How taxes and bans are fueling innovation

How taxes and bans are fueling innovation

By Navneeta Kaul

Government regulations such as taxes and bans are generally intended to improve standards of living and reduce environmental damage. These regulations can have a powerful effect on the targeted industries. In recent times, various taxes and bans have provided a stimulus for industrial research, encouraged market competition, and thus spurred growth and dynamism. Here are some examples of how taxes and bans are encouraging innovative industrial solutions and driving economic progress.

Pesticide ban in the European Union:

In a significant step towards tackling the plummeting bee population in Europe, the EU banned one of the most widely used class of insecticides, neonicotinoids, in 2018. Neonicotinoids share a similar chemical structure to nicotine and act by attacking the nervous systems of insects. However, studies show that neonicotinoids do not differentiate between the target insects and nontarget insects, including honey bees. As a result, the bee population suffered from neurotoxic effects of the insecticide that include memory loss and low sperm count. The move to ban neonicotinoids has been hailed by environmental scientists and has gained massive public support.

However, given the efficacy of the neonicotinoids, concerns have been raised about finding a compromise for crop protection. To achieve the goal of sustainable farming without these insecticides, companies and scientists are exploring alternative solutions. Here are some notable examples:

  • Pesticide Action Network (PAN) Europe, a network of nongovernmental organizations and institutions, has proposed a list of chemical and nonchemical alternatives to neonicotinoid use.
  • As a new ecological tactic, researchers have suggested two popular and globally distributed weeds, Solanum nigrum and Datura stramonium, as potential alternatives to pesticides.
  • A global scientific review by the Task Force on Systemic Pesticides has revealed several pest-management approaches as an alternative to the insecticides. These include better farming methods such as crop rotation and using resistant crop varieties, traps, and naturally derived insecticides.
  • Researchers have prepared and characterized poly(ε-caprolactone) nanocapsules loaded with neem oil, which is an essential oil with insecticidal properties. Though still in its nascent stage, this formulation could help to increase the use of natural bioinsecticides for pest control.
  • In another groundbreaking innovation developed at MIT, scientists have come up with a novel additive-based approach to increasing pesticide retention in plants. The additives composed of polyacrylic acid and poly-ethyleneimine are FDA approved, natural, and environment-friendly. This approach could further reduce pesticide usage and problems associated with pesticides.

Single-use plastic ban:

The world is finally waking up to the issue of plastic-waste management. In one of the most promising pieces of legislation, the EU approved a ban on single-use plastics including straws, cutlery, and cotton-swab sticks in Europe by 2021. The proposal is driven by the finding that 80% of marine trash on European beaches is made of plastics, posing a threat to the coastal ecosystem. As an action against plastic pollution, several countries, including the United States, India, Peru, and Chile, have signed the legislation. The goal to reduce plastic waste is also shared by many companies:

  • At least 250 organizations have joined hands to form the New Plastics Economy Global Commitment, including clothing company H&M, Unilever, PepsiCo, L’Oreal, Mars, and Coca-Cola. The companies aim to reuse, recycle, or compost plastics by 2025, and five venture capital firms have pledged $200 million towards the objective.
  • A new initiative from recycling company TerraCycle, Loop is a unique and innovative solution to help fix the problems created by single-use plastic waste.  The company has introduced sleek, reusable containers to deliver shampoos, detergents, diapers, ice creams, toothpaste, and various other items. After use, Loop will pick up, wash, and replace it with a clean, empty container. This breakthrough technology represents a zero-waste consumption and management solution. Several leading industrial brands have partnered with Loop, including Procter & Gamble, Nestle, and PepsiCo, and it could be a great game changer in adopting sustainable packaging.
  • Circulate Capital, a New York–based investment fund, has raised $90 million to collect plastic waste, improve waste management, and create markets for collected materials. And consumer companies including Coca-Cola, PepsiCo, Danone, Unilever, Procter & Gamble, and Dow are committed to funding the initiative. This approach could lead to new innovations in turning plastic waste into new products.
  • Chile-based designer Margarita Talep has developed a biodegradable alternative to single-use packaging derived from algae. The basic mixture is composed of agar from red algae, water as a plasticizer, and natural dyes extracted from the skins of fruits and vegetables. The resulting bioplastic packaging is sustainable and degrades in about 2-3 months. This biofabrication approach could be a significant part of future industries, as the process of extracting raw materials and the materials themselves are eco-friendly.  
  • Italian bioplastics firm Bio-on and Italian agricultural firm Gruppo Rivoira have partnered to form Zeropack, a joint venture that would use bioplastic materials to design packaging items for fruits and veggies. This innovative approach could revolutionize the food packaging industry as it is natural and biodegradable.
  • An innovative replacement for packaged synthetic bottles, which are harmful to the environment, has been developed by the London-based startup Skipping Rocks Lab. The biodegradable product Ooho is made of calcium chloride and sodium alginate, a derivative of seaweed. Furthermore, it is cheaper than plastic and could pave the way for reducing plastic waste.

Sugar taxes:

The introduction of a sugar tax was intended to reduce the intake of sugar to prevent obesity and other health risks. Though it is not a solution to all health problems, it has driven industrial innovations to challenge the status quo. Here are some examples:

  • Kerry has formulated a product range of TasteSense solutions that are natural sugar alternatives. These solutions maintain the perception of taste and sweetness through taste modulation even when the sugar is reduced, and it can also mask the bitterness of a natural sweetener.
  • Another company at the forefront of innovation in developing sugar-reduction products is DouxMatok, a small Israeli startup. The company has partnered with Südzucker, a leading European sugar company, to commercialize its branded sugars in 2019. Their scientists cracked the code of enhancing sweetness by coating sugar with food-grade silica. Sugar molecules diffuse more with this approach than sugar molecules alone. The silica system works in baked goods and chocolates, and efforts are also on to use it in beverages. This tiny tweak to sugar could revolutionize the food manufacturing industry.
  • A patented combination of acacia fiber and stevia by HEYLO has generated a lot of industrial interest. Due to the health benefits of acacia and stevia, this sugar replacement is natural and healthy. It is a clean-label product, has zero calories, contains prebiotic fiber, and delivers 10-15 times more sweetness than sugar.
  • Companies including Cargill and Sensus have achieved reasonable sugar reduction using chicory root fiber. Chicory root inulin derived from natural chicory root is a low-intensity sweetener that can provide 50% sweetness in the liquid form. Moreover, it presents potential health benefits as well.

Regulations driving innovations:

Maintaining the balance between health, safety, the environment, and economic efficiency with the regulations is crucial and yet not that easy. However, as discussed, more and more companies are now exploring innovative solutions to meet these regulatory objectives. It will be interesting to see how the mutual and dynamic relationship between regulations and innovations will fuel the next wave of industrial, social, and economic reforms to build a better future.

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