Market-Based Instruments: Justice Considerations in their Deployment in South Asia – By Tristan Gilet
Market-Based Instruments: Justice Considerations in their Deployment in South Asia – Tristan Gilet
South Asian countries are characterised by high levels of inequalities, high poverty rates or a great diversity of identitiesand ethnic groups. These are features to which particular attention needs to be paid to when designing and implementing environmental policy instruments such as standards, regulations and market-based instruments (e.g. taxes, trading schemes, subsidies). Focusing specifically on the experience with market-based instruments (MBIs) in South East Asia, I have identified three core principles of justice that policymakers should consider to ensure the fair and ethical deployment of MBIs.
1. Distributional Justice, to ensure a fair allocation of burden and benefits.
Emissions in South Asia are highly unequal: in total, the wealthiest 10% emit over ten times more greenhouse gases than the bottom 50%. The 'Polluter Pays Principle' suggests that those who pollute should pay to manage the environmental damage. MBIs can incorporate this principle by ensuring that carbon pricing mechanisms target industries and individuals according to their emissions.
In addition, policymakers should be aware of the underlying inequalities that exist between polluters. MBIs are usually implemented homogeneously among polluters and, therefore, often disproportionately affect the worst off. A potential mechanism to address this unequal burden is through revenue recycling, where a portion of the revenue generated from carbon pricing is returned to those disproportionately affected by these policies.
2. Procedural Justice, to ensure fairness in the policy-making process.
South Asia faces significant challenges, including widespread corruption and unequal representation (and, in turn, lack of fairness) in the policy process. In designing MBIs, policymakers must ensure impartiality, transparency and accessibility for all societal groups. Policymakers need to be particularly aware that the nature of the interests involved and the imbalances in power and access may lead to the benefits of MBIs being particularly skewed towards relatively narrow groups.
Promoting and enabling participation in the decision-making process can help mitigate these issues. By getting involved in the decision-making process, citizens can express their preferences and defend their views in the interests of a fairer policy for all. A majority of South Asian countries have democratic traditions that can facilitate the development of participatory practices.
3. Recognition Justice, to ensure that all communities are taken into consideration.
South Asia is known for its rich cultural diversity and high wealth disparities. MBIs must be designed to account for these differences. Homogeneous implementation can neglect the various needs of different communities. Policymakers therefore need to pay careful attention to the identities, cultures and knowledge of all groups and communities.
In addition, to ensure MBIs are both fair and effective, South Asian governments must proactively support and enable poorer and marginalised populations to understand and engage with these instruments. This is partly about capacity-building, partly about fair access to information and partly about ensuring that these populations can understand and engage with the MBIs. As part of this, governments need to ensure that these populations are provided with the resources - human and financial – that they need in order to contribute.
In conclusion, a focus on justice has profound implications for how policymakers introduce MBIs and other environmental policy instruments. It requires that policymakers ensure that marginalised communities are allowed to contribute to the policy process, that the views and concerns of these communities are taken into consideration and that the negative consequences of these policy instruments on the most deprived are explicitly identified and managed. In doing so, policymakers should be able to introduce MBIs that are both effective and societally acceptable.
Note 1: Tristan Gilet’s policy brief titles ‘Market-Based Instruments: Justice Considerations in their Deployment in South Asia’ was shortlisted for the Chronos Sustainability Prize 2024. A copy of the policy brief can be downloaded here
Note 2: Tristan is currently completing the MSc in Environmental Policy and Regulation at the LSE. He is also conducting policy research at the Grantham Research Institute on Climate Change & the Environment, analysing the political and institutional factors that influence the deployment of market-based instruments.