The more I study solutions to our environmental issues, the more I get frustrated with our economic structure. The answer is pretty simple, but we fail to make any progress on it.
Align our purchased price of an item with the true cost.
If oil and coal have a negative impact on the environment, then we should pay extra for that. That will increase the cost of electricity and gasoline. This will lead to increased investment in renewable energy or energy efficient options, and more fuel efficient vehicles, which will reduce our cost
Why don’t we do this? Because we’re always complaining that we can’t raise the costs of anything, because it’s “not the right time” or it will hurt businesses and the economy, or make it harder on the poor. But we continue to hurt everyone in the process, so we need to stop making that argument.
This also shows up in other areas of your life as well. Let’s stick with the environment for a second.
When you search for an apartment to rent, you probably search by monthly rental price. However, your actual monthly expenses are also affected by the energy efficiency of that place. If the place is well-insulated, has energy efficient appliances, and a solar water heater, your utilities will be lower than a place without. Yet you cannot easily compare the total price very easily. Therefore, if that place is asking for $1200 per month and the utilities are $100 per month, and another place is asking for $1100 (with higher utilities of $250 per month), most people are going to look at the less efficient apartment more often than the energy efficient one, even though the total cost is less ($1350 compared to $1300). We only look at the rent price, not the total cost, and so we make a bad investment. If that apartment ends up being vacant, then we negatively impact the environment by living in a more energy wasteful apartment. We also are not paying for that extra wasted energy, but we are paying for it in more emissions from the power plant, which impacts our healthcare costs. Just for starters, I would like to see the estimated utility cost added to the rent price, so I can search by total price, and have a better chance of finding a more environmentally-friendly place to live. Maybe someday we can add the externalities into the cost as well. Let’s talk about those in more detail.
We see this externality cost show up in other places, especially in our food prices. If you buy a donut for $1.00, and skip a healthy local organic fruit for $2.00, you will have more transportation costs (environmental impact), more chemical pollution from the junk food factory (pollution), less nutritional value which could increase your healthcare costs in the future, and more packaging (landfill waste), which you will need to pay for in trash charges or city taxes to expand the landfill in the future. Bottom line, the organic fruit was less expensive overall, but we tend to make short term decisions with our money, and that’s where we run into problems.
I realize that it can be difficult to estimate these costs, but without them, we have to educate all consumers on these external costs, in order for them to make the right decision for themselves, their families and the environment. If we could add up these costs and factor them in to our current pricing, then we can just sit back and let the market take over, and we wouldn’t have to provide rebates and incentives to improve the environment. Then the businesses you work with won’t have to use carbon footprint as a reason for implementing energy reduction or renewable energy projects, they’ll almost always have a cost reduction or avoidance reason for doing so.
So how do we do this? We tax the things that hurt society. Your gasoline prices will go up, your coal-powered electricity costs will go up, your food prices might go up, and you will see increases in other items (furniture, clothing, consumer products, etc) depending on how much they pollute. We are already paying these costs today in some areas, or we are creating a global warming problem that will end up costing us a tremendous amount of money in the future to clean up the floods and weather-related problems. All we need to do is tax the “bad things”.