Too Much Government Regulation? Then Let’s Perfect the Marketplace

By Mitch Rofsky, Better World Club

A letter is being circulated asking President Obama to stop the Keystone XL Tar Sands pipeline:

“… The well-being of our businesses and the economy in the United States are tied to the health of our environment.  The Keystone XL pipeline will have an immensely negative impact on the environment.  It would bring 700,000 barrels of heavy crude from Canadian tar sands to the US every day, furthering the US addiction to oil, and risking new oil spills in rivers and the Ogallala aquifer. The production of oil from tar sands would generate enormous greenhouse gas emissions, and create greater impacts from global warming. The impacts of global warming — from droughts, to floods, to extreme weather – are bad for business in the United States.  As we saw in the Gulf, oil spills also have a devastating impact on the economy.  The failure to shift America away from its dependence on oil to cleaner fuels will further imperil our economy and reduce the number of green jobs we need for sustainable economic growth. Your administration has taken bold and necessary steps to increase the green energy economy in the US.  Now, we urge you to reject the Keystone XL pipeline, and further invest in clean energy technologies.  It is the right decision for the US, and it is the right decision for business.” Of course, this is an understandable effort on the part of those who believe that the Canadian tar sands may address one part of our energy problem (that we are too dependent on dangerous sources for our fuel) but ignores the other part (global warming and the environment).”

image via Shutterstock

However, is having the President block the pipeline the best way to go about it?  Either politically or economically?

Fundamentally, the environmental problem is a market problem.  The marketplace is essential, but not perfect.  For instance, the marketplace doesn’t incorporate the cost of “negative externalities”.  Such costs are imposed on 3rd parties, often the U.S. taxpayer if not the US air breather or US water drinker.  Since producers don’t have to pay for the impact of their pollution, the market is subsidizing polluters.

Government regulation is sometimes necessary, but should be avoided when there are effective market alternatives.  What would a market orientation toward the pipeline look like?  How about this:  an externalities tax, in this case, mainly, a carbon tax (although other externalities should be included as well).  This would address global warming directly.

And this:  require a sinking fund sufficient to clean up any oil spills.  If the money is never used over time, it would go back to the oil companies.  If it is used, the oil companies would be required to replenish it.  The sinking fund should include sufficient amounts to cover economic as well as environmental damage.  (Alternatively, require the oil companies to purchase liability insurance that would cover these costs.)

Now if these requirements make the pipeline too expensive, so be it.  Then, construction isn’t economically justified.

But if the oil companies believe it is still profitable, this approach has one more benefit: it would increase the price of fossil fuel relative to greener alternatives.  The accurate pricing of fossil fuels could do more for alternative energy development than any government subsidy. Many conservatives will recognize the propriety of this approach.  They don’t like to remember it now, but it was Republicans who first proposed “cap and trade” as a market alternative to greenhouse gas regulation.  Many conservative economists support a carbon tax as the most efficient way to confront global warming and energy independence.

For those politicians who resist, Obama should use the threat of a complete block to determine whether this kind of compromise can be reached. After all, if successful, it wouldn’t be more, typical government regulation.  Rather, it would be the marketplace—a perfected marketplace—determining the proper energy mix while reducing greenhouse gas and other pollution. Now that’s a win-win.  Politically and economically.

 

Better World Club is the nation’s only eco-friendly auto club.  In addition to a different policy agenda than that other auto club (we’re not members of the highway lobby), BWC  has been a pioneer:  Providing the 1st and only nationwide bicycle assistance.  Offering free carbon offsets to auto insurance clients.  Discounting membership fees for hybrids and electric cars.   Donating 1% of annual revenues toward environmental clean-up and advocacy. All while providing the Emergency Roadside Assistance, Travel Services, and Auto Insurance usually offered by auto clubs.   Check out our eNewsletter, Kicking Asphalt, called “The Onion” of corporate newsletters by Eco-Talk Radio

  • Anonymous

    o.k. , so you do not like canadian oil??? why not buy more from chavezu00a0 or some arab despot , i am sure it will be money well invested and is likely in part to come back to you in some terrorist act financed by your dollar . (you are not going to stop driving are you??)

