years. For example:

Considerable investments have been made in environmental infrastructure (water, soil, air, waste). However, these efforts need to be reconciled with in those regions. W i t h the transport infrastructure priorities pursued economic development as their prima y objective, these priorities have not always paid suficient attention to safeguarding ecosystems(Ministers for Spatial Planning,1997, p38). The ESDP also contains policyaims and options, to beregarded as possible elements for discussion and consideration in defining more formal programmes. These include: complementarity and cooperation between towns and cities; dynamic, attractive and competitive towns and cities; the sustainable development of towns and cities; partnership between town and countryside; and the diversification of rural areas. Of outstanding importance to the ESDP is the prudent management of the urban ecosystem (especially water, energy and waste), and the development of strategies that reconcile economic development with the responsible maintenance of the natural heritage (Ministers for Spatial Planning, 1997, €357). Whereas this document holds considerable vision and a new approach to reconciling competing policy initiatives, it appears also toattribute identical meanings toenvironmental protection and sustainable development. In the early stages of the document, economic and social concerns frequently appear alongside sustainable development. Environmental factors arise later, especiallyamongst the background data. Even atthis level of cooperation and conceptualization, it appears that sustainable development canbe mistaken as a subset of economic development, rather than the opposite reality.

Regional Policy As a key instrument of economic development, European regional policy administered by DG XVI for Regional and Cohesion Policy- holds considerable potential for both positive and negative environmental impacts.

50 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN

Positive impactsmight include outcomes such as promoting more effective use of resources, reducing congestion, enhancing the environment in declining urban and industrial areas, supporting activities that preserve rural areas, providing pollution-treatment facilities, and assisting firms to meet environmental standards. The less desirable outcomes with negative impacts might include directly financing activities that produce environmental damage, increasing the geographical spread of activities leading to Lugher energy consumption,multiplying transport links between peripheral and central locations, and contributing to inefficiency in the operation of central urban regions. Within the Member States of the European Union, very few countries have made assessments of the positive or negative environmental impacts of EU regional policy programmes. Furthermore, the practice of integrating regional and environmental policy priorities is still a very new prospect. Earlier survey work by the OECD has indicated that the United Kingdom and France have carried out impact assessments; but these studies were incomplete and primarily qualitative rather than quantitative (Larrue, 1994). A more recent study of the Structural Funds - the major EU regional policy instrument - revealed considerable inconsistency in English programmes between approaches to environmental appraisals, even betwee authorities receiving identical guidance (Seamark, 1996). Very fewEuropean countries have announced formal initiatives to move towards environmental integration, although Germany and The Netherlands have nonetheless developed formsof regional environmental policy (Clement, 1994). In some instances, maintaining and enhancing environmental quality hasfeaturedas a component of EU regional policy, especially in programmes for declining urban and industrialareas. In this context, the improvement of environmental conditions to facilitate inward investment has resulted in its inclusion in development programmes in a range of countries. This approach is expected to continue in future, particularly in the older industrialized regions of countries in transition and the new Lander of eastern Germany. However,this status of 'prerequisite for development' frequently takes the form of a reactive approach, responding to the environmental damage already caused by financial support given for development in the past. The environmental characteristics of the Structural Funds are consideredfurther in Chapter 5. As indicated above, following the provisions of the Maastricht Treaty, the Cohesion Fundwas created in 1993-1994 to promote increased economic and social cohesionin Member Stateswith a GNP below 90 per cent of the community average. The fund is intended to complement the Structural Funds particularly in the areas of environmental protection and transport infrastructure. Today, 50 per cent of the fund is allocated forenvironmental measures, with different levelsof cofinancing dependent upon the status of

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projects, mostof which have been related to water supply, waste-water treatment and urban waste management (IEEP, 1999). Recognizing theenvironmental pressures that the cohesion process may involve through restructuring key economic sectors, the new Cohesion Fund regulation will introduce a more thorough ex ante evaluation than in the current period, as well fuller appraisals with regard to alternatives and environmental impact. This improved process may go some way towards meeting criticisms; but environmental assessment will remain restricted to projects rather than occur at a strategic level. In addition, the cohesion countries may be disadvantaged if environmental certification becomes a contractual requirement, and may potentially losemarkets to international competitors (Barrass et al, 1997, p107).

Environment a t the Summits A series of reports concerning EU environmental integration has been produced for the periodic summit meetings of the European Council. They serve as useful reference points for monitoring the development and progress of environmental concernwithin the EU policy sectors. The process was launched at the Luxembourg Summitin December 1997,with the first agreements todevelop a structured reporting framework. In June 1998, at the Cardiff Summit ending the UK presidency, the European Council invited all relevant sectoral councils to establish their own strategies for realizing environmental integration and sustainable development (CEC, 1998). Work has already begun in the areas of transport, energy and agriculture, where the commission has cooperated with the Member States and the EEA to develop sets of indicators for integrating environment within these sectors. Theindicators will be used as a basis for communication between policy-makers and socio-economic actors,and they will form a fundamental part of the mechanisms for sectoral environment reporting. The Cardiff Summit alsoendorsed the principle that major commission policy proposals should be accompanied by an appraisal of their environmental impact, following evidence that the existing system had proved to be inadequate. In addition, emphasis was to be placedon the environmental dimensionof employment and enlargement. At the European Council meeting in Vienna in December 1998, the commission was asked to prepare a progress report on the mainstreaming of environmental policy for the June 1999 summit, to be held in Cologne. The Vienna meeting also endorsed employment guidelines aimed at exploiting the potential for job creation offered by environmental services and environmental technologies. Theapproach would be to promotea reform of taxation that encouraged the efficient use of natural resources while reducing the taxburden on labour.

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In June 1999, in Cologne, the European Summit gavefurther impetus to the integration process. The report by the commission was critical of the Member States for falling behind on the strategy agreement made in Cardiff, stating that considerable effort was still required in sectors such as transport, energy, industry, the internal market and development cooperation. The commission emphasized that there was an urgent need for action,and that the Member States should take responsibility in this process. In response, the EU leaders reaffirmed their previous commitment, and they called for renewedemphasis on efforts to integrate the environment within other policy areasthroughout the 15 Member States, especially those related to climate change. At Helsinki in December 1999, the European Council agreed strategies for integrating the environmental dimension into the agriculture, transport and energy sectors.Work on similar strategies in a number of other sectors is to be brought to a conclusion by June 2001, incorporating a possible timetable for further measures and a set of indicators. It was also agreed that continuing efforts were required in working towards ratification of the Kyoto Protocol before 2002, reflecting the community’s commitment to integration of environmental issues and sustainable development into the definition and implementation of policies. The European Council notedthe global assessmentof the Fifth EAPand it invited the European Commission to prepare a proposal for the Sixth EAP by the end of 2000, and a proposal for a long-term strategy aimed at harmonizing policies for economically, socially and ecologically sustainable development by June 2002. This latter strategy will also serve as a community input for the ten-year reviewof the Rio process, scheduled for 2002.

ENVIRONMENTAL FUNDINGPROGRAMMES At EU level, a range of funding programmes is available for use in the Member States and other countries, and many of them have an environmental focus. They havevarying eligibility in terms of who may apply for the funding, where it may be used and the types of activities that can be supported. Rates of award and duration are also programme-specific. This section presents a selection of these schemes,particularly the ones that may be utilized in connection with economic development (EPRC, 1999). The following programmes are considered: the Fifth Environmental Action Programme; the Fifth Framework Programme for Research,Technology Development; LIFE, the Financial Instrument for the Environment; theEnvironmentalLoanFacility;

and

ENVIRONMENTINTHE EUROPEAN U N I O N 53 Environmental Information and Awareness Raising; Global Environment Pilot Projects; and Civil Protection and Ecological Emergencies.

Fifth Environmental Action Programme DG XI offers cofinancingsupport for proposals covering any subjects of the Fifth EAP. In addition to the five target sectorsand seven themes, there are three risk management themes (industry-related risks, nuclear safety and radiation protection and civil protection, and environmental emergencies). Ad hocproposals may be submitted at any time toDG XI-3, using application forms availableon the Internet. Projects in any EU Member State are eligible, but the objective of the proposed project must be non-commercial and non-profit making. The Fifth EAP identifies areas where community action should be increased. These include the integration of environmental requirements w i t h other policies, broadening the range of instruments, awareness-raising, cooperating internationally,and improving the basis for environmental policy. Also involved are sustainable productionand consumption patterns, shared responsibility and partnership, provisionof local and regional initiatives,and the developmentof policies on a numberof environmental themes. Eligible costs include staff costs, travel and subsistence costs,purchase costs for equipment, consumables and supplies, subcontracting expenditure, other direct costsand some indirect costs.Capital investment costs are not eligible. Therates of award are determined on a case-by-case basis.

Fifth Framework Programmefor Research, Technology and Development Under the theme of energy, environment and sustainable development, the Fifth Framework Programme (FFP)supports research, technological development and dissemination activities. The six key action areas are sustainable management and quality of water; global change, climateand biodiversity; sustainable marine ecosystems; the city of tomorrow and cultural heritage; cleaner energy systems(including renewables); and economic and efficient energy for a competitive Europe. Under the theme of quality of life and management of living resources, the FFP supports additional research, technological development and demonstration activities. In this case, the key action areas include, amongst others, sustainable agriculture, fisheriesand forestry, including integrated development of rural areas. Of particular interest are new toolsand models for the integrated and sustainable development of rural and other relevant areas, new or improved systems of production and exploitation in agriculture, fisheries and aquaculture, and the integrated productionand exploitation of biological materials for non-food uses.

54 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN The programme is set to run from 1998-2002, and it is available in EU Member States and associated countries. Applicationis made direct to the European Commission,and proposals will beevaluated in batches throughout the lifetimeof the programme.

LIFE - Financial Instrument for the Environment The financialinstrument for the environment (LIFE) promotes the development and implementation ofEU environmental policy by financing initiatives categorized in three areas, those of environment, nature and actions in third countries (selected countries outside of the EU). LIFE i s implemented through the cofinancing of programmes and projects, preparatory measures, demonstration schemes, awareness campaigns and actions providing incentives or technical assistance. The second phase of the programme covers the years 1996-2000, with a budget of Euro 450 million, and a further phase is under preparation. While all theLIFE areas of action aim to improvethe European environment, each area has its specific priorities. Environment favours innovative and demonstration actions for industry; demonstration, promotion and technical assistance actions for local authorities; and preparatory actions to support community legislationand policies. Thenature component supports actions aimed at the conservationof natural habitats and of wild fauna and flora of EU interest; and the 'third countries' element supports technical assistance in the establishmentof environmental administrative structures, nature conservation actions, and demonstration actions to promote sustainable development. In 1999, the eligible third countries included Albania, Algeria, Boznia-Herzegovina, Croatia,Cyprus, Egypt, Israel,Jordan, Lebanon, Malta, Morocco, the West Bank and Gaza, Syria, Tunisia, Turkey and the Baltic shoreline of Russia. Centraland eastern European countries could also participate according to the provisions set up in their European agreements. Within the environment component, sustainable development in industrial activities especially refers to the need todevelop clean technologies in order to save natural resources, to reduce emissions, to develop safer products that last longer, and to make reuse and recycling practices more generally available. Thedemonstration, promotion and technical assistance actions for localauthorities are intended to integrate environmental considerations within land-use development and planning, with a view to promoting sustainable development. This favours management of the environment by increased cooperation, particularly in transnational or cross-border contexts. The preparatory actions designed to contribute to the implementation of community environment policy and legislation involve the reduction of waste, water protection, including waste-water treatment, air pollution, acidification, and the protection and management of coastal zones.

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Financial support through LIFE is subject to the following maximum limits: in the area of environment, 30 per cent of eligible costs for income-generating actions and 50 per cent of eligible costs for other actions; in the area of nature, 75 per cent of eligible costs for actions; for third countries, 100 per cent of eligible costs. The LIFE programme is available in any EU Member State,and, as indicated, the participation of non-EU countries may alsobe considered if it concerns the provision of technical and financial support when implementing international conventions and resolving commonor global problems. Preference is given to demonstration or technical assistance projects that involve an associationbetween at least two partners from within the EU, and to projects using an international network.

Environmental Loan Facility The Environmental Loan Facility, launched by the European Investment Fund and the European InvestmentBank, provides low-cost loans to small firms to fund new investments thatproduce tangible environmental benefits. The loansare available throughout the EU. Eligible firmsmust have fewer than 100 employees; preference is given to businesseswith fewer than 50 employees. For businesses within a group arrangement where the parent holds more than one third of the equity of the business, the group should have no more than 500 employees, and limited net fixed assets. Applications may be made at any time, and they must satisfy one or more of the following eligibility criteria: The project brings direct environmental benefits, where there are clear and quantifiable reductions in air emissions, water pollution, noise pollution, waste materials generated for final disposal, energy usage, or raw material usage. The projectbrings direct environmentalbenefits, where the potential for land contamination, water pollution or air pollution is reduced through improved infrastructure, storage or waste disposal practices. The project involvesthe regeneration of brownfield or derelictland to a condition which issuitable for the intended use. The project involvesimprovements in health and safety in the working environment. The project is of indirect benefit to the environment as a result of the production, provision or purchase of technology, products or services with clear and quantifiable environmentalbenefits or applications.

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Or, the project is driven by regulatory requirements, where a licence, consent, permit or authorization needs to be obtained or upgraded in order to complywith tightening environmental legislation.

Environmental Information and Awareness-Raising Support for environmental information and awareness-raising activities is available through the Fifth EAP. This may cover conferences, seminars, occupational training courses, codes of good practice, pilot projects and audio-visual projects, amongst other themes. This funding programme is run on an annual basis, with an annual budgetof approximately Euro 4.5 million. Available in any EU Member State, projectapplications should involve partners from at leastthree Member States. Applicationsare made directly to the DG XI-A2 in response to calls forproposals published in the Official Journal of the European Communities. The scheme is open to trade unions, regional and local authorities, environmental protection organizations, consumer groups and non-governmental organizations (NGOs). In terms of eligibility criteria, projects should contribute to an increased awareness of the environment. They must address environmental integration within other sectoral policies, the development of new instruments with a view toimproving the state of the environment, the application and implementation of community environmental legislation, or the role of the EU in environmental matters at international level. The rate of award is generally up to 50 per centof expenditure.

Global Environment Pilot Projects Support is available from the European Commission for pilot projects to prepare, promote and facilitate innovative small-scale field projectswhich address a number of global environmental problems. These include safeguarding the ozone layerand the relation between energy and environment, with particular reference to measures concerning the greenhouse effect, the protectionof forests, particularly tropical forests,the protection of biological diversity, and other global environmental problems. In exceptional cases, workshops, conferences or other meetings in the field of the global environment may besupported. The programme runs on an annual basis, with an annual budget allocation of approximately Euro 1.5 million. Funding is available in any EU Member State to public or semi-public institutions, private organizations and NGOs. Giventhe small programme budget, the focus ison small-scale projects. Application is made direct to DG XI-D4, and the rate of award is between 30 per cent and 50 per cent of total costs, with average awards of between Euro20,000 and Euro 100,000.

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Civil Protectionand Ecological Emergencies European Commission support is available on a case-by-case basis for projects in the field of civil protectionand ecological emergencies,including marine pollution caused by accidents. Eligible activitiesinclude self-tuition workshops, pilot projects, the exchange of experts, annual simulation exercises, and information, education and support projects. Theprogramme terminates at the end of 1999, but a follow-on programme has been proposed to run from 2000-2004. The programme is available in any EU Member State, and it is open to national, regional and local government organizations, national or private specialized training centres, and the private sector. Applications may be submitted at any time directly to DG XI-C4. The rate of award is decidedon a case-by-case basis.

CONCLUSIONS Over thepast 25 years, therehas been an impressive and increasing momentum building up in European environmental policy and integration. The EAPs have provided a broad framework since their launch in 1973, and during this time they have moved from reactive to proactive, with the current programme promoting preventative action, shared responsibility and a change in values towards the environment. The status of the EAPs and EU environmentalpriorities was strengthened with the Single European Act, and the subsequent Maastricht and Amsterdam treaties have further reinforced the obligation to considerand integrate environment into policyformulation at EU level. Thereis now a prominent legal basis for European environmental action, and - in theory, at least- environment is now on an equal footing with economic development. In parallel with the EAP development, the EU institutions have also progressively increased their involvement in environmental issues. Encompassing new responsibilities, newreporting and even a new agency in the EEA, existing networks have been coordinated across Europe, with significant steps towards the harmonization of data collection and data comparison. TheEEA has also provided the first major reviews of European environmental issues, and a range of new annual reports will maintain and develop this scrutiny and analysis of progress. With regard to environmental funding programmes available from the EU level, there is considerable diversity and breadth in the themessupported. However, this combination of legislation, institutional change and policy initiatives has not been sufficient to reversethe trend of environmental loss in Europe. Encouraging progress has been made,but the EU environment is still deteriorating, and positive actions have been outweighed by broader

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negative trends. Economic development continues to undermine environmental protection, and consequently initiatives such as the Single Market are viewed as potentially environmentally destructive rather than being regarded as opportunities for environmental gain. Institutionalizing the technique of SEA has also met ongoing resistance, and its acceptance may still be some years away, even at programme as opposed to policy level. The response to this difficulty in securing a positive net outcome has included continual attempts to raisethe profile of environment and to strive for still better integration. Attention has been devoted to the theme of environment at the highest EU levels, and new initiatives suchas the ESDP show clear recognitionboth of economy and environment interactions and of the importance of steering these impacts to benefit rather than disadvantage Europe. Efforts in this direction are certain to continue and to grow, and the thematic coverageof these interventions can be expected to become steadily broader and more comprehensive.

4 INWARD INVESTMENT AND ENVIRONMENTAL FINANCE

INTRODUCTION A significant aspectof regional economicdevelopment activity isthe attraction of inward investment, and the growth of European economies is often directly linked to their capacity to attract and retain foreign direct investment (FDI). The degreeof FDI impact depends upon its scale relative toan economy, as well as the extent to which FDI projects influence local competitors, suppliers, distributors or infrastructure development (Wallace, 1996, p64). Inthis very competitive field, the significance of environmental factors and the scope to derive environmental gain have been regularly disputed, but environment and sustainable development continue tofeature in investment decisions. This occurs covertly,as a negotiating point in international location decisions, and overtly, for examplethrough the allocationof financial incentives targeted atimproving environmental performance in manufacturing industry. The Brundtland report represented a major impetus for sustainable development in the public sector, but other societal and sectoral groupings have contributed to its operationalization over the past ten years. For example, the series of World Industry Conferences on Environmental Management (WICEM) has explored the theme, and, as part of this focus, the International Chamber of Commerce (ICC) launched its Business Charter for Sustainable Developmentat the second WICEM in 1992, held in Rotterdam. The aims of the charter include committing enterprises to improving environmental performance and demonstrating to governments and society that business takes its environmental responsibilities seriously. Since its launch, the ICC charter has gained a prominent position and considerable support worldwide, having been signed by over1000 companies and associations in more than 50 countries, with virtually all economic sectors represented.

60 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN This broad expansion of environmental awareness amongst industry means that the momentum launched and sustained by European governments - national and supranational - has seen a parallel response, mostly by large industry, to improve environmental performance (Vaughan et al, 1997; Georg, 1994). As this degree of awareness heightens,so does its potential as a source of competition between companies and countries. Companies already resident in Europe respond to this challenge partly to match competitors’ strategies and to retain market share. In comparison, companies newly entering Europe must take cognizance of the emerging environmental emphasis, andthis impacts on business strategy and decision-making as well as on the corresponding attempts by governments to attract investment. This chapter examines three aspectsof the interaction between FDI and environment. These comprisethe status of environment alongside conventional plant location factors, the current relevance of the industrial flight hypothesisthat describes industry as averse to high environmental standards, and the provision of subsidies to improve corporate environmental performancein Europe.

INTERNATIONAL PLANTLOCATION FACTORS Plant location factors refer to those forces that influence a company’s choice of site fora new investment.A number of countries have conducted research into this area, each seeking tounderstand which factors are mostattractive to foreign investors.For example, localand regional development organizations may identify areas that need improvementor strengths that should be emphasized when promoting regions to potentially interested companies. Over time, empiricalstudies of location decisions by foreign investors have distinguished a hierarchy of factors. In the late 1970s, prior to any substantial awareness-raising for environmental protection, a major study was carried out on firms moving into the United States (Tong and Walter, 1980). Using a five-point scale,ranging from not important to extremely important, respondents indicated the relative importance of 32 plant location factors. The factors were derived from a review of literature concerning foreigninvestment and location theory,and the researchers used a postal survey method that secured usable responses from 254 companies. In the mean ratings and ranking of these factors (see Table 4.1), climate appears as number 26 on the list - a relatively passive reference to environment - but otherwise no ranking was given to any aspect of environmental protection (whether legislation, regulation or policy). Around 1980, therefore - when the World Conservation Strategy was being published - environment did not feature as an international location factor in the research literature, nor was it identified as such by foreign investors.

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Table 4.1 Significance of plant location factors Factor

Rank

Availability of transportation

Mean Rating 3.701

1

2

Labour attitudes Space for future expansion Proximity t o markets in US

3.665 3.647

4

Site availability Utilities availability Costs of land Attitudes of local citizens Costs of construction Labour laws Availability of skilled labour Costs of utilities Salary and wage rates Costs of transportation State tax rates Local tax rates Educational facilities Attitudes of government staff Availability of managerial and technical staff Police andfire protection Availability of unskilled labour Housing facilities Proximity t o suppliers Facilities for importing and exporting Proximity t o raw material sources Climate Government incentives Cost of local capital Availability of local capital Nearness t o home operation Proximity t o export markets (outside the US) Nearness t o operations in a country outside the US

3.594

5

3.652

3

3.375

6

3.290 3.277

8

3.330

3.232

3.192

3.1 25 3.120

3.1 03 3.036 2.982 2.938

2.924 2.911 2.880

2.781 2.750

2.741 2.656

2.531

2.375 2.321 2.281 2.228

1.795

1.755 1.219

Source: Tong and Walter,1980 Ratings: 5 = extremely important;4 = very important; 3 = moderately important 2 = slightly important; 1= not at all important

7 9

10 11 12 13 14 15 16 17

18 19

20

21 22 23

24

25 26 27

28

29

30

31 32

62 ECONOMIC DEVELOPMENT A N D ENVIRONMENTALGAIN

Drawing on more recent workwith a European focus,studies of the anticipated impact of the SEM on foreign investment in the UK were carried out for the UK's Department of Trade and Industry (DTI) in 1990 (Bachtlerand Clement, 1990a and 1990b). Factors considered relevant for the research included UK and European markets, competitor strategies, workforce skills, infrastructure, economic costs, financial subsidies and language. The DTI did not consider environment to bea relevant location factor for the research design; nonetheless, environmental information appeared in connection with the relative attractivenessof the different European countries. In particular, chemicals firms cited Spainas a destination, the reason beingthat the environmental regulatory framework was less developed and the implementation correspondingly poor. This provided some evidence that environmental policy was exertingan influence in certain polluting sectors. Subsequent research by Tufts University identified environmental legislation as a significant factor for American companies with European bases (Flaherty and Rappaport, 1991). In a survey of US multinational corporations, 45 of which had manufacturing operations in Europe, EU and national regulation was perceived as the mostimportant aspect of their environmental concern, followed by customer and community opinion. This approach cannot allow for or acknowledge the variation between European countries and between regions within countries, but it does indicate an increasing recognition of the need to be aware of legal environmental obligations by companies considering new or expanded European investment. Acquisition formsanother aspect of FDI in which environmental issues have become more significant. A study of the environmental strategies, management policiesand perceptions in industry indicated that most firms evaluated the environmental performance of potential partners (Deloitte et al, 1990). However,this was generally understood to happen only after the strategic financialand business decisions had been made.

THEINDUSTRIAL FLIGHTHYPOTHESIS REVISITED Given that environmental issues are increasing in strategic importance - in effect risingup the tableof international location factors- it isworth considering whether the theory first advanced as the industrial flight hypothesis now has new significance. The industrial flight hypothesis became an issue in the late 1970s, when a direct accusationwas made that US pollution control laws were so severe they could result in a massive outward investment, or relocation of major manufacturing industry, from the US seeking to avoid the high costs (Castleman, 1979). The argument was that as polluting industries came under more regulation, the processes would not be improved but just be exported - in other words, they would stay just as polluting or hazardous,

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but be based in poorly regulated countries.US pollution control costs were described as higher than anywhere else, and US industry was described as spending on average twiceas much for air and water pollution control as a percentage of capital outlay. The problem companies were identified as those with older facilitiesthat could not be made safe just byadding control devices: theyneeded to be redesigned or rebuilt. In the following year, this hypothesis was criticized as based on only a few industries, and no examples were found of major companies closing and moving because of high regulatory costs. Moreover, the original research had made no review of FDI statistics: when examined, these statistics revealed that US outward investment was going to highly regulated countries, not to poorly regulated ones. At the same time, foreign investment was still increasingin the US. The conclusion was that there were no grounds for arguing that overregulation was driving industry out of the US (Levenstein and Eller, 1980). To confirm these findings,the UN launched a survey on environmental aspects of the activities of transnational corporations. Referring to the ultimate destinationsas pollution havens, the flight argumentwas dismissed as based upon incomplete reasoningand a number of misunderstandings (UN, 1985). Three main reasons were produced in support of this conclusion: Environmental differentials cannot be considered in isolation. Their significance must be considered within the complete structure of costs, risks and returns which makeup location decisions. Rather than resort toalternative foreign locations, firms prefer to expand at present sites or make internal shifts within countries. Pollution-haven investments actually involve much higher degrees of risk. For example, in some developing countries, there are distinctanti-multinational sentiments, and - often in addition to unstable governments - this presents a potentially very bad investment climate. For export-oriented investments, there would be large transport costs in getting the product to the market, and supporting infrastructure is also often lacking, so that plant construction and bringing in qualified management may present higher costs than in the home countries. Overall, the UN found very little evidence of foreign investment being seriously influenced by environmental factors. Therea were number of cases of firms being blocked domestically on environmental criteria and, as a result, they had looked for foreign alternatives; however, this was not a major shift. Recent researchsupports these findings:

64

ECONOMIC

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Although there is no general support for the pollution haven hypothesis, there are some examples of firms, especially those facing higher-thanaverage pollution control costs, moving abroad to take advantage of lower costs (including lower costs due to lower environmental standards, or to lower levels of enforcement). However, this should usually be seen as part of the structural adjustment process, and not be seen as an argument for retaining suboptimal levels of environmental protection (OECD, 1997a, ~~12-13). Within the European context, German firms have been revealed as not significantly influenced by environmental costs. They prefer to stay nearthe market and meet higher environmental costs at home rather than relocate to developing countries. Instead of moving, they tend to develop better technologies for theirproducts in industrialized countries, and then end up installing these technologies in developing countries, anticipating that higher environmental standards will reach there eventually. However, in spite of these realities, German firms haveadmitted that they still threaten their federal and Lander governments withrelocation when negotiating siting decisions. Another example comes from The Netherlands, where a major Dutch chemical company recently threatened to leave Holland, unless the economic and environmental ministries agreed to make environmental concessions. If these concessions were not forthcoming, the company proposed to move just acrossthe border to Belgium, where a range of generous fiscal and financial incentives was available. However,when the Dutch government refused to concede, there were no further developments - the company had been bluffing, but it would have readily accepted relaxed regulations to maximize profits. Again,OECD research has confirmed this trend:

The threat of industrial location is openused byfirms in all industries who would like to have the burden of environmental policies reduced on their operations. This threat is sometimes real enough to convince policy-makers not to impose new environmental regulations, or to reduce the ones that already exist. In efect, thethreat of industrial migrationbased on pollution havens (rather than thereality of this migration) may be generating a political drag on environmental policy innovation (OECD, 1997a, p13). From the opposite perspective, European countries have also been targeted for environmental reasons (Leonard, 1988). Thisincludes the Irish Republic, a country that usually receives moreFDI than its economic size would merit. In the 1970s, the Irish Industrial Development Authority (IDA) decidedto tackle unemployment by attracting international chemicals companies. These were so-called'dirty industries', but they had significant job-creation

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potential, so there was an initial willingness to sanction their introduction to Ireland. The strategy was also defended on the basis that Ireland had a high environmental assimilative capacity- the ability of the natural environment to absorb and dispose of pollutants - especially due to the frequent rainfall and high wind speeds. Behind the scenes, IDA officials were smoothing the path for these industries, holding meetings with environmental authorities to ensure their cooperation; forthe benefit of the economy, they were negotiating less stringent pollution control. American chemicals firms were the main beneficiaries of these deals, which weresubsequently described as 'permission to pollute', following theenvironmental damage caused bysubstantial dumping of untreated waste in Cork Harbour. The IDA was severely criticized for this strategy in the following years, and it has since adopted a new strategy that incorporates EIA principles and site selection to minimizeenvironmental impact. Thetransformation to the new strategy was made easier becauseof the success of the IDA'S inward investment drive. This now brings in a range of industry, including healthcare and fine chemicals, and it means that Ireland can be selective and has no great need to pursue heavy chemicals. Public pressure has also been a factor, seeking improved environmental protection and more sensitive project selection. In the Europe of the late 1990s, the perspective on using environmental policy as a source forboth rejecting and attracting polluting industry is very different. Thenotion of the ecology-growth trade-offin which governments calculate the economic benefits of inviting environmental damage is being replaced by one of progress towards sustainable development, in which environmental issues are risingas a location factor. Inthis revised scenario, environment is often promoted not as a negative but as a positive incentive. With the new environmental awareness, the acknowledged growth in the environment industry (OECD, 1996b)and the increase in private-sector jobs in environmentalmanagement, thehypothesis for verification may now have moved from industrial flight to one of industrial attraction through environmental criteria. Economic development agencies frequently incorporate environmental objectives in their development programmes (Gibbs, 1998), and the promotion of European locationsas investment destinations regularly identifiesenvironmental advantages. These factorsrange from the quality of life and proximity to attractive landscapes through to the public relations and business advantages of being located in a country or region with high environmental standards and strict regulations. Credentials such as eco-audit and eco-labelling registrations are also presented as business catalysts; waste reduction, recycling and energy efficiency have been shown to bring financial benefits; and supply chain linkages are characterized by supplier and customer environmental audits that often go beyond minimum compliance (Hillet al, 1994).This image is

66 ECONOMICDEVELOPMENT A N D ENVIRONMENTALGAIN some considerable distance from the earlier visions of pollution havens, representing a new reality that welcomes clean industry and within which companies and regions with poor environmental performance are left behind.

