The European Union's environmental agenda and the EU's endemic corruption
Chris Heaton-Harris MEP
Julian Morris
On 31st December 2001 something quite unremarkable happened. The European Commission closed its books for that financial year. On 1st January 2002 something else unremarkable happened. The European Commission opened its books to start the financial year. But actually- during that short period of times two remarkable things occurred.
The First the European Commission appointed to start work Marta Andreasen. Bizarrely the first qualified Chief Accountant (they had economist & Engineers rumour has it even a dentist in that role) but never before a qualified Accountant the appointment sent shock waves through DG Budgets. And there was something worse than the fact she was qualified - she came from outside and had been handpicked by the German Green Budgets Commissioner, Michele Schreyer, to do with something shocking - to sort out the Commissions accounts.
Actually Marta started on the first working day in January 2002 -she had had read up a lot on her appointment about her new job and in her first few days did what all accountants do to inject some excitement into their lives -she went through the commissions accounts.
I told you that two remarkable things happened on 1st January 2002. Marta Andreasen actually spotted the second. There was a huge difference between the closing balance on 31st December 2001 and the opening balance of 1st January 2002. The same accounts, the same ledgers - different balances. It was then she realised she really did have a job on her hands.
And so she set about her task and it was quite some task. Remember at that point in time the Commissions own auditors had just said they would not sign off the Commissions account for the 8th year running.
In fact estimates of the sort of monies that were going missing through fraud or maladministration ranged from 3-5% of the Commission's budget - the best part of the UKs average net contribution to the club made by you and me.
In the next month Marta succeeded in completely annoying her immediate boss, a Frenchman called Mangasson who had been in charge of the Budget DG for as long as anyone could remember and he didn't like this upstart woman from the outside.
He and others constantly briefed Commissioner Schreyer that Marta was not up to the job and was upsetting everyone. Well the second part was true. By this time Marta was asking why the Commission didn't use double entry book-keeping in its budgetary accounts. In fact she wanted to know why the record-keeping was so poor and why the Commission's accounts had no audit trail?
A couple of months later, the Budget Commissioner had had enough and she passed the problems onto her boss -you might have heard of him - at that time he was the Vice President of the European Commission and in charge of reform... Neil Kinnock.
Obviously he had a couple of choices. The Hard Choice - Support Marta and reform or the easy choice - get rid of Marta.
So in May 2002, Marta was called into see Commissioner Kinnock. She was excited - someone at last at last was going to take her seriously. Little did she know that she the sole purpose of the meeting on his part was to suspend Marta from her role as Chief Accountant?
The meeting went something like this:
"Marta Andreasen, I'm suspending you"
"Why?"
"For not bringing forward a reform package"
"But I emailed it to you weeks ago and I have a copy here"
"Bugger"
In fact Marta was so convincing she left that meeting with all her responsibilities intact and headed (as it was the weekend coming up) to the airport to fly to her home and family in Barcelona.
As she left Kinnock's office pandemonium broke out in the European Commission. You see the Commissions Press Service had already placed the story of Marta's suspension on the front page of the next days FT.
Now we all remember Neil Kinnock best for two things: spectacularly losing the 1992 General Election and for his Party conference speech where he attacked the Militant Tendency. Remember he talked about how grotesque it was that a Labour Council (a Labour council) sent people out in taxis to handout redundancy notices.
Neil Kinnock (2002) sent a fax to Brussels Airport where it was handed to Marta Andreasen by two security guards when she boarded her plane home. When I reminded him of that speech in the Parliament Committee he went red - you know when you've got to Neil Kinnock when he does that and he does it in quite a comical way - from the neck up.
It was shortly after all this that Marta contacted me and to be quite honest I didn't believe her at first. I spent seven weeks working with her, asking questions to the Commission getting friendly journalists to do the same, before I was sure she was right. And on August 1st 2002 we went public together. We placed her on the story on the front page on the FT, held a press conference in Portcullis House and worked the media for the next day and the story flew.
When months later Neil Kinnock came before my Parliamentary committee to defend his and the Commission's actions I had been well briefed by Marta. I asked him if it was not the case that the Commission's accounts were in a worse a state than Enron or WorldCom's because at least they used standard accountancy practices and qualified accountants could come in and find the problems -but the Commission's accounts were a mess. He called me the most "devastatingly ignorant" MEP he had ever met.
