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Environment and Economics

Recent studies

A broad range of studies have been undertaken. A good summary of them, focusing on the links between the EU's economy and the environment can be found in the Brochure Fact and Figures: links between EU's economy and environment.

Recent studies are undertaken in the following areas of work:

  1. The economics of environmental policy
  2. The use of market-based instruments
  3. Green jobs and social impacts
  4. Support to sectoral policies (biodiversity, waste, climate change etc)
  5. Supporting impact assessment of policy-making
  6. Economic analysis of eco-innovation
  7. Strategic economic modelling and foresight
  8. Member State environmental policy
  9. Structural Change and the Resource Efficient Economy

1. The economics of environmental policy (Full list of studies in this area)

Economics can play a role in showing how most optimally to shift towards a low carbon and resource efficient economy. Studies look at the overall costs and sectoral implications and suggest ways to change. Examples of studies include:

The costs of not implementing the environmental acquis (2011)

This report examines the costs associated with the gaps in implementing the EU environmental acquis. These costs relate to many impacts – in particular, potential environmental benefits are not realised, but also impacts such as uncertainty for business and infringement costs. The costs are often not easy to quantify but, as an indicative estimate, the costs of the implementation gap between current legally binding targets and the current level of implementation could be equivalent to around 50 billion Euros per year.

The economic benefits of environmental policy (2010)

This report describes the areas in which environmental policies deliver Europe’s current economic priorities, often more successfully than other forms of economic policy intervention. It provides evidence of the role of environmental policy both in providing a short term economic stimulus and in building a sustainable, efficient and resilient economy in the long term. It highlights many areas where environmental policy is essential for sustainable economic progress. The report explains and illustrates how environmental policy may benefit the economy by delivering eight key economic outcomes. These are that environmental policy: Enhances Productivity, Stimulates Innovation, Increases Employment (and/or the quality of Employment), Improves our Balance of Trade, Strengthens our Capital Base, Supports Public Finances, Promotes Economic Cohesion, Encourages the Transition to a Resilient and Sustainable Economy.

Scoping Study on completing the European Single Market for environmental goods and services (2010)

The study explored what improvements EU Single Market needs to facilitate the growth of European eco-industries and to support the better trading and movement of eco-industry workers, technology and products and services. Fourteen important problems causing a malfunctioning of Single Market for environmental goods and services have been identified, ranked and policy recommendations have been formulated. Amongst the most important policy priorities to be put in place or further strengthened are: The improvement of legal clarity and efforts to correctly transpose and uniformly implement environmental legislation, the better implementation of the Services Directive, the introduction of a common EU-wide approach for subsidizing new environmental technology applications or supporting environmental goods and services, the further development of uniform green procurement rules, the reduction of EU labour market complexities, the promotion of EU-wide recognition of qualifications and skills in eco-industry and also the adoption and promotion of common EU standards, certification and testing procedures where necessary.

2. The use of market-based instruments (Full list of studies in this area)

Market-based instruments (MBI), such as environmental taxes, tradable permit systems or targeted subsidies, are a cost-effective way to protect and improve the environment. They provide incentives to firms and consumers to opt for greener production or products. Governments can also opt for an Environmental Fiscal Reform or the reform of Environmentally Harmful Subsidies.  Examples of studies include:

Budgetary support and tax expenditures for fossil fuels. An inventory for six non-OECD EU countries (2013)

The study provides information on measures supporting the production or consumption of fossil fuels in six EU Member States: Bulgaria, Cyprus, Latvia, Lithuania, Malta and Romania. In order to ensure comparability, the methodology and approach taken were as similar as possible to that taken by the OECD in the “Inventory of estimated budgetary support and tax expenditures for fossil fuels”.

Each country section presents a general description of the energy sources and energy market structure in the Member State. Next, energy price regulations, taxes and support mechanisms are described. Quantitative information on specific budgetary support and tax expenditure are given if possible over several years (back to 2002).

Exploring potential Demand for and Supply of Habitat Banking in the EU and appropriate design elements for a Habitat Banking Scheme (2013)

This study provides a critical assessment of the EU legislative framework for addressing the No Net Loss (NNL) of biodiversity and explores potential demand for and supply of habitat banking in the EU, and appropriate design elements for a habitat banking scheme. NNL is not explicitly stated in EU legislation but it is implicit in a number of Directives (Birds, Habitats, EIA and SEA Directives), while several EU laws also require compensation and remediation of damages to biodiversity (EIA, SEA and Environmental Liability Directive), which covers impacts to biodiversity from accidents). Moreover, several Member States have additional national or even regional provisions. Despite these provisions, there is no concrete and coherent framework for NNL in the EU. The new EU initiative on NNL will aim to cover the identified gaps. 

Demand for offsets under a NNL policy can be driven by land use changes, which in the EU account for 50,000 to 100,000 ha per annum, without taking account land changes and biodiversity loss due to natural disasters. Further loss of biodiversity and ecosystem services due to degradation, as well as impacts to global biodiversity from EU actors and actions could also be taken into account, increasing the above figures. To provide for this potential demand, the supply of grassland and wetland habitats for restoration, enhancement or re-creation is least constrained, while coastal, freshwater, forests and heathland habitats are slightly more limited.  Dunes and rocky habitats are the most difficult habitats to restore or replace and therefore provide limited opportunities for offsetting. Currently however, the largest constraint on supply is the availability and accessibility of land. Most available evidence in the EU suggests that the total costs of offsets are likely to range from between €30,000 and €100,000 per hectare, but could be higher than this in some circumstances. Offset costs represent only a small proportion of total development costs. Globally, the annual market for biodiversity offsets has been estimated to be worth at least $2.4 billion and possibly over $4.0 billion.

