Environmental Problems, Their Causes, and Sustainability 1

cluding costs, as much as possible, in the market priceof any good or service, such that its price would comeas close as possible to its full cost—its actual internalcosts plus its actual external costs.This system would allow consumers to make moreinformed choices, because they would be aware of mostor all the costs involved, which is one of the major goalsof a truly free-market economy. It would likely causeconsumers to give more thought to choosing fuelefficientcars over much more expensive gas-guzzlers.Many people would probably conserve more water becauseits price would be much higher. They might alsoproduce less trash, because the cost of collecting anddisposing of nonrecyclable trash would go way up.With full-cost pricing, some eco-friendly (orgreen) goods and services that now cost more wouldeventually cost less because internalizing externalcosts encourages producers to invent more resourceefficientand less-polluting methods of production,thereby cutting their production costs. Jobs would belost in environmentally harmful businesses as consumersmore often chose green products, but morejobs would be created in environmentally beneficialbusinesses. If a shift to full-cost pricing took place overseveral decades, most environmentally harmful businesseswould have time to transform themselves intoenvironmentally beneficial businesses. And consumerswould have time to adjust their purchases andbuying habits to more environmentally friendly productsand services.xHOW WOULD YOU VOTE? Should full-cost pricing be usedin setting the market prices of goods and services? Cast yourvote online at http://biology.brookscole.com/miller14.Full-cost pricing seems to make a lot of sense. Sowhy is it not used more widely? There are various reasons.One is that many producers of harmful andwasteful goods would have to charge more and somewould go out of business. Naturally, they oppose suchpricing.Also, it is difficult to put a price tag on many environmentaland health costs. But to ecological andenvironmental economists, making the best possibleestimates is far better than not including such costs inwhat we pay for most goods and services.Phasing in such a system requires government action.Few if any companies will volunteer to reduceshort-term profits by becoming more environmentallyresponsible. For example, assume you own an electronicscompany and you believe that we should allpay for the pollution resulting from production of electronicsproducts. Assume also that your competitorsdo not believe this. Will you raise your prices to includethe estimated costs of that pollution, while theydo not? If you do, your customers will probably buytheir electronics from your competitors. Most consumersare looking for the best price, and by doing theright thing, you may eventually go bankrupt. So fullcostpricing has to be initiated across the market by anoutside force, namely, the government.Governments can use several strategies to encourageor force producers to work toward full-cost pricingincluding phasing out environmentally harmful subsidies,levying taxes on environmentally harmful goodsand services, passing laws to regulate pollution andresource depletion, and using tradable permits for pollutionor resource use. Let us look at these and otherstrategies in more detail.26-5 WAYS TO IMPROVEENVIRONMENTAL QUALITYAND SHIFT TO FULL-COST PRICINGHow Can Ending Certain Subsidies andTax Breaks Improve Environmental Qualityand Reduce Resource Waste? Not RewardingEnvironmentally Harmful ActivitiesWe can improve environmental quality andhelp phase in full-cost pricing by removingenvironmentally harmful government subsidiesand tax breaks.Government subsidies and tax breaks can accelerate resourcedevelopment, depletion, and degradation. Wecurrently give depletion allowances and tax breaks tomining, oil, and coal companies for getting mineralsand oil out of the ground. Taxpayers subsidize the costof irrigation water for farmers and help to providesubsidies and low-cost loans to buy fishing boats.One way to encourage a shift to full-cost pricing isto phase out environmentally harmful subsidies and taxbreaks, which cost the world’s governments about$1.9 trillion a year, according to studies by NormanMyers and other analysts. This is about 4.5% of the $42trillion value of all of the goods and services producedthroughout the world in 2004 and creates a huge economicincentive for environmental destruction anddegradation.On paper, phasing out such subsidies may seemlike a great idea. But it involves political decisions thatoften are opposed successfully by powerful interestsreceiving the subsidies and tax breaks. They want tokeep, and if possible increase, these benefits and oftenoppose subsidies and tax breaks for more environmentallybeneficial competitors. For example, the fossilfuel and nuclear power industries in the United States(and in most developed countries) have gotten hugegovernment subsidies compared to those for lesshttp://biology.brookscole.com/miller14593