In praise of regulation

Whether it be global climate change or the impact of a new incinerator in a poor community in Scotland, regulation is badly needed to stop polluting multinationals and to deliver environmental justice. The banks, our energy market and the planning system are just three areas that demonstrate this. In each case the untrammelled operation of a ‘free market’ produces outcomes which are damaging to society as a whole and often very unfair.

The environmental justice movement arose out of the civil rights movement in America, as a result of increasing recognition that poor ethnic minority communities were bearing the brunt of environmental damage and pollution. While the concept has evolved from ‘environmental racism’, environmental damage – whether caused by climate change, pollution or over-development – continues to affect the poor and disadvantaged disproportionately. This is true in present day Scotland: the 2005 Scottish Executive-commissioned report Investigating environmental justice in Scotland found that people living in deprived areas in Scotland suffered disproportionately from industrial pollution and poor water and air quality. Its clear that free markets aren’t going to tackle this, especially when big business caused many of the problems in the first place.

The Government has spent billions of pounds bailing out banks. Banks that failed in large part because their investment strategies were hugely flawed. The Royal Bank of Scotland – one of the four biggest banks in the world before the recent financial crisis – is now 83 per cent publicly owned, yet it continues to invest our money in companies with questionable policies intent on dirty projects which damage the environment and threaten people’s human rights.

It is the UK bank that has been most heavily involved in financing the global coal industry and tar sands mining in Canada. Tar sands extraction has been described as the most destructive industrial project on earth, producing carbon emissions three times larger than conventional oil and creating devastating impacts on indigenous communities and the local environment; while the coal industry is the biggest emitter of human made CO2, and both the mining and combustion of coal is associated with horrific human rights abuses and environmental degradation around the world.

Unfortunately the UK Government has shown no sign of trying to constrain the lending practices of the bailed out banks, arguing that this will disadvantage these vis-a-vis the rest of the sector. Disappointingly too the Scottish Government, perhaps with the independence referendum in mind, has thus far refused to be drawn on whether it will pressurise the UK Government on this.

Of course the problems with lending practices aren’t limited to the bailed-out banks. Earlier this month, a coalition of over 20 leading experts, investors, NGOs and universities wrote to the Bank of England warning of the dangers of a ‘carbon bubble’, where Britain’s exposure to polluting and environmentally damaging investments might pose a systemic risk to the UK financial system and prospects for long term economic growth. If the Government isn’t going act on the bailed out banks, then it need to regulate for the whole of the banking sector. Without this, another banking crash is all but inevitable.

Regulation is one of our key defences against the power of corporates.

Another area where regulation is badly needed is the energy market. More than a third of Scots live in fuel poverty and recent price hikes by the Big Six will inevitably make things worse. Although the right-wing press would have you believe this is all down to renewables, household energy bill increases are being driven by the rising cost of wholesale gas as well as the enormous profits made by the ‘Big Six’ energy companies who dominate the market (the UK Government’s independent advisors the Committee on Climate Change estimate that since 2004, less than 16 per cent of price rises are due to environmental policies, with more 50 per cent due to the rising cost of wholesale gas). A levy on windfall profits, which could then be recycled to fund substantial improvements to the energy efficiency of our homes, is badly needed.

There are also areas, particularly around energy efficiency, where the Scottish Government could be doing more. People who rent their homes from private landlords are amongst those most likely to be in fuel poverty. This isn’t a surprise – there is no incentive for the landlord to carry out energy efficiency measures given they don’t have to put up with footing the bill and there is no incentive for the tenant to improve energy efficiency given they don’t own the house and therefore won’t benefit in the long-run.

Whilst one route to squaring this circle would be publicly-funded programmes and subsidies, the Government claims it has no more money for this and asks why should the taxpayer foot the bill for private landlords’ disregard to their tenants’ wellbeing and the state of their buildings? Another possibility then is regulation – the Government could require landlords in the private rented sector to bring their homes up to a certain ‘minimum standard’, by a given date. If done well, this is one of the main benefits of regulation – the cost can be passed onto those who deserve to pay it.

