Our Arizona-based law firm strives to provide added value for our clients, not only through the quality of our legal services, but also through our sharing of knowledge, insights, and ideas from the world’s great business minds. We commonly do this by posting links to valuable articles on our Harrison Law LinkedIn page. To help bring these articles to our clients’ attention, we will occasionally offer summaries of them here on our blog. At this time, we wish to spotlight an article featured in The Economist’s “Open Future” column entitled “How to Rethink Environmental Policies From ‘No’ to ‘Go.’”
This article combines excerpts from Daniel Esty’s book, A Better Planet: Forty Big Ideas for a Sustainable Future with an interview between The Economist and Esty. It begins by discussing the concept of “red lights” versus “green lights” in terms of environmental policies.
Esty explains that the market has traditionally taken a “thou shalt not” or “red lights” attitude, emphasizing the things that businesses, agencies, and institutions should not do for fear of imperiling the environment. Many of the environmental laws and regulations developed in the 1970s and 1980s primarily concerned themselves with restrictions against businesses and organizations aimed at discouraging pollution and regulating chemical/water disposal methods.
Unfortunately, argues Esty, the “red lights” approach only addresses half of the problem – restricting negative behaviors without promoting positive change. An emphasis on command-and-control inevitably leads to heavy government regulation, low efficiency, high public cost, and mixed results.
This is where a “green lights” policy framework can come into play, according to Esty. This framework includes initiatives and innovations that reward alternative, eco-friendly behaviors, offering individuals and organizations fresh, productive alternatives so that they can more easily turn away from destructive practices that earn red lights. A “green lights” framework would include Green Bank and Green Bond investment and funding to create an environmental financial infrastructure. Even small businesses can make use of such innovative financing tools to invest in sustainable finance options.
Esty points to his own experience with “green lights” policies as the Commissioner of Connecticut’s Department of Energy and Environmental Protection. When he first assumed that position in 2011, Connecticut had a goal of reaching 20 percent renewable energy by the year 2020, expanding its use of solar and wind power in accordance with its Renewable Portfolio Standards (RPSs). Unfortunately, the state simply didn’t have the financial resources in place to make much progress.
Esty’s department responded by establishing the first Green Bank in the U.S., funding innovative clean energy projects largely through private capital. These projects awarded bids to developers that promised the lowest energy rates (a concept known as reverse auctioning). It also emphasized 15-year energy supply commitments that made the projects more bankable. This leveraging of private sector competition drove clean energy prices down, making these methods more accessible and desirable.
In the interview portion of the article, Esty notes that the cost of a shift to a “green lights” framework can be mitigated, in part, by adopting a “polluter pays” strategy. This strategy incentivizes organizations to reduce their energy efficiency or carbon footprint to accepted standards or pay for the damage caused by their failure to adhere to these standards. Esty also notes that the Green Bank in Connecticut has managed to transform each dollar of government funding into seven dollars for green energy projects and initiatives, demonstrating the Green Banks’ potential to play a critical role in “financing decarbonization.” Esty refers to this model as “sustainability-finance.”
From a legal and business-law perspective, we’re seeing a trend toward incentivizing businesses to modernize or innovate their environmental impact, as opposed to an outright prohibition that essentially drives the business out of the area (thus limiting the jobs and economic benefits that the business supplies to the community.) The best approach involves working with the business and local/state government to supply solutions to the issues, including economic incentives, that allow businesses to survive and thrive under the new regulations. This outcome would be preferable to driving those businesses into other locations that may have more regulations and enforcement.
You can view the article in its entirety here. We also encourage you to visit our LinkedIn page for other compelling insights. Click HERE to find a previously posted summary of one of Harrison Law’s LinkedIn posts in the LinkedIn Spotlight Series. HERE is the third post in this series. To find the final installment of the most recent LinkedIn Spotlight Series click HERE.
© 2020 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