Some months later - a symptom of the problem Marta was trying to solve emerged. Thorough out 2003 I had been working with a number of other whistleblowers. Robert McCoy came from the Committee of the Regions, Dorte Schmidt Brown came from Eurostat. Eurostat is the extremely boring statistical arm of then Commission based in Luxembourg. From this boring place two whistleblowers separately approached me with reports of wrongdoing.
Whistleblowers are often put upon when they tell their stories and Dorte had a breakdown - the Commission put so much pressure on her to keep quiet. And then that story blew. Three of the top people in Eurostat had kept two sets of books and filtered away at least £3M over a period of time. I won't go into the detail of this case here but I want to describe what happened at the end. Essentially Dorte did get an apology from Commissioner Kinnock but lost almost everything else including her career.
The three people known to have done wrong were suspended on full pay and pension. To this day they have not been charged with any offence. One is now retired on a full pension, one placed back in his own member state's administration and one remains an employee of the Commission still suspended still I'm told on full pay and due to get a full pension. And therein lies the problem.
The culture of the Commission corrupts everything it touches. Most people who work for the Commission do a fine job, but put yourself in their position. Let's say you see someone stealing money from your department somehow. Do you, bearing in mind what has happened to every other whistleblower before you, say something -or do you think -hold on I have a mortgage and a family and I don't need the hassle and if you go, as I probably would, for the easy option nothing changes - you have been complicit - you have been corrupted.
My colleague Dan Hannan MEP quite rightly has pointed out in the past how the Commission, this big government institution, corrupts nearly everyone who has anything to do with it. He pointed to the numbers cases of British farmers who, phased by amazingly complicated paperwork, play the subsidy system and maybe occasionally make mistakes on paperwork to ensure their subsidy cheques arrive on time. Indeed Civil servants in DEFRA are being fined as we speak for mistakes made in the Single Farm Payment fiasco.
And if you have been corrupted by the institution you work for well, then you have to look after that institution.
I believe that the relentless spin of Blair's spin doctors was learnt in part from the European Commission. And now the Commission is reduced to trying to corrupt our minds through propaganda and lies. It recently set up "Europe Direct Centres" across the continent, so that we could learn more about and question less what it does.
I have collated some examples of the unbiased information that the Europe Direct Centres filter to us all.
And if that is not enough millions of pounds are spent in other ways to corrupt our minds and change our views on Europe.
In conclusion I shall briefly state what we shall do Firstly we should encourage my party localism agenda because its natural conclusion is that we repeal sections 2 & 3 of the 1972 European Communities Act and pass a reserve powers act so that English and Scottish and Welsh law sit above European law.
Secondly we should refuse to pay anything to the European Commission until it has had its accounts passed by its auditors and its stoops spending money on trying to brainwash the European public.
Quite simple really don't you think?
The topic of tonight's talk is something that I have thought about on and off over the past 15 years. It was actually something which I did some work on when I was at the Institute of Economic Affairs. Since starting in Central Policy Network in 2001 I have done relatively little work on this, so I hope that my thoughts today come across as at least coherent.
I thought I would try and give a broad conceptual idea as to what we might think about in terms of what an environmental policy in Europe might look like to start with, and then ask whether the conditions that are entailed by that theoretical policy exist. I will then talk about some more fun stuff. I will talk about what the EU environmental policy as it currently exists does, and then finish with some thoughts on how, perhaps, it might be possible to reform the system.
To begin with ¯ and I apologise if this is rather theoretical ¯ I think it is worth trying to ask ourselves the question, what would an environmental policy that covers more than one country look like? Why might it be worth having an environmental policy that went beyond the bounds of Britain?
There is a lot of work on this, and the basic logic is that where there is a problem that goes beyond one's borders, where there is a transboundary problem, it may be necessary to have a policy that is itself transboundary. But in the context of the EU, what is required is rather narrower: it is that there is a trans European problem. In other words, in order to justify the existence of an EU wide environmental policy, you need to show that there is an EU wide problem or a set of problems that needs to be addressed.
An example would be sulphate aerosols (sulphur dioxide and other oxides of sulphur that are emitted as a result of producing power from burning coal and other applications, but especially in power production and other large industries). If those emissions were coming for example from Germany, which is spoiling the whole of Europe, so if one country's emissions of sulphate aerosols were causing widespread environmental damage across the whole of Europe, then conceivably you could understand that it might be worth having a policy that somehow mitigates that, somehow prevents German emissions from harming anyone else's. Likewise, if there were problems from sulphate emissions emitted by every European country affecting every other European country or affecting only one particular European country, again, it might be justifiable to have a policy that is pan European, addressing that particular issue.
