Box 2: Progress toward stronger environmental regulations
In the run-up to the 21st Conference of the Parties (COP) of the United Nations Framework Convention on Climate Change to be held in 2015 in Paris, when a new climate accord is due, countries are getting more serious about their environmental policies.
On climate change, for example, as a recent report by the Global Legislators Organisations (GLOBE International) and the Grantham Research Institute at the London School of Economics points out, climate legislation in 66 countries now covers nearly 88 percent of current greenhouse gas emissions.1 To be sure, although some major industrialized countries have experienced serious resistance to climate legislation—for example, Australia’s government repealed a key element of the country’s Clean Energy Act (the carbon tax) three times in 2014;2 and Japan announced, in the COP 19 session of the Convention on Climate Change in Warsaw, that its greenhouse gas emissions will be slashed by only 3.8 percent by 2020 compared with 2005 levels to accommodate a much reduced reliance on low carbon nuclear energy after the accident at Fukushima3—almost 500 climate laws were passed in the 66 countries studied.4
According to the GLOBE report, developing countries and emerging markets have passed climate change laws and regulations at a faster pace than developed countries. For example:
Sub Saharan Africa saw major developments in 2013, with progress made in almost all of the study countries, notably the approval of national plans and strategies on climate change
- Kenya adopted 2013-2017 Climate Change Action Plan;
- Mozambique adopted 2013-2025 National Strategy for Climate Change;
- Tanzania passed its National Strategy on REDD+;
- Nigeria’s Legislative Council approved the adoption of a National Climate Change Policy and Response Strategy
The Americas are also taking concrete legislations
- Bolivia passed its Framework Law on Mother Earth and Integral Development to Live Well;
- El Salvador adopted its National Climate Change Strategy;
- In Ecuador, Decree 1815 established the Intersectoral National Strategy for Climate Change;
- In Costa Rica a draft General Law on Climate Change has been introduced and is expected to pass in 2014.5
Another breakthrough in the climate change regulatory landscape this year is the United States’ announcement to tackle carbon dioxide emissions. President Barack Obama, who promised to “respond to the threat of climate change” in his inaugural speech after his re-election, has exercised executive authority through the Environmental Protection Agency to reduce emissions nationwide by an average of 25 percent by 2020 and 30 percent by 2030.6
Confirming this trend, Figure 1 shows that, overall, countries are getting more serious about their environmental regulation. Findings from the Executive Opinion Survey (the Survey) show that the stringency of regulations has increased by more than 0.1 points in the last 10 years, and regulatory enforcement has increased by nearly 0.1 points in the same period of time.
Figure 1: Evolution of Survey results for environmental regulation indicators, 2005–14
Source: World Economic Forum, Executive Opinion Survey, multiple years. Note: Full Survey questions are provided here: Stringency of environmental regulations: How would you assess the stringency of your country’s environmental regulations? [1 = very lax; 7 = among the world’s most stringent]; Enforcement of environmental regulations: How would you assess the enforcement of environmental regulations in your country? [1 = very lax; 7 = among the world’s most rigorous]
Whether motivated by improved climate change science, the cost of doing nothing,7 or the heightened perception of environmental risk (since 2010, the respondents of the World Economic Forum’s Global Risks Perceptions Survey consider environmental risks both to be more likely to happen and to have greater impact),8 the increase in the number and efficacy of environmental regulations is welcome and timely. The drivers for this increase differ across the world. In Asia, for example, stronger policies are motivated as much by energy security as they are by local pollution and public health challenges, and in forested nations international attention on deforestation probably plays a key role in encouraging more stringent regulation to preserve forests. A growing realization that environmental degradation could derail growth is also contributing to this trend. The World Bank estimates the cost of pollution to China at around 9 percent of its gross national income,9 while China’s Ministry of Environmental Protection put it at around 3.5 percent of GDP (based on 2010 figures). According to the Global Burden of Disease 2010 study published in the Lancet in December 2012–January 2013, air pollution contributed to 1.2 million premature deaths in China in 2010.10
However, the GLOBE International report concludes that, despite the positive trends toward a greater number of environmental regulations, the cumulative ambition of these laws is still not enough to limit global average temperature rise to 2ºC above pre-industrial levels—the agreed goal of the international community. In general, the expanded efforts of regulators to deliver more sustainable development mechanism have not yet produced tangible effects on a large scale.
Against this backdrop, it is clear that private sector–led initiatives and public-private partnerships are needed to help mobilize new constituencies and deliver the needed targets. Already some key private-sector groups are forming to act voluntarily on climate and realize opportunities associated with climate-smart business. For example, the Consumer Goods Forum (CGF) is a group focused on sustainability composed of 400 retailers, manufacturers, service providers, and other stakeholders across 70 countries, with combined sales of nearly US$2.5 trillion.11 More specifically, the CGF has four key focus areas: addressing climate change, achieving zero net deforestation, shifting to natural refrigerants, and removing waste from supply chains. In another example, the Banking and Environment Initiative (BEI) comprises 10 of the world’s largest banks, including Barclays, China Construction Bank, and Deutsche Bank. Its mission is to lead the banking industry in collectively directing capital toward environmentally and socially sustainable economic development.
These groups are not only working on a sectoral basis but also coming together across industries to drive more significant impacts. For example, the BEI is supporting the CGF by providing models to finance sustainable commodity supply chains. Initiatives that encourage collaboration and communication cross stakeholders are just a first step toward finding a pragmatic solution to complex environmental problems, yet they represent a key step because they set the foundation for crafting regulations that are more simple and effective when applied to the reality of business operations.