Objections: cash, jobs, and taxes

When you tell people that coal, the oil sands, and other unconventional oil and gas should be left underground, three objections come up most often:

  1. Look at how much revenue these industries produce!
  2. And so many jobs depend on them
  3. And they provide so much tax revenue

All this, they argue, means communities and governments should welcome, or at least tolerate, these industries.

I think there are four major responses to this.

1) What Is Seen and What Is Not Seen

It is easy to tot up the revenues from oil sands producers or coal mining companies, the number of people they employ, and the taxes they pay. What is less obvious but equally real is the harm these entities produce, which is not compensated for. Air and water pollution sicken and kill people, as well as harming natural ecosystems. Mining tears up and poisons the land. Greenhouse gas emissions cause warming, extreme weather, sea level rise, ocean acidification, and many other ills.

Once all the damage caused by climate change is taken into account, it seems highly likely that these businesses actually destroy more wealth and human welfare than they create, because the indirect costs overwhelm the direct benefits.

2) What is the alternative?

We cannot keep using fossil fuels forever. We will either burn them until there are none that remain to be economically extracted, or we will stop sooner because we want to limit climate change.

Either way, the global economy is eventually going to need to rely on renewable forms of energy. All the infrastructure we are building now to support fossil fuel use will eventually be redundant and useless. At the same time, the sooner we get started on building the energy system of the future, the more time we have to work out which options are best and perfect them. A longer time horizon also means we need to invest less of our total wealth per year, in order to get the same final result.

There are big opportunities to be captured in moving to a sustainable energy system, as well. We can free ourselves from dependence on fossil fuel imports, with all the geopolitical and security implications that would have. We can free ourselves from the burden of illness and death caused by fossil fuel pollution. We can live cleaner, healthier, and safer lives.

3) The risks from climate change

I am not going to exhaustively re-explain the reasons why we should be fearful of climate change. In short, we should be worried because the warming projected just from staying on our present course of increasing emissions is on the order of 5°C. That would create a world as different from the present one as the present one is different from the depth of an ice age. The human consequences of that are impossible to fully appreciate, but certain to be highly significant.

Ken Caldiera expresses this idea very effectively:

If we already had energy and transportation systems that met our needs without using the atmosphere as a waste dump for our carbon- dioxide pollution, and I told you that you could be 2% richer, but all you had to do was acidify the oceans and risk killing off coral reefs and other marine ecosystems, risk melting the ice caps with rapid sea-level rise, shifting weather patterns so that food-growing regions might not be able to produce adequate amounts of food, and so on, would you take all of that environmental risk, just to be 2% richer?

Beyond that, the warming we are creating risks kicking off positive feedback effects, which themselves produce more warming. An especially important danger is causing the permafrost and methane clathrates to melt. The methane they contain could cause another huge dose of warming, on top of what human beings produced directly. They could even kick off runaway climate change, which could make the planet permanently inhospitable to life.

4) Ethics

To enrich yourself by causing certain harm to others, and by creating terrible risks, is surely not an ethical way to comport yourself. There is no reason why future generations deserve to inherit a wrecked and imperiled planet, and it would be preferable for them to inhabit a global economy that is already moving towards making itself sustainable.

As Henry Shue argues, climate change falls within the general moral category of the infliction of harm upon the defenceless. When we undertake activities that produce massive greenhouse gas emissions, we are playing a game of Russian Roulette with the gun pointed at the head of future generations. Even if climate change proves to be less of a problem than we legitimately fear, we are behaving unethically by forcing this risk upon them without their consent, and without them having any ability whatsoever to seek recourse from us.

23 thoughts on “Objections: cash, jobs, and taxes

  1. Anon

    This is all true enough, but may not be very concincing for either politicians or business men. It may be unethical to harm future generations, but if it is super-profitable, it is still likely to happen.

  2. Emily

    On the contrary, I think it should be very convincing for businessmen who are actually interested in long-term investments in energy and political stability.

    I can see corporations being more interested in investing in a stable financial future, than politicians who just ride on the swell of whatever popular beliefs keep them in a position of power.

  3. Tristan

    “I think it should be very convincing for businessmen who are actually interested in long-term investments in energy and political stability.”

    The way the current business structure is set up, only irrational actors “actually” are interested in long term investments. Rational actors are interested only in the appearance of long term stable investments since appearance is what sells. Executives are rarely around long enough to reep the benefit of sound long term planning.

  4. Tristan

    “I can see corporations being more interested in investing in a stable financial future’

    Really? You’ve got some rosy glasses on.

  5. Milan Post author

    “[B]usinessmen who are actually interested in long-term investments in energy and political stability” are a minority group.

