II. Context - Broader Developments

Several broad intersecting trends set the context, and increase the demand for, regulation by governments. In this section we single out four broad trends for special attention: the pace and impact of scientific and technological change; globalisation and economic trends, governance and jurisdictional co-operation; evolving public attitudes and demands; and increasing complexity.² It also identifies some of the general principles and approaches of modern environmental management that respond, in part, to these broader trends.

A. Scientific and Technological Change

Policy-makers and analysts in Environment Canada and the federal government are constantly confronted with a profound variety of scientific and technical developments. For instance each year, hundreds of new substances are developed to improve our quality of life, but that also present a challenge in terms of understanding their overall safety and environmental impacts. Without testing, we risk causing unintended harm to the environment and human health - we do not want to repeat the story of PCBs, CFCs, etc.

The recent Federal Science and Technology Foresight Project was created to help policy-makers gain a better understanding of the rapid pace of developments in science and technology, as well as providing some longer-term trend analysis. While there will undeniably be substantial benefits from these developments, we can also expect that these technologies may interact with the environment and society in unanticipated ways - particularly if we do not take the time now to assess their broader impact.

Many current environmental issues reflect the unthinking application, and unintended consequences, of past scientific and technological innovations. Consider the examples of ozone depletion, climate change, and water pollution stemming from residual drugs from human consumption. Each of these problems reflects the unanticipated consequence of technological progress i.e. improvements in refrigeration; energy production and use; and health care. In the long run, governments need to get a much better handle on how science and technology are developing, and create a more complete system that adequately integrates analysis of environmental and social consequences into our innovation activities. This will enable us to anticipate, rather than merely react to, the unintended consequences of profound technology shifts.

Scientific and technological developments do not only create new demands on regulators and policy-makers - they also provide critical information and analysis. One of the cornerstones of Environment Canada's work is a sound science-base, where we are considered a leader amongst government departments. Science is essential to understanding the environment, how it functions, the ways we depend on it, and how our activities affect it. For instance, atmospheric science has revealed the impact of greenhouse gasses (GHGs), and the movements and

interactions of air pollutants which contribute to smog, and will continue to be essential for modelling and developing strategies to address climate change. Further, environmental policies can require significant changes in behaviour, and it is also reasonable to ask for the best scientific rationale to support notable change and effort.

The pace of environmental science in some ways seems both too slow, and too fast. On the one hand, we urgently need a better understanding of how to deal with pressing environmental problems, such how to anticipate the impact of chemicals or organisms introduced into the environment. On the other hand, our investigations into the workings of basic environmental systems often seem to reveal more problems than they resolve. In any case, Environment Canada's activities are fundamentally shaped and driven by science, and sound scientific research remains a departmental priority.

B. Globalisation and Economic Trends

One of the most challenging trends for government policy-makers, and indeed many institutions, industries, and organisations in Canadian society, is the ongoing acceleration of a multifaceted phenomenon dubbed "globalisation". The underlying driving force for globalisation is technological change. Technological developments have allowed for faster movement of goods, ideas, money and peoples, shifting underlying patterns of interactions, the spread of technology, and the production of goods. We also recognise that ecosystems around the world are interconnected - that we share a common global environment and actions in one part of the world can cause serious harm in another. Finally, international agreements, such as the WTO, have accelerated global economic integration.

It is perhaps the economic developments of globalisation that are given the greatest attention, and indeed the trends have been dramatic. Trade has grown enormously, particularly for Canada, where 43.1% of our GDP is exported, and we import 38.1% of GDP in the goods and services we consume. Canada-U.S. economic ties have also become stronger, fuelling demands by business, and within policy circles, to give more careful consideration to our economic links to the U.S. in policy and regulatory discussions.

1. Economic Diagnostique

The integration of global markets and the pace of economic growth, highlight the need to assess the economic aspects of environmental policies and regulations. Environment Canada has over the years researched and developed a sophisticated analysis of the genesis of many environmental problems based on economic analysis and research. This economic framework was given centre stage in the Green Plan of the early 1990's, but its essential analysis, diagnostique and prescriptions are now internationally accepted, and promulgated by organisations such as the OECD.

