Cross-posted from Earth Policy Institute.

Moving the global economy off its current decline-and-collapse path depends on reaching four goals: stabilizing climate, stabilizing population, eradicating poverty, and restoring the economy’s natural support systems. These goals—comprising what the Earth Policy Institute calls “Plan B” to save civilization—are mutually dependent. All are essential to feeding the world’s people. It is unlikely that we can reach any one goal without reaching the others.

The key to restructuring the economy is to get the market to tell the truth through full-cost pricing. If the world is to move onto a sustainable path, we need economists who will calculate indirect costs and work with political leaders to incorporate them into market prices by restructuring taxes. This will require help from other disciplines, including ecology, meteorology, agronomy, hydrology, and demography. Full-cost pricing that will create an honest market is essential to building an economy that can sustain civilization and progress.

For energy specifically, full-cost pricing means putting a tax on carbon to reflect the full cost of burning fossil fuels and offsetting it with a reduction in the tax on income. Some 2,500 economists, including nine Nobel Prize winners in economics, have endorsed the concept of tax shifts. Harvard economics professor and former chairman of George W. Bush’s Council of Economic Advisors N. Gregory Mankiw wrote in Fortune magazine: “Cutting income taxes while increasing gasoline taxes would lead to more rapid economic growth, less traffic congestion, safer roads, and reduced risk of global warming—all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer.”

The failure of the market to reflect total costs can readily be seen with gasoline. The most detailed analysis available of gasoline’s indirect costs is by the International Center for Technology Assessment. When added together, the many indirect costs to society—including climate change, oil industry tax breaks, military protection of the oil supply, oil industry subsidies, oil spills, and treatment of auto exhaust-related respiratory illnesses—total roughly $12 per gallon. That is on top of the price paid at the pump. These are real costs. Someone bears them. If not us, our children.

Cross-posted from Earth Policy Institute.

We distort reality when we omit the health and environmental costs associated with burning fossil fuels from their prices. When governments actually subsidize their use, they take the distortion even further. Worldwide, direct fossil fuel subsidies added up to roughly $500 billion in 2010. Of this, supports on the production side totaled some $100 billion. Supports for consumption exceeded $400 billion, with $193 billion for oil, $91 billion for natural gas, $3 billion for coal, and $122 billion spent subsidizing the use of fossil fuel-generated electricity. All together, governments are shelling out nearly $1.4 billion per day to further destabilize the Earth’s climate.

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Michael Bloomberg.Photo: Center for American ProgressAt a press conference on July 21, New York City Mayor Michael Bloomberg announced that he was contributing $50 million to the Sierra Club’s Beyond Coal campaign. Michael Brune, head of the Sierra Club, called it a "game changer." It is that, but it also could push the United States, and indeed the world, to a tipping point on the climate issue. It is one thing for Michael Brune to say coal has to go, but quite another when Michael Bloomberg says so. Few outside the environmental community know who Michael Brune is, but every …

Iowa is an agricultural superpower, simultaneously eclipsing Canada in grain production and challenging China in soybean production. No, these are not mathematical errors. Last year, Iowa’s farmers harvested 55 million tons of grain, while Canada’s farmers harvested only 45 million tons. Over the last five years, Iowa has averaged 57 million tons a year to Canada’s 49 million tons. While Canada has more than 30 million acres of grain, mostly wheat, Iowa has only 13 million acres of grain, almost entirely corn. The difference in yield per acre is huge: just 1.4 tons in Canada against more than four tons …

Many countries are facing dangerous water shortages. As world demand for food has soared, millions of farmers have drilled too many irrigation wells in efforts to expand their harvests. As a result, water tables are falling and wells are going dry in some 20 countries containing half the world’s people. The overpumping of aquifers for irrigation temporarily inflates food production, creating a food production bubble that bursts when the aquifer is depleted. The shrinkage of irrigation water supplies in the big three grain-producing countries -- the United States, India, and China -- is of particular concern. Thus far, these countries …