Vested Interests in the Political Economy SUSTRA Workshop, 22-23 January 2004 Mike Wriglesworth

1. Vested Interests in the Political Economy SUSTRA Workshop, 22-23 January 2004 Mike Wriglesworth Senior Advisor European Affairs, International Emissions Trading Association

2. IETA Vision • IETA is dedicated to: • the objectives of the United Nations Framework Convention on Climate Change and ultimately climate protection; • the establishment of effective market-based trading systems for greenhouse gas emissions by businesses that are demonstrably fair, open, efficient, accountable and consistent across national boundaries; and • maintaining societal equity and environmental integrity while establishing these systems.

3. Some IETA Members

4. Main Activities - Build GHG markets • Standardize Components • Capacity building • Highlight issues • Respond to Regulators

5. Vested Interests in the Political Economy Scope of the presentation: • Delivering sustainable & equitable solutions: • Sustainability as the ‘objective’ long-term test • ‘Equity’ recognises likely competing self-interests • Democracy based on competing self-interest • Role of advocacy in expressing self-interest • Role of markets in harnessing self-interest: • Regulated markets that drive efficient solutions

6. Vested Interests in the Political Economy • In EU process, all institutions & stakeholders bring vested interests to the political debate • Commission protects its power of proposal • Parliament seeks publicity and to increase power • Member State deals to protect national interests • ENGOs seek a heady mix of publicity and funds • Business mixes short term defence with strategy • Consultants have their own more direct interests

7. Vested Interests Commission Proposals EU model & process from proposal to directive • Commission proposals need to be based on: • Coherent policy –agreed strategy, realistic aims • Sound data • Impact assessment -‘regulatory’ or ‘extended’ • Stakeholder input is key part of the process: • Stakeholders offer relevant data and expertise • Stakeholder impacts must be part of assessment • Advocacy is most effective if soundly based

8. Vested Interests in the EU Political Process EU model & process from proposal to directive • Commission Extended Impact Assessment provides the basis for stakeholder advocacy • EIA is at a very early stage of development • Early examples justify existing aims/strategy • EP Env Com vote on EIA test of amendment • Data, modelling and analysis lack objectivity • Risk: -lack of trust in science and scientists

9. Creative Markets Harness Vested Interests • Markets can harness creativity & self-interest • Regulated market meeting democratic model • Market mechanisms combine meeting aims early & effectively, with economic efficiency • But, design of market instruments is crucial: • Credible balance of aim, cost and effectiveness • Simple mechanism aligned with a clear objective • Simplicity and clarity help gain public support

10. Vested Interests Drive EU Political Process Conclusions: • Regulated markets can harness self-interest • Self-interest underpins the democratic model • All stakeholders bring legitimate self interest • Well designed market mechanisms can offer effectiveness with economic efficiency • Public support is crucial based on clarity and transparency of mechanism aligned with aim