ENVIRONMENTAL SUBSIDIES Offering subsidies to industry has long beena controversial policy measure, generally raising objectionson the grounds of inefficiency, unfair competition and distortions to international trade (OECD, 1997c, p21). With the increase in environmental pressures being placed on both government and industry, the additional factor of the polluter pays principle (PPP)has been introduced to the debate. The assertion that polluting companies should bear the cost of measures to reducepollution has meant that the legitimacy of initiatives providing environmental subsidies has been questioned. Nevertheless, environment ministers from OECD countries have acknowledged that various forms of economic instruments must be used in working towards environmental policy goals, and in practice most countries with rigorous environmental policies have had to make exceptions to the PPP, generally to avoidunemployment and plant closure. In attempts to examine and understand existing applications of economic instruments, the OECD has commissioned surveys of environmental policies within its member countries. Two projects have examined forms of economic instruments, including charges, subsidies, depositrefund systems, market creation and enforcement measures such as noncompliance fees (Opschoor and Vos, 1989; Savornin-Lohman, 1991). The survey results placed subsidies in second place (after charges): for 14 countries, the research identified 41 subsidies in operation. Of the EU Member States surveyed, Germany had the greatest number, offering 14 forms of environmental incentive. In subsequent years, the OECD sharpened the focus by launching a three-year Technology and Environment Programme. Its aim was to assess government policies for pollution reduction, realized through the promotion of technological innovation in both production and products. One aspect of the programme examined government financial assistance to facilitate the transfer to cleaner technologies (OECD, 1994). The project report recognized that innovation requires risk-taking,both technically and financially, and that governments seek to lower this risk bysupporting R&D and demonstration projects that contribute towards achieving national environmental policygoals. Inthis context, financial incentives for cleaner technologies are considered to be economically justifiableif their costs are offset by cumulative environmental and social gains obtained from innovation and technology diffusion.

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The European Commission also conducts periodic surveys to monitor forms of assistance given toindustry in the EU Member States. Statisticsin these reports indicate the total state aid to European manufacturing industry, identifying considerable variation between countries. Themajor investors in industry are identified as France, Germany, Italy, Spainand the United Kingdom (see Table 4.2).

Table 4.2 State aid to manufacturing industry in the EU, annual averages 1993-1995 and 1995-1997 (Euro millions) ~

