Taxonomy of public policy tools

This page outlines environmental policy tools available to UK government and gives examples of how these have been applied to date.

Policy tools overview

Policy at its broadest refers to a course of action taken by a policy-producing entity on an issue at the decisional agenda, implemented through procedures or protocols in order to achieve certain objectives (British Ecological Society, 2017). Tools or instruments are the specific means by which government actors seek to drive change. In the area of environmental policy, these can include:

  1. The creation of plans (such as the 25 Year Environment Plan) that outline strategic objectives, and strategies (e.g. the Resources and Waste Strategy or Critical Minerals Strategy) which further detail how these objectives will be met;

  2. The introduction of legislative instruments, including primary legislation (i.e. the main laws passed by legislative bodies of the UK), and secondary legislation (i.e. delegated legislation including Statutory Instruments, Statutory Rules and Orders) made by a person or body under authority contained in primary legislation;

  3. The distribution and redistribution of financial resources across the economy via fiscal and monetary policy and wider economic tools designed to raise revenues, as well as increasingly, to also incentivise behaviour such as taxes, subsidies, grants or public procurement;

  4. Soft tools such as voluntary approaches, advice-oriented information-based tools and participatory mechanisms; and

  5. The allocation of organisational/administrative resources to conduct particular activities such as greater enforcement.

Policy tool types

Policy instruments available to public sector actors to drive ‘circular economy’ (CE) aligned objectives like reducing material consumption, extending product lifetimes and increasing end of life activities which keep materials in use in the economy (such as reuse, remanufacture and recycling) can be categorised in different ways. Most broadly, into mandatory regulation1 on one hand and voluntary regulation2 on the other. At a more detailed level, into hierarchical, market and network forms. We define key policy instruments available to government below.

One option available to policy-makers is to simply let otherwise uninterrupted market and societal dynamics alongside existing regulations define outcomes, while engaging in little to no proactive intervention to go beyond these. The Green Book recommends a ‘do-nothing’ option is explored in policy appraisal. The NAO (2014) include making use of existing regulation or simplifying and clarifying these as well as improving enforcement and making legal remedies more accessible, as options which can be captured under a ‘do-nothing’ scenario.

Voluntary and cooperative instruments broadly involve action towards a desired outcome in the absence of a legal mandate. Voluntary environmental instruments have been used increasingly in the UK since the 1990s, including as part of a wider trend towards ‘better regulation’ (NAO, 2014). Voluntary approaches are diverse, ranging from private-sector unilateral action through to voluntary purchases by consumers of products with improved environmental performance. Voluntary instruments can be either brokered by the government or where developed by a non-state actor, supported, recognised and/or resourced by government actors in some way. Voluntary instruments include (OECD, 2003):3

  1. Voluntary industry standards - private codes of conduct to improve organisational performance promoted often by standardisation bodies, non-governmental organisations or governments. For example, the ISO 14000 environmental management system series, the European-level Eco-Management and Audit Scheme (EMAS) and the EU Taxonomy (Bauer, Busch and Tuncer, 2023).
  2. Public voluntary challenges - programmes promoted or supported by public authorities which encourage firms, households or other institutional actors to improve environmental performance. For example, the London Food Purchasing Commitment developed by the NGOs ReLondon and Sustain alongside the London borough of Hackney.
  3. Voluntary agreements - contractual or non-binding agreements with the aim of achieving certain objectives, developed through dialogue between public authorities or voluntary groups on one hand, and industry on the other (Defra, 2018b). Examples include the UK Plastics Pact and Textiles 2030 brokered by WRAP, as well as ‘climate change agreements’ made between industry and the Environment Agency to reduce energy use and CO2 emissions.

