Some politicians and
business leaders in the United States believe that the U.S. system of
capitalism and free enterprise is the main reason for the nation's
prosperity over the past two hundred years and the key to its future
success. Free enterprise was very effective in facilitating the economic
development of the United States, and many people benefited from it.
But it is equally true that this could not have happened without the
country's wealth of natural resources like oil, gas, timber, water, and
many others. When we consider the environment and the role of
sustainability, the question is not whether our system works well with
an abundance of natural resources. Rather, we should ask how well it
would work in a nation, indeed in a world, in which such resources were
severely limited.
Does business, as the prime user of these
resources, owe a debt to society? The Harvard Business Review recently
conducted a debate on this topic on its opinion/editorial pages.
Business owes the world everything and nothing, according to Andrew
Winston, author and consultant on environmental and social challenges.
"It's an important question," he wrote, "but one that implies business
should do the socially responsible thing out of a sense of duty. This
idea is a distraction. Sustainability in business is not about
philanthropy, but about profitability, innovation, and growth. It's just
plain good business".
On the other hand, Bart Victor, professor
at Vanderbilt University's Owen Graduate School of Management, wrote,
"Business is far more powerful and deeply influential than any competing
ideological force, political force or environmental force . . .
business now has to see itself and its responsibilities and obligations
in a new way".
Using deontological or duty-based reasoning, we
might conclude that business does owe a debt to the environment. A basic
moral imperative in a normative system of ethics is that someone who
uses something must pay for it. In contrast, a more utilitarian
philosophy might hold that corporations create jobs, make money for
shareholders, pay taxes, and produce things that people want; thus, they
have done their part and do not owe any other debt to the environment
or society at large. However, utilitarianism is often regarded as a
"here and now" philosophy, whereas deontology offers a longer-term
approach, taking future generations into account and thus aligning more
with sustainability.
Should businesses have to pay more in fees
or taxes than ordinary citizens for public resources or infrastructure
they use to make a profit? Consider the example of fracking: West Texas
has seen a recent boom in oil and gas drilling due to this relatively
new process. Fracking is short for hydraulic fracturing, which creates
cracks in rocks beneath Earth's surface to loosen oil and gas trapped
there, thus allowing it to flow more easily to the surface. Fracking has
led to a greatly expanded effort to drill horizontally for oil and gas
in the United States, especially in formations previously thought to be
unprofitable, because there was no feasible way to get the fossil fuels
to the surface. However, it comes with a significant downside.
Fracking
requires very heavy equipment and an enormous amount of sand,
chemicals, and water, most of which must be trucked in. Traffic around
Texas's small towns has increased to ten times the normal amount,
buckling the roads under the pressure of a never-ending stream of oil
company trucks. The towns do not have the budget to repair them, and
residents end up driving on dangerous roads full of potholes. The oil
company trucks are using a public resource, the local road system, often
built with a combination of state and local taxpayer funds. They are
obviously responsible for more of the damage than local residents
driving four-door sedans to work. Shouldn't the businesses have to pay a
special levy to repair the roads? Many think it is unfair for small
towns to have to burden their taxpayers, most of whom are not receiving
any of the profits from oil and gas development, with the cost of road
repair. An alternative might be to impose a Pigovian tax, which is a fee
assessed against private businesses for engaging in a specific activity
(proposed by British economist A. C. Pigou). If set at the proper
level, the tax is intended as a deterrent to activities that impose a
net cost - what economists call "negative externalities" - on third
parties such as local residents.
This issue highlights one of
many environmental debates sparked by the fracking process. Fracking
also causes the overuse and pollution of fresh water, spills toxic
chemicals into the ground water, and increases the potential for
earthquakes due to the injection wells drilled for chemical disposal.
Ultimately, as is often the case with issues stemming from natural
resource extraction, local residents may receive a few short-term
benefits from business activity related to drilling, but they end up
suffering a disproportionate share of the long-term harm.
