the assessment of environmental impacts in project appraisal in the european communities

THE ASSESSMENT OF ENVIRON- MENTAL IMPACTS IN PROJECT APPRAISAL IN THE EUROPEAN

COMMUNITIES BY NORMAN LEE AND CHRISTOPHER WOOD

Department of Economics, Department of Town and Country Planning, Uniuersig of Madester*

INTRODUCTION

THIS article sets out the reasons for assessing environmental impacts as an integral part of project appraisal and the associated problems which exist in achieving this. It then reviews the current role of environmental impact assessment in project appraisal in each of the Member States and the arguments for a Community (as opposed to Member State) assessment system. It concludes by suggesting some features of a possible system for the European Communities.

The adoption of an environmental policy by the European Communities effectively dates from the Council of Ministers' Declaration of November ZZ, 1973. In that Declaration the Council accepted the general principle that : effects on the environment should be taken into account a t the earliest possible stage in all the technical planning and decision-making processes.'

In furtherance of this principle the Council of Ministers approved, in its Action Programme for the Environment ( I 977-8 I), the proposal to examine how procedures for systematic consideration of environmental impacts might be applied in decision making by public authorities within the Communities and the Member States .s

* Ac&tJow/edggmrmt-The authors have been consultants to the European Commission on EIA procedures within the European Communities and gratefully acknowledge their assistance in obtaining material for this article. They also wish to thank the many individuals in Member States who gave them help and information. They are, however, solely responsible for the analysis and views presented.

'89

1 90 JOURNAL OF COMMON MARKET STUDIES

The methods and procedures by which environmental impacts are assessed, and then incorporated into the decision process of a public authority empowered to authorize an action, generically comprise an environmental impact assessment (EIA) system. Such a system might, in principle, be applied to any category of public authority action, for example, the approval of: development (investment) projects ; economic, sectoral or physical plans ; research and development programmes ; or the processing or sale of new products. This article is restricted to the subject of large development projects and therefore examines the role of environmental impact analysis in project appraisal.

The types of project concerned are major public and private schemes to develop new industrial complexes, mining or other extractive industry operations, transport and other infrastruc- tures, and large residential developments or shopping centres. The types of environmental impacts to be assessed may be grouped in three categories :

(a) Impacts due to the physical presence, physical operations and resource usage of the proposed development (examples of such impacts include accidents, visual intrusion, sever- ance, depletion of resources locally in short supply, loss of buildings and natural habitats) ;

(b) impacts resulting from the disposal of waste matter and surplus energy from the proposed development and the activities associated with it (for example, impacts resulting from air, water, land and noise pollution);

(c) impacts, of the type described above, associated with developments likely to be a direct consequence of the proposed development (for example, impacts associated with the provision of additional infrastructure to support a major new industrial complex).

The remainder of this article is divided into six main sections. In the first section, the American origins of environmental impact assessment are described and the rationale of an EIA system is briefly explained. The next two section focus upon methods of impact assessment and of taking impacts into account in project appraisal, revealing that there may often be an absence of consistent principles underlying the methodologies and their application in practice. The fourth section reviews the statutory and other provisions relating to EIA in each of the Member States and describes the substantial variations in procedural practice which currently exist. The fifth section is concerned with

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL I 9 I

identifying the types of problem which arise in the absence of a Community EIA system. This leads to the final section, which examines the possible requirements of such a Community EIA system. It summarizes the conclusions derived from previous sections and sets down principles relating to the procedures, methods of assessment and policies which might underly a Community system for environmental impact assessment in project appraisal.

THE ORIGINS AND RATIONALE OF ENVIRONMENTAL IMPACT ASSESSMENT IN PROJECT APPRAISAL

Before discussing the role of EIA in project appraisal more generally, it will be helpful to describe briefly the recently- established system in the United States, because of its strong influence on current thinking in other countries about environmental impact assessment. At the same time, it should be appreciated that some elements of environmental impact assessment have been in use elsewhere since an earlier date, though under different names.

The E I A Procedure in the United States The National Environmental Policy Act, I 969, provides that each United States federal agency : include in every recommendation or report on proposals for legislation and other major federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official covering :

(a) the environmental impact of the proposed action; (b) any adverse environmental effects which cannot be avoided

(c) alternatives to the proposed action; (d) the relationship between local and short-term uses of man’s

environment and the maintenance and enhancement of long-term productivity ;

(e) any irreversible and irretrievable commitments of resources which would be involved in the proposed action, should it be im~lemented.~

The environmental impact statement (EIS) forms an integral

(a) a draft EIS should be prepared and made available prior to

should the proposal be implemented ;

part of an EIA procedure of which the essential features arre:

192 JOURNAL OF COMMON MARKET STUDIES

the first significant point of decision in the responsible authority’s review process ;

