The Price of Everything (32 page)

The United States produces about twenty metric tons of CO
₂
annually for each American. By contrast, China emits five tons per capita, India only one. As these nations industrialize they expect, reasonably, to consume more energy and emit more carbon. But if each of 1.33 billion Chinese and 1.17 billion Indians were to put the same amount of CO
₂
into the atmosphere as Americans do, they would burden the environment with the equivalent of seven extra American economies, more than doubling the world’s emissions of carbon into the air.

Our new Malthusian moment confronts us with a difficult question. How much can the global economy grow without generating unacceptable climate-driven damage in the future? It becomes more difficult to answer when one flips the question on its head: how much economic growth should we be willing to forgo to avoid producing this damage to the world’s future ecosystems? Ultimately, the question boils down to this: what price are we willing to pay today to protect future generations?

The economist Jeffrey Sachs characterizes climate change as “an accident of chemistry.” How could we have known that the carbon released into the atmosphere every time we step on the gas or fire up the furnace would linger there for years, capturing heat and slowly raising the planet’s temperature to the point that it would threaten nature’s precarious balance? But it is also a failure of the market system. Global warming, like the extinction of species, soil depletion, and all the other signs that the planet is having trouble sustaining the humanity that lives on it, underscores the global economy’s inability to put a proper price on the endowments of nature.

In a market system prices are meant to allocate resources efficiently. When demand outpaces supply, prices can be expected to rise and smoothly readjust the balance—drawing more producers into the market and nudging some price-conscious consumers away. Yet this doesn’t happen when it comes to nature’s bounty. We often get that for “free,” no matter how much we consume. As is the case with other free things, the lack of a price signal to modulate our consumption will lead us to consume too much, until we deplete the resource at hand.

This pricing aberration explains landfills overflowing with garbage, rivers laced with mercury, melting polar ice, and depleted cod stocks in the Atlantic. From the point of view of a fisherman, cod are free—his only costs are those of getting to wherever the fish are, finding them, and catching them. That means he will catch as many as he can. So will every other fisherman in the vicinity. Overfishing—pulling them out faster than they can reproduce—is the inevitable consequence.

We have done the same thing with most “free” resources of nature—from clean air to clean water. Water, mostly a public utility around the world, costs very little; its price doesn’t rise to reflect its growing scarcity and encourage us to consume it prudently. The cost of dealing with nitrogen runoff into streams is usually not incorporated into the price of our crops. Lacking prices to ration their use, free clean water and free clean air have met the fate of free things everywhere: they have started to run out. We are scrambling to deal with the fallout. Nowhere does this dynamic present a more menacing threat to humanity’s future than in the context of climate change.

 

 

ENERGY IS PROBABLY
the most egregiously mispriced good. The cost of gas at the pump incorporates the cost to find the oil, pay rent to the rulers of whatever country sits atop it, pull it out of the ground, refine it into gasoline, and move it to your local gas station. But in most countries no part of the price accounts for the effect that carbon dioxide released by burning oil has on the atmosphere.

This is devilishly hard to measure, depending on many assumptions about the value of the damage caused by climate change to the natural environment. Yet a review of studies by the Environmental Protection Agency concluded that the “social cost” of CO
₂
emissions—a measure of the burden that releasing one metric ton of CO
₂
into the air will have on the environment over the next century—ranged between $40 and $68 today and would rise to somewhere between $105 and $179 in 2040 as the air became more saturated with the stuff. Given that burning a gallon of gas produces some twenty pounds of CO
₂
, accounting for the environmental cost of driving would require a tax today of about sixty-two cents per gallon.

Americans spew about twenty tons of CO
₂
per person per year. By the EPA’s calculations, the United States is imposing an annual burden on the environment of up to $1,224 per American. And that may be low. Other estimates reviewed by the agency put the social cost today of one ton of CO
₂
at $159. If we were presented with the bill, perhaps as a tax on energy use, we would in all likelihood use energy more sparingly.

Europeans do better, mostly thanks to hefty taxes that increase their price of energy. In 2009, German households paid almost €0.23 per kilowatt/hour of electricity, roughly three times the rate in the United States. They also pay about three times as much for their gas. And they are thriftier about their energy use. Germany consumes energy at a rate of somewhat above four tons of oil per person per year, roughly half the rate in the United States. German emissions of CO
₂
—about ten metric tons per capita—also amount to about half of what Americans disgorge.

Americans too could be made to emit less carbon. But to do that, they would have to be made to pay for their emissions. The United States is a nation of drivers. In 2000, nine out of ten Americans drove to work, up from two thirds in 1960. There are 820 motor vehicles tooling along the nation’s roads and highways for every 1,000 Americans, compared with 623 for every 1,000 people in Germany, 557 in Canada, and 76 in Indonesia. The transport sector in the United States consumes almost twice the amount of gasoline per person as in Australia, nearly four times as much as in Britain, and thirty times as much as in China.

