Tuesday, August 16, 2005

For-Profit Environmentalism

Via Tyler Cowen we see the Coase Theorem at work in this Slate article:
For a yearly fee of around $80, a company called TerraPass will offset the damage your SUV does to the atmosphere by spending your money to reduce industrial carbon emissions and to promote the spread of clean energy.
Even better is this company:
Another way to reduce carbon consumption is through emissions credits. The nonprofit Carbonfund is one group that buys credits, which represent the right to emit a given quantity of greenhouse gases, on a market called the Chicago Climate Exchange. The companies listed on CCX, all of whom have voluntarily agreed to emissions reductions, buy and sell pollution rights to one another as a cost-effective means of meeting their targets. Carbonfund buys credits from companies with low emissions and then "retires" them. Instead of a company buying credits so they can continue to pollute, Carbonfund tears them up and that much less fuel gets burned.
So if you really want to eliminate all the carbon you are producing, you can have them buy emissions credits for that amount. The only problem is that Carbonfund relies on guilt and good will in order to function. It extends the marketplace of the Chicago Climate Exchange to everyone, but most people don't have to care about it. Why not eliminate the gas tax and instead have people purchase emissions credits just like coal power companies have to? When you filled up your tank you would have to also spend a certain number of credits. You could buy and sell these credits through E*Trade or Merrill Lynch and every month or so the government would auction off a new batch. I'm getting giddy just thinking about it...

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