Biodiversity offsets have the potential to compensate for biodiversity loss, but a number of technical, ecological, geographical and economic constraints mean that this is not possible or appropriate in all circumstances. In cases of particularly vulnerable and/or irreplaceable biodiversity, ‘like for like’ offsets should be preferred. Where the biodiversity affected is not vulnerable or irreplaceable, ‘trading up’ to conserve higher conservation priority biodiversity may be the best outcome. For habitat banking and offsetting to be successful, there is a need for a strong regulatory framework to create demand, establish basic standards, and drive the process. The study explores how roles and responsibilities should be defined, including robust mechanisms for monitoring, enforcement, compliance and safeguarding against potential risks and uncertainties to ensure that benefits from offsets are sustained in the long term.

Integrating resource efficiency and EU State aid (2012)

The study provides an evaluation of resource efficiency considerations in the current EU State aid guidelines. It also assesses state aid cases and schemes to identify whether resource efficiency considerations have been taken into account. Finally, it develops practical ideas and options for integrating resource efficiency in the review of horizontal state aid guidelines.

A study supporting the phasing out of environmentally harmful subsidies (2012)

The study focused specifically on EHS at the level of EU Member States; it identifies and analyses key types of EHS and examines cases of existing EHS across a range of environmental sectors and issues; it assesses the economic, environmental and social impact of particular EHS. The study also analyses examples of good practices in the reform of EHS in EU Member States and the lessons that can be learnt from these cases. Finally, it develops practical recommendations on phasing out and reforming EHS to support the objectives of the Europe 2020 Strategy and the resource efficiency agenda.

Innovative Use of Financial Instruments and Approaches to Enhance Private Sector Finance of Biodiversity (2012)

This study explored ways that innovative financing through new instruments and approaches can be used to finance biodiversity and ecosystem services, responding to the needs of the new EU Biodiversity Strategy to 2020. In addition to the EU co-financing, there is still room to engage more actively the private sector (businesses and financial institutions, the utilities sector and municipalities) and to put forward proposals for bankable projects. The study looked to various types of biodiversity projects with a bankable potential, and analyse the project promoters and beneficiaries that can bring forward these projects. The study examined in detail the following 3 intervention areas: Market-based Instruments & Offsets, Establishing Green Infrastructure and Supporting Carbon Credit Actions, while also it looked to a lesser extent the provision of support for biodiversity-friendly businesses. Furthermore it explored 2 cross-cutting issues that are of concern for all type of biodiversity related investments, i.e. how to address investment and policy risks and how to collect and provide market information about biodiversity. Through interviews with market specialists and investors, as well as key stakeholders (EIB and the financial sector) they explored the potential for investment into the respective areas examined and made recommendations on Private finance opportunities in relation to biodiversity and on the European interventions that can bring these about. 

The role of market based instruments in achieving a resource efficient economy (2011)

This study offers a systematic collection of experience from various countries on market based instruments addressing resource efficiency; it identifies best practices, explores in quantitative terms how taxes, charges and other market based instruments influence the scale of resource extraction and consumption, identify gaps and places for improvement, and provide a basis for policy makers about the way that these would need to be used to achieve resource efficiency. 
The study feeds into the Commission work on resource efficiency under the Resource-efficient Europe flagship initiative of the Europe 2020 strategy.

The use of market-based instruments for biodiversity protection - the case of Habitat Banking (2010)

This study investigates the scope for using market-based instruments (MBI) and more specifically Habitat Banking to protect biodiversity at Community level – and the possible conditions and limitations for their use. The use of MBI is gaining acceptance as cost-effective , with Habitat Banking a potentially efficient MBI to get business to compensate for unavoidable harm from development projects. Habitat Banking can also contribute towards meeting the post 2010 EU biodiversity target and enhance the provision of ecosystem services.

The final study results indicate that although Habitat banking can be done voluntarily, a viable market of biodiversity credits will only be created by regulation that defines equivalence between those debits and credits, and enforces compensation obligations on those creating debits by developing, polluting or damaging, thereby ensuring sufficient levels of credit demand. The comparison of Habitat banking with other MBI for biodiversity, suggests that it can offer a useful additional instrument to help biodiversity policy move towards a "no net loss" objective, which remains part of the post 2010 biodiversity target and will feature in the future policies. Moreover, the creation of market incentives can stimulate private investment in biodiversity conservation, and facilitate economies of scale and efficiencies in delivering biodiversity offsets. The study also identifies a number of other opportunities but also risks associated with delivering biodiversity conservation through Habitat Banking, while it describes some possibilities for establishing an efficient system of Habitat Banking that can work in conformity with the existing EU legislative framework.

Environmentally Harmful Subsidies: Identification and Assessments (2010)

The objective of this study is to develop a methodology for identification, assessment and quantification of environmentally harmful subsidies (EHS). The study tested the tools developed previously by the OECD on six case studies of subsidies in energy, transport and water sector. Based on this analysis and on results of a workshop, the study developed the "EHS Reform tool" for screening, integrated assessment and reform of environmentally harmful subsidies. The study includes also a methodological guidance how to assess the value of subsidies, illustrated on concrete cases.

The Potential Benefits of using Differential VAT for Environmental Purposes (2008)

Using differential VAT rates on products which are environmentally beneficial compared to their substitutes may bring about greater sales of those products in a more cost-efficient way than other policy mechanisms. This may act as a form of marketing, changing consumer behaviours. This study looks at the potential impacts of changing current VAT rates to align them with environmental goals in some specific cases - domestic energy supply (where there are currently reduced rates in some countries), food and dairy products, insulation materials, white goods and boilers. It finds that the suitability of differential VAT as a policy instrument differs greatly across products, in particular depending on the nature of the market failure in consumer behaviour which the VAT rate would be trying to correct.

