News 2015 / March

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UK report shows increased cost benefits of environmental regulation

For every £1 spent on environmental regulation in UK, there is a £3 return to society through economic, environmental and health benefits. This is one of the findings of a regulation assessment carried out by the UK Department for Environment, Food and Rural Affairs (Defra).

The assessment covers 428 sets of regulations, of which 53% are derived from the EU or international legislations, and the remaining 47% are entirely domestic.
The benefit-cost ratio, which shows the overall comparison between benefits and costs, was in 2012 greatest for chemicals and genetically modified organisms. Other policy areas included in the assessment are e.g. plants, waste, air quality and sustainable products, and the general ratio trend between 2011 and 2012 is positive.

Overall, there was a small increase in the estimated benefit-cost ratio of Defra’s regulation from 2.9 in 2011 to 3.0 in 2012, as a result of modernization of regulations. However, the benefit estimates are likely to be underestimated, Defra comments in the report.

Direct benefit to business is estimated at about £2bn a year, and benefit to society more widely, excluding business, at about £10bn a year. Societal benefits include financial savings to government, environmental benefits and health benefits.

– It is important to emphasize the socio-economic savings that comes along with stricter environmental regulation, says Frida Hök, Policy Advicor at ChemSec. The impacts of chemicals on human health, environment and wildlife result in extensive societal costs, which is reflected in e.g. health care expenses, she continues.

ChemSec recently published the report Cry Wolf, showing how industry tends to overestimate costs of complying with new legislation, even though a proactive chemicals management can actually be beneficial for the company.

Defra’s regulation assessment
Cry Wolf – Predicted costs by industry in the face of new environmental regulations