The Price of Everything - Eduardo Porter [97]
The United States produces about twenty metric tons of CO2 annually for each American. By contrast, China emits five tons per capita, India only one. As these nations industrialize they expect, reasonably, to consume more energy and emit more carbon. But if each of 1.33 billion Chinese and 1.17 billion Indians were to put the same amount of CO2 into the atmosphere as Americans do, they would burden the environment with the equivalent of seven extra American economies, more than doubling the world’s emissions of carbon into the air.
Our new Malthusian moment confronts us with a difficult question. How much can the global economy grow without generating unacceptable climate-driven damage in the future? It becomes more difficult to answer when one flips the question on its head: how much economic growth should we be willing to forgo to avoid producing this damage to the world’s future ecosystems? Ultimately, the question boils down to this: what price are we willing to pay today to protect future generations?
MISPRICING NATURE
The economist Jeffrey Sachs characterizes climate change as “an accident of chemistry.” How could we have known that the carbon released into the atmosphere every time we step on the gas or fire up the furnace would linger there for years, capturing heat and slowly raising the planet’s temperature to the point that it would threaten nature’s precarious balance? But it is also a failure of the market system. Global warming, like the extinction of species, soil depletion, and all the other signs that the planet is having trouble sustaining the humanity that lives on it, underscores the global economy’s inability to put a proper price on the endowments of nature.
In a market system prices are meant to allocate resources efficiently. When demand outpaces supply, prices can be expected to rise and smoothly readjust the balance—drawing more producers into the market and nudging some price-conscious consumers away. Yet this doesn’t happen when it comes to nature’s bounty. We often get that for “free,” no matter how much we consume. As is the case with other free things, the lack of a price signal to modulate our consumption will lead us to consume too much, until we deplete the resource at hand.
This pricing aberration explains landfills overflowing with garbage, rivers laced with mercury, melting polar ice, and depleted cod stocks in the Atlantic. From the point of view of a fisherman, cod are free—his only costs are those of getting to wherever the fish are, finding them, and catching them. That means he will catch as many as he can. So will every other fisherman in the vicinity. Overfishing—pulling them out faster than they can reproduce—is the inevitable consequence.
We have done the same thing with most “free” resources of nature—from clean air to clean water. Water, mostly a public utility around the world, costs very little; its price doesn’t rise to reflect its growing scarcity and encourage us to consume it prudently. The cost of dealing with nitrogen runoff into streams is usually not incorporated into the price of our crops. Lacking prices to ration their use, free clean water and free clean air have met the fate of free things everywhere: they have started to run out. We are scrambling to deal with the fallout. Nowhere does this dynamic present a more menacing threat to humanity’s future than in the context of climate change.
ENERGY IS PROBABLY the most egregiously mispriced good. The cost of gas at the pump incorporates the cost to find the oil, pay rent to the rulers of whatever country sits atop it, pull it out of the ground, refine it into gasoline, and move it to your local gas station. But in most countries no part of the price accounts for the effect that carbon dioxide released by burning oil has on the atmosphere.
This is devilishly hard to measure, depending on many assumptions