Getting Real about Environmental Costs: A Response to Jo Ann Emerson

Representative Jo Ann Emerson (R – MO) isn’t happy about the idea that the EPA is looking to track (and then potentially tax) the creation of pollution:

The FY 2010 budget submitted to Congress in April contains an outline for a $646 billion tax based on the measurement of the gases subject to the proposed EPA rule. If you switch on the lights in your home or turn the key in your car, you will be bearing the cost of these new taxes. It sets a dangerous precedent in rural communities where our lives and our economy are energy intensive.

I can certainly understand Emerson’s empathy for the needs of the rural voters she represents. But she’s missing the central issue here: if the lives of rural voters really are especially energy intensive, that’s a problem, not an excuse. Maybe rural living should be more costly if it’s going to require a lot of pollution.

To put it another way, Emerson speaks of environmental concerns and regulations as creating additional costs for rural residents. Environmentalists, however, would retort that these costs already exist: pollution reduces air quality and increases problems like global warming that will have very real economic consequences on everyone. The problem is just that those costs are felt primarily by people (non-rural voters) who have no direct control over them.

If that’s correct, then the standard economic 101 solution is that the very people choosing whether or not to pollute need to internalize that larger social cost into their decisions. That means making sure that the price of energy intensive activities reflects their full cost. Once that’s the case, rural voters can then figure out for themselves whether the cost of the pollution is really worth whatever they’re doing that creates it. And if that means that living in rural areas becomes more costly overall, and less people do it as a result, then that’s an appropriate economic correction, not a bad thing.

There’s of course no question that, at least from the perspective of the status quo, this sort of change will bring hardship to many who are used to the status quo. People are accustomed to getting a sort of discount by imposing external costs on the rest of us, and they’ve planned out their lifestyle assuming that this situation will persist forever. But that’s still not a serious argument against the change: the whole point is that the status quo itself is harmful, creates bad incentives, and needs to be fixed.

Many politicians are quick to attack people that receive what they see as wasteful government aid. But cutting funding to some program (i.e. correcting an inefficient government expenditure) undeniably causes real hardship and economic ruin to those who have come to rely on it. In that situation, however, most politicians are still able to recognize that the cuts need to happen regardless: the status quo is simply maintaining an injustice and causing economic distortion that leads to even more bad choices down the road (i.e. more people living in overly expensive situations than they otherwise would if all the costs were taken into account).

Why is it so hard to see that exactly the same thing is at stake when it comes to environmental concerns?


~ by Drew on 2009/05/13.

2 Responses to “Getting Real about Environmental Costs: A Response to Jo Ann Emerson”

  1. Because they have an undying faith in the “free” market, even though that free market fails to solve problems time and time again.

  2. Well, in this case the reason the free market doesn’t fix the problems is precisely because the costs are not being properly internalized.

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