The Folly of Subsidizing Pollution

The 2009 Built Green Conference was a big success. The highlight for me was hearing Robert Kennedy Jr. speak. His main points revolved around the necessity of recognizing the environment for what it is: the fundamental infrastructure of our economy. To be an environmentalist in his words is not to be some hippie tree-hugger, but to recognize the reality that a clean environment enables prosperity across the social spectrum.

Kennedy clearly articulated that in an economy where industries are allowed to pollute, the fundamentals of free markets are not working. Pollution is a cost of production that is frequently externalized, in other words, shifted on to society. The final cost of goods produced does not accurately reflect the cost of production when spoiling our environment is not considered. In effect, society is paying industry to pollute. This tragedy has broad negative effects on the environment, economy and population.

The free market is not one in which all regulations are removed. Conversely, a free market must foster true competition forcing manufacturers to internalize all the costs of their production. Subsidizing industry that is inefficient, dirty and socially irresponsible does nothing for the cause of a market economy, much less for the longevity of humanity. The reality is that if industry, especially the energy sector, were forced to account for their negative externalities, there would be no issue with creating a green power infrastructure in this country. The cost benefit ratio would be so far slanted in favor of renewable energy sources that the issue would be effectively dead.

The same dynamic is in place in the construction industry. The conventional wisdom is that it costs more to build a high performance, super insulated house. And yes, it does in relation to a code built house. What is not accounted for in this equation are the long term social and environmental costs associated with building houses to current energy code. By allowing homes to be built to substandard energy requirements we are effectively subsidizing pollution and wasted energy. Energy use from homes comprises one of the single largest sectors of greenhouse gas production in the United States. The knowledge and technology are readily available today to reduce energy consumption in new homes by over fifty percent. There is no logical reason that the energy code should not require this. It should not cost more to build an energy efficient home, it should simply be the cost of building a home.

The European Union is in the process of implementing Passive House energy standards into their building code. This means that every new building built will use approximately 90% less energy than a typical American code built building.

Regulations like this do not increase the cost of doing business but simply force both producers and consumers to internalize the costs of their decisions. We as a society can not afford to continually bear the cost of environmental destruction. It is clear that effective and forceful governmental regulation is society’s best shot at standing up for their interests and working toward a truly free market.