    • Anonymous

      The sensible solution is to install renewable energy to replace the need for petroleum. Oil supplies are in decline all over the world, and what remains continues to be more expensive to obtain. Ignoring the problem cannot solve it. We can be energy self sufficient and remove the need to go to war over oil supplies, and reduce the military spending that defending oil supplies requires. We can use electric hybrid vehicles, hydrogen, biofuels for transportation. We can use wind, solar, hydro, flowing water turbines, wave and tidal power, geothermal for electricity generation. All that is required is to install the equipment and continue the research to refine processes and reduce costs through large scale utilization of these technologies. The solutions are known, the equipment is available, and the prices are as good and some are better than our present system, especially when real and total costs are considered.

      • John Smith

        Even if oil isn’t in decline, its not an energy source we can use for the next 1000 years, unless we all want to be covered in soot.

    • Anonymous

      The sensible solution is to install renewable energy to replace the need for petroleum. Oil supplies are in decline all over the world, and what remains continues to be more expensive to obtain. Ignoring the problem cannot solve it. We can be energy self sufficient and remove the need to go to war over oil supplies, and reduce the military spending that defending oil supplies requires. We can use electric hybrid vehicles, hydrogen, biofuels for transportation. We can use wind, solar, hydro, flowing water turbines, wave and tidal power, geothermal for electricity generation. All that is required is to install the equipment and continue the research to refine processes and reduce costs through large scale utilization of these technologies. The solutions are known, the equipment is available, and the prices are as good and some are better than our present system, especially when real and total costs are considered.

  • Anonymous

    I agree with the carbon tax and requiring sufficient liability insurance, paid by those who make the pollution, to account for any necessary cleanups. Unfortunately, clean ups are seldom satisfactory in restoring an area to it’s former state, and as such represent a reason why prevention is more valuable than after the fact attempts at clean ups that are known to be ineffective. It is this irrational underestimation of damage and the ability for it to be cleaned up that makes present energy policy unacceptable. Safety needs to be based on reality, not wishful thinking and fantasy about what is possible.

    • Anonymous

      don’t you know that the Carbon Tax is a SCAM, designed to loot you of your disposable income and your liberty?n

      • John Smith

        The carbon tax is a clever way of moving dirty energy to poor neighborhoods and clean up energy production near the wealthy.u00a0 Simply move your carbon credits around.

    • Anonymous

      don’t you know that the Carbon Tax is a SCAM, designed to loot you of your disposable income and your liberty?n

    • Crispregina

      If you believe in the enviro hype… then realize thatu00a0 a simple dairy farm …produces more co2 thanna city of 100,000.u00a0u00a0 A swamp….quite a bit more…nnSo…I guess mother nature needs to buy an insurance policy for polluting…and the cows need to go.nnYou live and learn. Or you don’t live long.Excerpt from the notebooks of Lazarus Long, from Robert Heinlein’s “Time Enough for Love”n

  • Anonymous

    we’re no more “addicted to oil” than we are addicted to water, food, oxygen, or sunshine!!u00a0 what bunk!!!u00a0 paint your ignorance in a negative light to make your communist point!!!nthe impact on the environment would be net zero, and they know it. What they hate is the free market and someone making a profit while delivering vital commodities to an ever demanding public!nI’d like to see any of these suckwads live without their tv, cable, dvd’s, cd’s,or public funded radio broadcasts!u00a0 And sacrifice their Prius and walk instead!!!

