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Why Cap and Trade Is Good for Environmental Marketing

From birth to death, humans are living on borrowed time. Every other animal on the planet is content to use the solar budget – the daily amount of sunlight that provides the energy needed to sustain life – for their ecosystem. Humans, on the other hand, have taken to harvesting the solar productivity of eons past through coal. The extra energy we gain has allowed technological innovation, medical advances, and a higher quality of life for billions of people. However, there is one particularly nasty side effect of using fossil fuel energies: a decrease in air quality.

Although there have been rumblings about regulation for years, air quality currently has virtually no global control. Although air quality is not a daily concern for most people, air pollution has been directly linked to higher death rates and has been proven to decrease efficiency. Long story short, we all know air quality is an important resource that’s keeping us alive, literally. So why have environmental concerns been ignored thus far?

Governing the Commons

When common resources are used, and the fee associated with them is a fraction of the total cost, eventually there will be a tragedy of the commons. A lesson learned throughout human existence, the tragedy of the commons is about to be demonstrated on a global scale through air pollution. One of the factors preventing an effective governance of air quality is the fact that it is a public good without any assigned value, allowing negative externalities to accumulate without penalty. Since you can’t exclude anyone from consuming a public good, there is no public consensus about the need to protect air quality. Instead, voting for air quality improvements and an indication of its importance has been relegated to the individual level, with consumption dictating air quality trends. Product choice, far more so than legislation, has demonstrated the increase in perceived importance of air quality concerns.

Global, Not Regional

The relationship between the products you buy and the area it is produced in is a global relationship, not a regional one. Complacency is much easier to achieve when the toxic fumes resultant from the production of your iPod is several continents away. Promoting air quality initiatives has become a privilege of First World Countries; however most of our goods are produced in Third World Countries. In First World Countries, with stronger federal regulation of industry, air pollution is associated more with vehicular emissions than industry. However, in countries where export is the primary economic stimulus, air pollution from manufacturing plants is overlooked as a necessary evil for continued growth. It has long been realized that with affluence and technology come a greater environmental impact. With the advent of a globalized economy, the difference is that we are now exporting our pollution, a solution that will soon come back to haunt us.

Recognizing the looming specter of complete air quality degradation, several strategies have been proposed for regulation. Two strategies with the most support are cap and trade, and statutory regulation. Although both strategies are anticipated to be effective, they use different methods to achieve success.

Statutory vs. Cap and Trade

The alternative to cap and trade is to issue a standardized approach, where the overall amount of pollution produced by each company must be reduced by a certain amount. Although overall both approaches would have the same effect, a statutory reduction presents many challenges.  Among them, the increased need for reduction at every facility regardless of ability to reduce, the need for a greater inspection framework, and the need for government regulation of continued emission reduction. A cap and trade solution resolves many of these issues. Marginal costs are reduced for companies who are more efficient at reducing pollution, and they can sell their pollution credits to others whose industry makes emission reduction more costly. Under cap and trade, factories are operating in a way that is most cost efficient.

So, finally, what does this have to do with marketing? A cap and trade emission reduction system allows companies that are taking active steps to reduce pollution factors to promote their efforts as an advantage. Mechanisms such as advertising how many carbon credits each company sells, or demonstrating a decrease from year to year can provide a competitive distinction among competition. Obviously, the green marketing aspect of air pollution reduction is unlikely to offset the cost required for the upgrades necessary to reduce emissions; however, as mentioned above, it is most likely that at some point in the near future such reductions will be legally required. The smart company would embrace a system that allows a market system for carbon, as well as cap and trade systems that also provide an economic incentive to reduce emissions more than their competition.

Emily McClendon is an environmental marketing specialist currently working at NeboWeb. She has a B.S. in Applied Biology from Georgia Institute of Technology and is currently pursuing her M.C.R.P. in Environmental Planning, also at Georgia Institute of Technology. She believes that communication and shared knowledge are the most important facets of conveying environmentally friendly practices. After participating in biological research, inter disciplinary planning, and interactive marketing, she is convinced a comprehensive approach is the only solution for creating a sustainable economy.

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One thought on “Why Cap and Trade Is Good for Environmental Marketing

  1. I like the ideas that you’ve put forward here about marketing with cap and trade, but it seems like this approach puts too much on the expectation on strong, effective regulations.

    Though I hope real cap and trade will be a reality here in the near future (and expect something like it at some point), I have a hard time relying on it for making a business case for environmental responsibility outright, today. Is there a way to tailor these good ideas so that they will work in a way that doesn’t necessarily rely on a large, formalized cap and trade system?

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