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Chapman, Ralph --- "Forum. A policy mix for environmentally sustainable development - learning from the Dutch experience" [2003] NZJlEnvLaw 3; (2003) 7 NZJEL 29

Last Updated: 10 February 2023

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FORUM

A Policy Mix for Environmentally Sustainable Development — Learning from the Dutch Experience

Ralph Chapman^*

The Dutch environmental policy scene is characterised by two very distinctive aspects — the emphasis on consensus-type agreements, following a broad move away from detailed environmental regulation, and initiatives to begin on a major set of transitions towards greater sustainability in key parts of the economy such as energy, agriculture and transport. Both of these aspects take place within a culture where the need for policies to advance sustainable development, and central government activism in the environmental area are more accepted than in New Zealand. At the same time, policy discussion is gradually shifting more towards the quality of life than the technicalities of pollution reduction - in short, a transition away from traditional environmental concerns towards the broader notion of sustainability. Nevertheless, the two societies have many similarities and can learn from each other. Gains in sustainable development can be generated for New Zealand by picking up on innovative features of Dutch sustainability policies, as evident particularly in the comparative success of its evolving covenant approach, backed by economic instruments.

• * PhD. Environmental Consultant, Maarama Consulting Ltd, Wellington. Formerly Manager, Strategic Policy Group, Ministry for the Environment, Wellington. This paper was made possible by support from the Embassy of the Netherlands, in Wellington, New Zealand. I am also especially grateful to Eddy Goldberg and Bob Zuur for comments on drafts of this paper. The views in this paper are personal and do not necessarily reflect the views of either the Dutch Embassy, or the New Zealand Ministry for the Environment. The author can be contacted at ralph.chapman@paradise.net.nz.

I. INTRODUCTION

This paper is written for those interested in comparative public policy. It is inspired by an interest in internationally benchmarking New Zealand environmental policy

— by examining, specifically, just how different the Netherlands’ environmental policy approach is from New Zealand’s — and whether New Zealand can learn from the Dutch approach.

In a number of ways the two countries are similar — small trading countries with a maritime orientation, flexible, innovative and outward looking. Both are tolerant, democratic countries, each with a highly developed civil society and a fairly robust social welfare system. There are many other parallels.¹

But in other ways, the Netherlands and New Zealand are quite different. The nature of the environmental problems they face is different. The most pervasive environmental issue in New Zealand is biodiversity protection whereas in the Netherlands it is probably management of land use and urban development. Agricultural management also faces different issues in the two countries. However, both countries do face similar difficult issues in some areas — for example, greenhouse gas emissions reduction, and the sustainability of transport and energy systems.

More broadly, a key difference is population density,² and this affects a number of aspects of Dutch culture, such as ways of resolving conflicts arising out of living closely together.³ In general, the Dutch seem more disposed to regulation than New Zealanders, but this is not to say that a regulatory approach is always favoured. Another difference, with critical environmental impact, is that the Netherlands is the gateway to a huge amount of Europe’s trade. The Dutch are intimately involved in carrying the cargo of a vast hinterland. They own a large proportion of the freight trucks which trawl daily across Europe, and they have the densest motorway network in Europe.⁴ They are now also increasingly engaged in a form of international governance — through the European Union (EU) — which is unparalleled for New Zealanders.

With this background in mind, this paper addresses the key features of environmental policy making in the Netherlands, with a view to their applicability

1. An insightful cultural analysis of the Netherlands is that of van der Horst, H., The Low Sky: Understanding the Dutch (2001).
2. The Netherlands’ population is now (2002) around 16 million and New Zealand’s almost 4 million. The Netherlands’ population density in 2000 was 382 persons per square km, whereas New Zealand’s was 14. However, New Zealand’s population grew at around twice the rate of the Netherlands, over the 1990–2000 decade (13.9% v 6.2%). (OECD statistics.)
3. I am grateful to Remco ten Rouwelaar (Rotterdam City Council) for illustrating this.
4. Population density and GDP come together in GDP density (GDP per square kilometre): the Netherlands’ was about 38 times that of New Zealand in 2000. I am grateful to Eddy Goldberg for this insight.

in New Zealand. I keep in mind ways in which synergies are being sought between Dutch environmental policies on the one hand, and economic and social policies on the other.

The next section sets out a background of current ideas about assessing policy instruments. This is followed by an evaluation in Section 3 of key features of Dutch environmental policy, and some comparisons are drawn with New Zealand policy. Without wishing to over-emphasise boundaries between policy instruments, I focus on “covenants” (a distinctively Dutch variant of voluntary agreements), economic instruments, and then other forms of support for environmentally sustainable development, including direct support for innovative technology. I end by drawing some general conclusions about some key areas in which Dutch policy might be given further consideration in a New Zealand context.

II. BACKGROUND IDEAS: EVALUATING POLICY APPROACHES

This section is not a primer on the basics of policy design — that topic is well traversed in many texts. But my own experience and some recent literature provide the following insights that underpin the empirical lessons I explore in this paper, concerning the success or otherwise of policy:

• There is often resistance to environmental policy where it does not clearly offer gains in the economic or social dimensions. Finding policies which give “win-win” gains across two or three of the sustainability dimensions (eg, reducing environmentally harmful subsidies) is a good place to start with policy design, although inevitably some policies will involve trade-offs among objectives.
• The course of policy development and implementation is always partly organic

— it cannot be fully scripted in advance. Suitable conditions have to be established. This may involve, for example, developing stakeholder clusters and raising awareness.

Thinking about the choice of policy instrument has evolved considerably in the last 20 years, and there is now (for example at the OECD) a more nuanced understanding of the difficulties of applying certain policy instruments in particular circumstances, and the need for sensitivity to local social and institutional conditions. The following suggestions ring particularly true in relation to Dutch experience, and it will be seen why below:

• There is a need to go beyond “instrumentalism” — the assumption that the choice of a single policy instrument determines the success of a policy. That

is a narrow view. Policy style, for example, or the way in which an instrument is applied, influences the result.⁵ Similarly, the formulation of goals, flexibility, timing, and consultation are all of great importance.⁶

• The success of an instrument also depends upon the “programme” formulated, and interaction in the “field of intervention” (eg, interaction between the regulator and the regulated). In particular, the importance of the particular instrument used can fall as actors reach consensus on their goals.⁷

Because covenants and related agreements are so significant in the Netherlands, I also note some of the findings of the policy literature on that subject:

• The policy maker often gives away part of his/her objectives for the advantage of practical applicability of the instrument. “The target group, in turn, benefits from the fact that unattainable policy goals are exchanged for attainable options.”⁸
• Often, goals stated in the contract are not achieved.
• “The value of contracts [agreements] lies especially in the possibility of making agreements with powerful, otherwise almost unreachable, members of a target group.”⁹

Lastly, there is an emerging literature on transitions to sustainable development, and the system changes this requires. Key points of relevance in evaluating the Dutch experience include these conclusions:

• Environment, employment and competitiveness tend to be the main operationally important dimensions of sustainability.
• A sustainable development agenda is, almost by definition, one of systems change — eg, the minimisation of pollution through far-reaching system changes, and the development of novel socio-technical systems.

