On this Earth Day, many bloggers with interests in nature and the natural sciences will post articles relevant to the environmental issues of our times. I feel compelled to join in with the chorus, and shall do so by offering you this – my own humble opinion as to what will be needed to overcome the global environmental hurdles we find ourselves facing.
The hot-button environmental topic of today is global warming. But climate change, carbon emissions and fossil fuels are not the only areas of concern in our world. Plant and animal species continue to decline at an alarming rate around the globe. The oceans are still being battered by polluted and toxic discharge. Wetlands disappear quicker than we can print new maps, and we all know what is happening to the rain forests of the equatorial regions. Air quality is still poor in countries that have attempted to clean it up, and the industrialization of Asia is recreating the same problems all over again, only this time on a more massive scale. The list of environmental threats, as you well know, goes on and on.
What can stem the tide? Sometimes, it all seems to be so hopeless. There are too many issues to deal with, and only so much time and energy that can be devoted to each individual problem.
The few issues that I mentioned seem unrelated at first. For instance, wetlands are disappearing because we drain them for development. What does this have to do with deforestation? Air pollution is caused primarily from burning fossil fuels, but how does that relate to mercury contaminating the fish we eat? Well, there is something of a thread that ties most environmental problems together – externalities.
Externalities – those pesky externalities. Economists have been studying them for decades, if not centuries. Perhaps it is time for all of us who profess to care for nature and the environment to study them as well. For it is my opinion that true global progress in reversing environmental degradation will occur only when we learn to effectively mitigate economic externalities through policy decisions based on sound economic analysis.
An externality, simple put, is a cost that is imposed upon others from a transaction not of their making. Here is a simple illustration of externalities that comes to mind. I buy a gallon of gasoline for my car for $2.50. I drive my car, which pollutes the air, so that you develop lung cancer. If you are fortunate, expensive medical treatment saves your life. The costs you have incurred are not reflected in the $2.50 I paid for that gallon of gasoline, and is thus an economic externality. Now we can go one step further with this type of analysis. Suppose it takes military action in the Middle East in order to secure the supply of petroleum used in refining that same gallon of gasoline that I put in my car. The cost of the military action may be substantial, but that cost also is not reflected in the $2.50 gallon of gas that I purchased for my car.
Another example of an externality can be seen in the disaster of hurricane Katrina. Experts seem to agree that a major contributing factor to the devastation that occurred in New Orleans was the lack of wetland buffering of the storm surge, due to the massive reduction of barrier wetlands attributed to land development over the past several decades. The developers of the wetlands are not being billed for their fair share of the multi-billion dollar rebuilding of New Orleans, and therefore we (as taxpayers) bear the brunt of another externality.
The point I am trying to make with all this verbiage is this – we can only do so much to help protect our environment by planting trees in our yard and recycling our aluminum cans. We must learn enough about the economic issues relating to the environment so that we can demand that our legislators develop policies that attempt to mitigate undesirable externalities.
For an example of the type of economic policy analysis that could be helpful in environmentally sensitive areas, you may wish to examine the following paper, published by the International Association for Energy Economics, entitled Environmental Externalities, Market Distortions and the Economics of Renewable Energy Technologies.
Your thoughts on this issue may run contrary to mine – I welcome your comments, be they pro or con.