The Role of Monitoring and Enforcement in Environmental Policy Evaluation Sandra Rousseau (HUBrussel & KU Leuven) 10 February 2012, European Environmental Evaluators Network, Leuven

“What matters is not how a policy regime works in principle, but how it works in practice” (Tom Tietenberg, 2000)

Compliance is never perfect… Violations of environmental regulations are common UK, US: more than 50% in violation Norway: in 79% of the inspections one or more violations were found Flanders: similar image (e.g. min. 38 % in violation in textile sector)

Regulation on its own is insufficient to induce compliance

Compliance decision Starting point: Firms and individuals are induced to comply and to protect the environment by the expected violation costs. Compliance costs Request environmental license Building water purification installation Searching new suppliers Measurements Completing administrative forms Payment of environmental taxes … Violation costs Monetary sanctions Non-monetary sanctions Social sanctions Impact on future inspections Informal disadvantageous consequences … x probability of detection

Modelling compliance matters Inducing compliance… is necessary is time consuming requires scarce resources can be complex is crucial in determining policy effectiveness

Enforcement trajectory Criminal prosecution Courts of first instance Courts of appeal Public prosecutor Settlement Policy dismissal Technical dismissal Prosecutor Notice of violation Sanction execution Fine Forfeiture Imprisonment Violation Monitoring Environmental inspectorate Local and federal police Other administrations Administrative prosecution Environmental administration Administrative Court of appeal Sanction execution Fine Forfeiture

Some figures for Flanders Flemish environmental inspectorate 2010 (Yearly report AMI) Staff: 110 Number of inspections: Number of inspected firms: 4404 Number of violations: 500 notices of violation and 964 warnings Public prosecutor’s office in Ghent 2005 ( Settlement: 126 environmental offenders Policy dismissal: 102 environmental offenders Technical dismissal: approx. 100 environmental offenders Criminal prosecution: 109 environmental offenders Environmental cases in criminal courts in 2005 ( 7 courts of first instance (East and West Flanders): 278 judgments Court of appeal in Ghent: 32 judgments Not only direct out-of-the-pocket costs, but also important opportunity costs!

Impact on effectiveness: penalty schemes The incentives provided by particular penalty schemes can be quite complex Specifically: subsidy schemes often include a penalty where all previous made subsidy payments need to be refunded Example: payments for conservation practices The US Program for Wild Rice, Fruit and Vegetable Provisions states that, for serious planting violations, ‘all payments previously paid to producers for the farm for the applicable year must be refunded, plus interest and no further payments will be made for the applicable farm’.

Enforcement of subsidy schemes Land users’ compliance decision Expected revenue from compliance Subsidy payments Compliance costs Positive or negative impact on land value Expected revenue from non-compliance Subsidy payments Expected fine, i.e. refund of previously obtained payments Expected probability of being banned from the program Dynamic setting: programs typically take several years t=0participation decision 0<t≤T compliance decision of participants t=T+1end of contract period

Enforcement of subsidy schemes Compliance incentives Cumulative refund effect Deterrence is increasing over time Being banned effect Deterrence is decreasing over time Thus several compliance patterns are possible Participants are always compliant Participants are always non-compliant Participants are non-compliant in first periods but compliant in last periods Participants are compliant in first periods but non-compliant in last periods …

Enforcement of subsidy schemes Participants are always compliant Case 1: compliance is beneficial even without subsidies Case 2: compliance is not too expensive, and monitoring is sufficiently frequent Participants are never compliant Case 1: compliance is too expensive, it is never beneficial even if monitoring is perfect Case 2: compliance is not too expensive, but monitoring is too infrequent Participants are show shifts in compliance behavior over time Case 1: compliance is not too expensive and monitoring is moderately frequent

Enforcement of subsidy schemes 0 0,03 0,05 0,125 Period 1Period 2Period 3 Inspection frequency PARTICIPANTS NON-PARTICIPANTS

Some concluding remarks Compliance with policy measures is crucially determined by monitoring and enforcement strategies Compliance decisions are not always easy to predict  Impact on effectiveness of environmental policy Measures to induce compliance are costly and time consuming  Impact on cost effectiveness of environmental policy Frequently observed (and unpenalized) violations Have a corrosive effect on the legitimacy of the justice system Undermine the public’s confidence in policy, government, administrations, prosecutors and courts.