Many conservatives ignore conservative principles in solving environmental pollution

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One of the attributes which distinguishes conservative principles, as opposed to other ideologies left of center, is their emphasis on market forces to solve most problems facing the U.S. economy. But many conservatives fail to apply the same principles of market forces to allocate environmental resources to solve pollution problems.

Private property rights do not exist for air, public waterways and public lands because they cannot be defined, delineated and/or enforced. They are common property resources. If there are no markets for common property resources and no prices to allocate those resources, individuals do not have the incentive to maintain and/or improve those resources. Overuse of a common property resource is the heart of the pollution problem, and it occurs in the absence of markets and price signals.

In this piece, I will focus on the air pollution problem, but the basic principles are applicable to water pollution as well as land pollution.

Overuse of air resource in an air-shed arises when emissions of different pollutants overwhelm the capacity of the air-shed to cleanse itself, thus resulting in pollution. Pollution causes adverse health outcomes and damage to other assets in the environment. Efficient use of air resource, which minimizes damage and adverse health outcomes, will result when we impose an appropriate price for the use of this resource. The editorials in the Standard-Examiner on April 8 ("The air out there") and again on June 3 ("The dream: to breathe easier") have highlighted the severe health problems Utahns are facing.

The April editorial aptly stated "we are breathing poison. And it is hurting the littlest among us as much as it is the tallest." Utah Physicians for a Healthy Environment claim that PM 2.5 (particulate matter 2.5 represents microscopic soot particles from burning fossil fuels) is responsible for the deaths of 2,900 Utahns from heart disease each year, and more than 1,500 are hospitalized each year at the average cost of $28,000.

Almost 1,000 Utahns die prematurely each year, costing $4 billion per year in health costs, according to the physicians. Pollutants like PM 2.5, ground-level ozone which forms when nitrogen oxides and volatile organic compounds react with sunlight, sulfur oxides, nitrogen oxides and carbon monoxide are some of the major pollutants. They are associated with health problems like respiratory illnesses, asthma, irregular heart beat, damage to the lung tissue and chronic bronchitis.

Congress passed the first Clean Air Act in 1963, but no comprehensive response to the problem took place until 1970 when Congress created the EPA (Environment Protection Agency) and a stronger Clean Air Act. The act was revised in 1990 to provide more enforcement authority to EPA. The agency is given the responsibility to manage common property resources on behalf of the public, and hence has the obligation to devise a policy which efficiently allocates those resources. It is no secret that the most efficient economic policy requires either imposing the tax-price on the use of air resource or to implement "cap and trade" policy if tax-price is difficult to impose for practical reasons. I will elaborate on this point later.

In the private market when someone uses a resource, he must pay the market price to use that resource. The same principle must apply to a common property resource. For stationary sources of pollutants like power plants, one could impose a tax per pound of emission of the pollutant in an air-shed. In the case of mobile sources like motor vehicles, one could add an emission tax to the price of gasoline. Imposing a price will provide the incentive to conserve the use of resources and hence to create less emissions.

Many conservatives object to the idea of a tax-price, but they fail to realize that when there is a common property resource, one has to create an efficient price system which reflects the value of the resource.

Either EPA must impose a tax-price to allocate the air resource or create a market for emissions where the emission rights can be obtained at a positive price.

Supporters of market principles should not be unwilling to accept a market-based solution.

There is one problem with the tax scheme: At the start EPA will have to forecast the amount of tax to achieve the desired results. Forecasting is tricky, especially in the case of pollutants. Hence the second-best solution is to implement a "cap and trade" policy. Simply put, under this policy EPA establishes emission standards in an air-shed (total amount of emissions) and creates total emission rights for each pollutant and an initial benchmark price for those rights. The emission rights are allocated among the major emitters. Anyone who emits more pollutants in the air than their allocated rights will have to buy the rights from those who have not used all their rights. Thus, the change in prices of emission rights, depending on the demand and supply condition in the rights' market, will regulate the market for total emissions. Hence, the "invisible hand" of the market will help meet the emission standards for each pollutant.

I hope conservatives who believe in market principles do not want people using our scarce air resource without paying for it. President Bush and many other conservatives put too much faith in technology and moral obligation of people to solve the pollution problem. But they will be disappointed if an appropriate price system for emission rights is not implemented to provide economic incentives to innovate and foster technical change to solve the problem.

Mathur is former chair of the economics department and professor emeritus of economics at Cleveland State University, Cleveland, Ohio. At present he resides in Ogden.

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