Al Gore's Electric Bill, Carbon Credits, and A Lesson In Economics

For a political ideology obsessed with free markets, the American Right displayed little understanding of the concept this week when it trumpeted a headline from TennesseePolicy.org. The right-wing media machine picked it up and within moments the banner headline from Drudge Report to Townhall read "GORE MANSION USES 20X AVERAGE HOUSEHOLD; CONSUMPTION INCREASE AFTER 'TRUTH'."

But that is only half of the story. Predictably, it is the half that makes Al Gore look bad.

While the Bush Administration has ignored, deflected, and delayed untold thousands of environmental policies and programs, Gore and many other members of the environmentalist movement have adopted them voluntarily. One such program makes use of the buying and selling of "Carbon Credits" to offset the environmental impact of certain activities including the ownership and operation of Gore's large home and private jet.

In the end, the spin and smear against Gore is unfounded. His activities are carbon neutral. Typically, however, the conservative slander-sheets have chosen to publish half-truths rather than take the time to educate and inform their readership.

Market Economics: A Two Minute Primer

Economics 101: Markets reward efficiency. Whoever can make Product X with the least expensive inputs can sell Product X at the greatest profit margin. Whoever makes the most profit is most rewarded for participation in the market.

Economics 201: All inputs have costs. Not all inputs are paid for by the people that use them. These inputs are called "Externalities." Because players in the market do not pay for Externalities there is no market incentive to reduce them. This results in a tragedy of the commons scenario.

Economics 301: Markets reward efficiency at the price of all other virtues. Other means of economic governance reward other virtues. For example, governments may reward equality or social responsibility.

Economics 401: Combining multiple means of economic governance (markets and governmental regulation, for example) creates a system of incentives which reward efficiency and other non-market-driven criteria. This is the way that most economic systems, including the United States, operate today.

Carbon Credits

Pollution is a classic example of a market Externality. There is no significant monetary cost associated with dumping massive amounts of carbon dioxide into the atmosphere and thus there exists no pure market incentive to reduce greenhouse emissions. The Kyoto Protocol sought to address this issue by artificially creating a "price" for carbon emissions through the institution of the Carbon Credit system. Very simply, carbon emissions for various activities would be capped at an agreed upon number of tons of carbon dioxide with each ton representing a "Carbon Credit." Those that were unable or unwilling to operate under the cap could purchase credits from those operating under their carbon budget.

The result of this system is a market for "Carbon Credits" with market forces determining the economic value of a ton of carbon dioxide emissions. As governments slowly decrease the cap, the price of "Carbon Credits" will increase and market players will be compelled by existing market dynamics to reduce emissions or to find some other way to offset the increased cost.

In For A Penny...

Even though the Bush administration pulled the United States out of the Kyoto talks, US citizens can still participate in the treaty - though on a voluntary basis. Al Gore has chosen to do just that. By purchasing "Carbon Credits" at the market price, Gore is placing his personal pollution under the umbrella of Kyoto and making it count towards the caps set in place by Kyoto even though the Bush Administration and the US Government refuse to participate in the program.

Gore's activities - Gulfstream Jet and all - are thus carbon neutral. Every pound of carbon dioxide generated by his home, his jet, and his touring activities is bought and paid for - representing decreased emissions by the companies and individuals selling Carbon Credits on the international stage.

It is market efficiency at its finest, not the hypocrisy charged by the two-bit partisan rags trumpeting Gore's electricity bill as some sort of political coup. Gore is voluntarily spending his money and investing his time in a system that actually has a fighting chance of making a real difference. He should be applauded for that, not ridiculed.

A Final Note

Those interested in purchasing Carbon Credits and other means of reducing their Carbon Footprint can find additional resource in this comment by evano within the following discussion.

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