The natural environment is changing, and will continue to change the circumstances in which the oil and gas industry operates. Apart from those traditional issues of Petroleum Business: Finding a commercial deposit, Producing it at reasonable cost, and Marketing it at competitive price, the oil and gas industry has now faced one more task of environmental accountability. Environmental regulations for oil and gas exploration &production, represent both a challenge and opportunity to the industry: the challenge to manage environmental legal risks for preservation of environment and conservation of natural resource in context of natural resource economics; and the opportunity to have petroleum production cycle developed, more sustainable for cleaner energy.
It has been recognized globally that just the instruments of state intervention and regulations, in popular parlance, Command and Control, are neither sufficient nor efficient tools to improve environmental management practices at regional, national, and international industrial sphere in general and petroleum production system in particular. In this context, policy makers, academics, NGOs and other stakeholders are exploring different tools, policy options and innovative mechanisms in order to achieve the desired objective. As part of such exploration, economic instruments and environmental economics are seen as the alternatives, that need to be incorporated and encouraged along with state regulations for improving environmental management systems at the industry in general and global E &P industry in specific.
This paper attempts to explore the menu of economic instruments in terms of environmental economics that are used internationally for improving industrial environmental management which can be applied to global E &P industry as well. The scope of this exploration is confined to those instruments that can be applied to industrial pollution concerns and secondly it precincts itself to nonfiscal instruments. This paper has four major parts, in the introductory part, it not only gives brief overview of different policy instruments on environmental management before explaining those economic instruments that can be applied in global hydrocarbon industrial &environmental context, enabling preservation of bio diversity of environmentally sensitive areas for energy development as well, but also enlists certain key elements and constraints in designing and implementing them. The second part of the paper attempts to examining the framework for implementation of economic instruments at Indian hydrocarbon industry by analyzing the current environmental regulatory scenario and by exploring the major concerns that need to be addressed for effective implementation of these instruments in broader context of E &P industry. It also attempts to evaluate current situation in Indian industrial scenario against the key necessary conditions as delineated by OECD. The third part of the paper endeavors to derive a ROAD MAP for implementation of economic instruments by outlining the broad strategy, the legal and institutional changes required, by involving stakeholders in designing these instruments incorporating environmental and natural resource economics. In the final part, paper concludes with some suggestions for effective implementation of economic instruments at global as well as Indian E &P industry in particular.
