Ex-post estimates of costs to business of EU environmental policies

Funded by: EU DG-Environment


May 2005 to November 2005

PSI researchers:

Robin Vanner

Background, summary and aims

The objective of the study is to provide ex-post estimates of (net) costs to business of selected pieces of EU environmental legislation. Given this general objective, the study will focus on:

  1. ex-post impact assessments of selected legislation - leading to conclusions on the economic efficiency and distributional consequences and advice on future policy design to reduce costs reflecting lessons learned; or
  2. comparisons of ex-post compliance cost assessments with available ex-ante assessments - leading to conclusions on methods for assessing ex-ante cost and advice on future ex-ante assessment.

For a number of reasons, determining the ex-post costs of environmental policy measures is not as straightforward as it might seem. These reasons include, among others, the fact that companies do not really have an incentive to reveal their 'true' costs (actually there is no incentive nor obligation for enterprises as far as we know - other than for statistical reasons - to measure the costs related to the implementation of (pieces of) EU legislation). It may therefore be necessary to obtain the information from other sources than the targeted firms themselves (e.g. from suppliers of pollution control equipment. Moreover, it is often difficult to quantify the costs (e.g. if compliance is achieved by means of a completely new production process, with 'embodied' emission reduction ) or to attribute them to a specific piece of legislation (e.g. if several emissions are reduced at the same time). And if the costs can be quantified, one should be aware of the fact that low costs may in some cases indicate a high degree of cost-effectiveness, but in other cases a low degree of compliance.

The project will consist of four elements:

  1. Literature review of existing studies and evidence.
  2. Expert workshop to discuss methodology and choice of case studies.
  3. Case studies on ex-ante and ex-post comparisons.
  4. Preparation of the final report.

PSI is one seven research groups contributing this study. PSI will contribute to the literature review as well as:

  1. undertake one of the case studies (case study to be determined);
  2. produce a discussion paper on the case studies for the expert workshop; and
  3. chair the expert workshop (Professor Paul Ekins) and write up the report from the workshop.