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Abstract
We address the possible outcomes of combining environmental taxes and environmental planning in managing non-renewable resources such as aggregates. We empirically investigate resource taxation issues by focusing on aggregate extraction policy in two large northern Italian regions, Lombardy and Emilia-Romagna. The evidence shows that environmental planning, in addition to economic instruments, is needed to shape and monitor environmental policies. We highlight that the complementarity of land use planning and economic instruments can be a key driver of sustainability performances. The unintended effects of economic instruments are also crucial.
Acknowledgements
We would like to thank all the staff of the Emilia Romagna region and the Provinces of Milan and Bologna for providing various data and information. We would especially like to thank arch. Paola Altobelli and Paola Cavazzi for data provision, and all the people who supported us in Servizio Pianificazione Paesistica Assessorato Ambiente Provincia di Bologna.
Notes
1. We observe that the ‘efficiency without optimality’ concept, associated with the implementation of economic instruments, is a reasonable assumption that also derives from the seminal contribution by Baumol and Oates (Citation1986). “The charges and standards approach says that setting a sufficient variety of environmental policies can contribute to the efficiency of a program for controlling externalities, and this is more relevant the higher the social costs are. A satisfying procedure that does not search for the global optimum can approach the least cost solution related to a specific target of interest. It thus can be designed as to approximate the Pigouvian outcome” (Baumol and Oates Citation1986, p. 165).
2. We note that the political economy approach we refer to does not deal with ‘public choice’ issues such as political behaviour, elections, interest groups, etc. We follow Pearce (Citation2006) in analysing efficiency and effectiveness issues in the application of environmental policy (taxes), that includes reasoning around the ‘recycling’ of tax revenues. Pearce states: “A political economy analysis, in which the interaction of economics and political reality is emphasised, explains the gap between theoretical ideas and practical reality. A closer look at the factors that influence real world policy design should help policy oriented economists in designing measures that have a greater chance of adoption”. He also critically argued that “great care is needed in pursuing the political economy perspective. Explaining differences between optimal and actual design of policy measures does not justify them” (p. 157). Our analysis integrates the theory of environmental taxation focused mainly on efficiency (but see Baumol and Oates Citation1986) with real world policy issues such as rents distribution and capture, tax revenue uses, unintended policy effects, effectiveness (in terms of environmental objectives). We thank one referee for this clarification.
3. This issue can nevertheless matter of open discussion for further conceptual and policy oriented research. We thank one referee for the clarification.
4. The regional case studies are partly motivated by the availability of information sources and direct communication with policy makers / planners, partly by the fact that the two regions are among those that have promptly and more effectively responded and adapted to the 2001 Constitutional Reform which assigns more and new competencies to Regions (reform of Part 5 of the Constitution, in particular the key article 117 which defines new regional competences).
5. A detailed analysis of the legislation on aggregates and quarrying in Italy, not presented here, is available upon request.
6. We note that in Italy 20 regions, 110 provinces and more than 8000 municipalities are present.
7. This lasts on average five years.
8. We thank one referee for this point.
9. The aggregate charges update of 2007 has been the first one since their introduction in 1991. The revision was likely to be based on past inflation, in order to restore levels to 1991 real term values. A new query to regional offices in March 2012 confirmed the same values. This is further evidence of a well-known fact in environmental policy implementation: tax levels erode over time in real value since they are not updated very often. Such a discrete change type of evolution is part of the ‘political economy’ framework. We note that for such a reason the new EU Energy Directive proposal witnesses a three-year update of the energy tax and a five-year update for the carbon tax. A ‘jumps’ scenario remains the most usual framework, compared to alternatives such as inflation linked taxes (or inflation + x%) (see Tables 2 and 3). It is interesting to note that the expected revisions of charges that were communicated by regional officers () have not occurred since 2007. One possible explanation is the decision to freeze fiscal tools during the recession, which heavily affected Emilia-Romagna (-5.9% GDP in 2009).
10. Regional offices dealing with extraction activities are full of technical (engineers, biologists and architects) skills, whereas they lack economists, and the application of economic evaluation and cost benefit analysis, for example, is highly infrequent. Sustainability paradigms seem, instead, quite well rooted even if they are not shaped in economic terms: weak and strong sustainability principles can be clearly inferred through the reading of official documents on planning rules and evaluations.
11. For comparison, the estimated revenue in France is approximately €50–60 million.
12. The figure is old (2003) but it can be realistic – or even overestimated – at present because of the crisis that has left the sector in a very depressed condition during the last few years.
13. In Emilia-Romagna, authorisations for extractions usually apply to a period of five years Four of these years are to be devoted to mining and the fifth to rehabilitation of the site (i.e. creation of grassland, wetland, tree planting). In practice, some rehabilitation begins in parallel with excavation activity.
14. Proper econometric analysis is currently impossible, given the short time series and missing data on most variables.
15. We consider 10 Provinces: Milan, Como, Varese, Lodi, Mantova, Bergamo, Brescia, Pavia, Sondrio, Cremona over the period 1995–2003.
16. All the information comes from direct interviews and research interactions with the Province administrators.
17. “The lack of recognition that high quality restoration is a positive element of a sustainable policy and, as such, should be distinguished from day to day issues such as control over noise, dust and vibration, plays down a genuinely credible sustainable aspect of the latest policy advice”, and “local plan policies on aggregates need to be written specifically with sustainability issues in mind. Thus the central issue should be the balance between environmental quality before working commences and after restoration is complete. Issues of demand management and the localisation of supply may be relevant to the realisation of policies. Control over working to protect local populations from nuisance will remain a central theme in mineral plans but it is not directly related to sustainability. Finally resource depletion issues, and the questions related to the economics of recycling of aggregates are best left to the market” (Kellett Citation1995, pp. 576–577).
18. “A balance needs to be struck between the theoretical rhetoric of sustainable development and the commercial realities faced by the minerals industry” (Kellett Citation1995, p. 572). Kellett is in favour of a ‘loose’ definition of sustainability, that allows a movement towards a more sustainable basis for policy through a combination of recycling of aggregates and reductions in the amount of primary aggregates extracted each year.