Economic assessment of DYNAMIX policy mixes

Citation: Bigano A., Zotti, J., Bukowski, M. and Śniegocki, A. (2015). Qualitative assessment of economic impacts. DYNAMIX project deliverable D 5.2. Milan/Venice: FEEM

The ultimate goal of the DYNAMIX project is to formulate a comprehensive mix of consistent policies that has the concrete potential to bring the EU on a path leading to absolute decoupling of resource use and economic growth by 2050, for a selected group of key resources. Through a careful design process, the DYNAMIX team has identified a number of promising policies, which are grouped in three distinct policy mixes (an overarching policy mix, a policy mix for land use and a policy mix for metals and other materials). The policy mixes and the policy measures they contain are described in Deliverable 4.2 (Ekvall et al., 2015).

There is no ex-ante guarantee, however that these policies will have the intended effects in the real world. For this reason, passing the policy mixes through a rigorous ex-ante assessment process can help identifying issues, which may hinder the implementation and the success of certain policies. This overall ex-ante assessment ultimately serves to identify the most promising policies, which are indeed worth further consideration and refinement. This assessment takes a multi-disciplinary approach, which allows for both a qualitative and a quantitative analysis of a wide array of distinct dimensions. In DYNAMIX these cover environmental, economic, social, legal and public-acceptance issues. The present document illustrates the main results of the qualitative assessment of the potential economic impacts of the suggested policy mixes.

In its methodological section (Chapter 2), the report provides an overview of the theoretical approach applied in the analysis of the policy instruments, which are reclassified into four standard groups of policies: market-based (such as green tax reforms, environmental taxes or subsidies); command-and-control instruments (such as product standards); education and information policies (such as skill enhancement programs or public information campaigns); voluntary (and other) measures. Moreover, this section illustrates the four criteria used by the economic policy analysis (i.e. effectiveness, efficiency, equity and feasibility) for policy assessment. In this perspective, we understand them as the attributes, which a policy should exhibit in order to be regarded as “promising”. In the same perspective, the chapter also investigates the major determinants of each attribute.

Chapter 3 describes the first stage of our assessment work, in which provide an evaluation of the DYNAMIX policy mixes according to the fundamental constructs of coherence and consistency. To this aim, we first match the three DYNAMIX policy mixes with the five key-targets of the Project, which are defined in Umpfenbach (2013). Then, we evaluate coherence and consistency both between the policy package and the key-targets and within it, as we analyse the interactions among the individual policies. 

The bulk of our analysis takes place in Chapter 4, which describes the outcome of the qualitative assessment of each policy measure and of each policy mix. Here, the adopted approach is mainly one of critically assessing the major issues that may affect in the various policy instruments rather than magnifying their strengths, as we are convinced that this report should help improving the expected degree of success of the whole DYNAMIX policy package. Chapter 5 draws upon these results to derive useful indications about the completeness of the policy mixes, their strengths and some viable directions for improvement, which alternatively include rethinking and reshaping some individual policies, or replacing measures, which prima facie seemed promising. Moreover, Chapter 5 draws on the economic approach to policy analysis to provide some indications about the ideal timing of the proposed policies.

 In our concluding remarks we  highlight that our analysis clearly shows that decoupling is a complex goal, which indeed calls for a mix of consistent and comprehensive policies. The design of such a policy mix is undoubtedly a challenging task. It requires an accurate selection of the basic policy instruments and great care in their application. The risk of simply overshooting the target due to an excessive application of the same sort of policy lever on the same group of economic agents is a very serious one. Our analysis further shows that details not only in policy design but also in policy implementation are crucial. In this vein, we highlight the importance of an effective compliance monitoring system, coupled with effective enforcement powers as a basic condition to ensure the implementation of the intended policy measures.As far as the DYNAMIX policy initiative relates to the current EU policy making we find a basic ambivalence. While sustainability considerations are increasingly included in the policymaking of the EU, there are apparently enormous countervailing forces that may seriously hamper these efforts. Consider for example the current negotiations for the TTIP (Transatlantic Trade and Investment Partnership), which includes the so-called ISDS (Investor-to-State Dispute Settlement) mechanism. Should such a mechanism enter into force, the ability of national (and supranational) governmental bodies to regulate would hardly remain untouched, with the probable effect of hampering the possibility of promoting policy initiatives in the spirit of the one prospected in DYNAMIX.