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«Environmental Policy Integration through the OECD Peer Reviews: Integrating Economy to the Environment or Environment to the Economy? Paper presented ...»

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Environmental Policy Integration through the OECD Peer Reviews:

Integrating Economy to the Environment or Environment to the


Paper presented at the IHDC conference, 3-4 December 2004, Berlin

Markku Lehtonen

Centre d’Economie et d’Ethique pour l’Environnement et le Développement (C3ED), Université de

Versailles Saint-Quentin-en-Yvelines


Home address:

60, rue de la Colonie

75013 Paris

tel: +33 (0)6-65 40 43 58 e-mail: makelehtonen@yahoo.com Abstract As an intergovernmental organisation lacking coercive powers, the OECD can promote policy integration through what have been called ‘idea-games’, relying on moral persuasion, and processes such as socialisation and imitation. This paper compares the impacts on environmental policy integration from two OECD ‘peer review’ processes: the Environmental Performance Reviews (EPRs), carried out since 1992, and the Economic Surveys, the flagship of the OECD since the establishment of the organisation in 1961.

The EPRs enhance environmental policy integration mainly by increasing the visibility and legitimacy of environmental issues in the non-environmental sectors. This impact stems both from the review process and from the use of the report and its recommendations. However, the scant interest that the reviews generate and by the low status of the ‘environmental policy community’ in policy making greatly reduce the potential of the EPRs to influence policies. The inclusion of a sustainable development section in the prestigious Economic Surveys hence carries a greater potential to enhance policy integration. Yet, the very limited scope of the sustainable development analysis, the lack of expertise among the economic experts participating in the debates around the Economic Surveys, and the lack of enthusiasm of the ‘economic policy community’ for addressing the questions of sustainable development compromise the Surveys’ potential to promote environmental policy integration. Given the highly unequal distribution of power between the two policy communities, genuine environmental policy integration and well-informed decision-making might be better served by clearly separating environmental and economic issues at the analytical, peer review level, so as to protect the independence and integrity of the environmental policy community.


Table of contents:

1. Introduction: OECD’s role in promoting environmental policy integration

2. Environmental policy integration in theory: what is meant by the term?

3. Environmental policy integration in practice: OECD peer reviews

4. The OECD Environmental Performance Review (EPR) Programme

5. EPRs and environmental policy integration

5.1. Impacts from the EPR process

5.2. Impacts from the review report and its recommendations

6. Integrating environment/sustainable development concerns into OECD Economic Surveys

6.1. Theoretical framework applied in the Economic Surveys

6.2. Review methodology and environmental policy integration

6.3. Review process and environmental policy integration

6.4. Review reports and environmental policy integration

7. Discussion: integration on whose conditions?

–  –  –

1. Introduction: OECD’s role in promoting environmental policy integration The OECD is typically an organisation that relies on ‘norm creation’ and ‘idea games’ as means of exercising its power, as it can exert neither regulatory nor financial pressure to influence the behaviour of national actors (Finnemore and Sikkink 1998; Marcussen 2001). The most important characteristic of the OECD work is that no decisions are made – the OECD committees are not mainly engaged in preparing decisions for the OECD Council (Marcussen 2001). Its power is therefore based essentially on moral persuasion and peer pressure. Julin (2003) has described the OECD as simultaneously fulfilling the roles of a think-tank, a databank, a problem-solver, a pathfinder, a policy adviser, a forum and meeting place, and sometimes a deal broker. The so-called peer reviews of OECD countries’ policies in different sectors have been characterised as the ‘flagship’ of the organisation’s activities, a key instrument used by the OECD in playing its various roles and promoting its policy agenda (OECD 2003a).

The OECD has defined the integration of policies, both vertically (international, national, and subnational levels) as well as horizontally (within and across sectors) as one of the major challenges of sustainable development (e.g. OECD 2001a, 47-56). Special emphasis has been given to policy integration in agriculture, transport and energy sectors, given the particularly significant economic, social and environmental impacts caused by activities in these sectors. Policy integration has in the OECD been mainly promoted by actors in the field of the environment, where the lack of integration of environmental concerns into sectoral policymaking has been a key concern at least since 1970s, and, was later on identified as an obstacle to sustainable development.1 For the OECD, as an organisation whose mandate is to promote economic cooperation and development, it is natural to stress the ‘economy-environment interface’ as the key area of integration (see e.g. OECD 1996). The main objective of such integration should be the ‘decoupling’ of environmental pressures from economic growth, established as one of the key objectives on the way towards sustainable development (OECD 2001a, 13-16) and one of the five objectives of the OECD Environmental Strategy for the First Decade of the 21st Century (OECD 2001b). The importance accorded to integration is likewise reflected in the development of indicators, notably those on sectoral integration, decoupling (OECD 2002a), and accounting (OECD 2004a). Finally, the choice of policy integration as one of the three themes to be discussed by the OECD Environment Ministerial meeting in April 2004 (OECD 2004b, 23-24) testifies to the continued importance given to this objective within the OECD.

Against this background, it is hardly surprising that policy integration constitutes one of the three main areas of analysis in the OECD Environmental Performance Reviews (EPRs). However, in line with the horizontal nature of its activities, the OECD has adopted an approach where sustainable development issues should be integrated to all activities of the organisation, and therefore also to all OECD peer reviews. Of particular importance is that after a number of ‘pilot reviews’ containing a chapter on ‘environmentally sustainable growth’ between 1998 and 2001, one full round of Economic Surveys – the oldest and the most prestigious of OECD peer reviews – included in 2001a section on sustainable development, an experiment that was nevertheless discontinued in

2004. This paper sets out to examine the somewhat uneasy relationships between the environmental and economic peer reviews, in particular with respect to their role and significance in promoting policy integration.

