Brussels (Brussels Morning) – In the year 2025; The European Fertilizer’s industry demanded an immediate impact assessment of the act (Delegation Act) which determines the energy use percentage shares.., global fertilizer affordability gets weaker, gas prices soar, and much more…
Big company behavioral tendency
The inappropriate and inadequate use of water and fertilizers by a cultivator of cotton fiber can cause droughts and thus lead to pollution. Producers interested in maximizing their profits are less likely to internalize social costs and are more willing to pay for only production costs.
The outside factors linked to other parties that affect the welfare of certain agents, firms, or households are referred to as externalities. Often, they are translated into costs or benefits that are not reflected in the market price.
If the manufacturer ignored the environmental and societal considerations, then, economically it would be depicted as a cotton textile product manufacturer seeking to increase production while outside controls being disregarded or non-existent – [the intersection of the demand curve and the private marginal cost curve, whereas the social marginal cost curve being higher than the former curve, resulting in loss of efficiency].
In other words, the result is allocative inefficiency, meaning that the pollution costs are distributed to people. To prevent or correct the situation related to pollution (i.e. external cost/diseconomy), it is important to alter the output volume, product prices, remained external costs, and promote recycling and reuse practices. The aforementioned are possible by regulatory intervention.
Regulatory measures
In this case, regulators can exert power by applying the traditional Command and Control regulatory systems (CAC), and market-based instruments. The combination of anticipatory and continuing control types of CAC regulation can be used ex-ante life cycle assessment (LCA) execution.
In the CAC system, there are certain standards set by regulators that imply specificity in the sequential life of a potential product. For example: emission standards focus on the consistency level and emission limits, and process standards concentrate on the production process, the sourcing of raw materials, and if the best available technologies (BAT) are being used. Simultaneously, market-based instruments can be utilized jointly with CAC systems, even ex-post LCAs’ predictions.
What else can Europeans do?
Environmental protection can be achieved by environmental and landfill taxes. Besides that, cost-recovery charging can bring benefits by charging increased rates on emissions costing a lot more to monitor and later ignite a desire in non-compliers to adhere to satisfy permits acquisition.
For the cotton fiber case, it is appropriate to refer to subsidies and grants that are of significant importance concerning the treatment of agricultural water because illegal use is regulated by the rules on illegal state aid. Another way of promoting incentives from the producers’ side would be to create a pollution credit market. The limit on total emissions is set, and companies can bid for their quotas.
Instrument comparison
The ‘rent-seeking’ practices can be expected, but the neglect of the Waste and Emission Trading Act 2003 is less likely to be untraced for a long period. Trading practices therewith may assist in the sustainability of habitats and conservation.
Furthermore, economic instruments mean less bureaucracy compared to CAC regulations and they incur fewer costs. Dull compliance that is imposed by CAC regulations is partly absent in economic instruments and more innovativeness is promoted.
The producer will focus on attaching more biodegradable components in good faith rather than using high-toxicity fertilizers that are being taxed greatly. Economic instruments also increase the freedom of choice of producers who want to come up with their ideas on how to reduce pollution.
The disadvantage of the economic instruments is that they are prone to lobbying and rent-seeking as mentioned before. This part can nullify the innovation, and BAT uses parts due to unrighteousness in the marketplace.
The asymmetry of information (i.e. absence of information when more than one or more firms know more than other firms or individuals) is one of the reasons, likewise, that can cause problems linked to unwarranted assumptions for instance on cost-benefit analysis and fairness of LCAs.
Unambiguously, in pursuing the establishment of an economically fair, competitive, and safe environment for all living organisms, European legislators should assess the environmental and human health-related issues thoroughly and devise environmental law policy instruments therewith complementing the traditional regulatory framework with market-based and informational instruments, thus strengthening the path towards stronger Europe through such actions.
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