    I think most people in the business world are trying to grab as much as they can as quickly as possible. For those obsessed with quarterly results, certain doom in eighty years is effectively irrelevant.

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  7. .

    “Has BP ever made a profit? The question looks daft. The oil company posted profits of $26bn last year. There’s no doubt that BP has been pumping money into the pockets of its shareholders. The question is whether this money is what the company says it is. BP calls it profit. I call it the provision the firm should be making against future liabilities.

    Despite an angry letter from two US senators and a warning from Barack Obama about spending big money on their shareholders while nickeling and diming coastal people, despite the fact that it has no idea what its total liabilities in the Gulf of Mexico will be, BP seems to be planning to pay a dividend this year. It’s likely to amount to more than $10bn. As the two senators noted, by moving money “off the company’s books and into investors’ pockets”, BP “will make it much more difficult to repay the US government and American communities”.

    Pollution has been defined as a resource in the wrong place. That’s also a pretty good description of the company’s profits. The great plumes of money that have been bursting out of the company’s accounts every year are not BP’s to give away. They consist, in part or in whole, of the externalised costs the company has failed to pay, and which the rest of society must carry.

    Does this sound familiar? In the ten years preceding the crash, the banks posted and disposed of stupendous profits. When their risky ventures failed, they discovered that they hadn’t made sufficient provision against future costs, and had to go begging from the state. They had classified their annual surplus as profit and given it to their investors and staff long before it was safe to do so.”

  8. .

    “A paper by the New Economics Foundation in 2006 used government estimates of the cost of carbon emissions to calculate the liabilities of Shell and BP. It found that while the two companies had just posted profits of £25bn, they had incurred costs in the same year of £46.5bn. The oil leaking into the Gulf of Mexico from the Deepwater Horizon well is scarcely more damaging, and its eventual impacts scarcely more expensive, than the oil which is captured by neighbouring rigs then processed and burnt as intended.

    The full costs imposed by the oil companies, which include the loss of human lives and the extinction of species, cannot be accounted. But even if they could, you shouldn’t expect the companies to carry them. They might be incapable of capping their leaks; they are adept at capping their liabilities. The Deepwater Horizon rig, which is owned by Transocean, is registered in the Marshall Islands. Most oil companies pull the same trick: they register their rigs and ships in small countries with weak governments and no international reach. These nations are, in other words, incapable of regulating them.”

  9. Milan Post author

    Naomi Oreskes and Erik Conway cite a good example of the phenomenon of industry exaggerating the cost of regulating pollution while downplaying the harm the polution does, in the context of acid rain regulation in the United States:

    In 1990, under the new administration of George H.W. Bush, amendments to the Clean Air Act established an emissions trading – or “cap and trade” – system to control acid rain. The system resulted in a 54 percent decline in sulfur dioxide levels between 1990 and 2007, while the inflation-adjusted price of electricity declined during the same period. In 2003, the EPA reported to Congress that the overall cost of air pollution control during the previous ten years was between $8 billion and $9 billion, while the benefits were estimated from $101 billion to $119 billion – more than ten times as great. [Fred] Singer’s “billion-dollar solution to a million-dollar problem” was just plain wrong.

    The energy industry has often accused environmentalists of scaremongering, yet this is just what they had done with their claims of economic devastation. Protecting the environment didn’t produce economic devastation. It didn’t lead to massive job losses. It didn’t cost hundreds of billions of dollars. It didn’t even cause the price of electricity to rise. And the science was correct all along. As Mohameg El-Ashry of the World Resources Institute was quoted in Newsweek, “When we waited for more research on acid rain, we ended up realizing that everything we knew 10 years earlier was true.”

    Oreskes, Naomi and Erik Conway. Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming. p.105 (hardcover)

    Emphasis theirs.

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  11. .

    “Now, there are costs associated with this transition [to zero carbon forms of energy]. And some believe we can’t afford those costs right now. I say we can’t afford not to change how we produce and use energy – because the long-term costs to our economy, our national security, and our environment are far greater. ”

    Barack Obama

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  14. .

    Wednesday, August 18, 2010 6:21 AM
    Economic fears prevent action on emissions

    Jeff Rubin

    “Of course as long as emissions don’t cost anybody anything, why would we expect any halt in emissions growth? After all, the engine of global economic growth still runs on burning coal and oil. And we’re certainly no closer to putting a price on carbon emissions today than we were before the much-anticipated global environmental summit in Copenhagen last December.