3. Green jobs and social impacts (Full list of studies in this area)

Environmental policy contributes to a structural shift in employment towards jobs associated with cleaner, more efficient products and processes. The eco-industry itself is an important source of new jobs. Besides studies on the eco-industry section, this section also includes studies on the wider relationships between social and environmental issues. Examples of studies include: 

The number of Jobs dependent on the Environment and Resource Efficiency (2012)

This study explores how 'greening the economy' can boost job creation in areas directly connected to the environment such as conservation, waste, water and air quality. In 2012, it is estimated that the total number of people working in eco-industries is around 3,4 million which represents around 1% of the total workforce, and that the eco-industries have a turnover of around EUR 550 million. The general trend is of a growing number of 'green jobs' and case studies show, not surprisingly, that improving resource efficiency leads to job creation. The global market for eco-industries is estimated at roughly EUR 1.15 trillion a year in 2010.  There is broad consensus that the global market could almost double, with the average estimate for 2020 being around EUR 2 trillion a year. The EU-27 has a strong export position vis-à-vis nearly all of the world's largest economies.

Programmes to promote environmental skills (2010)

This study looks at environmental skills programmes in six European countries: the U.K., the Netherlands, Italy, Germany, Bulgaria and Poland. It finds considerable variety among Member States in environmental skills programmes. Usually, firms are at the frontline of developing green skills – often through in-house training to their staff in response to a business need. There is an even mix of courses that cater for either the high-, medium- or low-skilled. The most common method of financing environmental skills programmes is a mix of public-private as there is considerable public funding of skills programmes conducted in partnership with companies. Overall, the study shows that there is potential to promote exchange of best practice, not only between Member States but also between businesses and others involved in the development of green workforce skills.

Environment and labour force skills (2008)

This study looks at the skills profile of green jobs and how it needs to change in the future. This is important as the skills profile will change as green jobs change, and skills will be key to delivering environment objectives. The study notes the poor data at present on green skills, and the need to better understand them and to forecast how they will change in the future. This would help us to develop the green skills needed in the future. A number of sectors already face skill shortages needed for green jobs. Finally, the study provides potential areas for future research.

4. Support to sectoral policies (biodiversity, waste, climate change etc) (Full list of studies in these areas)

Example of environmental economics studies as support for sectoral policy areas include:

Exploring potential Demand for and Supply of Habitat Banking in the EU and appropriate design elements for a Habitat Banking Scheme (2013)

This study provides a critical assessment of the EU legislative framework for addressing the No Net Loss (NNL) of biodiversity and explores potential demand for and supply of habitat banking in the EU, and appropriate design elements for a habitat banking scheme. NNL is not explicitly stated in EU legislation but it is implicit in a number of Directives (Birds, Habitats, EIA and SEA Directives), while several EU laws also require compensation and remediation of damages to biodiversity (EIA, SEA and Environmental Liability Directive), which covers impacts to biodiversity from accidents). Moreover, several Member States have additional national or even regional provisions. Despite these provisions, there is no concrete and coherent framework for NNL in the EU. The new EU initiative on NNL will aim to cover the identified gaps. 

Demand for offsets under a NNL policy can be driven by land use changes, which in the EU account for 50,000 to 100,000 ha per annum, without taking account land changes and biodiversity loss due to natural disasters. Further loss of biodiversity and ecosystem services due to degradation, as well as impacts to global biodiversity from EU actors and actions could also be taken into account, increasing the above figures. To provide for this potential demand, the supply of grassland and wetland habitats for restoration, enhancement or re-creation is least constrained, while coastal, freshwater, forests and heathland habitats are slightly more limited.  Dunes and rocky habitats are the most difficult habitats to restore or replace and therefore provide limited opportunities for offsetting. Currently however, the largest constraint on supply is the availability and accessibility of land. Most available evidence in the EU suggests that the total costs of offsets are likely to range from between €30,000 and €100,000 per hectare, but could be higher than this in some circumstances. Offset costs represent only a small proportion of total development costs. Globally, the annual market for biodiversity offsets has been estimated to be worth at least $2.4 billion and possibly over $4.0 billion.

Biodiversity offsets have the potential to compensate for biodiversity loss, but a number of technical, ecological, geographical and economic constraints mean that this is not possible or appropriate in all circumstances. In cases of particularly vulnerable and/or irreplaceable biodiversity, ‘like for like’ offsets should be preferred. Where the biodiversity affected is not vulnerable or irreplaceable, ‘trading up’ to conserve higher conservation priority biodiversity may be the best outcome. For habitat banking and offsetting to be successful, there is a need for a strong regulatory framework to create demand, establish basic standards, and drive the process. The study explores how roles and responsibilities should be defined, including robust mechanisms for monitoring, enforcement, compliance and safeguarding against potential risks and uncertainties to ensure that benefits from offsets are sustained in the long term.

Innovative Use of Financial Instruments and Approaches to Enhance Private Sector Finance of Biodiversity (2012)

This study explored ways that innovative financing through new instruments and approaches can be used to finance biodiversity and ecosystem services, responding to the needs of the new EU Biodiversity Strategy to 2020. In addition to the EU co-financing, there is still room to engage more actively the private sector (businesses and financial institutions, the utilities sector and municipalities) and to put forward proposals for bankable projects. The study looked to various types of biodiversity projects with a bankable potential, and analyse the project promoters and beneficiaries that can bring forward these projects. The study examined in detail the following 3 intervention areas: Market-based Instruments & Offsets, Establishing Green Infrastructure and Supporting Carbon Credit Actions, while also it looked to a lesser extent the provision of support for biodiversity-friendly businesses. Furthermore it explored 2 cross-cutting issues that are of concern for all type of biodiversity related investments, i.e. how to address investment and policy risks and how to collect and provide market information about biodiversity. Through interviews with market specialists and investors, as well as key stakeholders (EIB and the financial sector) they explored the potential for investment into the respective areas examined and made recommendations on Private finance opportunities in relation to biodiversity and on the European interventions that can bring these about. 

