Can we use regulation more effectively to protect nature?

In this blog Jenna Coull, Principal Economist at the RSPB (Royal Society for the Protection of Birds), responds to the recent Aldersgate publication on the use of regulation to restore nature and deliver net zero.

The case for regulation

We cannot ignore the link between nature and our economic wellbeing. The World Economic Forum estimates over ½ of global GDP is dependent on nature, and that nature loss is a top risk facing the global economy in the next 10 years.  A recent GFI study – the first attempt to quantify nature risks to the UK economy – concluded that continued environmental deterioration could result in a 6-12% reduction in GDP by the 2030s. This impact is potentially greater than that of the global financial and Covid-19 crises.

Many countries are signatories to the new biodiversity framework to halt and reduce biodiversity loss by 2030, agreed at Convention on Biological Diversity COP meeting in 2022. Crucial to the delivery of this mission is a suite of specific targets, including ensuring that by 2030, at least 30% of land, freshwater, marine and coastal areas are effectively conserved and managed (current global rates of protected areas are approximately 17% for land and 8% of seas). The State of Nature report puts the UK in the bottom 10% of countries globally for biodiversity health.

To have any chance of meeting these targets and reducing the subsequent economic impact, policymakers need to implement a range of tools. Environmental regulation, which covers instruments including permits, consents, project standards and statutory requirements, is one such tool available. Well designed regulation can support meeting both environmental and economic goals.

The complexity of regulating the environment.

While regulation principles are well established (e.g. through the Better Regulation Framework), regulating the environment is more complex given its unique characteristics.

The recent report, published by Aldersgate Group, set out four characteristics that are unique to the environment. It is multifaceted and interconnected; regulation which only focuses on a specific element can have negative impacts elsewhere, e.g. reducing nutrients from sewage can involve carbon-intensive solutions that reduce biodiversity. Thus, environmental regulation needs to be addressed in the whole.  All sectors of the economy interact with the environment; it is difficult to pinpoint the impacts, e.g. river quality can be affected by runoff from agriculture, road, and wastewater plans. It remains difficult to monetarise environmental impacts, while valuation techniques are improving this remains a challenge. Finally, impacts on the environment are not linear, ecosystems can reach a ‘tipping point’ and decline can be irreversible. It remains difficult to estimate long term impacts with certainty.

Current UK environmental regulation

Regulatory frameworks for the environment in the UK exist, but do not sufficiently take these nuances into account. The Environment Act, which became law in 2021, is the UK’s new framework for environmental protection since withdrawing from the European Union.   Several regulatory bodies were set up at this point, including the Office for Environmental Protection (OEP) for England and Wales, Environmental Standards Scotland (ESS), and the Environmental Protection Assessor for Wales. These bodies are still establishing their roles of ensuring public authorities’ compliance with laws and standards. The OEP reported that the government is largely off track to meet its environmental ambitions;  this suggests that we need a stronger framework to hold government to account.

Emerging nature markets

UK nature markets, such as those for buying and selling carbon and biodiversity credits, are still in their infancy.  There have been several strategic developments, most notably: the setting out of legally binding environmental targets; the publication of the Nature Market Framework; the commissioning of the British Standards Institute (BSI) to set accreditation; the release of the Taskforce on Nature Related Financial Disclosures (TNFD) for voluntary disclosure by businesses; and the establishment of an interim Environmental Markets Board to oversee the governance and evaluation frameworks for pilot projects. However, there is no overarching regulator, or coherent regulation, for these markets.

This regulatory gap is a mistake. Confidence in these markets is low due to a lack of consistent and coordinated approaches to policy and standards across diverse nature markets.  Private investment in nature is needed, and at scale – projects need to be credible and provide a financial return. Well-designed and effective regulation is needed to incentivise investment, while ensuring additionality and environmental integrity.

Policy recommendations

The challenge for the next government is to recognise and address this regulatory gap, alongside implementing policy which fully assesses the damage of inaction on the environment and captures the full costs and benefits to society.  There is no time to waste; both nature’s survival and our long-term economic health are dependent upon this.