Commission calls for integration of environmental issues in EU economic policy

In a Communication to the Council and the European Parliament EU Commissioner for Economic and Monetary Affairs Pedro Solbes argues that "there is no inherent contradiction between economic growth and the environment. Moving our societies onto environmentally sustainable trajectories will require change. Market-based instruments should be increasingly used in the effort to integrate environmental and economic policy objectives". According to EU Commissioner for Environment Margot Wallström "over time, removing environmentally damaging subsidies and implementing the polluter pays principle should enhance economic efficiency and competitiveness. It will lead to sustainable economic growth with more and better jobs and greater social cohesion."

Growth typically enables societies to provide their members with a cleaner, healthier environment as it allows them to invest in cleaner technologies and products. Accordingly, the issue is how improvements in living standards can be accompanied by the safeguarding and improvement of the quality of the environment. As part of achieving the Lisbon European Council's goal of making the Community the world's most competitive and dynamic knowledge-based economy, capable of sustainable economic growth it is essential to change our approach to environmental policy. Policy makers should acknowledge that market forces are implicated in many environmental problems and should seek to use them in order to achieve environmental policy aims.

However, to minimise the transitional difficulties that some sectors and regions could face, the Communication proposes a gradual but credible approach, backed up by targeted structural measures as needed. The recent sharp rise in oil prices to a large extent reinforces the arguments made in the Communication about the importance of taking a gradual, credible approach. Much of the current difficulties faced by some sectors are due to the fact that the rise in prices has been both sudden and unexpected. The Communication also identifies the need within a comprehensive framework for environmentally sustainable development for structural measures to assist sectors which may face particularly acute transitional problems.

For this and other reasons, the Communication argues that fears that the pursuit of a high level of environmental protection will inevitably seriously damage the Community's competitiveness are misplaced. The vast majority of Community production is also consumed in the Community; a substantial share of the remainder of trade is with countries committed to implementing Single Market legislation (applicants for Community membership and EEA members) or facing constraints on their greenhouse gas emissions under the Kyoto Protocol.

Nevertheless, efforts by the Community to achieve environmental sustainability cannot be fully successful in the longer term in the absence of co-ordinated international action. Global challenges such as climate change and ozone depletion can only ultimately be conquered by global action. International environmental problems such as trans-boundary water and air pollution can best be tackled by coordinated international efforts.

As regards the specific contribution of the Ecofin Council the Communication proposes that the process of multilateral surveillance of structural reform should include the environmental impacts of economic activity and regulation. This would enable the Broad Economic Policy Guidelines to incorporate fully the objectives of environmental integration. In addition, reviews of the quality and sustainability of public finances should take particular account of how tax and spending polices can interact with the environment.

The Communication responds to the European Council's request to integrate environmental protection into Community policies in order to achieve sustainable development, in line with the requirements of the Amsterdam Treaty. It is also an important input to the long term Community strategy dovetailing policies for economically, socially and ecologically sustainable development.