Government actors can play an import role in filling data gaps and resolving information asymmetries (Hood, 1983). Information-based approaches include:

  1. The provision of information, such as to producers in the form of guidance/guidelines on resource efficiency;
  2. Reducing transaction costs and other barriers to information flows such as through developing platforms, standardizing language or data sharing protocols;
  3. The regulation of information flows between private actors e.g. the UK’s Competition and Markets Authority (CMA) guidance on misleading green claims published in 2021; and
  4. Mandated information disclosure, involving government mandating the reporting and public disclosure of information regarding the environmental performance of specific activities, products or organisations (Blackman, Afsah and Ratunanda, 2004). Key routes for information to be made available include via labels, marking and information registers.

‘Green public procurement’ (GPP) is ‘a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life-cycle when compared to goods, services and works with the same primary function that would otherwise be procured’ (EC, 2008, pg. 1).4 It is an economic-based consumption-side approach providing a direct but voluntary financial incentive to firms to develop products satisfying these requirements (Nemet, 2009). While relatively uncoordinated, there are a range of sustainable procurement applications already in use across government bodies in the UK, which include:

  • The Public Services (Social Value) Act 2012 (the ‘Social Value Act’, or SVA) which requires consideration of how procurement might improve economic, social and environmental wellbeing;
  • The ‘Greening Government Commitments’ to buy more sustainable and efficient products and services across the government estate; and
  • The ‘Procuring for Growth Balanced Scorecard’ permitting non-financial considerations in major project procurements.

‘Circular procurement’, as part of a wider GPP, involves public authorities intentionally procuring goods and services aligned with circular economy principles and with a reduced environmental impact relative to alternatives. Procurement changes to support the CE can be implemented in a variety of ways. Sweden, for instance, have put in place public procurement requirements for refurbished ICT equipment across its municipalities (Crafoord, Dalhammar and Milios, 2018).

Strengthening consumer rights and protection laws to support actions aligned with CE principles such as repair, may help consumers further wield a demand-side lever for driving change. Consumer-rights approaches indirectly place a responsibility on firms, but one which only comes into play if a right is exercised by the consumer. An example of a potential consumer-rights approach is the introduction of mandatory guarantees on product lifespans (Keirsbilck, Terryn and Alogna, 2020).

Extended producer responsibility’ (EPR) schemes - as well as the wider assignment of a ‘duty of care’ are two examples of responsibility-based approaches. Extended producer responsibility (EPR) schemes seek to enshrine the polluter pays principle by placing the physical or financial responsibility for end-of-life treatment on producers. By forcing the internalisation of those costs, this can reduce financial burdens on the public sector for waste management and potentially incentivize firms to innovate and pursue more sustainable design (OECD, 2020). Several UK-wide producer responsibility schemes have already been introduced via:

  • Producer Responsibility Obligations, which place requirements on eligible businesses to recover a portion of the packaging they placed on the market;
  • The End-of-Life-Vehicles regulations, requiring producers introduce a take-back network for vehicles while meeting targets for reuse, recycling and recovery;
  • The Waste Electrical and Electronic Equipment regulations, requiring producers of electronics and electrical equipment (EEE) register with an approved compliance scheme and pay for the costs associated with end-of-life treatment; and
  • Regulations introducing producer responsibility requirements for batteries and accumulators.

Reforms to several these schemes are planned across the UK, while Defra have committed to consulting on the introduction of the EPR policy approach for five new additional product groups in England: textiles; bulky waste such as mattresses and furniture; vehicle tyres; fishing gear and certain materials used in the construction and demolition sector (Defra, 2018a).

Prices for resources and waste management which do not reflect their associated negative externalities can incentivise the over-consumption of resources and over-production of waste (Bleischwitz, 2010). Price and market-based instruments seek to harness market dynamics to influence behaviour and can take the form of:

  • Administered prices - where a price is introduced in the absence of one, or an existing price on goods or services is modified to better reflect otherwise externalised social costs in market prices (Pigou, 1920). Sub-types include:

