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Polluter Pays

Hanno Beck:  What The Polluter Pays Principle Implies
  Dinner has ended. Over a cup of tea, Sara is talking with Vernon:

    "... and so those new policies are justified because of the Polluter Pays Principle." ...

   But Vernon says, "It is not obvious to me. I do not agree with the Polluter Pays Principle. Why does it have to be the polluter's problem when he causes damage to the life or property or rights of others? Maybe it should be all the taxpayers' problem, or only the problem of people whose names start with the letter K."

    Now what is Sara supposed to do? What can you do, when somebody says they don't agree with something that seems obvious to you? ...  read the whole article

Hanno Beck:  Bathroom Policy
We were four college sophomores. And we were not going to live in a dorm, no sir, we figured that we were smart, mature fellows and so we arranged to rent a house. Each person would have his own private bedroom and we would share the bathroom. Four guys, one bathroom. That sounds reasonable, right? ...

Is there a solution? Of course there is. It's a simple solution. To respect our common interest in our planet's resources, those who take or monopolize or pollute more than their fair share of our planet should compensate those of us who they are taking from. ... read the whole article

Bill Batt: The Compatibility of Georgist Economics and Ecological Economics
Underlying the whole agenda is a commitment beyond simple description to sustainable development economics and to Daly’s “steady state” economics. This entails the institution of environmental safeguards, protection of cultural and biological diversity, minimal resource use, and recycling. It further means protection of small countries and localities — of both ecosystems and populations — against all-encompassing economic units that preclude the possibility of their being able to survive independently. It presumes also that not just humans alive today have entitlements, especially privileged elements of wealthy countries; it recognizes rather the justice and moral claims of people and natural ecosystems yet to live to survive as intact and integral units. It recognizes that governments must take a hand in the preservation of such ecosystems, as markets forces left to themselves will wreak destruction on the most vulnerable parts of the earth and ultimately upon the earth itself. It accepts the fact that the carrying capacity of the earth is  limited, and that we appear to have already exceeded that carrying capacity in our ignorance.119
119One oft-cited article is that of Peter Vitousek, et al, “Human Appropriation of the Products of Photosynthesis,” BioScience, Vol. 36, No.6 (1986), pp. 368-373, available at http://dieoff.org/page83.htm. It calculates that consumption of earth’s resources is doubles at an ever increasing rate, and that humans have already appropriated 40% of terrestrial biological productivity. The most comprehensive collection of articles addressing this perspective is created and maintained by retired Cornell Professor Jay Hanson, at www.dieoff.org. The site name arises from his view that the world economy’s dependence upon fossil fuels faces an imminent end, and the earth will then be capable of supporting only about two billion people. Hence a looming dieoff.

The distinction between CAC approaches to environmental challenges as compared with pricing approaches is central to all this analysis. Daly’s shows a strong preference for the latter. In what he calls “graded ecozoning,” for example, potential atmospheric impacts are divided into three areas.
  • First, for emissions that do not cause significant damage and do not accumulate in significant concentrations, taxpayers would be charged a general fee.
  • Second, in instances where incentives require altered behavior to address problems such as high ozone or carbon monoxide emissions in certain local areas, more targeted taxes would apply.
  • Finally for those pollutants that have profoundly damaging impacts, regulation and perhaps criminal liability would be called for in cases of their release. These classes are labeled the “property rights zone,” the “incentive zone,” and the “regulatory zone” respectively. The model follows the growing interest and preference for pricing approaches over more heavy-handed and administratively inefficient CAC approaches.
Green taxes, sometimes also called corrective taxes or Pigouvian taxes, are their first candidates for consideration. This is because they can, if priced right, recover the costs of externalities in ways that allow individuals to use their own discretion about employing environmentally damaging practices. But the authors extend their thinking to cover goods and materials that may have negative ecological impacts although not yet conclusively demonstrated by science. The answer there is to rely upon a “precautionary polluter pays principle” based on the present value of the forecast impact should the worst case scenarios be borne out. The annual cost of using a car in the early 1990s, for example, was $51,656 according to their calculations.120 This would obviously entail an enormous imposition of taxes, far above the less than $7,000 direct annual costs typically shouldered by drivers now,121 the rest of which are now passed on to society generally. Grave doubt exists about the potential impact of various externalities of driving, along with concern about the extent of damage which might possibly occur to the ecosystem; this warrants employment of the precautionary principle and calls for policy solutions to curtail this travel mode. Complete prohibition of certain materials and chemicals may be warranted in some cases.... read the whole article

Mason Gaffney: Nonpoint Pollution: Tractable Solutions to Intractable Problems
The frustrated economist, unable to tax runoff, still has a bag of tricks.  He looks for surrogates to tax, something in a sack or bottle that moves through a market: Aha! pesticides, fertilizers, salt, they'll do nicely to tax.  Thus we will "internalize the externalities" and have "proper pricing of inputs" to create incentives for correct "trade-offs" in the "production functions," and we're nearly home.  Well, halfway home.   

