ENVIRONMENTAL POLICY

The Government's role is to establish a clear policy framework and set appropriate environmental objectives. In doing so, it is guided by a number of general principles:

• Using the best scientific knowledge

• Taking account of the costs and benefits, including the costs to business

• Making the polluter pay

• Applying the precautionary principle when appropriate

The Government uses the full range of instruments to address environmental issues, including voluntary agreements, regulation, taxes and other economic instruments such as permit trading.

Environmental Regulation

Environmental legislation is primarily concerned with preventing or ameliorating environmental damage, but it should encourage - rather than stifle - innovation. 

Market-based and voluntary approaches to meeting environmental objectives should always be considered as possible alternatives to regulation.

Where regulation is the most cost-effective option, it should have clear objectives, and focus on environmental outcomes rather than being prescriptive in terms of the measures business should take. 

It also needs to provide business with sufficient time and stability to adjust.

Economic Instruments

The choice of economic instrument depends on the nature of the market failure to be addressed.

The use of taxation follows the Government's Statement of Intent on Environmental Taxation set out in the July 1997 Budget. The Statement describes how the Government is using the tax system to promote sustainable growth, by shifting the tax burden away from goods, such as employment towards bads such as pollution.

In November 2002 HM Treasury published "Tax and the Environment: Using Economic Instruments", a document reviewing its experience with environmental taxes so far. It shows how economic analysis can help us understand the issues involved in designing and implementing policy measures. And it sets out how effective Government intervention can help achieve the long lasting changes across the economy that we know are necessary to achieve  environmentally sustainable development.

Europe

Much of UK environmental legislation derives from the European Union. The Commission's 6th Environment Action Programme sets the framework for EU policy on the environment for the next ten years.