Friday, April 22, 2005

More environmental stuff

The Economist has a cover story, not surprisingly, on how market forces can save environmentalism. It's pretty short and a good read. Though I disagree with the article's premise, I do agree that market tools can be very successful in achieving economically efficient pollution reductions (e.g. SOx trading). What the article does not address is the difficulty of setting proper pollution levels. Trading markets function when the government establishes pollutant levels within which an industry (and traders) can function. It is this setting of pollution levels which engenders so much debate in the United States (and elsewhere). Cost-benefit analysis can provide you with a decisionmaking guide, a range of choices with associated costs, but the decision ultimately is made at the political level. For example, how much are we, as a society, willing to pay for lives improved or saved through reductions in mercury emissions from power plants? This decision point is where Economist's model fails. Greens fight the way they do, because they realize that for all the "scientific precision" we might bring to environmental decisions, there is an intangible moral/political element that will be the ultimate deciding factor.