Published 09 June 2011

Environmental-driven business development

- Analysis of national and regional preconditions

The Swedish Agency for Growth Policy Analysis (Growth Analysis) has been given the task by the Government to analyse the conditions for environmental-driven business development. (1)

The concept 'environmental-driven business development' partly applies to development of a sustainable economy - production and consumption that does not lead to negative environmental and health effects. The concept also includes making use of the business opportunities that such a transition carries with it, a structural change that is important in the long term but also produces winners and losers in the short term. In the report in question, Growth Analysis reports the first step in this task and aims to provide an overview of national and international research directed at investigating the conditions for, and effects of, public efforts to promote environmental-driven business development. Included in the task is a compilation of indicators that are used to follow up the progress and effects of the public efforts. Whilst planning the task, a request was received from the Department to briefly compile arguments for selective policy instruments.

Selective versus General Policy Instruments

The aim of the following study is to analyse how environmental policy instruments should be combined for an optimal economic effect to society. As an introduction to the overview of the research literature it is relevant to summarise existing knowledge about the need for environmental policy instruments, promotional efforts and the role of the selective policy instruments. The overview partly shows that there is a great amount of criteria for the choice of policy instruments, of which many cannot be evaluated from a strictly scientific perspective, as they fall in moral and political consideration. The most common criteria are environmental efficiency, cost-effectiveness, distributional effects, feasibility and effects on technical development. The overview indicates that effective environment policy is based upon a combination of policy instruments. The reason for this is that it is seldom possible to achieve the basic effects for the relevant criteria when only using one policy instrument. A strong argument for targeted, selective policy instruments is that generally, economic policy instruments provide an all too weak support for technical development. One cause of this is because technical development is characterised by positive externalities in the form of knowledge that easily 'trickles down' to other operators and for which, patents appear to be insufficient. The creates an increased risk for market failure – which in turn can be difficult to meet with only general policy instruments. A classic example is basic research with the aim to further technical development. One other motive for selective policy instruments is the need to secure a parallel implementation of technology that is viewed to reduce the costs of attaining environmental policy goals in time. Guidelines for an optimal policy mix, based upon the studied articles is built upon the foundations of general economic policy complemented by more targeted, selective policy instruments.

The Indicator Study

A compilation of qualitative and quantitative indicators were also included in the task, and were used to follow up public efforts to promote environmental-driven business development. The indicator that reoccurs in the majority of studies is eco-efficiency. The concept is however unclear; instead is is applied differently depending on the concentration of the study and can consist of one or more negative externalities. The concept 'efficiency' implies that the concept is relative, often when placed alongside the economical advantage. To use the indicator to follow the attainment of goals, an efficiency measure is required, complemented by a volume measure in order to bring forward a measure in absolute terms. It is clear from the literature that a way to measure goal attainment is being sought after.

Continuing Studies

To conclude, we believe that the work with the overview has generated a useful foundation before the continuation of work, despite it having been challenging in many ways as it had to cover such a wide area. Growth Analysis sees at least three areas where a further analysis of the current knowledge situation can be of interest.

  1. To closer analyse the role of selective policy instruments to promote the emergence and spread of eco-innovations and environmental technology.
  2. To analyse how efforts are to be coordinated on different levels, not at least the importance of municipalities and regions for an environmental-driven business development.
  3. To investigate how indicators can be used in structured work for environmental-driven development.

(1) The entire project shall be reported in full no later than 28 February 2012. Interim task one 30 April 2011

The concept 'environmental-driven business development' partly applies to development of a sustainable economy - production and consumption that does not lead to negative environmental and health effects. The concept also includes making use of the business opportunities that such a transition carries with it, a structural change that is important in the long term but also produces winners and losers in the short term. In the report in question, Growth Analysis reports the first step in this task and aims to provide an overview of national and international research directed at investigating the conditions for, and effects of, public efforts to promote environmental-driven business development. Included in the task is a compilation of indicators that are used to follow up the progress and effects of the public efforts. Whilst planning the task, a request was received from the Department to briefly compile arguments for selective policy instruments.

Selective versus General Policy Instruments

The aim of the following study is to analyse how environmental policy instruments should be combined for an optimal economic effect to society. As an introduction to the overview of the research literature it is relevant to summarise existing knowledge about the need for environmental policy instruments, promotional efforts and the role of the selective policy instruments. The overview partly shows that there is a great amount of criteria for the choice of policy instruments, of which many cannot be evaluated from a strictly scientific perspective, as they fall in moral and political consideration. The most common criteria are environmental efficiency, cost-effectiveness, distributional effects, feasibility and effects on technical development. The overview indicates that effective environment policy is based upon a combination of policy instruments. The reason for this is that it is seldom possible to achieve the basic effects for the relevant criteria when only using one policy instrument. A strong argument for targeted, selective policy instruments is that generally, economic policy instruments provide an all too weak support for technical development. One cause of this is because technical development is characterised by positive externalities in the form of knowledge that easily 'trickles down' to other operators and for which, patents appear to be insufficient. The creates an increased risk for market failure – which in turn can be difficult to meet with only general policy instruments. A classic example is basic research with the aim to further technical development. One other motive for selective policy instruments is the need to secure a parallel implementation of technology that is viewed to reduce the costs of attaining environmental policy goals in time. Guidelines for an optimal policy mix, based upon the studied articles is built upon the foundations of general economic policy complemented by more targeted, selective policy instruments.

The Indicator Study

A compilation of qualitative and quantitative indicators were also included in the task, and were used to follow up public efforts to promote environmental-driven business development. The indicator that reoccurs in the majority of studies is eco-efficiency. The concept is however unclear; instead is is applied differently depending on the concentration of the study and can consist of one or more negative externalities. The concept 'efficiency' implies that the concept is relative, often when placed alongside the economical advantage. To use the indicator to follow the attainment of goals, an efficiency measure is required, complemented by a volume measure in order to bring forward a measure in absolute terms. It is clear from the literature that a way to measure goal attainment is being sought after.

Continuing Studies

To conclude, we believe that the work with the overview has generated a useful foundation before the continuation of work, despite it having been challenging in many ways as it had to cover such a wide area. Growth Analysis sees at least three areas where a further analysis of the current knowledge situation can be of interest.

  1. To closer analyse the role of selective policy instruments to promote the emergence and spread of eco-innovations and environmental technology.
  2. To analyse how efforts are to be coordinated on different levels, not at least the importance of municipalities and regions for an environmental-driven business development.
  3. To investigate how indicators can be used in structured work for environmental-driven development.

(1) The entire project shall be reported in full no later than 28 February 2012. Interim task one 30 April 2011

Title
Environmental-driven business development - Analysis of national and regional preconditions

Serial number
Report 2011:02

Reference number
2011/057

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