(b) the responsible authority should consult with and (on the basis of the draft EIS) obtain the comments of the public, and of other public bodies with jurisdiction or special expertise relating to the environmental impact involved, on the environmental impact of the action;

(c) a final version of the EIS should be prepared, which incorporates the substantive comments of the public and the public bodies consulted, and this should accompany the proposal through the remainder of the responsible authority’s review p r o c e ~ s . ~

Although criticisms have been made of certain of the detailed, operational aspects of the American system: its basic features have been the subject of sympathetic study by a number of international organizations (for example, UNEP, ECE, OECD, as well as the EECa) and have led to the introduction of similar, though organizationally differing, systems in Australia, Canada and Japan, as well as contributing to the great interest shown in the Member States of the European Communities, as described later.

The Rationale of E I A Systems The control of environmental impacts by public authorities is considered necessary, not because environmental impacts are harmful and therefore undesirable (some environmental impacts are beneficial) but because they are not adequately taken into account by developers in the ordinary appraisal to which projects would otherwise be subject. The environmental impacts associated with a proposed development may affect other parties who will neither pay the developer for the benefits (if the impact is favourable) nor will receive full compensation from the developer for the reduction in their well-being (if the impact is unfavourable). This is commonly referred to as the ‘externality’ problem. It may arise, for example, where a development causes pollution damage which is not compensated’ or where it leads to the loss of natural resources (e.g. a natural habitat), the social value of which exceeds its commercial value.8

It therefore follows that two conditions should be met by any satisfactory EIA system :

(a) environmental impacts should be measured in a manner consistent with the externality concept ;

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL 193 (b) an appropriate instrument or instruments should be

employed to ensure that measures of environmental impact are satisfactorily incorporated in project appraisal.

These two conditions, which it will be shown are interdependent, are now examined further.

MEASUREMENT OF ENVIRONMENTAL IMPACTS

There have been three main preoccupations to date in the development of a methodology of environmental impact assessment :

(a) to acheve comprehensiveness in the coverage of the impact assessment : in particular, by the development of check lists and matrices to help identify all potential impacts and to ensure that all significant impacts are measured;

(b) to achieve greater quantification in impact assessment : chiefly by greater emphasis on measurement and the use of techniques which permit an assessment of the magnitude of impacts ;

(c) to assess more systematically the policy significance of different impacts : chiefly by the development of weighting systems to indicate the relative importance of individual impacts.9

Each of these is now briefly discussed to indicate where areas of difficulty in impact assessment can still arise.

Comprehensive coverage The use of check-lists and matrices, whilst it stimulates a much more comprehensive approach to environmental impact assessment, can result in inflated and non-comparable assessments through double-counting, if the externality principle is not strictly applied. Double-counting can occur in at least three ways.

(a) The loss of natural resources (for example, agricultural land) through development only involves a cost to society to the extent that any price paid by the developer for those resources (and therefore included as a cost in his own project appraisal) does not reflect their social value. The inclusion of the social cost of natural resources, without any consideration of the costs to developers in acquiring those resources, will involve an element of double-counting.

(b) Not all environmental impacts, affecting people other than

‘94 JOURNAL OF COMMON MARKET STUDIES

the developer, are externalities. In some instances there may be a legal requirement to compensate some of those who are damaged (as in the case of traffic noise from a new road or airport). In other instances, the developer may indirectly suffer through damaging other people (as in the case of the sea-side local authority which fails to treat its sewage before discharge and loses visitors as a consequence). To ignore this phenomenon of ‘internalizing the externality’ in project appraisal would result in an element of environmental impact double-counting.

(c) The same impact may manifest itself in more than one way. The assessor using a check-list, in an effort to be comprehensive in his analysis, may confuse different manifestations of the same impact for a series of different impacts. For example, use of a check-list may cause him to record that a discharge from a factory into a river will cause an adverse impact on water quality, on the ecological diversity of the river, and on the recreational use of the river. Whilst these three impacts are not coterminous, equally they cannot be aggregated without involving some degree of double-counting. Similar difficulties may arise when making the distinction between primary and secondary impacts:

Fugitive losses from the manufacturing process or the alteration of air quality by stack emissions is a primary impact of the project. The alteration of housing values because of degraded air quality (odours, corrosive properties) is a secondary impact. Secondary impacts are of great importance to the overall evaluation of any new source proposal . . .lo

However, in this example, housing prices would fall because of the deterioration in air quality : the secondary impact is a financial reflection of the primary impact and not additional to it.

