More Powerful and Less Costly Than Cap-and-Trade for GHG, Carbon Emission Reduction, Renewable Energy, Resource Conservation...
Based on a free approach (revenue-neutral taxation), this new strategy would make non-green products more expensive and lower relative prices and boost markets for environment-friendly alternatives. As a result, both consumers and markets would shift to more ecological goods and economies would turn green. All of it, not costing a cent to consumers or the taxpayer.
See also Book II of the Waves of the Future Series
6. A Comprehensive Environmental Strategy
Commitment to the
environment has picked up recently but still falls short of what we
need. We have to shift gear, or we will leave behind a devastated
world to future generations. We need fundamental change.
The only strategies
powerful enough to turn things around for the environment are those
targeting the very structure of economies. Patching up after
disasters or dealing with symptoms has not worked so far and will
likely continue to fail us in the future.
We need to use
markets to our advantage and make them work for us. This could be
achieved by changing the
incentive structure of the marketplace in order to create an
economic environment in which environmental practices would be more
profitable than their opposites. The new structure would make green
goods cheaper than others, prompting a shift in consumption patterns
and industrial practices.
The First Principle
The first principle of
a comprehensive environmental strategy is the recognition that a
significant part of environmental contamination and degradation is
directly related to the amount of non-renewable resources we dig out
of the ground. Decreasing our consumption of these resources is key
to both conserving them for future generations and reducing
campaign hard when it comes to global warming and pollution, but few
call for action on the conservation of non-renewable metallic
resources. Yet, these issues are intimately connected, one
being a significant part of the solution to the other.
One of today's
generally accepted principles in science is that nothing is
created nor destroyed. Antoine Lavoisier (1743-1794) and
Mikhail Lomonosov (1711-1765) are credited with its development
and formulation. The law of mass/matter conservation, as it
is known, pertains to the fact that things in the physical world are
not destroyed when they burn or decompose. They are simply
transformed into something else.
As a kid, you saw a
log burn and assumed that the combustion process destroyed it almost
completely, that most of its matter simply disappeared. In fact, it
was only transformed. Some of it was released into the atmosphere
as water vapor, gas, or smoke. Certain elements burned down to
ashes, and the energy that was captured from the sun through
photosynthesis was radiated back into the environment.
According to the
Lomonosov-Lavoisier law, the tons of ore that we mine every year are
not magically destroyed after we are finished with them. They end
up in the environment. Some of what we extract from the ground
becomes refuse at mining sites, and some is emitted into the air or
discharged into toxic lagoons. Jared Diamond, an American
evolutionary biologist and UCLA professor, describes the hardrock
(metals) mining industry as “currently the leading toxic polluter
in the U.S., responsible for nearly half of reported industrial
pollution” (Diamond, 2005, p. 452).
The rest of what is
extracted in the mining process is made into goods that eventually
end up in landfill sites. But the story does not end there. As
Annegrete Bruvoll, the Head of Research at the Unit for Energy and
Environmental Economics (Statistics Norway) reports, ”End
treatment, i.e. waste disposal and incineration, results in
emissions of toxic pollutants and greenhouse gases, and seepage from
waste disposal sites pollutes ground water and watercourses”
(Bruvoll, 1998, p. 16).
The total amount of
minerals we extract every year is exactly equal to the amount of
wastes we generate (refuse, emissions, fluid discharges, garbage,
gases and solids from incineration, etc.). One ton of extracted
minerals today means one ton of waste added to the environment
tomorrow. We dig out ore annually by the millions of tons.
Therefore, by the same millions of tons, we create wastes and
pollutants every year!
Reusing and recycling
are the closest thing we have come to so far in terms of a solution
to the problem. Unfortunately, our best efforts only minimally
delay environmental degradation. Most things can only be reused or
recycled so many times.
In the long term, our
two most prominent achievements, reusing and recycling, will only
give us a bit more time as everything will sooner or later end up in
the environment. Although their impact is very significant in the
short term, they cannot bring change on the scale needed and are
only part of the solution.
Conservation, on the
other hand, achieves two goals at the same time. It preserves
resources for future generations and massively reduces wastes and
pollution: one ton for every ton of minerals not mined or extracted.
The Second Principle
The second principle
of a comprehensive environmental strategy is that cutting down on
the extraction of minerals would not only preserve resources and
massively reduce pollution but also achieve a third goal: decrease
our use of the battery of invisible toxic compounds produced in the
processing of ores and manufacturing of goods.
Many of the toxic
chemicals that are released into the environment today result from
the transformation of the minerals we mine and their manufacturing
into finished goods. A range of compounds—intermediate
chemicals—are produced for those purposes or are by-products
of manufacturing. This is also true of certain toxic metals. As
such, they often end up in lagoons, waterways, and the atmosphere
just like intermediate chemicals.
