Global warming. That big, sexy issue should be left alone and we should confine ourselves to debating how to internalize the externality of air pollution — which shortens the lives of thousands every year.
An “externality” is a cost not being reflected in the price of something, but being pushed off onto others. A polluter gets to dump his refuse on your lap and he needn’t pay for it, or clean it up. This is a “negative externality.” To make the energy market work right, externalities need to be internalized. Uninternalized externalities are a kind of market failure.
Yes, cap & trade – the carbon tax in the climate bill currently being debated in D.C. – does internalize the externality of air pollution by making businesses (who pass on the cost to consumers) pay for it. So it’s an energy tax that’ll raise our gas and electric bills. But is that the right way to go?
Cap & trade harnesses market forces by allowing smaller polluters to sell their pollution credits to larger polluters. This incentivizes them to pollute less. But it effectively “legalizes” a tort (a private, civil injury or wrong), and politicizes it, creating a government bureaucracy that would favor selected businesses. Courts are much less likely to play favorites.
The free market, property rights solution is to have courts try polluters (including class actions) for the torts of trespass and nuisance. Pollution, like littering on your front lawn, is a tort, a property rights violation. The proper remedy should be through a court of law — or settlement out of court between private parties. This is what we do now for medical malpractice, car accidents and lots of other torts.
At common law, one could sue polluters for the tort of trespass or nuisance if they polluted your air or water. But modern courts have curtailed this remedy. Enforcing, restoring or creating property rights in air and water is the free market solution to pollution.
By not making fossil fuel companies pay for their air pollution, this acts as a subsidy to oil and coal, disadvantaging wind and solar – as U.S. Rep. Jay Inslee (1st Congressional District-D) aptly points out. But then wind and solar get federal subsidies to partly offset this.
But ultimately, the market—free of subsidies or penalties should decide which energy form is used. Yet there’s a market failure right now because an externality is not being internalized. Courts should internalize this externality to restore a working market, and then the government should be hands off and let the market decide what energy form is used.
Jeff E. Jared is a Kirkland resident and attorney.