    With most emerging market economies dreaming of emulating China’s carbon-spewing industrialization, don’t expect any multilateral breakthroughs on global carbon management any time soon. Nor should we, given the huge disparities in energy consumption per capita between the developed and the developing worlds.

    But at the same time, we are no closer to seeing any unilateral steps to price carbon on the part of wealthy emitters like North America, for example. Carbon legislation is effectively dead-ended in Congress with the Waxman-Markey bill unable to pass in the Senate, while legislation isn’t even on the drawing board with the Canadian federal government. Like China, North America fears huge adverse economic consequences from pricing the carbon it emits into the atmosphere.

    As a result, carbon emissions continue to pose no cost to our economy. Unfortunately, it’s becoming harder and harder to say the same about climate change.”

  15. .

    “The first point to make is that, even if Nordhaus’ calculations [about the cost of stopping anthropogenic climate change] were reliable, the costs of climate change mitigation do not see unmanageable. As Thomas Schelling puts it:

    The costs in reduced productivity are estimated at two percent of GNP forever. Two percent of GNP seems politically unmanageable in many countries. Still, if one plots the curve of US per capita GNP over the coming century with and without the two percent permanent loss, the difference is about the thickness of a line drawn with a number two pencil, and the doubled per capita income that would have been achieved by 2060 is reached in 2062. If someone could wave a wand and phase in, over a few years, a climate-mitigation program that depressed our GNP by two percent in perpetuity, no one would notice the difference. (Schelling 1997)

    Even Lomborg agrees with this. He not only cites the 2 percent figure with approval but adds, “there is no way that the cost [of stabilizing abatement measures] will send us to the poorhouse” (Lomborg 2001, p.323)”

    Gardiner, Stephen. “Ethics and Global Climate Change” in Gardiner, Stephen et al. Climate Ethics: Essential Readings. p.11 (paperback)

  16. .

    Environmentalism under fire
    Soaring emissions
    The rhetoric about environmental controls killing jobs is getting louder and louder

    Jun 2nd 2011 | WASHINGTON, DC | from the print edition

    ISN’T it odd, asks Henry Waxman, a Democratic congressman from California, how the same Republicans who make such a fuss about abortion do not seem to care if the unborn are poisoned by toxic chemicals such as mercury? Isn’t it strange, Republicans retort, that people like Mr Waxman, who profess to care about working Americans, cheer on bureaucrats determined to smother business and destroy jobs? It may be hard to discern amid the melodramatic rhetoric, but the two sides are talking about the Environmental Protection Agency, and the various new rules it has in the works to curb pollution. Besides the endless toing and froing about government spending, it has become the most fiercely debated topic in Congress.

    As soon as they took control of the House of Representatives in January, Republicans began summoning Lisa Jackson, the head of the EPA, and several of her underlings to answer questions about their job-killing ways. Fred Upton, the head of the committee responsible for energy and environmental regulation, joked that she would be on Capitol Hill so often she would need her own parking space.

    The Republicans’ chief concern is the EPA’s authority, as affirmed by the Supreme Court in 2007, to regulate emissions of greenhouse gases. But more broadly they worry that the EPA is constantly tightening restrictions on pollution, at ever higher cost to business but with diminishing returns in terms of public health. They point to a slew of new rules about industrial boilers, cooling water at power plants, the disposal of coal ash, and emissions of mercury, ozone and other chemicals from smokestacks, which cumulatively, they say, will have a crippling effect on power generation and other industries. “Even God,” says Joe Barton, a Republican congressman, “couldn’t meet some of the ozone standards.”

    Mr Barton is among the many Republicans in Congress who question whether global warming is caused by human activity, let alone whether the EPA should be trying to mitigate it by limiting emissions of greenhouse gases. The House has passed a measure that would rescind the EPA’s authority to do so, although it was blocked in the Senate, which the Democrats still control. The Republican leadership in the House has accused the administration of plotting to raise the price of energy through onerous regulation, in an effort to promote otherwise uncompetitive green technologies. It wants the EPA to give more weight to the impact on the economy and jobs when drawing up future rules.

  17. .

    Trudeau’s comments last week caused a political tempest in Alberta, but not much of a ripple in the business community. That’s because even the idea of phasing out the oilsands seems, if not impossible, then unlikely enough that it requires no serious consideration.

    “To phase it out would take many, many decades,” said Martin King, director of institutional research at GMP FirstEnergy. King described Trudeau’s comments as a blip in the media.

    It’s such a huge revenue and economic generator, not just for Alberta, but the whole country. They pay a lot of royalties and taxes. There’s a lot of Canadian technology, a lot of steel, a lot of smart people from out East, from the West Coast. It’s not something that is going to be phased out in very short order.”

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