News, 18 November 2010
The Nordic competition authorities have published a joint report emphasising the importance of effective competition and competition policy in generating economic growth based on sustainable development. The report is entitled Competition Policy and Green Growth. Interactions and challenges, and underlying it is concern about the environmental degradation and the threat imposed thereby on the development of the economy, and the view that so-called green growth is still possible provided that right kind of incentives are created for it.
Competition promotes sustainable development
– New innovations related to environmental protection - the creation of which is promoted by efficient markets - may well prove to be a key source of economic growth, argues Director Martti Virtanen, who was the FCA's representative in the working group.
– Crucial for the success of the growth strategy are the incentives of companies and other economic operators to relieve environmental damage and to develop new products and production processes which are more environmentally friendly, stresses Dr Virtanen. Price signals that reflect environmental externalities and are transmitted through the market mechanism spur the economic operators to activities consistent with sustainable growth. Indeed, effective competition can support environmental policy by allowing price signals that reflect environmental externalities to be effectively transmitted.
The report examines different environmental policy tools from the perspective of competition (e.g. taxation, tradable emission permits and environmental requirements pertaining to public subsidies). If the environmental policy tools harm effective competition, the social costs of the environmental benefits thereby attained will increase, reminds the report. According to the report, it is an important task of the competition authorities to pinpoint the ramifications of different environmental policy tools on the competitive conditions, and to promote the application of environmental policy tools which enable environmental goals to be achieved in ways which are as neutral and positive for competition as possible.
Challenge for competition control
The efficient application of competition legislation is inevitable for green growth. It is imperative that competition authorities actively intervene with cartels and other antitrust violations which slow down or even bring to a halt the introduction of new products and production processes decreasing the environmental burden, says the report. Ensuring competition neutrality between the economic actors is also of utmost importance for effective markets.
The more effective the economic incentives for sustainable development, the quicker the market will be entered by new innovative companies, and the quicker new markets and market segments will be created in the economy.While maintaining healthy incentives for a continued stream of new innovations, it is a great challenge faced by competition authorities and other social actors to ensure as smooth an entry of these new innovative firms as possible.
Director Martti Virtanen