Insulting a person is usually a crime, how about insults to the environment?
We know there is no planet B and that planet A is in a critical state. The big question is: What shall we do?
Implementing a carbon tax is a serious and natural option: in the presence of a negative externality, taxing the culprit helps to give the right incentives. This tax does not seem to be ready to go though.
Right now, we hear a lot about initiatives and changes but most of it is greenwashing. There is not much additionality in any of the current offering of ESG/SDG/Impact/green funds/bonds. Yet, additionality should be a minimal criterion. Even if it is arguably difficult to determine if something has additionality, that should not prevent people to think about it and anchor their arguments on it.
Similarly, divesting stocks is popular and hits headlines. It makes some people happy, but selling company ownership to someone else is unlikely to change things much – it depends on market efficiency/liquidity and markets are usually reasonably efficient and liquid in the mid to long term (which is what we care about here).
It seems that all what is currently happening in financial markets and corporate life could even be counterproductive because companies and people do not feel they need to change their consumption patterns since they can pretend they are already doing so much ESG.
If we are serious about tackling the problem, what can we do?
Let’s make a parallel with a related Law. Decades ago, many governments introduced competition rules. Why? Because if a company is behaving in an anticompetitive way – e.g. companies in the same industries collude with one another – it hurts consumers. Governments need to intervene to correct this market inefficiency and stop companies from making excess profits at the cost of consumers. The European Union has fined and tried to fine many large companies (Microsoft, Google, Facebook) for some anti-competitive practices.
Something that impacts welfare probably even more is when companies take an unnecessary toll on the environment – what I call insulting the environment. It is similar to anti-competitive behaviour. Yet, there is no equivalent law for damages to the environment
Let’s take a few examples:
- Generating excess trash:
- A company sells printers and programs the printer so that it can work only if all cartridges are empty, thereby forcing people to throw away all the cartridges and replacing them when one of them is empty (usually the black one).
- A company programs a device so that its performance deteriorates quickly after a few years to force its consumers to throw away the device and buy a new one.
- A pencil is sent and put in a box which is itself in another box and maybe another one plus tons of plastic and paper
- A box of cereal that is half empty so consumers think there are more cereals in it than there is, at the cost of using 2x required amount of carton
Why would any of these actions not be treated as criminal? Be report as an assault on, or an insult to, the environment? Why would organizations like the European Union not issue massive fines on companies behaving that way? What is the difference between hurting the environment via such actions and hurting consumer via anti-competitive actions? Not much, I would think.
It would probably not take too many fines to see many companies change the way they think about making money and how they treat the environment. The advantage of such a solution is that there is no need to wait to know how much carbon everyone is producing, to coordinate a tax between many countries (as is the case for carbon tax). We can start today.