We won’t solve global warming through voluntary effort

People who say they care about the environment believe that we could end global warming if only every person, corporation, and government, cared about the environment as much as they do. Certainly they believe that by purchasing carbon offsets, voting for high speed rail and expensive public transit, shopping at Whole Foods/purchasing locally, buying Priuses/Vespas/used cars, investing in solar panels or ethanol, and/or recycling (which does provide benefits), that they are 1) making a difference in the fight against global warming, and 2) that if everyone were to make the same sacrifices, the world would be safe from rising sea levels. (By the way, the sea levels are rising; no serious academic denies this).

I call bullshit, for the following reasons.

1) For most people, it’s much more important to signal care for the environment than actual care for the environment. Currently, good will toward the environment tends to have very visible signs. The government wants to construct new high speed rail lines, wind farms, and have cars running on ethanol. Energy Secretary Steven Chu’s plan to paint all of our roofs and roads a lighter shade, which would have roughly the same effect as removing every car in the world from the road for 11 years, was pretty much met with crickets. As one of six billion polluters on Earth, I am not going to observe any difference in the Earth’s temperature whether I drive a Hummer or ride a used bike. The social benefit from signaling care for the environment outweighs the observed environmental benefit.

2) It is nearly impossible to put a price on “benefit to the environment.” Many people act as though helping the environment is worth any price, like the tagline in the Visa commercial. As Arnold Kling writes,

Once you stray from using market prices, you can have all sorts of unintended consequences. How many gallons of fresh water should you be willing to use up to save a pound of carbon emissions? Do you know how much more water is used in the manufacturing of biofuels compared with the refining of gasoline? The whole point of market prices is to do these calculations for us.

The usual result is overpayment for little actual benefit.

3) When the laws are set up so that the cost of pollution is low, it makes economic sense for people and firms to pollute. The environmental problem is known in economic terms as a free rider problem. If paying taxes was voluntary, it wouldn’t make sense for anyone to pay, because everyone enjoys the benefits, like an army and paved roads, whether or not they personally paid taxes. Similarly, it doesn’t make sense for people to reduce their polluting activity, because the Earth is going to warm up whether or not they eat less meat this year.We pollute because it is cheapest for us to do so, even though in the long run society is worse off.

Companies have only one goal: to maximize profits for their shareholders, by providing services or goods that people want at the lowest possible cost. Environmentalists tend to view this as evidence of the evilness of firms, but companies are not purposefully evil; they are indifferent. Extra costs for helping the environment, in the form of “social obligations,” will raise a firm’s costs, reduce its profits, and make it less competitive relative to firms that are not worried about the environment. I believe most current environmental efforts by firms are merely for good public relations, as in #1.

4) If people think their voluntary efforts are actually making a difference, they may be less likely to support the massively expensive, painful regulations that we will need to actually solve the problem. As Richard Posner writes,

If people believe that voluntary efforts will suffice, there will be no political pressure to incur the heavy costs that will be necessary to avert the risk of catastrophic climate change.

The people who are most likely to buy carbon offsets, go local, support the environment, are the people who we need most to support useful legislation on the environment. If they are content to “avoid cognitive dissonance by exaggerating the practical efficacy of largely symbolic gestures, such as purchasing carbon offsets,” as Posner says, they will be less likely to push for the deeper sacrifices that we need to make to save the planet.

The simplest economic solution, but the toughest politically, is to place a higher price on pollution, so that people and firms make environmentally beneficial decisions as a normal result of cost-benefit analysis. Prices are an unbelievable tool for aggregating costs. The price of milk tells you exactly how much it costs to raise a cow, milk it, bottle the milk, drive it to the store, and pay someone to stock it, without having to worry about how much the individual components cost. That way, people who pollute would pay higher prices, to offset the damage they cause to the environment, and everyone would have an incentive to make smart environmental decisions.

2 thoughts on “We won’t solve global warming through voluntary effort

  1. Andy McKenzie

    Good post. Number four is obviously the controversial one, and I doubt the correlation you are positing between whether people who actually buy carbon offsets will be less likely to support changes at the political level. I think that the effects of such actions are neither good, nor bad, but for the most part decidedly neutral. Sure, it’s annoying when they think that they are doing something good, but that doesn’t matter so much either.

    Reply
  2. D

    “The solution to the problem is to place a higher price on pollution, so that people and firms make environmentally beneficial decisions as a normal result of cost-benefit analysis.”

    Fancy words my friend, but a few questions:

    1. By what form of measurement do you suggest that we base price increases on? In other words, how do we evaluate the price of pollution and what do we consider when determining how much to raise the prices?

    2. Do you believe that, economically, this planned increase could ever be more than a gradual adjustment? Could the United States impose drastic price increases for a unit of pollution and still manage to balance economic concerns, or would we suffer drastically in the global marketplace? Would this require a world-wide installment of price increases instead or would it still be an effective plan when implemented by individual countries.

    3. Do you have a Prius and shop at Whole Foods? If so, why?

    Nice writeup.

    Reply

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