Week 7 : Heirachies : Public Policy

            LCAs are a tool for assessing the environmental impact of products. Think up four ways in which government can increase the use of LCAs through external control and setting boundary conditions. Which way would you choose and why?

There is no doubt that environmental governance is crucial to reduce some of the negative environmental impacts of some products; as environmental problems will not be solved by ‘free market’ or ‘market-led’ solutions; as there is still no strong evidence that firms devote substantial profits to the public interest through their CSR, and such strategy will always remain complements to, rather than substitutes for, government action.

For this week's assignment, I suggest four different policies (means of intervention) in which a government could employ to encourage firms to utilize LCA methodology to asses the environmental impact of their products:

·        External Control

1.     Nationalized delivery

Government finances and delivers on environmental protection directly though central     government departments , (it is not of the firms responsibility to carry out LCAs)… but products have to meet the standards of  LCAs carried out by the government. (Newell 2010)argues that government should help to compensate for underinvestment by private firms by focusing on areas firms otherwise ignore, such as fundamental research

2.     An ''input –based intervention ''

The government requires firms to carry out LCAs specifically using its market-  based instruments like taxation, exemption

3.     Economy-wide relative prices

The government controls pricing of the goods according to their environmental impacts, or quantity of the social good or externality (e.g. carbon dioxide (CO2) emissions and implements policy to correct present prices. (here LCA is not specifically requires as a tool, but in this way, R&D of firms are likely to find LCA as an adequate solution to produce products that best achieve profit.

·        Setting boundaries (boundary conditions):

4.     ''Government by discussion'' : Moral suation

 In this form, lobbying takes place between the government and a given firm, ending with bilateral agreements, here, it is all up to the firm's Environmental management system/ (R&D).  The Government offers subsidies and sets the overall objectives (boundaries), and leaves it up to the firms (market) to deliver.

Conclusion:

    

  I choose method four  'Government by discussion'' : Moral suation as the best solution to encourage LCAs conduction by firms. However, I believe mixing of instruments of external control and boundary conditions is more efficient. Taxes and economical penalties may provide a way to ensure that firms will do their best to achieve the optimal environmental objectives, but it is also better to leave it up to firms to decide on the optimal methodologies  in order to best  meet these objectives that is because, governments never have complete information to put an optimal policy (e.g. on aggregated private sector abatement costs) so that a balance between costs and benefits can be struck.

   Moreover, governments are comprised of individual humans, and humans are subject to lobbying, manipulation, and subtler forms of persuasion by others who have an incentive to shape policy for their own benefit and hence, environmental governance and policy should never be an absolute duty of the government , but instead, carried out by complex networks of firms and governments.

References:

·        Hepburn (2010): Environmental policy, government,

and the market, Oxford Review of Economic Policy, Volume 26, Number 2, 2010, pp.117–136

·        Newell, R. (2010), ‘The Role of Markets and Policies in Delivering Innovation for Climate Change Mitigation’,

Oxford Review of Economic Policy, 26(2), 253–69