    1. Taxes – A price per-unit levied on e.g. flows or stocks within the economy such as tonnes of packaging placed on the market with a less than 30% recycled content as introduced by the UK Treasury in 2022; as well as on the use of the environment as a source (such as a tax on primary material extraction); or a sink, whether for solid or gaseous wastes.
    2. Charges/fees - Distinguished from taxes on the basis of being a ‘requited’ payment i.e. a good or service is received in exchange (ONS, 2019).
    3. Charge-rebate systems - Front end fees added to a transaction, combined with a rebate conditional upon sought action being undertaken such as a deposit return scheme.
    4. Subsidies – Subsidies can take indirect forms such as tax relief, which involves adjusting existing tax rates and burdens to reduce disincentives/distortions to particular behaviours. An example of a historic application in the UK is the Enhanced Capital Allowances for water and energy-saving technologies. Subsidies can also take more direct forms of a payment to an actor, either to not undertake environmental ‘bads’ or to subsidize the provision of environmental ‘goods’. Linked, grants are generally issued for specific purposes and offer a further potential means to support private demand/ supply for e.g. new technologies.

  • Administered markets – Work by assigning property rights over an allowable quantity of an environmental use or externality and creating (the mandate or conditions for) a market to trade in these (Coase, 1960). Sub-types include:

    1. Cap and trade schemes - A maximum level of environmental use is set, split into individual units to be allocated by auction or grandfathering. Under these schemes, actors who reduce environmental use below the level of permits they hold can sell their surplus.
    2. Credit trading - Credits are assigned when an environmental good or service is produced, which can then be traded with those required to hold credits. While also incorporating trading, these do not necessarily set a cap. Applications in the UK to date includes the ‘Packaging Waste Recovery Note System’ developed as part of the UK implementation of the Packaging Directive.

  • Market-friction reducing and market ordering instruments – These include antitrust/competition enhancing laws and wider routes to reduce market transaction costs. An application in the UK is the Supply of Extended Warranties on Domestic Electrical Goods Order 2005, which sought to improve competition in the extended product warranty markets.

The potential role of trade policy in regulating global environmental problems includes through both tariff- and non-tariff measures (Yamaguchi, 2021; Santana, 2023). Tariff-based measures involve introducing custom duties on imports or exports. Non-tariff measures encompass ‘policy measures other than tariffs that can potentially have an economic effect on international trade in goods’ (UNCTAD, 2019). Non-tariff measures can be broadly divided into ‘technical measures’, including regulations, standards, sanitary and phytosanitary (SPS) and Technical Barriers to Trade (TBT) measures on one hand, and ‘non-technical measures’ (NTMs) which include quantitative restrictions such as quotas, price measures or mandated distributional channels on the other. The compliance costs of NTMs are increasingly greater than customs duties (UNCTAD, 2023).

There are now more than 180 international environmental agreements (IEAs) covering a range of environmental issues and players. These broadly attempt to transform global public goods into common property resources and regulate the use of these resources in line with more sustainable levels. Most recently and in response to the global plastic pollution issue, over 175 nations have agreed up to develop a legally binding agreement on plastic pollution by 2024 with the aim to end plastic pollution by 2040 (UNEP, 2024).

IEAs can sometimes have a cross-over with trade policy, with approximately 10% incorporating trade provisions. These include the Cartagena Protocol, Kyoto Protocol, Montreal Protocol and Basel Convention, which either directly regulate trade of in-scope materials or products, or indirectly influence trade through routes such as technology transfers.

Procedural requirements relevant to the CE can be introduced in a variety of areas, including for planning policy, codes and audits, impact assessments and wider permitting processes. Environmental protection and sustainable development concerns have been given heightened primacy in planning in the UK through substantive and procedural changes in recent decades (Jones, 2012). Substantively, through broadening the range of material considerations that relevant decision makers must take into account at both the strategic plans and planning permission level and procedurally, through reducing the discretion of local decision makers. For example, heightened integration of environmental concerns in the planning system have resulted from the requirement of local plans to be aligned with sustainable development objectives such as is required under the National Planning Policy Framework (2012, updated 2021). A 2021 update to the framework – the National Model Design Code also provides tools and guidance for LAs to align local design codes with low carbon and circular economy principles.

