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Economics and Analysis

Economic considerations, and analysis of economic implications, are a key consideration in most environmental decisions.

Decision-making needs to go through rigorous processes of analysis and appraisal and ex-post evaluation after implementation and economists play a central role in this process, particularly with respect to the estimation of costs and benefits, including non market benefits.

Another major priority for economists working in the area of environmental protection is the promotion where appropriate of economic instruments, including "green taxes", permit trading schemes and liability regimes, as promising ways of tackling environmental problems.

Economic instruments are capable of influencing the behaviour of consumers and manufacturers in ways that are more subtle, yet potentially more powerful, than conventional regulatory controls, and which are capable of achieving results at lower cost.

Wider issues

See information on economics and statistics across Defra as a whole.

Business areas

Economic analysis has played, and continues to play, a particularly important role in the business areas set out below.

Links to some specific papers and consultation documents on key policies and economic instruments are also given.

Climate change and sustainable energy

• A study to estimate ticket price changes for aviation in the EU Emissions Trading Scheme - November 2007
• Greenhouse Gas Policy Evaluation and Appraisal in Government Departments (PDF 300 KB)
• UK greenhouse gas emissions trading scheme
• Climate change agreements and the climate change levy
• Economic instruments and energy efficiency
  • Economic Instruments to Improve Household Energy Efficiency: consultation document on specific measures
• Links to websites on climate change and energy efficiency

Air quality

• National air quality strategy
• Valuation of air pollution effects
  • Valuation of health benefits associated with reductions in air pollution
  • Valuation of air pollution effects on ecosystems: a scoping study

Waste

• The role of economic instruments and targets
  • Landfill Tax (PDF on OECD website)
  • Landfill Allowance Trading Scheme for municipal waste
  • Household incentive schemes to increase recycling and waste minimisation
  • Producer responsibility notes for packaging waste
  • Renewable Obligation Certificates and Waste (PDF on DTI website)
• Valuation of Health and Environmental Impacts
  • Valuation of the external costs and benefits to health and environment of waste management options (PDF 450 KB)
  • Disamenity costs from landfill
• Modelling and Analytical Support
  • Mass-Balance Estimator and Allowance Manager (M-BEAM) to Assist LAs in Developing LATS Trading Strategies

Water

• Implementation of the Water Framework Directive
• The role of economic instruments
  • Economic Instruments for Water Pollution Discharges
  • Economic Instruments for Water Pollution
  • Economic Instruments in Relation to Water Abstraction
  • The Review of the Water Abstraction Licensing System in England and Wales (Consultation Paper) - The Role of Economic Instrument
• Water Supply Industry Periodic review
• Diffuse water pollution from agriculture

Environmental liability

• The Environmental Liability Directive

Chemicals

• Study into the benefits of chemicals regulation (external site)
• The EU White Paper on Chemicals
• The role of economic instruments
  • Scope for the Use of Economic Instruments for Selected Persistent Pollutants
• Pesticides - economic instruments and the pesticides voluntary initiative
  • Pesticides, Design of a Tax or Charge Scheme for Pesticides
  • The Potential Cost and Effectiveness of Voluntary Measures in Reducing the Environmental Impacts of Pesticides (research report)
  • Review of the key issues related to economic instruments to reduce the environmental impact of pesticide use

Appraisal, evaluation and valuation of environmental costs and benefits

• Climate Change policy cost-effectiveness indicator (PSA delivery agreement 27 – indicator 6) (PDF 100 KB)
  As part of our PSA commitments, government is introducing an indicator to reflect our commitment of achieving emission reductions at least cost.   The indicator will show ‘the proportion of emissions reductions from new policies below the Shadow Price of Carbon’ (1) .   New climate change policy (Impact Assessments from 1 April 2008) will have to report to this indicator unless emission reductions are below the de-minimis threshold.    The guidance in the document sets out: who needs to report to the cost-effectiveness indicator; how to report to it; where to report your findings; and where to go for further information and/or questions. 

(1) See:  Measurement Annex – Indicator 6 (PDF on Treasury website)

• Greenhouse Gas Policy Evaluation and Appraisal in Government Departments (PDF 300 KB)
• Green book: appraisal and evaluation in central Government (on HM Treasury website)
• Multi-criteria analysis manual (on the ODPM website)
• Policy appraisal and the environment
• Review of technical guidance on environmental appraisal
• Ex-post policy evaluation of environmental policy
• Valuation of environmental costs and benefits
  • Environmental valuation source list for the UK
  • Environmental Valuation Reference Inventory (EVRI). An international database of environmental valuation studies, to which, through Defra's support, Environment Canada is offering is offering free access to all UK-based internet users.
  • The social costs of carbon

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Page last modified 28 March 2008
Page published 13 November 2002

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