Environmental regulation and the Productivity Commission

Is ‘efficiency’ the sole solution to the challenge of ‘sustainability’?

By Peter Burnett

Last week the Australian Government announced a new inquiry by the Productivity Commission (PC) into regulation of the resources sector. While not confined to environmental regulation, in announcing the review Treasurer Josh Frydenberg made specific reference to improving the efficiency of environmental approvals to reduce the ‘regulatory burden’ on business. Frydenberg also said that the review would complement the forthcoming statutory review of national environmental protection law, the Environment Protection and Biodiversity Conservation Act. (For more on this review, see my recent blog).

In his media release, Frydenberg repeated the mantra of recent governments: that the aim was to ensure that projects were assessed efficiently while ‘upholding robust environmental standards’. This largely reflects the terms of reference of the PC inquiry, which talk of removing unnecessary costs while ‘ensuring robust protections for the environment are maintained’.

The week before the inquiry was announced, the new chair of the Minerals Council of Australia, Helen Coonan (a former Howard Government minister), identified efficient regulation as one of her top priorities. She claimed that if project approvals were sped up by one year, this would release some $160 billion and 69,000 jobs to the economy. I’m not sure where this figure came from, but it may have been based on a PC inquiry into the upstream oil and gas industry in 2009, which estimated that expediting the regulatory approval process for a major project by one year could increase its net present value by up to 18%. In any event, that’s a juicy target for efficiency savings.

The PC’s role on sustainability

On its website, the PC advertises itself as ‘providing independent research and advice to Government on economic, social and environmental issues affecting the welfare of Australians’. That’s not bad for a slogan but the substance is a little more complicated.

Under the Productivity Commission Act 1998 the substantive functions of the PC are all cast in terms of industry development and productivity. And the PC’s statutory policy guidelines, to which it must have regard, are dominated by considerations of improving economic performance through higher productivity; reducing regulation and increasing efficiency.

The statutory guidelines do, however, include considerations relevant to sustainability. Beyond a direct reference to the need ‘to ensure that industry develops in a way that is ecologically sustainable’, there are also references to other things connected to sustainability such as regional development; avoiding hardship from structural change; and meeting Australia’s international obligations. Further, one of the Commissioners must be experienced in sustainability and conservation while another must be experienced in social issues.

So, while the PC is definitely about efficiency and growth, it doesn’t have a one-track mind. Environmental and social impacts are definitely members of the cast, though in supporting roles. As we’ll see below, the problem doesn’t seem to be the PC but what the government does or doesn’t do with its recommendations.

We’ve been here before

Industry keeps complaining about inefficiency and duplication in environmental regulation, and governments keep returning to this theme, often through references to the PC. In recent years, in addition to sector-specific reports on regulation (including environmental regulation) of transport, agriculture, fisheries, water, upstream oil and gas, and mineral exploration, the PC has produced general reports on native vegetation and biodiversity regulation (2004); planning, zoning and development assessment (2011); COAG’s regulatory reform agenda including environmental regulation (2012); and major project assessment (2013).

This is in addition to the statutory review of the EPBC Act itself by Allan Hawke in 2009, which also included significant recommendations for regulatory streamlining.

The PC has also conducted other relevant review activities, such as convening a roundtable on Promoting Better Environmental Outcomes (2009).

And it looks like we’ll do it again

The terms of reference for this latest review focus on identifying practices for project approval that have led to streamlining the process without compromising environmental standards. This is rather unimaginative and I think will simply lead the PC back to places it has already gone, such as recommending increased use of regional plans and other landscape scale approaches; increased regulatory guidance; and a single national threatened species list.

In response to past recommendations, governments have done some of all these things. For example, there is a process underway to adopt a common assessment method for threatened species listings.

But governments don’t seem to tackle the issues in a fulsome and vigorous way, to deal with them once and for all. In fact, they attempt to walk on both sides of the street, pursuing reforms in an incremental way while simultaneously cutting environment department budgets. On this basis, one must even question their appetite for reform.

So much at stake

So is environmental regulation just a convenient whipping boy? There’s so much at stake that I don’t think so. Perhaps governments are wedged between their own policies and the politics: they don’t want to increase spending and can’t be seen to water down existing standards, yet remain frustrated by the processes that those standards bring with them.

If governments want real improvements to regulatory efficiency, without simply winding environmental laws back, they have to front-load the regulatory process with information and guidance and resources, ie with things that the PC and others have already recommended. These boil down pretty much to landscape-scale approaches such as regional planning (done comprehensively) supported by increased levels of regulatory service, including detailed guidance on what will and won’t be approved.

It’s not rocket science, but it will take serious money. But keep in mind that such an investment would lead to saving even more serious money.

And there’s an incidental benefit in such an approach. Proper environmental information and planning will also improve the quality of decision-making, which should improve environmental outcomes.

Image: Image by Gerd Altmann from Pixabay