TCS Daily

Rethinking Precaution

By Craig Winneker - October 1, 2002 12:00 AM

Emotions run high when the debate topic is the contentious issue of climate change and the Kyoto protocol, but even diametrically opposed advocates found themselves agreeing this week on the usefulness of cost-benefit analysis in decision-making.

At a TechCentralStation-Europe conference in Copenhagen, experts from the business, academic and policymaking arenas convened to discuss the merits of cost-benefit analysis in general and the experience of Denmark in particular. The Danes, who now hold the EU's rotating presidency, have fueled this discussion by incorporating, ever so gingerly, cost-benefit analysis in their own national policymaking processes.
(Actually, what they have done is to consider incorporating it, but among the hide-bound bureaucratic structures of Western Europe, where new ideas must be vetted by things called "social partners" and "civil society", even this is downright revolutionary.)

The European Commission, which has been among the foremost proponents of the so-called 'precautionary principle' - that regulators should err on the side of overprotection when it comes to consumer protection and environmental policy - has recently admitted it needs to consider the social and economic impacts of legislation more carefully. In its proposal for 'better regulation' the Commission promises to consider cost-benefit analysis.

So it came only as a bit of surprise when an official of the European Environmental Agency (EEA) - and a staunch proponent of the Kyoto protocol - allowed that the precautionary principle sometimes amounts to throwing the baby out with the bathwater.

"It helps to take all kinds of knowledge on board when taking decisions," said David Gee, coordinator of emerging issues at the EEA and editor of a new EU report on the precautionary principle. The debate on asbestos, he said, was dominated by medical doctors; the debate on BSE (known universally as 'mad cow disease') has been dominated by veterinarians. But often the impact of proposed measures to deal with these problems "is much, much wider than one area."

Business-community speakers at the event were more vehement in their calls for lawmakers to take account of the potential economic impact of their actions - especially when so many other factors are intangible.

"If you're not using money terms as your criteria, then what are you using?" said Peder Andersen, director of the Danish Economic Council. "Can we identify all the impacts? No, that's for sure. But a lot them we can. The cost of a project is almost certain every time."

Helle Juhler-Kristoffersen, head of analysis and communication for health, safety and the environment at the Danish Confederation of Industry, said that in her country, those costs can be significant. "Denmark has forced industries to invest in energy-saving technologies. But a lot of the Danish enterprises had already started doing this, were already very energy efficient."

She pointed out that, for Danish businesses, complying with onerous environmental regulations can be especially difficult given the wide variance in, for example, approval periods for new construction projects. According to Juhler-Kristoffersen, these can be anywhere from two to 16 months, depending on the municipality. "Denmark is a very small country," she said. There is no reason for that diversity."

Hans Labohm, an economics professor at the Netherlands Institute for International Relations, focused his presentation on the Kyoto protocol, which he debunked as a "frontal attack on the free-enterprise economy. It is the introduction of central planning by the back door."

He added that proper cost-benefit analysis based on the IPCC's report on climate change is impossible given the scientific doubts that remain about the need for Kyoto. In the organization's recent summary report for policymakers, he pointed out, "the word 'uncertain' or its equivalent appears 40 times."

Gee spent a good deal of his presentation attempting to counter Labohm's arguments. As is usual with the climate change debate, tempers occasionally flared (and at one point Labohm was so flustered that he accidentally referred to Silent Spring author Rachel Carson as Raquel Welch - paging Dr. Freud!).

Gee agreed, however, that certain public policy decisions could be improved by using cost-benefit analysis, and allowed that in some cases - such as, for example, considering how a ban on DDT might harm the fight against malaria in the Third World - the precautionary principle may not be the best guide.

But not, he argued, when it comes to climate change. Gee admitted there was a lot of uncertainty about the scientific basis for Kyoto but protested that climate scientists "are trying to do their best in a very complex field."

Denmark is attempting to reconcile its reputation as a staunchly environmentalist country (even the drunks at Copenhagen's annual beer festival this week were cleaning up their own broken bottles) with efforts to make its economy more cutting-edge, but it still has a long way to go.

And so does the rest of Europe. "The focus on cost-benefit analysis in Denmark is increasing," said Juhler-Kristoffersen, "but the application of the processes is not."

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