policymakers demonstrate

Economic Approaches to Energy, Environment and Sustainability 299
onto Grubb’s third policy ‘pillar’. Each of these pillars will now be explored in
greater detail.
7.5.1 Standards and Engagement
Standards
Standards may take many forms. However, all act to ‘push’ a market, product
or process to higher levels of efficiency (or lower levels of pollution or resource
intensity), through regulation. Such regulations help to overcome market failures
such as split-incentives, a prominent example of which is the ‘landlord–
tenant dilemma’, under which the interests of the landlord and tenants are misaligned.
Whilst the installation of energy efficiency measures, for example,
would benefit the energy bill-paying tenant, savings do not accrue to the landlord
who would generally bear the cost of installing such measures, preventing
their introduction. Instead, standards can require their installation, or other
measures to induce the same effect. Such standards may be applied with a legal
basis, or through the use of voluntary agreements.
7.5.2 Information
It is well recognized that adequate, timely and relevant information is essential
for the understanding of the state of an economy and where it is headed. There
is a need for a new information infrastructure about material and resource use
that enables economic actors and policy-makers to understand and manage the
resource and environmental basis of the economy and businesses. Two major
extensions of national accounting approaches are required for this. The first is
the construction of a system of natural capital accounts (SNCA) to increase
understanding as to how and where natural capital should be maintained and
augmented, and to act as an interface between the economy and the environment,
to facilitate the detailed modelling of the impacts of the economy on the
environment and the contribution of the environment, resources and ecosystem
goods and services to the economy. The second is the construction of much
more detailed material flow accounts for national economies that track the flow
of different materials through the economy, to facilitate their retention of value
and their appropriate management at the end of product lives, without which
policy-makers will not be able to understand how resource use is developing,
and how it should be managed.
This information may feed in to engagement processes, mechanisms and
instruments for targeted communication and engagement between governments,
organizations, communities and individuals, which may help to overcome
issues of psychological distancing, motivational issues, split incentives
and information asymmetry. Such instruments act to ‘pull’ the market