By: Maurits Dolmans (Chilling Competition)
This summer, the Commission adopted “Fit for 55” proposals to deliver the Green Deal, and the Council and Parliament adopted a Climate Law. There have been calls for a reassessment of competition policy too. Indeed, DG Comp is considering whether to adopt a more permissive approach to sustainability agreements, in the context of the review of the Guidelines on Horizontal Agreements. Commissioner Vestager is about to decide.
When speaking early this year on this topic at the OECD Open Day on Sustainable Competition Policy, EC Chief Economist Pierre Regibeau put his finger on a sore spot. He asked, I hope rhetorically: “Can we allow sustainability deals if that means taxing the people who buy, to benefit those who do not buy?”
That question is of course exactly the wrong way around. Producers and consumers impose costs on society – including climate change, large scale pollution, and loss of biodiversity – that are not included in the monetary price consumers pay. This leads to overconsumption and a “tragedy of the commons”, the degrading of our environment, due to overuse. These supply- and demand-side market failures are hard to resolve – why should a supplier produce cleanly if that means higher costs and rivals taking market share; why should a consumer buy green at a higher price if the neighbours keep buying polluting goods? Eminent economist Sir Nicholas Stern said in 2007 that “climate change is a result of the greatest market failure the world has seen”. We all suffer from this collective action problem, including the consumers themselves.
The Chief Economist should have asked “Why should we allow producers and consumers to impose costs on those who do not consume?” Or “why should we prohibit agreements that could help reduce the social costs of climate change and pollution, if they may make the polluters pay for the damage they cause?”…