ECONOMIC AND SOCIAL RESEARCH COUNCIL KEY FINDINGS REPORT
Reference: ES/K007440/1 Investigator/s: Professor Frances Bowen Title: Defra / EA Fellowship: Professor Frances Bowen
1. Summary of Project Findings (circa 500 words)
Environmental regulators in many countries face the challenge of maintaining high quality environmental protection and supporting their governments economic growth policies. How can environmental regulatory policy both protect the natural environment and help drive the innovation and investment needed for longer-term economic growth? The ESRC, the UKs Department for the Environment, Food and Rural Affairs (Defra) and the Environment Agency (EA) jointly initiated this knowledge exchange project to explore environmental regulation and its effects on innovation, growth and business behaviours and the links between them, and investigate the scope for new approaches to regulation.
This project had two primary objectives, one focusing on research findings (objective 1), and one on capacity-building and knowledge exchange (objective 2):
Objective 1. To collate research evidence on which approaches to environmental regulatory policy would best support a sustainable economy, focusing on the relationships between environmental regulation, innovation, growth and firm performance.
Objective 2. To explore the rationale for future research collaboration on regulation for a sustainable economy and make appropriate recommendations on what form of future collaboration would be most valuable.
In order to achieve these objectives, Professor Frances Bowen conducted a 9-month policy placement at Defra. She was physically located with the Better Regulation Team at Defra that is responsible for delivering the UK governments commitments to streamline and simplify environmental regulations in the short term, and horizon scanning for broader regulatory reform in the long term.
Question 1: What does current research show about environmental regulation, innovation, growth and firm performance?
In order to answer this question, Professor Bowen conducted a systematic review of the literature on the relationships between environmental regulatory reform actions and economic growth. The review included not only academic literature, but also over 30 reports commissioned by Defra and other non-academic agencies on the actual and potential effects of regulation. The consensus view is that the impact of environmental regulation on growth depends on the regulatory design and the specific context. What this project adds to the literature is a sharper sense of which mechanisms link environmental regulation and growth, how and over what timescale.
Based on the review, Professor Bowen developed a framework including six mechanisms linking environmental regulatory reform with economic growth: infrastructure, investment in skills, innovation, inefficiency, information and integration ('the 6Is'). Mapping the growth mechanisms against specific regulatory instruments revealed some 'sweet spots' where sound evidence shows that specific environmental regulatory approaches may enhance business productivity, output, efficiency or lower costs. The review showed that using information-based regulation to drive changes in business behaviours has the potential to multiply positive links between environmental protection and economic growth. However, more research is needed on the unintended consequences of alternatives to traditional regulation such as industry self-regulation, certification or ranking schemes.
Question 2: How might the ESRC and environmental policy-makers collaborate to drive this agenda forward in the future?
On a strategic level, Professor Bowen held discussions with senior Defra and EA analysts on the importance of understanding dynamic business responses to environmental regulations, as well as their static net economic costs and benefits.
The rationale and form of several potential collaborative projects were discussed, particularly on information-based regulation and alternatives to traditional regulation. Some of these ideas have already been taken forward as part of other ESRC initiatives, such as within the ESRCs recent Sustainable Prosperity strategic steer in the 2014 large grants and centres call, and a proposed joint research initiative between Defra and other government departments on Evaluating Policy in Complex Systems. Professor Bowen also provided input into Defras new Network Evidence Strategy (June 2014), which identifies smarter regulation as a Strategic Evidence Priority area to drive environmental innovation and business growth. Other suggested projects have so far not been taken forward due to the current public sector budgetary constraints.
Professor Bowen continues to collaborate with Defras Better Regulation Team and the EA to link specific academics with policy teams as opportunities arise (e.g. hosted visits by Prof Neil Gunningham from Australia National University and Prof Tom Lyon from the University of Michigan).
On a more practical level, one of the most valuable aspects of the fellowship for Defra and the EA was that Professor Bowen was able to draw together a large body of research and relationships with others across Whitehall who were also interested in the relationships between business regulation, innovation and growth. The project helped build the long-term relationships needed to connect current and future civil servants with valuable past relationships and research, and to build a platform for a more ambitious research agenda in the future.
2. Exploitation Routes(circa 250 words)
The 6Is framework is already being put into use within the Department for Environment, Food and Rural Affairs (Defra) to communicate how the department can contribute to growth. As part of the project, Professor Bowen worked with Defra's Strategy Hub team to provide a sound evidence base and a conceptual framework for a 'Growth Roadshow'. The roadshow will provide staff development across Defra's policy teams on the connections between Defra's activities and growth. Professor Bowen will contribute with a 3-minute YouTube slideshow with voiceover on what growth is and what drives it. The Environment Agency is also interested in sharing this YouTube clip with its staff as it rolls out communications in response to new duties to have regard to growth in the Deregulation Bill that is currently under consideration in parliament.
More specifically, the project suggested several critiques and extensions to Better Regulation initiatives within Defra and across other government departments. These have been shared with teams within Defra, across Defra's regulatory delivery network, the Better Regulation Delivery Office (BRDO) and Better Regulation Executive (BRE), and the cross-whitehall group on the economics of regulation. During the project, Professor Bowen presented and gained feedback on the project from more than a dozen different groups in Whitehall and the Defra network, led three workshops on research methods and approaches, gave three keynote addresses to policy audiences, and met with over 60 individuals to discuss the project and its findings. This fellowship has laid the foundation for the ongoing relationships required to shape the conceptual foundations of more effective regulatory delivery in the future.
The project results are also being communicated to academic audiences through two presentations at two international conferences. Professor Bowen has submitted one academic journal article to review (on the efficiency and effectiveness of industry self-regulation), and plans to submit another journal article in 2014 (on regulators' reponses to the growth duty).
3. Potential use in a non-academic context (circa 250 words)
The primary use of this research in non-academic contexts is by government departments and regulatory agencies responsible for regulating and influencing behaviours. The research focused on firm responses to environmental regulation, but many of the insights may also be relevant to firm responses to a wide range of regulation such as behaviours relating to health and safety, rural development, housing, energy management, product labelling etc. Representatives of several government departments have expressed an interest in applying this research approach to their own work, including the Department for Energy and Climate Change (DECC), the Department for Business, Innovation and Skills (BIS), and the National Audit Office (NAO).
5. Sector Coding
Agriculture, Food and Fisheries Climate Change Economy Energy Environment Government & Diplomacy Innovation Land Use Waste Water
ECONOMIC AND SOCIAL RESEARCH COUNCIL