[MUSIC] [BLANK AUDIO] Hello. My name is Thomas Lindhqvist and in this lecture I will talk about the various types of mechanisms that are available for governments when designing environmentally related policies. To impose a policy on the national level is to change or reinforce the behaviors that decided whether you, as a society, will reach the goals you have set. As a government you may want to change the behaviors of companies. For instance, if our role as producers and sellers of products. Or individuals as citizens and as consumers. Or for that part any other group or factors in society. What you need to do is to create the incentives that are strong enough to influence these factors and that will convince them to do what is required. Various instruments are shown to have various strengths and be associated with various challenges. As said do you may or may not know what the best solution is. For instance, you may know that you need to reduce the emissions of heavy metals there. Should the companies install filters? Should we change raw materials? Should all companies take action? Only ones with the biggest emission. In such a case, you will as a government want to set your targets, but allow the companies to choose the best way of reaching these targets. As a government, you will also face problems with control and whether companies and citizens do what you ask of them. How much control do you need to have? And that is depend on what type of interventions you have done. These are some of the questions you meet when designing policies to address particular problems. In addition, a government will, of course, also be limited by political realities. Will the Parliament accept the proposal for new regulations, new environmental taxes you put forward as a government? Will various lobbying groups block the approaches you prefer, and force you to select the second best alternative? While the practical reality of designing policies is most of the time quite complex and demands a lot of understanding of a particular situation you want to regulate and influence, the way of creating incentives for policy intervention can easily be explained and systematized. The most common approach is to divide your policy increment into three different groups of instruments. Regulatory instruments, economic instruments, and informative instruments. How these instruments work could easily be explained by comparing to how we interact with each other in everyday life. For instance, how we raise our children. Let's say that we want to get help with tidying up the room of the children or we want them to brush their teeth regularly. We can then address our children in various ways. We can, for instance, try to force them to do it. We could say something like, you must clean your room today, and if you don't do it, you will not be allowed to go to your friends in the evening. What we have used is a so-called regulatory administrative instrument. This instruments tell what you must do or what you are not allowed to do. They also typically link to sanction that will come in place if someone does not follow the regulation. For an industry, this could be a prohibition to use certain toxic substances or prescription to reuse emission levels below a specified standard. But we also use other approaches when raising children. We sometimes give financial incentives. We can say, if you brush your teeth every day, you will every Saturday get one Euro. Or we may say that if you don't clean up your room today, we will deduct from your weekly allowance. This exemplifies what we often call economic or market-based instruments. These instruments do not prescribe what must be done, but add some financial implication. You can do it your way, but then you will meet an extra cost. Finally, you can try to change the behavior by explaining what the consequences of various actions will be. We will tell our children, what will happen if you don't brush your teeth? And we will explain what different parents will have to do everything at home then they will be too tired to play with the children, to take them to the football game, and so on. Now, these are also approaches we use when trying to steer the behavior of companies. We use regulatory instruments to tell them what we must and must not do. We use economic instruments to encourage and discourage them by financial incentives. And we know that if we provide better information about opportunities and consequences of various actions, many companies will understand that they will be better off by changing their technologies, routines, and approaches. As what is good for the environment, often also makes good business sense. The art of policy making is to choose the right set of policy instruments for the specific problems that we want to address. As we are facing big environmental challenges we'll also need clever and brave policy makers in the coming years. What we can hope for is that they will make good use of a lessons learned and be able to find the political support from the message that we as a society needs to take. [MUSIC]