EO Member State

~

~~~

Total Aid to Manufacturing

I997 19951995 1993Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg The Netherlands Portugal Spain Sweden UK

947 623

-

4401 19,232 619 329 11,529 45 585 495 1665 -

1339

537 936 725 383 4284 13,547 657 395 10,451 46 674 537 2472 394 1640

Source: CEC, 1999f

However, if the totals for environmental protection as an objective within manufacturing assistance are considered separately, a different order of significance prevails (see Table4.3). Germany retains the front position,the output attributable to the substantial effort directed towards reunification, with nearly 80 per cent of subsidies being channelledinto the New Lander. Thereafter, Denmark moves from seventh place in total assistance to second place in terms of environmental expenditure, with approximately 70 per cent of the German figure. Similarly, The Netherlands moves up from eighth position in Table 4.2 to third place in Table 4.3, with just below half of the German environmentalexpenditure. In interpreting these statistics,it should be borne in mind that, depending onthe form of financial instrument, EU survey techniques may categorize environmentalexpenditure under other sectoral groupings,such as support for SMEs or R&D. This may account to some extent for the absence of environmental entries for the UK, which featured more prominently in previous surveys.

68 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN

Table 4.3 Environmental assistance to the manufacturing sector, 1995-1997 EU Member State

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg The Netherlands Portugal Spain Sweden UK

Annual Average As a Percentage of Total Environmental Expenditure Manufacturing (Euro millions) Assistance

46.5 5.9 91.4 7.5 35.9 133.5

-

9 1 13 2 1

1

31.2 1.5 61.9

-

26.7 14.0 -

Source: CEC, 1999f

If environmental assistance is then considered as a percentage of manufacturing assistance (seeTable 4.3),yet another scenario emerges. Denmark is clearly the most committed, with 13 per cent of its manufacturing aid dedicated to environmental schemes, and The Netherlands and Austria occupy second place with 9 per cent. For Denmark and The Netherlands, this represents sizeable increases on previous years (Austria was not previously surveyed).

Incentives for Environmental Technology Within the new framework of governments seeking to encourage and support good environmentalpractices and improved environmental performance, clean technology is a key factorin facilitating the effective transition to sustainable production (ECOTEC, 1992). Whereas financial instruments for environmental technology are generally available from European governments to both indigenous and incoming industv, they regularly form a component of FDI packages, one which is expectedto increase in future years, potentiallygenerating greater policy competition. Although the utilizationof subsidies to cushion the impact of regulation is criticized as inappropriate in the context of the SEM, the counterargument advanced is that firms who can be persuaded to invest early can realize advantages of efficiency and productivity. In practice, those countries

INWARD INVESTMENT AND ENVIRONMENTALFINANCE 69 with the strictest environmental regulations generally prove to be the largest exporters of environmental technologies and services (Stevens,1992). Of the environmental finance offered directly to industry investing in Europe, the majority of national schemes have a technology component.A comparative survey in the mid 1990s identified 34 environmental technology incentives operational in the EU Member States (see Table 4.4). The distribution between countries comprised 11in Germany, nine in France, three in each of Belgium and The Netherlands,two in each of Denmark and Luxembourg, and one in each of Greece, Italy, Spainand the UK (Clement, 1997). In terms of subject matter, these incentives ranged from general environmental protection and supporting environmentally friendly investment to specific researchand technology applications. The three formsof these incentives comprised grants, soft loans (offered at below marketrates of interest orwith repayment holidays) and tax relief through accelerated depreciation allowances. In some cases, a scheme was offered in more than one form, depending upon the type of project being considered for support. Grants dominated the environmental technology schemes, accounting for 60 per cent of the assistance available; soft loans comprised 30 per cent of the total; and special depreciation allowances accounted for the remaining10 per cent. Two of the grants (in Belgium and Luxembourg) had an interest subsidy option. With regard to targets or aspects of environmental technology that the schemes actually fund, the emphasis is usually on investment, often with associated training. This accounted for 40 per cent of the measures available. In comparison,30 per cent of the schemes wereaimed at research and development; 20 per cent supported the demonstration of pilot projects;and 10 per cent related to feasibility studies. One fifth of these environmental technology incentives containedan SME clause - small- and medium-sized firms were given preference, higher rates of award or exclusive access. This was sometimes linked to location, for example with all firms being eligible in enterprise zones, but only SMEs outside these zones. In other cases, eligibility oraward rates were not linked to turnover or employees, but to capacity or physical scale of operation. For example, air pollution investment assistance in France was given only to firms subject to the parafiscal tax, based on factors such as thermal power, incineration capacity or sulphur emissions. Similarly,one scheme in Luxembourg had a minimum investment as an eligibility condition.

Incentives by Country This section focuses on one principal scheme from eachcountry surveyed, using examples that best illustrate the three main forms of subsidy type and the diversity of themes for whichsupport is available.

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ECONOMICDEVELOPMENTANDENVIRONMENTALGAIN

Table 4.4 Support for environmental technology in Europe EU Member State

Belgium

Environmental Incentive e e e

Denmark

e e

France

e

e e e e

e e e e

Germany

e e e e e e 0

e

e

e e

Greece Italy

e e

Luxembourg 0

The Netherlands e e

Spain United Kingdom ~~~~

Source: EPRC, 1996

e

Environmental technology R&D programme (Wallonia) Flemish environmental technology programme Grants for investment in environmental protection (Wallonia) Loans for environmental projects Promotion of environmentaltechnology Aid for development projects Grant for demonstration projects Assistance for clean technology pilot and demonstration projects Assistance for development of methods to prevent air pollution Assistance for investment in the preventionof air pollution Assistance from the Quality ofLife Fund Depreciation allowancefor noise reduction investment Special depreciation allowancefor anti-pollution investment Waste Management Modernization Fund DTA environment programme DTNBMU environmental protection demonstration projects Environmental R&D assistance ERP loans for air purification equipment ERP loans for effluent purificationequipment ERP loans for waste disposal equipment investment assistance to reduce environmental pollution KFW environment programme KFW/BMU environmental protectiondemonstration projects Promotion of climatic research Promotion of environmental protection investment grant for environmental protection Soft loans for SMEs: innovation and environmental protection Assistance for environmental protectionand rational energy use Special depreciation allowance Accelerated depreciation allowancefor environmental investment Promotion of environmentaltechnologies Promotion of environmentally friendly transport technology industrial environmental protection plan Environmental technology best practice programme

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Belgium The Flemish environmental technology programme assists technical feasibility studies, research projects and demonstration projects. Feasibility studies can last a maximum of 18 months and receive up to 100 per cent of personnel and operating costs, subject to a ceiling of six million francs. Research projects couldlast up to three yearsand receive a grant of up to 50 per cent (exceptionally75 per cent) of eligible expenditure up to 30 million Belgian francs. Demonstration projects can receive an interest-free loan of up to 50 per centof direct costsof a preliminary study construction of facilities and trials, subject toa maximum award of 75 million Belgian francs.

Denmark The Danish grant to promote environmental technology is intended to strengthen Denmark’s competitive position in the export of clean technology and to encourage product quality. It is aimed primarily at SMEs and is available for three types of project, namely networks and syndicates, international contracts and standardization. Networklsyndicate projects receive assistance for feasibilitystudies, setting up and implementation, with a 50 per cent subsidy during the first yearof implementation, up to a maximum of three million Danish kroner. For international contracts, the award rate is also 50 per cent for a maximum of three years. No rate is specified for standardization projects.

France The French Environment and Energy-Saving Agency offers a grant for development projects researching techniques that prevent or reduce air pollution, eithergenerating new techniques or significantly improving existing methods. It is available to manufacturers of pollution-prevention equipment, to firms developing this equipment for their own use, or to research centresand laboratories. Ratesof award are discretionary depending upon the exemplary and innovative nature of the project, its costs, the degree of financial and technical risk,and viability. In general, support of 50 per cent can beanticipated.

Germany The German Federal Environment Ministry’s investment assistance to reduce environmental pollution comprises a grant to support large-scale demonstration projects. To be eligible, these projectsmust indicate how old plant and facilities couldincorporate new technological advances to reduce pollution, orshow how new processes could be applied to reduce emissions, waste, waste-water, noise or energy consumption. The projects must be demonstrably new or experimental, and not undertaken to satisfy legal requirements. The award rate comprises up to 50 per cent of all associated costs.

72 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN

Greece The Greek Ministryof National Economyprovides an investment grant for environmental protection. The scheme is aimed at environmental improvement in general and at the conurbations of Athens and Thessalonika in particular. Assisted projectsmust result either in a reduction of soil, water, air orunderground pollution, orcontribute to water recycling orthe rehabilitation of the natural environment. Supported projects must be economically viable and consistent with national and regional development goals. The grant is available forindustrial investment throughout Greece, but rates of award vary by region, ranging from 40 to 55 per cent.

Italy In Italy, the bank of Mediocredito Centraleprovides a soft loan to encourage investment in innovation and environmental protection by SMEs. The loan covers up to 70 per cent (80 per cent in the Mezzogiorno) of expenditure on high-technology plant, pollution-control equipment and the development of environmentally friendly materials. The maximum loan would be two billion Italian lira (three billion lira in the Mezzogiorno), and the loan duration is seven years, with a two-year principal repayment holiday. The rate of interest is reviewed every six months, but always set 1.5 per cent below the standard soft loan rate.

Luxembourg The economic ministry in Luxembourg offers a capital grant or interest subsidy to promote environmentalprotection and the rational use of energy. Eligible investments are initiated to: comply with new significant environmental obligations placedon firms; improve environmental performance and rationalize energy consumption; or apply techniques that exploit or use new or renewable energy sources. The maximum award rate for the grant is 25 per cent of eligible expenditure; the maximum interest rate subsidy is a 4 per cent reduction for up to five yearson 75 per centof the investment.

The Netherlands The Dutch Ministryof Environment, Housing and Physical Planning offers an accelerated depreciation allowance for investments in environmentally friendly technology. Eligible technologies, which should not have yet reached major marketpenetration, are specified in a list regularly updated by the ministry. Thereare three criteria for inclusionin the list: application of the equipment must have a beneficial effecton environmental quality; the technology must not yet be in general use in The Netherlands; and the

INWARDINVESTMENTANDENVIRONMENTALFINANCE

73

equipment must be suitable for widespread application. The scheme allows firms to depreciatenew acquisitions overa shorter period of time, in effect paying less tax on fixed assets.

Spain The industry and energy ministryin Spain offersa grant both to encourage the development and application of new technologies and to improve the technological capacity of engineering firms specializing in environmental protection. Investments in plant and equipment necessary to meet environmental standards receive awards of up to 15 per cent (25 per cent for SMEs), or up to 25 per cent (30 per cent forSMEs) if the project surpasses minimum legal requirements. Investments in environmental R&D are eligible for 50 per cent grants for basic research and 30 per centgrants for applied research. Again, a further 10 per centis payable toSMEs. Finally,100 per cent awards are available forenvironmental training of engineers and technicians.

United Kingdom The UK Department of Trade and Industry operates a programme to promote better environmental performance and to increasethe competitiveof the programme are ness of UK industry and commerce. The main themes waste minimization and cost-effective cleaner technology.The’good practice’element promotes better environmental performance through successful casestudies, providing access payments of up to UKE10,OOO. The ’new practice’ element encourages the uptake of techniques and technologies new in commercial practice, withparticipant companies whose technology is assessed receiving up to UKE50,OOO (but not exceeding 25 per cent of total project costs). The ’future practice’ element relates to R&D, providing grants of up to 49 per cent for the development of innovative environmental measures.

Environmental Efficacy Considering the impact of these financial incentiveson European FDI, it is generally believedthat, unless the sums involved are very substantial, their influence is not strong. In other words, inward investors are considered to regard these one-off or fixed-term financialinducements as windfall gains, and they are usually secondary to other factors such as market proximity, availability of a skilled workforce and competitors’ strategy. Nevertheless, within that hierarchy, it is likelythat environmental incentives will increase in status as international industry orients itself more towards the priorities of the next century, offering opportunities for EU governments to derive environmental gain frominward investment. To realize these opportunities, greater attention needs to be focused on the impact of environmental incentives, particularly the extent to which

74 ECONOMIC DEVELOPMENT AND ENVIRONMENTAL GAIN they can influence the philosophy, investment decision-making processes or working practices of business. There isa need for systematicand comparative research that assesses the performance and effectiveness of existing environmental technology incentives, in particular to guide the design of future policy instruments. Orientations that might be considered include examining the factors involved in incentive design, whether the client groups within industry are adequately consulted on the targets of incentives, and whether they are linked to measurable objectives. In addition, if there is a variation in effectiveness between countries, towhat extent isthis variation attributable to supply-side factors such as incentive design and eligibility criteria, or demand-related factors suchas environmental consciousness orindustrial investment strategies? While financial subsidies ostensibly support research and investment that would not otherwise transpire, added value is gainedthrough advancing the technical meansof reducing pollution.In practice, research can be focused on technologies for which there is currently no cleaner substitute, or- if there is already an acceptably clean variety - efforts could be concentrated on demonstration projects or means of technology diffusion. In effect, the short-term measure of financial assistance supports the long-term aim of enhanced environmental performance within national and European policy goals. In the broader perspective, governments may ultimately find environmental technology incentives useful in attracting investment, but they appear unlikely to be an effective meansof tackling environmentalproblems on their own. In the Tufts survey cited above, technological limitations were perceived as a less significant obstacle to environmental progress than institutional and managerial barriers (Flaherty and Rappaport, 1991). This implies that improved environmental practices will be more likely to arise from better management rather than better technology, or indeed from an effective combinationof both of these concerns (Ashford,1993).

CONCLUSIONS Research into environmental factors and inward investment has produced differing perceptions over time. Formerly, most researchers in this field were of the opinion that environmental policy did have an impact on European FDI decisions, but they differed in their estimates of the degree of that impact. Thepredominant view was that the impact is small, statistically not significant, and with micro rather than macro relevance. More recently, survey research has supported this view, stating that major impacts are identified with specific firms or subsectors where environmental costs are proportionately higher,rather than affecting wholeindustries. The degreeof impact of environmental factors on industry has been the subject of considerable investigation,with a range of studies attempting to

INWARD INVESTMENTAND ENVIRONMENTALFINANCE 75 clarify whether strict regulatory regimes act as a negative influence. Enough evidence has been produced to show that the environment has been used in previous years in both a negative and a positive fashion to attract inward investment. Nevertheless, it is generally assumed that such manipulation of environmental standards has now been left behind, certainly outside of the developing countries. In practice, this is not always the case, but again the impact relates to specific firms or subsectors, not to an entire industrial sector. Over the past decade, it is evident that environmental factors have become more important for industry in general, as well as attracting the attention of internationally mobile investment.Contrary to previous experience, these developments are no longer restricted to negative outcomes. Initiatives such as the ICC Business Charter for Sustainable Development promote a very positive imageand commitment toimprove environmental performance, and they take a broader and balanced view of industry’s role in the global economy. Some governments are already moving towards more participatory regulatory regimes,and the matching corporate response is to work with governments rather than to work against them. This has been some yearsin its development as a philosophy, but the direct benefits and new public-private sector balancethat could result may ultimately lead to the realization of a new, and much more effective, means of preventing pollution. The response byEU Member States toindustry’s willingness toaddress environmental performance has created new opportunities for integrating elements of environmental gain within international industrial location decisions. Eventhough the provisionof environmental subsidies and incentives contravenesthe PPP, European governments have offereda wide range of grants, soft loans and tax relief to encourage industrial change. These incentives alone are not enough to change practices; but when offered as part of an FDI package, their influence canbe more strategic,and in future years it is anticipated that these incentives will grow in significance.

5 THEEUROPEAN UNIONSTRUCTURAL FUNDS

INTRODUCTION Rather than rely on sustainable development initiatives or environmental programmes to create frameworks for realizing economy-environment integration, a more immediate form of intervention is to modify economic development programmes. This chapter examines the context for environmental integration within the regional policy instrument of EU Structural Funds programmes. Over the past ten years, economic and social cohesion has become a progressively more important goal for the EU, reflected in the growing resources and political priority accorded toEU regional and cohesion policy, and particularly to the Structural Funds. Managed byDG XVI for Regional Policy and Cohesion, the Structural Funds comprise a grant-aid package operating on a European scale with the aim of improving social and economic conditions in the less-favoured regionsof the EU Member States. Ultimately, these funds offer match funding for projects that support business infrastructure, SMEs, training programmes, tourism, technology transfer and environmental improvement. The principlesgoverning the implementation of the funds stipulate that they must be designed and implemented as partnership programmes bringing together different levels of government, that they must concentrate on the mostdisadvantaged areas, and that they should be additional to national policy efforts. Thereis also a regulatory requirement that the funds must take account of environmental factors in the design and implementation of regional programmes,and the significance of this requirement has increased over time. Following an overview of the composition of the Structural Funds, this chapter describes their objectives (including the operational changes from the year 2000), practical considerations in designing and implementing

THEEUROPEAN UNION STRUCTURALFUNDS 77 regional programmes,and the environmental impactof the funds, incorporating a review of recent guidance to facilitate environmental integration. COMPOSITION OF THE STRUCTURAL FUNDS

The funds originated as individual financial instruments in the 1970s, but were brought together in a coordinated manner as the Structural Funds in 1988 (Michie and Fitzgerald, 1997). At that time, the doubling of their budgetary resources was designed to assist regions who expected to be disadvantaged by the forthcoming SEM. With further budgetary increases over the past decade, over onethird of the EU budget is currently allocated to the Structural Funds. In operational terms, there are presently four separate funds: the European Regional Development Fund (ERDF), which aims to reduce gaps in development between EU regions and provides a wide range of support; the European Social Fund (ESF), which supports training and job creation and generally improves employment prospects; the European Agricultural Guidance and Guarantee Fund (EAGGF), which supports national agricultural schemes and the strengthening of rural areas; and the Financial Instrument for Fisheries Guidance (FIFG), which assists in restructuring the fisheries sector. The ERDF is the largest, and it focuses mainly on productive investment, infrastructure and developing SMEs. The productive investment should facilitate the creation or maintenance of permanent jobs; the infrastructure support is for projects such as new roads, bridges, sewers, factories, business parks, science parks and tourism developments; and the SME assistance relates to the development of indigenous potential. The ERDF may also support investment in education and health, research and development measures, and investment linked to theenvironment. In terms of resources, the ERDF allocation amounts to almost half of the total Structural Funds budget. The ESF concentrates on vocational training and employment aids. It encompasses the occupational integration of individuals exposed to longterm unemployment and young people in search of employment, the integration of individuals excluded fromthe labour market, the adaptation of workers to industrial change, and the promotion of equal opportunities. In strategic terms, the ESF aims to promote stability and growth in employment, the improvement of educationand training systems, andthe strengthening of human potential in research, scienceand technology.

78 ECONOMIC DEVELOPMENT A N D ENVIRONMENTAL GAIN The EAGGF guidance section promotes the adjustment of agricultural structures and rural development measures. This includes supporting farming income and the maintenance of viable farming - assisting communities in mountainous areas - and conversion, diversification, reorientation and improvement in the quality of agricultural production. In addition, it is available forthe development of rural infrastructure, the encouragement of tourism investment,the exploitation of woodland, protection of the environment and countryside as well as other activities relating to the prevention of natural disasters, village renewaland protection of the rural heritage. Lastly, the FIFG promotes restructuring measures in the fishing industry, encompassing fleet modernization, the development of fish farming,the protection of marine areas, the improvement of facilities at fishing ports, support for the processing of fishery products, and the marketing and promotion of those products.

DEVELOPMENT OBJECTIVES, 1994-1999 In a further practical subdivision,the separate funds have been combinedto differing extents in order to meet a range of interrelated economic objectives. For theprogrammingperiod of1994-1999, there were seven objectives: objective 1- to assist lagging or less-developed regions; objective 2 - to support the reconversion of regions affected by industrial decline; objective 3 - to combat long-termunemployment and assist the integration within the labour market of young people (under 25s) and the socially excluded; objective 4 - to facilitatethe adaptation of workers to industrial changes and changes in the production system; objective 5a - to speed up the adjustment of agricultural and fisheries structures; objective 5b -tostrengthen and develop rural areas; and objective 6 - to support the economic development of regions with a very lowpopulation density (a recentaddition, introduced to accommodate the regional problems specific to the Nordic countries). In practice, objectives 1, 2,5b and 6 were spatially restricted to designated regions, identified through a mix of economic, labour market and demographic indicators. This utilizedthe Nomenclature of Territorial Units for Statistics(NUTS), which subdivides each Member Stateinto a hierarchy of increasingly smaller administrative areas. In comparison, objectives3,4

THEEUROPEAN UNIONSTRUCTURAL FUNDS 79 and 5a represented the objectives of European cohesion policy, and as such they covered the whole of the European Community.

Objective 1 Regions These areas, whosedevelopment is considered to be detrimentally lagging behind, were designated on the basisof per capita GDP, which should correspond to less than 75 per cent of the community average over the previous three years. Other regions with GDP above that level may alsohave cited special reasons for inclusion. More than two-thirds of the Structural Funds budget went to areasdesignated for support under objective 1. Designations for objective1for the period 1994-1999 were located in 11 of the EU Member States.This comprised the whole territory of the countries of Greece, Portugal and Ireland, all of the former East Germany (five new Lander), one province in Belgium, 11 areas in Spain, the French overseas dkpartements, Corsicaand areas adjacent to Belgium, eight regionsin Italy, one region in the Netherlands, three areas in the UK, and one province in Austria. In terms of population covered, these regions differed markedly, ranging from over 16 million in Germany to 217,000 in The Netherlands (see Table 5.1).

Table 5.1 Objective 2 regions’ population coverage, 2 994-2999 (2 995-2 999for Austria) Member State Austria Belgium France Germany Greece Ireland Italy The Netherlands Portugal Spain United Kingdom Total EU

Million Inhabitants

0.3 1.3 2.5 16.4 10.2 3.5 21 .I 0.2 9.9 23.3 3-4 92.1

% National Population

3.5 12.8 4.4 20.7 100.0 100.0 36.6 1.45 100.0 58.2 6.0 25.0

Source: CEC, 1999b

Objective 2 Regions For industrial regions in decline and requiring restructuring, objective 2 designation followed three key eligibility criteria:

80 ECONOMIC DEVELOPMENT AND ENVIRONMENTALGAIN

The unemployment rate must be above the community average. The percentage share of industrial employment should be higher than the community average. There should be evidence of an ongoing decline in industrial employment. Secondary criteria allowed the inclusion of additional areas adjacent to objective 1 or objective 2 areas, if they met the main criteria. Other areas potentially eligible included urban districts facing the threat of severe worsening of unemployment, or with problems related to the regeneration of derelict industrial sites or the impact of restructuring in the fisheries sector. Objective 2 regions existedin all the Member Stateswith the exception of the three countries designated wholly as objective 1 regions (see ?able 5.2).

Table 5.2 Objective 2 regions' population coverage, 2994-2996 (2995-2996 for Austria, Finland and Sweden) Member State

Austria Belgium Denmark Finland France Germany Italy Luxembourg The Netherlands Spain Sweden United Kingdom Total EU

Million Inhabitants

% National Population

0.6 1.4 0.4 0.8 14.6 7.0 6.3 0.1 2.6 7.9 1.o 17.7 60.4

8.2 14.0 8.8 15.5 25.9 8.8 10.8 34.2 17.3 20.3 11.0

31.O 16.4

Source: CEC, 1999b

Objective 5b Regions Regions designated under Objective 5b were intended to help rural areas develop and make structural adjustment. They had to meet a general eligibility criterion based on a low level of socio-economic development, again assessed on the basis of per capita GDP, and they had to fulfill two of three additional main criteria:

THEEUROPEAN UNIONSTRUCTURALFUNDS

82

a high share of agricultural employment; a low level of agricultural income; and a low population density and/or a significant depopulation trend. Eligibility could be extended to other areas not covered by objective1, but with a low levelof development, if they metone or more secondary criteria. These included remoteness, sensitivity to trends in the agricultural sector and the restructuring of the fisheries sector, the structure of agricultural holdings and the agricultural working population, and specific characteristics of the environment, countryside and mountain areas. As with objective 2, objective 5b regions existed in all Member States except three objective1countries (see Table 5.3).

Table 5.3 Objective 5b regions’ population coverage,1994-2999 (2995-1999 for Austria, Finland and Sweden) Member Million State Inhabitants Austria Belgium Denmark Finland France Germany Italy Luxembourg The Netherlands Spain Sweden United Kingdom Total EU

% National Population 2.3 0.5 0.4 1.1 9.7 7.8 4.8 0.03 0.8 1.7 0.7 2.8 32.6

28.9 4.5 7.O 21.5 17.3 9.6 8.4 7.4 5.4 4.4 8.6 4.9 8.8

Source: CEC, 1999b

Objective 6 Regions Objective 6 designation aimed to develop regions with a very lowpopulation density. Accordingly, the eligibility criteria included a density of no more than eight inhabitants per square kilometre, and in some cases contiguous smaller areaswith the same population density were also eligible. Objective 6 regions for1995-1999 were in Finland and Sweden (seeTable 5.4). In Finland, these included Lapland and the provinces of Kainuu, Pohjois-Karjala and Etela-Savo (full eligibility) and the regions of PohjoisSavo,Keski Suomi, Keski Pohjanmaa and Pohjois Pohjanmaa (partial eligibility). In Sweden, Jamtlands the region was entirely eligible,the regions

82 ECONOMICDEVELOPMENT A N D ENVIRONMENTALGAIN

of Norbotten and Vasterbotten were eligible with the exception of their coastal fringes,and the regionsof Vasternorrlands, Gavleborgs, Koppabergs and Varmlands werepartially eligible.

Table 5.4 Objective 6 regions’ population coverage, 2995-2999 Member Million State Inhabitants

% National Population

Finland Sweden Total EU

0.8

16.6

0.5

5.0

1.3

0.4

Source: CEC, 1999b

Objectives 3 , 4 and 5a As indicated above, objectives 3,4 and 5a were not regionally specific,but instead were available in all areas of the Member States. Objective 3 combated long-termunemployment and facilitated theintegration of young people, and of persons currently excluded from the labour market, within work. It also promoted equal employment opportunities for men and women. Objective4 assisted theadaptation of workers to industrial changes and to changes in production systems. Objective 5a aimed to increase the rate of adjustment of agricultural structures in the framework of the reform of the CAP and to promote the modernization and structural adjustment of the fisheries sector.

Community Initiatives In addition to the above objectives, complementary cohesion-related activities included thirteen community initiatives (CIS). Established by the European Commissionto respond to recurring and specific kinds of development problems, these CIS were geographically defined regional aid initiatives that supported measures to help adapt to industrial change and to improve working and living conditions in inner city areas. Aimed at developing transferable solutions of community-wide interest, examples include RECHAR, for the reconversion of coal-mining areas, RESIDER for the reconversion of steel areas, SME for small-firm development and PESCA, which supports diversification in fishing industry areas.

STRUCTURAL FUNDS BUDGET Financial resources for the 1994-1999 Structural Funds period were set at over Euro 150 billion (at 1994 prices), representing approximately onethird of the total European Communitybudget. This substantial financial alloca-

THE

EUROPEAN UNIONSTRUCTURAL FUNDS 83

tion reflects the perceived scaleof the effort required to achieve the goal of economic and social cohesion. Amongst the objectives, greatestpriority was given to objective1,which received approximately70 per cent of the total (seeTable 5.5). Together,the four regional objectives (1,2,5b and 6) accounted for almost 85 per cent of the budget, with the remaining 15 per cent divided among the non-regional objectives (3, 4 and 5a). The CIS received about 10 per cent of the total Structural Funds resources. With regard to financial allocationsbetween the Member States, indicative amounts were drawn up on the basis of statistical criteria. These criteria included the levelof national and regional prosperity;the population of the regions; the relative scale of structural problems, particularly unemployment; and the development needs of rural areas, amongst other factors. Table 5.5 Structural Funds contributions, 2994-1 999 (Euro millions, at 1994 prices) Objectives Member State

I

2

3&4

Austria 99 387 Belgium 342 465 Denmark 119 301 Finland 179 336 3774 3203 0 21 France 1566 1942 13,640 Germany ,980 Greece Ireland 14,860 Italy 1463 1715 Luxembourg 15 23 The Netherlands 150 650 1079 Portugal 13,980 Spain 26,300 241 6 1843 - 157 509 Sweden UK 2360 4581 3377 EU 93,972 Total 15,361 15,180

5a

5b

380 195 267 347 1933 1143

-

814 40 165 -

446 204 450 6384

6

403 77 54 150 450 1901652 2238 1227

Cls

143 287 102

Totals 1574 2096 843

1601 14,939 2206 21,724 1151 15,131 - 6103 483 901 - 1893 21,646 6 -104 20 150 - 2615 421 1058 15,038 - 1774 33,443 664 1377 125 247 135 81 7 - 1570 13,155 697 12,984 151,440 6862

Source: CEC, 1999b

RATIONALIZATION OF THE STRUCTURAL FUNDSFROM 2000 Procedural reforms to the operation of the Structural Funds from the year 2000 support the principal objective of promoting economic and social cohesion through reducing disparities between the EU’s poorest regions and the economically prosperous areas.

84 ECONOMIC DEVELOPMENT A N D ENVIRONMENTALGAIN In practical terms, the previous seven priority objectives are merged into three objectives. This comprisestwo regional objectives and one horizontal objective dealing with human resources. Greater efficiencyis to be sought through more systematic use of financial instruments other than grants, such as low-interest loans, loan guarantees and equity participation. In addition, a reserve of at least 10 per cent of the funds is to be set aside for allocation not earlier than mid-term to regions with good performance in the effective use of the European aid already distributed.

The new objective 1: regions whose developmenti s lagging behind This category integrates the previous objectives 1and 6, with a stricter application of the eligibility criterion relating to per capita GDP lower than 75 per cent of the EU average. Aid intensities will reflect the size of the population, the gap between regional wealth and the European Union average, and national wealth. Additional support is available for regionswith very high unemployment. For regions previously eligible under objective 1 but which exceed the 75 per cent threshold, a phasing-out mechanism has been defined. Very remote regions and regions with very low population density that were previously eligible for objective 6 have been accommodatedthrough special arrangements.

The new objective2: industrial, rural, urban and fisheries areas undergoing economicand social conversion The new objective 2 focuses on regions confronted with major economic and social restructuring needs, bringing together the previous objectives 2 and 5b. This includes areas affected by changein the industrial, services or fisheries sectors,rural areas in decline, and urban districts in difficulty. For the new objective 2, there is a geographical concentration on the worst affected areas with coverage as consistent as possible with the Member States’assisted areas. EU intervention under the new objective 2 should combine all forms of structural support, including measures linked to human resources. Areas previously eligible under objectives 2 and 5b but no longer eligible under the new selection criteriacontinue to benefit from limited financialsupport duringa transitional period.

The new objective3: development of human resources in areas outside objectives 1 and 2 regions The new objective3 relates to regionsnot covered by objectives1and 2. It is intended to promote activity in the four areas of: economic and social

THEEUROPEAN UNIONSTRUCTURAL FUNDS 85 change, lifelong education and training systems, active labour market policies to fight unemployment,and combating social exclusion. In particular, a determined effort is to be made to modernize labour markets in accordance with the multi-annual plans for employment and the new chapter on employment introduced in the Amsterdam Treaty.

Community Initiatives CIS have also been reduced in number. Fromthe year 2000, they concentrate on cross-border, transnational and interregional cooperation (INTERREG), economic and social regeneration of cities and urban neighbourhoods in crisis (URBAN), rural development (LEADER), and the development of human resources in the context of equal opportunities (EQUAL). INTERREG and URBAN are financed through the ERDF, LEADER through the EAGGF guidance section, and EQUAL through the ESF.

Budgetay Allocations The regional funds allocations for2000-2006 were announced in July 1999, in accordance with the seven-year budget framework agreed at the Berlin summit in March 1999. A total of Euro 213 billion was assigned to regional aid, of which Euro 195 billion goes to the Structural Funds and Euro 18 billion goes to the Cohesion Fund. The division between the Structural Funds objectives is 67.9 per cent to the new objective 1 (Euro 135.9 billion), 11.5 per cent to objective2 (Euro 22.5 billion) and 12.3 per cent to objective3 (Euro 24.05 billion) (CEC, 1999a, p10). A list of regions designated for support and financial allocations under the new objectives is included in Appendix 2. PROGRAMME FORMULATION AND IMPLEMENTATION

Finance made available through the Structural Funds is channelled into region-specific developmentprogrammes containing packagesof measures. In relation to programme design and implementation, this section discusses the elements of partnership, administration, programme form, the type of projects supported, and monitoring and evaluation.

The Role of Partnership Following designation of a region under one of the objectives, a plan or programming document must be drawn up by an appropriate partnership. This must follow the rules for contentand structure set out inthe Structural Funds framework regulation. A typical consortium in these partnerships might include national ministries, regionaland local government, specialist

86

ECONOMICDEVELOPMENTAND

ENVIRONMENTALG A I N

sectoral agencies, higher-education establishments,voluntary sector groups and representatives of the European Commission.Each team would generally beled or chaired by central or federal government. Although there are large differences in the practice of partnerships between Member States, most partners credit this approach with establishing new links or working relationships that would not otherwise exist, bringing obvious benefits for the regions:

Partnership in many programmes and initiatives has gone beyond a formal mechanismfor consultation and coordination and now represents a sign+ icant multiorganizational capacity which can extend beyond the remitof the Structural Funds (Tavistock Institute, 1999, pII). Partnerships have the option of choosing whether to prepare a regional development plan (RDP) or a single programming document (SPD). The RDP would be the subject of negotiations with the commission, leading to the production of a community support framework (CSF), which then In comparrequires subsequentadoption as an operational programme (OP). ison, the SPD contains programme proposals from the outset, and these can become operationalas soon as the SPD isadopted by the commission. In the negotiations, the commission may suggest changes, draw attention tothe requirements of particular EU regulations and policies, or ask for more data to beprovided. Once adopted by the European Commission, the programmes are implemented over a period of several years by the appropriate national or regional authorities or other designated public- or private-sector agencies. This establishes the context for project applications.

The Form of Programmes With regard to formand content, a programme should provide a structured development strategy articulating specific aims, objectives, priorities, measures and targets, as well as details on the volume of financial assistance available. The early chapters will generally describe the regional development context, outline social and economic characteristics,and incorporate analysis according to strengths, weaknesses, opportunities and threats. There should also be an appraisal of environmental conditions in the region, as well as an assessment of the impact of previous policy interventions. The development strategy should then be divided into strategic objectives and priorities for action.For example, broad strategic objectivesmight relate to enhancing regional competitivenessand improving economic and social cohesion. The corresponding priorities for action might be divided up, as in Box 5.1.

THEEUROPEANUNIONSTRUCTURAL FUNDS 87

BOX

5.1 STRUCTURAL FUNDSPROGRAMMES: STRATEGIC PRIORITIES

SMEs andlocal services Applied research, technologicaldevelopmentand innovation Strategicspatialdevelopment Tourismand cultural industries Communityeconomicdevelopment

Source: Strathclyde European Partnership,1996

Each of these priorities will be related programme to targets, identifying appropriate indicators, in order to measure both activity and output. The programme priorities are then subdivided into measures, generally presented according to a standard formula. Again, by way of illustration, possible measures under a tourism and culture priority arepresented in Box 5.2. A measure should be divided up into a structure that illustrates its objectives, the type of projects that it might support to achieve those objectives, the expected outcomes, (measure-specific)activity and output indicators, target groups and likely financial beneficiaries. The programme should also contain financial tables detailing budgetary allocations agreed betweenthe partnership and the European Commission. The expenditure profile should reflect the relative priorities between the identified regional problems, now addressed in the individual measures. The financial plan should also indicate the sources of support (ERDF, etc) for measures, and distinguish between capital projectsand revenue expenditure.

Programme Administration Programme administration is carried out through a hierarchy of committees. The committee structure is generally supported by a secretariat, BOX 5.2 STRUCTURAL FUNDS PROGRAMMES: TOURISM PRIORITY MEASURES Tourismand cultural facilities Marketing and developing the tourism and cultural industries Humanresources development for tourism and culture Source: Strathclyde European Partnership,1996

88 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN

established to administer the funds. Larger programmes have these secretariats based in the programme areas, with dedicated staff, whereas smaller regions with fewer resources maybe supported directly by central government ministries. Whether full time orpart time, secretariats coordinate the assessment and funding of projects. In some cases, implementation and administration of programmes may be contractedout to a public orprivate sector agency, which is then responsible for administering the community funds. Within the partnerships, the most senior committee is the monitoring committee. It oversees the policy and implementation of all Structural Funds’ activitiesin its region. Meetingperhaps twice a year, the membersof this committee include representatives of the Member States and the European Commission. The task of overseeing day-to-day operations is conducted by the second-tier committee,the programme management committee (PMC).Its work relates to decision-making on applications for project funding. The members of this committee are drawn from national, regional and local levels. It might meet three times a year. Supporting and advising the PMC are advisory groups (AGs). These groups comprise technical specialists that assess and appraise projects and make recommendations to the PMC. The themes or titles of these groups may be directly linked to the priorities for action,but they could also represent a cross-cutting orhorizontal theme such as labour markets. In addition to local partners with expertise in these areas, AG members might include external experts. Thesegroups could meetat least three timesa year. Oneof their primary tasks is to develop appraisal and scoring mechanisms for project applications, using selection criteria agreed by the monitoring committee. In some instances, specialist focusgroups are set up, often on a shortterm basis, todevelop strategies fornew or emergingareas of emphasis and to consider horizontal issues which affect the programme more generally.