Underlying this analysis are the related concepts of externalities and public goods. An example of an externality is a firm that pollutes without considering the impact of this environmental damage on others. The full costs and benefits of the firm's activities are not integrated into the firm's accounting framework, and the result is inefficiency and environmental damage. Public goods, such as clean air and water, are common property that is difficult to police and control - so (without regulatory intervention) when firms or individuals damage these resources there are no mechanisms to force an accounting of the damage, or externality, that is generated. For instance, in the decades prior to government intervention, firms and communities dumped thousands of tonnes of chemicals and untreated waste into the Great Lakes / St. Lawrence system, not considering the harm done downstream.

The solution is to develop mechanisms to control access to the public good, and to "internalise" the damages on those responsible. This is the "Polluter Pays Principle" i.e. holding polluters responsible for the damage they cause. While a number of regulatory instruments can accomplish this, economic instruments have many attractive features to recommend them.

Some have also raised concerns about the ability of national governments to impose controls on large footloose multinational enterprises; others ask whether countries are now competing with each other for trade, markets and investment. While some forms of policy competition are positive, and encourage countries to improve infrastructure, education, the legal system etc.; other forms of competition, as the OECD has noted, may be harmful. They can lead to negative tax competition, or unwillingness to regulate if this is seen as a making a jurisdiction less attractive to industry. These dynamics highlight the need to assess international implications and foster international co-operation when developing environmental policies and regulations.

C. Governance and Jurisdictional Co-operation

Globalisation accentuates the need for inter-jurisdictional co-operation and co-ordination. First, because environmental impacts do not respect political boundaries and many problems are regional or global. Second, stronger economic linkages also create pressures for common environmental standards and mechanisms. Firms in one jurisdiction may argue that they face extra costs and reduced competitiveness if forced to meet stricter standards, or use different technologies than competitors.

The need for jurisdictional co-operation is an inescapable reality for policy-makers and regulators on the environment. Yet, we also have to consider general concerns about impacts on sovereignty, and the need to respect important differences between jurisdictions with respect to ecology, legal systems, values, economic status, etc.

Canada faces some similar issues in dealing with shared federal, provincial and territorial jurisdiction for the domestic environment. Canada's experience with joint jurisdiction (discussed below) may also shed light on approaches to international co-operation.

D. Evolving Public Attitudes and Demands

The attitude of Canadians on environmental issues has evolved over time. Canadians have always had a deep-rooted appreciation of our natural heritage, but they once tended to assume that in such a vast country the environment was too immense to be damaged by our activities. Over the last few decades, as stories of contamination, species loss, climate change, etc. emerged, concern for the environment has become a core value of Canadians. The environment is now consistently ranked as a priority for government by 75-85% of Canadians. (EKOS, 2002). Further, the important links between environmental and human health contribute to the strong public interest in environmental issues.

Public attitudes are also evolving with respect to how governments share responsibility and interact with other parts of society, such as communities, civil society, and the marketplace. We now ask, whether, and to what extent government involvement and action is appropriate, versus letting other institutions in society address a problem. In some periods there have been calls for strong government action and regulation, in other times calls for less government and less regulation.³ More recently, the debate has become subtler, asking what are ways of regulating better, and how to use a more balanced and effective use of policy instruments and institutional strengths to achieve our policy goals - in short, a call for smart regulation.

Demands in different policy areas are often in tension. Calls for stronger environmental protection can occur at the same time as the public is asking for less overall government intervention in the economy. The environment also competes for top billing in polls with health, education and economic concerns. Environment Canada's regulatory efforts to need to be developed within a sustainable development framework that acknowledges the need to integrate public concerns about environmental, economic and social issues.