Economic assessment of policy measures for the implementation of the Marine Strategy Framework Directive (2012)

The study proposes an economic assessment of four categories of policy measures that could be used to implement the MSFD: Command-and-Control instruments; Market-Based Instruments; social instruments (information, awareness raising); and technical measures. The study developed a database of about 140 policy measures, covering the pressures they best respond to, the sectors and uses they best apply to, their effectiveness, costs and benefits, as well as key success and limiting factors for their implementation. The study developed deeper analysis for 5 case studies: a tax on NOx emissions from shipping (Norway), a levy on aggregates’ extraction (UK); a lump-sum charging system for ship-generated waste collection (Baltic Sea); a fisheries area closure scheme (Scotland); a Marine Protected Area (Spain). The study leads to some conclusions on under which conditions different measures and policy mixes work best (clear environmental goal, thorough measurement of results, spatially specific design, effective legal framework and enforcement capacity, use of revenue recycling of fee-based instruments, early involvement of key stakeholders, provision of sufficient lead time for implementation).

Design, implementation and cost elements of Green Infrastructure projects (2011)

Green Infrastructure (GI) is a valuable tool for addressing ecological preservation and environmental protection as well as societal needs in a complementary fashion. This study developed a definition of Green Infrastructure projects based on terminology and working definitions used in different EU member states and identified a set of European green infrastructure projects and initiatives with a view to operationalise the Green Infrastructure concept and create a typology of GI projects. Thereafter the study analyses green infrastructure projects carried out by EU funds or as national initiatives and provides elements of their design and process used to implement them on the ground, estimates of their cost and benefits, and of their potential to respond to multiple objectives (biodiversity management and enhancement, increasing resilience to climate change, protection against natural disasters, etc). Furthermore, the study reports on the potential of current EU policy(-ies) and available funding instruments to promote green infrastructure projects and provide for the capacities and planning needed to develop and implement them on the ground and provides recommendations for EU, national and regional/local policy makers to take them up when designing Green Infrastructures policies and projects.

Assessment of the Natura 2000 co-financing arrangements of the EU financing instrument (2011)

This study confirms that, despite the increased effort and some good examples on financing Natura 2000 from the Community funds, the existing EU co-financing framework is not fully effective. The problem arises from both gaps in the framework and significant constraints that make it difficult to use to its full potential. In particular, current funding is less than is needed; capacity building is needed to guarantee the most best use of the EU co-financing framework; and, there is scope to complement existing funding streams with innovative thinking and new funding mechanisms.

Costing the environmental needs related to rural land management (2011)

The study estimates the costs of undertaking environmentally beneficial land management on agricultural and forested land in 2020. A large proportion of the costs associated with environmentally beneficial management on farmland and woodland are associated with arable land. The study highlights, however, that it cannot be assumed that simply having sufficient budgetary resources available will lead to the environmental outcomes being achieved. Policy design and effective implementation are critical factors that will influence the cost of achieving the desired results. In many cases achieving changes in management practices also requires a change in attitude and approach to a farm’s core business activities.

Taking into account opportunity costs when assessing costs of biodiversity and ecosystem action (2011)

Addressing the challenge of halting the loss of biodiversity and the preservation of ecosystem services is key for European policy, thus providing adequate financial support for the successful protection of biodiversity and ecosystems services is crucial. Within Europe, however, there is limited data on their conservation costs, thus making the implicit costs of conservation explicit via the identification and inclusion of opportunity costs in estimates could help address this incoherence. Opportunity costs reflects the foregone economic benefits from alternative activities or uses of a resource on a particular site. This study is a first attempt to provide a comprehensive overview on the total costs for biodiversity and ecosystem actions in the European Union and makes a significant contribution to the understanding of opportunity costs within the context of biodiversity policies and actions established in various EU member states. The estimates produced demonstrate the broad scale of biodiversity costs but also the significance of opportunity costs within these, acknowledging the high variance between Member States and even regions. Given the wide discrepancies in costs categories present in existing estimates of biodiversity action costs, the study developed a general cost typology to enable the comparison of results from different cost assessments. The typology aims to deliver a clear categorisation of costs that could also serve as a model for an even broader application of the method beyond the project scope, and to allow for the integration of all relevant data from existing cost estimates. The combined cost of these different policy actions is roughly estimated at €10.6 billion per year. Within this, opportunity costs amount to approximately €8.4 billion.

The Social Dimension of Biodiversity Policy (2011)

This report investigates the social aspects of biodiversity conservation, in particular the links between biodiversity and employment, and the value of biodiversity for vulnerable rural people. The study maps the linkages between biodiversity, ecosystem services and employment and uses vulnerability-related indicators coupled with spatial mapping of biodiversity and ecosystem values for the EU to determine whether the poor and vulnerable rural communities are more strongly dependent on the provision of ecosystem services. A number of global case studies highlight a range of issues experienced by the rural poor in developing nations dependent on ecosystem services.

Establishing Environmental Sustainability Thresholds and Indicators (2010)

Environmental thresholds are tipping points which, once crossed, can lead to abrupt changes in the services provided by ecological systems. The study analyses how some of these thresholds can be monitored through indicators so that action is taken before the thresholds are crossed. It focuses on 4 threshold areas representing widespread problems in EU: water quality (focussing on eutrophication), water quantity, soil erosion and non-renewable resource use (for which a threshold perspective is introduced by analysing a potential link between non-renewable material consumption and air pollutant emissions thresholds). The study proposes new sets of indicators but concludes that knowledge and data availability are still too incomplete and uncertain for most environmental thresholds in EU to allow for specifying threshold values adjusted for regional conditions. The study recommends developing a searchable repository of threshold research and to better integrate threshold-related aspects into environmental data collection procedures.

Study on how businesses take into account their risks related to biodiversity and ecosystem services: state of play and way forward (2010)

The study examines what drives companies to address their biodiversity and ecosystem services risks and identifies the measures taken to tackle those risks and the main barriers for taking actions. The report presents case studies of sectors selected for their dependency and impact on biodiversity and ecosystem services (food and drink production, retail, tourism, bio-tech), their special link to consumers (retail) and to the whole economy (the financial sector). The study shows that, although businesses demonstrate concerns for sustainability, they are much less aware of biodiversity and ecosystem services as an isolated issue. Large companies are most advanced in addressing these risks, while SMEs seem to lack resources, awareness, knowledge and influence (e.g. against sub-suppliers) to do so. Sectors most dependent on biodiversity and ecosystem services (e.g. food production, pulp & paper, tourism) appear to be the most advanced in addressing their risks; securing future supply seems their main driver to do so and there is a growing trend towards direct procurement, ensuring a better control of upstream suppliers. For sectors closest to consumers (e.g. retail sector), the demand for labels/certified products and the promotion of corporate image are seen as the most important drivers.