One
method of dealing with the long-term harm caused by pollution is a
carbon tax, that is, a "pay-to-pollute" system that charges a fee or tax
to those who discharge carbon into the air. A carbon tax serves to
motivate users of fossil fuels, which release harmful carbon dioxide
into the atmosphere at no cost, to switch to cleaner energy sources or,
failing that, to at least pay for the climate damage they cause, based
on the amount of greenhouse gas emissions generated from burning fossil
fuels. A proposal to implement a carbon tax system in the United States
has been recommended by many organizations, including the conservative
Climate Leadership Council (CLC).
Exxon Mobil, Shell, British
Petroleum, and Total, along with other oil companies and a number of
large corporations in other industries, recently announced their support
for the plan to tax carbon emissions put forth by the CLC.
Visit the Carbon Tax Center to learn about the carbon tax as a monetary disincentive.
Would
this "pay-to-pollute" method actually work? Will companies agree to
repay the debt they owe to the environment? Michael Gerrard, the
director of the Sabin Center for Climate Change Law at Columbia
University Law School, said, "If a sufficiently high carbon tax were
imposed, it could accomplish a lot more for fighting climate change than
liability lawsuits".
Initial estimates are that if the program
were implemented, companies would pay more than $200 billion a year, or
$2 trillion in the first decade, an amount deemed sufficient to motivate
the expanded use of renewable sources of energy and reduce the use of
nonrenewable fossil fuels.
Some environmental organizations,
including the Nature Conservancy and the World Resources Institute, are
also endorsing the plan, as are some legislators in Washington, DC. "The
basic idea is simple," Senator Sheldon Whitehouse (D-RI) said. "You
levy a price on a thing you don't want - carbon pollution - and you use
the revenue to help with things you do want".
According to the
senator, a U.S. carbon tax or a fee of $45 per metric ton would reduce
U.S. carbon emissions by more than 40 percent in the first decade. This
is an idea with global support, and it has already been tried. The World
Bank has data indicating that forty countries, along with some major
cities, have already enacted such programs, including all countries of
the EU, as well as New Zealand and Japan.
Corporate and Personal Choices Regarding the Environment of the Future
The
car manufacturer Tesla is developing new technologies to allow people
to reduce their carbon footprint. In addition to a line of electric
cars, the company makes other renewable energy products, such as roofing
tiles that act as solar energy panels, and promotes longer-term
projects such as the Hyperloop, a high-speed train project jointly
designed by Tesla and SpaceX.
Of course, if businesses are to
succeed in selling environmentally friendly products, they must have
consumers willing to buy them. A homeowner has to be ready to spend 20
percent more than the cost of a traditional roof to install solar
roofing tiles that reduce the consumption of electricity generated by
fossil fuels ((Figure)).
Although solar panels can reduce your carbon
footprint, the tiles are much more expensive than standard roofing
tiles.
Another
personal decision is whether to buy a $35,000 Tesla Model 3 electric
car. While it reduces the driver's carbon footprint, it requires
charging every 250 miles, making long-distance travel a challenge until a
national system of charging stations is in place.
Tesla's
founder, Elon Musk, is also the founder of SpaceX, an aerospace
manufacturer that produces and launches the only space-capable rockets
currently in existence in the United States. Thus, when NASA wants to
launch a rocket, it must do so in partnership with SpaceX, a private
company. It is often the case that private companies develop important
advances in technology, with incentives from government such as tax
credits, low-interest loans, or subsidies. This is the reality of
capital-intensive, high-tech projects in a free-market economy, in which
government spending may be limited for budgetary and political reasons.
Not only is SpaceX making the rockets, but it is making them reusable,
with long-term sustainability in mind.
Elon Musk, founder of the electric car
manufacturer Tesla and other companies, recently spoke at a global
conference held at the Panthéon-Sorbonne University in Paris. In this
video, Musk explains the effect of carbon dioxide emissions on climate
change in clear and simple terms.