5. Richardson, J.J., Policy Styles in Western Europe (1983); cited in Janicke, M., Blazejczak, J., Elder, D. & Hemmelskamp J., “Environmental Policy and Innovation: An International Comparison of Policy Frameworks and Innovation Effects” in Hemmelskamp, J., Rennings, K. & Leone, F., Innovation-oriented Environmental Regulation: Theoretical Approaches and Empirical Analysis ZEW Economic Studies 10 (2000) 133.
6. Janicke et al, supra note 5 at 133.
7. Mayntz, R., “Zur Einleitung: Probleme der Theoriebildung in der Implementations-forschung” in Mayntz, R. (ed), Implementation Politischer Programme (1983). Cited in Janicke et al, supra note 5.
8. De Bruijn, H.A. & Hufen, H.A.M., “The Traditional Approach to Policy Instruments” in Peters,

B.G. & Van Nispen, F.K.M., Public Policy Instruments (1998) 20.

9. Baggot, R., “By Voluntary Agreement: The Politics of Instrument Selection” (1986) 64 Public Administration.

• It is important to take a strategic view of the long-term transitions that are necessary to achieve sustainability. This goes beyond arguing that public policies should take a view about the interests of future generations. It rather emphasises that a conscious process of going beyond incrementalism in policy is necessary in order to realise some of the large transitions — eg, to sustainable transportation systems — desirable for sustainability.
• In trying to make long term transitions, it helps to have clear goals and targets and show consistency in efforts to attain these.
• System transformations may be beyond those that the dominant industries and firms are capable of developing easily, at least by themselves.
• Sustainable transformation processes require “intelligent government” to encourage change, and considerable innovative capacity on the part of all actors involved.¹⁰

Naturally, this selection of success factors and caveats reflects to some extent a personal view of what lies behind effective policy, and the limitations of it. With this in mind, I examine in this paper the main features of Dutch policy making for environmental sustainability, make some comparisons with New Zealand, and focus on successful features of recent Dutch policy that can plausibly be considered for application in New Zealand. I begin with some institutional context.

III. DUTCH ENVIRONMENTAL POLICY ON THE GROUND AND SOME COMPARISONS WITH NEW ZEALAND

1. The Institutional Context: Integration in the Government Sector

A notable feature of the Dutch institutional context is that environmental protection is enshrined in article 21 of their constitution.¹¹ Also, since 1993, the production or update of a new environmental plan has become compulsory every four years (Environment Act 1993).¹² In both of these senses, it is clear that environmental protection and planning are treated very seriously in the Netherlands, and certainly

10. Hafkamp, W., “Pathways to Sustainable Industrial Transformations: Cooptimising Competitiveness, Employment and Environment. Final Report 30 June 2001” (2002) Unpublished paper, Erasmus University Rotterdam, 2.
11. Stanhope, R., “A Vision for the Future? The Concept of Sustainable Development in the Netherlands and New Zealand” (2000) NZJEL 147-180. Interestingly, as pointed out in OECD, Governance for Sustainable Development. Five OECD Case Studies (2002) 227, there has been environmental nuisance regulation (via licensing) since 1810, when the Netherlands was under Napoleonic rule. The regulation was specifically aimed at the hazards, damage and nuisance created by industry.
12. I am grateful to Ton Buhrs, Lincoln University, for pointing this out.

the central government strategic environmental planning process is more formally embedded than in New Zealand.

The Netherlands has considerably fewer central government ministries than New Zealand — only 13.¹³ This appears to provide a somewhat greater degree of integration across related issues within those ministries — eg, housing, spatial planning and environmental protection (which all fall within VROM).¹⁴ There is always at least one secretary of state as well as a minister, per ministry, and sometimes two secretaries. At the same time, there are considerable numbers of officials working on environmental policy issues within other Ministries (proportionally more than in New Zealand).

In practice, the gains in integration within government arising from a smaller number of ministries, and the greater integration of environmental concerns into the work of several ministries, appear to be matched by the “transaction costs” arising from the greater size and complexity of the ministries — the sheer difficulty of navigating through a more tiered and partitioned system. Also, policy conflicts within a ministry may be submerged, rather than resolved transparently. These difficulties seem to offset the integration benefits. It also seems unlikely that the higher degree of attention to sustainable development in the Netherlands is due to this structural difference — but is, rather, due to other factors.

What of integration between central and local government in terms of environmental policy and planning? Local government is bigger, more complex and more diverse than local government in New Zealand. For example, Rotterdam City (admittedly the world’s largest port) has around 18,000 employees (including those employed in the city’s public transport and harbour departments).¹⁵ Generally, Dutch local authorities tend to retain functions such as housing provision, in which New Zealand local authorities have been working to reduce their involvement, over recent years. On the other hand, central government has managed large infrastructure projects such as Schiphol airport, sometimes with extended

13. Of the 13, only four are directly concerned with the environment: 1: Housing, spatial planning and environmental protection (VROM); 2: Transport and water management; 3: Agriculture and nature conservation; 4: Economic affairs. Of course, others, such as Finance, and Education, Culture and Science, also have an interest.
14. However, a new independent Spatial Planning Office is to be set up from 1 January 2002, accountable to the Minister for Housing, Spatial Planning and the Environment (VROM) — VROM news release April 2001. The Netherlands will then have four similar “independent” planning offices of a similar nature. These together will cover the four major facets of government policy: economy (Netherlands Bureau for Economic Policy Analysis, CPB), ecology (Nature and Environmental Planning Office, part of the National Institute for Public Health and the Environment, RIVM), socio-cultural (Social and Cultural Planning Office, SCP) and spatial development (Spatial Planning Office).
15. Personal communication with Remco ten Rouwelaar, City of Rotterdam.

