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The Free Market and Social Justice | July 17th, 2008
The present policy of the United States on global warming policy is that the free market will resolve the issue. This policy has a serious flaw. For such a system to work, information about the CO2 emissions of each product needs to be available to consumers, which it is not. This begs the question, how can it be expected that the average American is capable of determining the emissions produced from a particular good when it seems that most cannot estimate the Calories in their food at their favorite restaurant or moca joint? This 'free' market is inhibited by lack of information (and possibly motivation); however, there is a solution to make the market do its job.

A fee and rebate system on carbon emissions (CO2) that is revenue-neutral would solve the issue by applying a cost to products that emit CO2 and cause pollution. To do this, a fee is applied to products that result in emissions of CO2, i.e. electricity, gasoline, and natural gas. For example, the fee could be 1 extra cent per kilowatt-hour of electricity or an extra $0.40 on a gallon of gas. Any revenue from these fees would then be split evenly and returned to each taxpayer. The reasoning goes that since the public pays an environmental and health cost for pollution and CO2 emissions, people who inflict a greater burden on the public should pay more for that privilege, proportional to their emissions. Under this system, there are two groups of people. A person might ...

emit less than the average | Such a person would gain money from this system yet be exposed more to other people's pollution and experience the environmental damage inflicted by others. These individuals are more efficient with their energy, consume less than the average, or use renewable energy.
emit more than the average | A person in this category pays more in fees than is returned in a rebate. More emissions are also due to this individual, meaning this individual is inflicting damage on others and on the environment more than the average person through inefficiency or excessive use of fossil fuels.

The fee/rebate system is certainly reasonable for anyone in the first category; their only change is receiving more money from the system than they pay in fees. But is it reasonable for a person from the second? What most people don't realize is that thousands of Americans die annually from pollution and millions more are subject to diseases, asthma, or other inflictions partially induced by pollution. Additionally, everyone will have to deal with climate change. Does it seem so unreasonable that people who pollute more than the average should pay everyone else for that privilege? Additionally, individuals in this second category may make their way to the first by becoming more energy efficient and/or using renewable energy to reduce the burden on society.

In the next few years, some system will be put in place in the United States to help reduce pollution and CO2 emissions. The best publicized is a cap-and-trade system, which allots a specific or maximum amount of permitted emissions to companies that currently emit CO2 and other pollutants. These 'emissions credits' may be either used or sold for profit. Although this would have some positive effect, such a system is inherently flawed. A cap-and-trade system would be highly beneficial to companies that currently cause the most pollution, and it would punish those companies that already have made changes by not granting them as many emission credits. It would also stiffle competition since new companies may not be granted emissions and must pay their competitors for that privilege. Instead of granting companies the right to place a burden on society and sell that privilege for profit, a fee/rebate system lets the public sell that privilege. For additional information on such a fee/rebate system, I would recommend visiting carbontax.org.