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Monday, December 03, 2007

An idea to encourage environmentally friendly manufacturing processes

I was going to ad this as a section in my last post, but I thought it warranted it's own post..

Last week environmental analysts released a report that Sony was the most environmentally responsible of the console manufacturers, this was a bit disappointing to me and I really hope MS gets their act together. Along those lines, I was thinking on the long drive to Witbank yesterday about incentives and so on with regard to environmentally friendly manufacturing. If there is an accepted scale for how 'green' a product's manufacturing process is, why not apply this in a timed program to encourage green production. Let's say such legislation imposes a goal percentage of X% of all output from any company to be green rated at, G% or higher. Any company that does not meet the required percentage pays a tax on the manufacturing cost of the shortfall, and any company that exceeds the percentage receives a return on their excess as an incentive. This has the effect of making green products more attractive to produce, while funding the subsidies from gradually more expensive non-green products. The gradual adjustment of the required percentages prevents the shock from being so massive that non-green companies are driven out of business, while encouraging them to think ahead to keep their business profitable.
To illustrate, let's say the time-line is as follows:

Year Compliance percentage (G) Min output to comply (X) Max output incentive (Y) Tax/Incentive percentage (T)
2008-2011 50% 10% 10% 5%
2012-2015 65% 20% 20% 6%
2016-2018 80% 50% 50% 7%

Then if 5% company A's total output is 50% or more green, it falls short of the minimum by 5%, and will have to pay 5% tax on the manufacturing cost of that shortfall-a total of 0.25% of it's overall costs. Not enough to drive anyone out of business, but enough to be noticed.
By contrast if 18% company B's output is 50% or more green, it qualifies for a 5% return on the manufacturing costs of it's 8% excess-a total of 0.4% of it's costs. The 10% max output limits this effect to 0.5% at this stage, but ensures that the tax gathered from non-compliance should cover the cost of subsidies.
Looking forward to 2017, if company A's compliance has reached 40% of total output being 80% or higher green, it's shortfall is now 10%, taxed at 7%-increasing it's total tax to 0.7% of gross production. If company B has really excelled and reached 100% of it's output being 80% or higher green rated, it will receive a boost of 3.5% of it's overall manufacturing costs.
This system has obvious benefits such as using 'dirty' manufacturing to subsidize 'clean' manufacturing, thereby making the latter far more attractive than it currently is. The are other less obvious advantages as well, such as attracting high tech investment, boosting demand (and potential funding) for highly qualified workers, boosting local research in related areas, green technologies available to locals at a lower cost boosting their use by consumers.. the list goes on and on.



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