controversy, and (in addition to legislation and regulation) establishes national targets applicable to lower levels of government.¹⁶

The area in which local government has the biggest impact on environmental sustainability in the Netherlands is land use planning. Policy here is mainly aimed at ensuring that urban areas develop sustainably, by careful consideration of land use impacts, and minimising unnecessary mobility through a mix of encouragement and discouragement mechanisms, such as providing effective public transport, planning shopping facilities near residential developments, and ensuring working and living areas are close by.¹⁷ However, while some of these policies show clear successes — for example, public transport and cycling facilities are generally excellent and undoubtedly reduce urban sprawl and emissions — the pressures for fewer fetters on land use in the Netherlands are strong, and if anything the coordination of environmental policy and spatial planning needs further strengthening.¹⁸

Historically, it has fallen to central government in the Netherlands to strengthen the resolve of local government in shaping development, and there has at times been real tension between localities with expansion plans and central government plans to protect open space and nature areas.¹⁹ Central government has been fairly successful — despite the pressures, and despite some failures²⁰ — in facilitating the protection of the longer-term and wider public interest in the quality of life (for example through protection of open space).

In comparing policy in this area with New Zealand’s approach, it has to be remembered that the scarcity of land in New Zealand is dramatically less and the high land to population ratio would lead one to expect less intensive (and more extensive) land development in New Zealand. Nevertheless, it is not clear that the Resource Management Act 1991 (RMA) does deal with these issues any more successfully. Although the RMA does not set out to control development (but rather to enable it), it does require that councils consider the (adverse) environmental effects of policies, plans and resource consents, and this undoubtedly occurs. But the pattern of recent rapid urban expansion in New Zealand (with

16. OECD, supra note 11 at 237. Note also that about 90% of municipalities’ and provinces’ budgets come from central government.
17. Personal communications with Johan van Reenen, City of Delft and Remco ten Rouwelaar, City of Rotterdam.
18. The OECD, supra note 11 at 222 argues that there can be a lack of overall sector coordination in the implementation of the devised policies.
19. The latest coalition government appears to wish to relax some of the constraints on local government. Environmental policy must be “more flexible, less rigid” according to Liberal (VVD) leader Gerrit Zalm, and “Our land must not be put under lock and key” according to Jan Peter Balkenende (PM elect): Pascoe, R., “Green Policy Focused on Formation Talks” (2002) Het Financieele Dagblad (English edition) 4 June.
20. For example, only a tiny proportion of the original peat bog of the Netherlands river delta area remains intact today, and nature areas are highly fragmented.

adverse environmental consequences such as rising vehicle emissions) suggests that the RMA’s effects-based approach may be too “hands-off”, and does not deal well with underlying economic and social drivers and the wider consequences for sustainability of settlement patterns.

Another key institutional feature of the Dutch policy landscape is the Environment Management Act 1993. This act has many similarities to the New Zealand RMA, in combining disparate prior pieces of legislation, and in providing the basis for environmental licensing/consenting, which is the control mechanism at the heart of environmental management in both countries. It also covers a wide range of spheres of environmental management — from waste management to planning — and the relationship of central and local government.

However, it is less comprehensive than the RMA (for example water management is covered mainly by other legislation).²¹ It also focuses more on activities than on environmental effects,²² simplifying planning but allowing if not encouraging greater prescriptiveness. The traditional licence, for example, is characterised by a large number of conditions, with the licenser often prescribing in detail how a company should prevent or limit adverse environmental effects. (I will describe below how this is, however, now changing.)

Second, whereas the RMA has a broad objective of sustainable management of (natural and physical) resources and the scope of this is broad, the Dutch legislation is more focused on the environment.²³ However, in practice, the focus of the RMA on environmental matters is quite similar to that of the Dutch legislation.

Probably the major difference on the ground is that central government has more direct influence on planning and environmental management in the Netherlands, and this stands in particular contrast to practice (rather than principle) in New Zealand where national interventions (such as national policy statements and national environmental standards) have been largely absent.

Also, the Dutch environmental legislation has been evolving over time, and a more flexible style of environmental licensing has been introduced. Called “customised licensing”, this allows more differentiation by the authorities (typically provinces²⁴ or cities). For example a framework licence with much more flexibility is granted (the company licence is confined to the “essentials” of objective-based conditions and a duty of care), if the company has an environmental management

21. In particular, the Pollution of Surface Waters Act 1969 and the Water Management Act 1989.
22. Not all agree that the “outcome” (effects) focus of the RMA, designed to yield greater flexibility as to “means”, has been successful. Stanhope, supra note 11, for example, has criticised the RMA for being too focused on adverse effects.
23. Rouwelaar, R., “Practice Versus Principle: Resource Management Act 1991” (2001) Research Project Report for Master of Public Administration at the Netherlands School of Public Administration, The Hague, provides a useful comparative analysis.
24. The Netherlands has 12 provinces and around 500 municipalities.

system (EMS) certified under ISO 14001, together with an approved company environmental plan, and an annual environmental report.²⁵

In short, the Dutch tradition of highly prescriptive licensing of “external control” has been evolving towards a less prescriptive and more objective-based system. In the process, pro-active companies have either generated internally a view that good environmental management is in their own best interests, or they have been persuaded of that view by the government. Either way, the locus of control has clearly been shifting from external to internal control over recent decades.

Turning to institutional integration, and the capacity of the system to “learn from experience”, the Dutch government retains within the government structure a number of independent research institutions. Key ones are the Dutch Institute for public health and the environment (RIVM), the Netherlands agency for energy and environment (Novem), and the Dutch Energy Research Foundation (ECN). Others, such as the Netherlands Organisation for Applied Scientific Research (TNO) classes itself as an independent organisation but is closely tied to government (it was originally established by a law passed in 1930) and its funding is still substantially from government.

The government research organisations are well integrated with the policy ministries. For example, Novem²⁶ and ECN explicitly recognise that the Dutch government has made a commitment to strengthen the transition to a sustainable society, which includes a transition to a sustainable energy system and a fundamental change of energy technology and society in a co-evolutionary way. RIVM provides regular independent advice on the state of the environment.

