Path to Great Lakes protection: Tax the polluters
The New York Times announced last week that it’s dismantling its environment desk and dispersing the staff of nine to general news coverage. Not to worry. Times management says environmental stories will still be covered, just in a more integrated manner because that’s how they play out now. The environment isn’t a stand-alone topic anymore.
Nice you say, but isn’t this inside baseball for journalists? Why should I care? Good point and here’s why.
Things have changed. It’s important for us to understand the modern day connections and complexities between conservation issues, the economy and how both impact our lives.
Pollution as a potential short-term revenue source is an example.
There’s buzz now in the popular press about what economists have long-referred to as externalities – the external costs passed on by someone to the public in the form of pollution. These external costs aren’t covered by the price paid by the consumer.
We count on service providers – mostly municipalities – to provide clean water. Yet billions of gallons of sewage are dumped into our rivers and lakes each year because we lack adequate infrastructure. That’s because we haven’t invested money to handle the ever-increasing volume.
The water has to be treated and there’s a cost for that. Beaches may be closed for fear of health problems and that has an economic impact. There’s also the loss of goodwill that extracts a cost. People won’t recreate near waters they consistently feel are unclean. They go elsewhere and take their dollars with them.
While I grew up in Detroit, my parents would often take us to Canada for picnics and swimming because the “water was cleaner.” That meant that the money spent on the outing was spent in Ontario, not Michigan.
New life for a tax
The idea to tax externalities is the brainchild of early 20th century British economist Alfred Pigou. Today a tax on unaccounted for external costs is referred to as a Pigovian Tax. As mentioned, it’s starting to be discussed by credible people.
Stop you say.
We’ve got one whole political party that’s against any type of additional tax so one crafted by a Brit a hundred years ago won’t fly. Get real.
Not so fast.
The beauty of the Pigovian Tax is that both liberal and conservative economists embrace the concept.
That’s because it accomplishes two things.
In the short term it generates revenue in an era when it is needed but where we’re reluctant to raise taxes on individuals or business. That’s where the tax on externalities comes in. If an industry wants to pollute it has to pay the tax.
In the long term if the industry keeps polluting, the Pigovian Tax increases. The goal is to tax to the point that it can’t be sustained. That means the behavior – polluting – will change which was the intent in the first place.
Needed tax revenue is generated in the short term and the environment is enhanced over the long term.
Back to the Great Lakes.
In addition to sewage discharges here are two candidates for a tax on external costs.
- Agriculture runoff that causes algae blooms is a leading candidate. Lake Erie is having another of its near-death experiences because of ag runoff, yet there is no political will to regulate farmers. I bet farmers would quickly embrace best fertilizing practices if they had to pay an ever-increasing tax to pollute.
- If the shipping industry wants to stall and play loose with ballast water regulations that allow aquatic invasive species unfettered access to the Great Lakes, they should pay for that privilege. The U.S. Fish and Wildlife Service estimates the cost to the region to deal with the invasive zebra mussel to be $5 billion for the period 2000-2010.
I understand that those being taxed will say it has to be passed on in the form of higher costs to the consumer. They may be right in the short term but that isn’t a sustainable position over time.
A new Great Lakes mantra: Prevention
When the Obama administration took office in 2009, EPA administrator Lisa Jackson said she wanted to apply a “new standard of care to the Great Lakes.” No more studying and waiting for the stars to line up before taking action. For the most part that promise has been kept even in an era of dwindling financial resources. Hopefully that work will continue.
But just as presidential campaign slogans fade after an election, so does the value of phrases like “a new standard of care.” The work the statement embodies can continue because it’s necessary. But it’s time for a new marching order, prevention.
The next four years and beyond should focus on prevention – the most cost-effective way to protect the Great Lakes.
And if it takes a tax on polluters who pass on those external costs to the public to get us there, so be it.
That’s the discussion we need to start.
And I’m sure the New York Times will cover it.