A free-market approach to climate change
It’s time for government to stop subsidizing dirty fossil fuels
My granddad always drove an Oldsmobile. As a proud American who beat the Japanese and Germans in World War II, and made his living in American manufacturing, Grandpa took it for granted that our nation’s Big Three Automakers of would do the same.
Then, sometime in the early 2000s, after another aging Olds came up short, he finally made the switch to a better-rated foreign brand. We grandkids were aghast — until we took a spin in his shiny import and had to concede that someone else had built a better ride.
It is an article of faith among conservatives like my granddad that the best solution to our problems is a free market one. Let market forces determine the price of goods and services — free from government subsidies and undue regulation — and goods will tend to be good and services of service.
We can all think of examples where healthy competition between competing brands brought prices down and quality up for the good of all consumers. What’s more, free-market thinking might just be the answer we’ve been seeking to catastrophic climate change — if one important condition can be met: information.
For free markets to function effectively, prices have to accurately reflect the true costs and benefits of a given item. Consumers need to know what they’re paying up front as well as any hidden costs down the road.
Last I checked, a gallon of gasoline sold for around $2.20 in New Hampshire. For many of us, that’s manageable — little reason to worry about buying an SUV or taking that weekend road trip up the coast. Indeed, at $2.20 a gallon, we deem it rational to drive the biggest, sportiest, most comfortable car or truck we can afford.
But what if the price of gasoline was being artificially deflated by massive government subsidies at taxpayer expense, a perversion of free-market economics?
According to the nonpartisan Center for Investigative Reporting, the real price we pay for a gallon of gas is not $2.20 but $15 when you factor in the public supports and negative externalities associated with exploring, mining, refining, transporting, defending and burning our precious petroleum. Would you pay that price at the pump?
In a true free-market economy, where taxpayers were no longer obligated to subsidize the most profitable (and politically connected) corporations on earth, would gas and gas-powered transportation stand a chance against cleaner technologies? The answer — like your answer to $15 gas at the pump — is a resounding no.
The same is true for energy in general. According to a growing body of academic research reported in Scientific American, the real cost of carbon pollution is $220 a ton, six times greater than official government estimates and many times more than the price we pay upfront when we purchase fossil fuels to heat and cool our homes and power our way of life. Those costs are not being paid by the fossil fuel industry — they are borne by us and by our kids.
The good news is that, in spite of market perversions and the failure of American leaders to put an accurate price on carbon, advances in clean technology have already made solar and wind the cheapest forms of energy on earth.
Although the conversion costs are real and essential storage technologies have yet to fully mature, the economic and social benefits of such a market-based transition are enormous — if only government will stop subsidizing dirty fossil fuels before it is too late.
Surely that is a cause on which conservatives and progressives can agree.
Dan Weeks of Nashua is a director at ReVision Energy.