They report annually with a short inventory of the state of play (“Environmental Balance”) and also every four years produce an “outlook”, in preparation for the ministry’s policy plans (Netherlands Environmental Policy Plans, NEPPs). There is no doubt that these assessments are influential.

The degree of integration between research organisations and policy ministries seen in the Netherlands is comparable to that in New Zealand, with fairly close links between the Ministry for the Environment and other ministries on the one hand, and the work of the Crown Research Institutes such as the National Institute for Water and Atmospheric Research (NIWA) and Landcare Research, on the other. A difference however is that in the Netherlands there are fewer research institutes and the ground each covers is larger. Also, the task of environmental

25. Ministry of Housing, Spatial Planning and the Environment & Ministry of Transport, Public Works and Water Management (VROM and V&W), “Circular on the Framework Licence and the Customised Licence” (1999) 4. In New Zealand, there is interest in similar approaches — eg, Tasman District Council and Environment Waikato.
26. Novem is not purely a research organisation: it has a number of operational activities akin to those of Energy Efficiency Conservation Authority (EECA) in New Zealand.

monitoring rests more with the research organisations than is the case in New Zealand, and this may have presentational (perceived objectivity) advantages.

Lastly, however, it is clear that the evaluative research base for policy in the Netherlands, as in New Zealand, has some distance to go. A recent OECD²⁷ study points out that research (to inform and evaluate policy) remains uneven in the Netherlands, and indeed there is little systematic evaluation of policies carried out within government, nor ex post accountability for progress towards sustainable development goals. The same can be said for New Zealand.

Against this institutional background, the next section outlines the state of play of environmental performance in the Netherlands, before going on to sketch the key policy approaches that have developed in the Netherlands in the last decade.

2. Is The Netherlands Decoupling Successfully?

It is beyond the scope of this paper to detail the successes and failures of Dutch environmental policy, and an OECD report will in any case soon be available.²⁸ Nor is there space to detail New Zealand’s degree of success in “decoupling” — that is, reducing the levels of emissions of environmental pollutants while maintaining economic growth. However, New Zealand is probably less successful than the Netherlands in terms of decoupling, to the extent that the available data give a representative picture. It is also of concern that the data for New Zealand are markedly less complete.²⁹

The overall Dutch picture can be summarised briefly as improving, but with significant remaining gaps.

The Netherlands’ economy grew rapidly throughout most of the 1990s.³⁰ Yet it stands out as probably the most successful OECD country in terms of reducing pollution. It has a high success rate in terms of decoupling. On the OECD’s list of 11 distinct potential decoupling indicators,³¹ some eight measures of emissions show “absolute decoupling” in the case of the Netherlands (ie, are declining while GDP grows). Of the other three measures, one shows relative decoupling (increasing or stable while GDP grows), while the other two give a mixed picture

— showing relative decoupling or no decoupling depending on which measure is

27. OECD, supra note 11 at 256–257.
28. The review mission for the OECD environmental performance review of the Netherlands took place in April 2002. I was part of the mission team. The review in Paris will take place in January 2003 and the report of the review will be published around April 2003.
29. OECD, Indictors to Measure Decoupling of Environmental Pressure From Economic Growth

(2002) Table 1.2 at 14–15.

30. Growth dropped to nearly zero in late 2001, but is expected to pick up again by late 2002.
31. OECD, supra note 29.

used. The troublesome three relate to, respectively, direct materials inputs, and CO₂ and total greenhouse gas emissions.

Former Dutch Environment Minister Jan Pronk’s prediction that “In 2010,

emissions of the most serious pollutants will have been reduced by 70 to 90 per

cent”³² is unlikely to be fulfilled — for example, for CO , NO VOCs and fine

2 x,

particle exposure.³³ Neither is the statement on VROM’s website that “All environmental pressures other than CO₂ have been detached from the growing economy.”³⁴ A more realistic assessment is that contained in the Netherlands’

x

2002 report to the World Summit, “Real, structural unlinking of pollution trends from economic growth seems out of reach for such issues as nitrate, greenhouse gases and NO .”³⁵ Unlinking is clearly also in the balance for some other issues such as waste.³⁶

Against this background, what are the success stories of Dutch environmental policy?

(a) Covenants

Covenants are a form of “voluntary initiative” — negotiated between the government and “policy target” groups. They have been a mainstay of Dutch environmental policy for a decade and are a continuing important ingredient of policy and action towards sustainability.

Covenants arise out of a more general Dutch way of doing things — the “polder model”. This is an approach which reflects a tradition of collective action

— often in the face of real adversity — and a view that good governance emerges if the parties get together and try to reach a consensus, rather than interacting adversarially.³⁷ They embody a history of practical consultative development of

32. VROM, Environmental Policy for Industry in the Netherlands (2002).
33. VROM, Where There’s a Will There’s a World: Working on Sustainability. 4th National Environmental Policy Plan (2002) 76. For example, the important pollutant NOx now has a 2010 target of –60% relative to 1990 levels and this is as yet some distance from being attained (in 2000 NOx levels were tracking 27% below 1990 levels). However, recent measures in agriculture and the chemical industry may yet effectively address NOx emissions.
34. <http://www2.minvrom.nl/pagina.html?id=4822>
35. Environmental Resources Management, “Ten Years After: Implementing Sustainability in the Netherlands since 1992: Report of the Netheralnds Government to the United Nations in Preparation of the World Summit on Sustainable Development (Johannesberg 2002)” (2002) 26.
36. VROM, Economic Affairs (EZ), V&W, Agriculture, Nature Management and Fisheries (LNV), Foreign Affairs (BuZa), Third Netherlands’ National Communication on Climate Change Policies (2001).
37. There are instances, however, where even prolonged consultation has failed to resolve differences

— eg, the project to expand Schiphol airport.

improved practice, not just for environmental ends but also economic and social gain. As far as environmental covenants go, they appear to also involve a pragmatic Dutch view that what is good for business (as a whole) is generally good for the environment, and vice versa in the longer run. Covenants are substantially responsible for the impressive (though not fully successful) decoupling performance of the Netherlands over the last decade.

Before describing the evolution of covenants in more detail, I briefly consider why this particular form of voluntary agreement caught on with more success and earlier in the Netherlands than in New Zealand (in New Zealand, the only major examples to date are the voluntary agreements on energy efficiency and on packaging, while other attempts such as creating a used oil recovery programme have not succeeded³⁸). The most obvious likely explanation is around cultural differences between the Netherlands and New Zealand, with New Zealand perhaps having a more adversarial culture. However, two or three additional plausible factors are as follows.

