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07/10/2017

"POLLUTER PAYS” MUST INCLUDE “EMITTER PAYS”

By quantifying the cost of pollution we will be able to reverse the global trend in emissions

"POLLUTER PAYS” MUST INCLUDE “EMITTER PAYS”

The old adage for environmental justice summed up as “polluter pays” was embodied by the first environmental liability laws, which form part of the path towards a carbon-free economy. Now there is an urgent need to add another maxim: “emitter pays”. 

Pollution is not progress, and it must be penalised in order to dissuade all those sectors that are not compatible with a world that is free of emissions; that is the only way to avoid robbing future generations of a balanced environment. Over time, thanks to greater social awareness, a consensus has been reached on the need to monetise the negative externalities caused by greenhouse gas emissions, which are responsible for pollution and for declining air quality. 

Investors are becoming increasingly interested in the carbon footprint

By quantifying the cost of pollution we will be able to reduce emissions

In the last few years, analysts and investors alike have become increasingly interested in assessing companies' environmental performance, looking at past, present and future emissions of greenhouse gases, the main culprits of global warming. Recently, the S&P Dow Jones Index released a report analysing companies' carbon footprint and their transition towards clean energy. Last year, Moody’s said it would analyse the risks of the transition from carbon based on emission reduction scenarios consistent with the Paris Agreement. In the same vein, Standard & Poor's downgraded the ratings of ten fossil fuel giants, mainly oil companies.

"Polluter pays" principle.

In this transition towards an emissions-free model, the most polluting electric utilities  (mainly fossil sources), such as RWE, E.ON, Enel and other names closer to home, are transitioning towards cleaner energy to safeguard their bottom line, since the future returns on fossil fuel-based energy are increasingly compromised. One flagrant case was that of Peabody Energy, which filed for bankruptcy in 2016 as a result of slumping coal prices combined with tougher regulations. Responsible, forward-looking companies must integrate their negative externalities into their business strategies. 

We could spend years talking about the need for a carbon-free economy, but only by quantifying the cost of pollution will we be able to reverse the global trend in emissions. By allocating a fair cost to pollution and by charging for that cost, it will be possible to redirect investment towards a non-polluting economic growth model based on renewable energy, electrified transport and cheaper public transport, energy refurbishment of buildings, etc.

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