It has come to my attention that I spent a lot of time on the theory and practice of carbon pricing as a systemic response to climate change. Solutions to climate change are available every minute of the day — why focus on legislation?
The other day, I noted with irritation that I was washing at least three glasses a day for each member of my family. An economist at heart, my mind immediately turned to “the market” — another word for my family’s minutely, hourly exchange of goods and services.
Households have markets, as do schools, churches and governments. As Adam Smith first pronounced, it is invisible, but it definitely exists. We are constantly thinking about or instinctively acting on our desire to maximize our gain and minimize our loss, given a shifting degree of risk.
There is no inherent problem with everyone using three glasses. The problem is that I am the only one doing the dishes. This is a “market externality.” The price is not equal to the value of the good or service. The rest of the family has no “loss” associated with using as many glasses as they feel like during the day.
I, on the other hand, don’t like to wash everyone else’s dishes, especially unnecessary ones! Hence the market failure: My dishwashing is undervalued.
My solution is to internalize the market — equalize price and value. As mom, I announce a new household resolution: Everyone is responsible for his or her glasses. If you want to use three glasses, go ahead — and wash, dry and put them away by the end of the day. If you would like to avoid extra washings, use fewer glasses and mugs. Label them. Remember them. Figure out something.
The causes of climate disruption are loaded with market failures. People in Australia are suffering under horrific, unequaled wildfires due to extreme drought and heat. Emissions in Australia have been historically high, propped up by a government that, like ours, seems unable to grasp its role in solving climate change.
Yet, the average Australian who is at this moment stranded on a beach, his home lost in the inferno, his only escape route by water, did not personally cause this pain and loss. Our collective use, over centuries, is the cause of this problem. Until we are all paying the actual price of using our emissions, market externalities will make it an extremely difficult problem to solve. Nobody knows who will be the next victim of this failure.
How can you, or I, know if we are doing “enough” to reduce our fossil fuels?
Who is using more — the downhill skiing family that flies to Colorado and stays at a ski resort to downhill ski for a week, or the snowmobile family that goes on trail rides on weekends?
Who is consuming more fossil fuels — the purely organic shopper who travels daily to Duluth for specialized products, or the Costco loyalist who feeds a large family with a strict once-per-week shopping list? No one can tell.
This is why it is so important to “fix the market.” When we as consumers pay the price to our planet in our purchase via the price tag, we will know. And as someone who uses fossil fuels, I feel we have the right to know.
There is a bill in Congress, H.R. 763, that acknowledges this market externality. It’s called the Energy Innovation and Carbon Dividend Act. It leaves solving climate change up to the market, once we have the proper information. As fossil fuel-intensive services and products get relatively more expensive, we use them less.
To allow us to fund this transition, it transfers all revenues from the carbon price (which is paid by fossil fuel companies) back to the consumer. Dividends coming to citizens in cash, studies have shown, fuel our economy as they transform it.
If I had one magical wish for the new year, I wouldn’t want to oust an enemy, or raise up a hero. I would want to change the system to allow us humans to solve climate change at our current level of ethical evolution. There is no one to solve this but us.
Katya Gordon is a volunteer for the Citizens' Climate Lobby and a Two Harbors resident.