First, there is a greater acceptance on the part of businesses in the Netherlands that environmental issues do (or did, even in the late 1980s) need to be tackled quickly and effectively — that business among others had a real obligation to act. That awareness has been slower to take root in New Zealand. Second, in the Netherlands covenants build on a very strong regulatory backdrop, and — more recently — they have been backed up by the alternative of the use of an economic instrument. Such backup has not been evident in New Zealand to date. Lastly, it is possible that in New Zealand there has been more suspicion of the potential for rent-seeking by business, and a reluctance on the part of government to commit resources to what may be seen as protracted and technically complex negotiations.

The first Dutch voluntary environmental agreement was signed in 1985, and the first on energy efficiency was drawn up in 1992, with overall more than 100 agreements reached with sectors of industry, trade and services.³⁹ They continue to contribute to environmental gains and are now entering a phase in which they have greater scope and potential for wider returns in terms of the transition towards energy and materials sustainability.

Particularly notable covenants exist in the energy efficiency and climate change arenas. The goals for the first generation of long-term agreements (LTAs) on energy efficiency were surpassed,⁴⁰ and a new generation of LTAs has largely been negotiated. However, a covenant on emissions from the greenhouse

38. There are however established successful practices of covenanting at the level of individual actors — eg, land owners entering a covenant regarding the protection of native forest on their land, such as under the Queen Elizabeth II Trust.
39. Confederation of Netherlands Industry and Employers (VNO-NCW), Environmental Agreements in the Netherlands (1999) 5.
40. VROM, The Progress of the Netherlands Climate Change Policy: An Assessment at the 2002 Evaluation Moment (2002) 5.

horticulture sector did not quite reach its target. At the energy-intensive end of the scale, an energy efficiency benchmarking programme applies now to companies using more than 0.5 PJ of energy per year.⁴¹ Companies must be among the world leaders in energy efficiency by 2012, through “profitable measures” taken by 2006 or “less profitable measures” taken by 2008.⁴² In return, the government agreed not to impose any additional specific national measures relating to energy saving or CO₂ reductions on the firms involved.

A wind energy covenant (“BLOW”) between central government and the

provinces, signed in July 2001, aims at realising 1500 MW of wind energy by 2010.

While covenants are the subject of sceptical comment by some, their record appears quite solid. The consensus seems to be that they achieve progress towards sustainability, even if their results are not easy to pin down. The energy efficiency benchmarking covenant has a high take-up rate among relevant companies (84% of potential companies within 18 months), and emission “prevention” is fairly clear (eg, 4.6 M tonnes by 2012, excluding power companies), but uncertainties remain due to the indeterminacy of future manufacturing output levels.⁴³

A recent evaluation of environmental covenants vis à vis other instruments was not able to draw firm conclusions as to cost-effectiveness.⁴⁴ The same study admitted that it was only possible to examine static efficiency of covenants, not their dynamic efficiency features, including their impact on innovation. However, the study was able to conclude that the cost-effectiveness of covenants can be maximised if:

• they are applied where a customised approach is more suitable and where generic instruments such as levies are inappropriate
• clear and quantified targets are formulated
• results-based commitments are laid down
• measures are legally enforceable
• cost levels (curves) are taken into account
• rules which restrict the possibility of trading in emission reductions are avoided

41. Smaller enterprises are under strong pressure to save energy and can have energy saving measures with a payback of up to five years imposed under the Environmental Management Act. See VROM, supra note 32 at 40.
42. VROM, supra note 32 at 42.
43. Benchmarking Commission, Energy Efficiency Benchmarking Covenant: Interim Report as at February 2002 (2002) <www.benchmarking-energy.com>
44. “cost-effectiveness ... of most of the covenants cannot be accurately assessed since data on costs and benefits are incomplete, unreliable or simply unavailable”: de Wit, R.C.N., Leurs, B.A., de Wit, G., The Costs and Benefits of Environmental Covenants Compared with Market Based Instruments.

• emission reduction transfer mechanisms between the “exposed” and sheltered sectors of the economy are developed.

The LTAs for energy have been evaluated by various players. The view of industry and the employers is a positive one, that “Roughly half of the energy efficiency that has been attained can be attributed to LTAs.”⁴⁵ Moreover, this organisation concludes that “... the use of Environmental Agreements has set in motion an irreversible change which has initially manifested itself in the attitude of companies to environmental problems and the solution of these problems”.⁴⁶

A European Commission based evaluation looking at energy agreements in six European countries concluded that LTAs have to be integrated with other instruments, key actors have to be involved from the start, a trustworthy independent third party should assist negotiations, and a two-level arrangement (framework; individual contract) works well. Preferably, agreements should be legally binding as in the Netherlands. In addition, targets should be ambitious but reachable, and quantitative if possible; progress against milestones should be audited and transparently reported; and agreements should be accompanied by sticks and carrots such as information services and benchmarking tools.⁴⁷

A significant caveat in relation to covenants is that expressed by the OECD, in a 1999 look at regulation in the Netherlands, and reiterated more recently. In relation to co-regulation, where regulatory functions are shared between industry and government, as with covenants, their warning was that “[t]he incentives that exist for rent seeking require that the government more carefully supervise the use of delegated and self-regulatory powers than it has in the past.”⁴⁸ Moreover, “[i]f not carefully managed, extensive consultation and bargaining with ‘established’ groups runs the risk of shifting responsibilities from elected officials, who are accountable to citizens, to unaccountable ‘groups’.”⁴⁹ One partial check on this has been the Dutch approach of encouraging NGO participation in policy development, and the development of policy targets.⁵⁰ But it always pays to keep such warnings in mind, along with the caveat that the policy maker may give away part of his/her objectives for the advantage of practical applicability of the instrument (section 2 above).

45. Confederation of Netherlands Industry & Employers (VNO-NCW), Emissions Trading for Business and Industry: A New Instrument to Achieve Environmental Goals (2001) 16.
46. VNO-NCW (1999), supra note 39 at 29.
47. Booij, M., “Long Term Agreements (LTA): Effective Instrument to Achieve Higher Energy Efficiency in Industry?” (2001) Unpublished paper prepared for the EU expert workshop, 16 May 2001, Brussels.
48. OECD, Regulatory Reform in the Netherlands (1999) 14.
49. OECD, supra note 11 at 243, 255.
50. OECD, supra note 11 at 245. Note that NGOs are often directly funded by (all 3 layers of) government, typically on a project basis. This is true not just of environmental NGOs but also those in other areas — eg, the Youth Organisation.

