COMMENTARY: CLEAN AIR IN AN ERA OF CHEAP OIL
The expensive oil of the 1970s and early 1980s had one virtue: By discouraging consumption, it lessened the pollution caused by the burning of gasoline, diesel, and other petroleum products. Environmentalists hoped rising oil prices would promote a switch to cleaner energy sources, such as solar power.
If oil instead remains cheap for decades to come, the harm to the environment from sulfur dioxide, carbon monoxide, particulates, and other poisons could be enormous. Combustion of oil, coal, and other carbon-based fuels may also overheat the planet by creating an insulating layer of carbon dioxide. Indeed, cheap oil is bound to complicate efforts to achieve a treaty on global warming in Kyoto, Japan, this December (page 158).
PRICE TAGS. Luckily, there's growing support for a new pollution-fighting approach that harnesses market forces instead of fighting them. The concept--embraced by economists and market-savvy environmentalists--is to charge polluters for each unit of pollution they emit. A few polluters that can't easily cut emissions will pay a hefty cost, but many others that have the technology to cheaply cut emissions will be motivated to reduce them far more than they would have under traditional regulation. The result: Profit-seeking behavior leads to bigger reductions at lower costs than might have seemed possible.
Putting a price tag on pollution can be done either by taxing emissions or by issuing (or auctioning off) tradable emission permits. Already, the U.S. has taxed chlorofluorocarbons (CFCs) to protect the ozone layer and has used permits for sulfur dioxide to reduce acid rain.
Heading into the Kyoto summit, the Clinton Administration is advocating a world- wide system of tradable permits for carbon dioxide emissions. Under such a system, a U.S. electric utility with good environmental technology could earn permits by cleaning up inefficient generating plants in developing countries.
The world may not be ready for strong action against global warming, especially since people are still debating how serious a problem it is. Meanwhile, though, taxes or permits could certainly be effective against other pollutants from oil combustion. Technology creates pollution by making oil cheap. In turn, market-based environmentalism can stimulate the development of technology that could make the pollution go away.
By Peter Coy
Updated Oct. 23, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.