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Ecommerce in the age of the virus: the dark secret behind the rise of online shopping

EconomicsEcommerce in the age of the virus: the dark secret behind the rise of online shopping

It is undoubtedly true that the rise in ecommerce is bad for the environment. It seems really easy to think that ecommerce is beneficial. After all, if you order all your food and other products on the internet, you don’t have to drive anywhere. You, the consumer, are not burning any gas directly. However, the delivery of products to your house is causing a large environmental impact, one that is hidden from view.

It’s indisputable that trains and buses are able to transport people while burning a lot less fuel than cars. Even carpooling is greener, which is why this practice is incentivized by highway carpool lanes. The main idea of carpools is that multiple trips along the same route are combined into one shared trip, a trip that might require a slightly bigger vehicle but a lot less tonnage than if everyone were in their own vehicle. Originally, ecommerce orders would be collected in a large warehouse until the deliveries for one neighborhood could fill an entire truck. But, with the advent of lightning-fast two day shipping, Amazon Prime (with no minimum purchase required to qualify for free shipping), and tiny non-prime free shipping purchase amount minimums, this concept of collecting large amounts of items and shipping them all at the same time has died.

For one thing, giant boxes are being filled by one small product, which is very wasteful. In addition, trucks are being sent out far from full to drive their long routes. This is causing enormous waste. Instead of driving to the store to pick up a bunch of products (as many people tend to do), people are now tending to order one or two things and expect it to be delivered in one or two days, causing a truck to be sent out just because they, and a few other people, ordered barely-full boxes full of one or two products. And remember, not all these products are actually needed by the purchaser.

In addition, a fact that is not well known is that diesel (which trucks burn as their fuel) releases four times more nitrogen dioxide and twenty-two times more particulates than gasoline when it burns. It is commonly thought that diesel is much more efficient and beneficial for the environment than petrol, but this is not the case.

Delivery trucks pollute the environment. Their CO2 emissions contribute to rapid climate change and their particulate emissions cause a range of health problems such as asthma (niehs.nih.gov). And, the recent rise of ecommerce and the demand for convenient instant gratification has led to an increase in the amount of delivery trucks driving around and as a result, a further increase in environmental harm. It’s a serious problem, and one that we need to watch.

An eco tax

One way to try to minimize the negative externalities (hidden social costs that exceed private benefit) would be to institute an “eco tax” on all ecommerce which would internalize the negative externalities. Basically, an eco tax would be a form of Pigovian tax (a tax levied on products in order to reduce or get rid of negative externalities). The purpose would be to reduce the negative impact of ecommerce on our environment.

I believe that the best way to do this would be to disincentivize certain especially harmful forms of online purchasing. One strategy could be to charge a fixed eco tax on every shipment therefore incentivizing the purchase of several items at once, one order. Maybe the eco tax could also increase as shipping time decreases (a negative correlation) in order to further incentivize longer shipping times. To Amazon’s credit, they do incentivize prime members to choose longer shipping times rather than the super fast option, although not having to ship as many orders as fast does also benefit their profit margin. However, I think that the eco tax should not be levied on every single ecommerce transaction. Brick and mortar stores also cause environmental harm, but harm of a different nature.

The pandemic’s effect on ecommerce

The COVID-19 pandemic has had a large impact on consumer behavior. According to Statista, 84% of the respondents to a survey said that their behavior had been affected in some way by the coronavirus pandemic. Since the pandemic made it risky to go out in public, those who were privileged enough to be able to stay inside their home started buying everything (including groceries) online. The effect was a drastic increase in the rate of ecommerce sales.

During the pandemic, the ecommerce market’s share of the wider retail market increased by six percentage points. In the United States, during the second quarter of 2020, its market share peaked at 15.7% (Statista). This is a significant increase. In the UK, the ecommerce market share increased from 20.3% to 31.3% (OECD.org), an even more drastic increase! Finally, 52 percent of respondents reported shopping more online during the pandemic (Statista). And, it seems that although ecommerce sales have decreased slightly from peak pandemic levels, they remain much higher than before the novel coronavirus arrived to haunt us. So, ecommerce sales have increased drastically, meaning that more delivery trucks are out on the road polluting. 

I have personally seen this shift. Before the pandemic, I saw barely any Amazon prime trucks (or UPS trucks for that matter) on the road. But now I see at least one Amazon prime truck everywhere I look. They are everywhere at all hours of the day, delivering and harming the environment. It doesn’t matter that Amazon is pledging to be carbon neutral by 2040 and is adding electric vehicles to its fleet (although that is good). Right now, at this moment, Amazon is delivering like crazy and creating waste and pollution as it does so. Don’t forget that electric vehicles are for the most part charged by electricity generated by the burning of dirty fossil fuels.

The COVID-19 pandemic has both contributed to environmental pollution and reduced environmental pollution. On one hand, lockdowns and shutdowns caused a lot less transportation-induced pollution. Cars weren’t driving and planes weren’t flying. According to CNN, people in the Punjab province of India are able to see the Himalayas from over 100 miles away for the first time in 30 years. This is because of the large reduction in air pollution and smog. However, as discussed before, the rise of ecommerce has served to counteract this effect. So, I believe that the coronavirus pandemic has had a net environmental effect of zero.

Now, I will leave you with a question:

Do you think that your behavior going forward will be influenced by the concerns raised in the week’s articles and the explanations of how free and fast shipping negatively affects our planet? In other words, do you think that you are now more likely to choose an option with a longer delivery time or try to group more of your purchases together?

Please feel free to leave a comment below with your thoughts.

Disclaimer: The opinions expressed herein are not necessarily those held by GoldPundit or GoldPundit Media.

Images courtesy of Pixabay.

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