Case Study: Environmental Protection

Economy and ecology are they irreconcilable? Not at all! The conflict between industry and environmental protection can be readily resolved if the municipality sets up the right inducements, taking economic considerations into account, rather than merely handing out prohibitions right and left. The head of a regional water board in the centre of Europe is keen to sub- scribe to this modern principle of environmental policy. The authority run by this committed environmentalist has targeted a paper mill that is polluting a beautiful, ecologically unique lake. The new environmental laws certainly give him the option of simply closing the factory down, but ultimately no one would be served by such a decision. The region is classed as economically depressed, and the mill offers 450 jobs to the small town on the lake where it is situated. Such drastic action on the part of the water authority could also enrage the local population and cause considerable trouble for the environment ministry. On the other side of the coin, the discharge of toxins into the lake must decidedly stop, with no ifs or buts. The water board is in need of a victory that will bring it back the support of the various environmental groups and associations, having suffered a reverse in the matter of the construction of a waste plant. How can all these different objectives be catered for in a single arrangement? The departmental head has done his homework and has had an order prepared under which the paper mill could provisionally be closed down. The paperwork necessary to initiate a shutdown procedure is sitting ready on his desk. In a courteous but firm letter, he has indicated the two options to the owner of the mill. Responding by telephone, she now assures him that the factory is no more interested in a spectacular and unpredictable power struggle in the courts than he is. And so they both agree to table their respective positions to one another in an informal negotiation and then to seek a joint solution that does justice to both the ecological andeconomic issues in question. The great variety of imaginable alternatives leaves sufficient leeway for a session of integrative bargaining. Two different technologies with different degrees of efficiency are available. The authority could make a gesture towards the paper mill by offering to subsidize the better (but more expensive) installation. To get the best press, they could close down the plant, recognized as a polluter, until the filter has been installed. Given that there is a temporary fall in demand for its products, and that its present stocks are quite high, the factory would not have any great objection to a temporary break in production. A public relations campaign on the part of the water authority could serve either as a threat or, if it were to present the paper mill as a model undertaking, as a reward for voluntary compliance with the official order. For this purpose a subsidy pool is available from which the authority could offer financial inducements for the incorporation of a novel filter technology. The official thus has a variety of instruments at his disposal. These represent a considerable gradient in terms of their cost to the public authority,

because a subsidy could be regarded as a precedent and thus bring many other claims in its wake. A public relations campaign, on the other hand, could do a lot of good with a relatively small outlay. In the negotiations that follow at attempt is made to put together those combinations of concessions that offer both sides the greatest possible benefit at the lowest possible cost. Table 4-1 shows a direct comparison of the costs and benefits of various concessions from both point of views. From the figures given in the Table, it will be seen that the water board could put through the installation of a standard filter if it threatened the factory with the alternative of permanent closure. The authority is however greatly interested in an installation with state-of-the-art technology, as this would win the approval of the environment lobby. But direct subsidization of this advanced technology would be relatively expensive, as it would serve as a precedent for claims from other businesses. Other concessions would be much less onerous for the authority, e.g. a public relations campaign in which the paper mill is put forward as a model of ecological production. Another possibility would be the provisional closure of the works for three months: this would illustrate the determination of the water board and save the company twice as much in salary costs but would result in social costs in the form of social assistance payments since the company would be temporarily closed. Under such circumstances the negotiation has a fair chance of success, if the broad range of

alternatives available is utilized to the benefit of both partners.

(After Lax, D. et al, 1985)