The recent development of energy efficiency covenants into a “second generation” instrument offers some insights for future developments. Because a relationship of trust had been established, it has been possible to build flexibility into the covenants so that energy savings outside the immediate energy using processes are able to be taken into account. This means that there is an incentive to make savings in product design, transport and even use and disposal.

Covenants also offer potential for dematerialisation (reduction of material usage per unit of value) in areas such as carpets,⁵¹ which serves to illustrate that their benefits are not confined to reduction of energy use, energy cost savings or emission reduction.

(b) Economic instruments

Economic instruments in the Netherlands are increasingly important. Increased attention is in part driven by the liberalisation of the European market, and the increasing difficulty of maintaining differing and complex regulatory approaches in that context. The need to coordinate internationally to reduce greenhouse gas emissions is also clearly significant.

Economic instruments provide a general incentive structure for evolution of activities and actions in an environmentally sustainable direction. Philosophical support for them is evident in a recommendation of the VROM Council, endorsed by the Dutch Cabinet:

The strategy [for CO₂ reduction over the long term] and policy instruments must exploit to the maximum the self-directing capacity of society.⁵²

Price signals can either be provided at central government level by taxes or tradeable permits. At local government level (provinces or municipalities), some weak incentives are provided by charges but these are usually designed to recover administrative / operational costs rather than to simulate external costs.

The Netherlands has been successful to date in its green taxes policy — a substantial greening of its tax system has taken place since the early 1990s. Interestingly, initial use of environmental charges was in part motivated by a desire to fund environmental policy measures without reshuffling the budget.⁵³

51. Te Riele, H., Van El Berg, M. & Kemna, R., “Dematerialisation: Less Clear Than It Seems” (2000) Paper Prepared for the Dutch Ministry for the Environment (VROM) (2000) 22.
52. “Transition to a low-carbon energy economy”, cited in VROM, Netherlands Climate Policy Implementation Plan, Part 1 (1999) 15–16.
53. Pieters, J., “Green Tax Reform in the Netherlands” in Jeong, H., Min, D. & Yong Jung, T. (eds),

Green Tax Reform. Towards a Sustainable Society (2001) 119.

By contrast to the Netherlands, New Zealand has been slow to adopt economic instruments for environmental purposes (exceptions include differentiation of the petrol tax according to lead content, tradeable permit systems in fishing and ozone depleting substances, and a recent government proposal for a charge from 2007 on small carbon dioxide emitters). New Zealand’s overall level of environmentally related taxes remains below the OECD average.⁵⁴ Also, the debate about the merits of ecological tax reform remains muted in New Zealand. As with covenants, the reasons for the slower adoption of economic instruments in New Zealand seem both cultural and to reflect the lesser business acceptance of the need for policies to accelerate environmental improvement. New Zealand seems content to see northern European countries trial innovative mechanisms in this domain. How far have the Dutch gone in terms of green tax reform? The Netherlands now has a high proportion of total tax revenue coming from green taxes, compared with most other European and OECD countries. Total green taxes in the Netherlands generate around 14% of government revenue.⁵⁵ Some, such as a water extraction tax to counter loss of groundwater, are quite recent.⁵⁶ However, there are now moves to trim back some (minor) existing green tax elements.⁵⁷ Also, the proposed kilometre tax (kilometerheffing), with its anticipated time-of- day differentiation, has been a political hot potato and now looks to be stalled.⁵⁸ Tradeable permit regimes are now being developed for both CO₂ and NO_x. In part, their shaping is aimed at simplifying a complex system of agreements,

regulations and support mechanisms:

The instruments of climate policy, such as agreements, regulations and economic incentives, vary by target group. Without custom tailoring, they would not be specific enough and therefore be ineffective. Currently about 25 to 30 different instruments either exist or are under preparation. This maze of instruments will become impenetrable for both government and the target groups as policies are stepped up. A system of tradeable emissions ... will offer advantages in

54. See OECD data sources (Environment Directorate: environmental policies and instruments):

<www.oecd.org/EN/document/0,,EN-document-464-nodirectorate-no-1-3016-8,00.html#title3>

55. de Waard., “Greening the Tax System: Summary. An Exploration of Ways to Alleviate Environmental Pressure by Fiscal Means” (2001) Green Tax Commission, The Hague, 7, 33.
56. OECD, supra note 11 at 225.
57. For example, following the 15 May 2002 election, the parties negotiating to form the coalition government have made it clear that one element of the tax mix, a small (25 guilder cent or about 25 NZ cent) tax on petrol, the “kwartje van Kok”, is likely to be abolished: Ruairi, C.M., “Green Lobby Irate At Plant to Build in Countryside” (2002) Het Financieele Dagblad (English edition) 5 June, 4.
58. This variable road tax would not generate more money than the current road tax, but if differentiated by time of day, would cut traffic jams – at least in theory. It is a contribution to the Netherlands’ climate change implementation plan, so its absence will necessitate other measures: see VROM, supra note 40 at 7.

this situation. Many of the existing instruments will become superfluous or may be reduced to merely a supporting role.⁵⁹

This may of course be optimistic, given the remarkable ability of existing measures to hang on even after new simplifying approaches are adopted. While understandable, it is also arguably somewhat simplistic in the sense that existing instruments such as the energy efficiency covenants have their own dynamic, support base, and evolutionary track.

The view of the Confederation of Netherlands Industry and Employers (VNO- NCW) is indicative:

Emissions trading and agreements are not however opposed instruments. On the contrary, emissions trading can play an important role in realising the energy efficiency target specified in an LTA or the benchmark agreement. The benchmark agreement in fact explicitly includes a role for emissions trading

... albeit only as a form of safety net.⁶⁰

With emissions trading, a hiccup could occur if prices from the system emerge as rather low because of system design. This seems possible in the case of the international greenhouse gas emissions trading scheme under the Kyoto Protocol now beginning to emerge for the 2008–12 period. If anything, low price signals could undercut emission reduction efforts that are motivated by broader sustainability concerns. There is also the question of whether any European trading scheme operating before 2008 can provide higher price signals, without engendering large political resistance in some parts of the EU, given likely low prices under the Kyoto Protocol regime after 2008.

