Brunton, Nicholas --- "Environmental Regulation: The Challenge Ahead" [1999] AltLawJl 24; (1999) 24(3) Alternative Law Journal 137

According to the law of entropy, what is hot is cooling down continually and irreversibly, and what is cold is tending to heat up, and the result is the progressive degradation of matter within a closed system like ours. The root cause of scarcity, and hence of economic value, lies in the degradation of energy and raw materials through entropy: the use of highly concentrated mineral resources with low entropy transforms them into high entropy matter, which is disordered and so no longer reclaimable. Like any other vital process, the economic process is irreversible.[16]

Thus the economy involves a throughput whereby low entropy matter and energy are imported from the environment into our social and economic system and high entropy outputs are exported back to the environment, usually as waste and pollution. If the entropic throughput exceeds the inputs of low entropy sunlight (which is the case), ultimately humans will deplete the terrestrial stocks of low entropy fuels (typically fossil fuels and minerals) and exhaust the capacity of the earth to deal with waste and pollution. This understanding is in direct contrast to the neoclassical model of a circular or spiral flow of exchange. This analysis sees the economy and the environment integrally linked, with decisions made in relation to one fundamentally affecting the other.

Strong sustainability rejects the argument that one must have economic growth in order to protect the environment. Underlying this argument is the proposition that as income goes up there is increasing environmental degradation up to a point, after which environmental quality improves. Arrow and others have argued that while economic growth may be associated with improvements in some environmental indicators, it has not been established that economic growth is sufficient to induce environmental improvement in general. They contend that environmental effects of growth cannot be ignored, and that the Earth’s resource base is not capable of supporting indefinite economic growth.[17] Moreover, they argue that the certain long-term and more dispersed pollutants such as carbon dioxide increase with income; that the model does not apply for resource stocks such as soils, forests, and other ecosystems; and that it ignores system-wide consequences of reducing emissions, such as the impacts of pollutants being transferred to other locations or to other media.

Where the SS position departs from the WS position is that it considers that these ecological constraints preclude continual economic growth and environmental protection. It argues for a change in the allocation of resources over time which does not affect the overall parameters of ecosystems; an economy that does not threaten the stability or resilience of the system or its key components:

Sustainability does not imply a static, much less stagnant, economy, but we must be careful to distinguish between ‘growth’ and ‘development’. Economic growth, which is an increase in quantity, cannot be sustainable indefinitely on a finite planet. Economic development, which is an improvement in the quality of life without necessarily causing an increase in quality of resources consumed, may be sustainable.[18]

The ecological economists argue that natural capital must be kept constant (or increased) and that whatever the benefits foregone, any losses in natural capital (in aggregate, not necessarily for each asset) are unacceptable. Losses in natural capital must be prevented via monitoring of physical indicators.

The SS position is less convincing in the form of the policy instruments suggested to attain these goals. They typically concentrate on the specification of property rights rather than using prices or market valuations as policy instruments. The ecological economists argue that the risk of environmental harm occurring is less with property-rights systems because of numerous problems with poor information as well as other factors. Thus in relation to pollution, the ecological economists propose measures such as direct regulation, property rights, marketable permits, subsidies and the use of environmental bonds to ensure sustainability. While more aware of ecological constraints, and in some aspects more theoretically advanced, their recommendations are not all that different from those of the London School of environmental economists.

Very strong sustainability (VSS)

The VSS position is still further along the spectrum. This interpretation of sustainable development has a number of important conceptual premises. First, it argues that the starting point for analysis is not the circular flow of exchange model, but a one-way throughput of matter and energy. Second, while markets can determine an optimal allocation among competing uses of a resource flow, they cannot of themselves determine the optimal scale.[19] Third, the evidence of the greenhouse effect, the depletion of the ozone layer and the prevalence of acid rain all constitute evidence that we have already gone beyond the horizon for the optimal scale of the macro-economy.