The use of market-based instruments for biodiversity protection - the case of Habitat Banking (2010)

This study investigates the scope for using market-based instruments (MBI) and more specifically Habitat Banking to protect biodiversity at Community level – and the possible conditions and limitations for their use. The use of MBI is gaining acceptance as cost-effective , with Habitat Banking a potentially efficient MBI to get business to compensate for unavoidable harm from development projects. Habitat Banking can also contribute towards meeting the post 2010 EU biodiversity target and enhance the provision of ecosystem services.

The final study results indicate that although Habitat banking can be done voluntarily, a viable market of biodiversity credits will only be created by regulation that defines equivalence between those debits and credits, and enforces compensation obligations on those creating debits by developing, polluting or damaging, thereby ensuring sufficient levels of credit demand. The comparison of Habitat banking with other MBI for biodiversity, suggests that it can offer a useful additional instrument to help biodiversity policy move towards a "no net loss" objective, which remains part of the post 2010 biodiversity target and will feature in the future policies. Moreover, the creation of market incentives can stimulate private investment in biodiversity conservation, and facilitate economies of scale and efficiencies in delivering biodiversity offsets. The study also identifies a number of other opportunities but also risks associated with delivering biodiversity conservation through Habitat Banking, while it describes some possibilities for establishing an efficient system of Habitat Banking that can work in conformity with the existing EU legislative framework.

5. Supporting impact assessment of policy-making (Full list of studies in this area)

For all new policy initiatives, the Commission undertakes integrated impacted assessments. This involves the identification of the problem (including any market failures), objectives, options to address the problem and an analysis of the economic, social and environmental impacts of the different options. Underlying studies support the Commission in developing impact assessments for new proposals. Examples of studies include:

Expanding the Evidence Base for the Design of Policy influencing Consumer Choice (2011)

Policy makers designing effective policy to influence consumer choice need to understand how consumers make their purchasing decisions in real life situations. The study identified several important drivers and other key aspects, some of which cover behavioural aspects often ignored in consumer policy making. It investigated the practical tools needed to help policy makers build up sufficient evidence to guide individual pieces of policy. It includes a behavioural experiment to demonstrate the practical aspects of policy design.

Implementation of the CAP Policy Options with the Land Use Modelling Platform - A first indicator-based analysis (2011)

Using land-use modelling steered by economic drivers and agro-environmental constraints, the study assesses a range of environmental impacts resulting from the implementation of different policy settings foreseen under the CAP reform, focusing on the greening component of direct payments. Results are expressed in terms of land cover changes (e.g. arable land, permanent crops, pasture, natural and semi-natural vegetation, artificial surfaces, etc.) and environmental indicators such as the conservation of Green Infrastructure and biodiversity or the change in Soil Organic Carbon stocks. In general and at the EU27 level, the greening options that are modelled have a lower level of environmental impact than under the Status Quo scenario. However, several indicators also show pronounced regional differences and local developments, which do not follow the national or European trends and the results emphasize the importance of geographically targeted measures.

Coastal zones in Europe: Impacts of land use policy alternatives (2011)

Following-up on the 2010 study on "Land use modelling : Implementation - Preserving and enhancing the environmental benefits of land use services", this report describes how the EU-ClueScanner land allocation model has been used to analyse the impacts of different scenarios (more or less environmentally-friendly) related to land use in coastal areas. With a 1km spatial resolution and 10 land classes, it shows the results of these scenarios for the period 2000-2050. Results are presented through maps and indicators describing, inter alia, built-up areas, coastal erosion, risk of coastal flooding, soils quality, landscape fragmentation and biodiversity index. This report provides insight for the analysis of options for Coastal Zone Management in Europe.

Designing Policy to Influence Consumers (2009)

30 years of Nobel prize winning research shows that consumers make choices through a mix of mental shortcuts, emotion and conscious deliberation. Yet, EU policies usually assume consumers only make conscious deliberation. For instance, it is often assumed more information is a good thing - but the opposite is shown to be true. Designing policies based on how consumers actually make choices would be likely to significantly improve policy outcomes and suggests the use of new instruments. This report summarises the global knowledge from marketing and economic research and makes clear the significant implications for the organisation of the Commission's policy work, and its range and design of instruments for greening consumer choice. It is also a fascinating insight into our own mental processes.

6. Economic analysis of eco-innovation (Full list of studies in this area)

Eco-innovation is the ability to take new ideas and translate them into commercial outcomes to the benefit of ecological improvements. Its economic analysis examines how economic agents interact and which factors influence them. Examples of studies include:

The implementation of green recovery measures in the EU (2011)

This report assesses the green elements of the fiscal stimulus packages that were implemented in response to the economic and financial crisis that began in 2008 through general analysis, case studies of countries and modelling. The majority of the green measures focused on energy efficiency and climate change mitigation. The recovery packages contributed to economic recovery and provided a temporary boost to employment, the scale of the impacts being limited by the small share of green measures in the recovery plans. The multiplier effects for green investment are similar to those from any kind of investment. Within a few years, the net environmental effects of the measures were generally found to be favourable.

Bridging the Valley of Death: public support for commercialisation of eco-innovation (2009)

The report recommends the Commission and Member States to use greater demand-side innovation policy to tackle constraints on eco-innovation. It analyses the experience of existing innovation procurement policies. A major block to greater eco-innovation is the uncertainty over future market demand for an innovation. That uncertainty partly reflects an information failure: buyers do not indicate they will buy until the innovation is put on the market. This block can be mitigated cost-effectively if groups of market players are brought together to indicate the characteristics of an innovation that they would be likely to buy. This needs to be coupled with pre-announced use of demand-support measures, in an expansion of current EU demand-side innovation policy. The report analyses the areas of innovation where this would be successful and identifies the practical needs of the policy.

