Climate change affects economies of all sizes. In small and insular markets in particular, competition law enforcers are faced with a regulatory stalemate. Mitigation of climate change, adaptation and ecosystem restoration may require cooperation, shared infrastructure and investment at a scale that narrow markets cannot sustain easily without increasing the risks of market power, exclusion and excessive coordination.
That is why it is essential for competition law protect competitiveness, market entry and consumer welfare without becoming an unintended barrier to legitimate climate action. The question is not whether small markets should apply weaker competition rules. They should not. The question is how established competition principles should be applied where scale, geography and market structure make conventional large-market assumptions less reliable.
This joint COP 31 policy paper by ICC–ISLE examines the specific competition challenges in small and insular economies and proposes six principles to help competition authorities and businesses support sustainability initiatives while safeguarding effective competition.
Six principles for competition law in small and insular economies:
- Climate and sustainability objectives do not displace competition law; they form part of the factual and economic assessment where the applicable legal framework allows.
- Concentration should not be assessed in isolation from entry conditions, efficient scale, innovation and the counterfactual, or the impact on sustainability.
- Cooperation between competitors to achieve sustainability goals should be permitted only where it is genuine, necessary and proportionate to achieve those goals, with clear limits on competitively sensitive information.
- Where infrastructure duplication is inefficient or not sustainable given the local ecosystem, competition should focus on fair access, interoperability, non-discrimination and future contestability.
- Competition authorities should provide practical legal certainty for time-sensitive climate and sustainability initiatives, using guidance or early engagement mechanisms where legally available.
- Any accommodation justified by small-market conditions should be evidence-based, transparent, reviewable and time-limited where possible and appropriate.
Can your climate initiative go ahead without breaching competition law?
Take the Small-Market Competition and Climate Test – a six-question checklist to help authorities and businesses assess whether a climate objective is genuine, whether cooperation or concentration is truly necessary, whether benefits outweigh restrictive effects and which safeguards are required.
This paper advances ICC’s goal to align competition frameworks with climate goals.
