Environmental regulation: lessons from the 'credit crunch'

摘要

The recent financial crisis has affected the stability and proper functioning of the global banking system and caused a downturn or recession in many of the world's capitalist economies. The global economic cost has been so high that there has been substantial investigation into the reasons behind the crisis and the failings in regulation and governance which allowed it to happen. This offers the potential to examine the transferability of the lessons learned in terms of regulatory failings for sectors beyond the financial services and markets.rnHaving assessed the validity of the approach, this article investigates the potential implications of four identified generic categories of regulatory failure for the sphere of environmental regulation. Despite the obvious disparity between the nature of the respective regulated communities, this analysis shows that there are some interesting comparisons to be drawn between recent failures of financial regulation and threats and challenges that currently or potentially exist in environmental regulation.rnAs a result, a number of areas have been identified as risk factors which it may be prudent for regulators and policy makers to consider in relation to the regulation of the environment and regulating for the orderly conduct of the rapidly growing carbon markets. These factors include: an increased risk of sole reliance on economic instruments to deliver environmental objectives, due to the fallibility of previously accepted assumptions about market behaviours; risks to liquidity management within carbon markets by inadequate regulation of liquidity control or high levels of trading in highly structured securitised derivatives; an appreciation of the strength of the 'herd instinct' in the overexploitation of common environmental resources at the level of both the regulated and the regulator; and, finally, a need to guard against regulatory complicity in short-termist, economically driven behaviours which are detrimental to environmental sustainability and, in some cases, also to long term economic interests.