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Overcoming the Competitive Argument against Climate Change Action

Many communities' avoid or delay response to climate change in part due to an understandable fear that their industries will lose business to competitors in non-responding communites - resulting in loss of employment while the pollution reduction is minimised by the business moving to a less regulated environments. And of course this understandable reticence hampers other communities' political will to be proactive in their response to climate change, leading to a sense of powerlessness given the difficulty in getting all communities to agree to global action.

What can be done to reduce the impact of this "public good" problem and related sense of powerlessness on achieving effective responses to a global issue? What approach can early adopter communities take that both protects their competitive position from late adopter communities and increases the global pace towards reducing pollution and greenhouse gas emissions?

The problem:

There is a clear argument that a country or community that imposes controls or pricing on greenhouse gas emissions or pollution generally is in effect incenting business to move to environments with less controls or lower pricing. To an extent this is reasonable and consistent with communities' rights to set their own policies, allowing communities who put a higher value on low pollution environments to price pollution accordingly and see high polluting businesses move to other places from which they can then export pollution intensive goods back. 

However if the concern is for global greenhouse gas emission levels or pollution that is global in its impact, then this practice is clearly flawed. In this case those industries that are mobile will simply be incented to move to more accommodating environments with no resulting improvement in global pollution levels despite the local costs on economic activity and employment on the country/community that imposes tougher controls/higher pricing. No wonder there is the current impasse on garnering community support for climate change initiatives.

Some industries are not mobile - rather they may be anchored to resource locations (such as in the case of mining) or there may be other strong factors (such as distribution costs or perishability) that will mean they will stay geographically close to their end markets. But even in these cases marginal investment and production decisions will be affected by a differential in the pricing of pollution.

Achieving a global consensus and consistent global action would be a good way to avoid this problem, but has not been successful to date - and does not seem likely to be so in the near future given the different economic and political starting points.

The existence of this real economic argument also plays into the hands of those seeking to deny the need to respond to climate change. Sustaining a community's will to respond to a global long term challenge, with uncertainty about the extent and timing of the impacts, is made much harder when there is a more easily demonstrated and tangible short term cost - and many willing to argue emotively about it. Not surprisingly individuals and communities suffer a sense of powerlessness, which in turn may lead more to deny the undertlying issue rather than have to face their own inaction.

The political problem is how to separate or quarantine concerns about the competitive and employment impacts of a country or community's individual response to the climate change challenge. How can a community introduce a control or price incentive that encourages its industries and consumers to move towards more environmentally friendly products and technologies without also incenting business to move towards another more accommodating jurisdiction?

What can be done to encourage, rather than discourage, actions by individual countries and communities in the meantime?

The proposal:

  1. Focus countries/communities' responsibilities on their consumption rather than their production - that is, for the global pollution and greenhouse gas emissions involved in the production (wherever it takes place) of goods and services they consume rather than on those produced within the country or community some of which might be exported 
  2. Ensure a level playing field for exports by applying controls and pricing on pollution or greenhouse gas emissions from the production of exported goods and services broadly equivalent to the level applied in the recipient country - this will involve monitoring and estmation of the effective controls or pricing regime for pollution and greenhouse gas emissions in a community's trading partners.
  3. Ensure a level playing field for imports by applying a pollution and greenhouse gas emissions charge to imported goods and services broadly equivalent to the effective difference in the impact of controls and pricing on pollution and greenhouse gas emissions between the exporting and importing communities.
  4. Independently estimate the approximate impacts of controls and pricing in other communities, as accurately as possible, and with investigative powers and in collaboration with other countries/communities to minimise gaming and to encourage a consensus into effectiveness of different measures.
  5. Encourage other communities to act by incorporating some additional incentive, gradual at the start, to favour  communities that are quick to move to a scientifically support standard for controls and pricing on pollution and greenhouse gas emissions.

By focusing on a community's consumption and providing adjustments in the case of both exports and imports the community no longer suffers the competitiveness problem that has hindered climate change action to date.

Estimating the equivalent pricing impacts of different communities' actions, independently of business but in collaboration with other communities/countries, can only encourage convergent initiatives from other countries.

Please make any suggestions to improve this proposal in a comment below.

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Last Updated on Saturday, 19 May 2012 03:44

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