The Potential of Market Pull Instruments for Promoting Innovation in Environmental Characteristics (2009)

Firms select which innovations to commercialise on the basis of expected future demand. Those expectations are based on assessments of trends in demand and the innovation undertaken by competitors. Policy measures which signal increased future demand, or rewards, for certain innovations (e.g. energy efficiency) have the potential to boost innovation rates. The effect could be substantial - an increase in energy efficiency improvement by only 2%/year could lead to new products being 25% more efficient in 15 years time. This study examines the potential of policy instruments - for example financial incentives for products - to increase innovation, how they influence firms' decisions and how such instruments (or existing related policy instruments) should be designed to maximise the increase in innovation. The report is aimed at EU, regional and national policy instruments, with a focus on environmentally advantageous innovation.

7. Strategic economic modelling and foresight (Full list of studies in this area)

Environmental processes can be attributed to a diversity of factors such as economic activities, geographical elements, institutional and legal requirements, cultural and social factors etc. Economic models help environment policy makers to identify relationships between different parameters and are used for scenario analysis of future trends. Examples of studies include:

Global integrated assessment to support EU future environment policies (GLIMP) (2012)

Drawing on a complex global modelling exercise carried out over two years, this project shows the relationships - by year 2050 - between the EU and other world regions in four critical areas: fisheries; phosphorus (see as scarce resources); long-term bioenergy prospects; and biofuels - history and projections for land use change to 2020. Its focus is on environment-related issues whereby actions within the EU, or the fact that no actions are being taken, are expected to have significant consequences elsewhere in the world, or where the EU needs global partners to effectively address a problem. This global, model-based assessment produced as well a world baseline scenario for 2050 that was carefully coordinated with the OECD environmental outlook to 2050.

EU Resource efficiency perspectives in a global context (2011)

This study provides a global, model-based analysis of five distinct resource themes: energy; land; phosphorus, fresh water and fish stocks. The assessment finds that, with ambitious global efforts, there is substantial potential to improve efficiency in the use of these resources:

  • the increase in global annual energy use between 2010 and 2050 could be limited to less than 25%. For greenhouse gas emissions, this would halve the gap between the situation of unchanged policy and the 450 ppm CO2 eq mitigation scenario.
  • net global agricultural expansion between 2010 and 2050 may be halted, with expansion in Africa reduced by half, by improving the efficiency of agricultural production, consumption and food supply chains.
  • the global increase, up to 2050, in the use of phosphorus fertilisers from primary sources could be limited to 11%, mainly by making better use of manure and by recycling phosphorus from human excreta.
  • globally, water efficiency, in all sectors combined, could be improved by 25%.
  • fish stocks may recover and marine biodiversity may improve if a temporary reduction in fishing efforts is implemented.

  • Final report (pdf ~ 8.2 MB)

Macroeconomic modelling of sustainable development and the links between the economy and the environment (2011)

This study examines the economic underpinning for resource policy. It provides a matrix of risks for Europe's future use of different resources: the nature of the risks, timescales, examples and quantifications of risks. The study notes an ongoing shift in Europe to resource imports: by 2030 two thirds of resource use will be either imports or use outside the EU. Marginal abatement cost curves are developed, showing that resource use can be reduced with benefits in terms of jobs and growth. A number of policy simulations are carried out, with the conclusion that we could realistically reduce the total material requirements of the EU economy by 17%, and that this could boost GDP by up to 3.3% and create between 1.4 and 2.8 million jobs. Every percentage point reduction in resource use is worth around 23 billion Euros to business and could lead to up to 100,000 to 200,000 new jobs.

Sustainability Scenarios for a Resource Efficient Europe (2011)

This study analyses scenarios for sustainability and resource efficiency for the global and European economy up to and beyond 2050. These scenarios cover different resources (raw materials, metals, energy, climate water, land biodiversity) and economic sectors (construction and housing, agriculture and food, industry and manufacturing, transport). The report provides the baselines, the assumptions for the key underlying variables used in modelling, as well as the assumptions made about entering new variables in models or modelling suites to explore sets of parameters that create a vision for a Resource efficient EU by 2050 (i.e. how resource availability, efficiency, etc is factored into the scenarios and models). The report identifies and recommends models and modelling approaches to assess policies to deliver a vision of a resource efficient Europe and to measure progress in achieving it, recognising the importance of cross-cutting policies and issues. For example, the linkages between resources and the economy that do not involve economic transactions and are not well-covered in existing models. The study also identifies key gaps in the existing models, such as the links between land use change and climate change, as well as omissions due to the limited understanding of the nature, direction and strength of these links.

Scoping Study on the Macroeconomic View of Sustainability (2010)

This study examine whether the current macroeconomic models are up to the task of evaluating policy from a sustainable development viewpoint or whether they 'miss' something that may systematically bias them. The analysis focused on sixty of the most used models, and looked at them in the light of what both neoclassical and ecological economics would suggest is needed and important. Three major constraints were spotted, which in certain circumstances could be material for policy makers: the often one-way linkages from economy to environment; physical limits, such as stocks and maximum carrying capacities are not usually covered in the analysis; the models are not good for making a proper assessment of ‘extreme’ scenarios. There is particular scope for improvement in the modelling of resource use but recommendations also cover: the role of technology; non-linear relationships, thresholds, limits; and, uncertainty. Overall, it should be possible to move macroeconomic models towards a more systematic modelling of the two-way linkages between the environment and the economy, and to allow for a more comprehensive assessment of how the economic, environmental and social aspects of our societies affect each other.

