November 29, 2021

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Not part of problem, but a solution – Competition Law & climate change

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this article has been written by Pushkaraj Ghorpade, pursuing a Certificate Course in Competition Law, Practice And Enforcement from LawSikho. It has been edited by Zigishu Singh (Associate, LawSikho) Ruchika Mohapatra (Associate, LawSikho).

Table of Contents

The title of this article may be a little confusing to few, like it was for many when they first encountered these two disciplines of law in one sentence. In many lectures of learned professors, when explaining the characteristics of competition law, they usually touch upon a different tangent which leads to a brief discussion about the need for carbon control in newly established industries. It is easy to get confused because when one talks about competition law, one thinks of free market, capitalism, free trade and antitrust laws which is in stark contradiction to the law of environment which includes concepts of polluter’s pay, Agenda 21 and preservation of the environment, and protection of “common good”. In other words, how can a discipline, which is purely economic, affect a discipline which has nothing really to do with economics.

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In this article, an attempt has been made to make a bridge, a link of sorts to establish an understanding between the two domains and also strive to highlight how competition law can be a solution to the current deteriorating climatic setup of the world and also how environmental law can be a part and parcel of competition law for the benefit of all.

The word “competition” itself makes us imagine an environment which is cut throat and not often an environment which is fair and just. In market space, competition means an environment where the buyers as well as the sellers have an equal playing field, where any one dominant party does not have the scope to abuse its dominant position andwhere the pricing is on the basis of reasonable and fair play by all players.

It is not easy, no matter how much our society is  developed, to have a self- regulating or self-governing competitive  environment. Deterrence, by the way of a law, is required to keep individuals and enterprises in check. Thus, there is a constant need for competition law.

Competition law is a branch of law which encircles around promotion and sustenance of fair competition by checking anti-competitive practices and by barring abuse of dominance by major players in the market. In India, the law is governed by the Competition Act, 2002 which replaced the previous Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969 owing to the policy of Liberalisation, Globalisation and Privatisation adopted by India in the year 1999.

Very different from this law is the Environmental law which deals with aspects of climate change and sustainable development and aims to curb or rather end all such acts which harm the environment such as global warming, deforestation, problems of waste management and carbon emission.  Numerous international instruments to curb climate change have been signed and almost all nations have adopted a domestic legislation in their local territories to contribute in their resolve to stop environmental degradation.

So  far, the individual and separate functioning and sphere of both the branches of law is clear. Then why do we need to link the two? What is so urgent is that laws of competition  and antitrust have to be read with laws of the environment to aid in controlling climate change. 

As mentioned above, countries are adopting domestic legislations and ratifying various international treaties in their attempt to curb environmental degradation in their respective territories. Still, the rate at which our Earth is losing its natural properties and the resources are becoming scarcer and unusable with each passing day is high. However,  despite the countries coming together and also endeavoring individually to handle climate change, what is still going wrong?

As per the report of the UN Secretary Generals on  Climate Action Summit, 2019[1], global warming is still increasing and for having a better impact on rejuvenation of Earth’s sanctity, there is still a requirement for sharp and considerable decline in emission of greenhouse gases. It was also reported that if this was not achieved, “global warming will increase earth’s average temperature by 1.5ºC, meaning irreversible ecosystem loss and human catastrophe.” 

The words “irreversible ecosystem loss” and “human catastrophe” are not only scary but also a reality for not one, but for each and every entity on this planet . But still, many don’t wish to contribute to  the above dialogue because “it may not concern them” and  that  is where the problem lies.

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There are some problems which often get resolved on their own but there are some other problems which require collective effort. Climate change is one such problem which cannot be solved by one country or by action of any one industry. It requires inputs, co-operation and indulgence of all. In  this regard, the words of the UN Secretary-General on climate change have to be noted wherein he stated that since climate change is “ the defining challenge of our time” a sector-specific response shall not  be beneficial t and therefore any and all actions must involve “all sectors of the society and the economy, including industry”. [2] In this respect, Competition law may not be the problem, however it can be part of the solution.

Competition law regulates competition and the conduct of market players. It regulates fair play and mutual benefit. Now, when we all agree that environmental changes affect everyone and it is only fair that everyone contributes to its preservation , why can’t regulators of competition bring in “environmental efficiency” of market players as another ground for regulating “fair competition”. In other words, when a number of factors, grounds and qualifiers are allotted for regulating the fair market, why can’t “environmental” factors also be considered as such a qualifier?That is the role of environmental considerations within economic policies, including competition policy, which can be an innovative contribution to this vital debate.[3] This can be understood better with the help of an example.

The European Union is the foremost region to somewhat adopt an inter-linked law of Competition and the Environment. Article 11 of the Treaty on the Functioning of the European Union clearly states that “environmental protection requirements must be integrated into the definition of the union policies and activities, in particular with a view to promoting sustainable development”. It is to be noted that in Article 11 no reference is given to competition law and it more or less gives a holistic approach, but still, it is a start.[4]

At ground level, there are different ways of achieving this. For instance, It can be made mandatory that companies, manufactures, retailers and wholesalers have to adhere to certain actions or have to refrain from indulging in any action which may not have  a beneficial environmental outcome or act in an environmentally efficient manner; whichever way it may be possible. Some examples can include making recycling mandatory, especially in shops and supermarkets; having minimum plastic usage allowance or by reducing the plastic allowance rate in packaging or by making fishing more sustainable.[5]

 Competition law can come into picture  if it is found that any of the market players are not following the guidelines set for beneficial environmental outcomes or an outcome with no regards to “environmental efficiency”. In such cases, the appropriate authority can step in and take actions against such market players for not following laws of “fair” competition.

In this sense, if one looks at it, it will promote fairness in the market, because if one player can benefit from  all environmental beneficial outcomes and can still run as a successful player in the market, why can’t the other players do the same? If one player is fair in terms of his seriousness to “environmental efficiency” then why can’t the other player? In such a situation of unfairness, the authority shall have the jurisdiction to intervene and help preserve competition as well as the environment.

It is wrong to say that environmental law and competition law cannot be linked with each other. Competition law can immensely help in monitoring the conduct of market players and can keep vigilance on their environmental efficiency in conducting themselves when national legislations update their laws and provide the competition authorities jurisdiction as well as legal backing to include environmental sensitive norms in conducting fair competition.

[1] Report to the UN Secretary-General’s Climate Action Summit: WMO, United in Science (WMO 2019); https://www.un.org/sites/un2.un.org/files/cas_report_11_dec_0.pdf
[2] European Parliament, Resolution declaring a climate and environmental emergency 2019/2930 (RSP) (28 November 2019; https://www.europarl.europa.eu/doceo/document/TA-9-2019-0078_EN.html
[3] Suzanne Kingston; Forthcoming in Competition Law, Climate Change & Environmental Sustainability (eds. Holmes, Snoep & Middelschulte, Concurrences, 2021; University College Dublin UCD Working Papers in Law, Criminology & Socio-Legal Studies Research Paper No. 3 / 2021; https://www.ssrn.com/index.cfm/en/uc-dublin-leg/
[4] Climate Change and Competition Law; Simon Holmes; Directorate For Financial And Enterprise Affairs Competition Committee; 2020; https://one.oecd.org/document/DAF/COMP/WD(2020)94/en/pdf
[5] Climate change, sustainability, and competition law; Simon Holmes; Journal of Antitrust Enforcement, Volume 8, Issue no. 2, July 2020, Pages 354–405; 2020; https://one.oecd.org/document/DAF/COMP/WD(2020)94/en/pdf


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