Linked to the planning regime, the UK Integrated Pollution Prevention and Control regime was developed to regulate industrial installation in a cross-media pollution approach. Under the Environmental Protection Act 1990 and since updated by the 2010 Environmental Permitting Regulations, permits are required for regulated activities which prescribe limit values and other conditions based on the application of Best Available Techniques (BATs) and Best Practical Environmental Options (BPEOs). Expanding these to further cover resource efficiency dimensions has been highlighted as a way to support a more circular UK economy (Marshall, Velenturf and Jopson, 2018). Another example of relevant tools linked to permitting requirements is that requiring disclosure of convictions when applying for a permit for waste activities or installations (Environment Agency, 2023).

Defining and introducing plans, strategies and targets which effectively drive society towards a CE can help deliver ‘strategic vision’. Key recent country-level plans and strategies across the four nations in the area of the CE include Scotland’s Making Things Last (2016) and Circular Economy Bill (2023), England’s Resources and Waste Strategy (2018), Wales’ Beyond Recycling (2021) and the Draft Circular Economy Strategy for N. Ireland (2023). In addition, several plans targetting objectives associated with the CE, predate the use of the term in UK policy documents. These include the 2003 UK-level Sustainable Consumption and Production (SCP) framework ‘Changing Patterns’, its general action plan in the 2005 UK Sustainable Development Strategy and Waste Prevention Programmes, introduced since 2013 across the four UK nations and which were intended to deliver preventive and integrated approaches to tackling waste.

In the UK, mandatory targets have been used to target the movement of waste from the lowest rungs of the waste hierarchy e.g. landfill diversion targets, household waste recycling targets and as part of EPR regulations on end-of-life-vehicles, packaging, batteries and WEEE, requiring producers to meet targets for reuse, recycling or recovery. Under the Environment Act, long-term environmental targets have been introduced in England. This includes in each of the priority areas: Air quality; Water; Biodiversity; and Resource efficiency and waste reduction. In the area of Resource efficiency and waste reduction, a statutory target has been introduced which requires that by the end of 31st December 2042, the total mass of residual waste for the calendar year 2042 does not exceed 287 kilograms per head of population in England. England also considered a long-term target on resource productivity as part of the Environment Act.5

Across the UK, there has been increasing interest in targets (mandatory and non-) relating to resource use set in absolute terms. Examples include the Welsh Government’s ambition to achieve ‘one planet resource use’ by 2050 based on an ecological footprint calculation approach. Another is the proposed target outlined in N. Irelands’ Draft Circular Economy Strategy to reduce per capita material footprint to 8 tonnes per person and England’s long-term target in law to reduce per-capita residual waste generation. Targets across the four nations in linked areas such as emissions are also drivers of change relevant to the CE.

Standards specify a particular process to use or condition to be attained and include:

  • Technology-or means-based standards, which mandate the use of specific technologies such as catalytic converters or activities and approaches such as waste segregation; and
  • Performance-based standards, which prescribe a minimum quality or outcome to be met without requiring any specific way to achieve it. Outcomes can be set in relation to inputs (such as fuel efficiency) or outputs (such as maximum emissions per unit of fuel used). Performance standards may also be specified in relation to ambient environmental quality, such as maximum NOx levels, which can be technology forcing and have implications for the CE.

Examples of relevant standards applied in the UK include:

  1. Ecodesign standards, which work by limiting entry onto the market of the worst performing products for energy efficiency and now in some cases, covering resource efficiency dimensions;
  2. The Restriction on Hazardous Substances Regulations which prohibited electrical and electronic equipment containing more than specified levels of lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl (PBB) and polybrominated diphenyl ether (PBDE) flame retardants from being placed on the market;
  3. Performance standards levied on the government itself, such as targets introduced to reduce landfilling via the Landfill Directive; and
  4. Technology standards such as part of the UK Waste Regulations (2015), which require businesses and households to fully segregate their waste into general and recyclables.