(c) Policy to directly support innovation

To the extent that innovation is a collective, exploratory activity which is distributed across many agents and occurs in networks — economic networks (suppliers and customers), knowledge networks and policy networks⁶¹ — then the Netherlands has certainly created many of the right framework conditions for supporting effective ongoing innovation.

Furthermore, a fairly comprehensive set of policies has been shaped — sometimes with a degree of overlap — over the 1990s to support the technological side of innovation for sustainability. Noticeable in this are the “economy, ecology,

59. VROM, supra note 52 at 98.
60. VNO-NCW, supra note 45 at 17.
61. Kemp, R., Smith, K. & Becher, G., “How Should We Study the Relationship Between Environmental Regulation and Innovation” in Hemmelskamp et al, supra note 5.

technology” programme, programmes around integrated product policy, and supporting programmes to provide fiscal support for innovative investments.⁶²

This nexus of policies is organic in the sense that it is complex, hard to survey, and constantly evolving. It is also tempting to criticise it for being rather indeterminate in terms of its effectiveness, and being too specifically focussed on subsidising certain technological approaches (eg, investment in high technology around the chemicals, energy and transport sectors).

However, it is not clear that other developed countries have more focused and effective policies in terms of shaping innovation towards sustainability. It is at this point too early to assess whether the New Zealand “growth and innovation framework” (February 2002) will be significantly shaped in the direction of environmental sustainability.

Another perspective on the Dutch approach is that environmental policy as a whole in the Netherlands appears too light on consideration of the social and cultural conditions for achieving greater sustainability. Those who make this criticism⁶³ point to a gradual evolution of “sustainability” problems from ones amenable to technical solution (engineering-type problems, which the Dutch have clearly been good at solving), to ones of social motivation, such as a willingness to alter lifestyles to reduce private vehicle use.

(d) Transition policy

Partly in response to this sort of doubt, and a sense that incremental policy may not add up to a fundamental transformation to sustainability, there has emerged in the last few years an interest in fostering a transition to a sustainable system. Among those in policy circles, and increasingly among business leaders, there seems to be a widespread perception that a transition to an efficient, environmentally sustainable economy is a vital long-term change to make. The 1997 policy document on the environment and economy,⁶⁴ produced in consultation

62. See the author for a separate detailed paper on policies shaping innovation towards environmental sustainability.
63. Eg, Jan-Paul van Soest, of CE-Transform; and Balthasar Klimbie at CE (a well informed environmental and energy consultancy in Delft). OECD, supra note 11 at 260 also points to efforts to strengthen social science knowledge about society and the environment (eg, traffic congestion).
64. VROM, supra note 32 at 10: The 1997 Policy document on Environment and Economy announced a raft of measures “to stimulate the transition to an environmentally efficient, sustainable economy, including the intensification of technological research, the introduction of fiscal measures to make environmentally-friendly products and services cheaper, and the stepping up of investments in new transport systems, underground infrastructure and information technology.”

with the business sector, and the fourth environmental strategy (NEPP4), were the first clear articulations of this. Others have been emerging since.⁶⁵

Not just VROM — the environment ministry — but also other ministries in the Netherlands seem to be cognisant of this.⁶⁶ They have for some time been working on the basis that an important factor for environmentally sustainable innovation is that actors have an overall sense of the logic and direction of policy change — particularly some clarity about the extent to which goals, such as emission reduction goals, will be pursued and shared, and in what timeframe. This underlies the thinking in the 2001 Dutch review of policy towards a sustainable development strategy, in which long-term (20–30 year) directions for energy, biodiversity, agriculture and transport were set out.⁶⁷

One of the stumbling blocks in any developed economy is having a clear and realistic view about the role of government in any system transitions. Hafkamp puts a coherent view in drawing conclusions from three case studies of potential system changes:

... depending on the specific transformation there is a role for government from the direct support of R&D and incentives for innovation through appropriate tax treatment of investment; to the creation and dissemination of knowledge through experimentation and demonstration projects; to the creation of markets through government purchasing; to the removal of perverse incentives or regulations in some instances and the deliberate design and use of regulation to stimulate change in others; to the training of owners, workers and entrepreneurs, and educating consumers. What the cases illustrate is that the role of government should be considered beyond simply creating a favourable climate for investment. While it is true that “the government may not be competent to choose winners”, it can create winning forces, and provide an enabling and facilitating role by creating visions for sustainable transformations.

Probably the most impressive of the transition policies is developing around the transition to sustainable energy systems, which is of course intimately linked to climate change policy.⁶⁸ It is beyond the scope of this paper to detail, but involves such elements as a second generation of voluntary agreements on energy for SMEs, and the benchmarking covenant on energy efficiency for large energy users referred to above. It is also exploring the potential for development of new energy systems

65. The “Pathways Project” is an example: see Hafkamp, supra note 10.
66. For example, the following ministries co-sponsored the 2002 conference “Innovation for Sustainability: technology meets the market”: the Ministry of Economic Affairs, the Ministry of Housing, Spatial Planning and Environmental Protection; and the Ministry of Education, Culture and Science. See EET Programme Office (2002).
67. Ministerial Policy Group on Sustainable Development (2002).
68. For a recent survey of climate change policy in the Netherlands and lessons for New Zealand, see the author.

such as biomass for fuel cells, without being prescriptive about what sort of energy systems are likely to be “successful” in 30 years’ time. There are, in addition, complementary policies such as the labelling system and associated green tax incentive for more energy-efficient vehicles.⁶⁹

In the eco-efficiency and waste domain, key elements being explored as part of the transition towards sustainability are dematerialisation (and the associated concept, immaterialisation — the reduction of materials through conversion of products to services). As yet, their scope remains to be fully explored. In NEPP4⁷⁰ an ambitious programme (focusing mainly around dematerialisation) is sketched out, including:

• creation of dematerialisation indicators (based on a material flow monitoring system)
• ensuring the indicator is aligned with the European development of a similar indicator
• setting of dematerialisation objectives for the business sector, after consultation
• establishing a dematerialisation norm, for the year 2050 (relative to 2000), of, indicatively, a factor of 10; and a norm for 2030 of 2–4
• further research to substantiate the norm factors and pin down the exact environmental benefits of dematerialisation⁷¹
• development of policy instruments, such as influencing the costs of raw materials, and introducing an incentive policy to encourage more sustainable product-service combinations.