However, if a problem is only bilateral ¯ that is, for example, if there is a problem that goes between Germany and France, if there is water pollution in the Rhine and it affects from one country to the other, or if there is some air pollution issue that, taking an arbitrary and unlikely example, means that there are nasty emissions from Poland which are affecting us in Britain, that does not entail having an EU wide environmental policy. What it entails is something different. It entails having a bilateral policy to address that. Even if there are 3, 4, 5 or 6 countries that have effects on one another, it doesn't, in principle, entail having an EU wide policy.
So I thought about it and I thought, are there any problems that are truly EU wide that would then justify having an EU wide environmental policy? I couldn't think of any. In the end that should be it, shouldn't it? I should just say, actually there is no justification a priori for an EU wide environmental policy. Unfortunately, that is not how they saw it in Brussels, and over the course of the past 40 years, especially in the past 20 years, an enormous amount of environmental legislation has been promulgated in Brussels. I asked my researcher to look at this today, and she found over 3,000 pieces of legislation of various kinds, whether they are directives or regulations or whatever other smaller pieces of intervention.
Initially this legislation was justified on the grounds that environmental policies in one country act as a barrier to the single market operating ¯ I love this idea. So if Germany has a problem, as it did in fact with water pollution, polluted ground water, then the argument is, well, everyone should have the same regulations because otherwise you don't get a level playing field. The result of that particular issue was the adumbration of a Water Framework Directive and the Ground Water Directive, which had all sorts of interesting knock on consequences. I could go on for ever about them, but one is that in Britain, where we have relatively fast flowing rivers and we have clay basins, the landfill industry was forced to put in place synthetic liners to prevent water from dripping through to the ground, simply because that's what was regulated under the EU legislation, and not in any way, shape or form to protect British ground water or the British public. One of the perverse consequences has been that you then create bioreactors that generate methane and cause other problems. You can deal with that by putting in pipes to take out the methane, and then you either burn it off or just let it escape.
In any case, the point is that through this idea that creating a single market can only be done if you have a level playing field and all regulations across Europe must be the same, you have also all sorts of perverse and unintended consequences.
I should say that these regulations, the regulations before 1987 in relation to the environment, came about without any competency on the part of the Commission. That is not to say that the Commission was incompetent ¯ that may be true as well ¯ but it didn't have the authority to regulate on the environment but nevertheless was doing so.
In 1987 the Single European Act was passed, and that explicitly recognised the environment as an objective for the EC. This led to pieces of legislation such as the 1988 Large Combustion Plant Directive, which imposed restrictions on emissions of sulphur dioxide and particulate matter, and nitrous oxide and other oxides of nitrogen, which were essentially arbitrary. They imposed a uniform emissions reduction of 58% by 2003 of sulphur dioxide, a uniform emissions reduction of 40% of NOx and particulates by 1998. That was regardless of the initial emission levels and regardless of the harm that was being done.
The premise of the Large Combustion Plant Directive, which you might think actually satisfied my earlier condition of being justified by the existence of a pan European problem, was that emissions of sulphate aerosols and particulates and NOx were causing widespread pollution problems. They were causing transboundary problems in particular, and one titenic problem that was much talked about (it was the environmental issue in many respects in the 1980s) is acid rain. The only problem is that actually acid rain, to the extent that it was a problem, was largely being caused locally and by emissions from outside of Europe. Poland and the Soviet Union were particularly problematic in emissions. The UK ¯ research done by Gwyneth Howells at the University of Cambridge has demonstrated ¯ was responsible for less than 5% of the deposits of acid in Scandinavia, where to some extent the emissions from the North East coast of Britain would flow.
So it is just not true that there was a pan European problem, and even to the extent that there was a problem in Europe, it was to a significant degree caused by countries outside of Europe. The premise and the conclusions of the Large Combustion Plant Directive are ultimately flawed.
Even whilst the EU was ratcheting up legislation on the premise of its remit now, after 1987, to protect the environment, it was still doing things on the premise of the single market. A wonderful and bizarre example is the Packaging and Packaging Waste Directive of 1994. The origin of that goes back to 1991, when Germany passed a thing called the Packaging Ordinance, which required very, very high levels of recovery and recycling of packaging materials, and restrictions on the use of plastic and all sorts of other things.
The consequence of the German Packaging Ordinance was to increase the amount of what in the industry they call 'recyclate' on the market, because the Germans were collecting a lot of this recyclable material and then putting it onto the open market. It was essentially flooding the market with crushed plastic and paper packaging and stuff (allegedly, I have to say). The recycling industry in other countries was very upset about this because it was depressing the price, so they lobbied to have harmonised legislation around Europe to make the single market work: in other words, to put their profits back where they had been.