Projects Supported As soon as a programme is agreedbetween the commission and the Member State, the partnership informs potential project applicants of the financial assistance available and sets the operational procedure in motion. All projects receiving this European assistance must also be cofinanced from national or other (including private sector) sources, as indicated in the programme’s financialplan. Project applications are normally led by a public-sector agency,such as government departments, regional and local authorities, enterprise trusts, local enterprise companies, collegesand universities, and voluntary sector organizations.

THEEUROPEAN UNlONSTRUCTURALFUNDS

89

Applications are assessed firstly by the secretariats to determine their technical eligibility,and then by the appropriate AG to assess economic and other benefits. With regard to environmental content, designated competent environmental authorities are invited to participate at both AG and PMC level. The European Commission not is involved at the level of project selection, but leaves this decision-making activity the to partnerships. Projects are assessed against specific criteria determined by the partnership for each priority and measure, frequently assisted by the use of a scoring system. These systemswould attribute either numerical or qualitative scores to applications, in accordance with each project’s relative merit and the degree to whichit meets or exceedsprogramme requirements. AG members subsequently discuss the strengths and weaknesses of applications at committee meetings, usingthe expert scores as a guideor preliminary indicatorof a project’s value. To meet regulatory requirements, applications should demonstrate additional benefits for the area as well as the need for Structural Fund support. In theory at least, grants will only be awarded to projectsthat can demonstrate that they would not otherwise be carried out. This assessment of ’additionality’ has proved to be problematic, because it requires value judgements on what would have been the case in the absence of funding. Other general criteria could include job creation,value for money, leverage of private-sector investment,the strategic nature of the scheme, synergy with other schemes and measures, and environmental impact, where considered appropriate. Typically, projects fallinto five categories:

physical construction, such as building small business units; more general infrastructure - such as roads or sewerage - has been financed in the past, but would only be eligiblenow if essential forbusiness initiatives; business development,for exampleproviding marketing or export services to localSMEs; tourism development,entailing physical construction orthe upgrading of tourist attractions and marketing; training,for examplein customer relations,computing or environmental management, allof which must be related to local labour market needs; and environmental works, eligible where they can be related tothe economy of the area, either directly in terms of job creation, or indirectly - for example, through maintenance of environmental quality which in turn affects tourism or inward investment.

90 ECONOMICDEVELOPMENT A N D ENVIRONMENTALGAIN

Monitoring and Evaluation The monitoring committeesupervises the implementation of measures and projects, and it can also set new guidelines where necessary. To assist decision-making, monitoring and evaluation are brought together at three strategic pointsin the programming process. Reports are commissioned from external evaluators to assess progress prior to programme implementation, at the midway point, and immediately after programme completion. These are referred toas ex-ante, interim or mid-term,and ex-post evaluations. Whereas the ex-ante appraisal is intended to assess a programme’s regulatory compliance, potential and capacity to achieve the tasksit specifies, the interim and ex-post evaluations are intended to review progressin meeting objectivesand targets contained in the programme. Moreover, these reports should provide an overall assessment of the benefits arising from projects and an analysis of the cost-effectiveness with which these benefits have been achieved. In recognitionof the need to adapt conventional evaluation methods to the specific context of the Structural Funds, the commission disseminates technical information to the Member States and partnerships through its programme onmethods for evaluating actions of structuralnature (MEANS). In broad terms, the MEANS initiative - with its associated working groups and international conferences - is intended to foster a European evaluation culture and to speed up the process of learning from advances made by other programme partnerships.

ENVIRONMENTAL IMPACT Several factorshave contributed in recent years to raiseboth the status and the practical significance of environment in the Structural Funds. As indicated in Chapter 3, the EAPs introduced the concept of environmental integration, particularly from the mid 1980s (Johnson and Corcelle, 1995). The Third EAP called for a strategy to integrate environmental policywith socio-economic development;the Fourth EAP further developed the theme of integration while advancing the idea of environmental responsibility; and the Fifth EAP now requires the integration of environmental concerns within all other areas of activity. This especially includes the economic development process as assisted by EU financial support mechanisms. The SEA approach for policies, plans and programmes is also supported in the Fifth EAP, particularly in relation to sectoraland spatial planning, where its relevance for regionaldevelopment is highlighted (CEC, 1993c, p70). During the period of the Fourth EAP, attention was focused specifically on the Structural Funds, by then widely perceived as an obvious interface between industrial development and the environment. A series of critical

THEEUROPEAN UNION STRUCTURALFUNDS 91 assessments focusedon the outcomes of this interaction,illustrating that as the funds continued to increasein scale territoriallyand thematically, so did their potential for environmental impact. The firstsuch study, prepared by theInstitute for European Environmental Policy and the World Wide Fund For Nature, revealed how the funds had supportedenvironmentally damaging projects all over the European Community, with only minimalprocedures for screeningout the most damaging projects. This had been especially the case in the fragile environments of the Mediterranean countries. In examples of tourism development, environmentally insensitive schemes had been put together very quickly, mainly to attract funding to the area; in some instances these comprised projects previously rejected by commercial lenders as uneconomic. The report also outlined the 1988 reform of the Structural Funds and the significance that the increase in expenditure might have for the environment:

The rapid expansion of the Structural Funds is intended to encourage a wave of new investment in the regions. This will lead to the constructionof new roads, bridges, sewers and energy supplies, investment in new factories, tourist developments, etc. Few would quarrel with the basic aim of closing the gap between the richer and poorer parts of the Community and assisting regional development. However.. .spending under the Structural Funds.. .will indicate whether Member States really are prepared to give priority to sustainable developmentand the integrationof environmental protection into other policies (Baldock and Corrie, 1989, p6). Whereas new environmental initiatives in addition to the ERDF were welcomed, the report warned that this would be no substitute for environmental integration within the Structural Funds as a whole. A year later, a follow-up report reviewed the first 12 months of operation of the new Funds and appraised the likely environmental implications. In addition to clarifyingthe programme approval process - and the disadvantaged position of DG XI - the report acknowledged the new procedures put in place to stem environmental damage and to promote sensitive projects. However,the authors remained cautionaryin their conclusions:

There are clear signs of progress. Nonetheless, the numberof complaints organizations about destructive new roads, dams, fish farms, power stations and other projects continues togrow.. . Not all EC Member States can be relied on to comply fully with Community environmental law. Thus, there is still potentialfor considerable environmental damage arisingfvom the Structural Funds (Baldock and Wenning, 1990,pl).

from local

92 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN

A subsequent report by the European Court of Auditors published in 1992 found little evidence to support any claims of environmental conformity within the Structural Funds. Documents provided during consultation phases for Structural Funds CSFs were described as too vague to be of use in considering environmental aspects, and the spread of environmental responsibilities across the European Commission DGs was seen to require substantial coordination, something that was far from being achieved.This lack of coordination alsohad repercussions for the projects carried out:

In the aquaculture and fish-farming sectors, funding was provided for several intensive exploration projects, in particular in the lagoons and other wetland areas along the Mediterranean... Simultaneously, DG X I was working on wetland conservation measures, even going so far as to provide financial aid to environmental protection agencies wishing to purchase lagoons in order to protect themfrom intensive exploitation (CEC, 1992a, PP6-7). Within the Member States, Structural Funds programmes were prepared mostly by departments responsible for regional development, agriculture and employment. Environmentdepartments were seldom consultedduring programme design, and Germany and the Netherlands were cited as examples of this oversight. The number of environmental operations appearing in programmes had increased, but these were revealed as often simply a transfer of projects that had previously been funded under other headings, such as infrastructure. More fundamentally:

Often, the measures concerned are more a matter of providing supportfor the development of activities and do not take into account the policy of combating the sources of pollution. No distinction is made between the (largely dominant) corrective side of the matter and the preventative side, and little information is suppliedas to expected impact(CEC, 1992a, p14). In short, the quality of environmental integration was very superficial,with no real effectivenessin terms of harmonization, but instead perhaps even the generation of new conflicts. Too high a proportion of community aid was going into investments described as 'little more than cleaning operations', few clear links could be identified between investments financed and the protection of the environment, and where measures of this type were actually adopted, real impacts werehardly monitored. Further insight was provided by the 1994 interim review of the Fifth EAP. It noted that while there had been progress on integrating environmental approaches both within the European Community and individual Member States, sustainable development was still seen as the business of those who deal directly with the environment. It also observed that:

THEEUROPEAN UNIONSTRUCTURALFUNDS 93 Strategic assessmentsof the impact of policy initiatives on the environment have yet to take root in most of the Member States. Initiativeson the introduction and implementation of appropriate mechanisms to ensure that environment and sustainable development concerns are considered in new policy actions need to be speeded up. Integration of environmental concerns needs to be better reflected in the regional development plans and proposals forfinding being developed by Member States (CEC, 1994,p3). In responseto these considerable criticisms and a parallel campaign directed at DG XVI and the European Parliament(Wilhson, 1993, p3),environmental protection has since been given a legal basis in EU regional policy through the Structural FundsFramework Regulation. A requirement for environmentalappraisal of the funds had already been incorporated in 1988, but the commission recognizedthat this needed to beupgraded, and it was given greater weightin the 1994-1999 regulations. Accordingly, since 1994, Member States have had to meet three obligations in preparing RDPs or SPDs: Prepare an appraisal of the regional environmental situation. Evaluate the environmental impact of the strategy in accordance with the principles of sustainable development and in agreement with the provisions of community law in force. Make arrangements to associate the competent environmental authorities designated by the Member Statein preparing and implementing the operations foreseen in the plan and ensure compliance with community policy and legislation concerning the environment (CEC,1993a, pp10-15). In practice, Member Statesand individual partnerships have fulfilled these three requirements to differing extents. The progress in environmental performance by Structural Funds programmes is considered in detail in Chapter 6.

ENVIRONMENTAL GUIDANCE Horizontal Integration In attempts to facilitate environmental integration within the Structural Funds, the European Commissionhas produced various forms of guidance. One of the first initiatives in this area, distributed in 1993, comprised an aide-mkmoire for assessing the environmental situation of a region (Bradley, 1996, p158).This was followed in 1996 bystrategic guidelines for objective2 programmes, which identified environment and sustainable development

94 ECONOMICDEVELOPMENT AND ENVIRONMENTAL GAIN

as new priorities for attention. Acknowledging the complementary nature of environment and regional development, the guidance emphasized the horizontal character of the environment as a principle to beborne in mind in defining and implementing other community policies and especially in the Structural Funds programmes. Two main themes were to be pursued more vigorously in new programmes. The first related to the traditional approach of improving the physical environment and infrastructure to increasethe attractiveness of the region for business development. Any proposal for the development and enhancement of industrial sites was to be linked to the stimulation of local development activity - for example, meetingthe needs of potential inward investors or stimulating growth in new sectoral specialisms.Others factors were linked tothe direct needs of established firms,including the development of environmental infrastructure such as facilities forwaste recycling, removing pollution and protecting areas of ecological interest. Applications for cofinancing of such projects had to show how they would enhance economic development. In the second theme, new emphasis was given to forward-looking measures as a potential source of future competitive advantage, linking ecological awareness with opportunities for economic growth. Examples included environmental measures for industry, energy-saving projects, advice for industry on technology and improved production processes, green business development and marketing support. The broad aims were to improve the environmental performance of business generally and to encourage and develop specialist environment-related sectors. Over the subsequent two years, new draft regulations were developed for the Structural Funds and approved by the European Parliamentin 1999. Again, the environment and sustainable development appear as horizontal factors in programmes, with several new points of emphasis: There is scope to differentiate the rates of contribution on the basis of the regional importance attached to the protection and improvement of the environment (CEC, 1999a, Article 29). Structural Funds partnerships at all levels (national, regionaland local) are to be broadened to include organizations concerned with environmental protection and sustainable development (CEC, 1999a, Article8). The ERDF is to be seen to support the clean and efficient utilization of energy and the development of renewable energy sources(CEC, 1999e, Article 2). Environmental considerations are to form a greater part of evaluation. Ex-ante evaluations, especially, areto assess the effectiveness of environmental integration and compatibility with national, regional and local environmental management objectives, and are to confirm a

THEEUROPEAN UNIONSTRUCTURALFUNDS 95 quantified description of the environmental baseline and an estimate of the expected environmental impact of the strategy (CEC, 1999a, Article 41).

ECOTEC Handbook, 1997 External studies for the European Commissionhave also contributed to the methodical treatment of environment in the Structural Funds. In 1997, ECOTEC Research and Consulting produced guidance for programme managers with responsibility for objective 2 regions. Thedocument offers a working definition of sustainable development as pursuing three objectives in such a way as to make them mutually compatible for both current and future generations. These comprise: sustainable, non-inflationary economic growth; social cohesion through access for allto employment and a high quality of life; and enhancement and maintenance of the environmental capital on which life depends. Thereafter, the guidance focuses mostly on environmental features of sustainability. Its aim is to help identify and promote those features of programmes that could significantly change regional development towards sustainable patterns. Three successivestages for positive action are elaborated. The first corresponds to the reactive phase of environmental protection describedin Table 2.1;the second and third stages could be interpreted as proactive and pursuing environmental gain:

business as usual, where appropriate environmental standardsand regulations are generally met; minimization, where firms adopt best available (clean) technologies and production patterns that conserve energy and recycle waste materials; since these firms become more resource-efficient, this corresponds to scenarios that secure employment as well as fulfilling environmental objectives; and restructuringfor sustainable development, in which the regional economy encourages sectors that use fewer environmental resources, orients spatial planning or spatial policies to reduce the need to travel, and increases opportunities for firms to share heat or exploit waste (ECOTEC, 1997, p12). Thereafter, the guidance suggests means of tracking the region, essentially monitoring and measuring moves towards sustainability through a series of indicators with both top-down and bottom-up characteristics. Theresultant

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statistics of positive and negative outputs are to be measured against the baseline conditions to identify progress. The report also identifies possible core project selection criteria according to the three dimensions of economic development, cohesion and environment, with additional environmental criteria that could be used to assist project scoring. Asa useful appendix, a parallel report from ECOTEC provides summaries of 20 projects exemplifying good practice in sustainable developmentand employment.

ERM Handbook, 1998 A second externalstudy this time by Environmental Resources Management ( E M ) , was aimed at development authorities and environmental authorities within Member States. The report presents an overview of the scope for integration between the Structural Fund programming process and the environmental assessment process. In practical terms,it is intended to actas a handbook setting out ways in which environmental issues could be more systematically incorporatedwithin the definitionand preparation of regional development plans and programming documents. It does not represent a legal requirement. While recognizing that environmental factors arise at all stages of programming from plan formulation to ex-post evaluation, the ERM handbook focuses principally on the ex-ante phase in the Structural Funds process. For each stage of RDPs,CSFs, OPs and SPDs, the handbook describes the relevance of SEA for contributing to development strategies, priorities and measures. The various sections of the report follow a common structure. From basic definitions and the importance of baseline data, it works through sustainability criteria for programme objectives and project selection, to performance indicators, impact indicators and monitoring arrangements. Surprisingly, the handbook tends to use the phrases environment and sustainable development interchangeably, an unfortunate confusion in a report seeking to convince economists and environmentalists that the European Commission now understands their common ground. In practice, various European Member Stateshave begun to produce summaries of this handbook, comprising smallerand more accessible versions for day-to-day use by Structural Funds partnerships.

ECOTEC Handbook, 1999 In 1999, ECOTEC circulated a draft version of a second handbook for consultation, containing further guidance on integrating sustainability within Structural Funds programmes. Supplementing material in the previous handbook, thestatedpurpose of this second volume is to stimulate

THEEUROPEAN UNIONSTRUCTURALFUNDS 97 questions, identifygaps and suggest where improvements could bemade to programmes. In content, it concentrates on three tools forthe programme design stage. They comprise a discussion of development-path analysis, a system for checking the programme against key environmental criteria, andan integrated economy-environment SWOT analysis. These tools do not require the use of quantified data, but instead rely on qualitative assessments of environmental issues and potential impacts. They are intended to encourage the development of an interactive relationship between programme design and programme evaluation. In the development path analysis, six paths are listed,ranging from the option to increasegrowth in economic activity and make no real changein environmental impact, up to improving resource efficiency and fostering economic activity that reduces demands on environmental resources. However, what might be considered the next step - one of aiming for regional environmental competitiveness, for example through specialization in environmental-sector activities- is not addressed. The analysis divides up the programme budget between each of the different development paths to see where the programme might steer the region. This involves a considerable number of assumptions about the outcome of measures, which is very uncertain, given that project proposals have still tobe submitted. Consequently, this method appears better suited to the interim or ex-post reviewstage, rather than being applied as anexante task. Checking the programme against key environmental criteria addresses individual measures, using a limited set of indicators drawn from ECOTEC’s earlier casestudy work. This is necessarilybroad and indicative, while highlighting key uncertainties. Again, as estimates of impacts can only reallybe determined when projects are put forward, this type of analysis may be best used to create measure-specific guidance, constructing scenarios for whichto aim. In other words, rather than try to measure the impact of a programming document in advance, this feature of the handbook might be more advantageously used to illustrate what could be achieved in a closely targeted programme. Furthermore,this tool appears to be oriented towards deriving the least negative impact, rather than securing the maximum positive impact. This seemsinappropriate for the design stage, when a positive message of realizing opportunities for environmental gain may open a more constructivedialogue. Lastly, the integrated economy-environment SWOT analysis attempts to mergethe environmental qualities of a region with the economicstrategy to mutual benefit. It tries to answer a range of questions, including identifying environmental assets on which the region can build, and whether environmental problems may beholding back development. In addition, it

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asks whether the economic sectors to be supported could damage the environment, how fragile areas in the region could be protected, and if particular sectors of the economy are vulnerable tostringent environmental standards and costs. Thereafter, the construction of a matrix alternately lines up the various economic strengths, weaknesses, opportunities and threats against the relevant environmental assets, problems, and fragile and robust areas or resources. Completing the boxes within the matrix should then allow overlaps and interactions to be identified, leading to more informed discussions, pote tial adjustments in the programme, and clarification of issues for closer monitoring. As a catalyst for increasing environmental integration,this tool shows considerable promise,and it may representa sigruficant step in identifying and exploiting synergies for sustainable regional development.

CONCLUSIONS In addressing regional economic imbalance across the EU territory, the Structural Funds represent a major instrument with very greatpotential for environmental impact. In practice, the form of programmes adopted and the methods used to progress regional growth mean that cofinancing has supported activities such as job creation, infrastructure and the development of new enterprises. With this very targeted perspective and the substantial resources allocated to the funds, it is not surprising that they have a history of environmental insensitivity. However, over the past ten years, there has been increasing criticism of the negative environmental impacts and lack of integration; the annual reports of the funds’ activities have responded with periodic revisions giving more systematic attention to the treatment of environmental issues. There now appears to be a much greater awareness in the EU of the environmental dimensionof these funds. In implementing programmes, the European Commission relieson the Member States to protect the environment and choose projects wisely. From a positive perspective, this means that there is considerable scope for individualpartnerships to develop schemes or scoring systems that maximize environmental gain. Certainly, the hierarchy of committees and the range of specialist inputs involved in project assessment and approval offer opportunities for creatively integrating environmental objectives or development of a specific environment priority. Such an overt concentration on environmental factors would, of course, depend upon the agreement of the regional partnership, as well as the recognition that environment has strategic importance. With the revised regulationsand the increasing emphasis on horizontal integration of environment and sustainable development, the European Commission seems intent on securing balanced programmes in future

THEEUROPEANUNIONSTRUCTURALFUNDS 99 Structural Funds submissions. The rationalization of the funds may also present an opportunity to incorporate a more comprehensive environmental technique within the standard approach to programme formulation. In this context, the new handbooks on environmental guidance may be important catalysts. However, superimposing SEA methodologies onto the various Structural Funds programming stages may be difficult to achieve, and some form of strategic environmental input, rather than strategic environmental assessment, may be a more appropriate means of approaching this task.

6 ENVIRONMENTAL INTEGRATION IN REGIONAL PROGRAMMES

INTRODUCTION Since the 1988 revisions, there have been three programming periods with regard to objective 2 regions, the main focus of this chapter. During this t h e , consistent improvements have been made in integrating environmental concernswithin regional economic programmes. As indicated in Chapter 5, evaluation is a core componentand condition of Structural Funds programming, and this chapter draws on a series of evaluations conducted for the European Commission, as well as separate studies for individual partnerships and industry ministries within the EU Member States. The analysisrelates principally to programmes for declining urban and industrial regions; but the common elementsof programme structure and development allow the generalization of lessons learned to programmes for those regions classified as less developed, rural or lowpopulation density, respectivelythe former objectives 1,5b and 6. In terms of coverage, programmes are reviewed from the longer-term Member States of Denmark, Germany, France, The Netherlands, Spain and the UK, and from the new Member States of Austria, Finlandand Sweden. The chapter isarranged chronologically, considering inturnthe programming periods during the ten years from1989 to 1999. For the second period, the ex-ante evaluation reviews state-of-the-environment information, environmental impact, integration and potential for environmental gain; whereas the ex-post evaluation concentrates on the two categories of programme management and programme implementation. For the most recent phase, the mid-term evaluation addresses all the above factors, as well as monitoring and evaluation. Lastly, a summary of progress considers the likely components of an index of environmental integration for European programmes.

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PROGRAMMING PERIOD 1989-1993 In accordancewith the revised Structural Funds procedures, the European Commission and the Member States agreed the first round of programmes in the late 1980s. In these early documents, the general philosophy was to give priority to European cohesion, based on reducing economic disparities likely to undermine the forthcoming SEM. Environmental policywas to be adhered to, but it did not condition the operation of the funds or the SEM initiative. In consequence, few of the programmes integrated the environment in the sense of using its protection or improvement as a development objective. Wherethis did happen, it generally occurred within infrastructure programmes, andtheform of integrationachievedvaried substantially (Woodford, 1991, p8). These programmes were perceived as economic and social - not environmental - strategies, and consequently job creation and economic development took precedence over environmental protection. Moreover, at that stage, DG XI had no legal basis from whichtoinsist thatpartnershipsshouldconductprogramme-level environmental assessment. Environmental references in these early programmes may be grouped into two main categories: those that implied a measure of integration of environmental factors withinthe programming and implementation process; and those that considered environmental policy as an external element of the process. The first category reflects the philosophy that development must include environmental matters. As might be expected, the clearest evidence of this level of integration came from those northern Member States where environmental protection issues were already a part of the day-to-day development process. For example, Denmark’s objective 5b programme stated:

It is a fact that future economic and infrastructure developmentmust be undertaken with regard to the environmentand nature protection.Forcing production in the primary and industrial sectors as well as the intensive construction of infrastructure, especially in tourism, can eventually damage landscapes and the environment. All measures linked to production and to infrastructure thus have an environmental dimension. At the other end of the spectrum, the more distanced approach maintains only that development must conform to environmental policy and legislation. This interpretation can be illustrated by aquotation from the Portuguese CSF, the only objective 1 region that did not include a specific priority on the environment:

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I t should be noted that actions specifically aimed, in the Portuguese situation, at the preservation of the natural heritage and the exploitation of the full potential of internally generated development will be undertaken i n conformity with existing Community legislation, for which systematic relations have been established with the Ministry for the Environment and Natural Resources. In between these two extremes lay more ambivalent submissions, such as those fromthe UK. These programmes generally contained an environmental paragraph that described the town and country planning system as providing the framework forland use and all aspectsof programme implementation, including environmental improvement, while at the same time emphasizing conformity with the EIA Directive 85/337/EEC. The uncertainty here related towhether the physical planning system was assumed to integrate environmental considerations - and so there was no need to address them in the programme - or whether conformity with European Community legislation through transposing EU directives into national legislation was considered to be sufficient. The commission published its first annual review of the activity of the reformed funds in 1991. When describing how operations might improve and protect the environment, it stated that there were signs of increasing environmental awareness in the regions, but there were also conflicts:

On the one hand, there is a severe backlog of problems to be remedied, while on the other there is a risk that development measuresfinanced by thefunds will aggravate the pressure on the environment(creating precisely the kind of problem that otherfunds are seeking to remedy) (CEC, 1991, p68).

By the end of this programming period, the fifth annual review observed that the scopeand status of environmental legislationin the various Member States stillvaried considerably, but no great difficulties wereanticipated in the drafting or approval of legislation at national level. Instead,the problem lay in the practical implementation and integration process, reflected bythe superficial considerationof the environment in the Structural Funds: During the period 2989-2993, no Member State had carried out environmental impact assessments for theiroperational programmes as a whole. The informationsupplied in the plansand programmes was usuallygeneral and therefore seldom directly usable for the monitoring and assessment of environmental impact. Only a f e w OPs explicitly mentioned the need to carry out impact studies forspecifi'c operations (CEC, 199513, p107).

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PROGRAMMING PERIOD 1994-1996: EX-ANTE EVALUATION At the beginning of the second programming period, the message being conveyed fromthe commission was that the environment should no longer be seenas an isolated sector. Instead,it was to be perceived as a fundamental component of sustainable development and as a source of economic initiative, innovation and job creation, particularly at local and regional levels (CEC,1999g,p29). In response, theprogramming documents prepared for the 1994-1999 period (respectively 1994-1996 for objective 2 regions) generally show improvements, but not at the level to which the commission aspired. This first example is drawn from the ex-ante evaluation of nine SPDs prepared for objective 2 regions in the area surrounding the North Sea. These regions are found in the four countries of the United Kingdom (western Scotland, eastern Scotland, north-east England), The Netherlands (Groningen-Drenthe), Denmark (Lollandand north Jutland) and Germany (Schleswig Holstein, Bremen and Lower Saxony). The programmes were evaluated for their state-of-the-environment reporting, assessment of environmental impact, environmental integration and potential for achieving environmental gain (Clementand Bachtler, 1997).

State of the Environment The regulatory requirement toprovide an appraisal of existing environmental conditions was generally complied with in all nine programmes, albeit superficially. Theinformation tended to be descriptive rather than analytical, there was an absence of quantitative indicators, and the depth and quality of information varied considerably between countries and regions. A common approach was to present environmental information separately from the main body of the SPD, often in an appendix - symptomatic of the way in which environmental factors were still being treated in isolation within regional development thinking. In assessing the inclusion of baseline environmental data, six categories of information were identifiable (see Table 6.1):

air quality, particularly the presence of carbon monoxide, nitrogen dioxide, sulphur dioxide and carbon dioxide; water quality, relating to rivers, estuarine and coastal waters, and drinking water; land quality, generally the inclusion of data on vacant and derelict land and buildings, sitesof archaeological heritage,agricultural land or urban centres; biodiversity, identifying nature conservation and wildlife sites, and greenbelt designation;

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incidence of pollution, specifying locations or degrees of pollution encountered, including polluting industries and contaminated land; and waste treatment and recycling, focusing on current methods utilized, divisions between methods, and anticipated demand. Table 6.1 SPD information on the state of the environment,1994-1996 SPDIRegion Air QualityQualityQuality

Water

Biodiversity LandIncidence

Waste of Treatment Pollution and Recycling

Western Scotland

Yes

Yes

Yes

Yes

Partial

Yes

Eastern Scotland

Yes

Yes

Yes

Yes

Partial

Yes

North-east England

Yes

Yes

Yes

Yes

Partial

Yes

GroningenDrenthe

Yes

Yes

Yes

Yes

Yes

Yes

Lolland

No

Yes

No

No

No

No

North Jutland

No

No

No

No

No

No

Schleswig Holstein

Yes

Yes

Yes

Yes

Yes

Yes

Bremen

Yes

Yes

Yes

Yes

Yes

Yes

Lower Saxony

Partial

Partial

Partial

Yes

Partial

PartiaI

Source: Clement, 1994a

The mostevident characteristic fromTable 6.1 is the omission by the Danish authorities in providing the baseline environmental information. This was based on the assumption that physical planning authorities would process any applications approved for Structural Fund support, and data would be gathered at that stage. Accordingly, the DanishSPDs constantly made reference to information provided through statutory procedures of planning and development control, implying that environmental considerations were inappropriate for SPDs, essentially to avoid duplication. Two points arise here. Firstly, with regard to programme partnerships, local authorities (as the competent environmental authorities) should have been included in the programme preparation team. In this capacity, they would have been expected to make significant input in terms of environmental data and impact assessment. Rather than duplicate decisions, this

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would represent appropriate consultation with environmental authorities, as specified in the framework regulation. The second issue that is relying on the local authority regulatory system to process applications invariably results in minimum compliance with regulations, rather than a positive exploitation of the scope forenvironmental gain.

Environmental Impact A key issue in environmental impact is the timing - and consequently the feasibility - of impact assessment. Some of the SPDs stated that ex-ante impact assessments were not feasible, with programme or project completion cited as a more appropriate time, basically to carry out an ex-post impact assessment. While this reaction is understandable, it could be challenged on the basis that potential positive impacts could be identified ex ante, even if only as guidelines within which to pursue some form of environmental gain. At this stage, it would be most realistic to consider the impacts of projects such as tourism infrastructure, transport facilities or manufacturing investments. The outcomesof other factors such as environmental training and knowledge dissemination would be more difficult to anticipate, but they could still have been drawn into the programme design. The impact of proposed measures on the baseline environmental situation is a central part of any environmental appraisal. For this level of assessment, the evaluation analysed environmental impact under two headings: broad impact assessment and specific impact assessment. Broad impact assessment related to whether the documents contained broad statements on anticipated likely impact for the programme as a whole; and specific impact assessment related to whether they contained estimates of the likely impactof specific measures or priorities. Few of the programmes under review incorporated any structured consideration of environmental impact. The only promising approach appeared in the programme for north-east England, which utilized both broad and specific EMS. Borrowing on a methodology for spatial planning proposed in the UK (DOE,1993), the north-east England programme rated each of the priorities for its likely degree of impact. The priorities were considered against a series of environmental themes, grouped under headings of global sustainability,natural resources and local environmental quality. This allowed an assessment of broad impact - in this case summarized as ‘a largely neutral effect on the environment’ - and preliminary insights into the specific impacts expected from individual programme priorities against environmental criteria. Although undeveloped beyond this listing of impact levels (including the absence of explanations on how weightings werederived), the methodology formed a useful first step towards constructing a more detailed environmental impact matrix for regional economic policy programmes.

206 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN This effectively built on work exemplified in the UK Department of the Environment’s guidelines on policy appraisal (DOE, 1991; DETR, 1997).

Environmental Integration Beyond regulatory requirements, consideration was given to the degree to which the SPDs achieved environmental integration - for examplewhether the environmentwas treated as a separate issue oras an integral part of the SPD. Fromthis perspective, none of the SPDs integrated environment effectively. The inclusion of environmental references throughout the strategy documents did not necessarily signify successful integration. In general, environmental input related principally toindividual measures, rather than approaching the issue holistically. The environment was frequently perceived as a purely physical issue, involvingthe redevelopment of industrial areas, for instance, rather than focusing on issues such as environmental training, product improvements, the uptake of environmental technology, improved energy control measures, or the setting of environmental targets as conditions within projects. Only a few SPDs approached the question of integration more broadly, with the inclusion of themes such as the promotion of environmental technology and environmental investment. A common characteristic was the tendency to see environmental protection as an aspect of economic development, an approach which is not only restrictive,but which hinders the incorporation of environmental criteriawithin measures for the success of all the action priorities.

Potential forEnvironmental Gain An additional perspective was adopted in terms of identifying means of advancing environmental objectives as part of the development process. This meant looking for evidence of environmental gain in the form of environmental targets,the inclusion of environmental criteriaor indicators, and the establishment of monitoring procedures.

Environmentaltargets related to whether the SPDs set targets for environmental improvement, for example for derelict land reclamation, pollution reduction,improved recycling or environmentaltraining. Environmental criteria in project appraisal referred to the methodologies used for assessingand selecting projects for financial support. Tlus may involve a scoring systemincorporating environmental criteria alongside factors such as job creation, ethnic minoritiesand new company formation. Environmental indicators in performancemeasures represented factors such as environmental training, product and process improvements, the uptake of environmental technology, improvements in energy efficiency, or the number of environment-oriented projectssupported.

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Environmental monitoringreferred to identifyingprocedures and partners to monitor the environmental impact of the programmes over time. Table 6.2 SPD measures for environmental gain,1994-1996 SPDIRegion Environmental Environmental Environmental Monitoring in Indicators in Targets Criteria Performance Project Measures Appraisal

Procedures

Western Scotland Eastern Scotland

No

Yes

Yes

No

North-east England No

No

No

Groningen-Drenthe

No

No

No

Lolland

No

Schleswig Holstein

Yes

North Jutland Bremen

Lower Saxony

No

Yes No

No

Yes

No

No

Yes

No

Yes

No No

Yes Yes

No

Yes

Yes

No

Yes

Yes

No

No

No

No

Source: Clement, 1994a

All the North Sea SPDs were assessed against these environmental gain criteria, and the results indicated that none of the SPDs achieved consistency across all categories (see Table 6.2). TheGerman SPDs were the best performers, incorporating environmental targets, identifying environmental criteria for use in project appraisal and making provision for monitoring procedures. However,the advantageous use of environmental indicators in performance measures was restricted individual to UK and Dutch SPDs that had set no targets and made no allowances for monitoring. At this stage, therefore, therewas still scope for improving the distribution of effort across categories.

PROGRAMMING PERIOD 1994-1996: EX-POSTEVALUATION The second example relates to the ex-poststage of programme evaluation, reviewing environmental performance during the 1994-1996 implementation. In this case, the evaluation compared 12 regional programmes from the Member States of Austria (Styria and lower Austria), Denmark (north Jutland), Finland (national), France (Aquitaine and Rhbne Alps), Germany (Saarland and North-Rhine Westfalia), Sweden (Fyrstad and Angermanlandskusten) and the UK (industrial South Wales and west of Scotland). Insights from the evaluation are presented from the two perspectives of

208 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN programme management and programme implementation (Clement and Fitzgerald, 1997).