Study on the evolution of some deforestation drivers and their potential impacts on the costs of avoiding deforestation scheme (2010)

The study describes the drivers for deforestation in the main regions in which it happens, namely Latin America and the Caribbean, Sub-Saharan Africa and Pacific Asia. On a global scale, the most important identified direct drivers for deforestation are agricultural expansion for food and energy production, followed by infrastructure development and wood extraction. The study estimates, using GLOBIOM and G4M models, the effects of changes in drivers on deforestation levels. Six shock areas are identified for quantitative modelling analysis: increased demand for biofuels, wood, meat, infrastructure and for biodiversity schemes. Some shock areas are analyzed on a global scale as well as for each of the 3 hotspots regions while the policy shocks related to infrastructure development and biodiversity protection are modelled both on a global scale and at a geographic-explicit level, namely the Congo Basin. The scenarios chosen do not necessarily seek full realism since the objective is rather to understand which kind of drivers is more important than other. Consequently, the technical details of the study are not as robust as they can be in more specific analysis fully dedicated to a specific driver, since some compromises in the modelling had to be made.

The study concludes that the two policy shocks leading to the worst consequences in terms of additional deforestation are an increase in consumption of 1st generation biodiesel and an increase in meat consumption. The Latin America and Caribbean region is predicted to experience, across all scenarios, the highest levels of deforestation worldwide between 2020 and 2030. By analyzing associated annual marginal costs of avoiding certain degrees of deforestation under the various shock scenarios, the modelling exercise also shows that world demand has significant implications in terms of financing a REDD mechanism: with more ambitious avoided deforestation targets, the need for financing not only becomes higher but also less predictable as the impacts of possible shocks become more influential.

Land use modelling : Implementation - Preserving and enhancing the environmental benefits of land use services (2010)

A new open source land allocation model - the EU-ClueScanner – has been developed in order to assess the environmental impacts of land use change in Europe at a 1 km2 scale, with a time horizon of 2030. The report describes the methodology used in order to develop this model and the related set of environmental, economic and social indicators. In addition to the reference scenario (IPCC B1), the report describes eight policy alternatives that were used as examples for testing the model. These policy alternatives relate to biofuel production, increased biodiversity protection and climate change adaptation and mitigation measures related to water management and soil protection. The implementation of the modeling framework shows that it is successful in simulating different spatial land use policy options, in identifying hotspots of change and in providing results in terms of specific indicators. The annex to the report explains how scenarios, indicators and data can be changed in order to study different policies.

8. Member State environmental policy (Full list of studies in this area)

While progressively EU environmental policy legislation has gained in depth and coherence, one of the biggest challenges remains the proper implementation of environmental legislation across EU Member States. Countries face sometimes particular obstacles when working towards the fulfilment of the environmental objectives they have agreed to at a European level. Country level analysis also allows identifying newer and more efficient and effective environmental policy instruments across Member States. Examples of studies include:

Gathering information on Member State's new environment policies and performance

  • Studies summarising Member States' policy developments related to resource efficiency and the environment: 2010 country profiles are available.
  • Studies undertaken to support the Commission's annual Environment Policy Review (EPR). EPR's latest edition – the 2009 Environment Policy Review - includes country profiles with policy highlights and data tables with environmental indicators.

9. Structural Change and the Resource Efficient Economy (Full list of studies in this area)

Study on modelling of the economic and environmental impacts of raw material consumption (2014)

This report provides a quantitative analysis of different resource productivity (RP) targets for the EU. Resource productivity in this study is defined as GDP per unit of raw material consumption (RMC), instead of the usual GDP per unit of domestic material consumption (DMC). Resource productivity increased during the period 2001 to 2011 at +1.9% per year on average. A ‘business as usual’ baseline for resource productivity was constructed: the projection is of relative decoupling with resource productivity increasing by an average 0.9% per year until 2030. Modelling was undertaken that suggests that resource productivity improvements of around 2% to 2.5% pa can be achieved with net positive impacts on EU GDP, and creating around 2 million additional jobs. Overall, the study suggests that it is possible to meet RP targets through policies that lead to slightly higher rates of growth and employment across the EU.

Nowcasting of and target setting for resource efficiency indicators (2014)

Indicators' timeliness is vital for allowing quick and adequate policy response by policy makers. Early estimates and nowcasting are emerging techniques that are increasingly being used as a way to bridge the gap between the most recent reported observations of an indicator and its, as yet unreported, or even unmeasured, current value.
For example a GDP flash estimate is produced by Eurostat within 45 days. The third and last revision is produced within three months.
The Beyond GDP communication highlights the need for more inclusive, timely and understandable indicators to inform social and environmental issues. The Resource Efficiency Roadmap foresees the need for indicators and targets as important tools to measure and foster progress  
The purpose of the study is to map the current and potential future availability of resource efficiency indicators, assess their potential for early estimates and nowcasts and target setting.

Assessment of Scenarios and Options towards a Resource Efficient Europe (2014)

This study identifies the potential for improving resource efficiency in the built environment. This includes assessing the economic, social and environmental effects of technical efficiency improvements from both single technical options and more system wide changes. The study finds that significant reductions in resource use (around 10% of the EU's Raw Material Consumption) are possible, with a positive effect on European GDP. However, resource efficiency policies need to be targeted in order to maximise the positive environmental impacts. The positive impacts are possible, at least in part, due to the availability of win-win options, caused by non-financial bottlenecks that hinder implementation of worthwhile technical improvement options.

Steps towards greening in the EU: Member States’ resource efficiency policies (2013)

This study reviews environmental policy in the Member States during 2011-2012. It examines a number of areas of priority in the context of Resource Efficiency and the Europe 2020 Strategy. In particular, it sees what the current position is (providing comparative statistics where possible), and asks what is changing in terms of policies for the following policy areas: economic, fiscal and financial aspects (i.e. budgetary issues, market-based instruments, environmentally harmful subsidies and state aids), waste management, support to SMEs and air quality. These are areas that can enhance growth and job creation and/or contribute to fiscal consolidation in addition to being environmentally beneficial. It identifies a range of both performance and policy approaches.