QUantrfitation of Impacts The attainment of greater quantification in impact assessment is very desirable where it leads to greater precision in the formulation of impact estimates. However, in many instances such precision may be difficult to achieve because of the gaps in the base-line data from which the impact assessment has to com- mence, lack of standardization in the measurement methods used, and limitations in knowledge of the statistical relationship between changes in the quality of the general environment and

ENVIRONMENTAL IMPACTS IN PROIECT APPRAISAL 195

their impact on receptors within it. In such circumstances, quantitative measures can confer a false precision on an impact assessment. There is therefore a need to improve the comparability of estimates obtained by different methods, to establish confidence limits for statistical estimates and, more generally, to make explicit provision for the element of uncertainty in assessment methods.

Relative SigniFtance of Impa6t.r The assessment of the magnitude of an impact is only a preliminary to measuring its significance for social importance so that it can be added to, or compared with, other impacts. Broadly speaking, there are three approaches to significance measurement which are in current use.

(a) Standardized scaling or weighting of the magnitude of each impact prior to aggregation or comparison with other impacts. This approach has been criticised on the grounds that the scaling and weighting systems used are either arbitrary or implicitly based on the personal value systems of impact assessors.ll

(b) Expression of each environmental impact in its monetary equivalent leading to a measure of total impact by aggregating the sums involved. This approach implicitly measures impact significance on the basis of the system of values reflected in the market price mechanism, and is therefore criticised by those who reject that values system. In addition, it is deficient in so far as a number of the techniques for the monetary valuation of environmental impacts are not well developed, causing many impact valuations to be incomplete or otherwise unreliable.12

(c) Use of public consultation and the judgment of public representatives to obtain a social assessment of the importance of different impacts. This method is widely used although, as currently practiced, it has a number of critics. The data presented to the public, as a basis upon which to form their judgment, may be incomplete or technically too complex to obtain a meaningful response; the form of public consultation used may result in a non- representative expression of the community view ; and the public consultation procedure may be manipulated by a project’s opponents to delay reaching a decision upon it.13

We conclude that, despite the attention given to the development


of methods of environmental impact assessment, deficiencies remain in the identification of impacts and in the measurement of their magnitude and significance. These weaknesses are, in turn, a potential source of inconsistency between the impact assessments of different projects, both within and between Member States.

INCORPORATION OF ENVIRONMENTAL IMPACTS INTO PROJECT APPRAISAL

There are four principal means by which environmental impacts might be incorporated into project appraisal. These are through :

(a) a system of environmental impact charges and subsidies; (b) investment constraints derived from standards ; (c) authorization schemes using social cost-benefit analysis ; (d) ‘trade-off‘ schemes of project authorization.

None of these ‘policy instruments’ is free from methodological criticism, on either theoretical or practical grounds.

Environmental Impact Charges and SubJidies The rationale of this approach is to ‘internalize the externality’ by charging the developer (for example, through a system of pollution charges) when he causes an adverse environmental impact and by paying him a subsidy (for example, through a system of environmental improvement payments) where the development has a favourable environmental impact. The developer, anticipating these payments or receipts would then be expected to take such externality impacts into account automati- cally through the usual form of private investment appraisal based upon a comparison of all his anticipated receipts and costs. In this situation, the end product of the environmental impact assessment would be an estimation of the likely charges and subsidies with which the developer would be faced if he proceeded with the project. Provided this system is operationally efficient and comprehensive, the existence of a public authority to authorize or reject projects would be superfluous.

Though theoretically attractive, this type of instrument is little used at present in the Member States and is likely to have only limited application in the foreseeable future for two reasons. Firstly, there are considerable difficulties in determining the appropriate level of charges and subsidies because of the previously mentioned problems in measuring externalities in monetary equivalents.12 Secondly, there are likely to be severe

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL 197 practical difficulties in developing a comprehensive system of impact charges and subsidies, given the very large number of sources and types of environmental externality to be encompassed.

Environmental Standards as Investment Constraints In this situation, the development appraisal may be undertaken according to the developer’s own investment criteria, provided the development meets the environmental standards established by the controlling authority. In evaluating this approach, it is necessary to distinguish between two types of environmental standard : firstly, those applicable to the development in the form of building, operating and effluent standards and secondly, those applicable to the environment itself, such as ambient noise levels and river quality standards. Both types of standardare used within the Member States although the second type, in particular, has not yet been developed into a comprehensive system. Differences in standards exist between Member States and attempts are being made to achieve greater harmonization through Community directives.2

It is now increasingly accepted that strict uniformity of development standards, as a general principle, is undesirable; given, for example, that it takes no account of variations in the desired use of the environment surrounding a development or in the assimilative capacity of the en~ir0nment.l~ Uniformity in environmental standards is generally considered more acceptable but leaves unresolved the important issue of the extent to which any one development may ‘use up’ the available assimilative capacity of the environment and so preclude other development in the area. Therefore, the setting of environmental standards which are appropriate as investment constraints, involves consideration of both the quality standard for the receiving environment and the wider economic and social consequences of using up part of the spare capacity remaining. The intrusion of these wider issues into the decision process usually involves resorting to one or both of the two instruments mentioned below.

