Download - Prof. RAGNAR LÖFSTEDT Director King's Centre for Risk Management King's College London

Prof. RAGNAR LÖFSTEDT

Director

King's Centre for Risk Management King's College London

Prof. Ragnar Löfstedt Prof. Ragnar Löfstedt

The evolving risk management field in Europe Some insights and speculations

Presented at annual meeting Society for Risk Analysis

December 10th 2002-11-24

Background (1)Background (1)

The EU has been concerned about better regulation

Regulatory simplification seen as a pre requisite for EU enlargement (1985)

Edinburgh 1992 summit - better regulation seen as a priority

This is now changing

However, not much has happened


Commission concerned about two areas in particular:

Better regulatory preparationNeed to be as rigorous as possibleBased on a minimum standards of public consultation

Draw in expertiseNeed to be coherent as possibleTransparent


Laws are made too flexible (especially the case of directives)

Regulation needs to be implemented in the member state countries (eg EC 1996; Jordan 1999)

No uniform implementationGrowing problem of compliance

Rules implemented slowly

Regulations are too elaborate (and many poorly conceived)Laws are not based on consensus

Many unrealistic

Little consultation with affected parties

Some unfair (Swedish woodcock hunting season) Overwhelm national institutions: hence some ignored and others adopted in a nationalistic way

Present regulation (1)Present regulation (1)

Better regulation is driven by:

Role of competitiveness

Sustainable development

European governance

Present regulation (2)Present regulation (2)

Lisbon European Council established competitiveness as an EU strategic goal

Concern about unemployment rates and slow growth in the EU

EU to become the most competitive and dynamic based economy in the world by 2020

To reach this:

‘Set out by 2001 a strategy for further co-ordinated action to simplify the regulatory environment, including the performance of public administration, at both national and Community levels’

CompetitivenessCompetitiveness

Need for simplified regulation

Removal of unnecessary regulation

Clearer guidelines

Uniform implementation of regulation

Better governance (1)Better governance (1)

• European regulators not trusted

Food scandals

Cronyism

• Realisation that consensual style of regulation

is effectively dead

• Too much of a democratic deficit

Better governance (2)Better governance (2)

EC White paper in July 2001concluded:

• Opening the policy making process to get more people and organisations in shaping and delivering EU policy

• Simplify further existing EU law

• Define the criteria for the creation of new regulatory agencies and the framework in which they should operate

• Improve dialogue with governmental and NGO actors of third countries when developing policy proposals with an international dimension

Sustainable development (1)Sustainable development (1)

Interest came about following EU signing up to the Rio Declaration:

Promise to develop strategies for SD by the 2002 Summitin Johannesburg

At Gothenburg Summit 2001:Results published under title:

‘SD should be the key objective for all policies considered by the Commission and therefore careful assessments would be needed to lay out both good and bad effects of policies on SD’

Commission sees no conflict between SD and competitiveness:

‘The perceived conflict between environmental protection and economic competitiveness stems from a narrow view of the sources of prosperity and static view of competition.’ (commonly referred to as the Porter hypothesis-Porter 1991, Porter and van der Linde 1995)

In addition to achieve EU wide SD there is a need for public and stakeholder involvement

The coming together of these 3 EU factorsThe coming together of these 3 EU factors

Regulatory tools (1)Regulatory tools (1)

To achieve the 3 above mentioned goals, 2 regulatory tools have been particularly mentioned:

Precautionary Principle

Regulatory Impact Analysis


Precautionary Principle:

Co-developed by Sweden and Germany

Sweden very much reversed burden of proof

Germany – more cautionary: better safe than sorry


PP and the EU

First discussed in the 1982 Charter of Nature

First significant use in relation to the North Sea

Germany played an important role


PP and Europe

Germany lobbied the EU to adopt its version of the principle as a standard environmental policy:

Competitiveness

Fairness

Environment

Leadership

PP now in 14 multilateral agreements


PP at present

• Expresses aversion to health, safety and environmental risks

• Shifts burden of proof to industry to show that products are safe

• Replaces consensual or industry dominated risk management with more adversarial mode

• Enhances regulators credibility


PP at present

• Driven by an erosion of distrust

• Greater citizen access to information

• Regulators and industry faulted in highly visible problems

• NGO’s sought as source for advice and assurance


• US first used it in 1974

• RIA has a more recent EU history• UK - 1992 Compliance Cost Assessments

• Other member states made it popular in the mid 1990s• Swedish National Audit Office 1995• Dutch Business effect list 1995

• And the OECD 1997 report:• Regulatory Impact Analysis: Best Practices in OECD Nations

History of Regulatory Impact Analysis


There is no clear definition of PP (see Weiner and Rogers 2002)

Yet PP is growing in popularity

1994 - 1999 PP was referred to in 27 European Parliament resolutions (Vogel 2002)

Has been used in high level EU-US trade disputes:

Bans on hormones in beefGMOs

Use of PP at present


Is PP a tool for trade protectionism?