Bans are a strong prohibitory instrument used to restrict outright, products, services or substances. The use of bans is particularly relevant in cases where inaction creates a high level of risk and the desired outcome is for an activity to cease altogether (OBR, 2021). Examples of bans applied or called for in the UK include the:

  1. 2020 ban on single-use plastic straws, drinks stirrers and cotton buds in England and subsequent related bans and consultations;
  2. The ban on biodegradable municipal waste going to landfill by 2025 in Scotland;
  3. A UK-wide ban on the disposal of untreated industrial and automotive batteries to landfill under the Batteries and Accumulators and Waste Batteries and Accumulators Directive; and
  4. The ban called for by the environment, food and rural affairs (EFRA) committee on the export of all plastic waste from the UK by 2027.

Project- and programme-level support involves the government funding specific activities out of its budget. Project-level interventions can occur across technology-lifecycles, from initial R&D to commercialization pilots, and can be introduced alongside other instruments to de-risk private investment (Schröder and Raes, 2021). The use of targeted public financing has been highlighted as a potental way through which to attract private investment in infrastructure to the support of circular economy activities such as recycling and repair, for example (Aldersgate, 2021). Examples of this instrument applied in the UK to date include: a £4 million project funded by UKRI to develop an automated sorting and recycling demonstrator plant in textiles for the UK and the £20 million Plastics Innovation Fund.

Public sector delivery involves the Government financing and delivering on environmental protection directly. While governments across the UK no longer hold the same role in production via state enterprises as they did in the past, the public sector retains an important indirect role in supporting the market and innovation (Castree, 2008), and continues to directly finance collective consumption in areas relevant to the use of resources such as waste management, public infrastructure and government operations. This is made possible through revenues generated by the government, which primarily comes from taxes paid in the UK alongside a small percentage (~10%) from non-tax sources (IFS, 2023).

Wider forms of influence: Enabling, promoting and facilitating

The ‘OECD Checklist for Action for the Circular Economy’ extends the policy tools outlined to further detail some of the forms of ‘soft’ influence that governments can have. For example, as promoters of the CE, cities, local authorities and other levels of government can define responsibilities in implementation processes, act as role models in their operational activity and support campaigns to promote reusable alternatives. As facilitators, those bodies can support system thinking to ensure coherence across sectors, enable collaboration and dialogue and work with industry and other actors to develop, for example, industry roadmaps. They can also provide enabling functions such as allocating financial stimulus to support the innovation process, capacity building across the public and private sector and introducing publicly accessible information, monitoring and evaluation systems based on robust data and incisive metrics (OECD, 2021b).

Figure 5. Wider forms of influence in the governance of the CE in cities and regions (OECD, 2020)

These wider forms of influence can be seen at work in the UK. As one example, the Resources and Waste Provisional Common Framework Outline Agreement and Concordat (HM Government, 2022) sets out the UK-wide Resources and Waste Common Framework intended to facilitate multilateral policy development across the UK countries in coordination with one another.

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Footnotes

  1. Government bodies defining binding rules enforced by executive and judicial branches↩︎

  2. More suggestive or facilitative approaches without legal mandate↩︎

  3. There are several examples of voluntary approaches achieving positive change in the UK in relation to CE objectives and those wider, suggesting these can be made to work when well-designed and targeted (OECD, 2000). From the perspective of government but too other actors, a key motivation for the use of voluntary instruments is being able to achieve sought outcomes without the need for additional regulation. This can lessen costs for government and the private sector, while in some cases sidestepping the inertia that can be associated with the policy-making process.↩︎

  4. Approximately £400 billion is spent each year in the UK on public procurement suggesting that the UK government can exercise significant demand-side leverage through its purchasing decisions (HM Treasury, 2023b). Government consumption expenditure furthermore accounted for approximately 20% of England’s material footprint (155 Mt) in 2020 (Defra, 2023b), and likely a similar percentage for the UK as a whole.↩︎

  5. The first wave of national-level targets across the EU and further afield relating to resource use largely targeted improvements in resource efficiency. However issues have been highlighted with such relative measures, including permitting absolute material demand to increase alongside (EEA, 2018).↩︎