Social Cost-Benefit Anabsis The stream of social costs and social benefits associated with a proposed development are estimated and compared in this method. This comparison provides the justification for approval or rejection of the developer’s application by the authorizing body. The cost-benefit approach has mainly been developed for

‘98 JOURNAL OF COMMON MARKET STUDIES

use in reaching decisions on public sector projects such as transport infrastructure schemes and water resource proposals.16 In principle, however, the techniques employed could also be applied to the assessment of private sector projects, providing that data on the development’s likely stream of costs and receipts are available. The method requires that an assessment, in monetary terms, of environmental externalities be made but differs from the charges and subsidies approach insofar as the practical difficulties of operating a comprehensive charges and subsidies scheme, mentioned earlier, are avoided. Some attempts have been made to incorporate a cost-benefit analysis in a number of environmental impact statements prepared in the United States5 but at present this approach is of more limited application in environmental impact analysis in the Member States of the Communities.

Two basic difficulties continue to exist in the use of this method (which were previously discussed in relation to measuring the significance of impacts). These are the inability to measure a number of environmental impacts reliably in monetary terms by existing techniques, and lack of acceptance of the values expressed through the market price mechanism which are implicit in the use of certain of these techniques.15 These difficulties are being faced, in the better EIA studies, by recording alongside the monetary cost-benefit balance sheet the physical magnitudes of those cost and benefit items which it is not possible to measure satisfactorily in monetary terms and by ‘testing’ through public consultation, the values implicit in the balance sheet, rather than mechanically using it to determine a decision. However, when these important modifications are introduced, the approach takes on many of the characteristics of the trade-off method described below.

‘ Trade-of Prqect Autborixation SchemeJ In this situation, the public authority, usually comprising elected representatives, is presented with data on the nature and magnitude of all those significant impacts (including environmental impacts) relating to a development which are considered relevant. In reaching a decision the authority makes a trade-off (which may often be implicit in nature) between the various advantages (benefits) and disadvantages (costs) of the proposed scheme. In the process of making its decision it may be able to modify certain elements in the trade-off (for example, by causing the developer to revise the proposal or by attaching conditions to an approval) and it may be guided in making the trade-off between impacts by a process of public consultation. This kind of policy

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL 199

instrument is widely used in the Member States of the Communities, often incorporating in hybrid form various elements of the three preceding approaches.18

The care with which the impact trade-off is determined is critical to the value of this instrument since the benefits of good EIA studies are lost if the trade-off stage in the decision process is unsatisfactory. There are, in our view, two conditions which should be satisfied in an effective trade-off procedure. Firstly, decision makers should, as far as is practicable, be provided with reliable comprehensive data, presented in a manner which highlights the critical elements of advantage and disadvantage between which the trade-off should be made. Secondly, the decision makers should have the opportunity to test the weights to be attached to the major elements in the trade-off by the community that would be affected by the project, through a system of public consultation. In practice, however, it would seem that the trade-off procedure is often deficient because of weaknesses in the quality and clarity of presentation of key data: and because of limitations in the process of public consultation in a number of countries.139 l 8

ENVIRONMENTAL IMPACT ASSESSMENT IN MEMBER STATES

Each Member State possesses elements of an embryonic EIA system which, in a number of instances, form part of long established authorization procedures relating to the siting, building or operation of industrial establishments. In other instances, though often in a much less systematic way, environmental effects are taken into consideration in decision procedures for public sector projects. Many of these procedures are in the process of being extended and strengthened, partly as a political response to the increased environmental awareness which originated in the late 1960s and, more specifically, because of the interest generated in the EIA system established in the United States by the National Environmental Policy Act 1969 (see above). This section of the article briefly outlines the provisions for environmental impact assessment in each country and summarizes the main procedural differences which exist between Member States.

Belgium Industrial establishments, scheduled in two classes, require public authorization prior to operation under the provisions of the

ZOO JOURNAL OF COMMON MARKET STUDIES

General Regulation for the Protection of Labour, which orig- inates from a law of 1888, subsequently amended and supplemented on a number of occasions. The legislation requires that basic information be provided by the developer and for the holding of a de commodo e t incommodo public inquiry.* The procedure does not apply to public infrastructure projects. More recently an Industrial Ecology Commission has been established to undertake impact assessments of large projects, funded by national ministries in one of the three Belgian regions, and these are much fuller than is possible under the above Regulation. This Commission functions in an advisory role and there is no provision for public consultation in its procedures.

