Competition rules stymie co-operation on climate goals

By Nicole Kar, Financial Times

As the urgency of addressing climate change rises, many industries face a daunting task of overhauling established business models to shift to a lower-carbon footing.

While some companies will be able to make adequate progress on their own, there is growing recognition that collaboration within industries could be the most effective way to bring about the long-lasting change needed to attempt to slow the pace of global warming. But strict enforcement of competition rules can stand in the way of such endeavours getting off the ground. Competition laws are designed to prevent companies from conspiring to raise prices, reduce quality, or otherwise harm customers. Despite those laudable aims, in practice they can make it much riskier for companies to collaborate to produce environmental benefits.

Competition cases can bring potential fines of up to 10 per cent of global turnover, so the costs of getting the balance wrong are high. Those that worry about working together can already point to several cautionary tales. Take for example one of the most high-profile efforts to preserve the Amazon. 

The “Amazon soyabean moratorium” — a commitment by trading firms not to buy soyabeans from parts of the rainforest cleared after 2008 — is widely credited with having turned the tide on soy-related deforestation. Yet Brazilian farmers plan to complain to the local competition authority in an effort to overturn it. 

And when carmakers agreed with the state of California to abide by a new set of vehicle emissions rules that are stricter than those proposed by the federal Environmental Protection Agency, the US Department of Justice launched an antitrust investigation. US president Donald Trump then revoked California’s authority to set its own vehicle emissions standards.

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