Report sets out improved framework for developing, appraising and evaluating sustainable development policies

The Final Report of the Review of the Economics of Sustainable Development is now available.

The Review proposes a working definition of sustainable development, identifies considerations that policymakers need to understand when assessing whether an individual project or policy is consistent with the Government’s position on sustainable development and sets out the steps taken in the past year to implement these across Government.

The aim is to establish a clear analytical framework for considering sustainable development during policy development, appraisal and evaluation.

At the outset, says report author Richard Price, Chief Economist, Defra and Member of the GES Board, we found that while existing guidance helped to set out the wide range of factors which influence sustainability, it had little practical advice for those analysing alterative different policy options or for helping to choose between competing alternatives.

In the UK, most policy decisions are informed using social cost-benefit analysis (SCBA) using an approach set out by HM Treasury. This helps officials to set out the relative merits of alternative policy approaches when advising Ministers. In the Interim Report we identified a number of ways in which exiting approaches to SCBA can be improved to give better assessments of the impact of policy on the environment.

This Report sets out the progress that has been made. More fundamentally, we proposed to move to a ‘capitals approach’ for assessing sustainability, which shows more explicitly whether the stock of wealth-creating assets we pass on to future generations is better or worse that than what is available to us today.

Using this approach, it is easier to see which aspects of sustainability are well reflected in SCBA and which are not. Research for this Review suggests that much of what is needed to assess sustainability is, in principle, already taken into account by SCBA when it is done well.

This means that government is already doing much to ensure that decisions taken are compatible with sustainability. However there are some circumstances in which standard SCBA does not reflect the full consequences of policy choices – particularly where there are large, non-marginal impacts or where the consequences are hard to reverse. We have identified steps which can be taken to adapt SCBA to reflect these when presenting options to Ministers.