This position argues for a wholesale reordering of current approaches to the economy/environment equation. It emphasises that economic and population growth ought to be close to zero because of the constraint of thermodynamics and the limited influx of solar energy. While this steady state paradigm seeks to limit the scale of human activities in the macro-economic sense, it still allows for ‘development’ through social preferences, community-regarding values and generalised obligations to future generations. Thus, the VSS position places a premium on playing safe, so the benefits are loaded in favour of an assumption that critical thresholds are under threat.

The fundamental problem in actualising such a ‘steady state’ society is the forces and controls necessary to dampen the inputs to the social and economic system. Although proponents of this position do not contemplate controls beyond those applied to economic institutions, Clements argues that if such controls do go beyond the economic sphere they could extend to economic sanctions and educational indoctrination and that such controls could generate extensive ‘personal and cultural suffering’.[20]

Sustainable development in Australia

In Australia, ecologically sustainable development (ESD) is now an accepted principle of environmental policy. After a rather tortuous process of negotiation and compromise, the Commonwealth, States and Territories agreed on the National Strategy for Ecologically Sustainable Development (the ESD Strategy) in December 1992. At the same time, the same governments agreed to the Intergovernmental Agreement on the Environment which incorporated ESD as a primary policy objective.

The ESD Strategy has as its goal ‘development that improves the total quality of life, both now and in the future, in a way that maintains the processes on which life depends’. It contains three core objectives:

•	to enhance individual and community wellbeing and welfare by following a path of economic development that safeguards the welfare of future generations;
•	to provide for equity within and between generations (intergenerational equity); and
•	to protect biological diversity and maintain essential ecological processes and life support systems.
•	In addition, the ESD Strategy has seven guiding principles which ought to be considered in pursuing the goal of sustainable development:
•	decision-making processes should effectively integrate both long-term and short-term economic, environmental, social and equity considerations (a form of intergenerational and intragenerational equity;
•	where there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation (the precautionary principle);
•	the global dimension of environmental impacts of actions and policies should be recognised and considered;
•	the need to develop a strong growing and diversified economy which can enhance the capacity for environmental protection should be considered;
•	the need to maintain and enhance international competitiveness in an environmentally sound manner should be recognised;
•	cost-effective and flexible policy instruments should be adopted, such as improved valuation, pricing and incentive mechanisms; and
•	decisions and actions should provide for broad community involvement on issues which affect them.

In the process of developing the ESD Strategy, the Commonwealth bureaucrats greatly watered down the measures recommended by the working groups which were established to develop the strategy. Moreover, without consulting the working groups, an intergovernmental steering committee then inserted into the ESD Strategy an explicit commitment to ‘develop a strong, growing and diversified economy which can enhance the capacity for environmental protection’ and the ‘need to maintain and enhance international competitiveness’.

The politics of these last minute changes is a reflection of the long held belief in the benefits of economic growth and development, a belief which has featured prominently in modern Australian history. The Commonwealth is committed to economic growth as it exercises the most control over macro-economic policy and income taxation and thus carries the burden of discontent over unemployment, high inflation and low or negative growth in the economy. The States and Territories have restricted sources of revenue and thus are constrained and limited in their policy choice. One area under their control with the potential for expansion is natural resources. Thus the States and Territories understandably become committed to their exploitation, and consequently, generally hostile to conservation. They are always tempted to maximise resource throughput in the short term rather than to husband resources for an optimal return over time. This results in a strong, at times authoritarian, commitment to ‘development’ at any cost.[21] As the ESD Strategy incorporates a commitment to continued economic growth, it clearly reflects the weak or even the very weak sustainability position. Moreover, the measures it recommends are unlikely to prevent the ongoing degradation of the Australian environment.

