April 26, 2005

Prices on the environment

There is much talk these days about "creating" markets for ecological services and thus "putting" prices on the environment (see this article in the Economist). Cardozo Bozo puts his finger on the key issue in a comment to a post in WorldChanging:

The real problem I see with Environmental Economics at this point is legal/ political - specifically, property rights. Who has the right to charge for environmental services? Well, the landowner I guess. But lots and lots of land is owned by the world's Governments. Gov't is a notoriously bad resource manager. Pretty much all of the land currently in the public domain will have to switch to private hands before we really see big gains from this. Yellowstone Park doesn't have any incentive to charge for services, but Yellowstone, Inc. would. Teddy Roosevelt's park system was a great idea for its time, but that time has passed. Better for the parks to pass into private hands so that their full environmental value can be realized (and monetized).

This makes great sense to me. Cardozo Bozo goes on:

Also, once you start paying people for fresh air, the next logical step would be to charge people for pollution rights, at all levels. This would put enormous pressure on every business and consumer to minimize pollution production and switch to clean technologies. We already have Cap-N-Trade systems for bit polluters, like electric utilities, but once we have clean cars/ lawnmowers/ etc., there's no reason not to 'monetize' the folks who insist on using gasoline.

Now, this is problematic. Who "monetizes" folks, and how? Land can have clearly-defined owners, but air cannot. If I nominally own a piece of air and sell my polluting rights to my neighbor he will pollute everyone's air, not only mine.

So we let government manage our air, as in cap-and-trade systems. But government is in turn managed by interested parties, such as electric companies. Maybe we should take air out of government hands and deal directly with polluters (including our polluting selves), because we are likely to be more influential as strategic neighbors and consumers than as voters.

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