Archive for the ‘Environmental Economics’ Category

We Should All Pay for Carbon Emissions

March 20, 2009 1 comment

On Monday,  Li Gao of China’s National Development and Reform Committee, told the Pew Center on Climate Change that Western consumers should pay for 15 – 20 percent of the carbon emissions that China spews out as it manufactures goods for sale in the US and Europe. I think this is an entirely reasonable request because all items should include the true cost of their production.

If China wants the West to pay for the emissions of the goods it manufactures for us, then they should simply charge us more for them and invest the increased revenues in sustainable, efficient, and carbon cutting technologies. We should all pay the full price of the goods we buy from any country and including a carbon fee is a natural step. Environmental economists have long said that the true cost of items will never be accurate until we account for every step in the development processes, from which resource extraction, carbon emissions, and end of life disposal have traditionally been missing. 

China has at least a couple of major incentives to use the money they would gather through slightly higher prices to make their manufacturing plants more environmentally sustainable. First, as their facilities become more efficient and less pollutting, the prices of their goods will fall and they will become more competitive in the globalized market place. Of couse, it will really only be a fair and open market if all manufacturers are including carbon costs into their pricing strategy. 

Second, they also have an increasing number of examples to follow as well known organizations across the world discover that being “green” means saving money, increasing customer loyalty, and protecting our world.  Massive firms like IBM, Walmart, Nike, and Unilever are showing how sustainable business is providing a new path to wealth and prosperity. Their triple bottom line approach creates money but also protects the planet and its people. 

As China hurtles forward into unbridled capitalism, it is following the example the US and Europe set a century ago, a model predicated on the idea that carbon is not a cost of production. China is saying the West advanced by polluting and it is their right to do the same. And that if we want them to stop, we should pay to clean up the mess they are making because it is really our mess. This is all true. We have outsourced much of our manufacturing to places like China where labor is less costly and environmental laws are less stringent. These goods are being made for us and we should pay the true costs associated with their production. 

It is estimated that one third of China’s carbon emissions are directly related to products destined for outside of their country. So, even if the West begins to pay for 33% of China’s carbon, the rapidly growing nation will still have to shoulder the majority of the burden itself. But that is another issue to be discussed in another blog.