Programme Management The form of institutional arrangements and management structures that is utilized toadminister programmes environmentally representsa significant determining factor in pursuing environmental gain. Two different models appeared to be in operation during the 1994-1996 period, reflecting generalist and specialist approaches to environment. The generalist systems tended to reflect the existing order, oftenusing a 'coordinated' approach. This means that programme management would lie primarily with economic planners who periodically consultwith environmental authorities when deemed to be necessary. This form of interaction between economic development and the environment was evident in the Nordic countries. In Sweden, the county administrative board (CAB) acting as the competent environmentalauthority - followed its involvement in the Fyrstadprogramme preparation with representation on the PMC. As a matter of procedure, every project wassent to the environmental departments in the CAB for approval. This did not result in project applications being rejected, because existing environmental standards were already high. A similar situation occurred in Denmark, with all projects that might potentially affect the environment being sent to the (county) department of the environment. Again, the emphasis was on ensuring that the proposed development did not contravene existing regulations, and consequently this stage might be regarded as a necessary formality rather than expected to offer new opportunities. In parallel with the Nordic tendency to follow generalist systems, environmental management in the German programmes also reflected the existing order. In both cases of Nordrhein Westfalen and the Saarland, the Structural Funds programmes fitted into existing state policy, and consequently the environment ministries assumed responsibility for parts of the programme which fellwithin their conventional remit. With regard to specialist systems, these favoured an alternative 'integrative' approachin which programme management steers economic development towards environmentally advanced practices. Sucha structure may have both advantages and disadvantages.An exampleof this approach operated in Austria, where programmes were administered by generalist programme managers; but thereafter monies were distributed through specialist funding agencies and departments using existing environmental schemes. Thismeans that programme environmental management was in effect carriedout by environmental departments. Whereas all projectshad to complywith environmental regulations,the specialist environmental schemes included support for industrial waste/

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sewage measures, assistance for environmental protection measures, and two parallel schemes from the Austrian Ministry of Environment that were administered by the Austrian bank Osterreichische Kommunal Kredit. In practice, these schemes were differentiatedby their restricted eligibility for environmental investments that exceeded minimum legal requirements. Although forward-looking in design, this form of scheme dependence in effect slowed programme implementation, particularly since the European Commission required lengthy periods to approve two of the environmental schemes, delaying their realization until approximately two years after the programme launch. In comparison, the French region of Aquitaine provided an example of innovative programme management. It encouraged agencies that were not previously environmentally oriented to change their perceptions and so allow a wider range of integrative activities to beundertaken. As a result, the services provided include advice on environmental audits, environmental technology and environmental action plans, and the provision of collective services(including environmental expertise) at Lacq for chemical firms (seeBox 6.1). This measure is intended to raise the profile of the region environmentally, whilegenerating an improved image forattracting potential investors.

Programme Implementation Environmental progress was less apparent in programme implementation; at the time of evaluation, strengths in programme design and management had not yet been fully carriedthrough to measurable impactsat the project

Box 6.1 LACQPOLEENVIRONNEMENT The centre of environmental expertise establishedin Aquitaine is a collective facility providing services and advice to firms, particularly in the chemicals sector, in the field of environmental protection and technology. The facility advises companies, undertakes a research programme on their behalf, invests in joint equipment and provides a series of other services. One of its main objectives isto signal Aquitaineas a region with anindustrial sector that is environmentally advanced. The idea for the initiative came from a group of local public-sector organizations who recognizedthe need for a regional facilityto promote environmental issues and to find cost-effective, innovative solutions to environmental problems. As interest grew in the idea, a group of financing partners was assembled and an application made for Structural Fund support to help movethe idea forward. Source: Clement and Fitzgerald,1997

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level. The moststriking element was the lackof continuity that might have been expected from highly regulated countries from earlier phasesthrough to practice. Thetwo issues of greatest interest were those of project selection and programme environmental monitoring. Rather than being proactive in project selection, criteria mostly reflected reactive approaches. In Denmark, for example, the northJutland programme restricted environmental criteria to general environmental requirements that any project would be required to meet. Furthermore, it included no overt promotion of projects with a positive environmental impact. The involvementof the department of the environmentwas only to ensure the legalityof projects, not to considersetting priorities. In comparison, in France there isa standard national approach to carrying out EIAs, and therefore no special discussion was considered necessary regarding impacts in regional programmes. In the Aquitaine programme, all project applicants had to indicate the likely environmental impact of projects, but the main question asked about proposals was whether or not they respected the rules with regard to environmental standards. It was considered beyond the remit of the partnership to insiston the environment being accommodated in a more holistic way.For the Rhhe-Alpes programme, by contrast, measures with a positive environmental impact were setout in a programme environmental profile; negativeenvironmental impacts werenot identified. In Austria, there wereno centrally defined environmental project selection guidelines, and individual (specialist) funding departments had to devise their own criteria. In the Swedish Fyrstad programme, project selection criteria stated that projects should build on, and further develop, the strengths of the region and respect natural, cultural and environmental values. However, the exact weighting given to environmental features in project assessment was unclear. In comparison, the Swedishhgermanlandskusten programme did not explicitly use environmental goals in project selection; but it nonetheless approved an environmental project worth highlighting - the KretsloppsparkCentrum - comprising an eco-cyclic centre expected to containa range of integrated companies (see Box 6.2). The exception amongst the programmes reviewed was the document for the west of Scotland region, where recent revisions had incorporated criteria for environmental management within the scoring system devised for project selection. Applicants who failed to complete or to return this section of the form automatically lost points from their potential overall score. These criteria weredevised by an environmental specialist, bringing together the knowledge gained bythe partnership in the implementation of previous programmes. The second keyfeature of implementation related toprogramme environmental monitoring. At the time of the evaluation, this was still at an early

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Box 6.2 KRETTSLOPPSPARK CENTRUM The purpose of the Krettsloppspark Centrum is t o support an eco-cyclic centre comprising a large number of partially integrated companies, but also including research and laboratory facilities. The companies involved have a range of competences and use different methods and processes, but all of them must be companies dealing with recycling and deproduction activities. Examples of appropriate business activities are recycling of refrigerators and tyres anddeproduction of plastic materials and glass. The project applicant was the municipalityof Ornskoldsvik. As the local planning authority, the municipality took responsibility for the eco-cyclic centre in terms of overseeing site identification, infrastructure provision and meeting regulations. The project’s most important partneris a company that deals exclusively with recycling. Cooperation with universities and departments of environmental studies is also an important component of the process. The project aims t o generate 50 new jobs as well as five new companies. Beneficial spin-offsare anticipated for the transport sector and the service sector. Source: Clement and Fitzgerald, 1997

stage of development, which meant that monitoring data frequently remained inadequate for economic assessmentand very inadequate for the appraisal of environmental change. In Austria, for instance, existing environmental monitoring indicators were extremely general, but more exact and detailed monitoring was considered to be too technically difficult and resource intensive. Accordingly, the environment ministry would not commit the necessary time or resources to carry out more detailed monitoring checks, and project sponsors were expected to be equally unwilling. On the project monitoring form, the question of assessing environmental impact was also very general - more detailed questions had been considered, but rejected on the basis of minimizing any additional administrative burden and complexity that might discourageapplicants from seekingsupport. In France, the post-implementation assessment of impacts inthe Aquitaine programme was considered to be straightforward for environmental projects, but onl limited success was achieved for projectsin other fields. In Sweden, the ngermanlandskusten programme implementation involved environmental monitoring of projects, some of which was selfassessed, but this originated from national legislative requirements, not from the programme objectives. In Fyrstad, no specific monitoringarrangements were made for environmental matters. Lastly, in Finland, problems in monitoring included the administrative

K

112 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN

Box 6.3 LAHTIENVIRONMENTAL FORUM Lahti Environmental Forum was established a t the end of 1993. Set up initially by the City of Lahti Municipality, i t s activities are now funded by different municipalities, EU Structural Funds and national regionaldevelopment funds. The aim of the forum is t o adopt a common approach t o promoting sustainable development in the Lahti area and t o meet the challenge of Agenda 21. The forum comprises approximately 90 participants, representing 40 different organizations (municipalities, different local communities, organizations and companies).Its objectives and proposalsfor action are prepared by working groups. The specific objectivesof the forumare as follows: Developand implement localAgenda 21. Organize different events such as environmental auditingfor SMEs, ecocompetition for shops, seminars on the future oftransport, monitoring of planning activities and waste recycling. Developlocalindicators for sustainabledevelopment. These indicators are to allow the evaluation of current conditions and t o help establish objectives for sustainable development. The participants of the forum also propose ways for different regional policy actors t o take these objectives into account. Source: Clement and Fitzgerald, 1997

difficulties of gathering data, particularly since several offices may cover each region. Nevertheless, the Lahti Environmental Forum project has attempted to produce environmental indicators for monitoring over time (see Box 6.3). This project involved funding and collaboration between a number of public authorities, carrying elements of regional planning through to regional development strategy.

PROGRAMMING PERIOD 1997-1999: MID-TERM EVALUATION In its ninth annual review of the reformed funds, the European Commission indicated that the SPDs approved in 1997had a much stronger environmental content,a result that may beattributed to thehorizontal guidance issued the previous year (CEC, 1999g, p142). This view corresponds with the findings of the mid-term review of the performance of objective 2 programmes, which formsthe third example in this chapter. Focusing on the programming period of 1997-1999, environmental information has been drawn from over 25 Structural Funds programmes

ENVIRONMENTALINTEGRATION I N REGIONAL PROGRAMMES 213 from across the EU Member States. The following analysis considers the aspects of state of the environment, impact, integration, management and implementation, and monitoring and evaluation.

State of the Environment Meeting the requirement of the framework regulation, the majority of the objective 2 SPDs contained details of regional environmental conditions. These profiles tended to vary in length from perhaps four to 18 pages, and they also varied in usefulness - some remained essentially descriptiveand focused on environmental protection, while others were more analytical and aimed for tangibleenvironmental improvement. These programmes also varied considerably in terms of environmental content. The moredescriptive programmes listed the environmental characteristics of the region, but did not analyse the data in depth;whereas the analytical programmes tended to identify and explore environmental strengths and weaknesses in detail. However, a problem common to both types of programme is that the environmentalprofile was seldom integrated effectively within the programme in a strategic manner - environmental data and discussion generally remained confinedthetoprofile sectionrather than appearing in, and influencing, otherprogramme components. Within the spectrum of content, the programmes ranged from the environmental detail of Germany and the UK through to the environmental brevity of Spain and Sweden. All the German objective 2 programmes included environmental profiles, and they considered impacts on a wide range of ecological factors, West Berlinbeing a particularly good example. The UK programmes similarly alwayspresented environmental profiles, in most cases with good environmental detail and in some instances incorporating moves towards programme impact assessment and sustainability criteria. Inthis latter category, eastern Scotland appeared to have made the greatest progress.

Environmental Impact With regard to environmental impact, there was a trend towards identifying impacts for each measure. This was a considerable step forward from the previous round of programmes, and it represents a very useful tool at the ex-ante stage,as it allows some considerationof desired cumulative effects in accordance with the principles of SEA. However, in individual analyses, there was a tendency to focus primarily on environmental measures. In practice, all measuresshould be evaluated for impact, especially since nonenvironmental measures are more likely tohave a negative impact and so require greaterattention. Programmes from Germany and France regularly included impact analysis by measure in the SPDs (see Box 6.4), whereas countries such as

114 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN

BOX 6.4 MEASURE-LEVEL ASSESSMENT OF ENVIRONMENTALIMPACT: SAARLAND The Saarland programme took a systematic approach to the prior identification of potential positive, negative or neutral impacts of each programme measure. These appeared on every measure sheet in order to inform project development and assessment. Few were presented as environmentally neutral. It was acknowledged that the fulfilmentof positive impacts or mitigation of negative impacts would depend upon projects submitted. Examples of identified impacts were as follows. Scienceparkdevelopmentwould be considered negative through greenfield siting, but positive through the production of advanced technology for the industrial sector, supporting resource efficiency and pollution reduction. Business-related infrastructure could be positive if brownfield sites were used, in some cases perhaps overcoming existing ground,water and air pollution.However,newindustrialandcommercialdevelopments inevitably bring negative environmental impacts. For energy-relatedprojects, direct and immediate benefitswere anticipated through the ecological audit programme and the construction of low-energy housing. Support for business activities was expected to be largely environmentally neutral, but it was hopedthat thecreation of new service-sector jobs, to compensate for the falling industrial employment, would lead to an overall reduction in industrial pollution. For training programmes, a positive impact was expected from integratas the managementof finiteraw materials, ing themes such development of environmentally friendly products, use of eco-friendly production methods, andthe reduction of polluting emissions. Source: Clement, 1999a

Sweden simply stated that environmental impact would be considered at the project selection stage. an Inintermediate position, the UK had a number of programmes with environmental assessments of programmes or priorities, and several with environmental assessmentof individual measures.

Environmental Integration With regard to the strategic approach to the environment, it is useful to compare how environment has been defined in terms of aims and objectives. In most cases, programmes approached the environment from a horizontal perspective (see Table 6.3). Consequently, environmental issues appeared within substrategies or within priorities and strategic objectives,

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but they were not given separate status. French and German programmes generally adopted this approach, both countries acknowledging the direct links between regional environmental image, industrial investment and the potential forjob creation in a number of sectors. Notable exceptions in these countries included the programmes for Picardie and West Berlin, each of which devoted a vertical priority to the theme of environment. Thisresulted in a very high profile for environmental factors, and Berlin especially encouraged a wide range of project-types in support of environmental integration. Within the horizontal approach, the scope varied from the Spanish focus on basic physical infrastructure requirements and clarifying regulatory systems to the United Kingdom’s interpretation of environment as encompassing clean technologies, waste exchange, energy efficiency, green tourism and developing the employment potential of eco-businesses. Denmark adopted a methodology that used horizontal integration as a starting point, but simultaneously sought to reward investments that went beyond minimum legislative compliance to exceed government environmental standards. Across the Member States, examples from France, Germany, Denmark andthe United Kingdom fitted well with the European Commission’s perspective on exploiting positive links between environment and economy. By contrast, the Swedish approach adopted a lower profile, relating more tothe need to protect the environment from harmful economic development rather than emphasizing the potential synergies between the two areas. An example of attempting to use sustainable development as a basis for a programme’s strategic approach was developed in a previous EU pilot project involving the eastern Scotland programme (see Box 6.5). This was considered by DG XVI to be the leading case study amongst the partnerships being supported through this initiative.

Management and Implementation Organizations involved in environmental implementation of programmes typically compriseda combination of national or federal ministries working alongside regional authorities. For example, at national level (and ’Land’ level in Germany), these ministries would have specific environmental remits, such as the German Federal Ministry for Environmental Protection, the Finnish Ministry for Environment, and the environment agenciesin the UK. These organizations were usually involved at all three stages of programme preparation, implementation and monitoring. At regional level, the participating authorities often have a number of broader public-sector functions in addition to environment. Specialist environmental departments within these organizationswould have consid-

21 6

ECONOMICDEVELOPMENT A N D ENVIRONMENTALGAIN

VI

n

L

a,

c3

ENVIRONMENTALINTEGRATION IN REGIONAL PROGRAMMES

c

i 0

c

c

U

0

L

.-c -

0 A

aJ

m

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227

2 18 ECONOMlC DEVELOPMENT A N D ENVIRONMENTALGAIN

BOX

6.5 A STRATEGIC APPROACH TO SUSTAINABLE DEVELOPMENT:EASTERN SCOTLAND

The first step was t o assess all elements of the programme against the sustainable developmentguidanceprepared by ECOTEC (1997).This indicated that the eastern Scotland programme was performing broadly in line with other objective 2 programmes, and that elements of sustainable development already existed in the currentSPD. The second stage included a series of participatory workshops involving the whole partnership. These sessions evaluated the potential of sustainable development t o enhance the programme,and the result was a reduction of ECOTEC's original 16 areas of action to four criteria. Linking these with economic and social criteria enabled the derivation of 12 core criteria for sustainable development. Stage three comprised an interim report t o the European Commission to adjust output indicators andt o integrate theemerging criteria for project selection within 12 sustainable development criteria, as follows: net additional jobs created; evidence of demand: leverage; infrastructure impact; resource efficiency; environmental impact; access and opportunity;

local added value; capacity-building; inclusion; social strategic integration; and durabilityfeasibility. and

Source: Eastern Scotland European Partnership,1998

erable involvement in the day-to-day assessmentof environmental characteristics of programmes and projects. Examplesinclude the CABS in Sweden and the regionalauthorities in Spain. The inclusion of specific environmental targets as part of SPD implementation was uncommon. To some extent, this is a consequence of attempting to integrate environment on a horizontal basis, since programmes have tended to set targets for vertical priorities to which greater importance is normally attached. In some cases, environmental profiles have included a discussion of qualitative environmental impacts. Frequently prepared by the environmental authorities identified above, these sections can make a valuable contribution,but numerical targets have generally formedno part of such descriptions. An approximation of environmental targets is made through the reference to likely environmental outcomes in the sections coveringthe impact of the programme. In instances where this relates toindividual measures, it would be feasible to use these estimates as guidelines for action oraspiraUK tions to work towards, where positive impacts have been identified. The

ENVIRONMENTAL~NTEGRATlON IN REGIONAL

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6.6 IMPACT ASSESSMENT IN SUPPORT OF TARGETSETTING: WESTERN SCOTLAND

Within thewestern Scotland SPD, each of the five programme priorities was assessed for its likely (positive or negative) impact againstfive environmental issues: carbon dioxide/global sustainability; land use; air quality/energy; waste; and training. The results ranged from high impact, principally for new build projects with scope for energy efficiency and brownfield locations, intermediate impact through environmental training projects, and low impact during the life of the programme, for example related t o energy and waste research and development. While this SPD did not go so far as t o measure impacts, it listed positive outcomes for which t o aim. For example, auditing should result in waste reduction and increased recycling, new build projects should conform t o high standards of energy efficiency, locating projects on brownfield sites should reduce transport needs, and traffic calming alongside investment in public transport investment should improveair quality at local level. Further development of this approach could link the identification of specific projects meriting support with the establishment of targets differentiated by individual measures. Source: Strathclyde European Partnership, 1996

programme for western Scotland, in which the programme priorities were assessed against five environmental issues, provides an example of how estimating the impacts of a programme might be modified to substitute for environmental target-setting (seeBox 6.6). Environmental criteria for use in project selection were found in programmes from most of the countries under review, but this occurred only in a few programmes from each country. In other words, the differentiation was not attributable to the country of origin, but rather to theattitude or vision of the individual partnership. In general, environmental criteria were not included as standard, and they did not feature strongly where regionalized scoring systems were used to evaluate a project’s strength. A more typical approach was to specify in programmes that projects should have no negative effectson the environment.

Monitoring and Evaluation Very few partnerships evaluated the environmental impacts of previous programmes. For the most part, evaluations tended to takea predominantly economic perspective with a preference for measurable and quantified results. Moreover,previous rounds of programmes had not been framed in

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BOX

6.7 ENVIRONMENTAL PROGRESS IN POITOU-CHARENTES

The environmental dimension of the 1994-1996 Poitou-Charentes objective 2 programme concentratedon the rehabilitationof industrial sites and on a range of projectsenablingenvironmental progress, notably a nature reserve, a study for the urban charter, and water treatment actions. This field, which only gained momentum towards the end of the 1994-1996 programming period, was continued into the 1997-1999 programme in measures encouraging projects in the followingareas: urban and industrial rehabilitation actions, including abandonedand degraded industrial areas, pollution reduction, improvements t o sea fronts and historic sites; improvements to the region’simage; environmental projects t o enhancebusinesscompetitiveness, including energy management, pollution prevention, environmental audits, and waste treatment and reuse; new eco-products, including an integrated projectt o develop an electric car; and the creation of local environmental expertise through specialized training. Source: Clement, 1999a

a manner suitable for easy evaluation of environmental factors, and this impacted on subsequent assessments. In France, however, critical evaluations showed that programmes for the 1994-1996 periodhadnot achieved the predicted environmental impacts; in other cases, the evaluations focused more on environmental activity rather than environmental impact, and so they were less useful.In the programme for Poitou-Charentes, bycontrast, environmental progress was identified with the creation of a nature reserve, a study for an urban charter, and a series of water treatment projects. There was also a clear identification of changing priorities, as the 1994-1996 programme represented a phase of rehabilitation, taken a stage further in the subsequent programme which exploitedthe economic benefitsof the recorded environmental change (seeBox 6.7). In addition, as part of the interim evaluations of the eastern and western Scotland programmes, project-level analyses were carried out to substitute for monitoring data, which had proved inadequate to fully assess environmental performance within the programmes (Clement, 1999b and 1999~). Broad conclusions from these evaluations were as follows:

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No projects with significant negative environmental impacts had been supported. Examples of good practice were identifiable in both programmes, but they were limitedin number. There was a considerable degree of underreporting, indicating a general lack of awareness but also revealingthat sound environmental practice is consistent with sustainable economic development. There had been a substantial number of missed opportunities.

A review of the application forms for these projects revealed that none had identified likely negative environmental impacts, and that the option to state 'not applicable' was frequently used inappropriately. Furthermore, a large number of applications had not indicated positive impacts, whereas others had exaggerated positive impacts, especiallyin relation to environmental skills. Even though these application forms were evaluated by the various AGs, there appeared to be no procedure in place to assess the accuracy of any environmental information provided in this manner. Amongst the two partnerships, there were different levels of comprehension, ability and commitment with regard to integrating environment and sustainable development, and partly as a consequence there was an unevendistribution of environmentally relevant projects across the programme priorities. PROGRESS IN

ENVIRONMENTAL INTEGRATION

In reviewingthe successive programming periods, three different orders of integration can be identifiedand used to construct an index (seeTable 6.4). In addition to illustrating relative stages in development based on current practice, the index could also serve as a means of categorizing degrees of progress in existing programmes and could inform the strategic phases of programme design, managementand evaluation. Table 6.4 Index of environmental integrationin European programmes First-Order Integration

Horizontal Externalconsultations or individual experts on othercommittees Limited influence

Second-Order Integration

Vertical Committee of environmental experts assessing projects Environment budget

Third-Order Integration

Strategic Internal environmental expertise Generating regional environmental competitiveness

122 ECONOMIC DEVELOPMENT AND ENVIRONMENTALGAIN First-order integration relates to the stage in which programmes treat environment as a horizontal issue - in practice often meaning that the environment receivesno explicit priority,but rather is assumed to feature as a component of other (economic)priorities. One characteristic of dealing with the environment in this manner is that external consultations carried out with relevant departments or agencies may meanthat time constraints severely limit the level and usefulness of this external input. Alternatively, individual environmental experts may participate in AGs, but again the degree of influence is limited. In recent years, the majority of SPDs have fallen into this category, although some still appear to be makingprogress in overcoming hurdles to environmental integration. For objective 2 programmes, the European Commission prefers the horizontal approach, also known as environmental mainstreaming. However, in practical terms it corresponds to the weakest of the three orders, especially if used in isolation. While it is very likely to be the most politically acceptableoption and less liable to generate opposition, it may bebest regarded as a first step towards the secondand third orders. Second-order integration relates to the higher profile treatment of environment as a vertical component of the regional strategy. Vertical integration means that the environmental objectives are expressed as a separate priority of the programme, given more status, and this facilitates more effective monitoring. Alsoat this level, a committee ofenvironmental experts might work as a programme advisory group making recommendations on project selection. Thereis also scope for a direct link to a specific environmental budget, which can assist both implementation and project accountability. A disadvantage of the verticalapproach is that partners tend to assume that environmental issues relate only to projects within the environment priority - consequently, the benefits of horizontal integration may be lost. Only a small number of objective 2 programmes have characteristics of vertical integration. In comparison, programmes for Structural Funds former objectives 1 and 5b covering less-developed regions and rural areas were more likely to acknowledgethe importance, orpotential importance, of the environment for the regional economy. In those cases,environment generally gained or retained vertical status, and in some instances was merged with themes such as community development or tourism and regional distinctiveness. The scenarioof third-order integration would comprise the adoption of a strategic approach to exploiting environmental issues aimedat a competitive purpose. Bringing together both horizontal and vertical integration would ensure that environment forms a fundamental element of the economic development strategy. This would signify a substantial change in the perception and role of environment, overseen by internal environmental

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expertise employed byprogramme partnerships during the three phasesof design, implementation and evaluation. Utilizing both qualitative and quantitative targets for environmental gain, this strategicprogramme orientation would set environmental excellence as a central objective, potentially giving rise to environmental competitiveness. Inthe most recentround of programmes, this third level of integration was principally aspirational. A large number of programmes appeared to be movingtowards this stage, but none progressed sufficiently to generate regionalenvironmental competitiveness.

CONCLUSIONS Over the ten years from 1989 to 1999, continual progress was made in environmental integration in EU regional programmes. Froma slow and in some cases reluctant beginning, a large number of European partnerships improved their response to environmental factors with each successive programming period. In the first round, the prospect of integrating environmental issues within economic development strategies represented a major step for participating authorities. In the best examples,partnerships succeeded in making the transformation from regarding environmental features as restricted to obvious physical measures- such as tree planting, sitesand premises, and derelict land reclamation - to perceive them in more broad-based terms encompassing energy efficiency, environmentally friendly materials and transport modes. However, in other cases, some of the apparent successes were subsequently diminished in significance, as the administering authorities again favoured economic developmentin programme implementation. During the second programming period, thereanwas incremental refinement of approaches and an emergence of innovative ideas. Even though integration was still not being fully achieved, individual regions were successful in developing particular themes or project types, and some were used as examples of good practice from which other partnerships could learn. In other programmes, environmentwas still moreevident in descriptive text and environmental chapters, rather than finding expression in the detail and implementation of priorities and measures. Furthermore,although projects that werefunded were often entirelyin line with sustainable development, the assessment criteria ensure to that these projects were recognized and rewarded for their contribution have frequently been lacking. Interestingly, partnerships with limited flexibility imposed by institutional constraints still found means to support environmental objectives. Rather than requiring revisions of regulations, thesebarriers were overcome through recognizing that a different approach to integration was possible: working within the existing system. Other experiences in implementation

124 ECONOMIC DEVELOPMENT AND ENVIRONMENTALGAIN resulted in environmental factors receiving more attention in the current programmes, with the regular participation of environmental authorities in a formal capacity. Nevertheless, opportunities for environmental gain are still being missed, ranging from the initiation of elementary integration to the more sophisticated capacity-building that can raise performance to attain levels of outstanding practice that is capable of wider replication. In summary, recent activityshows considerable promise- generally attributed to specific regions, rather than countries - but further modifications to practice are required to allow faster environmental progress.

7 A METHODOLOGY FOR REALIZING ENVIRONMENTAL GAIN

INTRODUCTION Integrating environment within economic development presents a current challenge for programme managers, and it is evident from the previous chapter that partnerships across Europe have responded with different approaches and levels of success. This methodologychapter focuses principally on EU Structural Funds programmes, but it is written in a style that makes it applicable to other forms of regional economic programme, both within and outside of Europe. In essence, the lessons learned from Structural Funds implementation may be generalized to a range of national contexts for devising,managing or evaluating regional programmes. Drawing upon elements of existing good practice and introducing ideas for future practice, thischapter suggests methods of working to incorporate environmental gain. The task isapproached by first lookingat preliminary considerations, and then dividing the coverage into the three phases of programme design, managementand evaluation (see Table 7.1).To a certain extent, the factors raised correspond with the issues addressed in ex-ante, interim and ex-post assessments. The categories used are not mutually exclusive, but this sequential treatment is considered to offer the most useful means of analysis.

PRELIMINARY CONSIDERATIONS Development Interpretation At the outset, programme managers, teams or partnerships must agree on the interpretation of development that drives their economic programme. Historically, the economic dimension has been paramount in the different

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Table 7.1 Environmental considerationsby stage of programme development Programme Phase

Environmental Input

Preliminary Considerations

a

a a

Design Programme

a a 8

a

a

Programme Management

a a a a a

Programme Evaluation

a

a

Development interpretation Preferred form of integration Role of environmental authorities Environmental profile Environmental indicators Environmental targets Environmental impact assessment Environmental strategy Measure-specific guidance Application forms Advisory groups Project selection Award discretion Programme performance Project performance

generations of programmes, but the focus has now changed to encompass a broader purpose. In theory, if not yet in practice, economic programmes should be formulated as sustainable development programmes. This logic brings together the three elements of sustainability as equally significant inputs. Literally, this corresponds to supporting 'development that is sustainable', and it is not equivalent to converting economic programmes into environmental development programmes. In practice, the scope for misinterpretation seems substantial, given the reactions by economic planners from a range of countries. Interestingly, in France, the terminology maylend itself more to cautious acceptance. As the term 'development durable' places the adjective second and seemingly retainsdevelopment as the principal theme,this may appear more reassuring in that the programme seems primarily to seek development, rather than simply to advance environmental protection under another guise. As illustrated in Chapter 2, the common goal of sustainable development is the balanced advancement of economic, social and environmental development, with attention to all three factors in programmes in all three areas. Unlessthis is clarified and agreed at the beginningof the process, the environmental component willnot achieve the desired impacts or benefits. Accordingly, programme teams need to agree initially on a working definition of sustainable development relating to the regional context, and this definition would subsequently influence the plan of action and act as a basis for integrating environmental principlesinto each of the programme phases.

A METHODOLOGY FOR REALIZING ENVIRONMENTALGAIN 127

Preferred Form of Integration A second decision facing programme teams is the form of environmental integration to employ. Basically, what role is tobe attributed to environment within the programme? As illustrated in Table 6.4, three potential forms of integration are the horizontal, the vertical and the strategic.If environment is tobe treated as a horizontal theme, then priorities and measures must be drawn up inways that facilitate integration, with mainstream economic projects contributing towards wider environmental goals. For example, new-build projects should maximize opportunities for energy efficiency, contribute, through siting, towards goals such as reducing the need for road transport, and maximize habitat protection, wherever possible. As a theoretical approach,the horizontal option is attractive. Itsuggests that each level of decision-making will considerand integrate environmental principles into the planning process, and that entire programmes from strategic objectives to individual measures could readily incorporate environmental improvement. In reality, the degree of integration varies in accordance with regional priorities, the specialisms of programme teams and the quality of submitted projects, amongst other factors. The main disadvantage of the horizontal scenario is that the implicit inclusion of the environment in all areas hinders its integration as an explicit strategic objective in programme planning. Consequently, the focus on environment within the programming document may not be sufficiently transparent and could be open to the danger of poor implementation. This also makes the environmental evaluation of the programme more difficult. A further disadvantage in this approach is that the programme could still be finalized and approved without being subjected toany rigorous analysisof its environmental impact or sustainability. In comparison, opting for verticalintegration - with a separate environment priority - has the advantage of allowing a high degree of visibility for environment during programme formulation, and the direct expectation that subsequent implementation and monitoring responsibilities would involve statutory environmental authorities. In some cases, as a compromise, programmes have contained a separate environment measure within one of the priorities. Both of these approaches have inherent disadvantages, as programme decision-makers may perceive environment as accommodated within a discrete budget, priority or measure - so isolating it - and the link between environment and economic development becomes weakened instead of strengthened. An additional consequence of creating a separate environmental measure or priority is that it may reduce the requirement for these projects to competein terms of economic and social impact. Environmental projects should be valued because they areseen to address core programme issues -

128 ECONOMICDEVELOPMENTAND ENVIRONMENTALGAIN

such as creating the preconditions for growth and job creation - as well as improving the physicalenvironment. The comprehensiveoption is to attempt strategic integration. Essentially, this involves combining the advantages of horizontal and vertical, while avoiding the disadvantages. The horizontal aspect would promote the sustainability philosophy in all aspects of programme design and implementation, without allowing it to become isolated, whereas the vertical attributes would give status, significance and day-to-day visibility to environmental issues. Whereasthis might be seenas the ideal combination, finding the appropriate balance, in practice, will requirea careful identification of boundaries and responsibilities and the need for flexibility, as regional circumstances change over time.

Role of Environmental Authorities To secure environmental integration through whichever form is adopted, environmental authorities must be involved and consulted at all stages in programme development and implementation. The national environment ministries in each country will generally have responsibility for overseeing environmental integration within economic programmes, but the day-today administration may be delegated to relevant regional and local agencies. The environmental authorities may participate initially through advisory groups, but it is important to maintain environmental input into the programmme throughout the development process. As this chapter indicates, a range of specialist environmental inputs continues to be required during the differentprogramme phases, particularly in the following activities: preparing the regional environmental baseline and profile; defining environmental objectives and targets; identifying appropriate environmental indicators to measure the programme’s environmental impact; advising on project appraisal and selection criteria; providing measure-specific guidance for applicants on environmentally sustainable projects; and participating in the monitoring and evaluation of programme environmental performance.

PROGRAMME DESIGN Environmental Profile Programmes must provide information on regional environmental conditions. Decisions should be taken onthe broad categories for inclusion, such

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GAIN 129