Denmark Industrial and mining establishments, which are classified as ‘heavily polluting’ must be authorized before they can be established or operated under the terms of the Environmental Protection Act I 973 as elaborated in the Ministerial Regulations of March 29, I 974. These regulations provide for information to be supplied by the applicant, for consultation with environmental authorities, for making all non-confidential background papers publically available and for a period of public comment and appeal before a licence is finally granted. These provisions, however, do not extend to most infrastructure schemes.

Federal Republic of Germany The main federal legislation by which discharges from a wide range of industrial establishments are regulated is the Federal Immission Control Law 1974. In order to obtain an authorization for a new development the applicant must supply information to the appropriate controlling authority so that an assessment of the likely impact of the proposed activities may be made. Non- confidential documents are laid before the public and any objections put forward may, in turn, result in the holding of a public hearing.

This legislation is one component of a much broader policy of ‘examination for environmental compatibility’ which was provided for in the federal government’s Environment Programme of 1971. By the Federal Cabinet Order of September 9, 1972, the

* A form of inquiry in which members of the public make written observations on a proposed development, which are collated and analysed by an inspector, but in which there is no provision for a public hearing or the cross-examination in public of witnesses.

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL 20 I

Combined Rules of Procedures of the Federal Ministries were extended so that:

in the case of draft laws, regulations and administrative provisions which might have a bearing on environmental protection, the Federal Ministry of the Interior must be called upon at an early stage of the preparatory work to ensure that the examination for environmental Compatibility is carried out to avoid or counteract damage to the environment.

Since then the Federal Ministry of the Interior has prepared a Model Procedure to provide a standard system for examining proposals for environmental compatibility. It is now the responsibility (and duty) of Federal Ministries to implement the Model Procedure by modifying, where necessary, their existing administrative procedures to comply with its requirements.

France The licensing of dangerous, insanitary industrial establishments, etc., dates back to the Law of December 14, 1917 which has been revised subsequently on a number of occasions, the latest of which was in 1971. The legislation requires the applicant to furnish information to the controlling authority which would be available when holding a de commodo et incommodo public inquiry as part of the authorization procedure.

More recently, the Ministry of the Environment promoted an act relating to the protection of nature which became law in July I 976. This provides that the studies which must be undertaken prior to commencing significant public works or private projects, requiring a public authorization, must now include an impact assessment. Application Decrees of the Council of State, to elaborate this law, have since been prepared to derail the particulars relating to this assessment including its coverage, content and provisions for public consultation.17 This strengthens the earlier provisions relating to industrial establishments, contained in the Law of I 9 I 7, and, extends the formal assessment system to include public works, for which arrangements for impact assessment were much less developed.

Ireland As in the United Kingdom (below), new industrial establishments are authorized through the development control system. The Local Government (Planning and Development) Acts, I 96 3 and I 976, empower the Minister for Local Government to require the preparation of an environmental impact statement as part of the


development control procedure for all proposed large developments (defined as having a value in excess of Lym) covered by these acts. From May 1777 each developer, to whom the above conditions apply, must furnish the planning authority with a written study of what effect the proposed development, if carried out, would have on the environment. The normal procedures for public consultation and comment, as provided for in the acts, would continue to apply. However, certain types of projects carried out by state authorities and all development by local authorities in their own areas (including roads) are excluded from the definition of ‘development’ for the purposes of planning law and are therefore not covered by these new arrangements.

Itab The authorization of industrial esrablishments in Italy is now largely the responsibility of regional and local authorities and approval procedures therefore vary from one part of the country to another. In some instances the authorization is undertaken under the provisions of pollution control legislation and in other cases under building permit regulations. In general, the environmental impact assessment of new projects is not well- developed, except in the case of nuclear power plants and, to a lesser degree, conventional power plants. Similarly, provisions for public consultation during authorization of major industrial developments are not well-established in most regions.

Luxembourg In Luxembourg industrial establishments, scheduled in three classes, require public authorization under the provisions of the Grand-Ducal Order of I 7 June I 872. Basic information is supplied by the developer and provision is made for a de commodo et incommodo public inquiry. Very few public infrastructure projects are covered by these provisions although, as in other Member States, there are special and more stringent arrangements relating to nuclear installations.

Netherlands Industrial establishments in the Netherlands require authori- zations to engage in activities which involve discharges to the environment. Depending upon the type of discharge involved, the authorization may be granted under the Nuisance Act I 9 5 2, the Surface Waters Pollution Act 1969 or the Air Pollution Act 1970. Additional legislation relating to noise and the coordination


of the different licensing systems is expected. The extent of the existing provisions for documentation, publication and public consultation varies between the legislative systems, tending to be greatest in the case of those more recently established. This legislation does not apply to many public infrastructure schemes.

