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A multi-purpose tool for sustainability Precycling insurance: reshaping the market to reverse unsustainability The toughest global problems, such as climatic change, loss of nature, poverty, pollution and resource conflicts, are shaped by market signals that are beyond effective control by existing economic tools. However a new tool, based on insurance, offers hope of reforming capitalism to align self interest, wealth creation and global survival. Conventional insurance is well suited to localised risks. The value of an insured house is protected by a payout following a disaster such as theft or fire. However damage from steadily worsening global risks cannot be made good with post-disaster payouts. By the time global problems hit the economy, they may be no longer affordable or correctable. A new form of insurance is needed in order to shift funds from problematic activities to problem-preventing activities. Global sustainability issues are tied to today’s mainly linear pattern of using resources, from nature to products to wastes accumulating in the biosphere. So the key leverage point at which to apply premiums is on the risk of a product becoming waste in the land, air or water. The vast majority of the technosphere can be covered, since chemicals, fuels, equipment, houses, roads and most other human works take part in the economy of products. Even product components are products. Every producer should already know if their product will add to waste levels. “Is our product recyclable or biodegradable? Have we contributed towards sufficient industrial or ecological processing so that our product can become a new resource for people or nature?” How can premiums be best invested to reduce the risk of products becoming waste and to prevent additional worsening of global problems? Support is needed for a wide array of activities that build economic, societal and ecological capacity to make resources, not wastes. This goal of ‘circular economics’ was devised by Kenneth Boulding in 1966 and is now national policy, for example in the 11th five year plan (for 2006 to 2010) of China’s National Development and Reform Commission. Both sustainable development and circular economics may be implemented in practice by ‘precycling’, meaning action taken to prepare for current resources to become future resources for people or nature. Premiums charged to producers in proportion to waste-risk would fund precycling. This generalises the ‘recycling insurance’ enacted by the European Waste Electronics (WEEE) Directive, which funds recycling to cut the risk of particular products becoming waste. A generalised ‘precycling insurance’ could support the full range of sustainable development activities. Precycling encompasses a range of actions: Precycling insurance allows all the usual market mechanisms to inspire change. The incentive of avoiding premiums would support producer investment in systems which give their products a future as a resource ‘precycled’ products. Those who choose to continue making ‘prewasted’ products would pay a premium and find their products less competitive in a market where alternatives rapidly emerge. Premiums would also influence the market by directly funding solutions which bridge the gap between what’s being done and what’s needed. Small per-item premiums could add up to large market shifts. Unresolved global-scale problems are expensive (and sooner or later, unaffordable). The prescriptiveness and complexity of governmental constraints on economic activity are expensive. Both these expenses may be tackled by retaining primary responsibility for externalities within the market, leaving government with a more manageable monitoring task. This provides ‘producer responsibility’ whilst eliminating inefficient prescriptiveness. A stable climate, for example, does not require mandatory global emissions limits. Savings to government would allow some taxes to be phased out (such as Value Added Taxes) while precycling insurance is phased in. A level playing field for all significant producers could be achieved with global introduction of obligatory precycling insurance, with insurers accredited by government and web-based information open to public scrutiny. Administrative effort, regulation and long-term prices would be minimised while economic stability and growth would be maximised. Over the coming years it will become clear to all political leaders that sustainability is not optional. It remains to be seen which nations will take a global leadership role. Will it be those with the most environmental regulations or those with the greatest imagination? References: Want a world that works? Return to: top of page, home page, BlindSpot reviews, BlindSpot tools. | |
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