as land-use, natural resources, biodiversity, energy, waste, transport, heritage features and the built environment, and industrial environmental performance. The level of detail should allow a comprehensive picture of regional environmental strengths and weaknesses. Environmental profiles should act as a starting point for identifying key issues for the region and for projects to be funded, and they should also provide baseline data against which subsequent programme performance can be assessed. Bearing in mind the business development focus of economic programmes, preparation of an environmental profile should work through a series of steps, as follows: Prepare a description and informed analysis of regional conditions, including trends and pressures upon the natural environment, supplemented by mapsandquantitative information. The quantitative information should relate to a range of issues such as waste statistics, areas of conservation importance, and employment in environmental sectors. Environmental databases and local and regional authority development plans may be directly useful in this respect. Frame the data analysis in terms of the programme aims, for example by highlightingthe direct link between environmental factors and social and economic investment. These links are important for project justification and in relating projects to the wider context, including business issues such as material and energy use, waste generation, and their potential contribution to sustainable development. The environmental impact of previous programmes would also be analysed here. Where linkages are identified, the profile should identify actions required to achieve environmental gain, as well as minimizing negative impacts. If they are to be used constructively, these actions must be measurable at project level. In accordance with the categorization of environmental problems, identify a hierarchy of environmental indicators to monitor the impact of programme measures. From the programme design stage, associations between environmental problems, indicatorsand measures can be used to direct the form and scale of projects to meet programme objectives.

Environmental Indicators Within the environmental profile, general and regional-specific indicators should be identified.In practice, the combinationof indicators chosen often represents proxies for those would that be preferred for the region as a whole, because mostnatural heritage indicatorsmust be monitored over decades to provide reliable data on measurable change. Nonetheless, programmes should support the developmentof structures that allow long-term monitoring and reporting and the more rigorous definition of future baselines.

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In Structural Funds programmes, the selection of environmental indicators has met with limited success. This is partly because of macro-micro level incompatibilities, namely the difficulty of translating programme indicators which address regional and global issues into project monitoring indicators. Another problem has been encountered in the conventional methods of collecting information, for example through checklists of environmental questions. The range of indicators necessary for monitoring the programme’s environmental impact could be drawn or developed from the following examples (DOE,1996; OECD, 1998):

Land Use: comprising vacantand derelict land, land take, the balance of brownfield and greenfield land use, woodland cover, forestry management, agricultural land quality and coverage, minerals extraction and aggregates output, and land reclamation. Natural Resources: such as air quality and soil quality, freshwater and drinking water quality and supply, available resourceand rates of use by purpose, and bathing waters meeting EU standards. Biodiversity: including key habitats, plant diversity, species at risk and wildlife distributions, protected areas- noting levels of designation and extent of coverage - wildlife corridors and conservation priorities. Energy: relating to energy consumption totals with analysis by sector (residential, commercial, industrial, transport, etc), energy-generation capacity and output, including the proportion of renewables, trends in emissions, local atmosphericpollution and energy efficiency. Waste: including waste arising by volume, quality and sector, waste disposal percentages to landfill, incineration, recycling and reuse/recovery, and the provision of waste-treatment facilities and sewerage infrastructure; Transportation:covering trends in car ownership and usage, publictransport provision and usage, the distribution between modes of transport, efficiency in the transport mix, and emissions. HeritageFeatures andthe Built Environment: including the historic heritage, sites of acknowledged value and cultural distinctiveness, countryside, topography and vegetation, landscape features, and coastline, quality and management. Industrial Environmental Performance: identifying environmental-sector employment, companies with environmental management accreditation, environmental business clubs, the provision of advice and environmental education and training. The availabilityand reliability of data always present problemsat this stage, and it may not be possible to extendthe coverage as broadly as the above

A METHODOLOGY FOR REALIZING ENVIRONMENTALGAIN 131 indicators would suggest. As an alternative, the task could be approached in a more practical manner, seeking more easily quantifiable results and focusing in on data known to be available. For example,if this were to relate to biodiversity,land use and the built environment, the following questions would have to be addressed. For biodiversity, how many hectares of semi-natural habitat have been enhanced, safeguarded or damaged? In terms of land use, how many hectares of vacant or derelictland have been improved (including soft landscaping)? For the built environment, have vacant or underused premises been utilized, or how many buildings have beenrenovated? These are relatively straightforward to collect and aggregate to provide an overview of programme impact. They also have the advantage of being directly attributable to projects funded, and could serve as the basis for establishing further subsidiary indicators. Another option would be to usea top-down approach in a form of issue auditing, following the progress of issues fromprogramme design through to project implementation. This would involve identifying a method to tackle the issueand then deriving project-specific indicators (see examplein Box 7.1).

Environmental Targets To steer theprogramme in the direction of environmental change, clearand measurable environmental targets should be set, linked to a hierarchy of objectives and goals. BOX

7.1 ISSUEAUDITING WITHIN PROGRAMMES

Issue Pollutionreduction/improvementsinresourceuse Method Promotionofenvironmentalmanagementinbusiness Potential indicators Number of environmental management audits carried out in SMEs Recorded savings from waste minimization initiatives Numberorproportionofsupported businesses adoptingaformal environmental management policy or EMS Source: Faulk and Clement, 1998

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Whenever feasible,priorities and measures should set output targets for value added to the environment from both mainstream and environmental projects, encompassingboth qualitative and quantitative dimensions. They should be qualitative in the sense of defining an aspiration - for example, creating a successful and competitive environmental sector - and they should be quantitative in the senseof establishing numericaltargets against which both the activity and outcomes of supported projects could be statistically measured. Examples of priority and measure-level environmental targets would include the following: the amount of derelict land to be reclaimed; the number of people to be trained in environmental techniques; the number of companies to be certified with environmental management standards such as the eco-managementand audit scheme (EMAS); levels of emissions reductions; the number of training courses provided for environmental managers; and the associated number and market share of new SMEs appearing in the environmental services sector.

Environmental Impact Assessment Rather than state thatminimum impact or no environmental impact will follow from programme implementation, programmes should be oriented towards making a deliberate impact - ideally a measurable, positive environmental impact - which relates to clearly specified targets for environmental change. Once this expectation is generated, regional programmes will more readily integrate the complementary objectives of economic developmentand environmental improvement. However, techniques forestimating impacts can beused to identifyboth positive and negative attributes, and they may be restricted to qualitative rather than quantitative measurements. A number of regional programmes in Europe incorporate matrices showing possible environmental impact by issue, set against the different priorities and measures. These assessments have necessarily been carried out without knowledge of the detailed projectsthat will subsequently come forward. Consequently, impactsare uncertain, as is the reliability of a matrix used in this fashion. Nevertheless, useful guidance for generating positive impacts can be derived, and this information can profile the specific types of projects to beencouraged. While construction projects have obvious potential to impact on the physical environment, other projects supported under business development measures could have extensive indirect effects. The scale of impact

A METHODOLOGY FOR REALIZING ENVIRONMENTALGAIN 133 will vary,depending upon the types of businesses involved. Indirect impacts could require considerationof issues such as the demand for raw materials, the need for expansionof energy-generation facilities, or the choice of transport modes. In terms of directing and justifying environmental impactin the context of economic development, the notion of value for impact could be used to explore themessuch as links tojob creation, professionaltraining and attention to local labour-market requirements. Given that available funding is limited, it is important to consider how programmes can achieve the most effective form of impact. For example, programme teams may choose to assess whether financing energy-efficient buildings would be more advantageous in terms of end results than developing an SME environmental initiative.

Environmental Strategy In some instances, environmentalintegration may be best promoted through the early preparation of an environmental strategy. This could serve to identify parameters of programme relevance, and highlight the main issues for consideration and the various options for their implementation. As a preliminary discussion document, it could resolve or clarify uncertainties surrounding issues such as whether to create a separate environmental priority or measure, the advantages and disadvantages of a dedicated environmental budget, and how to securethe most effective environmental impact. Environmental targets based on the profile’s findings could also be devised within such a strategy; a form of strategic appraisal then could be used both to identify project types or project characteristics considered most appropriate for reaching thesetargets through programme implementation. An integrated economy-environment SWOT analysis (see Chapter 5) may fit wellinto this phase of identifying strategicenvironmental considerations. Following production of the environmental profile,it could serveas the next step in highlighting how positive interactions could be exploited in this way orienting the programme towards environmental gain - and how possible negative interactions could be avoided.

PROGRAMME MANAGEMENT Measure-Specific Guidance To assist project applicants and encourage appropriate forms of development applications, measure-specific environmental guidance could beused to indicate both the scope toaddress environmental issues and the form of projects bestsuited to realize this potential. If the guidance also containeda

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statement to the effectthat projects which demonstrate an effort to embrace environmental issues would be considered favourably, this might be effective in stimulating new forms of projects. Environmental guidance of this nature has already been developed in the UK. Prepared for the eastern Scotland programme, the guidance provides information on sustainable development and environmental legislation, followed by detailed environmental guidance for each of the programme measures (Douglas and Keller, 1997). This involved working through each of the four priorities, in this case relating to SMEs, tourism, locally based initiatives, and technology and innovation. The exercise revealed that the format has considerable potential to draw attention to possible environmental benefits from a wide range of project types that would not otherwise be apparent. An example of the approach used in the guidance is represented in Box 7.2. It is drawn from the tourism priority, and is for a measure offering support for SMEs in the tourism and cultural industries.

Application Forms Project application forms can have a very important role in programme management. Interms of environmental criteria, these formsshould require applicants to show that they have considered environmental impacts, detailing the results of any formal or informal impact evaluations. As these forms generally concentrateon the economic characteristicsof projects, one option to improve integration is to include an obligatory environmental checklist. Thiswould comprise a series of questions divided into environmentalbenefits and environmental costs:

Environmental benefits might include conserving or improving environmental assets such as habitats, wildlife and landscapes, or reducing energy orwater consumption, reducing areas of derelict land, reducing or treating pollution, oreducating and training people in environmental skills. Environmental costs might include impacts on, or loss of, high-quality agricultural land, areas of valued landscape, areas or speciesof wildlife importance, the water environment and waterside habitats, or the air environment. Checklists might also identify whether projects include measures and proposals for compensation or mitigation of any adverse environmental impacts. Even though environmental checklists have the potential to promote good practice, theyare often perceivedas operating on a voluntary, one-off and detached basis, rather than being integral to the programme as a whole.

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BOX

7.2 MEASURE-SPECIFIC GUIDANCE FOR S M E S IN TOURISM AND CULTURAL INDUSTRIES

Key Environmental lssues Preventincreasedvisitorpressure from adversely impacting on natural and cultural resources. Avoid inappropriate development of new tourist accommodation. Ensure that SMEs supported are aware of the environmental implications of their activities and incorporate measures t o improve their environmental performance. Combine locations and attractions t o offerpotentialfor increasing awareness of, and accessibility to, environmental resources for information and education.

Design for the Environment For new facilities, consider location in relation to sensitive environment a l resources (habitats, wildlife, landscapes, historic sites), t o arrangements for access, including availability of access by public transport, and to the capacity of local infrastructure (roads, water, sewerage, waste disposal). Environmental benefits maybe obtained through reusing existing buildings and generally helping t o renew and maintain the built environment. Projects thatbring historic buildings back into use through sensitive development proposals should be encouraged. The operation of any tourism businesshas environmental consequences through i t s use of resources and the production of waste. Support for SMEs should therefore incorporate the consideration of environmental issues within the promotion of good business management. The development of appropriate environmental management systems by SMEs should be encouraged.

Potential to lncrease Environmental Awareness Projects can explain t o visitors the complex links between landscape, history, wildlife and human occupation in an effective manner. Projects can link past and present themes to the future as an element in long-term sustainability.

Potential to Maximize Environmental Gain Enhance visitors' knowledgeandunderstandingofenvironmental resources and processes. Seek opportunities to reuse existing buildings and t o upgrade them and their surroundings. Createnew habitats or improvedegradedhabitats.

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Design buildings taking account of the character of the local area and using energy-efficient and resource-efficient designs and sustainable sources of materials. Landscape facilities with appropriate care for each location.

Management o f Adverse Impacts Control risks of water pollution and soil erosion. Locate buildings and other facilities in areas with fewest environmental constraints. Source: Douglas and Keller, 1997

To avoid this outcome,environmental questions should be placed amongst the standard economic justification,particularly the requirement to identify precisely how project applicants intend to monitor economic, social and environmental impact. By the time an application is completed and submitted, it should demonstrate a consideration of likely environmental impacts (both positive and negative), in this way directly assisting project scoring. It should also identify environmental indicators against which the project can be monitored, and which will beincluded as part of the informationsubmitted as the project progresses.

Advisory Groups Once applications are received, the assessment of projects is often carried out by specialistAGs - for example, basedon the themes of the programme priorities or through cross-priority groups adopting a broader perspective. Increasingly, thesevarious groups include environmental specialists in their membership to identifyand assess relevant impacts.In this format - which corresponds to first-order integration in Table 6.4 - the focus is principally on environmental protection, and the environment representatives have a statutory role to ensure legislative compliance. To create opportunities for environmental gain, the formation of a specialist committee or environment advisory group could involve environmental actors from local, regionaland national administrations, as well as corporate-sector individuals. Operating on a cross-priority basis, such a committee could increase the potential for environmental integration and generate a higher expectationthat environmental benefits should be drawn from programmes. In a further development of this scenario, the appointment of an environmental specialist to the programme executive would allow inhouse assessments of project proposals prior to applications being submitted. In

A METHODOLOGY FOR REALIZING ENVIRONMENTALGAIN 237 other words, before the AGs receive an application, informed discussions during the developmental stage would build in the greatest possible environmental gain, while supporting sustainable development and regional competitiveness. In terms of the indexin Table 6.4, t h s would correspond to strategic integration,a characteristic of the third phase.

Project Selection Project selectionis based on a range of eligibility criteria, and this is often divided between core criteria relating to the programme level and subsidiary criteria specific toindividual measures. The latter category may be devisedin association with the measure-specific environmentalguidance described above. Onceapplications have fulfilledthe eligibility criteria,and assuming that the scale of funding requested exceedsthe budgetary allocation for a given measure, the opportunity exists to concentrate on projects that bring broader benefits. At this point, scoring methodologies can be applied to differentiate between project applications, allocating points on the basisof how well they satisfy thevarious criteria. Existing scoring systems often take some account of environmental issues, but it is not always clear what this means in practice orhow a numerical or qualitative score isawarded to projects. Itis important that these project assessment methods are both understandable to applicants and justifiable. If the division into core and subsidiary criteria is used, environmental factors should be addressed at both stages. Their inclusion in the generic core criteria would correspond to the phase of environmental protection, ensuring that projects meet all relevant legislative demands. Thereafter, their significance in the measure-specific criteria could be used to maximize environmental gain. If a points system is used for scoring, the number allocated to environment should be large enough to encourage good practice. Realistically, systems offering between 5 and 10 per cent of total points to environmental factors are very unlikely to makemuch difference, other than at the margin when resources are scarce; in effect, this can disadvantage good practice by those applicants who go beyond minimum environmental requirements. While it is usually possible to assess the effect a physical development project will have on the environment, it is more difficult to comment on business development or training projects, where impacts may comprise secondary or indirect consequences of project implementation. Nevertheless, most activitiesdo have some impact,and there is frequentlya more sustainable alternative.For example, a project using local raw materials is likely to have more benefit for the local economy than a similar project that imports raw materials fromoutside the region. The useof local materialswould also be environmentally beneficial in terms of reducing the need for transport.

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Box 7.3 IDENTIFYING ENVIRONMENTAL GAIN IN PROJECT APPLICATIONS Physical Projects Does the projecthavepositiveornegativedirectimpactson the environment through change of land use or construction works? If building land is required, is the site being reused (ie brownfield in preference to greenfield sites)? Has the project been sited to maximizeaccessby public transport, pedestrians and cyclists andto minimize road traffic generation? Areenergyefficiencyorwasteminimizationheuseofmaterials considered? Arelocalmaterialsbeingused?

Business Development/Community Development Projects Does the project have positive or negative impacts on the environment through the types of process being used?Is there evidence that more sustainable alternativesto processes being promoted have been considered and assessed? Does the project contributeto the more efficient use of raw materials, especially where these are non-renewable, renewable but overexploited or scarce? If materials with a high environmental impact are involved, is there evidencethat alternatives have been considered? Does the project reduce transport demand through the provision of local services or by import substitution of products or services previously brought in from outsidethe region?

Tourism Projects Does the project enhance the tourism experience through environmental improvements that would not otherwise take place? Does the project help businesses to promote the green image of the region through reducing waste?

Training Projects Does the project maximize the potential for education or training in environmental management (waste minimization and pollution prevention, habitat management, use of information technologyto minimize travel, etc)? Does the project add to the local knowledge base in ways that will encourage local development of environmental services in future? Source: Faulk and Clement, 1998

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139

In support of scoring systems, and to facilitate the integration of environment within project selection, thequestions listed in Box 7.3 serve as examples of how to identify and encourage positive environmental impact in applications. Reflecting themes conventionally used in EU Structural Funds programmes, the questions are grouped into four categories with different environmental impacts and characteristics, thoseof physical development, business and community development,tourism and training.

Award Discretion In keeping with the approach of directly encouraging improvements to existing practice, two options are available to decision-makers or regional partnershipswhenapproving project applications. In practice, these elements could be directly tied in to the scoring system, and their significance made clear to applicants. The first aspect involves the scope to make projects competefunding, for with differentiated rates of award related to levels of environmental achievement. Obviously, this requires a substantial external demand, a situation sometimes constrained bythe absence of cofinancing. Nevertheless,in favourable circumstances, adopting a position that rewards higher environmental scores with higher financial contributions could result in a marked improvement in environmental input. The second option is to impose environmental conditions upon approvals, in the same way that statutory planningpermission might be granted with conditions. Theimportant difference between the two systems is that whereas planning can usually only impose conditions that bring a project into line with existing legislation, economic programmes have the opportunity to set independent targets and to accept only environmental standards that exceed the legal minimum. This is justifiable in a circumstance where public money is being injected into projects as cofinancing, which contrasts with planning permissions or bank loans where the investment rests solelywith the developer. Examples of award conditions mightinclude that organizations beingsubsidized must have an environmental management systemin operation, orthat companies attending training courses or occupying new premises must be accredited with, or beworking towards, environmental standards certification.

PROGRAMME EVALUATION Environmental evaluations can involve a number of data collection methods. For instance, the process may combine the analysis of monitoring data, the administration of postal questionnaires, theconduct of face-to-face interviews and the facilitationof workshops to explorethe theme of environ-

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mental integration with key participants. In each case, the objective is to ascertain how the programme has performed environmentally,and particularly whether integration has been achieved andopportunities for environmental gain createdand realized. Theevaluation would be expected to produce reasoned conclusions on these questions, as well as recommendations on how to achieve greater progress. Depending on the stage at which an environmental evaluation is carried out - ex ante, interim or ex post - the assessment will focus principallyon programme content, process or impact, although inevitably all three factors interact at various points. The first sections in this chapter havealready examined the issues most relevant for the programme design stage; this final sectiongroups together processand impact questions to be addressed duringand after programme implementation. Again, the examples presented are not exhaustive, but representative of the approach to follow and the main themes to consider. The material is divided into programmelevel and project-level environmental performance.

Programme Performance Strategic questions relating to environmental performance at programme level are listedin Box 7.4. BOX

7.4 PROGRAMME-LEVEL ENVIRONMENTAL EVALUATION: KEY QUESTIONS

Has environment been integrated effectively during programme implementation? Do the variousprogrammecommitteesandadvisorygroupsattach appropriate significanceto environmental factors? Have the programme’s environmental goals or targets been met? Are the programme-level environmental indicators adequate? Has implementation taken the programme closer to (or further away from) the philosophy of environmental gain?

Has environment been integrated effectively during programme implementation? With regard to environmental integration, several questions can be considered. For example, has an environmental strategy been guiding programme implementation, allowingan appreciation of desired and likely cumulative impacts? Have environmental considerations been carried through from initial stages to end products? If environmental objectives have been identified at the outset, have they made it through to projects? Have there been barriers to environmental integration?

A METHODOLOGY FOR REALIZING ENVIRONMENTALGAIN 141 Environmental strategies within economic programmes are still uncommon, but there isan expectation that their use in Europe will increase in line with the EU commitment to sustainable development. However, the sustained presence or absence of environmental factors throughout programme implementation may be dependentuponadministrative choices. For example, if the environment has been treated as a horizontal objective, this canwork against its integration; in practice it may relegateit to a lower priority, and it may even become lost in the process. In addition, if a programme has excluded specific environmental measures, this may have marginalized certain agencies, now technically unable to bid for project funding. Accordingly, it is important to ascertain whether horizontal or vertical treatment has worked for or against integration. Perhaps unexpectedly, the launch of sustainable development has sometimes constrained environmental integration. In some cases, this has happened because of misunderstandings of the concept, assuming that sustainable development simply means greater environmental protection, so reducing its status and impact. In other instances, the assumption has been made that work is in progress to rethink fundamental approaches to programme implementation through sustainable development methodologies. Consequently, environmental factors have been given progressively less attention in anticipation of new holistic guidance appearing at a later stage.

Do the various programme committees and advisory groups attach appropriate significance to environmental factors? Amongst programme committees and advisory groups, there are often different levels of commitment with regard to integrating environment. What is the current perception or level of environmental awareness? Has this changed over time, and in which direction? To what extent have environmental authorities been actively involved? Have their opinions been influential, or has their impact been lessened by arguments favouring job creation? Is there still an assumption amongst the various programme participants that the statutory planning process protects the environment, thereby obviating the need for the programme to be concerned with these issues? If some members of the programme partnership are more active than others environmentally, this can result in anuneven distribution of environmentally relevant projects across the programme priorities. Alternatively, if no strategic attention is given to environmental issues, they mayappear in projects only if project applicants have raised them. In either of these scenarios, it may be beneficial toorganize a series of induction seminars or training exercises to ensure these factors are understood and given sufficient consideration.

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Have the programme’s environmental goalsor targets been met? Monitoring data should reveal how close programme implementation has cometo achieving the levels set for environmental goals or targets. Quantitative targets are easier to measure against, but additional qualitative observations may be necessary to clarify achievements. In some cases, targets may be exceeded, but the more common outcome isa partial fulfilment of expectations. In such cases, theevaluation should examine why this has happened, especially if targets in other areas have been met. Have the environmental targets proved to be unrealistic, or are there specifichurdles preventing their realization? What form of action would be required to improve the ability to realize environmental targets?

Are the programme-level environmental indicators adequate? With regard to environmental indicators at programme level, is the coverage sufficiently broad and does it accommodate bothfundamental information requirements and region-specific environmental characteristics? The chosenindicators must also be capable of adequately portraying environmental changethat is attributable to - or at least partially associated with - the activitiessupported by the regional programme.In this respect, it is important to anticipate the full range of impacts that may be generated during programme implementation. Can the indicators be measured with accuracy, and to what extent do they allow reliable comparabilitywith the baselinedata? Since the environmental profile formsthe basic reference point,the chosen indicatorsshould have beenprompted initially bythe results of the profile compilation- and a direct linkshould be retained tothat data source. Are the indicators appropriate for the timeframe within which results must be reported? This raisesquestions regarding feasibility and appropriateness of their choice. For short-term comparable results, the indicators may need to be modified substitute or indicators adopted.

Has implementation taken the programmecloser to (orfurther awayfiom) the philosophy of environmental gain? On considering the approximation to environmental gain, do the levels of awareness and procedures followed indicatethat additional environmental benefits are being deliveredin parallel with economic development? There should not only be a net environmental gain, but a clear trend towards increasing this expectation. This would be evident, for example, through partnership acknowledgement or discussion of issues such as the links between economy and environment, and how environmental strengths can lead to advantages in economic competitiveness. New information, either from research or regional economic monitoring, may also have led to a positive reorientation of programme priorities.

A METHODOLOGY FOR REALIZING ENVIRONMENTALGAIN 143 In addition, an analysis of budgetary commitments supporting environmental aspects within measures could reveal whether environmental expenditure met, exceeded or fellshort of expectations, and the evaluation should identify why this has happened. The creation or reinforcement of links toother strategic documents,such as those of other agencies or ministries with environmental competencies (regional or national), may also signify environmental gain. In evaluating these links, lines of inquiry might differentiate between coordination and integration, whether there is an impact on national regional and economic policies, and whether any impact extends across national boundaries - for example, acting as a catalyst for environmental cooperation or job creation.

Project Peqformance Examples of questions that might be addressed in project-level environmental evaluation are presented in Box 7.5. BOX

7.5 PROJECT-LEVELENVIRONMENTALEVALUATION: KEY QUESTIONS

Have projectapplicants received practical adviceandguidance on environmental integration? Does theproject assessmentprocess recognizeand rewardgood environmental content? Is environment well integrated within approvedprojects? Do the projects identify and report on feasible environmental indicators? What form of environmental impacts have the projects had?

Have project applicants received practical advice and guidance on environmental integration? With regard to advice and guidance on how to bring environmentalbenefits into project design, applicants should be encouraged to believe that such enhancement will improve a project’s prospects of approval. Accordingly, the evaluation should assess how applicants see the role of environment and the extent to which there has been a change in perception to understand sustainable development as a means of operation. Within the application process, how useful is the application form environmentally? This first task facingapplicants can immediately increase environmental awareness through introducing fundamental questions, supported by guidance material, based on a policy or strategy that spells out exactly what applicants should be aspiring towards. Similarly, doesthe

144 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN application documentation indicate the relative significance of environment amongst project-selection criteria? Such transparency improvesthe process element and raises expectations. If an environmental checklist is part of the application process, how useful is it in identifying (and quantifying) impacts? In existing practice, there is often little evidence that project applicants are either actively encouraged to consider environment or that checklists have been designed to increase understanding or demonstrate how project design can simultaneously benefit economyand environment.

Does the project assessment process recognize and reward good environmental content? Part of the process of project assessmentshould include satisfying environmental criteria. Evaluations should determine whether these criteria exist, and what weighting or influence they have on project selection. For projects with obvious environmental impacts, how strict has the partnership been with regard to the thoroughness and quality expected in environmental impact assessment? In scoring applications, have projects with positive environmental impacts been awarded additional points? And how are projects with no environmental content treated? In such cases, allocating medium scores (because there is no negative impact), rather than low scores (because there is no positive impact), represents a missed opportunity to reinforce thesustainable development philosophy. If environmental checklists support applications, how useful are they? As indicated in Chapter 6, applicants seldom identify likely negative environmental impacts of their projects, and some even omit to highlight certain positive impacts. Further undermining the process, programme administrators frequently have no formal mechanismin place to assessthe accuracy of any information provided in this manner. Consequently, these checklists are usually inadequate to assess projects environmentally, a circumstance that may be improved by integrating the checklist into the main application form. Is environment well

integrated within approved projects?

Evaluations should identify and assess examples of good practice when reviewing environmental integration in approved projects. As this is still a relatively new area, partnerships do not always recognize environmental strengths, and there may be instances of underreporting. Alternatively, opportunities for integration may have been missed, and close attention should be drawn to these losses. Where projectswith significant negative impacts are encountered, measures for mitigation or compensation should be assessed for their effectiveness. Are there barriers to environmental integration at project level? For example, if a programme has used a horizontal approach and excluded

A METHODOLOGY FOR REALIZlNG ENVIRONMENTALGAIN 245 specific environment-related measures, this may have suggested to applicants that environment has no real priority or status. As a result, projects may have given only brief coverage toenvironmental impacts, both positive and negative. Interviewswith project applicants can offerinsights on where it has proved most difficult to integrate environment, and so highlight lessons for future programme delivery. In addition to meeting or exceeding quantitative environmental targets, procedural elements of environmental gain can be identified in the spread of environmental issues across the programme priorities. For maximum effect, the environmental evaluation should highlight these successes, especially if they provide examples of imaginative or innovative integration. Beneficial linkages between programme impacts are also commendable, such as subsidizing energy efficiency amongst SMEs, but with a view to bringing immediate financial and competitive benefits to companies, as well as longer-term environmental and economic benefits for the region. To illustrate the range of possible approaches, Box 7.6 contains examples of environmental gain drawn from recent Structural Funds programmes, using the earlier fourfold categorization into physical development, business and community development,tourism and training.

Do the projects identijjt and rqort on feasible environmental indicators? In considering project-level environmental indicators, the evaluation stage should assess whether they reveal, for example, environmental change, behavioural change at firm level, orperhaps elements of improved environmental performancethat will have other benefits. In some cases, the absence of appropriate indicators may have resulted from a lack of expertise amongst applicants and programme committees, indicating a need for greater involvement of environmental authorities. In other cases, straightforward indicators could be devised to provide useful monitoring. For instance, SMEs benefiting from energy-efficiency cofinancing could provide time-series information on reduced energy costs, showing the positive impact on competitiveness or economic viability. Similar evidence could be used to demonstrate economic benefits of waste reduction or recycling initiatives, or the impact of training on companyenvironmental practices or environmental management accreditation. It is alsoimportant to consider the degree of complementarity between programme-level indicators and project-level indicators. Ideally, the project environmental indicators should act as building blocks for calculating programme environmental impact, but there is often considerable difficulty in relating the two dimensions. Programmes generally evolve incrementally rather than in accordance with a precise environmental strategy, and most have no equivalent of measure-specific environmental guidance to assist indicator selection.

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BOX

7.6 EVIDENCEOF ENVIRONMENTAL GAIN IN PROJECTS SUPPORTED BY EU STRUCTURAL FUNDS

Physical Projects Physical projects, such as construction or refurbishment of premises and access improvements, have generally made direct linkswith environmental protection. They conventionally cite newsoft landscaping and the upgrading of derelict land, and occasionally wetland conservation works, often accompanied by the submission of very thorough EIAs. As an additional benefit, a number of projects have demonstrateda partnership approach, involving several agencies,as well as public and private sectors. New-build projects have taken the opportunity to incorporate a wide range of benefits encompassing energy efficiency, maximum use of natural light, a facilities management strategy that would include waste recycling, and designs that minimize impact on existing trees and shrubbery, while providing additional soft landscaping.

Business DevelopmentlCommunity Development Projects Within business development, project benefits have included pollution reduction, energy savings, the recovery of derelict land, links with public transport in location decisions, using insulation above minimum standards, and initiating sustainability programmesfor SMEs. Examples have often demonstrated well-structured and comprehensive approaches to improving company performance and entering new markets, including local sourcing initiatives. In community development, positive attributes of redevelopment and community regeneration projects have included the reuse of buildings, direct links with public transport, energy efficiency, salvaged materials being used onsite for infill, provision of linked training in environmental skills, and evidence of a good partnership approach. From the perspective of sustainable development, pilot projects in establishing community transport integrated well with existing transport provision, but also contained a strong cohesion focus, sustaining local jobs andfacilitating attendancea t training courses.

Tourism Projects In thetourism sector, funded projects have included integrated networks of public visitor facilities and enhanced visitor management, involving the use of local materials, sustainable sourcing policies, minimization of transport requirements, and management regimes for woodland and vegetation. Other good examples comprised structural and environmental improvements to inland waterways, with associated EIAs, attention to protected landscapes and wildlife conservation, and regular consultation with environmental authorities. Further integrative projects related to the creation of cycleways,anticipatingpositiveenvironmentalimpacts, as well as an

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increase in tourism activity, benefiting SMEs and generating additional visitor expenditure.

Training Projects With regard to training, referencesto environmental impact have included labour market justification, drawing on statistical analyses of predicted national workforce requirements and identifying regional demand for environment-related skills and qualifications. Projects linkedto business training have acknowledgedthe need to integrate environmental factors, including the creation of an institute for vocational training in advanced environmental technology. Source: Clement, 1998,

1999a,

199913 and 1999c

Whatform of environmental impactshave the projectshad? The appraisal of environmental impacts of projects is closely linked to the adequacy of indicators and monitoring data. Considerations include whether projects have met their environmental objectives and targets, whether unexpected environmental impacts occurred, and how applicants interpreted and reported impacts. In terms of expenditure and value-forimpact, the evaluation should attempt to identify the extent of funding utilized in the environmental components of projects, as well as the associated environmental outcomes. However, it is often difficult to isolate environmental costs from overall project costs. Evaluations may choose to review the impacts of a sample of projects. In this case, it is important to selectboth environmental and 'non-environmental' projects. Increasingly, Europeanpartnerships are realizing that whereas environmental projectsare given careful assessment for their economic justification, economic projects should be assessed for their environmental justification. Such analyses may reveal potential for environmental damage, but also scope for long-term indirect benefits.

CONCLUSIONS This chapter has identified and structured a series of steps to be taken in integrating environment within economic programmes, categorized by four stages. The focus on preliminary considerations should resolve elements of programme direction, environmental integration, and the role to be given to environmental authorities. These represent fundamental issues for early agreement; the procedural factors then can be addressed within a clear framework. The exact combinationof direction, integration and participa-