Towards the end of 1974, the Ministers of Health and Environmental Hygiene and of Economic Affairs invited the Central Advisory Council on the Environment to study the desirability and feasibility of introducing EIA procedures as part of the environmental policy of the Netherlands. The Council, reporting in I 976, recommended the preparation of environmental impact statements for a wide range of government measures. Case studies involving both the environmental impact assessment of projects and plans are now being sponsored by the Ministry of Health and environmental Hygiene, prior to determining action in this field.

United Kingdom New industrial establishments are authorized as part of the development control system, as provided for in England and Wales by the Town and Country Planning Act 1971, and by separate, but similar, legislation in Scotland and Northern Ireland. This system does not apply to state development, where a ‘deemed’ planning permission procedure applies nor to those roads covered by the Highways Act, though arrangements for these are not dissimilar. Where the planning Acts apply the developer is required to supply information to permit the controlling authority to assess the likely impact of the development and there is provision for basic documentation to be available for public consultation and comment.

A number of official studies have recently been publishedle-*’ on the subject of environmental impact assessment in the United Kingdom. These generally support the strengthening of environmental impact assessment as part of the existing development control system. The British government, to date, has not defined its position on these recommendations ; however, it has commended one of these publications (a manual for the assessment of major industrial applications) ‘for use by planning authorities, government agencies and de~elopers’.~Q

Diferences Between Member State E I A Systems The current provisions relating to environmental impact assess-

204 JOURNAL OF COMMON MARKET STUDIES ment of major new development projects vary between the Member States in the following ways.

(a) The field of application of environmental impact assessment varies from one Member State to another. This is largely because, in the private sector, the authorization schemes of which the EIA forms a part are themselves of differing coverage. In the case of public infrastructure schemes, authorization procedures are often internal to government service and there is no formal requirement for environmental impact assessment, although it is known to be a (variable) factor in the governmental appraisal of public projects.

(b) The requirements of developers to provide documentation upon which an environmental impact assessment can be based, vary considerably between authorization procedures and between Member States. Similarly the environmental analysis which is based upon this documentation varies greatly in accordance with the resources and expertise available to the controlling authorities.

(c) There are considerable variations in practice in the extent of documentation made publicly available and in the extent, timing and form of all types of consultation

These legislative and procedural differences between EIA systems in Member States are additional to the more basic differences and deficiencies in methodology, described earlier.

ARGUMENTS FOR A EUROPEAN EIA SYSTEM

These differences raise the question whether, in the context of the stated environmental objectives and policies of the European Communities1 some form of Community intervention should be considered. It would seem that the development of a Community, as distinct from Member State, EIA system could be justified on the grounds of either:

(a) regulating environmental externalities within the Communities so as to avoid the distortion of competition and the misallocation of resources within the common market comprising the Member States ; or

(b) regulating environmental externalities as part of a common environmental policy applied to the European Communities.

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL toy

Avoidance of Distortion in Resource Allocation There are three types of situation in which intervention at supranational level may be justified. These arise where there is:

(a) a general failure to incorporate all significant environmental externalities in project appraisal in allMember States ; or

(b) failure to incorporate environmental externalities into project assessment to the same extent in all Member States; or

(c) a failure to incorporate tram-frontier environmental externalities in project appraisal in each Member State.

Each of these possible situations is now discussed in turn. In a common market with no internal tariff barriers, and with

provision for the mobility of capital and labour, distortions in the pattern and location of investment, both within and between Member States, will result from a failure to incorporate all significant environmental externalities in project appraisal. This will normally be associated with some loss of welfare in the common market as a whole which will not, except fortuitously, be shared equally by all Member States.a

It might be expected, in the second situation, that the Member State which takes least account of negative impact externalities will gain as a consequence from internal trade within a common market because the non-tariff barrier on its imports will rise relative to the non-tariff barrier on its exports. However, the situation is complicated to the extent that uncompensated externalities are borne within the Member State in which they originate. Where this is the case, the competitive advantage of the exporting industries of the Member State which takes least account of environmental externalities may be reduced, causing a reduction in its total exports to other states in the common market.% Therefore, as in the first situation, a welfare loss to the common market occurs and, without more detailed data, the allocation of this loss between Member States cannot be determined.

In the third situation Member States, favourably located from a geographic standpoint, can export environmental impacts across frontiers and will, therefore, be net gainers and the recipient countries will be net losers. Impact exporting states will tend to locate their heavily polluting establishments nearer to their frontiers and impact importing states will locate their pollution- sensitive activities some distance from their frontiers.% Again, a distortion in the allocation of resources occurs between and


within Member States and, in this case, the losses fall upon the impact-importing states.

