Business and trade
A) New way of doing business
This Global Community project promotes research and policy dialogue on corporate social and environmental responsibility. An investigation is conducted to found
whether or not transnational corporations (TNCs) and other companies are taking meaningful steps to improve their social and
environmental record, particularly in developing countries. Considerable attention is focused on the effectiveness of "voluntary
initiatives" such as codes of conduct, social and environmental reporting, certification, labelling, corporate social investment and
improvements in environmental management systems.
1. building social and environmental concerns into the WTO trade rules;Over its long past history trade has never evolved to require from the trading partners to become legally and morally responsible and accountable for their products from beginning to end. At the end the product becomes a waste and it needs to be properly dispose of. Now trade must be given a new impetus to be in line with the global concepts of the Global Community. You manufacture, produce, mine, farm or create a product, you become legally and morally responsible and accountable of your product from beginning to end (to the point where it actually becomes a waste; you are also responsible for the proper disposable of the waste). This product may be anything and everything from oil & gas, weapons, war products, to genetically engineered food products. All consumer products. All medicinal products! All pharmaceutical products! In order words, a person becomes responsible and accountable for anything and everything in his or her life.
Carbon dioxide is one of the main culprits for greenhouse gases and the reduction of emissions of this toxic substance has become the topic of the agenda. Greenhouse gases are released into the atmosphere by burning fossil fuels. Accelerated industrial activity in many developed and developing countries has dramatically increased the levels of these emissions in the air. Mass deforestation has also cut the globe’s ability to absorb these gases. The dilemma is how to find ways that permit the economic growth without jeopardising the environment. Canada along with other 37 countries has ratified the 1997 Kyoto protocol according to which the emissions of greenhouse gases must be reduced significantly by year 2012. It has adopted the policy of private-enterprise solutions to the global warming problem.
As the date of reducing significantly the emissions of greenhouse gases is approaching, many wonder whether governments would ever consider the adoption of some measures to reduce the accelerated deterioration of the atmosphere. It is feared that the uncontrolled industrial activity may lead to a situation where further economic development would be impossible. Greenhouse gases believe to cause warming of the Earth’s climate, leading to erratic whether, melting polar caps and drought in already warm regions. The ecological equilibrium is in jeopardy. From a policy perspective the radical plan hammered out by politicians in Kyoto is the first concrete initiative to fix targets for a significant reduction of greenhouse gases. Although the timetable set for gases emissions reductions is considered by some too long and by others too short, the fact of the matter is that the countries which ratified the Kyoto protocol have not taken, as yet, any concrete measures to the application of the agreement. Plausible questions arise as to the seriousness of politicians and policy makers to tackle this problem.
Canada is a case in point. It has pledged, under the Kyoto agreement, to cut greenhouse gas emissions by 6 per cent from 1990 levels by 2012. It has opted to use a market where every ton of carbon dioxide that is removed from the atmosphere or prevented from being emitted is bought and sold on an exchange like the one that already exists in the U.S. for sulphur dioxide emissions – a market that is now worth an estimated $500-million (U.S.) in trade a year. Under such a regime overpolluters could offset their reduction obligations with credits. Demand and supply for credits would provide the appropriate incentives for reducing emissions. Actually, prices, as determined in the auction exchange market, would provide the appropriate signals for emissions reduction. A strong demand for market credits would push up the price of the units and create a powerful incentive for others to create more credits by devising innovative means of cutting emissions. Such an environmental regulation provides incentives for technological change and better environment.
The Kyoto accord has set the bases for a cleaner environment and the participating countries are currently trying to develop the necessary means for attaining the targets established. The most favoured approach is the use of trading permits. This private-firm solution is debated by many as far as its efficiency is concerned. Economists, however, demonstrate the superiority of this approach compared to most direct ones such as taxes and direct penalties. Little progress has been done though world wide even in the use of this approach. The apparent difficulty lies in the uncertainty surrounding the real threat emanating from the presence of sulphur dioxide and the sheer size of costs associated with the reduction or the curtailment of the emissions of gases. Given that the costs are ten times higher than the estimated benefits little interest exists from private firms and governments to implement the necessary measures for cleaner environment. The estimated costs and benefits, although valid in a strict economic sense, neglect some important facets that can make an important difference in the outcome. The benefits arising from the reduction of CO2 emissions are calculated as the environmental damages that are avoided by preventing rising concentrations of gases. Although costs are calculated in a more direct way the benefits are at best uncertain. Even the direct benefits are really difficult to calculate, never mind the indirect ones. Cleaner environment and better standards of living arising out of emissions curtailment are difficult to quantify accurately. Should such comprehensive calculations were possible we would have a more balanced picture of the true costs and benefits. The international trade in emission rights reduce the calculated costs without altering drastically the ecological capital. Weak sustainability is possible and it can be achieved by relying on the market mechanisms, such tradable pollution permits.
In an ever increasing competitive environment firms have a particular interest and incentive to comply with the Kyoto accord first before their competitors do so. The competitive advantage thus gained makes them more efficient and financially stronger, not weaker. The very recent experience with an ever increasing number of firms seeking to strike deals in getting trading permits is an evidence in point. Such a market is worth more than $60 billion-a-year in the U.S. alone. If politicians agree on clear rules for international trading, the global market could in time reach a trillion dollars a year. Such a growth in the market of tradable permits is quite promising as far as weak sustainability is concerned. Governments should abide to concrete and permanent rules on trading of pollution permits so that polluters and non polluters find the way to trade their permits and reduce the pollution of the environment. By rendering markets more perfect (information becomes more symmetric) the quality of the environment in the future can only get better.
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