A Double-Edged Market Solution to Climate Change

I’m certain most of you have heard about taxing carbon. It’s a policy of charging for the release of carbon dioxide and other greenhouse gasses into the air. The reasoning for this is called the internalization of externalities. An externality is a cost which someone makes others bear. If I don’t take out my trash, it not only smells to me, but my roommates have to deal with that too. The same goes for communities and the environment. If I’m using my car or running a factory, when I pollute the air and contribute to climate change, I should have to pay that cost.

And honestly, you don’t even have to spend that money towards anything special to get the job pretty well done. Just the simple act of pricing activities better through making users bear the actual cost is enough to better balance people’s choices with the consequences. If gasoline costs what it is supposed to after factoring in the pollution, that finally puts it on equal playing field with an electric car — the way it should be.

Something that has been particularly important in 2019 is deforestation and wildfires. The folks in California don’t choose to set alight millions of acre of land, but many of the fires in South America were intentionally started to clear land for development. I’ve discussed this very topic with the ethics committee I’m on for the past two years:

Are we allowed to tell poor countries they cannot use their natural resources?

Some people say heck yeah! South America is the lungs of the Earth. They must preserve those forests. Anything else would be catastrophic. Others say heck no! We need to mind our own business and stay out of other folks’ decisions.

Both of these are wrong.

It is our business, and we cannot tell them what to do. This sounds bonkers, but consider this: what occurs anywhere in the ecosystems of the planet can affect the globe due to increases or decreases in greenhouse gasses. We also would be hypocrites to ban another sovereign nation from using its resources to develop when the United States has been the single greatest beneficiary of the Industrial Revolution. We built this country on exploitation of resources; what makes us so special that no one else is allowed to do the same?

The case I want to make, though, is that this doesn’t mean we cannot and should not do anything. What it means is that we must consider a solution to encourage action that is beneficial to not only developed nations but also those who are foregoing resource harvesting for the sake of others.

Consider the carbon tax. We charge people for pollution because they are contributing a negative externality. Not all externalities are negative. Some are positive. If I buy candles to burn in the common area, my roommates also get to appreciate that. The same goes for communities and the environment. If I own a tree, I am basically the owner of a carbon to oxygen conversion factory.

If we’re so capitalistic here in the USA, why don’t we compensate the shareholders who own equity in the preservation of the planet?

Pay forest owners. Allow trees to be deducted from income taxes. Direct funds to developing countries that function as the lungs of the Earth so they can invest in leap frogging to a services-based economy. If we are going to price carbon as it enters the atmosphere, why don’t we price it when it comes out?

I can understand countries deforesting massive swaths of land when countries like ours bark at them to stay poor and don’t provide better solutions to raise their standards of living. If we want to save the planet, we better start paying rent.