Promotion of u Common Environmental Policy The Council of Ministers 1973 Declaration that: major aspects of environmental policy in individual countries must no longer be planned and implemented in isolation. National programmes in these fields should be co-ordinated and national policies should be harmonised within the Community.l

may be used to justify the pursuit of a common environmental policy for the Member States. This may provide a broader justification for intervention at Community level than prevention of distortion in the use of resources. For example, if the European Communities wish to harmonize the environmental policies and quality standards which are applied by the Member States, they must have some concern with the harmonization of instruments by which those policies and standards will be achieved. Thus, if fundamental differences in their methods and instruments of project appraisal continue, then the resulting development patterns may set up pressures which make it harder to achieve the long-term harmonization of environmental policies and standards between Member States.

Both of the above justifications for a Community EIA system imply the desirability of consistent assessment and treatment of environmental externalities in all Member States. However, they do not constitute a case for xtundurdkption of all procedures, methods and instruments of environmental impact assessment in these countries. On the contrary, there are good reasons why a high degree of this kind of uniformity should not be sought:

(a) Each Member State has long-established procedures for project authorization. It is, therefore, likely to be more efficient and less disruptive to permit each authorization process to comply in its own way with the essential requirements of a Community EIA system, than to require the replacement of existing procedures by a new system based on standardized procedures.

(b) The ‘most appropriate’ methods of assessment vary from one situation to another, depending upon the nature of the project, the background data and assessment expertise available, etc. Therefore, a standardization of methods which ignores these differences could be inefficient. Also, methods are subject to continuing improvement so that any


list of approved ‘standard’ methods will rapidly become obsolete.

We therefore conclude that a Community EIA system should contain those features necessary to achieve a consistent approach to the treatment of environmental externalities in project appraisal, while allowing Member States discretion to implement these requirements within their own institutional frameworks. The nature of these necessary features is the subject of the final section of the article.

GUIDE-LINES FOR A COMMUNITY EIA SYSTEM

In the earlier sections of this article two main sources of inconsistency in the treatment of environmental .externalities in project appraisal have been identified : legal and procedural differences in existing EIA arrangements between Member States, and methodological deficiencies in both the estimation of environmental impacts and of their significance. The nature of each source of inconsistency is now briefly summarized and procedural and method guide-lines for a Community EIA system to help correct these differences and deficiencies are suggested.

Procedural Guide-lines In the fourth section of this article attention was drawn to differences between existing project authorization procedures in Member States. These are of three types: in the field of their application, in the provision for documentation and analysis of environmental impacts and in the provision for consultation. We believe that these procedural differences between the Member States are likely to result in variations in the treatment of environmental externalities in project appraisal within the Communities. To remedy these, we suggest that a Community EIA system should contain provisions for:

(a) the uniform coverage of the system in all Member States both in terms of the types of project to which it relates and the types of environmental impact which it includes:

(b) the preparation of a draft environmental impact report (EIR) for each specified project prior to the first significant point of decision on the project by the authorizing body;

(c) the required content of an environmental impact report ; (d) the authorizing body to make provisions (which meet

prescribed minimum requirements) to consult with, and


obtain the views of, relevant agencies and authorities and the public on the draft EIR; and

(e) for the authorizing body to prepare a final version of each EIR incorporating a summary of main comments received on the draft report, and which should then accompany the project application through the remainder of the authority’s decision procedure.

Method Guide- lines In addition to the need for some procedural consistency within the European Communities, it is necessary to promote a more consistent approach to the estimation and use of impact assessments in project appraisal. The inconsistencies in assessment methodology which have been described have been attributed to inaccurate identification of environmental externalities, to deficient techniques for estimating the magnitude and significance of environmental impacts and to the often unsatisfactory way in which estimates of environmental impact are incorporated into project appraisals. Some of these deficiencies should be reduced by the implementation of the procedural guide-lines suggested above but a Community system should, in our view, also ‘embody the following methodological guide-lines :

(a) environmental impacts should be identified and estimated in accordance with the externality concept ;

(b) the methods of assessment used to produce impact assessments should be stated in the environmental impact report so that impacts estimated by different methods might be more easily compared;

(c) the confidence limits attached to estimates should be indicated and the manner of treating any important elements, of uncertain or unknown magnitude, in the assessment should be clearly stated;

(d) where assessments involve aggregation of impacts, the weights used should be made explicit and be subject to test through public consultation ; and

(e) project appraisal and authorization, both in the private and public sectors, should be based upon a systematic trade-off between all the significant favourable and unfavourable impacts of a project. These impacts include those directly affecting the developer as well as other impacts (such as environmental impacts) which are of an external nature. Such an appraisal should be based upon a ‘balance sheet’

ENVIRONMENTAL IMPACTS IN PROJECT APPRAISAL 209 approach in which non-monetary and non-quantifiable items should also be included. The weights implicit in trade-offs within the balance sheet together with their distributional effects should, wherever possible, also be tested through public consultation.