    • Josephthl

      Um yea… there are other ways of powering your “tv, cable, dvd’s, cd’s,or public funded radio broadcasts” than with oil. Just because you are gradually shifting away from oil and on to a more sustainable form of energy doesn’t mean you have to give up any of that. nnClaiming that the impact of oil consumption on the environment is “net zero” is obviously ignorant of current events and overwhelming scientific evidence. The Gulf Oil spill is case in point of the negative effects the transportation/extraction of oil has in environmentally sensitive areas. Pipelines can and DO leak oil into their surrounding environment. The question is not if… it’s when. nnNot too mention the huge body of scientific research that has revealed the impact of greenhouse gas emissions from oil consumption on climate change. It sounds like you haven’t looked too extensively at peer-reviewed scientific journals – I recommend you do so, so that you can at least back up your points with actual scientific evidence, rather than empty rhetoric.

      • Anonymous

        hypocrite and maniplated stooge!u00a0 there is no “consensus” of peer reviewed material on this!!u00a0 It’s hotly contested, and that contest is buried by the media!nAnd the “impact” that we may have is temporary at worst.

        • John Smith

          There is more to it than impacts on the global environment, its also about quality of life.u00a0u00a0u00a0 How do you enjoy a quality of life if the water is polluted, the ground is radioactive, and everybody dies young of cancer?

    • John Smith

      There are no free markets, they’re all manipulated.u00a0 Businesses lobby government, government sets up trade deals with other nations governments, there is legal trade, illegal trade.u00a0u00a0 Whats important is that trade must benefit people, not be a god that you worship.nnOnly a simpleton would believe in the concept of free trade.

  • Anonymous

    we’re no more “addicted to oil” than we are addicted to water, food, oxygen, or sunshine!!u00a0 what bunk!!!u00a0 paint your ignorance in a negative light to make your communist point!!!nthe impact on the environment would be net zero, and they know it. What they hate is the free market and someone making a profit while delivering vital commodities to an ever demanding public!nI’d like to see any of these suckwads live without their tv, cable, dvd’s, cd’s,or public funded radio broadcasts!u00a0 And sacrifice their Prius and walk instead!!!

  • John Smith

    The problem has never been government regulation, but government favoritism towards dirty energy.u00a0u00a0 Government lives on re-election funds, and big dirty energy has the most money to busy congressmen with.

  • Crispregina

    Your premiseu00a0 makes no sense/and is just more hype… We are trying to get the most effecienct /low cost energy..to the consumers…nGreen projects should get no special pass. As.the .Ethanolu00a0 andu00a0 Solyndrau00a0 hard facts realities unfold… along with an ever increasing list of shovel readyu00a0 green projects,u00a0 sucking off billions in wasted effort /tax dollars for heavily favored …feel good projects.u00a0u00a0 nnWind farms are turning into s-wind-le farms…requiring incredible subsidies.?tax breaks etc.u00a0 Big problem…is they only producenkw at bestu00a0 30%of the time.{the differenc is made up by conventional production|nnCurrent job market in Minnesotau00a0 and the Dakota’s shows best green jobs are decommissioning wind farms.nnThe evidence is mounting about hyped green projects….consumersu00a0 are starting to look at the numbers…and realizeu00a0 the hype can be a costly misdirection of scarce capital and taxes.u00a0u00a0u00a0 Selling the sizzleu00a0 …is no longer acceptable to a skepticalu00a0 public….being askednto dump millions into way begotten projects.nnGreen needs to turn Yellow…. Caution is needed./ Accountability is necessary.u00a0 No free passes…for any scheme is acceptablen

  • Crispregina

    Free enterprise…Let’s Perfect It ??  Billions of transactions…millions of individual decision are
    the market place…..

    Somehow  you miss the point….  the govt star chamber you propose is
    still  the same old  intervention of govt.
    Maximizing  individual human action….is the only anwer…

    [Shirkers from the Real  World } Dishonest -Big Academia and Star Chambers are the same  old formula…. the overseers  ….telling the great unwashed howto buy  purchase  choose…..  govt restriction on options/alternatives

    It’s all for your own good….authoritarian double speak..  just buy the light bulb we
    tell you to buy…..shut down the factories…aly off the workers…. let the czar decide
    you foolist  little people.  . The Amercian system  has always been the exception..
    rights  are exclusive to the individual…not  granted on limited basis
    from the king or govt.    Viva  Amercian exceptionalism