Industrial Pollution Control and Efficient Licensing Processes: The Case of Swedish Regulatory Design

Industrial pollution accounts for a large proportion of global pollution, and in the European Union, an integrated pollution and prevention approach based on individual performance standards has been implemented to regulate emissions from industrial plants. Crucial for the assessment of the licensing conditions are the Best Available Technique (BAT) requirements, which should be set in accordance with the recently introduced Industrial Emissions Directive (IED). In this paper, we review and assess the licensing of industrial plants in one of the Member States, namely Sweden. Specifically, we discuss how the existing regulations (including the IED) manage to address potential trade-offs between important regulatory design issues, such as flexibility, predictability and the need to provide continuous incentives for environmental improvements. The analysis indicates that while the EU regulations provide flexibility in terms of the choice of compliance measures, in Sweden, it enters an existing regulatory framework that adds a lot of uncertainty with respect to the outcome of the licensing processes. An important challenge for the implementation of the IED is to implement performance standards that lead to continuous incentives to improve environmental performance in industrial sectors without, at the same time, adding new uncertainties. While standards ideally should be both flexible and predictable, achieving one of these criteria may often come at the expense of the other.