State-of-play of national-consumption-based indicators (2013)

The present report provides a concise review of the state of the art in the development of footprint-type indicators for materials, water, land and carbon for use on the national level (macro level). Based on a review of a large number of papers and studies published in recent years, the various footprint calculation methodologies along with their key advantages and disadvantages are discussed. In addition, the quality and availability of data to calculate those indicators is assessed and evaluated. In the final chapters, key areas for further improvement of the footprint-type indicators are described, including a first estimation of the required efforts to make them ready for use in the context of EU resource policies.

Sectoral Resource Maps  (2013)

This study examines the resource use of different economic sectors for the EU-27 and each of its Member States. Using data calculated for 1997 and 2007 it examines whether the material resource use of economic sectors is changing (absolute or relative or no decoupling of resource use from growth). It allows the most resource intensive sectors to be identified and also provides some first comparisons of how resource use differs between Member States.

Modelling of milestones for achieving Resource Efficiency (ongoing)

The objective of this study is to provide a view on whether and how the milestones set in the Roadmap on a resource efficient Europe could be used for setting quantified objectives. Task 1 involves an assessment of the different milestones according to whether associated targets would be attainable, relevant, measurable through acceptable indicators and available at EU, Member State or sectoral level. This Task 1 report was taken into account by the Commission in its work to support the European Resource Efficiency Platform. Task 2 continues with a literature review of modelling for a limited selection of indicators and Task 3 will provide additional in-depth modelling of environmental tax reform, environmentally harmful subsidies and food waste.

The opportunities to business of improving resource efficiency (2013)

This study examines resource efficiency measures available to EU companies based on bottom-up industry data and case studies. It finds economic opportunities for businesses in three example sectors (Food and Drink manufacturing, Fabricated Metal Products, and Hospitality and Food Services). Companies in these sectors could do a number of things ranging from better use of ecodesign, waste prevention and reuse: some measures would pay off almost straight away, others require up-front investment. Across industry, the study suggests that the net benefits for business from improved resource efficiency could potentially be in the range €245 billion to €604 billion, representing between 3% and 8% of annual turnover. There would also be environmental benefits from these material savings, for example, a reduction of between 2-4% of total annual greenhouse gas emissions in the EU. However, there are barriers that stop companies from realising these opportunities: these include a lack of access to funding, distorted market demand, lack of knowledge and capability, and a desire to avoid lock-in. The study also looked at information provision programmes, such as knowledge transfer, industrial symbiosis, direct consulting and auditing services, training workshops and self-help tools and guides. In general, these programmes pay off by helping businesses to realise some of these benefits and so delivers savings, and these types of programmes could be more systematically applied.

Mapping resource prices: the past and the future (2012)

This study examines changes in resource prices. On average, real prices increased by more than 300% between 1998 and 2011 for resources. At the same time, resource price volatility has also increased. In general, the prices of commodities are expected to rise due to increased population growth, demand from emerging economies such as China and India, and potentially from increased political risk in producing countries for critical materials. This may impact on the EU's competitiveness: the EU is not self-sufficient in many resources and so the rents from resource production and higher prices increasingly are earned outside the EU. Finally, the study notes higher resource prices only give a partial signal to the market, and by itself will not lead to socially efficient use of resources.

Indicators linking resource use to the economy (2012)

This report provides a first analysis of the macroeconomic indicators best suited to explain and describe the link between resource use and economic activities. Four major links between the economy and resource use are identified and the most relevant indicators to inform these links are selected. The report then points to gaps of the current set of indicators and develops propositions for adaptations and alternative ways to complement it.

Assessment of resource efficiency indicators and targets (2012)

This study investigates how indicators and targets of resource use can be used to increase resource efficiency in the EU as part of the European Commission’s Flagship Initiative for a Resource Efficient Europe. The study analysed several existing indicators that track the different types of resource flows in the economy, such as materials (abiotic and biotic), energy, water and land use. The selected indicators were then evaluated for their appropriateness for target setting at the EU policy level.

The outcome of the study is a framework for a set (or basket) of indicators for resource use and their associated environmental impacts. This basket of indicators was used as a basis for proposing a corresponding set of targets for the EU in 2020 and 2050. The implications of setting resource use targets were evaluated to provide the Commission with possible ideas on how to concentrate their efforts towards setting medium and long-term resource efficiency targets.

Transition Costs (2011)

This paper provides a basis for discussion on structural change and the transition to a resource-efficient economy. It examines the process of economic growth and structural change at a macro-economic and a micro-economic scale so that the costs and benefits of transition can be assessed. It points out that there is no fixed 'status quo' in the economy compared to on-going structural change. It looks at the factors resulting in higher or lower costs of structural change, whether induced by policy or economic conditions. As a result, it provides a basis for reconsidering how to look at the costs and benefits of policy change - suggesting that the costs of transition to a green economy are best compared to alternative scenarios of transition costs, rather than to a 'no cost' scenario.

Lags in the EU Economy's response to change (2011)

This study examines why economies do not always respond optimally to changing economic conditions. In particular, it identifies reasons why the EU economy may be slow in its response to changes in resource scarcity to the detriment of its competitiveness. The analysis of lags to the spread of innovation suggests that some of the existing literature is too simplistic, that the considerations involved are complex, and that smart policies which seek to influence consumer behaviour through differentiated, non-traditional approaches may be needed.

Economic Analysis of Resource Efficiency Policies (2011)

This study identifies existing policies that have successfully optimised the use of resources and estimates their current net benefits to the EU. Based on a literature review and stakeholder consultations, 120 resource efficiency policies were identified in 23 countries. Most policies address either material efficiency of specific resources, such as water and aggregates, or material efficiency in industrial production at a general level. The scope of such policies ranges from improving material efficiency in SMEs through dissemination of information on best practices. A number of projects and schemes were identified in the UK, Germany, Belgium, Finland and the US. The study assesses their value and their potential economic benefits for the EU if applied more widely.

 

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