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Box 51 Precycling Insurance
James Greyson
The most daunting global problems, such as climatic change, loss of nature, pollution and
resource conflicts, are shaped by market signals that are beyond effective control by exist
-
ing economic instruments. However, a new instrument, based on insurance, offers hope of
reforming capitalism to align self-interest, wealth creation and global survival. Conventional
insurance works with localized risks. The value of an insured house is protected by a payout
following a disaster such as a fire. However, global problems may not always be reversible so
a new form of insurance is needed to encourage the prevention of environmental impacts in
the first place.
Global ecological problems are linked to linear patterns of using resources, from nature to
products to accumulating wastes. So the key leverage point at which to apply premiums is
on the risk of a product ending as 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 could premiums best be spent to reduce the risk of products becoming waste and to
prevent additional worsening of global problems? Support is needed for a wide array of activi-
ties that build economic, societal and ecological capacity to make resources, not wastes. This
goal of ‘circular economics’ was devised by Kenneth Boulding in 1966. It is now national policy,
for example, in China’s 11th five year plan (for 2006 to 2010). Sustainable development and
circular economics may be implemented in practice by ‘precycling’: 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 generalizes the ‘recycling
insurance’ enacted by the European Waste Electronics (WEEE) Directive, which funds recycling
to cut the risk of particular products becoming waste. A generalized ‘precycling insurance’
could support the full range of sustainable development activities:
•
Action to cut dependence on substances that unavoidably accumulate as waste (fossil
fuels, heavy metals, persistent synthetic compounds).
•
Action to give products (any part of the technosphere) a future as a resource.
•
Action to expand ecological habitats (that process non-solid emissions).
•
Action to use resources efficiently enough to meet more people’s basic needs.
Precycling insurance allows 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 is being done and what is needed. Small per-
item premiums could add up to large market shifts.
Unresolved global-scale problems are expensive. 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 gov
-
ernment with the more manageable monitoring task. This achieves ‘producer responsibility’
whilst eliminating inefficient prescriptiveness. A stable climate, for example, does not require
mandatory emissions limits. Savings to government would allow some taxes to be phased out
(such as value added taxes which have a large point-of-sale burden), while precycling insurance
(which does not require any transactions at the point-of-sale) is phased in. A level playing
field for all significant producers could be achieved with simultaneous 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 minimized while economic stability and growth would be maximized.
340
Positive Development
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