–  –  –

review mechanism and its role, in particular from the point of view of environmental policy integration. The empirical part of the paper begins by an analysis of the OECD EPR programme as an attempt to enhance environmental policy integration, with an emphasis on identifying the main mechanisms through which the reviews enhance policy integration. This analysis is then contrasted with another OECD attempt at policy integration, namely that of the inclusion of sustainable development sections in the OECD Economic Surveys. The final section draws conclusions concerning the pros and cons of environmental policy integration through these two peer review mechanisms.

The analysis on the Environmental Performance Reviews is based on

1) the author’s experience as a national delegate to the OECD Working Party on Environmental Performance (WPEP) since May 1996,2 as an organiser of the Finnish EPR in 1996-1997, as a country expert on teams reviewing the environmental performance of Mexico (1997-1998) and Russia (1998), and as an OECD consultant on the review of Sweden (2003-2004);

2) examination of diverse OECD policy documents, notably those relating to the EPR programme and the organisation’s work in the area of sustainable development; and

3) interviews with the WPEP delegates of Canada, Hungary, Japan, Portugal, and Slovakia, as well as with other stakeholders involved in the reviews of Japan, the Netherlands and Portugal.

The section on the Economic Surveys, by contrast, relies on a less representative sample of experiences gained through discussions over the years within the WPEP group, with persons involved in the Economic Surveys in the OECD Environment Directorate and in some member countries, an analysis of OECD documents concerning the Economic Surveys and OECD sustainable development work, and participation in the Finnish Economic Survey in 1998 as a representative of the Ministry of the Environment.

2. Environmental policy integration in theory: what is meant by the term?

Integration of environmental concerns into all areas of policy making has been adopted by many of the key international institutions (e.g. WCED 1987, 313-314; UN 1994; CEC 2001) as a central objective and a means of improving environmental policies and fostering sustainable development.

Yet, this increasing commitment to environmental policy integration (EPI) has not been accompanied by similar progress in improving the conceptual framework underlying integration (Lafferty and Ruud 2004, 10). As a consequence, there is no single accepted definition of EPI.

Here, the definition of Underdal (1980, 162; cited by Mickwitz and Kivimaa 2004, 4) may serve as

a starting point. In his view, a perfectly integrated policy is:

“one where all significant consequences of policy decisions are recognised as decision premises, where policy options are evaluated on the basis of their effects on some aggregate measure of utility, and where the different policy elements are consistent with each other”.

Lafferty and Hovden (2002, 15) have, in turn, defined environmental policy integration as

–  –  –

“the incorporation of environmental objectives into all stages of policymaking in nonenvironmental policy sectors, with a specific recognition of this goal as a guiding principle for the planning and execution of policy; accompanied by an attempt to aggregate presumed environmental consequences into an overall evaluation of policy, and a commitment to minimise contradictions between environmental and sectoral policies by giving principled priority to the former over the latter.” Lafferty and Hovden thus add to the definition of Underdal by establishing environmental policy integration as the guiding principle in policy planning and execution. This ultimately ethical choice is further substantiated by political arguments, referring to the numerous political declarations that place environmental policy integration as a priority above others. However, the same ethical argument could be made for many other policy goals, such as equity and gender issues, or the social dimension of sustainable development more generally (e.g. Dubois and Mahieu 2002; Ballet et al.

2003). To counter this argument, Lafferty and Hovden (2002, 16-18) note that the priority given to environmental concerns is not absolute, but ‘principled’. In other words, while environmental concerns as a rule should take precedence, the society can decide, in a specific situation, to give first priority to other societal objectives, just as today economic objectives today have a ‘principled’ priority, but may be, and are, in fact, frequently overridden in policy making by other considerations.

A corollary to this line of reasoning giving priority to environmental objectives is the assumption that environmental policy integration is always and automatically desirable from the point of view of sustainable development. However, it is not difficult to find examples of situations, where policy integration is actually just given lip service without genuine intention to actually improve policies and achieve real integration. The argument used by the opponents to the creation of a Ministry of the Environment in Finland in the 1970s – the need to integrate environmental concerns into all sectors of policy instead of creating a specific agency for the purpose – is one among many such examples (Mickwitz and Kivimaa 2004, 5). Hukkinen (1999) has therefore criticised the idea of integration arguing that the problem today is not that different sectoral authorities would not communicate and cooperate with each other – in fact this cooperation is often intense and wellestablished – but that the long-term concerns of sustainability are systematically pushed aside in the daily decision making focused on satisfying short term interests.3 Usually, literature on environmental policy integration focuses exclusively on procedural criteria for determining the degree of EPI, referring to the political commitments and declarations, action plans and strategies, budget allocations, institutional mechanisms of cooperation, monitoring mechanisms, etc. (e.g. Lafferty and Ruud 2004, 16; Lafferty and Hovden 2002, 19-25). However, as Mickwitz and Kivimaa (2004) point out, comprehensive evaluation of policy integration should also look at its concrete policy outcomes, since rather than being an end in itself, EPI should be seen as a means of achieving specific environmental policy objectives.

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