The first step towards sustainability- changing values and expectations through ecotaxation policy

                With recent discussion in the United States and abroad about possible policy responses to climate change focusing on “cap and trade,” where select polluters will be issued a quota of permits corresponding to a maximum amount of carbon dioxide, and the ability to trade them among themselves to work out the least possible cost of abatement, now is an excellent time to look at deeper reforms, reforms that address the fundamental issues and causes of our current crisis in a way that sets our economy, and indeed our society and civilization as a whole, on the right long-term track. Instead of attempting to mitigate the end result (too much CO2), we need to examine what actions and practices got us here, and what else needs to be addressed beyond CO2 in order to stabilize the earth’s climate, and have a truly sustainable society.

      This goal is a big one, perhaps the largest ever, and does require a rethinking of some of our most fundamental assumptions. Rampant and ever-increasing consumption cannot continue in its current form, neither can the earth’s population growth,  and perhaps most obviously nor can our expanding use of finite natural resources, especially those that release carbon dioxide back into the atmosphere. Fundamentally, all of this will require a shift in values and expectations, a process that is bound to be difficult and slow. This is no reason to be defeatist and bemoan society’s inevitable evil excesses, however tempting such wallowing maybe, because, as always, defeatism leads to defeat, and we to start such a large journey with the first step.  Within our current system- economic, social, etc.- we need to use what tools exist now to start this shift in perception, and thus policy.

                By using the tools of taxation policy, the most fundamental of all in the economic tool box, we can provide the incentives for the individual as well as the firm, both big and small, to start realizing this economic, and thus mental, shift. As prices for environmentally and socially destructive goods and services start to resemble the true costs associated with their consumption[1], actions will charge first, as price shifts are strong incentives to change one’s behavior, and expectation changes will soon follow.

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[1] Internalizing the externality of the social cost into a private cost, in Pigovian form