E. Increasing Complexity - Interaction and Interplay amongst Trends

The net result of these broader developments is that the challenge facing policy-makers and regulators is increasingly complex. The demand for new regulations is growing, and yet the problems to be addressed are becoming more interconnected and challenging to understand. Thomas Homer-Dixon has noted that our society is faced with an ingenuity gap. Despite the continual and impressive improvements in our understanding, and better tools to address our problems, the pace at which issues are arising, and their level of complexity, is increasing at an even faster rate.

Pressures to deal with existing and emerging issues such as climate change, regulating toxic substances, protecting endangered species; biotechnology; reducing urban air pollution - are all generating enormous demands on Environment Canada. We are facing our own ingenuity gap - even the need for basic science outpaces our research capacity. These increasing pressures are now part of Environment Canada's basic work environment, and we will need to find the resources, develop new tools and new ways to set priorities, in order to deal with them.

What is called for is a better way of integrating policies - greater co-ordination amongst disciplines, departments, and jurisdictions. Our policy analysis will need to consider how the trends in large fundamental systems such as the economy and the environment interact - where they mutually reinforce each other and when policies in one area undermine efforts in the other. However, despite the challenges we have made progress, and have developed some sound guiding principles to guide our future efforts.⁴

1. Sustainable Development

Sustainable development is the basic model underlying Environment Canada's vision of good decision-making. Sound policies and regulations must be based on an integrated consideration and assessment of the impacts on the environment, economy and society. Sustainable development is not only a guide for Environment Canada's own activities, but also one that is endorsed and adopted by institutions and organisations throughout the world. Further, the sustainable development framework echoes current demands for greater horizontal policy integration. Sustainable development is a framework that captures the essence of sound policy - the ability to consider, manage and integrate multiple priorities in a complex world. It is also the core of Smart Regulation more generally.

2. Ecosystem Approach

As noted earlier, environmental systems do not respect political boundaries. Ecosystems at a natural level require a complex multidisciplinary approach, bringing together biology, geography, meteorology, chemistry, physics etc. Because we are also part of the ecosystem, human behaviour also needs to be considered, and social sciences such as demography, economics and political science will be part of a full understanding of ecosystems. Again, as with sustainable development analysis, we find that an ecosystem approach demands a multidisciplinary, horizontal style of thinking and analysis. Good environmental management also demands that we recognise the relevant ecosystem for analysis, and match our policy and regulatory interventions to this level - whether it be a local community effort or a global agreement.

3. Pollution Prevention

Complexity is not always inevitable. Some of our most difficult problems reflect our failure to intervene in a timely fashion. Our experience on environmental issues has repeatedly illustrated that it is simpler, more effective and less costly to prevent environmental problems than to deal

with the damage after the fact. Remediation is almost always more costly than prevention. In some cases, the damage may be irreversible. It is also generally cheaper to integrate a pollution prevention system within a manufacturing process, than to implement end of pipe controls once a plant is already built. An important challenge is older manufacturing infrastructure in some industries where technology is being updated slowly. Overall, a key feature of smart environmental regulation will be the extent to which it anticipates, instead of reacts to, environmental problems.

4. Precautionary Principle

Environment Canada has integrated the precautionary principle throughout its environmental protection activities. As formulated in Principle 15 of the 1992 Rio Declaration, the precautionary principle states, .where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason to postpone cost-effective measures to prevent environmental degradation.. Canada was one of the first countries to incorporate the precautionary principle into its main environmental protection statute, CEPA 1999.

5. Polluter Pays Principle

Environmental policies and regulations will often redistribute costs and benefits. The polluter pays principle embodies the basic value that those who are responsible, the polluters, should bear the costs of preventing or repairing the environmental damage they cause.

² Of course, there are other major developments, such as armed conflict and geopolitical security, or population growth, which also have major impacts on the environment. For consideration of length, these are not addressed in this paper.

³ See Hill, 1998, for a comprehensive review of evolving attitudes on regulation over the last 20 years.

⁴ While these are principles that help guide government regulatory activity, they also apply more broadly. Indeed on issues such as sustainable development and pollution prevention, civil society and many elements of the business community have been leaders in developing and putting these principles into action.