Urban air pollution contributes to health risks, especially in low-income neighborhoods. In response, some churches in St. Louis are installing air quality sensors on their property. The churches, working with groups like AirWatch St. Louis and St. Louis’s Washington University, are sharing data in an effort to produce a better-informed advocacy and ultimately motivate legislative change.
Why is air pollution often worse in poorer neighborhoods? There are various reasons. It is tempting to attribute the problem to moral failures like dehumanization and discrimination. But ordinary economic incentives also play a role, and we ignore them at our peril.
One of my lectures at Mises University each summer concerns environmental issues. I make changes every year, but I always mention Murray Rothbard’s essay “Law, Property Rights, and Air Pollution.” In it, Rothbard lays out a libertarian method for handling what mainstream economists usually call externalities—the side effects of production or consumption activity on bystanders. The contrast between Rothbard’s welfare economics and the mainstream is plainly visible. Whereas many mainstream economists try to measure costs and benefits of pollution in order to come up with the most efficient level of pollution, or the appropriate tax to impose on the polluter (a la A.C. Pigou), Rothbard strictly eschews any such effort to measure the immeasurable.
Emissions Taxes and Tradable Permits
The typical presentation of negative externalities involves something like the diagram below, where the costs on bystanders are added to the marginal private costs (MPC) faced by the polluting firm, to come up with a marginal social cost (MSC) that, along with the marginal private benefit (MPB) to the firm from producing its output reveals the ideal level of output. In the presence of these negative externalities, and absent positive externalities that would offset these, the market level of production QM is too high, compared to the welfare-maximizing level of production Q*.
As court-made law to settle conflicts over nuisances like pollution has been increasingly regarded as inadequate to deal with externalities, government interventions have typically taken three forms: 1) command-and-control regulation, 2) emissions taxes, or 3) cap-and-trade systems.
Responding to shareholder demands and broad public pressure, international development banks backed by western economies are throwing their weight behind renewable energy projects in the developing world. Projects that would facilitate better distribution of gas, or accelerate electrification with readily available coal or gas are denied funding. But while policymakers in Europe, the United States, and other wealthy economies gain domestic political traction from opposing fossil fuels, their efforts to select growth paths for the developing world seem out of touch and condescending. Former Indian chief economic adviser Arvind Subramanian has called this anti-fossil fuel push “carbon imperialism,” and Indian Prime Minister Narendra Modi has complained of a new colonialism, in which the developed countries of the world, having used fossil fuels to achieve prosperity, now promote energy policies that would deny growth to countries like his own.
Without access to reliable electric power or liquid fuels, around three billion people worldwide use biomass (e.g., wood, charcoal, or crop waste) to cook and heat their homes. These highly polluting fuels—which, it should be noted, are renewable—remain in use partly because of the objections of foreigners to alternatives like LPG (liquefied petroleum gas) and coal- or gas-fired electric power grids, a deplorably out of touch way of thinking. The WHO estimated in 2018 that 3.8 million people—mostly women, children, and the elderly who spend disproportionate time indoors—die each year from respiratory illnesses and other diseases caused by indoor air pollution. Many of these “traditional fuels” require time-consuming collection, taking away from other uses of time such as education or wage-earning activities.
Economic growth can affect land use change to release or sequester carbon, intensifying or mitigating the impact of other carbon emissions, and the functional form of that relationship is important to crafting policy responses. Data on land use and land cover change (LULCC) for 14 countries reveal an N – or M-shaped environmental Kuznets curve (EKC) for LULCC carbon flux to/from the atmosphere in some nations, while others display very different relationships. Most nations studied show some variation of the inverted-U EKC. All but one nation display initial turning points ranging from $2,000 to $9,000 per capita GDP (2011 dollars), and half are now net negative carbon emitters with respect to LULCC. For the US, regression analysis of the LULCC EKC indicates a roughly M-shaped quartic EKC function, with local maxima at about $3,700 and $45,700 and a local minimum at about $29,400. Where N-shaped EKCs are observed, the carbon sequestration from increasing forest regrowth is transient, and may be followed by a phase in which rising aggregate emissions dominate slowing sequestration in maturing forests. An M-shaped EKC indicates a third turning point, representing a return to increased net carbon absorption.