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tion will vary with each partnership and its associated regional priorities, and this may condition or define expectations of outcomes. With regard to programme design, the initial step of constructing the environmental profile is instrumentalin highlighting environmental strengths and problems requiring attention. This should lead logically to identifying programme indicators, setting targets, and orientating the programmetowards deliberate and positive environmental impacts. Depending upon the composition of the regional partnership, the preparation of an environmental strategy may be useful to facilitate the integration of these key componentsinto programme design. Programme management corresponds to the stage of strategy implementation. This may be assisted by devising measure-specific environmental guidance for project sponsors,and the application form will also have significance both for how environment is perceived and for drawing out useful analysesof likely impactsat an early stage. Decisions on the membershipof advisory groups and the means used to assessand score projects are also very important factors in creating scope to realize environmental gain. Award discretion, in terms of differentiated rates or conditions on approvals, represents another means of encouraging environmental integration at project level. Lastly, environmental evaluation can focus on both programme performance and project performance. Key questions for each level of analysis should provide compatible and comparable data, with common elements including the degree of effective integration, theappropriateness of indicators, project selection and assessment procedures, and success in meeting environmental targets. For the different stages of ex-ante, interim and expost evaluation, the focus will shift between programme content, process and impact.

TOWARDS REGIONAL ENVIRONMENTAL COMPETITIVENESS

INTRODUCTION This book has explored the theme of economic development and environment through the instrument of regional economic programmes. The focus has been on the European context, with specific examples drawn from the changing environmental orientation of the EU Structural Funds. With the previous chapters culminating in the elaboration of a methodology for realizing environmental gain, this final chapter considers how this technique may contribute to developing outstanding qualities of regional environmental competitiveness. For many people, competitiveness often has negative associations, especially when it is assumed to be driving economic sectors, regional economies and individual companies to find ways around legislation or to lower standards in order to compete more effectively. This is the concern of observers such as Braun (1995) who, in common with many others, casts doubt on 'the currently confessed faithin the almost miraculously beneficial powers of competition' and the tendency to regard competition as a worthy end in itself. Thischapter has a different purpose for competitiveness. The objective hereis to exploitthe instinct for competitiveness to as acta positive force to move economies towards and beyond environmental gain. In this form, competition becomes a catalyst for environmental progress, rather than environment being degraded in the drive to sustain competition. In terms of structure, the chapter begins by summarizing the key points that have emerged throughout the book. It then reviews aspects of the conventional argument that a direct link exists between environmental regulation and industrial competitiveness. Moving outward from this perspective, a different scenario is suggested, where environmental gain can be used as a means of creating environmental competitiveness at the regional level, adding a fourth category beyond the proactive phase. The

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focus is again on the potential inherent in modifying economic programmes. The final section concludes the book, with a brief consideration of the ultimate goalof regional environmental competitiveness.

KEYPOINTS It is a common perception and reality that economic development has for some time been eroding environmental quality. This trend has continued alongside increasing awareness of the negative relationship that exists between economic growth and environmental impact. Various publications and expert reports have highlightedand categorized these impacts, suggesting not only that a new development path is essential, but also that if existing rates of growth continue, the physical limits of the planet will be reached within 100 years. Irrespectiveof this advice, the past 20 years have seen continued growth, accompanied by increased losses in key environmental features from agricultural land and forests through to habitats and biodiversity. Environmental improvements during this period have been heavily outweighed by substantial increases in emissions, wasteproduction and the accumulation of pollutants. Even the promise offered through technological progress, which was anticipated to reduce theburden on the environment, has been seen, instead, to increase the pace of population growth and prompt an even greater negative environmental impact. Actions to meet this urgent challenge and manage the problem have been occurring for over a quarter of a century, with international discussion focused on meansof stopping or even reversing thetrend. These responses have included major conferencesand reports, international strategies, and the formationof new institutions. From 1972 to 1992, the dates of the respective UN Conferences on the Human Environment and Environment and Development, a very substantial momentum and multidisciplinary initiative was created, followed by post-Rio tasks such as the fulfilmentof Agenda 21. However, rather than this concerted effort producing a breakthrough in implementing sustainable development, the result has more often comprised an indicator of the enormous complexity of the task that still lies ahead, revealing the myriad of subtle distinctions that impede the global transition to environmentally friendlyand equitable economic development. Within the European Union,a wide range of policy responseshas been developed over time to strengthen the management of the environmental problems resulting from economic development. From the early 1970s, environmental action programmes have stimulated new ideas and policy initiatives, a number of which have been enacted as legislation, both at EU level and in the Member States. The treaties agreed at Maastricht and Amsterdam have progressively raised the status of environmental integration within EU activities, andthe new institution of the European

TOWARDSREGIONAL ENVIRONMENTALCOMPETITIVENESS 151 Environment Agency has initiated the data-gathering necessary to monitor environmental change in the EU territories and beyond, with a series of periodic assessments of the state of the environment. Other initiatives include the European Spatial Development Perspective,the draft directive on strategic environmental assessment, and a variety of environmental subsidies available at both EU and Member State level for incoming foreign investment as well as existing investors. Regional economic programmes have been highlighted in this bookas a policy instrument that could be modified to derive greater environmental benefits. Economic programmes have long been identified as a source of negative environmental impact, and in the context of EU regional policy, there has been a history of placing employment creation above environment to the extent of taking no account of physical impacts. In the Structural Funds, designed to balance out economic and social disadvantage across the Member States, regionalprogrammes have been slow to takeon board the regulatory requirements for environmental appraisal. However, in the programming periods since 1989, progressive improvements in environmental integration have been identified in programmes prepared for declining urban and industrial regions. Whereas the earlier programmes made little or no attempt to incorporate an environmental dimension, current programmes from across the Member States contain forwardlooking environmental aims and objectives and examples of sustainable development thinking. In the past three years,various attempts have been made to improve the environmental performance of Structural Funds programmes. Rather than relying solely on regulations, which are associated more with minimum (and reluctant) compliance, the European Commission has sought to persuade programme partnerships to recognize the inherent advantages of horizontal integration, even suggesting development of a regional environmental sector. Newregulations for the Structural Funds are now broadening the scope for environmental integration in programme implementation and ex-post evaluation.In addition, a series of handbooks has addressed themes such as using strategic assessment at the ex-ante stage,restructuring regions towards sustainable development, identifying environmental strengths, weaknesses, opportunities and threats, and assessing progress towards targeted development paths. The decision tooland methodology elaborated in this book focuses on environmental gain. Theapproach distinguishes between levels of environmental integration and identifies directly practical opportunities to utilize the momentum of economic developmentin order to improve environmental conditions in a measurable fashon. In comparison tothe broad objective of sustainable development, environmental gainhas a more restricted focus and a shorter-term implementation phase. Its practicalnature means that it

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can inform decision-making choices and contribute effectively tofurthering environmental integration. In regional programmes,environmental gain can assistthe three phases of programme design, management and evaluation. Using this method can clarify key issues such as the development model to be pursued, the most effective formof environmental integration, and the status of environmental authorities throughout the programming process. Thereafter, environmental gain could be used in programme formulation; in structuring the environmental profile, setting targets and assessing impacts; andin programme management, determining the form of guidance for maximum integration in projects, and assisting advisory groups in project selection and award decision-making. Lastly, it can be used to steer the practical assessment of programme and project environmental performance.

ENVIRONMENTAL REGULATION AND INDUSTRIAL COMPETITIVENESS As a final theme for this book, the question of competitiveness offers some opportunity to takethe analysis further. The most commonly debated means of using the environment to generateindustrial competitiveness isthrough strict regulation. InChapter 4, the discussion of inward investment considered environmental regulation as one of a range of factors that influence both a company’s choice of location and the relative competitiveness between countries and regions. However, in studies carried out to clarify this relationship,environmental regulation has been variouslyportrayed as a positive force for innovation, as a constraint on economic growth, and as having no significant impacton competitiveness. Representing the positive view, the ’Porter hypothesis’ is the most optimistic theoryof regulatory impact:

The relationship between environmental goals and industrial competitiveness has normally been thought of as involving a trade-of between social for benefits and private costs. The issue was how to balance society’s desire environmental protection with the economic burden on industry. Framed this way, environmental improvement becomes a kind of arm-wrestling match. One side pushes for tougher standards; the other tries tobeat the standards back. Our central message is that the environment-competitiveness debate has been framed incorrectly (Porter and van der Linde, 1995, €397). Under the prevailing ’static view’of environmental regulation, technology, products and processes are all established, and firms are assumed to have already made their cost-minimizing choices. The introduction of environ-

TOWARDS REGIONAL ENVIRONMENTALCOMPETITIVENESS 153 mental regulation would then raise costs and restrict the market share of domestic companies on global markets. In comparison, the more progressive view of environmental regulation claims that the paradigm defining competitiveness has been shifting, especiallyin the last 25 years, away from the static model toa new dynamic scenario basedon innovation. Thisstatement is supported by research indicating that internationally competitive companies are not those with the cheapest inputs or the largest scale, but those with the capacity to improve and innovate continually (Porter and van der Linde, 1995, p98). In the new paradigm, it is argued that properly designed environmental standards can triggerinnovation that may partially or morethan fully offset the costs of regulatory compliance. The synergy between the practical reduction of pollution and the improvement of productivity with which resources are used means that firms would actually benefit from well-crafted environmental regulations, especiallyif they are more stringent or imposed earlier than those faced by competitors in other countries. Whereas laxregulation can be handled incrementally - allowing innovations to be avoided in favour of secondary solutions - stringent regulation focuses greater attention by companies on discharges and emissions, and compliance requires more fundamental solutions. In essence, the argument is that by stimulating innovation, strict environmental regulation can enhance competitiveness. With regard to designing appropriate environmental regulation to encourage innovation, three principles are considered essential. Firstly, maximum opportunity should be allowed for innovation, leaving the approach to innovation to be determined by industry, not by the standardsetting agency. Secondly,rather than identify with any particular technology, regulations should foster continuous improvement. Thirdly, the regulatory process should minimize uncertainty at every stage. Against these criteria, conventional regulatory regimes often deter innovative solutions or even make it impossible for them to emerge. The three necessary subsequent steps are to constructenvironmental regulations as goals that can be metin flexible ways,to encourage innovation to reachand exceed those goals,and to administer the system in a coordinated way. This win-win scenariohas been supported in other empiricalstudies. In an example from the US chemicals sector,the response byDu Pont to regulatory change is considered to have brought enhanced profits, preempted further and potentially stricter controls by the regulators, and given the company a 'first mover' advantage (Howes et al, 1997, p34). Inother cases, environmental management responses encompassing minor changes in technologies and organizational practices, as well as major innovations in products and process, havegenerated substantial cost savings in companies (Gouldson and Murphy 1998, p23). However, t h s positive perspectivehas also been widely challenged:

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Ifthe Porter hypothesis was true, then why do we seefirmslobbying against environmental protection programs insteadof lobbying for tighter environmental regulation? Porter and van der Linde cite dozens of examples which allegedly buttress their case. But ’examplevism’ is no substitute for systematic empirical evidence (Neumayer, 1998, p39). Other studies quoting empirical researchhave found no systematic support for this hypothesis, and they have also cited cases in which companies facing environmental regulation have experienced increased costs and reduced profits and have even beenpushed over the brink into bankruptcy (Palmer et al, 1995; Jaffe et al, 1995).Additional research for the World Bank has suggested that environmental regulation may still beimpacting negatively on pollution-intensive industry, resulting in its disproportionate growth in poorer countries:

Stricterregulation of pollution-intensiveproductioninthe OECD countries has led to significant locational displacement, with consequent acceleration of industrial pollution intensity in developing countries (Lucas et al, 1992, p80). Furthermore, in a study of Nordic companies established precisely to test the Porter hypothesis, the evidence was clear that strict regulation had disadvantaged those firms (Brannlund et al, 1996). A third category of studies attaches much less significance to the potential impactof environmental regulation.For example,the relative stringency or laxity of environmental standards has been described as having little or no influence on the general competitiveness of countries or on their trade balances. %s conclusion was based on empirical researchinto the relationship between the costs of compliance, environmental regulations and international trade patterns. Basically, environmental compliance does not represent a large share of overall costs to industry, and in most sectors it accounts for only between 1 and 2 per cent of total costs or turnover (Stevens, 1993). In comparison, Barker and Kohler state that the use of environmental policy instruments such as carbon taxes neither improves nor diminishes international competitiveness. As long as the operational conditions are adhered to, including recycling revenues so as to reduce labour costs in the same region or country, then the tax loss would be offset by gains in price competitiveness and market share of employment-intensive sectors (Barker and Kohler, 1998, p5). From another perspective, there are indications that the practicality of enacting environmental regulations may have reduced their attractiveness for governments:

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In the early years, environmental laws and implementing directives were relatively easy to enact in the OECD countries which were environment conscious. But this feature has disappeared over the years in the face of contentious and time-consuming parliamentary debates over proposed legislation, and the expanding useof the courts by opponentsof regulation (Long, 1997, p14). Research into regulatory impactappears to be both contradictory and inconclusive, suggesting that it would be more advantageous to pursue an alternative, more transparent and less costly means of promoting competitiveness. At the regional level, it may be possible to develop another approach based on environment, but one with a broader scope than regulation, which in practice forms only one component of a more complex framework.

ENVIRONMENTAL GAINAND REGIONAL ENVIRONMENTAL COMPETITIVENESS Within the EU, the number of published documents that encourage a link between competitivenessand environmentalprotection seems to be increasing. The White Paper on growth, competitiveness and employment aspires towards competitiveness through a development model that would reverse the negative relationship between growth and pollution; the Amsterdam Treaty seeks a high degree of competitiveness as well as a high level of environmental protection; and the ESDP aims to raise performance to reach the optimum level of competitiveness for Europe. With regard to regional economic programmes, similar goals are articulated in the European Commission guidance on horizontal environmental integration, in the new guidance for the Cohesion Fund, and in all three Structural Funds environmental integration handbooks prepared by ERM and ECOTEC. Making Europe’s regions not only economically balanced and ecologically stable,but also competitive, is clearly a major issue forthe European Commission. Rather than subscribe to an approach such as regulation that coerces high environmental standards, a policy of encouraging environmentalexcellence may ultimately prove more productive and cohesive. The idea of regional environmental competitiveness introduced here takesa broad view of the opportunities, catalysts and constraints active in the development process. Outcomes are also interpreted broadly - beyond the frame of economic competitiveness - to generate wide-ranging positive economic, social and environmental change and associated cooperationand cohesion. Accordingly, the perspective is one of strong integration, in which regional development programmes are firmly basedon the principles of sustainable

156 ECONOMICDEVELOPMENT AND ENVIRONMENTAL GAIN development. Thereafter, in devising follow-up programmes, innovative approaches to environmental integration and management become critical features in accelerating regional economicintegration and enhancing both regional (internal) identity and regional (external) competitiveness. The proposition for Structural Funds programmes, amongst others, is that scope existswithin the programming process topursue environmental excellence as a basis for regional competitiveness. In relation to the three stages of environmental management describedin Chapter 2, the notion of environmental competitiveness represents a potential fourth category, progressing beyond environmental gain. Having moved throughthe elements of passive, reactive and proactive, generating competitiveness equates with an advanced stage that may be described as interactive (see Table 8.1). Table 8.1 Stages in moving towards regional environmental competitiveness Environmental Loss (passive)

Habitat destruction Loss of plants and wildlife Water pollution Emissions to air Soil contamination Waste accumulation Aesthetic losses

Environmental Protection (reactive)

Environmental Gain (proactive)

Planning 0 Land reclamation conditions and decontamination Retaining landscape 0 Air and water purification features Environmental Energy efficiency charges 0 Waste reduction and filter recycling and Creating systems for woodlands industry and wetlands Land-use zoning Brownfield sites Waste treatment Damage repair

Environmental Competitiveness (interactive)

0

0

0

0

Regional environmental promotion Business parks based on industrial ecology Developing specialist environmental services Promoting innovative environmental practices Targeted environmental incentives

The interactive characteristics relate to the necessarily close cooperation between public and private sectors, government agencies and industry to promote regional cohesion and a sustainable economy. With regard to competitive strategy, this stage would involve elements such as regional environmental promotion, the specializeddevelopment of the environmental-services sector,the encouragement of innovative environmentalpractices

TOWARDSREGIONAL ENVIRONMENTALCOMPETITIVENESS 157 and sustainable industrialization, construction of business parks according to the principles of industrial ecology, and environmental incentives to improve industrial performance. In this context, regional promotion would involve the active marketing of the competitive advantages inherent in the environmental approach of the territory. Domestically, these advantages could include improved resource efficiency in production, the introduction of innovative practices through environmental technology and training, and linkages into a network of matched companies basedon industrial ecology. Internationally, incoming firms could benefit froma positive public relations image, earlymover advantages in international markets, and leading-edge positioning against trends in international competition. In parallel, regions would benefit from increased employment,a distinct regional sectoral-specialism in the environmental sector,and a greatly increased profileas a destination for innovative investment. Drawing on the methodology outlined in Chapter 7, practical steps to support this transition would include qualitative environmental goals and quantitative environmental targets. For example, this might include numbers and types of companies from specific industrial sectors and subsectors that should be pursued, based on factors such as environmental innovation, reputation and export markets. SWOT or matrix-based qualitative environmental impact assessment could steer programme development and implementation, with progress measured by indicators linked directly to the processes of policy revisionand project prioritization. The new challenge would be to make all of the programme environmental impacts positive, as well as becoming known for this achievement. Strategic investments would need to be highly innovative, developing sectoral specialisms basedon both the quality of the regional environment and the skills available in the environmental-services sector. A scenario tending towards this dynamic end-state has already been described in the European Commission’sseventh annual report on the Structural Funds: A high quality environmentcan play an importantrole in attracting poten-

tial investors toa region. Furthermore, activitiesrelated to the environment can be a substantial source of employment and create major opportunities for SMEs to provide goods and services. Lastly, the environmentis an excellent justification for diversification as regards both activities (in rural areas, for example) and new skills and qualifications for the work force (CEC, 1996d, p20). With regard to the practicalities of convincing regionalpartnerships of the merits of this approach - in whole or in part - the language of sustainable development may needto be replacedwith the logic of sustainable develop-

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ment. It is easier to identify with the benefits of financial savings, greater efficiency, positive sectoralinteraction and international competitive status than to justify decisions on regional financial priorities as a means of addressing global concerns. In terms of outcomes, regardless of the restricted focuson regional competitiveness,the contribution to sustainable development would still be significant.

While there are some unexploited options, and informed policy-makers can help to realize these options, it is nevertheless true that substantial environmental protection will have its economic price (Neumayer, 1998, p39). In contrast to the above sentiment, this scenario of regional environmental competitiveness points towards substantialprotection with no economic price - cofinanced investments would already occur through the regional programme, so that the transformation would represent benefits without (additional) costs. The roleof the partnership would be to createthe opportunity to directinvestment towards a broader and more purposeful goal.

BEYONDCOMPETITIVENESS Through ignoranceor indiference,we cando massive and irreversible harm to the earthly environment on which our life and well-being depend. Conversely, throughfuller knowledge and wiser action, we can achieve for ourselves and our posterity u better life in an environment more in keeping with human needs and hopes (UN, 1973, p3). Given that competitive society generally results in winners and losers, Braun (1995) maintains that competition is the enemy of compassion, whilenoting that only a compassionate society can live in harmony. In comparison, Henderson (1980) observes that we overvalue competitive activitiesand we undervalue cooperation and social cohesion. These moral criticisms of competitiveness usefully highlightthe assumptions that should be emphasized in this extension of environmental gain towards environmental competitiveness. In the same way that any physical tool can be used constructively or destructively, this simple truth applies to Competitiveness. Rather than suggesting that economic hierarchies are the ultimate goal, environmental gain seeks to unify the three elements of sustainable development by exploiting competitiveness toderive holistic and positive outcomes. Accordingly, competitiveness is not an end in itself, but simply a means to reach a desired end-state. The realizationof this end-state would be expected to fulfil a number of societal objectives. Firstly,the concept of 'development' could recover its

TOWARDS REGIONAL ENVIRONMENTALCOMPETITIVENESS 159 positive associations - or perhaps finally claim them - so that economic development, environmental development and social development would effectively combine to generate sustainable development. Ratherthan being divisive, competitiveness would be integrative, stimulating an improvement in each of economic prosperity, environmental quality and social cohesion. Secondly, in addition to establishing international linkages, environmental competitiveness couldvalidate an opposite hypothesis of industrial flight to explain the relocationof mobile investment into high performance regions or countries. Rather than policing the accumulation of polluting industry in developing regions or cohesion countries, international agencies may become more concerned with monitoring the effectiveness and optimum numbers of companies who gravitate towards environmentally competitive regions. Inthis scenario of inward investment pressure, enterprises would be eager to benefit from the ongoing efforts to create a new development paradigm, one often envisagedbut never yet realized. Lastly, the harmony that could emerge from this positive interaction, cooperation and cohesion could delivera reward farin excess of the individual limited remits of pollution prevention or economic competitiveness.At this point in the evolution of scientific knowledge, the life expectancy of the planet has been predicted,but the life expectancyof mankind is still uncertain. It is to be hoped that in future our civilization will learn to live in harmony with itself and with nature, and that we can survive long enough to createa world in whch such positive visions become reality.

Appendix 1 EU ENVIRONMENTAL LEGISLATION RELEVANT FOR STRUCTURAL FUNDSREGIONAL DEVELOPMENT PROGRAMMES

Appendix 1 identifies the types and forms ofEU environmental legislation relevant for regionaldevelopment programmes. In practice, the context and currency of EU environmental policy and legislation is constantly changing as progress is made,and the selection of EU initiatives citedare intended to serve as examples only. Nonetheless, eventhough not comprehensive, they should convey a broad sense of the thematic coverageand level of detail to be expected fromenvironmental directives and proposals. In some cases,the examples havea broad applicability fordevelopment activities; in others they relate more to sector-specific projects in areas such as industrial plant, transport infrastructure or waste treatment. For a comprehensive coverage of EU environmental policy and legislation, see Johnson and Corcelle, 1995.

ENVIRONMENTAL IMPACTASSESSMENT One of the main drives of EU environmental policy is to ensure that new infrastructure projects take account of environmental consequences. The main piece of legislation inthis field isthe Environmental Impact Assessment Directive, supplemented by a recent proposal for SEA of plans and programmes.

E I A Directive Council Directive 85/337/EEC of 27 June 1985on the assessment of the effects of certain public and private projects on the environment;amended by Directive 97/11/EC. The EIAdirective is designed to ensure that an EIA is undertaken for certain

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types of projects, and that this is takeninto account before these projects are approved and implemented. The developer has to supply specific information for the assessment, and the public and certain authorities must be consulted. The EIA must identify, describeand assess the direct and indirect effects of a project on human beings; fauna and flora; soil, water, climateand the landscape; and material assets and the cultural heritage. It must also examine the interaction between those factors. Projects that must be subjected to an environmental assessment, unless exempted, appear in Annex I to the directive under nine categories. In summary, these comprise: oil refineries; large thermal power stations and nuclear power stations and reactors; installations forstorage or disposal of radioactive waste; iron and steel works; installations for extractingand processing asbestos; integrated chemical installations; construction of motorways, express roads, railway lines and airports; trading ports and inland waterways; and installations for incineration, treatment or landfill of hazardous waste. There is also a second list of projects for which environmental assessments can be requiredif Member States considerthat they havea significant effect on the environment. This list,in Annex I1 to the directive, includes projects in the following areas: infrastructure; agriculture; extractive industry; energy industry; processing of metals; manufactureof glass; chemicalindustry; food industry; textile, leather, wood and paper industries; rubber industry; and other projects, including modifications to projectsin the first list above. National legislation specifies the information that developers must supply with project applications.This would typically include a description of the project with information on its site, design and size; measures intended to avoid, reduce or remedy significant adverse effects; the data required to identify and assess the mainenvironmental effects; and a nontechnical summary of the above.

1997 Amendment Council Directive 97/11/EC of 3 March 1997 amendingDirective 85/337/EEC on the assessmentof the eflects of certain public and private projects on the environment. In 1997, new rules under the EIA directive were agreed,and they had to be in place and applied by March 1999. Under these new rules, Member States

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may provide a single procedure for environmental impact assessmentsand integrated pollution prevention and control. All projects subjectto an EIA must receive a development consent. More information isnow required from developers, including an outline of the main alternatives to the proposed development that have been studied by the developer. Public and environmental authorities in other Member States are to beconsulted where significant transboundary effects are likely. Competent authorities must also give the main reasons for their development decision, whether it is refusal or permission, and the main measures to avoid, reduce or offset the major adverse effects. The listof projects for whichan EIA is mandatory has been enlarged by adding 14 additional categories of project: e e e e

e e e e e e e e e e

transfer of water resources between river basins above certain thresholds (piped drinking water excluded); waste-water treatment plants (over 150,000 population equivalents); construction (afresh orby widening) of 10 kilometres of dual carriageway; groundwater abstraction or artificial recharge schemes (annual volume exceeding ten million cubic metres); dams (with new or additional storage capacity of more than ten million cubic metresof water); installations far the production of non-ferrous crude metals; incineration or chemical treatment of non-hazardous wastes (installations with a capacity of more than 100 tonnes per day); extraction of petroleum (more than 500 tonnes per day) and natural gas (over 500,000 cubic metresper day); pipelines forthe transport of oil, gas or chemicals (more than 40 kilometres longand over 800 millimetres in diameter); installations for the intensive rearing of poultry and pigs above certain thresholds; pulp and paper factories; quarries and open-cast mining (over 25 hectares) and peat extraction (over 150 hectares); overhead power lines (220 kilovolts or more and over 15 kilometresin length); and installations for thestorage of petroleum, petrochemicalsand chemicals (200,000 tonnes and over).

The listof projects for whichan EIA is requiredwhere there are likely to be significant environmental effects has also been extended. It now includes inland waterway construction; works for the transfer of water between river basins; deforestation; marineand fluvial dredging of minerals; wind farms;

APPENDIX 1 163 asbestos production and manufacture of asbestos products; manufacture of ceramic products; coastal works to combat erosion; groundwater abstraction and artificial groundwater recharge; ski runs; permanent camp sites and caravan sitesand theme parks.

Strategic Environmental Assessment The present EIA rules are concerned with environmental impact assessments being carried out before development consent is given for projects likely to havea significant effecton the environment. In 1993, the European Commission submitted a report on the application and effectiveness of the EIA directive. Oneof the conclusionswas that project-level assessments take place too latein the decision-making process to address all of the significant issues. As a result, the commission has put forward a proposal for a new system of SEA.

Proposal for a council directive on assessing the eflects of certain plans and programmes on the environment, COM (96) 511,4/12/96 The proposal is designed to complement project-level environmental assessment by extendingthe process toplans and programmes. The newproposal is concerned with instigating environmental impact assessments before adopting the plans and programmes which set the framework for development consent decisions,such as town and country planning documents and regional economic programmes. The resultsof the SEA would then have to be taken into account during the preparation and adoption of such environmentally significant programmesand plans. The proposed SEA directive should ensure that environmental targets are defined earlyin the process and assessed in aninteractive and comprehensive manner at the appropriate level. It should allow the issue of alternatives to be assessed, as well as the cumulative and synergistic environmental impacts of small but numerous projects. By conducting a comprehensive assessmentat the strategic level, some of the information required by the EIA directive for the environmental impact statement for particular projects would be used or provided in less detail by referring to the assessment already completed at the strategic level. In terms of procedure, the EIA and SEA are very similar, and a properly conducted SEA should clarify the environmental conditions for project approvals. The proposed date by which authorities have to comply with this proposal is 31 December 1999. However, SEAS (of varying forms) have already beenundertaken in relation toStructural Funds programmes.

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PROTECTING BIODIVERSITY The EU’s programmes to protect habitats and species withinand beyond the European borders are based on the 1992Convention on Biodiversity. The main piece of legislation is the 1992 Habitats Directive, which usesNatura the 2000 programme to create a linked network of European habitats and corridors. Other key piecesof legislation concentrateon the promotion of sustainable land management practicesin and around habitats of importance. There are also Europeanrules concerning thequality of waters needing protection or improvement in order to support fish life; protecting forests against atmospheric pollution; protecting forests against fire; and the trade in wild fauna and flora.

Habitats Council Directive 92/43/EEC of 21May 1992 on the conservation of natural habitats and of wild fauna and flora; Ref OJ L206 22/7/92; implemented by Decision 97/266/EC, OJ L107 24/4/97, amended by Directive 97/62/EC, OJ L305, 8/11/97

The aim of the directive is to contribute towards ensuring biodiversity through the protection of natural habitats and of wild fauna and flora. To achieve this, the directive provides for thesetting up of a coherent European ecological network of special areas of conservation, calledNatura 2000, by a process of staged designation. The network will be composed of sites containing natural habitat types and habitats of species ofEU interest. It also includesthe special protection areas(SPAS)designated under Directive 79/409/EEC on the protectionof wild birds (see below). In the special areas of conservation (SACs), the Member States must establish the necessary conservation measures, which involve appropriate management plans specifically designed for the sites or integrated within other development plans and appropriate statutory, administrative or contractual measures. Member States must also take appropriate steps to avoid, in the SACs, the deterioration of natural habitats, as well as the disturbance of species for which the areas have been designated. For a series of animal and plant species of EU interest, for which the establishment of special areasof conservation is not required, the Member States must take the necessary measures to establisha system of strict protectionin their natural habitat range.

Wild Birds Directive 79/409/EEC (as amended)on the Conservationof Wild Birds, OJ L103, 25/4/79

The Birds directive requires Member States to establish a general systemof protection for all species of wild birds. Particularly vulnerable species, listed

APPENDIX 1 265 in Annex I, are subject to special conservation measures. This directive requires Member States to classifyhabitats supporting the most important species as special protection areas(SPAS).Member Statesmust protect these sites from deterioration, with particular attention to wetlands because of their importance for migratory species.

WATER EU legislation with regard towater seeks toprevent pollution and improve the management of water resources, with initiatives relating to water quality, water monitoring and groundwater, amongst others.

Water Quality COM (97) 49 proposal for a council directive establishingaframework for European Community action in thefield of water policy COM (98) 76 Amended proposal for a council directive establishing a fiamework for European Community actionin the field of water policy The European Commission’s amended proposal for a framework for EU action in the fieldof water policy aims to protect surface water and groundwater according to a new approach based on the concept of river basins. This is intended gradually to repeal a number of existing directivessuch as the surface water for drinking water directive, the shellfish directive and the groundwater directive. The benefitsare that it will lead to a more rational protection and use of water, to reduced water treatment costs, to increased amenity value of surface waters and to a much more coordinated administration of water. The main points of the directive are as follows: Good surfaceand groundwater quality should be achieved by2010. A five-step process is to be followed: the characteristics of the area are catalogued; environmental stresses are identified; measures to achieve all existing environmental objectives are designed and implemented; progress is monitored;and the measures are revised if necessary. These measuresare coordinated for each river basin within a river basin management district,and are set out in a river basin management plan. For areas protected under existing ornational legislation, the proposed directive will ensure that their water needs are satisfied within the overall water policy, but will not impose any new obligations. For surface water abstraction areas, quality standards must be set and observed. The proposal focuses on establishing the right conditions to encourage the efficient protectionof water at the local level,but it also provides for

266 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN the overall coordination of water policy at European Union level, in particular ensuring the coordination of emission controlsand environmental quality objectives in a combinedapproach.

Water Monitoring A proposal exists through COM (98) 76for legislationto specify the technical details required for the monitoring of surface and groundwater, under the proposed framework document for EU action in the field of water policy. The technical specificationsoutlined in the proposal include: definitions for high, good and fair water quality in respect of fish and aquatic florain rivers, lakes,estuaries and coastal waters; procedures to be followed by Member States forthe setting of chemical quality standards for surface water; monitoring of the ecology of inland and coastal waters; and monitoring of chemicals in groundwater.

Groundwater Council resolution on thefiture European Community groundwaterpolicy, OJ C 059; council resolution on groundwater protection, OJ C 049; Directive 80/68 on theprotection of groundwater against pollution caused by certain dangerous substances, OJ L20, 26/1/80 The European Commission argues that, in principle, groundwater should not be polluted at all, and for this reason setting chemical standards may actually be counter-productive, giving an impression of a permitted level of pollution. The commission is therefore proposing a ban on direct discharges to groundwater, and a requirement to monitor for indirect discharges.

WASTEMANAGEMENT In the area of waste management, the aim of pollution reduction is promoted through the establishment of an operational framework of public authority responsibilities, strategy development, and a hierarchy of related waste avoidance and reduction measures

Waste Directive Directive 75/442/EEC on waste,OJ L194,25/7/75, as amended by Directive 91/156/EEC (Waste Framework Directive) This directive defines waste and gives a list of wastes, establishesthe principal of proximity and the use of waste management plans. Sometimes referred toas the framework directive,it stipulates that Member Statesmust

APPENDIX 1 167 take the necessary measures to ensure that waste is disposedof without endangering human health and without harming the environment. The directive contains fourmandatory elements: Competent authoritieswith responsibility for waste should be appointed. Waste disposal plans should be prepared by these competent authorities. Permits from the competent authorities are to be obtained by installations orundertakings handling waste. The polluter pays principle applies. The 1975 framework directive on waste was amended and expanded by Directive 91/156 of 18 March 1991 toinclude three new annexes covering definitions of categories of waste, disposal operations and recovery operations. A European Commission decision of 24 May 1996 (96/350) further amended the annexes on disposal and recovery operations in line with scientific and technical progress.

Waste Management Strategy Council Resolution of 24 February 1997 on a European Community strategyfor waste management, 01 C76,11/3/97 The main points of the council resolution on an EU strategy for waste management can besummarized as follows: Appropriate emissions standards should apply to the operation of facilities in which waste is incinerated. EU standards on emissions from incineration installations to air, waterand soil should be strictly respected. An adequate and integrated network of disposal facilities should be established. Only safe and controlled landfill activities should be carried out in the future. Old landfills and other contaminated sites should be properly rehabilitated. The differencebetween waste and non-waste goods and between operations which are waste-recovery activitiesand those which are disposal activities should be distinguished more clearly. An EU-wide reliable system for data collection for waste is to be established. The waste management implications of a product should be fully taken into consideration fromthe conception phase onwards. The responsibilities of the different economic actors (ie producers, importers, distributors and consumers) should be translated into practical action.