For example, mercury
is at times used in the extraction of gold. It is also contained in
the ores of other minerals, the smelting of which releases the
volatile metal into the atmosphere. The burning of coal for
electricity or other purposes also results in the emission of
mercury into the air in addition to all the other pollutants its
By virtue of the fact
that nothing is created nor destroyed, intermediate chemicals
and some toxic metals also end up in the environment, in their
original forms or as byproducts.
The Third Principle
The third principle of
a comprehensive environmental strategy is that we have to reduce
world population. Even the greenest measures and initiatives will
not be able to compensate for the devastation that billions of
people can wreak upon the earth. The greater it is, the more
resources are consumed at any given point in time.
For example, if the
total number of people on the planet were reduced by 30% and
everything else remained the same, we would theoretically consume
30% fewer goods and use up approximately 30% fewer resources. We
would need to extract 30% less mineral, burn 30% less fossil fuels.
We would create 30% less waste, pollution, and degradation.
Industrialized countries consume far more than their fair share of
resources. Reducing their population would have a much larger
impact on mineral reserves and the health of the planet.
towards the environment only skim the surface of problems and have
no hope of ever catching up to the current rate of destruction.
There is just too much being dumped into the environment, from
the billions of tons of minerals extracted every year, to the
millions of gallons of intermediate chemicals, to the multitudes
of soaps, detergents, solvents, and cosmetics flushed down rivers on
a daily basis.
Funding for a Comprehensive Environmental
Funding has always
been the stumbling block of the environmental movement. Fixing
problems costs money. This is why our efforts are still only
skimming the surface of problems.
People often complain
of giving too much of their hard-earned cash to governments.
Doubling taxes to raise the trillions needed for the environment is
not going to happen. The countries that do tax for the environment
have only been able to raise minimal amounts for that purpose.
There is no particular support, either on the part of politicians or
voters, for any large amount of additional taxation. Even the most
charismatic environmentalists already have enormous difficulties
raising money to support their own work.
As it stands,
additional taxation can only have a minimal impact for the
environment because of its hopelessly insufficient fundraising
Subsidies and Tax Breaks
When governments give
grants or tax breaks to corporations, they have to make up for the
shortfall in revenue through additional income tax, cuts in
services, or other similar actions. Subsidies and tax breaks are
not as free as many would think; taxpayers ultimately foot the bill.
As such, these approaches to resolving environmental problems are
nearly as limited as additional taxation is.
scored a number of victories for the environment, for example,
outlawing PCBs in open systems and chlorofluorocarbons (CFCs),
the chemicals responsible for the depletion of the ozone layer of
the atmosphere. However, they are also ultimately limited by the
availability of funds. PCBs, for example, are still widely used
today in closed systems. CFCs will only be totally phased out in
2030 despite being the object of significant restrictions and
bans since the late 1980s. Why is that?
Regulations do cost
money either in the form of higher prices for substitutes or because
of conversion expenses. These are usually passed on to consumers.
Once again we pay the bill, this time in the form of more expensive
retail products. This is why regulations are often much weaker than
needed, assuming they make it to the political agenda and are
Short of people
dying, there is a limited amount of social commitment to seriously
address environmental problems and even less with respect to
long-term preemptive planning. Regulations will remain an important
tool for the environment, but alone they have no hope of ever
solving our problems. We may be willing to pay a little more for
greener alternatives but not what would be required for an
environmental turnaround or revolution.
Policies for the Future
has generally failed to make it to the social and political agendas.
Most often, the only resources targeted with our efforts towards
sustainability are forestry and fisheries. This is no great
achievement as both are actually renewable. Despite that fact, we
still managed to fail. The collapse of the cod fishery on the Grand
Banks on the eastern coast of Canada and the U.S. is but a striking
example of our lack of resolve.
We have made no
significant progress on the issue of non-renewable resources, which
is by far much more critical. The world hopes that OPEC increase
production to lower gasoline prices, not decrease it to save
reserves. Nothing is done to conserve metals. On the contrary,
calls are being made to increase production in order to create
development runs over and over again into the same brick wall. The
very incentive structure of the system in which we live directly
pushes us to deplete non-renewable resources to keep prices down or
create jobs. Similarly, it makes it cheaper to pollute, use toxic
compounds in the manufacturing of goods, and flush hazardous waste
into waterways than opt for cleaner alternatives.
