...What Can We Do About It?
The free market system. A system where "the market" (supply and demand and other factors) determines the price of goods and services. For many, the free market is comparable to motherhood and apple pie!
But the free market system has what may prove to be a fatal flaw, if we don't deal with it soon. Specifically, the free market often does not factor in "externalities" in setting prices. One definition of an externality is "a cost or benefit that affects a party who did not choose to incur that cost or benefit." Some examples include the health and environmental impacts of air and water pollution from the use of fossil fuels--the impacts affect many who did not choose to spill the oil, mine the coal, frack the shale, etc.
The prices we pay for some (most?) goods do not reflect their true costs. Ultimately, we all pay the costs of air pollution (e.g., costs related to pollution-aggravated diseases such as asthma), the costs of radioactive waste disposal (as yet undetermined), and the costs of cancers resulting from exposure to carcinogens released into the air and water by manufacturing processes or the burning of gasoline, but these costs are not included in the price we directly pay for the good or service that caused them.
The energy sector is notoriously bad at including the full costs of energy production and use in the price we pay for energy. Again, we absorb the costs of pollution--in myriad ways--but many of these costs are not reflected in the price of a gallon of oil or a kilowatt-hour of electricity.
Every gallon of oil or gasoline or cubic foot of natural gas that we burn contributes to global climate change. We suffer the costs of the growing impacts of climate change (e.g., stronger storms, more severe droughts, rising sea level, expanding ranges of pest species, etc.). But the price we pay for oil, gasoline, or natural gas does not include those costs. If the price of these fuels included the externalities, we could more readily see the advantage of cleaner, renewable sources of energy such as solar electricity, wind, small-scale hydro, biomass, etc. Of course these, too, have costs that are not factored into their prices, but I would argue that these costs are significantly less than the externalities due to fossil fuels and nuclear power.
So, how do we fix this seemingly intractable problem? How do we make energy prices more accurately reflect the true cost of energy? How do we help the free market encourage us to make rational decisions about energy purchases--e.g., a decision to purchase less, low-priced oil that results in global climate change and purchase more, apparently higher-priced solar electricity to power our emission-free space-heating heat pumps and electric cars instead?
One way is to add a carbon tax to fossil fuels in an attempt to make it more clear what the true costs of those fuels are. Many don't like the idea of higher oil or gasoline prices. But we also don't like polluted water, polluted air, cancer, devastated land, higher-priced fruits and vegetables due to droughts, flooded coastal cities, etc. Doesn't it make sense to include the external costs of oil and gasoline--costs that we all pay while the oil companies reap huge profits--in the costs charged to oil companies and the price we pay at the pump?
Rather than ignore the fact that the “free market” doesn’t accurately price energy and rather than ignore the fact that the market actually encourages us to make irrational, planet-threatening energy purchases, shouldn’t we wrestle with the difficult task of improving the way the market works?
Obviously, there are many details to be worked out. What do we do with the carbon tax dollars that are collected? Do we subsidize consumers as they transition away from fossil fuels? Do we provide incentives to encourage people to purchase renewable energy and non-polluting electric cars? Do we subsidize the costs of adding insulation and sealing air leaks in houses so that Vermonters use less energy for heat?
If you'd like to learn more about how a carbon tax might help us make more rational decisions about energy purchases, attend the free public forum at the Richmond Free Library at 7:00 PM on Tuesday, 4/21. For more info see: http://tiny.cc/richmondcarbontax or https://drive.google.com/file/d/0B4iv_xyI0VcwVU4zNG1PcE04T0k/view?usp=sharing
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