Brendan Read's Blog


Post-Earth Day Resolution: Start Charging For the Environment

24 Apr 2015 | by Brendan Read
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Economists point out that “there ain’t no such thing as a free lunch (TANSTAAFL). That goods are scarce; as more of them are consumed there will be less available. And that prices rise when supply shrinks.

But the logic of TANSTAAFL, and supply and demand, are mistakenly not being applied to life-sustaining environmental goods: air, water, open space, trees, wetlands, and arable land. Instead, economics, and the marketplace, incorrectly treat them as “free goods” that will never run out. Moreover, the costs of when environmental goods are damaged, degraded, and/or destroyed are not accounted for.

The failure to fully charge for using environmental goods and incorporating them into product and service prices, that is the root of the global environmental crisis. By not paying for these costs upfront we are subsidizing our destruction by making unsustainable decisions and purchase choices cheaper.

There are all too many illustrations. Companies that end telework result in more pollutants from commuters’ vehicles, their energy sources, and from transportation system building and upkeep. Firms choosing greenfields for offices, factories, warehouses, and solar parks, while brownfields go empty or existing space (such as parking lots) are underutilized. Homebuyers who pick newly built large houses to accommodate home offices, among other reasons, built on former farmland.

In this distorted marketplace, environmentally efficient goods become overlooked in favor of those that waste resources. Like business travel, instead of unified communications and collaboration solutions, driving instead of transit, and non-recycled goods for recyclables. Our unwise environmental decisions decrease productivity and increase costs and taxes. To illustrate, pollution and sprawl lead to higher healthcare and water wastewater expenses while sprawl slows down highways.

Yet if we continue down this path we will inevitably face the ultimate set of scarcities that will shorten our all too brief existence. While rising prices often lead to more, or substitute products this is not true for the environment. We don’t have an alternative to Earth.

If there is one post-Earth Day resolution we should make and follow it is to find a means by which to effectively and equitably charge for environmental goods. Tapping the power of the marketplace is the most defensible and effective method of limiting pollution and climate change. It shifts the conversation from the false and futile “environment or the economy” to, correctly, “environment and the economy.” This strategy and tactic will help us respond to, and shape, the converging economic, social, technology, and environmental global Mega Trends and ensure a sustainable quality of life.

Making the environment user-pay will not be easy. First, many environmental costs are becoming understood, but they are still difficult to quantify, link to cause and effect, and assign to products and services. Second, there is powerful opposition from producers and users to paying their share. The GOP-controlled U.S. Congress has strongly resisted President Barack Obama’s climate and environmental initiatives. The Canadian Liberal party was crushed by Stephen Harper’s Conservatives in the 2008 election after its then-leader, Stephane Dion, proposed a carbon tax.

Yet if we are serious about keeping Earth inhabitable then policymakers have to own up to their primary responsibility of protecting the inhabitants. Here are several steps to consider:

  1. Increase research into environmental cost quantification and attribution with standards-like process engaging all parties to achieve a fair, if compromise, consensus. Value-added tax regimes like Canada’s Goods and Services Tax offers a road map. There are others.
  2. Offset charges with lower general taxes. Insist that imports also include environmental costing; not having it amounts to unfair trade subsidies.
  3. Create an administration means. Utilities offer a well-understood model.
  4. Prod the private sector in developing environment goods costing by withholding development approvals pending cost quantification, including downstream impacts. Give added weight to suppliers who have entered the amounts in their bids.
  5. Have the fees offset present and limit future environmental damage, like remediation, healthcare, setting up recycling, and improving transit.
  6. Identify and phase out direct and indirect subsidies that contribute to environmental damage.

Finally, governments should aggressively communicate environment costing programs on the common sense and fair play economics themes. Let’s quit subsidizing pollution, waste, and sprawl. Time—before it is too late—to end the environmental “free lunch.”

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