Today's reality is
that the more we pollute and decimate resources, and the less we
leave for our children, the greater our economic growth. Two things
are needed to address environmental problems. Firstly, the
solutions have to be on the scale of the problems. Secondly, the
current economic structure has to change. No matter how hard we
fight for the environment, if capital runs counter to our efforts,
little will be achieved. How do we change that? Let us first look
at what has been proposed before.
Hitting the Jackpot
The idea of
environmental taxes is not new. In 1989, David Pearce produced for
the Department of the Environment in Britain a document which
recommended a comprehensive green taxation program in the UK
(Dryzek, 2005, p. 130-132). The U.S., Canada, and many European
countries have already implemented some form of environmental
levies, albeit very minimally. The global warming debate has also
led to talks of carbon taxes in several countries.
Could trillions of
dollars in additional taxation for the environment solve our
problems? Probably. The scale would be appropriate, but the idea
would not be politically viable. Could we find trillions' worth of
spare change within the existing taxation system? The answer is
also very likely no. But...
Many countries have
deterrence or punitive taxes such as levies on cigarettes and
alcohol. These are meant to do two things: deter usage and generate
income for the government. They are dual-purpose levies.
When governments tax income, they bring in revenue but nothing is
specifically being deterred. Because this is a single-purpose
type of levy, society derives from it only one benefit when it could
have had two.
Shifting taxation to
the environment would double the social dividends we get from our
tax dollars. This would create synergies that could achieve a lot
while not costing us a cent. There might not be trillions of
dollars of spare change available within the current taxation
system, but there certainly is that amount of wasted incentive or
Americans and Canadians alone are paying about US$ 2 trillion
annually in income tax, the benefits of such a strategy could be
massive and result in a complete turnaround for the environment in
as little as a decade. Let's take a closer look.
A New Budget for the Environment
There is no doubt that
levies have to be collected to fill governments' coffers and
fund social services, healthcare, education, roads, the police, the
army, etc. But, who is to say that income has to be taxed in order
to raise the money for the above? Canadian taxation represents over
30% of national income. In the U.S., the figure is somewhat lower
but remains a massive component of the country's revenue. Those
represent staggering amounts.
Let me illustrate
with a concrete example what a shift in taxation could do. For the
purpose of the exercise, $1 of deterrence is considered $1 of
benefits although it is not clear how much direct savings the
deterrence would translate into for society. It could be less but
Income tax is a
single-purpose levy designed to raise revenue for governments: $100
of it produces $100 worth of services. With deterrence taxes,
governments collect revenues to provide services as well as deter
the use of products which are generally considered unhealthy: $100
of those provides not only $100 worth of services but also $100 of
deterrence. In the case of cigarettes, the latter could translate,
for example, into lower healthcare costs from decreased cancer
In North America,
when you tax income—as opposed to goods like cigarettes—you get
US$ 2 trillion into the government coffers, but you lose another US$
2 trillion worth of deterrence effect. That alone could radically
turn things around for the environment without costing the
taxpayer a cent, i.e. without additional taxation!
issues are ones of deterrence. We want to deter the emission of
greenhouse gases, the use of pollutants, and the depletion of
non-renewable resources. Shifting the single-purpose tax on income
to an environmental deterrence system would double the social
benefits we get from every dollar of tax paid without increasing
taxation. The US$ 2 trillion of deterrence that this would generate
for North America alone would be a massive engine of change for the
Our lifestyles would
change, but that is unavoidable. As expressed earlier, the
transition to a greener world will occur one way or the other,
either destructively or constructively. However, with the strategy
proposed in this book, our standard of living would not go down.
Disposable incomes would essentially remain the same as the total
amount of taxes paid before and after the shift to dual taxation
would essentially be equal.
We already know that
there is no social commitment to any significant increase in
taxation and that current spending for the environment is far from
adequate. The shift to deterrence taxation would allow us to get a
second bang for free from the tax system. If you currently pay
$10,000 in income tax, you will still be paying about the same
amount under a dual taxation system. However, a significant portion
of it would then come from deterrence levies, for example on fossil
fuels, contaminants, and non-renewable resources, instead of income.
$10,000 worth of revenue would still be generated for the
government, but the punitive effect would reduce greenhouse gases
and contaminants, and foster resource conservation without your
paying any more taxes than before.
In 2000, Canada
collected on incomes about CAD$ 127 billion (Revenue Canada, 2002).