Evidence of this is now emerging. Picton and Daniels have shown that while there has been a moderation or reduction in demand observed for some environmentally sensitive inputs, this has been more than offset by substantial growth in others.[22] Accordingly, they argue that there is no convincing evidence that the Australian economy has undergone ‘ecological restructuring’. It has been estimated that on current trends, industrial production is likely to approximately double between now and the year 2020 with total wastes and emissions increasing by around 60% and material use increasing by 80%.[23] This is reflected in the general increase in the numbers of premises required to hold licences to emit pollution. New South Wales, for example, generally issues 300 additional licences under the Pollution Control Act 1970 (NSW) each year.[24] Population and demographic pressures are likely to increase. The Resource Assessment Commission Coastal Zone Inquiry noted that if current demographic trends continue, then over the next decade it can be expected that an additional 400,000 dwellings may be constructed in the non-metropolitan coastal zone.[25] This will place a great deal of pressure, in terms of resource use and disposal, in a relatively small area and on highly sensitive coastal and marine environments.

While there have been many innovative and exciting recent legislative reforms, Australia’s environmental legal framework is still based on a weak sustainability foundation. Pollution law has reduced pollution from point sources, but it is proving ineffective against mobile or diffuse sources. In many situations, such as the urban air environment and inland rivers, these sources are the major problem. The legislation continues to adopt and rely on the outdated and inappropriate concept of assimilative capacity. Each State and Territory now has integrated environmental protection statutes supported by ambient standards for air and water quality. Yet the ambient standard model was rejected in the United States in the early 1970s as a key regulatory mechanism. The legislation does provide regulators with a suite of new tools to protect the environment. Those tools include environmental auditing, environmental improvement programs, clearer investigation and enforcement powers, higher penalties and a wider range of remedies on conviction (such as adverse publicity orders). However, their effectiveness depends on the resources and capacity provided to the administering agencies.

Another problem with current pollution law referred to earlier is its tendency to cause displacement or media transfer. The transfer of waste from rivers to sewers to the ocean via offshore outfalls and air pollution control equipment collecting waste which then goes to landfill are notable examples. Moreover, there are very few laws which require organisations to actually reduce pollution and implement clean production, obligations which are hardly novel concepts. Governments have preferred education, promotion and self-regulation to achieve these goals but their success has been very limited.

There are some positive signs that governments are beginning to see economic instruments as an important adjunct to the regulatory toolbox. Although they are not the general panacea as some economists suggest, these instruments do have significant potential in certain situations.[26] With regard to pollution, load-based licensing has emerged as a favoured approach. This system imposes fees depending on the type of industry, the effects of the pollutant, the quality of the receiving environment and the degree to which the polluter has reduced emissions. It aims to instil the polluter pays principle and provide an ongoing economic incentive to reduce emissions. Such a scheme was introduced on 1 July 1999 in New South Wales under the Protection of the Environment Operations Act 1997. Whether the fees are high enough to provide an incentive to implement pollution reduction remains to be seen. Other jurisdictions, such as the Australian Capital Territory, are looking closely at the New South Wales model.

In the use and allocation of natural resources, economic concepts, largely in the form of transferable property rights, are beginning to be used in a number of jurisdictions. Examples include individual transferable quotas for fishery resources, carbon sequestration in forestry plantations, and transferable water entitlements. It is still too early to empirically assess the effectiveness of these innovative regulatory mechanism, but at least at the theoretical level, they offer considerable promise. Concerns have been raised by some over the degree to which these tools delegate the responsibility of the state to protect the environment for future generations to the market mechanism. While these economic instruments seem to have an ‘environmental bottom line’ (such as determining the total allowable catch or total amount of water to be extracted), there are fundamental political and ethical implications to the wide adoption of these instruments, quite apart from the lack of detailed empirical analysis of their effectiveness.

In other areas, environmental law has much to achieve. The loss of biological diversity, perhaps the most significant environmental problem in Australia, continues apace. Legislation which protects endangered species, preserves representative ecosystems, controls introduced species, and prevents general land degradation is yet to be enacted in many jurisdictions. Directly related to biodiversity loss is the rate of clearance of native vegetation. Legislation has not halted the increase, let alone reversed, the rate of land clearing across the nation. While South Australia has achieved significant outcomes with its Native Vegetation Act 1991 (SA), other jurisdictions, particularly New South Wales and Queensland have yet to impede the bulldozer’s path.

