THE Competition and Tariff Commission (CTC) is pushing for a review of the tobacco pricing matrix in order to give farmers better prices for their product and protect them from unfair competition.
In its most recent report, CTC exposed how agricultural produce purchasers were abusing their market dominance by setting low prices for agricultural products to guarantee significant profit margins by purchasing cheap and selling at a premium.
CTC says, in a desperate attempt to break even owing to low prices, farmers end up resorting to using methods that may not be good for the environment, but are less expensive for farming operations.
“Abuse of dominant market position can also result in negative outcomes that may affect the environment. A case (in point) involves exploitative abuses by dominant buyers, especially in the agricultural sector,” CTC said in the article titled: Role of competition policy and law in mitigating climate change.
“In competition analysis, customer-supplier relationships between farmers and buyers of agricultural produce are a cause for concern. In such instances, farm produce buyers abuse their market power through arrangements that dictate low prices for farm produce to ensure they make huge margins through buying low and selling high,” CTC revealed.
“In desperation to break even due to low prices, farmers may adopt practices which may not be good for the environment, but less costly for farming operations. A typical example of bad environmental practice is the destruction of forests for firewood as a source of energy in tobacco curing.
“In the tobacco sector, the commission has advocated for the review of the tobacco pricing matrix so that farmers get better prices for their tobacco critical in them adopting sustainable ways of tobacco curing with a view to reduce deforestation and agriculture emissions.”
Other energy alternatives for tobacco curing which have been tried, according to CTC, include biogas though research is still ongoing, while ethanol and solar energy have been viewed to be expensive for smallholder farmers in the interim in terms of cost effectiveness.
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Meanwhile, CTC said climate change could be mitigated by pushing for a competitive environment whereby companies innovate to produce environmentally-friendly products.
It said the Competition Policy and Law (CPL) was one of the key drivers of environmental protection because it aims to improve quality, sustainable production of quality products, increasing choice of more environmentally-friendly products and use of green innovation.
“Where consumers prefer environmentally-friendly products, companies are most likely to adapt their supply of environmentally-friendly products and gear their investments to reap that demand. When there is willingness to pay on the part of consumers for more sustainable products, competition leads to the most efficient outcomes and stimulates companies to invest in product differentiation in a green direction,” it said.
The commission said CPL enforcement also helps mitigate climate change through supporting green transition, by protecting competition that drives companies to innovate more and to operate more sustainably.
Businesses can limit competition through various forms of agreements some of which may also have negative implications on the environment, it added.
In the European Union for example, car makers were fined for agreeing not to compete to produce cleaner cars. Thus, agreeing not to compete in this instance when firms had capacity to produce cleaner vehicles was anti-competitive and denied consumers increased alternatives or choice and innovation.
However, these rules are not to discourage companies from working together for purposes of making their products more environmentally-friendly, it said.
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