True Cost Economics – Free Markets with the Environmental in Mind
We are reaching a crossroads in the environmental movement. With many Asian countries rapidly industrializing, resource consumption is growing at a enormous unsustainable rates. Rainforest destruction in 2003 reached record levels, while increased oil consumption choked our air quality, our fisheries continue to be depleted, and our ecosystem irreversibly damaged. Something needs to be done, and soon.
Environmental regulations may have worked in the past, but in todays increasingly Globalized and trade-oriented world, it is evident that they are having unintended effects. For example, Norway may have the strictest eco-regulations in the world, but those regulations just mean that manufactures will just move their operations to countries with lax environmental regulations, such as China. And even companies that stay will have to pay higher costs (to meet regulations) and then have to compete with cheaper, environmentally destructive products from abroad. The system is inherently flawed – and is punishing those who try to protect the environment. Something needs to be changed.
The future may be, instead of trying to command environmental protection, to change the system so that it rewards those who pollute or consume the least, and punishes those, regardless of location, who pollute and consume more. And this system exists.
It is called True Cost Economics, and it is, through think tanks such as Oakland based Redefining Progress, and the anti-consumerist publication Adbusters, gaining momentum as the future of the languishing environmental movement. The basic tenet of True Cost Economics is that human well-being trumps economic growth. As most environmentalists know, economic growth is often a cover for increased consumption, destroying our future for growth today.
Everything we buy takes into account production costs, but does not take into account environmental or health costs. Why do we accept that Nike shoe factories in Vietnam should be allowed to pollute as much as they want to manufacture cheap shoes for a profit – a profit that was directly derived from environmental destruction. Meanwhile, Vietnamese government has to deal with the health and environmental consequences, such as cancer, lymphoma, birth defects, and deadly air pollution, at a high monetary cost. But Nike pays nothing.
In True Cost Economics system, environmentally conscious companies would no longer be at a disadvantage against mass producing polluters. Environmentally harmful products would have the monetary costs of human health and environmental ruin added onto them, specifically onto consumers who purchase those products, while eco-friendly products would already be at their true costs, rendering them cheaper and leveling the playing field. This would reward the eco-friendly companies and force destructive companies to change their ways, or perish.
Determining the cost, in monetary terms, of environmental, would not be that difficult. Statistics on the costs of pollution on human health exists, and with computers and modern technology, it will not be too difficult to calculate the long term costs either. Consensus on such standards would be the biggest roadblock, but no more than the consensus on the U.N. Charter.
How would this system be implemented? And regulated? In my opinion, through the same system that regulates the current global system, the dreaded WTO. The WTO has leveled the playing field in terms of tariffs and trade barriers, but it has done nothing to level the disparities in environmental regulations worldwide, giving a distinct, unfair advantage to those countries which have low standards.
But even if this system is not implemented within the WTO, the system can still be implemented though individual countries or trading blocs. The European Union or the United States could, independently, start placing Environmental Tariffs, reflecting the true costs of products, on imports that are eco-unfriendly. The economic power of either of these two entities would force change in how products are manufactured in many parts of the world, and would likely lead to other countries doing the same.
This system would not mean higher prices in products, flights, and more. Most big polluters, like GM, Exxon-Mobil, and Dow Chemical won’t just go bankrupt under competition from cheaper, environmentally friendly products. With technological innovation inspired by true cost economics, they will, cost consciously, reduce the pollution and consumption in their products while maintaining profit margins! The estimated price of gas would be $6.05 a gallon, but that gallon might go a lot further in an eco-friendly car. And the prices in Wal-Mart will, in the end, probably not change all the much, minus less plastic and more biodegradable packaging. Environmentally friendly DOES NOT mean expensive. True Cost economics can accomplish something that years of regulations and fines have not – true green corporate responsibility and profits.