In many respects, Australian environmental law is passing through its second stage. The first stage was in the late 1960s and early 1970s which saw a wave of legislation relating to pollution and environmental impact assessment. Now nearly all of this has been, or is about to be, repealed and replaced by more detailed and comprehensive statutes. The early gains were relatively easy, but the present problems are harder to solve. In my view, the second stage legislation will still not be enough to ensure a sustainable future. What directions should our laws then take?

Future directions for Australian environmental policy

The continuing decline in many environmental indicators suggests that a fundamental reappraisal of current approaches is required if sustainability is to be achieved. At the macro-level, it is arguable that the strong sustainability position offers the most promise as a philosophical basis from which to construct a policy framework. This position would require a concerted attempt at defining sustainable population goals and identifying and maximising appropriate forms of economic ‘development’ as opposed to economic growth per se. This would require detailed analysis of current policies dealing with energy, transport, agriculture, resource use and extraction and so on and assessing their impacts on sustainability within the strong sustainability paradigm. Policies would then have to be modified accordingly, on a whole-of-government basis. Another aspect of macro-level policy choice is the use of the tax system to achieve environmental outcomes. The concept of ecological tax reform,[27] well developed in Europe, has yet to achieve any status at the political level in Australia. Many see the recent changes to the tax system as a chance gone wasted.

It is obvious that to confront the reality that current policies are not truly ecologically sustainable and to respond appropriately is a formidable and difficult task. Few governments, if any, have made significant progress. Yet the evidence is that unless such issues are debated, defined and appropriate targets achieved, environmental policy will remain as window dressing. All it may do is slow down the inevitable environmental degradation. For example, there is clear evidence that current efforts to control air pollution and diffuse source water pollution will be more than offset by population growth and by increases in the overall level of consumption.

Assuming for the moment that appropriate maco-level policies are in place, what direction should Australia’s current environmental regulation take? Because of our limited understanding of ecology and the limits of the laws of thermodynamics, environmental policy requires a more precautionary approach to the interaction of the economy and the environment. Precaution and prevention need to be institutionalised, such that decisions which have the potential to harm ecosystems cannot be made without considering ways to prevent that harm. One of Australia’s most influential ecological economists argues that the precautionary principle requires:

•	subjecting projects to intergenerational impact assessment;
•	developing national and regional biological diversity objectives;
•	providing community consultation and education;
•	setting safe minimum standards;
•	amending monetary, taxation and other macro-economic policies;
•	extending markets to recognise the importance of ecological functions;
•	pursuing waste minimising and resource conserving strategies;
•	shifting the burden of responsibility and proof to the polluter or developer;
•	improving resource pricing to reflect the full cost of environmental harm (the polluter pays principle); and
•	monitoring progress through state of the environment reports.[28]

Others would suggest that even stronger measures are required, particularly in relation to biological diversity, greenhouse gas emissions and endangered species. One approach that ought to be rejected is increasing voluntary and non-regulatory measures. Such measures have not been very successful. For example, the Australia State of the Environment Report 1996 found that while Landcare has been successful in enlisting community support for the sustainable use of resources, the effectiveness of voluntary measures relating to revegetation and farm forestry, broadacre soil conservation and fertiliser management, vegetation clearance, tree planting, streambank stabilisation, and other catchment management and Landcare programs has been poor.[29]

Regulatory policy needs to adopt a holistic approach to the management of ecosystems. As the Australia State of the Environment Report 1996 noted, there is little likelihood of a coherent policy emerging from the traditional compartmentalised approach in which different departments or different levels of government each handle different, small parts of the problem.

There is a need too for our frameworks to be sufficiently flexible to allow for policy experimentation, close attention to particular situations, and learning from experience. The need for this adaptive management approach comes from recent ecological research, the results of which emphasise the role of interaction between and within natural systems.[30] Thus the species composition of a river, for example, may be influenced by the clearance of native vegetation which induces higher rates of soil erosion and sediment inflow to the river and the amount of shading of the river from overhanging trees.

In relation to pollution, Australia needs to adopt and implement strategies that entail the progressive reduction (in both volume and concentration) of the wastes discharged to the environment. This will foster the identification and development of life-cycle approaches to product design, creation, use and disposal, the development of new products, markets and uses for wastes discharged. The goal should be a zero discharge of most industrial and all toxic and hazardous wastes, implemented in stages through licensing and agreements, with priority given to the most harmful pollutants. For less harmful pollutants, rather than zero discharge, emissions should be reduced to the point that such reductions do not increase environmental burdens elsewhere in other media. For diffuse sources, the goal should be to implement strategies which reduce the contribution of these sources to a few per cent above natural inputs. These targets, naturally, cannot be achieved immediately or be required in time frames that cause severe dislocation to industry, regulators and the community. By clearly articulating such goals in legislation and requiring the development and implementation of pollution reduction plans over specified periods, reductions should be achievable.

Finally, it is vital to recognise that the community has an important role in the management of ecosystems. This is because legislative goals such as ecologically sustainable development, protecting the health, integrity or biological diversity of the environment are normative terms embodying certain values. If environment protection agencies are legally bound to protect these values, the values by themselves do not provide any specific guidance to decision making. They require the consideration not only of ‘scientific’ criteria, but also the values and needs of the relevant community, especially indigenous communities. This poses a challenge to scientists who often believe that the best option ‘is understood as one being selected on a scientific basis, using scientific criteria’ which ‘should be objective and ought to be universally applicable’.[31] This view, called ‘technological determinism’, implies that only those technically qualified can understand and hence delineate the actual constraints. By implication they should be in control of decision making. This ignores the normative values implicit in such judgments. However, by recognising the role of public participation, the ecosystem management approach seeks to include non-technical values in decision-making processes. Of particular importance in this regard is the incorporation of indigenous Australians into the processes and institutions for environmental protection.