Now, I think it is clear that there was a negative consequence of the German Packaging Ordinance, but to address that as Europe did, with a directive that mandated Europe wide minimum recovery and recycling rates for packaging and packaging waste, I think is utterly, utterly, perverse. The German system costs billions to operate. That then has been exported effectively through the Packaging and Packaging Waste Directive to every other country, so we are all now paying billions to do something which is probably environmentally damaging. Recycling can be a very good thing and there are often good incentives to engage in recycling, but under the mandates that have been created in Germany, now Europe, there is probably too much recovery and recycling of that individual waste stream. Experiments around the world with recycling suggests that individual waste stream recycling like that is by far the least efficient, except in a few minor examples like the collection of aluminium, which is such a high value commodity.
But since 1994, even, environmental policies have gone from the sublime to the ridiculous. Under the Maastricht Treaty and the Amsterdam Treaty, more and more authority to protect us, protect the environment, was granted to the European Commission, to DG Environment. Its ambit was very broad and it included very, very vague language, like ‘the precautionary principle’, so there's now this idea that action can be taken to address a potential threat, regardless of the probability of that threat actually materialising, simply because it might be there. That is, in a nutshell, the precautionary principle, and it enables almost any action to be taken.
That perhaps explains why Europe has developed things such as the REACH legislation. This stands for Registration, Evaluation and Assessment of Chemical Hazards. The idea is that there are lots of chemicals being used in industrial processes which have never been tested. This is true. What the European Commission wants us to believe is that as a result of that we are all at risk and therefore we need to evaluate all of those chemicals that haven't been tested, just to see if they might cause a problem, both individually and in combination.
Given the fairly large number of chemicals for which this applies (in the realm of 30,000), there were, as you might expect, some objections from the chemical industry: observations that this would take 1,000 years, it would cost hundreds of billions of Euros, etc., etc., were taken somewhat seriously ¯ so seriously that they did actually scale back the legislation very, very slightly. Now it only applies to about 10,000 chemicals and will only take then, I suppose, on that measure, 333 years, and cost a mere tens of billions of pounds to implement ¯ quite mad and without real justification.
Among other things, one can observe that it doesn't apply to petrochemicals ¯ they managed to get a complete exemption ¯ nor does it apply to natural compounds, and yet scientists in the US have shown that when you study the carcinogenicity of natural and synthetic compounds, on average there's no difference: they are just as carcinogenic as one another. So surely, if you were to do this you would apply it to everything, not merely to the 10,000 remaining chemicals. But the point is that it is just not feasible, and probably not desirable. It wouldn't pass a cost benefit test. It is not clear that REACH action is going to save any lives whatsoever, whether human or animal.
The other piece of legislation which Robert wanted me to talk about is Europe's approach to the Kyoto protocol. This is deeply troubling from a constitutional perspective, in that Europe has the ability now to sign up, as a block of 27 countries, to international legislation, regardless of what national parliaments might think about it. So you can have the Commission negotiating and then Parliament approving, and then the Council finally rubber stamping the deal, without any review by Parliament ¯ international law, so quite outside the normal ambit even of the EU.
The Kyoto protocol is a good example of this. It's a treaty that entails quite swingeing restrictions on emissions of a range of chemicals, carbon dioxide, methane and other greenhouse gases, on the premise that in so doing one is going to reduce the threat of climate change. But the Kyoto protocol itself, even if it was to continue ad infinitum ¯ and it ends in 2012, but if it was to continue until 2100, it would delay warming by at most six years, under the IPCC (the Intergovernmental Panel on Climate Change) estimates. So it really doesn't have a lot of effect. Meanwhile, in the way that it has been implemented it is costing already hundreds of millions of pounds across Europe. It has been implemented in a way that benefits big business at the cost of consumers and smaller businesses.
What has happened is that Europe has set up a thing called the Emissions Trading Scheme, under which each member state government allocates a certain number of emissions permits and then allows those to be traded. Now unsurprisingly, given the voice of big business, both in national governments and in Europe, those permits have predominantly gone to larger industry. In Britain, a study was done by Open Europe showing that hundreds of millions of pounds have been made by oil companies, by Exxon, Shell and BP, who have been selling their permits to the NHS and smaller businesses and making good money out of it, but of course the cost falls on the small guys. So this is a really nasty piece of legislation. Unfortunately, that piece of legislation now being in place and those vested interests having been created, there is a threat that this is going to continue, because big money is being made and the people making big money want that to continue into the future. So there has been a very strong push ¯ and that is what we have seen in the media recently ¯ for an agreement after 2012 which will keep this going and keep the big guys in the money.
