1. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Vested Interests in the Political Economy SUSTRA Workshop, 22-23 January 2004 Mike Wriglesworth Senior Advisor European Affairs, International Emissions Trading Association

2. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS IETA is dedicated to:  the objectives of the United Nations Framework Convention on Climate Change and ultimately climate protection;  the establishment of effective market-based trading systems for greenhouse gas emissions by businesses that are demonstrably fair, open, efficient, accountable and consistent across national boundaries; and  maintaining societal equity and environmental integrity while establishing these systems. IETA Vision

3. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Some IETA Members

4. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Main Activities - Build GHG markets  Standardize Components  Capacity building  Highlight issues  Respond to Regulators

5. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Vested Interests in the Political Economy Scope of the presentation:  Delivering sustainable & equitable solutions: Sustainability as the ‘objective’ long-term test ‘Equity’ recognises likely competing self-interests  Democracy based on competing self-interest  Role of advocacy in expressing self-interest  Role of markets in harnessing self-interest: Regulated markets that drive efficient solutions

6. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Vested Interests in the Political Economy  In EU process, all institutions & stakeholders bring vested interests to the political debate Commission protects its power of proposal Parliament seeks publicity and to increase power Member State deals to protect national interests ENGOs seek a heady mix of publicity and funds Business mixes short term defence with strategy Consultants have their own more direct interests

7. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Vested Interests Commission Proposals EU model & process from proposal to directive  Commission proposals need to be based on: Coherent policy –agreed strategy, realistic aims Sound data Impact assessment -‘regulatory’ or ‘extended’  Stakeholder input is key part of the process: Stakeholders offer relevant data and expertise Stakeholder impacts must be part of assessment Advocacy is most effective if soundly based

8. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Vested Interests in the EU Political Process EU model & process from proposal to directive  Commission Extended Impact Assessment provides the basis for stakeholder advocacy  EIA is at a very early stage of development  Early examples justify existing aims/strategy  EP Env Com vote on EIA test of amendment  Data, modelling and analysis lack objectivity  Risk: -lack of trust in science and scientists

9. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Creative Markets Harness Vested Interests  Markets can harness creativity & self-interest  Regulated market meeting democratic model  Market mechanisms combine meeting aims early & effectively, with economic efficiency  But, design of market instruments is crucial: Credible balance of aim, cost and effectiveness Simple mechanism aligned with a clear objective Simplicity and clarity help gain public support

10. SUSTAINABLE MARKET SOLUTIONS FOR GLOBAL ENVIRONMENTAL PROBLEMS Vested Interests Drive EU Political Process Conclusions:  Regulated markets can harness self-interest  Self-interest underpins the democratic model  All stakeholders bring legitimate self interest  Well designed market mechanisms can offer effectiveness with economic efficiency  Public support is crucial based on clarity and transparency of mechanism aligned with aim