Well, we've made a start.  A few problems remain.  One is that a plurality of economists don't like the effluent charge approach anyway, even for point sources.  They follow Coase and prefer to grant pollution entitlements to be traded in a free market.  Incredibly (to me) this view has prevailed.  

In principle they profess not to care what worthy few get the original entitlements, but in practise a select company of ancient and honorable polluters get them.  We now call these "offset rights," a new form of property.  In the L.A. Basin (South Coast Air Quality Management District), a few have grown rich by establishing their respective histories of pollution which they can now sell to others who wish to continue this wholesome tradition.  The demonstration effect on those contemplating new and as yet unregulated forms of pollution may be imagined.   

Those needing air to breathe?  Well, according to the modern philosophers they can enter the market, buy up offset rights and retire them.  Thus is fulfilled Robert Ingersoll's forecast a century ago that if some corporation could bottle the air they would charge us to breathe.  It seems to confirm this dour warning from a former Secretary of Labor:  
"We soon  discovered ...  the danger of allowing economic policy to be dominated by business or financial interests or, which usually comes to the same thing, orthodox economic analysis."  (Marshall, p.ix) (emphasis added)

The public has learned what is being done to it, finally, and is rebelling at the Coase logic, which only a Chicago economist could love.  Offset rights are on the ropes.  To simplify, therefore, I am not going to speculate how Coase might be applied to nonpoint, but just ignore it.  I will treat effluent charges, and taxes on surrogates, as the conventional economic solution to pollution.   

But before leaving this there is a lesson in it.   The holders of offset rights, whether "ancient and honorable" or "innocent purchasers," are demanding compensation.  Never mind about asking them to pay the victims; they demand payment to stop!  (Polakovic, 1987)  

They will probably get it, for if the system be changed, there will be a taking of something, which they claim is property.  Such is the force of the Great Secular Superstition, that unearned gains are sacred, even those originating with something as unworthy as dumping crud on other human beings.  This superstition is why effective control seems so expensive.  My remarks will not be instructed by it.   ...

The solution is land stewardship, a new-old ethic to supplant the cowboy ethic in which western man has wallowed over several centuries of territorial expansion.   

To reprise from the section on forestry, we must synthesize two concepts of land stewardship.  Concept A says "save for the future"; Concept B says put land to full use right now, to serve and employ people.  Concept AB says do both, but each in the right place.  Use the good land, use it well and fully, employ the workers, serve everyone's needs.  Congregate and cooperate on central, low, flat, fertile ground, as efficient markets and efficient public policies would dictate anyway.  Leave the marginal land in peace.   ...    Read the whole article

Peter Barnes: Capitalism 3.0: Preface (pages ix.-xvi)

But who should own the sky? That question became a kind of Zen koan for me, a seemingly innocent query that, on reflection, opened many unexpected doors. I pondered the possibility of starting a planet-saving, for-profit, sky-owning business; after all, I’d done well by doing good before. When that didn’t seem right, I wondered what would happen if we, as a society, created a trust to manage the atmosphere on behalf of future generations, with present-day citizens as secondary beneficiaries. Such a trust would do exactly what Waste Management Inc. would do if it owned the sky: charge dumpers for filling its dwindling storage space. Pollution would cost more and there’d be steadily less of it. All this would happen, after the initial deeding of rights to the trust, without government intervention. But if this trust — not Waste Management Inc. or some other corporation — owned the sky, there’d be a wonderful bonus: every American would get a yearly dividend check.

This thought experiment turned into a proposal known as the sky trust and has made some political headway. It also served as the epicenter of my thinking about the commons, which led to this book. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 4: The Limits of Privatization (pages 49-63)

I don’t think it will ever happen, but consider this scenario. Imagine Congress passes a law requiring every corporation — in exchange for limited liability — to have a triple bottom line. The law also says that at least a third of corporate directors should represent workers, nature, and communities in which the company operates. And it protects directors from lawsuits if they favor nature over profit. You’re the CEO of Acme Corporation. What changes do you make after the law takes effect?

Well, you might start by increasing your accounting budget. You’ll need, henceforth, to keep track not only of money but also of your nonmonetary impacts on society and nature. This isn’t easy, though presumably shortcuts will be developed. Next, you assign people to find ways to reduce Acme’s negative impacts on nature and society, ranking the proposals by years to payback. You budget a modest sum for the most cost-effective projects, giving preference to those with public relations value. You publish ads and reports, patting yourself on the back for doing what the law requires. And you remind your board of directors that, if they choose, they can snub offers from the likes of Charles Hurwitz and forgo large capital gains for shareholders.

All this would be well and good. But given the algorithms that still rule, how much difference would it make? And even if it did have some effect, would it make enough difference in the right ways? After all, you might spend your small green budget on one thing, while nature most needs something else.

Now, as an alternative, imagine that the price of nature is no longer zero. All of a sudden, it costs big bucks to pollute or degrade ecosystems. Overnight, your managers scramble to cut pollution and waste. The higher the price, the faster their behavior changes. And it changes in response to specific natural scarcities, as indicated by specific prices.

The question is, which of these approaches would work better — mandatory social responsibility, or increases in the price of nature? The answer, without doubt, is the latter. ... read the whole chapter



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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper