Market based measures seek to encourage organisations (or individuals) to change behaviour so that efforts are made to improve environmental performance (reduce impacts) in a response to market signals. This approach usually attempts to encourage voluntary action to improve environmental performance and is therefore somewhat different from the traditional regulatory, command and control approach which is based on mandatory legal requirements.
Two important forms of market based measure are economic instruments and official voluntary schemes.
Economic Instruments
These are based on the concept that environmental impacts associated with resource use or the release of pollutants are ‘externalities’ - that is, the costs are not borne by those responsible for the impact but are instead imposed on the wider community. Environmental economic instruments, therefore, are an attempt to ‘internalise’ these costs - they aim to adjust market forces so that price signals better reflect environmental costs and benefits.
Examples include taxes and levies, such as:
- the ‘climate change levy’, introduced in April 2001 on business use of electricity, gas, coal and LPG
- the landfill tax - £24 per tonne of non-inert waste (2007/08)
These instruments introduce pressures for organisations to implement environmental protection measures, not through regulatory requirements, but primarily through cost control. Thus, companies may choose to either pay these taxes, or reduce the cost imposed by the tax, by either using less energy, or implementing waste minimisation measures to reduce the amount of waste going to landfill.
However, the economic instruments themselves are introduced by legislation - for example, the landfill tax was introduced by the Finance Act 1996. Further details concerning the landfill tax and climate change levy are provided in the main text.
Official Voluntary Schemes
These allow organisations to demonstrate their environmental credentials to relevant stakeholders through successfully participating in an official scheme on a voluntary basis.
| Voluntary Scheme |
Description |
Scope |
Stakeholder |
|
ISO 14001 -Environmental Management System (EMS) Standard |
Certification to conformance with the standard by a certification body that has been accredited to undertake such an assessment. |
All organisations, including manufacturing companies or industrial sites. |
Various, but especially key customers. |
| EU EMAS - Eco -Management and Audit Scheme II |
Registration with scheme following verification to conformance with its requirements by an accredited verifier. This includes the validation of a public environmental statement. An initial environmental review is a requirement. The central environmental management system can be one that is certified to ISO 14001. |
All organisations. |
Various, but especially key customers. |
| EU Eco-label Award Scheme |
Manufacturers of relevant products can apply to the national competent body for an eco-label. These are awarded if the product meets certain ‘ecological criteria’ established by the EU. |
Consumer products in selected product groups. |
Consumers. |
| BS 8555 – Environmental Management Systems – guide to the phased implementation of an environmental management system (including the use of environmental performance evaluation) |
New standard providing a guide to the phased development, implementation, maintenance and improvement of an environmental management system. It describes a 6-phased incremental approach to implementing an EMS using environmental performance evaluation. It is aimed particularly at smaller companies that want to gain recognition for being en route to a full EMS. |
All organisations, but particularly useful for smaller companies. |
Various, but particularly large companies who are looking for improved environmental performance in their supply chain |
Both the EU initiatives were introduced by an EU Regulation (EMAS, originally published in 1993, was updated by Regulation EC 761/2000 and the Eco-Label Award Scheme by Regulation EEC 880/92), to ensure that harmonised schemes apply across the Member States. However, while these schemes were introduced by EU legislation, company participation in them is not a regulatory requirement - it is voluntary.
Revision of the 1993 EMAS Regulation was agreed by the EU in February 2001. Revisions include widening the scope of sites to which it can apply, and making allowances for ISO 14001 certified systems to be acceptable as the environmental management system part of the Scheme.
ISO 14001: 2004 was published on 15th November 2004. The changes to the standard have made it more 'user-friendly' and clarify some of the requirements. It also brings some of the clauses in line with ISO 9001:2000.
The pressure to become involved in such schemes is primarily felt through the supply chain, from customers. However, financiers, neighbours and others may also be important stakeholders. The regulatory authorities may also consider the implications of dealing with regulated operators that have environmental management systems certified to ISO 14001 or registered with EMAS II. Regulatory compliance is a key requirement of both EMAS II and ISO 14001.