By Julie María Bustamante Guerrero – Student of International Relations
In recent years Latin America has been improving in its environmental sustainability, with recent events such as Uruguay becoming a leading country in renewable energy. While the region is improving, this could be achieved at a faster rate, this is why the thought of further perusing market-based approaches to handle environment degradation and climate change seems very attractive. This raises the following question: is it possible for the region to sustain these practices? And if so, are these practices really effective? Well, I believe it is possible for the region to expand these practices and that these could be incredibly effective for environmental protection. To achieve this, we must analyze what these practices really do, what implications these practices have, and how effective they have been in Latin America.
First of all, we should discuss why are there market-based approaches to environmental degradation and climate change. As defined by the United States Environmental Protection Agency and provided by Khan Academy: “market-oriented or market-based environmental policies create incentives to allow firms some flexibility in reducing pollution”. (Khan Academy 2020, para 3). To simplify it, a market-based approach provides an incentive, a reason for corporations, landowners, and other producers, the flexibility to pollute to a determined extent. In return these entities receive direct monetary compensation or fees.
But are these incentives really needed? Do these entities not care about the environment as it is? As much as we would like to believe that big corporations do care about the environment, we are at a day and age in which what matters the most is profit. For example, corporations would rather find fast and efficient ways to mass-produce items, regardless if the process or the product itself has a big impact on the environment.
Now, we should discuss the implications that these practices have. Market-based approaches are portrait as a way to take advantage of the capitalist agenda, by giving an incentive to corporations to change their ways of production to be more environmentally friendly. Yet, this approach has many loopholes. In some cases, if a company can afford to constantly pay pollution fees, then they will continue to pollute without thinking of changing their practices. We also have to consider the possibility of tax fraud and corruption, if a company is able to bribe its way out of paying pollution taxes, it most definitely will.
Another issue that these market-based approaches may come across is bad management; the United Kingdom is an example of this. The UK implemented carbon taxing to achieve their goal of reaching net-zero greenhouse gas emissions by 2050, and while they already see great results, there is a lack of proper management when it comes to pricing. They have been focusing on some sectors more than others, creating an inequality in the recollection of these taxes, adding that the incentives and penalties that the government is implementing do not match up to their original goal of efficiently reducing carbon dioxide emissions. (Campbell, 2020).
On the other hand, Costa Rica is a great example of a Latin American country that has been implementing this market-based approach in its fight against environmental degradation. Some of these include national payments for environmental services (PES) and reducing emissions from deforestation and forest degradation (REDD+). As defined by the United Nations Framework Convention on Climate Change (UNFCCC), the PES program in Costa Rica provides direct monetary compensations to the private landowners of specific properties, and in return the landowners have to comply with the environmental goals of the program (UNFCCC, 2020). Through the PES program, Costa Rica has not only significantly reduced deforestation by protecting primary forests, but has also helped more than 18,000 families, including indigenous communities (UNFCCC, 2020). We can say that these practices have been successful in the country, and expanding this type of project seems very appealing.
We can conclude that the expansion of monetary-based approaches to environmental issues can be very effective and should be expanded throughout Latin America. Regardless, these practices are not perfect and require a lot of planning and proper managing to achieve the desire results.
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Campbell, C. (March 10, 2020). Zero emissions goal: the mess of Britain’s carbon taxes. Financial Times. https://www.ft.com/content/c4e7cf36-61f5-11ea-a6cd-df28cc3c6a68
Khan Academy. (2020). What are market-oriented environmental tools? https://www.khanacademy.org/economics-finance-domain/microeconomics/market-failure-and-the-role-of-government/environmental-regulation/a/market-oriented-environmental-tools-cnx#:~:text=Market%2Doriented%20environmental%20policies%20create,and%20better%2Ddefined%20property%20rights
UNFCCC. (2020). Payments for Environmental Services Program. UNFCCC. https://unfccc.int/climate-action/momentum-for-change/financing-for-climate-friendly-investment/payments-for-environmental-services-program#:~:text=Costa%20Rica’s%20Payments%20for%20Environmental,the%20country%20and%20the%20region