References

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[1] See Commonwealth of Australia, Australia State of the Environment 1996, CSIRO Publishing, Canberra, 1996; New South Wales Environment Protection Authority, State of the Environment Report 1997, NSW EPA, Sydney, 1997.
[2] Leopold, A., A Sand County Almanac, Oxford University Press, Oxford, 1949, reprinted in 1968; Naess, A. ‘The Shallow and the Deep, Long Range Ecology Movement. A Summary’, (1973) 16 Inquiry 95.
[3] World Commission on Environment and Development, Our Common Future, Australian Edition, Oxford University Press, 1987, p.84.
[4] See Commonwealth of Australia, National Strategy for Ecologically Sustainable Development, AGPS, Canberra, 1992. The prefix ‘ecologically’ has been widely used primarily to clarify that ‘sustainable’ does not refer to sustainable economic development.
[5] See Commonwealth of Australia above, ref 4, p.8.
[6] See for example s.6(2) Protection of the Environment Administration Act 1991 (NSW) and s.10(b)(iv) Environment Protection Act 1993 (SA). Other statutes refer generally to the principles of ecologically sustainable development, see for example s.3(b) Coastal Protection and Management Act 1995 (Qld).
[7] See Harding, R. and Fisher, L., ‘The Precautionary Principle in Australia’, in O’Riordan, T. and Cameron, J. (eds), Interpreting the Precautionary Principle, Earthscan, London, 1994, pp.252-61, at p.255; Rothwell, D.R. and Boer, B., ‘From the Franklin to Berlin: The Internationalisation of Australian Environmental Law and Policy’[1995] SydLawRw 17; , (1995) 17 Sydney Law Review 242; Bates, G., ‘Implementing Sustainability’, (1994) 11(4) EPLJ 251.
[8] Unreported, Land and Environment Court of New South Wales, 1026/92, 10041/93, Stewart, A., 23 July 1993. The applicant appealed this decision, but that appeal was dismissed, see Simpson and Anor v Ballina Shire Council (1994) unreported, Pearlman J, No 10206 of 1992.
[9] (1994) ELR 060.
[10] (1994) 84 LGERA 397.
[11] (1994) 84 LGERA 397, at 419.
[12] Commonwealth of Australia, above, ref 1, p.ES-8.
[13] Turner, R. K., ‘Sustainability: Principles and Practice’, in Turner, R.K. (ed), Sustainable Environmental Economics and Management: Principles and Practice, Belhaven Press, London and New York, 1993, pp.3-15.
[14] See for example Pearce, D.W. and Turner, R.K., Economics of Natural Resources and the Environment, Earthscan, London, 1994; Klassen, G.K. and Opschoor, J.B., ‘Economics of Sustainability and the Sustainability of Economics: Different Paradigms’, (1990) 4 Ecological Economics 93; Pearce, D.W. and Warford, J.J., World Without End: Economics, Environment and Sustainable Development, Oxford University Press, Oxford, 1993.
[15] The first law of thermodynamics provides that matter and energy is neither created nor destroyed, it is merely rearranged. The second law provides that there is a universal tendency for entropy to increase, to move from a state of order to disorder.
[16] Georgescu-Roegen, N., quoted in Ravaioli, C., Economists and the Environment, Zed Books, London, 1995, pp.54-5.
[17] See Arrow, K., Bolin, K., Costanza, R., Dasgupta, P., Folke, C., Holling, C.S., Jansson, B-O., Levin, S., Mäler, K-G., Perrings, C. and Pimmentel, D., ‘Economic Growth, Carrying Capacity, and the Environment’, (1995) 268 Science 520, reprinted in (1995) 15 Ecological Economics 91.
[18] Costanza, R., Daly, H. E. and Bartholomew, J. A., ‘Goals, Agenda, and Policy Recommendations for Ecological Economics’, in Costanza, R. (ed), Ecological Economics: the Science and Management of Sustainability, Columbia University Press, New York, 1991, p.7.
[19] Daly, H., ‘Steady State Growth Concepts for the Next Century’ in Archibugi, F. and Nijkamp, P. (eds), Economy and Ecology: Towards Sustainable Development, Kluwer Academic Publishers, London, 1989, pp.73-87; Daly, H.E., Steady State Economics,Earthscan, London, 1992.
[20] Clements, C., ‘Stasis: The Unnatural Value’, in Elliot, R. (ed), Environmental Ethics, Oxford University Press, Oxford, 1995, pp.223-4.
[21] Walker, K., ‘Conclusion’, in K. Walker. (ed), Australian Environmental Policy, (1992), New South Wales University Press, Sydney, p.240.
[22] Picton, T. and Daniels, P., ‘Ecological Restructuring and the Australian Economy’, (1998) 5(4) AJEM 200.
[23] Hamilton, C., Hundloe, T. and Quiggin, J., Ecological Tax Reform in Australia, Using Taxes, Charges and Public Spending to Protect the Environment without Hurting the Economy, Australia Institute, Discussion Paper No 10, Canberra, 1997, p.30.
[24] See Environment Protection Authority of New South Wales, Annual Report 1993-94, Sydney, p.41; Environment Protection Authority of New South Wales, Annual Report 1994-95, Sydney, p.44; Environment Protection Authority of New South Wales, Annual Report 1995-96, Sydney, p.44.
[25] Resource Assessment Commission, Coastal Zone Inquiry Final Report, AGPS, Canberra, 1993, p.46.
[26] Brunton, N., ‘Economic Instruments for Water Pollution Control: The Australian Experience’, (1999) 6(1) AJEM 21-31.
[27] Hamilton, C., Hundloe, T. and Quiggin, J., above.
[28] Young, M.D., For Our Children’s Children: Some Practical Implications of Intergenerational Equity, the Precautionary Principle, Maintenance of Natural Capital, and the Discount Rate, AMNRS Programme Division for Wildlife and Ecology, CSIRO, Working Document 93/5, 1993, p.13.
[29] Commonwealth of Australia, Australia State of the Environment 1996, CSIRO Publishing, Canberra, 1996, Table 7-14 Summary, pp.7-44.
[30] Commonwealth of Australia, above, ref 30, p.289.
[31] Kullenberg, G., ‘Summary of Workshop’, in G. Kullenberg (ed), The Role of the Oceans as a Waste Disposal Option, Reidal Publishing Co, 1986, p.701.