I should end, on the EU's record on the environment, by reiterating what it has done in terms of the Common Agricultural Policy, the Common Fisheries Policy. CAP is an absolute environmental disaster. It incentivises inefficient use of land, excessive application of fertiliser and pesticide, with quite severe environmental consequences. I read only yesterday that the recovery of the otter in British waters is apparently associated with a reduction in the use of dieldrin and other organic chlorine pesticides, but would we have been using that amount of those pesticides but for the incentive to do so under the Common Agricultural Policy? Quite possibly not.
Meanwhile, the Common Fisheries Policy is an absolute disaster, because it communalises the ownership of fish. Basically, under the Common Fisheries Policy each fishery producer organisation has an incentive to lobby to get as much of this year's catch as possible, and in fact to increase the total allowable catch. So what has happened is every year fishery producer organisations have lobbied to increase the catch of fish for their members. I will talk in a minute about what has been done in other countries that offers an alternative to that.
Indeed, in both New Zealand and Iceland, since the mid 1980s governments have gradually been vesting rights in the fishermen themselves, so what they have done is they have granted a portion of the total catch to the fisherman and allowed them to own that into the future and to trade it, to sell it to other people. The result of that is that the fishermen themselves have an incentive to call for lower catches. It may seem sort of counterintuitive, but think about it from the perspective of a fisherman. If they know that they are going to get a larger number of fish in the future by reducing their catch today, then they are more likely to argue for that smaller catch because they know that that larger catch in the future is going to benefit them more. It's just like any investment, actually. Why did you invest in the stock market today? Well, because you are hoping that there is going to be a return in the future, even though that means forgoing some benefit to you today. Indeed, in both Iceland and New Zealand this is what has happened: catches have fallen and as a result, over time, the stock of fish has risen, so that in fact you are gradually seeing a rise in the catch levels again as stock levels allow that to happen.
In Europe the opposite has happened: we have just had this continuous rise in catch levels until now, finally, we have had to cut back, but it's only when crisis has hit. I think we can learn a lot from the experience of these countries where fish is a very important product in their economy and they have learned really how to deal with the problem well. I'm not convinced, however, that we actually need the EU to be the party organising that. About 80% of fish lie within the exclusive economic zone of the United Kingdom. We would probably have to come up with some bilateral deals. We would anyway, with Norway (it's not an EU country) but then a bilateral deal I suppose with the EU, if we were to leave.
In the context of pollution issues, most of the pollution issues that Britain would be associated with would be bilateral ones. I mean, we don't share rivers with any European country, so clearly that's not going to be a problem anyway, but air pollution, conceivably there could be an issue, a cross border issue with Ireland, with some parts of Western Europe.
There is good precedent as to how one can address those problems. The most famous example is the Trail smelter case, which is a cross border dispute between the United States and Canada. A nickel smelter in Trail in British Columbia was causing a lot of pollution across on the American side of the border, and so the residents who were being affected sued the Canadian government. This dispute was resolved by a thing called the International Joint Commission: there was an arbitration which granted an injunction against the smelter. The smelter was forced effectively to shut down because of the harm that was done, and damages were awarded to the people who were affected in the United States.
That sort of solution seems to be the equitable way of addressing issues where there are cross-border problems, not by some fudged deal done in the Commission through corrupt bureaucrats.
Is this feasible? That's another question. I would say that in the short run it is only feasible if we do what Chris suggests and essentially give British law priority over EU law. I would say perhaps just leave the EU altogether, rescind the European Communities Act and join the European Economic Area. If you are concerned about trading with other European countries, let's be party to a multilateral trade agreement which gives us similar beneficial rights.
Currently, the EU is structured in such a way that I don't think it's feasible to achieve the sorts of changes that would be necessary to move towards a rational approach to the environment. The Commission is essentially unaccountable. It feels some constraints, being unaccountable ¯ there are lots of accusations of democratic deficit and so on ¯ so what it does, it seeks to placate interest groups, MGAs. Better than that, it pays those interest groups to behave in ways that are consistent with what it wants to do. In Brussels the main consulting interest group on the environment is the European Environment Bureau, which is funded largely by the Commission. Amazing! Amazing!
So I think that under the current structure it is not feasible to reform Europe in the right direction, and I fully support the Bruges Group's approach to all of these things.
Thank you very much.