The more we do to reduce energy demand the less energy we will need to produce in the first place. Yet we will still need a certain level of energy generation. Under Ed Miliband’s reign as Energy and Climate Change Secretary, the previous Government regulated to require new coal plants to demonstrate carbon capture and storage on at least 25 per cent of the plant. Excepting for the ridiculously speculative application that is Peel Energy’s proposal at Hunterston, this has largely been successful in preventing any polluting coal plants being built. The problem is that the UK is now facing a gas glut. The current rate at which consents are given to new gas power stations risks breaking any chance the UK and Scotland have of meeting long-term carbon budgets as well as making us reliant on gas imports and dangerous new methods of extracting unconventional gas such as ‘fracking’. Indeed hydraulically fracturing, a process that involves pumping water and chemicals underground in order to explode rocks and release gases, has led to severe contamination of water supplies in the USA as well as earth tremors in Blackpool last year. In Scotland, Greenpark has started fracking near Dumfries and Dart Energy is exploring other methods of unconventional extraction in Airth. Both new gas plants and unconventional fossil fuel extraction are in desperate need of regulation if we aren’t to become reliant on gas to meet our energy needs.

I’m unashamedly pro-renewables. I believe it is the only genuinely sustainable solution to our energy problems. Yet that’s not to say renewables don’t need regulated too. We do need to ensure that they are properly sited and community and environmental concerns are accounted for. Having said this, its somewhat ironic that its often politicians with a deregulation agenda that are the first to oppose windfarms. What would they do without our planning system?

More seriously there is a genuine issue of who is financially benefiting from renewables. It would be a shame to look back in 20 or 30 years and think, ‘those multinationals have made a mint from our resources, that’s a shame’. We should explore the route that Denmark has gone down with a ‘community right to buy’ requiring a percentage of new developments to be open for community and non-profit ownership

The planning system is one of the well-established methods of regulation of markets. Although it restricts the rights of property owners it is in fact welcomed by the property development market in general since it gives certainty and reduces risk. It illustrates that that alongside establishing the need for regulation we have to think about who the regulation works for, and whether everyone is able to get the benefits of regulation to which they should be entitled.

Individuals, communities and NGOs have the right to be involved in planning decisions that affect our environment, such as the construction of power stations, bridges, roads and golf courses. When people are enabled to take part in decision-making, this helps to shift the balance of power away from big corporates and developers towards the communities who are affected by these decisions.

On paper, Scotland’s planning system is relatively good. Freedom of Information legislation and consultation standards ensure the right to be informed about developments that affect our environment as well as the right to participate in the decision-making process. However, in practice, individuals and communities are often inadequately informed or engaged in decisions that affect their environment, and feel that poor decisions have been made that will adversely impact on them.

And when people and communities try to legally challenge a badly made decision or a damaging development, all kinds of barriers stand in the way. In fact, the odds are so stacked against the ordinary citizen who wants to challenge an environmentally damaging decision or act that going to court to defend a healthy and clean environment has become a luxury that effectively only the very time- and money-rich can afford.

Recent cases taken to Court, such as the judicial review against the proposed coal-fired power station at Hunterston in Ayrshire, highlight this. Despite being unemployed, the individual bringing the case was refused legal aid and was required to raise upwards of £80,000 (he was only able to do this through contributions from NGOs and others). At the end of the process two years later, the Judge ruled that he didn’t have standing, or the right, to take the case (because in the eyes of the court he didn’t have a strong private interest, i.e. an adjacent property) and because of the lapse in time between the decision he was challenging and his taking the case (mora).

Fortunately, following our intervention last year in a case at the UK Supreme Court, there has been a crucial breakthrough on the issue of standing. Lord Reed and Lord Hope expressed the opinion that the ‘title and interest’ technicality had “no place” in public interest litigation in Scotland, and that a broad new ‘sufficient interest’ test must be introduced. The ruling was damning about the negative effect that years of judge-made law has had on the development of public law in Scotland, and effectively calls into question the basic premise of applying private law principles in public law cases.

However the cost issue remains and the Scottish Government is dragging its heals. Until going to court to challenge badly made decisions is affordable for ordinary people, then, developers, Government and others won’t feel obliged to properly consult in the first instance and badly made decisions will continue to be made.

Regulation is one of our key defences against the power of corporates. There are others of course; cooperatives and alternative ways of doing things need to be prioritised as a matter of urgency. But if social and environmental justice campaigners won’t stand proud behind the importance of regulatory safeguards, then who will?