It will be useful to follow this programme over the next five years, to assess the extent to which it contributes to improving both environmental sustainability and production profitability (as is sometimes claimed), while also helping to reduce the Netherlands’ ecological footprint, one of the areas of some sensitivity of the Dutch government. So far, the programme design appears well-considered and adaptive, so it is likely to increase the likelihood that the Netherlands will be able to make a successful transition, over the next few decades, towards an environmentally sustainable economy.

69. The eco-labelling of cars was introduced in January 2001, complemented in January 2002 with a differentiated vehicle tax incentive of up to Euros 1000 for the most economical models. This initiative combines conformity with EU requirements for detailed fuel efficiency information for consumers — through 7-colour coded labelling (green through red) of new vehicles — with a fiscal incentive (a saving of up to 1000 Euros for buyers of the greenest cars): VROM et al, supra note 36 at 98 and <http://www.anwb.nl/auto/brandstofetikettering/index.jsp> .
70. VROM, supra note 33 at 92, 122.
71. Early indications from a major study in Finland suggest that achieving significant environmental gains from dematerialisation through ICT and related services is harder than it appears: Heiskanen, E., Halme, M., Kama, A. & Lovio, R., Dematerialisation: The Potential of ICT and Services (2001).

IV. CONCLUSION

The Dutch environmental policy scene is characterised by two very distinctive aspects

• — the emphasis on consensus-type agreements, following a broad move away from detailed environmental regulation, and initiatives to begin on a major set of transitions towards greater sustainability in key parts of the economy such as energy, agriculture and transport. Both of these aspects take place within a culture where the need for policies to advance sustainable development, and central government activism in the environmental area are more accepted than in New Zealand.⁷² At the same time, policy discussion is gradually shifting more towards the quality of life than the technicalities of pollution reduction — in short, a transition away from traditional environmental concerns towards the broader notion of sustainability.

In some ways, notably in its gravitation toward the use of economic instruments such as emissions trading, the Netherlands is treading the path of standard OECD policy prescriptions and related international thinking. Indeed, the Netherlands has already gone considerably further than New Zealand in the direction of “getting prices right”, a central element of the OECD’s environmental strategy for the first decade of the twenty-first century, with its successful ecological tax reform. And it has made large steps towards decoupling environmental pressures from economic growth, certainly much more successfully than most OECD countries. In understanding and emulating the best features of such policy steps, New Zealand can learn a considerable amount.

Yet significant environmental problems remain in the Netherlands, particularly in the more densely populated Randstad (the area comprising Amsterdam and Haarlem, the Hague, Rotterdam and Utrecht). Jan Pronk, former environment minister, recently stated in an interview that “We are still running behind developments, quantity goes before quality, and materialism still rules. Environmental policy has to adjust to technological development.”⁷³ In addition, there is a high level of recognition of the ecological footprint of the Netherlands

• — the impact of Dutch consumption practices on other parts of the world, and the need to reduce this. And there is a considerable level of recognition of the need for Dutch engagement in international environmental issues, a feature perhaps to be expected in a country that is highly trade-oriented, like New Zealand.

The recognition of these concerns and needs in the Netherlands is real, although, it seems not to have gone much beyond the more informed sectors of society as yet. At the same time, there is some developing resistance to the use of economic

72. Despite signs of some change in this area with the forming of a new coalition government, it seems likely that central government will retain a strong grip on environmental policy and a strong influence on the shape of sustainable development in the future.
73. Kleijburg, H. & Versteeg, A., “Je Kunt Teveel Willen” (2001) 30 Milieudefensie 30–32. I am grateful to Ton Buhrs for bringing this quotation to my attention.

instruments, particularly taxes, and it may be that emissions trading could encounter similar problems over time.

These considerations are all relevant to New Zealand, now or in the not-too- distant future. For example, as an internationally oriented country, how cognisant are we of our ecological footprint? The Dutch experience also suggests that there is a case for looking hard at the potential of the so-called “transition management” approach, central elements of which are pollution prevention rather than control, human-technology “systems change” (especially in energy, transport and agriculture) rather than simply technology fixes; and support for innovative policies such as an economy-ecology-technology programme, which seeks breakthroughs in technological and social innovation.

Returning to the analytical framework set out earlier in the paper, I noted there that a persuasive view in the literature, which accords with my own observations, is that the importance of the particular instrument used falls as actors reach consensus on their goals. Both covenants, as they are developing in the second round of Dutch long-term agreements for energy, and “transition policy” are good instances of this. The latter goes beyond pointing definitively to particular instruments, and recognises that a mix of instruments centred around concerted network building, consultation, and collaboration with the innovators in society

— including the business sector — is a more powerful approach. With good consensus on goals, a great deal is possible.

The associated insight is that for any particular instrument of policy to work well, a high degree of dialogue is necessary in any case, and it is this which acts to motivate and encourage on the one hand, and lead to greater understanding in policy design on the other. Another way to put it is that policies such as the use of regulation and economic instruments designed to impose the internalisation of externalities are less likely to be successful in the long run than policies based on changing hearts and minds — that is, policies which work on internalisation of the ethic of environmental sustainability. The Dutch certainly have something to teach New Zealanders in this respect.

My own view is that, while New Zealand lacks the tradition of highly developed dialogue over policy and its implementation that the Dutch have built up over generations, we do have a considerable degree of trust, understanding and awareness among central and local government, the business sector, Maori/iwi, and civil society organisations. In short, among the key actors in the sustainable development process, some social capital is there, if under-utilised. This is offset at times by a tendency to revert to an Anglo-Saxon adversarial approach. But on the whole, the Dutch networking/consultative approach is not too far from what New Zealanders do already, allowing for cultural differences and for the greater pressures that the Netherlands has been under.

New Zealand’s environmental and economic performance has not been as strong as that of the Netherlands over the last decade and a half. This paper has

also identified some significant differences between the two societies and economies, and the greater scale of some environmental issues (such as land development pressure) in the Netherlands is evident. Nevertheless, the two societies have many similarities and can learn from each other. In particular, I conclude that gains in sustainable development can be generated for New Zealand by picking up on innovative features of Dutch sustainability policies, as evident particularly in the comparative success of its evolving covenant approach, backed by economic instruments. Similarly, the emerging Dutch transition management approach, focusing on long-term transitions to more sustainable systems, has considerable potential and should be followed closely.