The Role of Competition Law in Environmental Sustainability
According to the World Meteorological Organization (WMO), there is a 50% chance that the average global temperature will hit 1.5 °C above pre-industrial levels in the next five years due to increased greenhouse gas emissions. This will negatively impact the economic, environmental and societal wellbeing of global citizens and, therefore, a collaborative and inclusive approach is necessary to attend to this existential threat.
As a research and policy adviser working in a competition agency, I find myself pondering what role competition law practitioners can play in mitigating this crisis.
To tackle this question, it is important to internalize the facts. For starters, fossil fuels remain the largest contributor to global climate change, accounting for over 75% and about 90% of global greenhouse gas and carbon dioxide emissions respectively. These emissions arise from, among others, industrialization, deforestation, mass transportation, and inefficient waste management.
Altered weather has resulted in perennial droughts and famine, floods and unprecedented heat waves across the World. As a result, food production cycles have been severely disrupted, putting millions of lives and livelihoods at risk. At the moment, over four million Kenyans are in need of humanitarian assistance due to food shortages in various parts of the country.
The impact on climate change on our economy is a fiscal liability equivalent to 2% - 2.8% of Kenya’s GDP, annually.
To counter these negative effects, sustainable practices that seek to reduce greenhouse gas emissions must be adopted to realize economic and social development. Such aspirations align with this year’s World Competition Day Theme on Competition Policy and Climate Change.
One of the areas where competition law can play a role in alleviating the impact of climate change is in the global aviation industry. This key cog of global commerce is responsible for 12% of carbon dioxide emissions from transport sources. Joint ventures and code-sharing agreements, on the face of it, may raise anti-competitive concerns, especially where competing airlines share strategic information. However, these agreements may occasion economic and operational benefits through efficient use of resources, knowledge transfer and risk reduction.
These agreements may enable airlines to shore up the load factor in an aircraft, thereby reducing carbon dioxide emissions per passenger. Despite these obvious public interest benefits, these arrangements have the potential to restrict competition, resulting in concentration on certain routes. The onus is on competition agencies to be more expansive in their consideration and analysis of transactions to ensure they only approve them when the gains to the Public, including positive environmental impact, is demonstrated. It is also critical to implement a robust compliance regiment to compel undertakings to deliver on their commitments.
Further, Kenya’s meat and offal exports were estimated at over USD 75 million in 2021, with the top destination being the Gulf region. Conversely, animal agriculture is responsible for 16.5% of global greenhouse gas emissions and causes significant environmental degradation, from biodiversity loss to deforestation.
This presents a dilemma to the Government; balancing between revenue from the exports and environmental degradation. In the same vein, the Kenya Meat Commission enjoys Government backing in terms of funding and wider access to markets, price discounts, among others, compared to the small scale exporters. To create a level playing field, the Government should formulate policies supportive of small-scale farmers including extension services, access to funds that will support improved farming and source for markets for their products.
Thirdly, we must acknowledge the major strides that Kenya has made in the past decade in its ongoing transition from ‘dirty’ to clean fuels. Two of the strategies adopted are to deepen the use of Liquefied Petroleum Gas (LPG) and investment in wind power.
At the moment, 53% of urban and 5.6% rural households consume LPG which emits less carbon than charcoal and kerosene which have been ubiquitous in our society for decades. The pursuit for a 100% transition to clean energy by 2030 has been buttressed by an October 2022 State agreement to fast-track construction of a natural gas pipeline between Kenya and Tanzania.
While this is expected to increase penetration of clean energy in Kenya, it may raise competition concerns regarding wholesale and retail distribution model adopted when the project is commissioned. The Government should ensure that access and quality is not compromised due to distribution monopolies that may arise in the value chain. In addition, the relevant agencies must ensure that the quality of gas being distributed is beyond reproach in order to safeguard consumer welfare.
The shift to renewable wind power presents social and competition concerns. The former is centered on perceived health concerns, displacement and loss of agricultural land and harm to the eco-system, among others. The wind power equipment, transported from the port of Mombasa by road, covers 1,200km to the Turkana Plant thereby, contributing to air pollution. Competition concerns arise due to the length of contracts awarded, some running for up to 20 years. This may foreclose other players willing to invest in this sector, with probably more efficient technology. The Government should review such contracts in order to open up the market and benefit from the most modern technology that is also environmentally sustainable. This will in effect, result in lower consumer prices.
It is estimated that Kenya generates 22,000 metric tonnes of waste per day, with around 60% of it being recyclable organic waste. The Dandora dumpsite in Nairobi is more than three times full, holding over 1.8 million tonnes of solid waste. Greenhouse gases such as carbon dioxide and methane are produced during the decomposition of organic waste, contributing to global warming.
This presents an urgent need to sustainably deal with the waste at this site and similar ones dotted across the country. Such an intervention is capital intensive and, therefore, may seem insurmountable. One way to literally move this huge mountain is to encourage Public Private Partnerships geared towards effective and sustainable waste management. A word of caution though; whereas these agreements present benefits such as financial and managerial expertise, they may also lock out SMEs from participating in this market since they do not have the financial muscle. To prevent foreclosure and exclusion of firms, Government should ensure that SMEs participate through supply ancillary services that can be contracted separately and for shorter periods of time.
Finally, the Africa Market Observatory indicates large differences in maize price levels across local markets. In 2021 there were extremely low prices of well under US$150/t in Zambia, Malawi and southwest Tanzania at the same time as prices well above US$400 in Kenya and Uganda. In boosting the strategic food reserves, member states, should implement the various trade agreements with African countries to allow food to flow and achieve stable supplies at a time when this has greatly been disrupted by climate change.
Cecilia Kyenze, Senior Analyst, Policy and Research Department
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