Is there a thing as too much regulation?
Let’s be honest, all of us working in the Brussels bubble do like a good piece of legislation. This town is often accused of over-regulating. Brexiteers loved to wave that flag. Closing this year, I have decided to do a reality check and see if, when looking at the next Commission, we should only focus on implementation or indeed push for new regulations.
Something is clear, the world is not going in the right direction. No week passes without a new report coming out that feeds our eco-anxiety. It is clear that action is needed if we want to prevent the worst of the on-going climate and biodiversity emergencies.
There are two alternatives to regulation. The first one is markets. However, as I learnt in my environmental economic classes, there is a problem when externalities are not factored into the price. That’s almost always the case. The EU’s carbon market – called the Emission Trading System (ETS) – tried to solve a market failure by assigning a price to carbon dioxide.
Despite its imperfections, such as excluding most international long-haul flights from paying for carbon, the ETS has helped sectors like utilities to considerably reduce their emissions. But is this a free market? Well, it is a highly regulated market, showing that markets left alone cannot solve the mess we are in.
The second one is through voluntary commitments from companies. Either whole sectors or individual companies commit on a regular basis to “net-zero by X” or “reduce the impact of Y”. Let me give you a few examples below on how that has worked so far.
Not so long ago, some oil majors promised that they would reduce their oil extraction activities. Despite those promises being too little and too late, some thought that it was a step in the right direction. Guess what? Putin invaded Ukraine, oil prices went through the roof and big oil decided to scrap those plans, showing once more that they cannot be trusted.
Another example is Airbus. So far, they have escaped most forms of climate regulation. When ICAO established a CO2 standard, they shaped it according to their own wishlist. The standard was so weak that it translated into business-as-usual. A few years later, they announced with fanfare that they would sell a hydrogen plane by 2035; they would fix aviation’s climate problem for us and we could all fly guilt free.
Recently, their CEO has not only come out and asked the taxpayer to pay for this, but he’s also trying to get financing for a new fossil plane! Long gone the promises of green flying. It wouldn’t be the first time that the aircraft maker would ask for tax paying money, it still owed Germany and France hundreds of millions for loans to build A380 jumbo jets, which have now stopped being produced. Let me digest it for you: Airbus is now asking Herr Müller and Doña García to help rich people continue flying on fossil fuels, taking resources away from their local public transport or healthcare systems.
It doesn’t stop there. Airbus’ CEO recently said “we are not at the point where we have to decide what we really need in terms of SAF”. For the record, Boeing is no better. Despite many (including some airlines) agreeing that some sustainable aviation fuels can actually be worse than fossil kerosene, for instance if produced from palm oil products or from fake used cooking oil. This begs the question, who is holding Airbus accountable?
My final example is leasing companies. They all claim to be leaders in the transition to electrification of road transport. When we looked into it, it was clear that not only are they not leading, but in fact they are – especially in France – actively discouraging their customers from transitioning to electric cars. Thankfully, the Commission is considering setting targets for the electrification of company cars, as both markets and voluntary pledges failed to bring the change needed.
In an ideal world, it would be tempting to stop regulating. But also in an ideal world, scientists would not be publishing reports stating that we are at the edge of planetary collapse. We cannot simply rely on the good will of corporations to act on the climate and reduce emissions. If they are genuinely committed to the environment, they won’t mind new regulation. Those that fight tooth and nail against being regulated are those that know that in order to keep paying unmoral bonuses to their executives and dividends to their shareholders, they need to continue destroying the atmosphere and polluting our lungs.
Let’s force oil majors to pay for their destruction. Let’s oblige Airbus to deliver their hydrogen plane, and let’s implement ReFuelEU to make sure that airlines only use good SAFs. Let’s constrain leasing companies to electric vehicles only. Voluntary pledges fly away with the wind. Effective regulation published in the EU’s Official Journal stays and delivers true change. Don’t be fooled. Dear Brussels bubble: the regulation show must go on.