Guide-lines such as these cannot be expected to establish an immediate consistency in the assessment and use of environmental impacts in project appraisal within the European Communities. However, it is believed that they could provide the framework and impetus within which a progressive movement in the direction of greater consistency might be achieved. Over time they will need to be supplemented by:

(a) further elaboration of Community guide-lines based upon more practical experience of their use;

(b) programmes to establish more clearly the comparability of assessment techniques and to improve those which are deficient; and

(c) training programmes relating to the correct and consistent use of assessment techniques.

The correct treatment of externalities is generally judged important in promoting the welfare of a nationM and this is no less true of a community of nations." The attempt to evolve an EIA system for the European Communities is, therefore, likely to be of considerable practical as well as academic interest.

.

REFERENCES

x . Commission of the European Communities ( I 97 3) Ojfcial foutn.1 of the Enropean

2. Commission of the Euro an Communities (1 976) Continnation and implementation of

3 . National Environmentol Polig Art 1969, Sertion Ioz(r). 4. Counal on Environmental Quality (1973) Preparation of environmental impact

5 . Council on Environmental Quality ( I 976) Environmentol impart statements: an anabsis

Commvnities No. CIIZ, zo.iz.73.

a European Commmio Po )" iry and Artion Programme on tbe Environment, CEC, Brussels.

6. Economic Commission for Europe (1977) Environmenta f impart asscssment,

statements: guidelines, Federal Register 38, No. 147, zoj lo.

of sixyeors' experienre by seven0 Feokral agencies, CEQ, Washin ton.

Background paper ENV/Rj 3, ECE, Geneva. (Restricted) 7. Kneese, A. V. (1977) Eronomirs ond the environment, Penguin, Harmondsworth. 8. Pearce, D. W. (ed.) (1971) The eronomirs of natural resonrce dcpletion, Macmillan,

London. 9. Many reviews of the methodology of environmental impact assessment have been

published, including: Bennington, G. et al. (1974) Resowre and land investigation program: methodologics for cnvironmental anuhsis, 1 Mitre Corporation, McLean, Virginia; Mum, R. E. (ed.) (1971) Environmental impact assmmnt: prirrciplcr and

'

2 1 0 JOURNAL O F COMMON MARKET STUDIES

pracedurts, SCOPE Report 1, Toronto; Warner, M. L. and Preston, E. H. (1974) A review of environmental impact assessment methodologies, Report EPA-6oo/ 5 -74, US Government Printing Office, Washington.

10. Environmental Protection Agency ( I 97 5 ) Environmental impact assessment guidelines for selerted new sowce industries, EPA, Washington (Chs. 3-1 I).

1 1 . Bennington, G. et al. (1974) op. cit. (Section 2. )

12. Lee, N. (1974) The scope for pollution charges. In: Institute for Fiscal Studies Procaedings of the Conjermre on Fiscal Policy and the Environment, IFS, London.

1 3 . Natural Resources Journal (1976) Symposium on public participation in resource decision making, NR], Vol. 16, 1-236.

14. Kneese, A. V. and Bower, B. T. (1968) Managing water quality, John Hopkins, Baltimore.

I 5. Layard, R. (ed.) (1974) Cost-Benefit anabsis, Penguin, Harmondsworth. 16. Environmental Resources Ltd. (1976) b w undpructice relating to pollution control in

Member States oftbe European Communities, Graham and Trotman, London. (Country volumes.)

17. Journal Officiel de la Republique Frangaise (1976) Loi No. 76-629 du 10 Juillet 1976, IORP, I 3 Juillet 1976.4293; Ministere de la Culture et de I'Environnement. 1977. 'L'itude d'impact sur l'environnement, M.C.E. Paris.

I 8. Department of the Environment (1976) Environmentul impuct una!ysis, Research Report 1 1 , DOE, London.

I 9. Department of the Environment ( I 976) Assessment of mdor industrial applications: a manual, Research Report I 3, DOE, London.

20. Dobry, G. (1975) Review ofthe development control system:jnal report, Department of the Environment, HMSO, London.

2 I. Royal Commission on Environmental Pollution (1976) Fgtb report, Cmnd. 6371, HMSO, London.

22. Walter, I. (1971) International economirs of pollution, Macmillan, London. 23. Tolley. G. (1974) The welfare economics of city business Jownalof Urban Economics,

VOl. I , 324-45. 24. Mishan, E. J. (1969) The costs of aconomicgrowth, Penguin, Harmondsworth.

the assessment of environmental impacts in project appraisal in the european communities

Documents