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Effort needs to be increased in waste prevention by improving the environmental dimension of technical standards, by reducing the presence of dangerous substances where less dangerous alternatives are available, by using eco-audit schemes, and by promoting changes in consumption patterns through consumer education. Appropriatewaste management planningat all competent levels, including local and regional levels, isimportant. SMEs should receive support inorder to encourage responsiblewaste management policies.

Hazardous Waste Directive 92/689 on hazardous waste, OJ L377, 32/22/92 This directive introduces strict requirements for operations applying to hazardous waste. It requires that hazardous waste is recorded and identified at tipping sites, and a general prohibition is placed on the mixing of different categories of hazardous waste or hazardous and non-hazardous waste. Theseplans may forma part of the general waste managementplans required under the waste framework directive, or may be separate.

Waste water Council Directive 92/271/€EC concerning urban waste-water treatment, OJ L235, 30/5/91 This directive sets minimum standards for the collection, treatment and discharge of urban waste water. Effluent from sewage works serving a population equivalent of 2000 people or more should receive secondary treatment (a process generally involving biological treatment with a secondary settlement). This is to be achieved in a phased programme between 2000 and 2005. Tertiary treatment (significantreduction of nitrate and phosphate levels) is required for discharges (from agglomerations with a population of 10,000 or more)to designated priority or sensitive areas. Treatment can be lower in less sensitive coastal areas.

Landfill In 1997, the Council of Environment Ministersheld an initial debate on the proposal for a directive on landfill of waste. The aim is to reduce the impact of waste disposal on the environment and to ensure the prevention of waste through recycling. The proposal concerns reduction of the landfilling of biodegradable waste, pretreatment of waste before landfilling, a ban on used tyres, increased costof landfilling, no joint disposal of hazardous and non-hazardous waste, harmonizingtheenvironmental and technical standards for the landfill of waste, and stricter provisions for landfills in remote areas.

APPENDIX 1 169 In 1998, the environment ministers reached a common position on the proposal for a directive on landfill of waste. The newrules aim toprevent or reduce the negative effects of waste landfill on the environment, particularly the pollution of surface water, groundwater, soil and air, as well as the resulting risk to human health. Member States were requested to increase the cost of landfilling toensure that all costsof the setting up, operation and closure of a landfill site would be covered.

AIRQUALITY Directive 80/779 on air quality limit valuesand guide valuesfor sulphur dioxide and suspended particulates, OJ L229, 30/8/80 This directive set limit values for ground-level concentrations of sulphur dioxide and suspended particulates (smoke) which were to be achieved throughout the Member States by 1April 1983.A general duty was also laid on the Member States towork towards more stringent guide values set out in Annex 11.

Directive 85/023 on air quality standardsfor nitrogen oxide,OJ L87,27/3/85 This directive set a limit value for nitrogen oxide in the atmosphere to be observed from1July 1987. It also setguide values for the Member Statesin certain specified zones with the objective of improving the environment in the long term. Directive 89/369 on the preventionof air pollutionfrom new municipal wasteincineration plants,OJ L163, 14/6/89, and Directive 89/429 on the reductionof air pollution from existing municipal waste-incineration plants,OJ L203, 15/7/89 Directive 89/369 (new plants) requires that the provisions of the directive are attached to prior authorizations required under the waste framework directive. The emissions limits coverdust, heavy metals, acid gases,hydrofluoric acidand sulphur dioxide. Directive 89/429 (existing plants, defined as all those granted first authorization before 1 December 1990) set out the timetable by which to reach the standards for new plants laid down in Directive 89/369.

Directive 96/62/EC on ambient air-quality assessment and management Daughter directives are to be made under 96/62/EC to introduce air quality standards for a wider range of substances. They areintended progressively to replace the existing series from 80/779 onwards.

270 ECONOMICDEVELOPMENT ANDENVIRONMENTAL GAIN

INDUSTRIAL ACTIVITIES For the industrial sector, directives affecting the characteristicsof development projects are oriented towards regulating the overall environmental performance of industry, as well as individual voluntary measures, suchas EMAS, to improve environmental managementwithin companies.

Integrated Pollution Prevention and Control Council Directive 96/61/EC of 24 September 2996 concerning integrated pollution prevention and control, OJ L 257, 20/10/96 The objective of the Integrated Pollution Prevention and Control (IPPC) Directive is toprevent or solve pollution problems fromindustrial installations, rather than transferring them from one part of the environment to another. In instances where prevention or solution is not practicable, emissions should be minimized. The directive places the emphasis on the use of best available techniques that each European country should use to set emission limit values. Applications for a permit must describe the installation, materials and substances to be used, details of foreseeable emissions, techniquesused to prevent emissions, proposed measures for recycling, and measures to prevent the risk of major accidents. Thedirective should be implemented into national legislation during 1999. However, existingplants will benefit from an eight-year transitional period. As techniques and technologies improve, so will the appropriate standards required, and permits should be reconsidered at least every ten years. If the operator or owner of an industrial plant plans a substantial change to the installation, the competent authority must be notified. The IPPC directive takes a wide range of environmental impacts into account with the aim of ensuring the highest possible levelof environmental protection: emissions from pollutants to air, water and land; energy efficiency; consumption of raw materials; noise and site restoration. A full list of types of installation coveredis provided in Annex A to the directive.

Environmental Auditing Council Regulation (EEC)No 2836/93 of 29 June 1993 allowing voluntary participation by companies in the industrial sector in a European Community ecomanagement and audit scheme, OJ L 168,10/7/93 The voluntary eco-management and audit scheme (EMAS) was introduced in 1993. Theoverall objectiveof the scheme is to promote the environmental improvement of industrial activities by committing sites to evaluate and improve their performance and provide relevant information to the public. The scheme allows companies to obtain external verification for systems and procedures put in place to manage environmental issues. Companies

APPENDIX 1 171 that successfully meet the criteria obtain the EMAS designation, which is recognized across Europe. Each year the European Commission publishes, in the OfJicial Journal, a list of registered sites in the EU.

AGRICULTURE Development programmes forrural areas, whilepromoting the agricultural sector, are required to reduce environmental impact from associated polluting outcomes suchas run-off and eutrophication.

Nitrates from Agricultural Sources Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates fiom agricultural sources, OJ L 377, 31/12/91 This directive, adopted in December 1991, aims to reduce water pollution caused or induced by nitrates from agricultural sources, and to prevent further pollution of this kind. Member States were required to identify, by December 1993, vulnerable zones, where waters are affected - or could be affected - by nitrates from agricultural sources. Following the designation of such zones, Member States had to establish action programmes containing mandatory measures such as rules relating to periods when the land application of certain types of fertilizer is prohibitedand limitation of the land application of fertilizers. Factors to be takeninto account included the characteristics of the vulnerable zone concerned, especially soil conditions, soil type, climatic conditions, land use and agricultural practices.

ENVIRONMENTAL INFORMATION Directive 90/313 on the fieedomof access to information on the environment,OJ L158, 23/6/90 This directive requires that all public authorities holding information on the environment are to make it available publicly, subject to exemptions. The directive defines information to include written, visual, aural or database form. Publicauthorities must respond to requests for information within two months but may refuse it, stating their reasons if it affects, for example, the confidentiality of the proceedings of the public authorities or public security. However,information must be supplied at leastin partif it can be separated out from items exempted by the directive’s confidentiality provisions.

Appendix 2 STRUCTURAL FUNDSSUPPORT, 2000-2006

On 1 July 1999, the European Commission adopted a series of decisions relating to the implementation of the Structural Funds for the 2000-2006 programming period. Areas eligibleunder objective 1were identified, and ceilings were established for the areas to be eligible under objective 2 for each country. The commission also finalized the budgets for the Member States for each priority objective and the appropriationsfor the four new community initiatives.

OBJECTIVE 1 The following regions are eligible under objective 1 over the period 2000-2006: e e e e

e

e e

e e

e

Austria: Burgenland Finland: Ita-Suomi, Vali-Suomi(part), Pohjois-Suomi (part) France: Guadeloupe, Martinique, Guyane, Reunion Germany: Brandenburg, Mecklenburg-Vorpommern, Sachsen, SachsenAnhalt, Thuringen Greece: Anatoliki Makedonia, Thraki, Kentriki Makedonia, Dytiki Makedonia, Thessalia, Ipeiros, Ionia Nisia, Dytiki Ellada, Sterea Ellada, Peloponnisos, Attiki, Voreio Aigaio, Notio Aigaio, Kriti (ie the whole counhy) Ireland: Border, Midlands and Western Seaboard Italy: Campania, Puglia, Basilicata, Calabria, Sicilia, Sardegna Portugal: Norte, Centro, Alentejo, Algarve, Aqores, Madeira; Spain: Galicia, Principado de Asturias, Castilla y Leon, Castilla-La Mancha, Extremadura, Comunidad Valenciana, Andalucia, Region de Murcia, Ceutay Melilla, Canarias Sweden: Norra Mellansverige (part), Mellersta Norrland (part), Ovre Norrland (part);

APPENDIX 2 173

United Kingdom: South Yorkshire, west Wales and the Valleys, Cornwall and Isles of Scilly, Merseyside Transitional support is provided for the areas previously eligible under objective 1, but which are no longer eligiblebetween 2000 and 2006. These areas are: Belgium: Hainaut Spain:Cantabria France: Corse and the districts of Valenciennes, Douai and Avesnes Germany:Ostberlin Ireland: southern, eastern Italy:Molise TheNetherlands:Flevoland Portugal: Lisboa e Vale do Tejo United Kingdom: Northern Ireland, Highlands and islands

OBJECTIVE 2 To ensure that the new objective 2 complies with the ceilingof 18 per cent of the total population of the European Union,the commission setupper limits for the population coverage under objective 2 for each country (see Table A2.1). In accordance with those ceilings, the Member States were asked to submit proposals for objective 2 areas, on the basis of which the commission draws up the final listof eligible areas. Transitionalsupport is also available for areas previously eligible under objectives 2 or 5b, but which are no longer eligibleunder the new objective 2 from2000. Areas within the following regions are eligible under objective 2 over the period 2000-2006:

Austria: lower Austria, Vienna, Carinthia Styria, upper Austria, Salzburg, Tyroland Vorarlberg Belgium: Bruges, Ostend, Ghent, Veurne, Antwerp, Turnhout, Brussels, Hasselt, Maaseik, Tongeren, Philippeville, Dinant, Huy,LiGge, Verviers Denmark: Nordjyllands amt, Viborg amt, Bornholms amt, Storstroms amt, Fyns amt, Sonderjyllands amt,and numerous islands Finland:Ahvenanmaa/&and, Varsinais-Suomi, Uusimaa (Maakunta), Kanta-Hame, Ita-Uusimaa, Kymenlaakso, Etela-Karjala, Paijat-Hame, Pirkanmaa Satakunta, Pohjanmaa, Etela-Pohjanmaa, Keski-Suomi, Keski-Pohjanmaa, Pohjois-Pohjanmaa France: Ile-de-France, Champagne-Ardenne, Picardy,upper Normandy, centre lower Normandy, Burgundy, Nord-Pas-de-Calais, Lorraine, Alsace, Franche-Comt6, Loire, Brittany,Poitou-Charentes, Aquitaine,

174 ECONOMIC DEVELOPMENT A N D ENVIRONMENTAL GAIN

Table A2.1 Objective 2 population coverage, 2000-2006 Member State Belgium Denmark Germany Spain France Italy Luxembourg The Netherlands Austria Finland Sweden United Kingdom EU-15

Population Ceiling (‘000) 1269 538 10,296 8809 18,768 7402 118 2333 1995 1 582 1223 13,836 68,170

Percentage of the Population 12 13 22 13 28 15 31 24

Source: CEC, 1999d

Midi-Pyrhkes, Limousin, RhBne-Alpes, Auvergne, LanguedocRoussillon, Provence-Alpes-CBte D’Azur Germany: Berlin, Schleswig-Holstein, Hamburg, Weser-Ems, Bremen, Luneburg,Braunschweig, Hannover, Munster, Dusseldorf, Arnsberg, Kassel, Giessen, Saarland, Rheinhessen-Pfalz, Unterfranken, Oberfranken, Tubingen,Stuttgart, Oberpfalz, Mittelfranken, Karlsruhe, Niederbayern, Saarland Luxembourg: Rural zone in the northern Oesling region, eastern zone including Echternact and Grevenmacher, eight communesin south-west Luxembourg The Netherlands: south, middle and north Limburg, Zuidoost-NoordBrabant, Noordoost-Noord-Brabant, Groot-Rijnmond, Agglomeratie s’-Gravenhage, Utrecht, Arnhem/Nijmegen, Veluwe, Achterhoek, Zuidwest-Overijssel, Twente, Zuidwest-Drenthe, Zuidoost-Friesland, Zuidwest-Friesland, Noord-Friesland, Noord-Drenthe, Oost-Groningen, Overig Groningen, Delfzijlen omgeving Spain: Pais Vasco, Comunidad Fora1 de Navarra, La Rioja, Aragon, Comunidad de Madrid, Catalufia, Islas Baleares Sweden: Stockholm, Uppsala, Sodermanland, Ostergotland, Orebro, Vastmanland, Blekinge, Skine, Varmland, Dalarna, Galveborg, Jonkoping, Kronoberg, Kalmar, Gotland, Halland, Vastra Gotaland United Kingdom: Tees Valley and Durham, Northumberland and Tyne and Wear, Cumbria, Cheshire, Greater Manchester, Lancashire, East Riding andNorth Lincolnshire, North Yorkshire,WestYorkshire,

APPENDIX 2 175 Derbyshire and Nottinghamshire, Leicestershire, Rutland and Northants, Lincolnshire, Hertfordshire, Worcestershire and Warwickshire, Shropshire and Staffordshire, West Midlands, East Anglia, Bedfordshire, Essex, inner London, outer London, Surrey, Eastand West Sussex, Kent, Gloucestershire, Wiltshire and North Somerset, Dorset and Somerset, Devon, east Wales, north-eastern Scotland, eastern Scotland, southwestern Scotland, Gibraltar At the time of writing, Italy’s objective 2 map has yet to be finalized. Ireland, Portugal and Greece all benefit solely from objective 1 or transitional funding (Coss, 2000, p13).

FINANCIALBREAKDOWN The financial allocations for objectives 1and 2 were decided on the basis of the eligible population, regional and national prosperity, as well as the relative severityof structural problems, particularly the level of unemployment. For objective 3, the allocation was made according to the eligible

Table A2.2 Structural Funds breakdown by Member State, 2000-2006 (Euro millions, at 2999 prices)

Belgium Denmark Germany Greece Spain France Ireland Italy Luxembourg The Netherlands Austria Portugal Finland Sweden United Kingdom

EU-15

0 0 19,229 20,961 37,744 3254 1315 21,935 0 0 261 16,124 91 3 722 5085 127,543 841

368 65 625 27 0 156 729 2984 526 0 0 0 98 352 2553 551 5437 613 1773 0 0 187 2145 377 6 0 34 123 119 676 578 102 0 2,905 0 0 0 459 30 0 354 52 706 1166 3989 1 19,733 2721 24,050 1106 183,564

737 365 4581 0 2140 4540 0 3744 38 1686 528 0 403 720 4568

34 197 107 0 200 225 0 96 0 31 4 0 31 60 121

1829 745 28,156 20,961 43,087 14,620 3088 28,484 78 2635 1473 19,029 1836 1908 15,635

Key: A = Member State; B = Objective 1; C = Transitional support for former objective 1 areas; D = Objective 2; E = Transitional support for former objective 2 and 5(b) areas; F = Objective 3; G = Fisheries instrument (outside objective 1 areas); H = Total Source: CEC, 1999d

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GAIN

population, the employment situation and the severity of problems such as social exclusion, education and training levels and the participation of women in the labour market. The breakdown in Table A2.2 also identifies transitional support for former objective1,2 and 5b areas, and for structural operations in the fishing industry outside objective 1 areas. With regard to the four European Community initiatives, the commission allocated Euro 4875 million for INTERREG, Euro 700 million for URBAN, Euro 2020 million forLEADER and Euro 2847 million for EQUAL.

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182 ECONOMIC DEVELOPMENT A N D ENVIRONMENTALGAIN Hill, J, Marshall, I and Priddey, C (1994) Benefiting Business and the Environment: Case Studies of Cost Savings and New Opportunitiesfiom Environmental Initiatives, Institute of Business Ethics, London Howes, R, Skea, J and Whelan, B (1997) Cleanand Competitive?Motivating Environmental Performance in Industry, Earthscan, London Institute for European Environmental Policy (IEEP) (1999) EU Structural Funds 2000-2006: Conserving Nature, Creating Jobs, IEEP, London International Union for Conservation of Nature and Natural Resources (IUCN) (1980) World Conservation Strategy: Living Resource Conservation for Sustainable Development, Gland, Switzerland Jackson, T and Roberts, P (1999) ’EcologicalModernization as a Model for Regional Development: The ChangingNature and Context of theEasternScotland Structural Fund Programme’, Journal of Environmental Policy and Planning, vol 1, ~~61-75 Jaffe, A, Peterson, S and Stavins, R (1995) ’Environmental Regulation and the Competitiveness of US Manufacturing:What does theevidence tell us?’, Journal of Economic Literature,vol33, pp132-163 Janicke, M (1992) ’Conditions for EnvironmentalPolicy Success: An International Comparison’, The Environmentalist, vol 12, pp 47-58 Janicke, M andWeidner, H (eds)National Environmental Policies:A Comparative Study of Capacity Building,Springer Verlag, Berlin of theEuropean Johnson, S and Corcelle, G (1995) TheEnvironmentalPolicy Communities, Second Edition, Kluwer LawInternational, London Khan, A (1995) ’SustainableDevelopment: The Key Concepts,Issuesand Implications’, Sustainable Development,vol3, no 1, pp63-69 Kelinschmidt, V and Wagner, D (eds) (1998) Strategic Environmental Assessment in Europe: Fourth European Workshop on Environmental Impact Assessment, Kluwer Academic Publishers, Dordrecht Kmnarv, L (1997) ‘Strategic EnvironmentalAssessment:Sustainability and Democratization’, European Environment, vol7, pp175-180 Kunzlik, P (1994) SpicersEuropean Union PolicyBriefings:EnvironmentalPolicy, Longman, Harlow Larrue, C (1994) ’Regional Development and Quality of the Environment: The Experience of OECD Member Countries’, in Lindstrom, B and Frovin, A (eds) Regional Policies and the Environment, Nordrefo, Stockholm Leonard, H (1988) Pollution and the Struggle for the World Product: Multinational Corporations, Environment and International Advantage,Cambridge University Press Levenstein, C and Eller, S (1980) ‘Are Hazardous Industries Fleeing Abroad?’, Business and Society Review,vol34, pp44-46 Long, B (1997) ’Environmental Regulation: The Third Generation’, OECD Observer, no 216, pp14-18 Lucas, R, Wheeler, D and Hettige, H (1992) ’EconomicDevelopment, Environmental of Toxic IndustrialPollution Regulation and theInternationalMigration 1960-1988’, in Low, P (ed) International Trade and the Environment, World Bank Discussion Paper no 159, Washington DC, pp67-86 Maddison, D, Pearce, D, Adger, Aand McLoed, H (1997) ’Environmentally Damaging Subsidies in the United Kingdom’, European Environment, vol 7, ~~110-117

REFERENCES 183 Meadows, D, Meadows, D, Randers, J and Behrens, W (1974) The Limits to Growth: A Report for the Club of Rome‘s Project on the Predicament of Mankind, Pan Books, London Michie, R and Fitzgerald, R (1997) ’The Evolution of the Structural Funds’, in Bachtler, J and Turok, I (eds) The Coherence of EU Regional Policy: Contrasting Perspectives on the Structural Funds,Jessica Kingsley Publishers,London Ministers for Spatial Planning in the EU Member States (1997) European Spatial DevelopmentPerspective:First Official Draft, Commission of theEuropean Communities, Brussels Ministry of Environment, Housing and Spatial Planning (1989) National Environmental Policy Plan:To Choose or to Lose?, MHPPE, The Hague Myers, N and Kent, J (1998) Perverse Subsidies: Tax $ Undercutting our Economics and Environments Alike, Greenleaf Publishing, Sheffield Neumayer, E (1998) ’PreservingNatural Capital in a Worldof Uncertainty and Scarce Financial Resources’, International Journal of Sustainable Development and World Ecology, vol5, pp2742 Organisation for Economic Co-operation and Development (OECD) (1994)Supply

Side Policies toAugment Government Supportfor Promoting Cleaner Technologies, OECD, Paris OECD (1996a) Integrating Environment and Economy: Progress in the 199Os, OECD, Paris OECD (1996b)The Environment Industry: The Washington Meeting,OECD, Paris OECD (1997a)Economic Globalization and the Environment, OECD, Paris OECD (1997b)Environmental Policies and Employment, OECD, Paris OECD (1997~)Sustainable Development: OECD Policy Approachesfor the 21st Century, OECD, Paris OECD (1998)Towards Sustainable Development: Environmental Indicators, OECD, Paris Opschoor, J, and Vos, H (1989) Economic Instruments for Environmental Protection, OECD, Paris Palmer, K, Oates, W and Portney, P (1995) ‘Tightening EnvironmentalStandards: The Benefit-Costor the No-Cost Paradigm?’,Journal of Economic Perspectives, vol 9, no 4, pp119-132 Partidario, M and Moura, F (1997) ‘StrategicSustainability Assessment - or how to get Strategic Environmental Assessment in the move towards sustainability’, informal discussion draft Porter, M and van derLinde, C (1995) ’Towards anew Conception of the Environment-Competitiveness Relationship’,Journal of Economic Perspectives, vol 9, no 4, pp97-118 Redclift, M (1987) Sustainable Development: Exploring the Contradictions, Routledge, London Reed, D (ed)(1996) Structural Adjustment, the Environment, and Sustainable Development, Earthscan, London Reid, D (1995) sustainable Development:An Introductory Guide, Earthscan, London Savornin-Lohman, A (1991) ’Financial Instruments and Economic Incentives in OECD Countries’, unpublished report, Institute for Environmental Studies, Amsterdam Schramm, G and Warford, J (eds) (1989) Environmental Management and Economic Development, Johns HopkinsUniversity Press, Baltimore

184 ECONOMIC DEVELOPMENT AND ENVIRONMENTAL GAIN Seamark, D (1996) 'European Funding and Environmental Appraisal', Town and County Planning, vol65, pp340-345 Skolimowski, H (1995) 'In Defence of Sustainable Development', Environmental Values, vol4, no 1 Stevens, C (1992) 'The Environment Industry', OECD Observer, no 177, pp26-28 Stevens, C (1993)'Do Environmental Policies Affect Competitiveness?', OECD Observer, no 183, pp22-25 Strathclyde European Partnership(1996) Single Programming Document 2997-2999, SEP Programme Executive, Glasgow Tavistock Institute (1999) Thematic Evaluation of the Partnership Principle, Evaluation Development and Review Unit, TavistockInstitute, London Taylor, S (1999) 'All change at Commission HQ', European Voice, vol5, no28, p2 Therivel, R, Wilson, E, Thompson, S, Heaney, D and Pritchard, D (1992) Strategic Environmental Assessment, Earthscan, London Therivel, R and Partidario, M (eds) (1996) The Practice of Strategic Environmental Assessment, Earthscan, London Tong, H-M and Walter, C (1980) 'AnEmpirical Study of Plant Location Decisionsof Foreign Manufacturing Investors in the United States', Columbia Journal of World Business, vol15, pp66ff United Nations (UN) (1973) Report of the United Nations conference on the Human Environment, United Nations, New York UN (1985) Environmental Aspects of the Activities of Transnational Corporations: A Survey, UN Centre on Transnational Corporations, New York UN (1992) Agenda 22: The United Nations Programme of Action from Rio, United Nations, New York Vaughan, D, Scott, P and Mickle, C (1997) 'Environment:What do Europe's Boardrooms think?', in Ledgerwood, G (ed) Greening the Boardroom: Corporate Governance and Business Sustainability,Greenleaf, Sheffield Verhoeve, B, Bennett, G and Wilkinson, D (1992) Maastricht and the Environment, Institute for European Environmental Policy, London Wallace, D (1996) Sustainable Industrialization, Royal Institute for International Affairs, Earthscan, London Warford, J (1989) 'Environmental Management and Economic Policy in Developing Countries', in Schramm, G and Warford, J (eds) Environmental Management and Economic Development,Johns Hopkins University Press, Baltimore Warnock, M (ed)(1962) Utilitarianism, Fontana, London World Commission on Environment and Development (WCED) (1987)Our Common Future, Oxford University Press Weale, A (1993) 'Ecological Modernization and theIntegration of European Environmental Policy', in Liefferink, J, Lowe, P and Mol A (eds) European Integration and Environmental Policy,Wiley, Chichester Weizsacker, E, Lovins, A and Lovins, L (1997) Factor Four: Doubling Wealth, Halving Resource Use, Earthscan, London Wilkinson, D (1993) 'Greening the StructuralFunds', European Information Service,no 137, pp3-6 Wilson E (1993) 'Strategic Environmental Assessment: Evaluating the Impacts of European Policies, Plansand Programmes', European Environment, vol3, pt 2, PP2-6

REFERENCES 185 Wood, C (1995) Environmental Impact Assessment: A Comparative Review, Longman, Harlow Woodford, J (1991) Conflict or Convergence? Environmental Priorities and the Structural Funds, Environmental Policy DiscussionPaper No 1, EPRC, University of Strathclyde, Glasgow

INDEX accession countries 30,32,4142 acidification 54 AG see Structural Funds projects advisory groups Agenda 21 5-6,15,42,150 agriculture EAGGF 77-78 environmental integration 51-52 fifth EAP 38 Fifth Framework Programme 53 nitrates 171 SEA directive 43-44 Structural Funds 81/82 air quality Environmental Loan Facility 55 EU directives 169 financial assistance 71-72 SPD baselines 103-104 Albania 54 Algeria 54 Alps 39 Amsterdam Treaty 31,47,57,85,150, 155 aquaculture 53 Austria assistance to manufacturing industry 67-68 Structural Funds 1995-1999 financial contribution 83 objective 1 79 objective 2 80,107-112 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 1172,175 objective 2 173-175 objective 3 175 Belgium assistance to manufacturing industry 67-68 environmental technologyincentives 70-71 Structural Funds 1994-1999 financial contribution 83

objective 1 79 objective 280 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173,175 objective 2 173-175 objective 3 175 Bentham, Jeremy 23 best practicable environmental option (BPEO) 44 biodiversity 46,56,103-104,164-165 Birds Directive164-165 Boznia-Herzegovina 54 BPEO seebest practicable environmental option Braun, E 149,158 brownfield sites 19,55 Brundtland report see World Commission on Environment and Development Business Charter forSustainable Development 59,75 business strategy 60 CAB seecounty administrative board CAP seeCommon Agricultural Policy carbon/energy taxes 39,154 carrying capacity 7,14,28 CBA see cost-benefit analysis central and eastern Europe (CEE) 30,40, 41,54 chemicals environmental advice, France109 SecondAssessment (Dobris 2) 41 international location decisions 62, 64-65 response to regulatory change 153

Silent Spring 2

CIS seeStructural Funds community initiatives civil protection 57 clean technology 17,18,48,54,66, 68-74,95,115 see also environmental technology

INDEX 187 climate change 52 Kyoto 32,52 coal-mining areas, reconversionof (RECHAR) 82 coastal zones 54 codecision procedure 46,47 Cohesion Fund 47,50-51,155 Common Agricultural Policy (CAP) 39, 82 cost-benefit analysis 27 Council of Ministers 31-32,39,45 county administrative board (CAB) 108, 118

Croatia 54 CSD see United Nations Commissionon SustainableDevelopment CSF see Structural Funds community support framework Cyprus 54 derelict land 55 Denmark assistance to manufacturing industry 67-68 incentives for environmental technology 69-71 Structural Funds 1989-1993 102 Structural Funds 1994-1999 financial contribution 83 objective 2 80,103-121 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 2 173-174 objective 3 175 Department of Trade and Industry (DTI) 62 developing countries 63,64,75,154,159 development path analysis 97 Directorate-General for Environment, Nuclear Safetyand Civil Protection (DG XI) structure and responsibilities34-35 SEA directive 43 SEM programme 46 fifth EAP 53 Structural Funds 91-92,101 Directorate-General for Regionaland Cohesion Policy(DG XVI) regional policyand environment 49, 93 Structural Funds management76 Dobris Assessment 36,40,48 DTI see Department of Trade and Industry

Earth Charter5,6 EAGGF see European Agricultural Guidance and Guarantee Fund EAPs see environmental action programmes EC see European Communities ECJ see European Courtof Justice eco-auditing as a businesscredential 65 EU directive (EMAS) 170-171 eco-labelling 65 ecological emergencies 57 ecological modernization 10,12,16-19, 21-23,28,45,47 ecology-growth trade-off 65 economizing the environment 17-18 Economic and Social Committee48 ECOTEC handbooks 95-98,118,155 ECSC see European Coaland Steel Community EEA see European Environment Agency EEC see European Economic Community Egypt 54 EIA see environmental impact EIONET see European Informationand Observation Network EIS see environmental impact statement EMAS see eco-auditing emissions carbon dioxide 41 carbon monoxide41 nitrogen oxide 41,48 environmental finance54,55,71 energy efficiency 65,145 fifth EAP 38 Dobris Assessment 41 SEA directive 43 environmental integration 51-52 Fifth Framework Programme 53 Environmental Loan Facility 55 global environmentalpilot projects 56 environmental incentives 71-72 Structural Funds Regulations 94 enterprise zones 69 environment sector7,4748,51,65,157 environmental auditing see eco-auditing action programmes (EAPs) Council of Ministers 32 EIA 43 European Courtof Justice 33 funding schemes 52,53,56,57 programme characteristics36-39, 150

188 ECONOMICDEVELOPMENT AND ENVIRONMENTALGAIN SEA 43 SEM programme 45 Structural Funds 90,92 assimilativecapacity 65 differentials 63 finance 52-57,66-74,75,151 gain concept and practice 9-11,12, 19-23,28-29,151-152 ECOTEC guidance 95,97 international location decisions 75 SEA directive 43 SEM programme 46,58 programme evaluation 106-107,142 project applications 138,146-147 impact Cohesion Fund 51 EL4 23-24,37,42,44,65 EIA directive 43,160-163 positive and negative dimensions 19-21 regional competitiveness157 statements (EIS) 23-24 Structural Funds 90-93,102, 105-106,110,113-114,120-121,

132-133,136,147 incentives, effectiveness73-74 information awareness-raising 56 EU directive 171 indicators programme evaluation 142,145 project evaluation 145 sectoral integration 51-52 SPDs 106-107,128-131,157 SSA 27-28 sustainable development 16 tracking a region 95,97 integration horizontal, vertical and strategic 114-115,121-123,127-128,141

index of 11,100,121-123 regional programmes 106,114-115 strong and weak 17 legislation see also environmental regulation EAPs 36,38 financial assistance 54,56 international location decisions 60, 62 Structural Funds 160-176 Loan Facility 55 mitigation 26,44 performance international location decisions 59,

60,62,74-74 incentives 73 Structural Funds 130 problems/pressures 1-3,4042,4849, 51,56 Programme for Europe42 regulation see also environmental legislation compliance costs 154 industrial competitiveness 152-155 innovation 152 international location decisions 60, 62-63,75 Structural Funds 93 subsidies 68 reporting Dobris Assessment 40-41 Second Assessment (Dobris 2) 41-42 sectoral integration 51 Structural Funds 103-105,113-114 standards SEM programme 46 international location decisions64, 75 industrial competitiveness 153 subsidies see environmental finance tax concessionssee environmental finance technology 10,47,51,68-74,106,109 see also clean technology training 73,105,106 EQUAL 176 equal opportunities 77,82 ERDF see European Regional Development Fund ERM handbook 96,155 ESDP see European Spatial Development Perspective ESF see European Social Fund ETCs see European Topic Centres EU see European Union EURATOM see European Atomic Energy Community European Agricultural Guidance and Guarantee Fund (EAGGF) 77,78 Atomic Energy Community (EURATOM) 30 Coal and Steel Community(ECSC) 30 Commission Cohesion Fund 47 commissioners 34 EAPs 37-39 ESDP 48 executive responsibilities34-35

INDEX 289 monitoring state aids 67 operating framework32 SEA directive 43-44 SEAct 45 sectoral integration 52 Structural Funds 86,87,98 Communities (EC)30 Council 31-32,34,51-52 Court of Auditors 92 Court of Justice (ECJ) 31,33-34 Economic Community (EEC)30 Environment Agency (EEA) responsibilities 35-36,57, 150-151 Dobris Assessment 40-42 sectoral integration 51 Information and Observation Network (EIONET) 36 Investment Bank 55 Investment Fund 55 Parliament composition andresponsibilities 32-33 Environment Committee 32,44 ESDP 48 expansion of powers 45,46 links with commission 34,35 links with EEA 36 Structural Funds 93,94 Regional Development Fund(ERDF) 77,91 Social Fund (ESF) 77 Spatial Development Perspective (ESDP) 31,4&49,58,151,155 Summits 31,51-52 Topic Centres (ETCs) 36 Union (EU)8,9,30

EU presidency 32 Structural Funds 1995-1999 financial contribution 83 objective 2 80,100,107-121 objective 5b 81 objective 6 81-82 Structural Funds 2000-2006 financial contribution 175 objective 1 172,175 objective 2173-174 objective 3 175 fiscal realignment 18 fisheries 53, 77, 78, 81, 82, 84, 92 fishing industries, diversification in (PESCA) 82 foreign direct investment (FDI)see inward investment forestry 44,53,56 France assistance to manufacturing industry 67-68 environmental technologyincentives 69-71 regional policy environmental impact 50 Structural Funds 1994-1999 financial contribution 83 objective 1 79 objective 280,100, 107-121 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173 objective 2173-174 objective 3 175

FDI see inward investment feasibility studies 69 felicific calculus 23 FFP see Fifth Framework Programme for Research, Technologyand Development FIFG see Financial Instrument for Fisheries Guidance Fifth Framework Programme for Research, Technologyand Development (FFP) 53-54 Financial Instrument for Fisheries Guidance (FIFG) 77,78 financial instrument forthe environment (LIFE) 54-55 Finland assistance to manufacturing industry 67-68

Gaza 54 GDP see gross domestic product geographic information systems(GIS) 27 Germany assistance to manufacturing industry 67-68 environmental technologyincentives 66,69-71 environmental consultation 92 international location decisions64 regional environmental policy50 Structural Funds 1994-1999 financial contribution 83 objective 1 79 objective 280,100, 103-121 objective 5b 81 Structural Funds 2000-2006 financial contribution 175

190 ECONOMIC DEVELOPMENT AND ENVIRONMENTAL GAIN objective 1 172-173 objective 2 173-174 objective 3 175 GIS see geographic information systems global environmentpilot projects 56 GNP see gross national product Greece assistance to manufacturing industry 67-68 environmental technologyincentives 69-70,72 Structural Funds 1994-1999 financial contribution 83 objective 1 79 Structural Funds 2000-2006 financial contribution 175 objective 1 172 gross domestic product (GDP) 47,79,80, 84 gross national product (GNP) 2,14,47, 50 Habitats Directive 164 ICC see International Chamber of Commerce IDA see Industrial Development Authority IEEA see integrated economic and environmental accounting industrial competitiveness 152-155 ecology 157 flight hypothesis10,6246 Industrial Development Authority (IDA) 6445 industry EAPs 39 SEA directive 43 EU funding 52,54 international location factors 59-66 environmental subsidies 66-75 Structural Funds 94 infrastructure 44,49,59,63,76,77,78, 92,94,101 innovation 72,73 integrated economic and environmental accounting (IEEA) 6 Integrated Pollution Prevention and Control (IPPC) Directive170 International Chamber of Commerce (ICC) 59 international plant location factors 10, 60-62 International Union for the

Conservation of Nature (IUCN) 4 INTERREG 176 inward investment (FDI) 10,19,59-75, 89,94,152 IPPC see Integrated Pollution Prevention and Control Ireland assistance to manufacturing industry 67-68 attracting polluting industry 64 Structural Funds 1994-1999 financial contribution 83 objective 1 79 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173 Israel 54 Italy assistance to manufacturing industry 67-68 environmental technologyincentives 69-70,72 Structural Funds 1994-1999 financial contribution 83 objective 19 objective 2 80 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173 objective 2173-175 objective 3 175 IUCN see International Union forthe Conservation of Nature Jimenez-Beltriin, Doming0 36 job creation 19,47,64,77,89 Jordan 54 Landfill directive 168-169 LCA see lifecycle analysis LEADER 176 Lebanon 54 LIFE see financial instrument forthe environment lifecycle analysis (LCA) 27 Limits to Growth 2 local authorities EU funding schemes 54,56 Structural Funds 104-105 Luxembourg assistance to manufacturing industry 67-68 environmental technologyincentives 69-70,72

INDEX 292 Structural Funds 1994-1999 financial contribution 83 objective 280 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 2173-174 objective 3 175 Maastricht Treaty 31,46-47, 50,57,150 Malta 54 MEANS see methods for evaluating actions of structural nature Mediterranean 39,91,92 methods for evaluating actions of structural nature (MEANS) 90 Morocco 54 multinational corporations 62-66 national conservation strategies 15 National Focal Point (NFP) 36 Netherlands, The assistance to manufacturing industry 67-68 environmental consultation 92 environmental technologyincentives 69-70,72 international location decisions64 regional environmental policy50 SEA 25-26 Structural Funds 1994-1999 financial contribution 83 objective 1 79 objective 2 80,100,103-107 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 2173-174 objective 3 175 NFP see National Focal Point NGOs see non-governmental organizations noise pollution 55,71 Nomenclature of Territorial Units for Statistics (NUTS)78 non-governmental organizations (NGOs) 56 Nordic countries 78,154 normative models 21,22,23 Nuclear ControlOffice 34-35 NUTS see Nomenclature of Territorial Units for Statistics OECD see Organisation for Economic Co-operation and Development

OP see Structural Funds operational programme Organisation for Economic Co-operation and Development (OECD) ecological modernization 18 economic instrumentsin environmental policy 66 environmental impact surveys50 industrial location research64 sectoral integration 7 Our Common Future 5 outward investment 63 ozone 42,56 partnership see Structural Funds partnerships PESCA see fishing industries, diversification in PMC see Structural Funds regional development programmes management committee polluter pays principle (PPP) 38,45,46, 66,75 pollution havens 63-64,66 Porter, Michael 152,154 Portugal assistance to manufacturing industry 67 Structural Funds 1989-1993 101-102 Structural Funds 1994-1999 financial contribution 83 objective 179 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173 PPI? see polluter pays principle precautionary principle 38 prevention principle 38 programme see Structural Funds regional development programmes project see Structural Funds projects proximity principle 38 qualified majority voting (QMV) 31-32, 33,45,46 R&D see research and development RDP see Structural Funds regional development plan RECHAR see coal-mining areas, reconversion of recycling 48,54,65,72,94,95 regional development agencies 60,65 regional development plan (RDP) see Structural Funds regional develop-

292

ECONOMIC DEVELOPMENT A N D ENVIRONMENTAL GAIN

ment plan regional development programmessee Structural Funds regional development programmes regional economic programmessee Structural Funds regional development programmes regional environmental competitiveness see Structural Funds regional environmental competitiveness regional environmental policy50 regional policy 18,49-51,76,93,151 see also Structural Funds research and development (R&D) 67,69, 73'77 RESIDER see steel areas, reconversionof Rio Declaration 5, 6 rural areas Fifth Framework Programme 53 Structural Funds 77,78,84 Russia 54 SEA see strategic environmental assessment SEAct see Single EuropeanAct SEM see Single European Market shared responsibility (fifth EAP) 38,57 Silent Spring 2 Single EuropeanAct (SEAct) 32,45,46, 57 Single European Market(SEM) environmental implications4546,58 European Parliament 33 Fifth EAP 38 investment implications 62 perspective on subsidies 68 sectoral integration 52 Structural Funds 77,101 single programming document (SPD) see Structural Funds single programming document small and medium-sized enterprise (SME) environmental technologyincentives 69, 71, 72, 73 EU surveys 67 Structural Funds 76,77,82,89, 135-136 Spain assistance to manufacturing industry 67-68 environmental technologyincentives 69-70,73 international location decisions 62

Structural Funds 1994-1999 financial contribution 83 objective 1 79 objective 2 80,100,112-121 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173 objective 2173-174 objective 3 175 SPD see Structural Funds single programming document SSA see strategic sustainability assessment state-of-the-environmentreporting see environmental reporting Structural Funds steel areas, reconversion of (RESIDER) 82 strategic environmental assessment (SEA) Second Assessment (Dobris 2) 42 EU directive 31,4344,151,163 mitigation procedures 26,44 scope and process 23-27,29,58 SEM programme 45 Structural Funds 90,96,99,113 strategic sustainability assessment (SSA) 12,27-28'29 strengths, weaknesses, opportunities and threats (SWOT) analysis ESDP 4849 economy-environment SWOT 97-98, 133,157 Structural Funds additionality 89 annual reports 157 budgets 77,82-83,85 composition and objectives 10,76-99 community initiatives (CIS) 1994-1999 82,83,2000-2006 85 community support framework (CSF) 86,92,96 eligible regions 172-175 environmental authorities, role of 128, 141 objective 1 1994-1999 78,79,81,83,100 2000-2006 84,85,172-173,175 objective 2 1994-1999 78,79-80,83,100 2000-2006 84,85,173-175 objective 3 1994-1999 78,82,83 2000-2006 84,85

INDEX 293 objective 4 78,82,83 objective 5a 78-79,82,83 objective 5b 78,80-81,83,100 objective 6 78,81-82,83,100 operational programme (OP) 86,96, 102 partnerships 8,53,76,85-86,104,158 programmes see Structural Funds regional development programmes projects advisory groups (AGs) 88,89,122, 136-137 analyses 120-121 application forms 134 award discretion 139 cofinancing 88 environmental content 89,144 evaluation 143-147 scoring systems 88,89,98,110,137 selection criteria 88,96,106-107, 110,119,137-139 regional development plan (RDP) 86, 96 regional development programmes environmental appraisal 50 competitiveness 10,11,97,121,123, 155-159 guidance 93-98,125-148 impact 90-93 potential 8-9 profile 113-114,128-129 strategy 133,141 targets 106-107,118-119,131-132, 142,157 evaluation ex ante 90,94,96,97,100,103-107 interim 90,97,100,139-143 ex post90,97,100,107-112,139-143 formulation and implementation 85-90 management 108-112,115-119 management committee (PMC)88 monitoring 90,110-111,119-121 priorities 86-87 measures 87 secretariat 87-88 sustainable development pilot project 115,118 single programming document (SPD) 86,96 Summit meetings51-52 supply chain linkages 65 sustainability 14, 17,20,27-28 sustainable development Amsterdam Treaty47

Business Charter 59 conceptual hierarchy21-23 CSD 6 definition and operationalization 12-16,28 Second Assessment (Dobris 2) 41 ESDP 4849 fifth EAP 38 growth of concern 6-7 language and logic 157-159 LIFE 54 SEA directive 43 sectoral integration 51-52 Structural Funds 9,91,92,94,95,96, 115,118,126,141 White Paper on Growth, Competitiveness and Employment 48 sustainable production and consumption 53,68 Sweden assistance to manufacturing industry 67-68 Structural Funds 1995-1999 financial contribution 83 objective 2 80,100,107-121 objective 5b 81 objective 681-82 Structural Funds 2000-2006 financial contribution 175 objective 1 172 objective 2 173-175 objective 3 175 SWOT see strengths, weaknesses, opportunities and threats synergies 17,28 Syria 54 taxation 39,42,51 technology ambivalent role 3,150 ecological modernization 17 Environmental Loan Facility 55 environmental technologyincentives 68-74 fifth EAP 39 international location decisions 64 Structural Funds 94 Technology and Environment Programme 66 technology transfer 76 White Paper on Growth, Competitiveness and Employment 47-48 TENS see Trans-European Networks

194 ECONOMIC DEVELOPMENT AND ENVIRONMENTAL GAIN tourism 38,43, 76, 77,78,89, 91,101, 105,115,122 Towards Sustainability 38 see also environmental action programmes trade-offs 15 trade unions 56 training 69,76,77,85,89, 114 Trans-European Networks (TENS)33 transport 38,41,43,46,47,49,50,51,52 Treaty of Rome 30,45 Tunisia 54 Turkey 54 UN see United Nations UNCED see United Nations Conference on Environment and Development UNCHE see United Nations Conference on the Human Environment UNEP see United Nations Environment Programme United Kingdom assistance to manufacturing industry 67-68 environmental appraisals 50 environmental technologyincentives 69-70,73 inward investment research62 Structural Funds 1989-1993 102 Structural Funds 1994-1999 financial contribution 83 objective 1 79 objective 2 80,100,103-107,112-121 objective 5b 81 Structural Funds 2000-2006 financial contribution 175 objective 1 172-173 objective 2 173-175 objective 3 175 United Nations (UN) Commission on Sustainable Development (CSD) 6 Conference onthe Human Environment (UNCHE) 4,7,150 Conference on Environmentand Development (UNCED)5-452 Environment Programme (UNEP) 4 survey of transnational corporations 63 United States 60-63,65 URBAN 176

Wallstrom, Margot 35 waste Cohesion Fund 51 Dobris Assessment 41 Environmental Loan Facility55 environmental loss 19,65 ESDP 49 Hazardous Waste directive 168 minimization incentive 73 SEA directive 43 SEM programme 46 Structural Funds 94, 104, 115 sustainable development 15 Urban Waste Water directive 168 Waste directive 166-167 Waste Management Strategy (EU) 167 White Paper on Growth, Competitiveness and Employment 48 water Cohesion Fund 51 Environmental Loan Facility 55 ESDP 49 EU directive 165-166 groundwater 166 LIFE 55 monitoring 166 SEA directive 43 Structural Funds 103-104 technology incentive, Greece72 WCED see World Commission on Environment and Development West Bank 54 White Paper on Growth, Competitiveness and Employment 4748,155 WHO see World Health Organization WICEM see World Industry Conference on Environmental Management World Bank 154 World Commission on Environment and Development (WCED) 5,6,13,59 World Conservation Strategy 4-5,13,15, 60

World Health Organization (WHO)41 World Industry Conference on Environmental Management (WICEM) 59 zero-growth option 16,18