The 'polluter Pays' Principle as a Basis for Sustainable Competition Policy

Abstract

The climate crisis has become an emergency. To have a chance of keeping global warming to 1.5 degrees, carbon neutrality by 2050 is not enough. We need negative greenhouse gas (“GHG”) emissions to compensate for ongoing emissions from human activities, as well as for methane from melting arctic tundras, and carbon emissions from wildfires and drying and dying forests. Market forces, regulation and innovation may not save us, in view of market failures, Government failures, and the uncertainty that we will timely develop adequate carbon capture and sequestration technology. We need a coherent and consistent program of regulation, innovation, taxation, education, reforestation, and private cooperation. In markets where consumers’ willingness to pay for sustainability is enough to cover at least the “true price” of goods, we may not need special rules to enable private cooperation beyond environmental standards and labeling, and arrangement to create a minimum efficient scale. Where willingness to pay is inadequate, cooperation may be needed to counter market failures, create economies of scale and scope, and to implement the polluter pays principle. The article describes a model for a “polluter pays” agreement between suppliers, that could be a template. It analyses this model under the “ancillary restraints” principles underpinning EU case law in Wouters and Albany, and under Article 101(3) TFEU. Consumers need not be fully compensated by in-market countervailing benefits – they profit even if they benefit from better access to non-market goods or out-of-market goods, and enjoy “a fair share” even if they are not fully compensated with in-market countervailing benefits, so long as the arrangements eliminate costs imposed on others (negative externalities) in accordance with the “polluter pays” principle, or otherwise reduce environmental or climate change harm to all consumers. The current EU Guidelines are too restrictive taking into account the wording of the Treaties and the case law of the CJEU.