Economics

“Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen.” Sir Nicholas Stern (1)

Nicholas Stern reveals an environmental prisoner’s dilemma where economic development sustained by carbon-based fuels benefits industry in the short term at the cost of environmental destruction in the long run. The devastation of fossil fuels on the environment may be better categorized as an absence of a market, as there has yet to be a standard set to account for the negative environmental externalities. 

As our economy continues to establish, it becomes clear that the linear nature of our resource usage needs to be amended. 

Capitalism has enabled exponential economic growth for many countries; it has done so at the expense of the environment. This contradiction results from the endless accumulation and consumption for the capitalist system itself. Nature’s capacity to renew and support life on the planet constitutes the very conditions for capitalism to exist. As a result, capitalism is free-riding on nature, both as a source of ‘inputs’ to production and as a ‘sink’ to absorb capitalism’s waste (Fraser, 2014: 63).

In altering the atmosphere, biosphere, cryosphere, lithosphere, and hydrosphere through our continued extraction and combustion of fossil fuels and the destruction of carbon ‘sinks’ such as forests, jungles, peatlands, and tundra, we are conducting a planet-wide experiment with potentially catastrophic consequences. 

Can the environment contend with capitalism and can the solution lie within a market-based mechanism? (1)

Evidence

Capitalism

Profit-driven production is the true culprit overcoming our environment with pollution. Profitability, rather than sustainability, has asserted itself as a driving factor of our economic system. As long as this hierarchy is in place, the environmental crisis will continue and expand. The cheap, disposable commodities our society have become accustomed to are the driving force behind the intentional suffocation of our Earth’s systems. As long as we continue to remain unaccountable for our impact on the environment, the exponential devastation will continue. It should be widely accepted; capitalism is to blame.

Tax and Dividend

Tax and Dividend programs are a market-based mechanism intended to reduce carbon emissions driving anthropogenic climate change. The carbon tax/fee is a progressively-rising tax set on carbon-based fuels. The dividend is set to return those taxes to the public as a regular dividend. This mechanism is intended to incentivize the shift to low-carbon energy sources while protecting consumers from the increasing costs of carbon-based fuels the tax will inevitably ensure.

 

Product Life Cycle Assesment of a Plastic Bottle

The billions of plastic water bottles sold every year has created an environmental crisis, but what is the actual environmental cost? Using a product life cycle assessment helps break down impact associated with every level of a product’s life.  The stages that must be taken into account are raw material acquisition, production and distribution, consumption, and disposal or recycling.

The plastic used to make the bottles are made from resins, which are derived from oil, refined petroleum, or natural gas. Extraction and refining result in the largest amount of greenhouse gas emissions throughout the entire cycle, not to mention the environmental disruptions caused by the extraction process. A study by Gleik and Cooley found that the production of a single plastic water bottle requires approximately 5.6 to 10.2 MJ1-1 of energy. Performance-enhancing additives are often added to the plastic bottles, which can further harm the environment. Lastly, millions of gallons of water are used to make these bottles, which raise sustainability concerns of their own.

The plastic bottle’s life is often concluded at the disposal stage, often after a single usage. The impact of the plastic bottle at this stage is more ambiguous because there is little information about how long it takes plastic to biodegrade. Most plastic bottles break down through photodegrading into tiny pieces that never fully degrade, existing indefinitely. The plastic pieces can be consumed by marine life, either killing their host or making their way back up the food chain to humans.

The options of disposal are almost as bleak as the lifecycle. Recycling is a poor option. According to the UN environmental sector only 9% of the world’s plastic is recycled. Most of the time, the plastic ends up being incinerated, exponentially leading to the release of dangerous chemicals — some associated with anthropogenic climate change. There are some advances being made with pyrolysis — plastic-to-oil-technology —as well as different incineration techniques and companies repurposing waste. Yet, it seems the largest issue is stopping the production of plastic altogether.

The life cycle assessment of a plastic bottle indicates that the production and consumption stages are associated with the highest environmental and health costs. Plastic manufactures do not fully internalize their negative externalities, due to the profit-driven nature of their industry. Thus, the true cost of the plastic bottle is not reflected in the market price, causing overproduction and overconsumption. Moving forward, policy needs to enforce the true price of a good taking into account the life cycle of the plastic bottle on the health effects of humans and the devastation to the environment. (2)

Circular Economy

The Circular Economy is an industrial model that prioritizes the process of repurposing outputs back into inputs. The idea of gradual decoupling economic activity from the usage of finite resources, while waste is intended to be designed out of the system. The systems will be supported by renewables, seeing the earth and its systems as one symbiotic being, which humans can hopefully join rather than being taken advantage of. 

Cap and Trade

Cap and trade refer to a system that requires industries to cap the amount of carbon emissions that are released into the atmosphere over a specific time period. For businesses that cannot achieve this cap, they can trade with other companies that won’t reach their cap limits. The overall goal is to reduce emissions over time by slowly lowering the caps, thereby potentially removing the threat of global warming over time.

1. Stern, Nicholas. “The Economics of Climate Change.” 2007

2.  Barton-Hashimoto, Ian. “The Economics of Plastic: A Life-Cycle Assessment of Plastic Bottles and Potential Policy Implications.” 2017

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