An Economic Vaccine for COVID-19 (That Might Just Save the Environment, Too…)

On November 9, 2016, I climbed the stairs, dreading what would come next.  A moment later, I sat on my six-year-old’s bedside.  “Who will save our environment?” he sobbed, his face buried in my lap.  A few days later we began volunteering weekly at our local watershed organization.  That is, until COVID-19 forced the center to shut its doors.

Even as the global economic shutdown was being gauged from space by observations of diminished manufacturing emissions, President Trump used the cover provided by the pandemic to ramp up his ongoing assault on our nation’s environmental protections, granting companies the right to pollute -unencumbered by federal regulation.  So was my six year old right?  Are we doomed to spiral back into a reality of pervasive pollution? 

Maybe not, and here’s why.  This pandemic, and the economic destruction it has wrought, provide an inflection point in how we relate to the natural world.  Do we lean into our polluting ways, as the President would have us do, in the hopes of salvaging the market?  Or, do we rethink how we relate our natural world?  Do we look beyond the traditional regulatory carrots and sticks for its protection, instead embracing smart economic interventions – interventions that protect our environment and work to reduce the yawning economic disparities that helped drive the outcome of the 2016 election to begin with? 

Photo by Carlos “Grury” Santos on Unsplash

Sound too good to be true? Please humor me by considering a short thought experiment. 

First, do you agree that no person built the Earth?  That no person created the air or water?  That no person made the soil, the land?  (This is the easy part.  It gets trickier from here.)  And if no person made any of those things, can you imagine that we might view them as belonging to everyone equally, like a natural birthright?  And if you think we all have rights to the resources of the Earth, just by virtue of being, do you think it’s correct that some people get rich by using (and abusing) those common resources, while others bear the burdens of pollution without reaping any of the fiscal benefits of its production?  Finally: Who makes all this inequity possible?  The answer: government (and that’s a good thing because our government is us, so we can decide to change things). 

At the most basic level, government seeks to strike a balance between the good (benefits to society, and let’s face it, private profits) and the bad (pollution).  Economic activity and pollution are seen as positively correlated, and the public plays the role of beneficiary of whatever is being produced and victim of the resulting pollution. 

But, if you also view the public as owner of the natural factors of production (and yes, the atmosphere and water bodies into which pollutants are dumped are among those factors), the regulatory toolbox must expand beyond carrots and sticks, beyond efforts to simply internalize externalities, to include the collection of resource rents, which have moral, not just efficiency-based justifications.  

A natural-resource rent is the difference between the price someone gets for producing and selling a product, and the cost of the extra labor and capital goods incurred producing it. The difference is the land rent or resource rent, and it is immense.

Our government already dabbles in the collection of resource rents, selling or leasing rights to oil extraction or the use of the electromagnetic spectrum, for example.  But the vast majority, particularly in the arena of pollution, fall into private hands, leaving the rest of us, and our environment, poorer for it. 

What if, instead of leaning into the idea of pollution as an inevitable outgrowth of economic health, we chose to stake our collective claim to our natural resources, and demanded that our government reclaim their value for our benefit?  In a time of massive unemployment and crippling public and private debt, this is an idea whose time has come.  Add to this people’s natural drive to avoid taxation, and we can expect such taxes to yield another benefit: new, private innovation to limit pollution. 

The idea of putting the market to work in support of environmental quality is not new (remember all that buzz about CO2 fee and dividend some years back?), but it is currently a vanishingly small part of the U.S. regulatory toolbox.   With coronavirus devastating our economy and our health, and $2.2T in federal spending on tap through the CARES Act, we don’t need to pit our environment against our fiscal health.  Tapping into pollution-based resource rents can create an economic vaccine that will allow us to emerge from this pandemic a fiscally, ethically, and environmentally healthier nation. 

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