Americans paid US$ 2,098 billion in taxes in total during the same
year. Assuming that the currencies are at par (CAD$ 1.00 = US$
1.00), this would amount to about US$ 2,225 billion (or $2.225
In comparison, the
U.S. gross national product (GNP)—a measure of the total value of
goods and services produced by a country—for 2000 was about US$ 10
trillion. The actual annual environmental deterrence budget—the
green firepower—for the U.S. alone would be about 20% of
its entire national production.
story would be similar. The rest of the developed world would have
a comparable share of its total production available for
environmental deterrence. Developing countries, which have been
able to afford environmental standards only with difficulty up until
now, would have less but still enormous amounts of deterrence at
their disposals. By any standards, we are talking about massive and
unprecedented firepower for the environment in both rich and
The GNP is very
effective in giving us a good idea of the actual size of the new
potential environmental deterrence budget. But, a much more
interesting comparison is with the American military budget. It
stood at US$ 379 billion for 2003 (Council for a Livable World), in
the midst of the Afghan and Iraq Wars. At $2,225 billion, the new
budget for the environment would not only beat but actually dwarf
the war chest of the most powerful military on the planet.
With this kind of
budget, an environmental revolution becomes more than a mere
possibility. It is right in our hands, just waiting to happen.
7. Premises of Large-Scale Environmental Change
Turning things around
for the environment would imply change on a large-scale. At first
sight, it may seem impossible to achieve. However, if certain
principles are respected, it can happen. There is a science to
The First Premise: Massive Scale
The first premise of a
meaningful environmental strategy is that needs are massive.
Therefore, the solution should be of appropriate scale, powerful
enough to address all issues. There is an urgency to deal with
global warming and environmental degradation. There is also a dire
need to reverse the current trend of rapid resource depletion
so that future generations can have enough for themselves. The sad
reality is that the earth does not come with a warranty stating
that because its life expectancy is five billion years, its
resources should last that long.
The small step by
small step incremental solutions proposed so far will not do the
The Second Premise: Strong Political Support
The second premise is
that environmental change on the scale needed would require massive
voter support. For any solution to be implemented, it must first
make it to the political agenda and receive support. To that
purpose, the strategy explored in this book is revenue neutral,
making it as voter friendly and as politically viable as possible
given the ambitious task at hand.
support for the environment is ultimately limited, large-scale
change would have to be achieved with virtually no additional amount
of social commitment. This brings us to the next premise.
The Third Premise: Minimal Social Commitment
The third premise is
that to be voter friendly and get massive support, strategies for
large-scale environmental change have to be able to be implemented
essentially without additional social commitment.
always run into the same obstacle: voters do not want any additional
taxes, at least not on the scale required. Designing strategies
based on a massive increase in support is unrealistic. We need
solutions that are able to address most environmental problems
with roughly the same amount of social commitment as we have
today. The revenue-neutral approach proposed in this book does
provide for this.
The Fourth Premise: Implementability
The fourth premise is
that large-scale environmental change calls for practical and
implementable solutions. Remember Keynes' famous quote, “Foul is
useful and fair is not”? Rather than an attempt at cynicism, it
was an acknowledgment of the basic reality of economics. Theories
and principles are not very useful if they are not applicable. If
he had spoken about the environment, he might have said, “What
does not make it to the political agenda and sway the voter has very
Some of the money
spent on research every year does not benefit society for a number
of reasons. Studies might not result in practical
applications, they might not have been brought to the general
public's attention, or the solutions proposed are just too
unfriendly to voters to be politically viable. Of course, not all
research is meant to produce solutions. Some types are supportive
21st Century Environmental Revolution
was written strictly from an implementability point of view. What
is implementable and politically viable is useful; what is not, is
not. The strategy described in the next chapters is intended to be
as practical and voter friendly as it can be, considering the fact
that we are contemplating massive change.
The Fifth Premise: Market-Efficient Mechanisms
The fifth premise is
that, to maximize implementability and political
support—especially given the magnitude of change being
considered—environmental solutions should make use of the most
efficient mechanisms available. Let's review the options at our
divides approaches into two main categories, regulations
(command-and-control) and taxation. Regulations can be very
effective in specific cases and have their place on the
environmental agenda. However, they generally lack efficiency
on several counts.
Ian Bailey (Senior
Lecturer in the School of Geography department, University of
Plymouth, UK) reports that they are viewed as economically
inefficient because they are imposed uniformly on polluters who have
different abilities to adapt to better practices (Bailey, 2002, p.
235). For example, big corporations can more easily invest in
cleaner technologies than smaller businesses.
(1998) further argues:
The required control costs
under regulations can be considerable and the administrative costs
are usually higher than under taxes. Also, price incentives offer
free cost information, while mandated recycling is often
accompanied by expensive education and motivation programs.
In other words,
regulations often have a number of costs associated with
them—administrative, implementational, educational, etc. The same
author also reports that studies had consistently shown regulatory
programs to be poorly designed and have costs exceeding
Another problem is
that, unlike taxation—which promotes continued
improvement—regulations are not dynamically efficient.
