If I buy bread from you, when you want to sell it to me, and we agree on a price, that’s a deal between the two of us. Now imagine that you getting up early to bake bread wakes two people who would rather sleep in. They are not a factor in our deal — they are “external” to our market exchange and any effect on them is an “externality” we have ignored in agreeing on our price. The same logic holds for the greenhouse gases your ovens generated when you baked the bread. That contribution to climate change is an “environmental externality.”
How many of those did you create today?
Well, you created a whopper of an environmental externality if you were in any way tied to the electricity grid that includes a certain TVA plant in Tennessee — the Kingston Fossil Plant that produced the fly-ash slurry spill in Harriman, Tenn. Given interlocking power grids, odds are if you lived in the U.S. you helped create that mess when you turned on the computer.
Unless your electricity bills include a charge on the risk that such an accident could occur, they failed to internalize that externality.
Your utility bill also likely fails to internalize the greenhouse gas emissions associated with generating and delivering your power.
But the slurry spill and the massive damage to water and soils it has produced also helps us remember that we miss externalities even when we are looking for them and might be willing to pay for them. It should remind us how much we have benefited from ignoring externalities in the past. Yes, benefited.
Harriman, Tenn. now has a new contaminated site. Pity. But there are, by most estimates, well over 500,000 “brownfields” — sites that are abandoned or underutilized due to real or perceived contamination — across the U.S. So why all the noise about one more contaminated site?
It’s because we can no longer ignore the externality — the spill risk posed by all the coal-fired power plants storing fly-ash slurry on-site (see “Who will be the next victims?“). We have to admit that coal is not clean and that the price we pay for power does not cover all the costs generated by the power generating process. (We still do not have enough publicity for a real national debate over the social, economic, and environmental external costs of coal, but that is another story.)
But what if we had known all those costs when we built the first coal-fired power plants? Would we have built them? Would we have charged far more for the power? What would our society and economy be like now if we had charged more for power?
Extend those questions to those 500,000 brownfields. They include old power plants, coal gasification plants, steel mills, factories making any of the thousands of products that drove American technological progress in the 19th and 20th century, and all those machine shops, appliance and sewing machine repair shops, dry cleaners, paint stores and others that polluted the soil and water in the course of doing business, mostly out of ignorance. Would we be better off today had they never existed?
Would we be better off if the externalities had been recognized at the time and the products far more expensive, with fewer made?
Would our current incomes be higher or lower? Would our ability to pay more for cleaner power to avoid further greenhouse gas emissions or to invest in energy efficiency be higher or lower?
Are we sure that we would not have done as much damage either way?
There’s no hard evidence. There’s a lot of argument and speculation grounded in assumptions. You can’t have hard evidence on the “might have beens,” as there is no source.
Except perhaps for automobiles. There are other high-income industrialized countries that rely far less on cars and trucks than the United States. Western Europe offers empirical evidence for the “might have been” if the U.S. had internalized auto externalities — vehicles would have been more expensive and bought in fewer numbers, and mass transportation systems would be stronger.
If that evidence seems weak, think how much less there is for arguments about incorporating externalities into the prices for other products and services developed in the 20th century. Speculate on the full cost of a computer today, including all externalities — even those associated with the computers of the mid-20th century, which helped make those of today possible. Would I be blogging? Would you be reading this?
We probably have to admit to ourselves that we are, on balance, benefiting today from past pollution without putting price tags on it or paying for it.
We owe a debt. But to whom, or what? And how do we discharge it?