Wahlstrom says no:

‘We do not spend our days in Brussles, as some might think, in Machiavellian plotting to apply precaution to the detriment of US business’


Commission put an official clarification on it:

‘Application of the PP is part of risk management, where scientific uncertainty precludes a full assessmet of the risk and when decisions makers consider that the chosen level of environemntal protection of human, animal and plant health may be in jeopardy.’ (EC 2000)


Communication is now used as a defence of PP

‘Our aim (of the communication was to promote transparency in light of public concerns stemming from BSE and dioxin crises and to present broader understanding of the EU’s position on the subject. The communication establishes guidelines for the application of the precautionary principle.’ (Wahlstrom 2002)


Is PP Communication followed?

Regulations are frequently based on a hazard rather than risk assessment

EU’s cosmetic directive (based on RM) is challenged by an EU scientific committee - wants a blanket ban on reprotoxic, carcinogenic and mutagenic substances).

EU’s forthcoming chemical regs:Calls for substances that are: persistent, bio-accumulative or known endocrine disrupters should be subject to ‘authorization’


European Court of Justice (First Instance)

Justifies the use of PP even if appropriate scientific committees felt that there was little / no risk:

‘When the PP is applied, the fact that there is scientific uncertainty and that it is impossible to carry out a full risk assessment in the time available does not prevent the competent public authority from taking preventive protective measures if such measures appear essential, regard being had to the level of risk to human health which the public authority has decided is the critical threshold above which it is necessary to take preventive measures in respect of the product.’


Present day use of RIA

Grew out a need for better regulation

2001 Governance White PaperForm of impact assessment also discussed at Goteborg and Laeken European Councils

Seen as a tool to:

Promote TransparencyHelp measure direct and indirect impacts


Widely advocated in the recent EC Better Regulation Package

Biggest regulatory initiative in the past 5 years

Other issues discussed:

Better Law MakingSimplifying and Improving the regulatory environmentTowards a reinforced culture of consultation and dialogue


RIA has not yet been operationalised in the EU

Call for proposals went out in October

Will be phased in incrementally

Seen by some observers:

‘Crown jewel in th Better Regulation package’

Number of consulting firms have been set up to deal with future demand


• RIA and the entire regulatory package has been welcomed

• Swedes see it as an important step towards open and efficient dialogue

• EU Committee of the American Chamber of Commerce sees it as a commitment to ensuring consistency and transparency

• UNICE sees it as business friendly

• US government loves it - argues for an establishment of an European version of OMB

Something supported by Majone (2001)

Future of EU regulation - Speculations (1)Future of EU regulation - Speculations (1)

Future of Regulation

Use of PP has peaked

Little consensus to use PP in a strict as possible wayNot mentioned once in better regulation package

Split in the commission between DG Enterprise and DG Environment

However: PP has been written into EU lawYet: recent research shows that the term PP is being used less and less


PP has been used as a tool to rebuild public credibility

French ban on UK beef

EU chemical regulation

GMOs

A tough regulator - gains public trust

A weak regulator losses public trust

US arguably did the same 30 years ago


Maybe trust in regulators is now being restored?

Regulators realise that the pendulum toward pp has swung too far

Costs for industry will be too high

RIA is seen as a tool to re-address this balance

Conclusions (1)Conclusions (1)

• The three drivers of present day European regulation are: competitiveness, sustainable development and governance

• The two most talked about regulatory tools are the precautionary principle and regulatory impact analysis

Conclusions (2)Conclusions (2)

• With regard to the precautionary principle, most EU regulators and industry accept the use of it as defined by the Commission’s 2000 communication

• One possible explanation to the changing nature of EU regulation is the shift in public trust toward regulators.

Download - Prof. RAGNAR LÖFSTEDT Director King's Centre for Risk Management King's College London

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