That is, they offer little incentive for polluters to exceed
minimum requirements and do better year after year. In addition,
without international agreements to back them up, regulations are
further limited as they tend to impede the competitiveness of
countries which implement them.
For these reasons,
the focus of policy has recently been shifting to market-based
solutions. These new approaches are increasingly viewed as the best
ways to address environmental issues. Bailey (2002) states that
“both theoretical and empirical studies suggest that market-based
mechanisms remain the most efficient method for pursuing many
environmental goals, so that countries pursuing such strategies
generally perform better economically than those that rely on
legislative standards” (p. 237).
Note that the Kyoto
Accord sets caps or limits on emissions. As such, it is a
regulatory system, not a market-based solution. The cap part
of cap-and-trade refers to its targets. The trade component
refers to an exchange system that would need to be set up and that
would make use of markets. However, it is only a flexibility
component allowing companies that find it cheaper to pollute to
continue to do so and buy emission credits instead.
further down, the trading system itself would not lead to a
reduction of greenhouse gases. Shocked? As such, it is not an
environmental strategy per se. What would bring down carbon
emissions are the caps negotiated under the Kyoto Accord. The
system does not help businesses or countries—whether through
information, funding, research, strategic planning, or technology—to
reduce carbon emissions. Under a cap-and-trade initiative, it is
really up to the industry to figure out how the Kyoto Accord target
are going to be achieved. Such an approach does not take too much
thinking on the part of governments!
(2002) describes three main market-based
options, incentive taxes, cost-covering charges, and
revenue-raising taxes. Incentive taxes are designed to
increase the costs of polluting in order to bring about positive
environmental behaviors. For example, toxic chemical compounds or
fossil fuels can be taxed to reduce their use.
are usually levied from users of a particular resource and used
to manage it or mitigate its degradation. For example, entrance
fees to national parks may be used for their maintenance.
Pollutants might be taxed to raise funds to undo the damage they
are two types of revenue-raising taxes. The first, additional
taxation, involves for example environmental charges on plastic
soft drink bottles or residential tipping fees on garbage. The
revenue generated through these go directly to general government
tax coffers rather than being targeted for specific purposes. They
are additional charges to consumers and businesses (which pass those
on to us) just like the first two types of market-based approaches
As such, all three
options are limited by the current level of social commitment—nobody
wants to face new user fees or pay more taxes, at least not on the
scale required—and are therefore bound to only skimming the
surface of environmental problems. This brings us to the last
The second type of
revenue-raising options is revenue-neutral taxation. Environmental
levies are collected and offset by lowering other taxes, for
example, on income or retail sales. They do not increase the
general level of taxation for people in a country. They are only a
shift from one form of levies to another.
For example, if a
government were to raise $1 billion in new environmental taxes, it
would decrease income or retail taxes for taxpayers by the same
amount. A government would take with one hand and give back with
the other. In other words, because environmental taxation is
offset by a drop in other taxes, it would be revenue neutral. The
levies would result in a deterrence of unenvironmental
behaviors—progressively making economies greener—without
increasing total taxation for individuals.
This essentially gives
us not only an efficient mechanism but also a politically-viable
one. It is the basis for structural changes that would be powerful
enough to bring about an environmental revolution.
The Sixth Premise: Focus on Resource
The sixth premise is
that resource conservation should be at the core of environmental
policy as it attacks the problem at the source through prevention.
As discussed earlier,
a ton of mineral not extracted represents one less ton of garbage
produced and a reduction of intermediate chemical use and
environmental degradation from waste disposal. In addition, making
conservation a primary focus of policy forces us to address the
issue of non-renewable resource depletion. Current economic
planning leads us to give little or no attention to preserving
resources for future generations. In fact, it does the very
reason for putting conservation at the core of environmental policy
is that pollution and contamination are in most cases easier and
cheaper to prevent than clean up. To what extent can gases from
industrial processes or the incineration of garbage be cleaned up?
Bruvoll (1998) writes, “Most [waste] materials are dispersed and
hard to collect after use at the emission stage, and designing and
operating a tax system that tracks all environmental effects is
out of reach” (p. 16).
The Seventh Premise: Landfill Sites Are Limited
The seventh premise is
that there is a limited supply of suitable sites to dispose of our
garbage. Because of the toxicity of some materials and
concerns about seepage of contaminants into water tables, not all
locations are geologically suitable for waste disposal.
efficiency, landfill sites are often located in close proximity to
towns, threatening the contamination of drinking water sources.
Current recycling efforts only partly reduce the continued demand
for landfill space. They do not eliminate it.