But though we love our cars, we can be persuaded to drive more efficient ones. A study of auto sales from 1999 to 2008 concluded that a one-dollar increase in gas prices boosted the market share of compact cars like the Toyota Corolla by 24 percent and reduced the share of pickups like the Ford F-150 by about 11 percent. That won’t transform the United States into Britain. There, gasoline costs up to three times as much and the bestselling car in 2009 was the tiny Ford Fiesta, which emits only 158 grams of CO
₂
per mile driven, compared with about 660 grams per mile emitted by Americans’ beloved Ford F-150 pickup truck. But tripling the price of gas might persuade Americans to lead somewhat more energetically frugal lives.

 

 

PRECISELY BECAUSE ENERGY
is not sufficiently taxed, humanity consumes it with abandon, spewing around 39 billion tons of CO
₂
from energy use, 60 percent more than in 1980. Other dynamics, like deforestation, add another 20 billion tons. Because of this, the concentration of CO
₂
in the atmosphere has risen by more than half since the dawn of the Industrial Revolution. And global temperatures have risen by about half a degree Celsius since then.

We have a lot more warming coming. According to the Intergovernmental Panel on Climate Change, a group of scientists studying warming around the world, on present trends greenhouse gas emissions will grow between 25 and 90 percent from 2000 to 2030. Along this path, the planet would warm at least 1.8 degrees Celsius and perhaps up to 6.4°C over the course of the current century.

For comparison, we are only 5°C warmer than we were during the last Ice Age.

It doesn’t require a lot of warming to cause environmental havoc. Even if temperatures rose less than 2°C, warming would disrupt patterns of rainfall, causing both floods and drought in India, China, and South America. Parts of the Amazon rain forest could become a grassy savannah. Fifteen to 40 percent of the world’s species of plants and animals would risk extinction.

If temperatures were allowed to increase further, damages could become catastrophic. As Greenland’s ice pack melted, rising sea levels could cover the Netherlands, the alluvial planes of Bangladesh, and about one third of Florida and Louisiana. Regardless of how one personally values nature’s ecosystems, this would be a problem. By 2050, the world is expected to have 2.5 billion more people. On present trends, they would have to feed themselves with 10 percent less fresh water.

Until recently, the call to arms against warming was couched in terms of lost species and melting polar ice. But a few years ago, a team led by Sir Nicholas Stern, former chief economist of the World Bank, changed the terms of the debate with a report for the British Treasury that detailed the cost of climate change in strict economic terms.

If we continue spewing carbon into the air at our present pace, Stern concluded, the damage inflicted on the planet later this century and the next would be frightening, “on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century.”

The Stern Review on the Economics of Climate Change,
published in 2006, estimated that the future cost of our folly would amount to at least 5 percent of the world’s total economic production and perhaps up to 20 percent “now and forever.” A fifth of the world’s gross domestic product is about $12 trillion. Losing that would be equivalent to, say, losing four fifths of the American economy. Or losing the entire economies of China, Japan, and India.

Shouldn’t we be more worried?

I found the first reference to the concept of climate change in the
New York Times
in September of 1955, running above a story about an electronic brain that could search a dictionary for the right word. In October of 1958, George H. T. Kimble, chairman of the geography department of Indiana University, wrote an article in the
Times Magazine
titled “Why the Weird Weather,” in which he mentioned CO
₂
, and sunspots, as potential culprits of strange weather patterns that included May snow in Portugal, a heat wave in Czechoslovakia, and Florida’s wettest March on record. By February 14 of 1979 the
Times
science editor, Walter Sullivan, was writing that “there is a real possibility that some people now in their infancy will live to a time when the ice at the North Pole will have melted.”

Thirty years later, shipping lines, mining companies, and oil firms are waiting with baited breath as the forbidding masses of ice over the North Pole thaw—opening up oil and mineral deposits as well as new shipping lanes over the top of the world. Yet despite the crescendo of warning, the world’s people and its leaders have proved incapable of agreeing on a decisive course of action to drastically reduce emissions of carbon. In December 2009, world leaders left a supposedly crucial summit on global climate in Copenhagen much as they arrived, with no firm agreement to cut emissions of carbon dioxide. The Obama administration was unable to persuade the United States Senate to pass a cap and trade plan to limit carbon emissions in 2010.

Hammered by economic troubles, Americans appeared to lose interest in the perils of the weather. In early 2010, only 32 percent of Americans said global warming amounted to a serious threat, 16 percent thought the damages would not materialize in their lifetime, and 19 percent thought it would never happen.

The notion that we must curb our carbon emissions has many natural foes. ExxonMobil alone spewed 306 million tons of greenhouse gases in 2007. The American Electric Power Company emitted more than 150 million. A forty-dollar levy on each ton of CO
₂
would amount to almost half of the power company’s revenue and six times its profits.

But opposition is broader than that. Republicans mostly oppose legislation to cut carbon emissions because of their ties to the energy industry. But their skepticism about climate change also has a geographic rationale. Republicans on the House Energy and Commerce Committee in the 110th Congress represented districts with carbon emissions per capita that were 21 percent higher, on average, than those in districts represented by committee Democrats. Fifty-nine percent of Oklahoma’s carbon emissions from electricity generation come from coal-fired plants. So it should perhaps be unsurprising that Senator James Inhofe, a Republican from Oklahoma, called global warming the “greatest hoax ever perpetrated on the American people.”