Proposal by John Champagne, for the EcoTax Reform Project of the Progress Report:

Image from “The Commons,” in The Hague Exhibition

“Population increases and continual expansion of the many ways that human beings impact this planet are causing depletion of resources that support human civilization and destruction of ecosystems that make up the diverse communities of life on earth. We cannot continue on our present path. We must find ways to counteract the economic forces that drive people to tax natural systems beyond their carrying capacity.

When a living system made up of many interacting, interdependent parts experiences unsustainable stress, that stress is perceived and an adaptive response is produced that tends to reduce the stress and preserve the health of the organism. An overheated animal will sweat, pant or seek shade, and its body temperature will fall. A system that responds to a stressful stimuli in a way that reduces the stress constitutes a system of negative feedback. Rising temperature causes a change in a physiological process or behavior that then causes a decrease in the stress. The earth, as a complex system made up of many interacting, interdependent parts, resembles an organism in many ways, but it lacks a system of negative feedback that would cause an adjustment in the system when human economic activity starts to exert unsustainable pressures on the larger ecosystem.

Attaching appropriate fees to the taking of resources and putting of pollution would bring information about ecological impacts into the economy and it would keep economic activity within sustainable limits. A monetary representation of ecological pressures and degradation, an ‘ecological impact price’, would be factored into the price of goods and services in the marketplace. People would have incentive to change buying habits that are harmful to the environment because they would feel the ecological impact in their pocketbook. Resource user-fees and pollution fees would correct the defect that causes our economy to injure or deplete the larger systems of which it is part.

No one person or small group of people knows for certain what level of human impacts the earth can sustain. The question is a highly subjective one which implies qualifiers such as, “At what level of risk, to present and future generations?”, and “Do we want to slow and stop present trends of degradation, or do we want to go further and reverse these trends and actively work to expand the portion of the earths surface covered by forests, other diverse ecosystems, etc.?” “Do we want to bring carbon dioxide emissions back to 1990 levels, or do we want to institute a policy of ‘No net increase of carbon dioxide concentrations in the atmosphere?’” These are questions of long-lasting import. The answers we give will affect ourselves in the short and long term. They will affect our offspring and generations not yet born.

Management of natural resources through a fee on release of pollution and taking of resources would produce a monetary representation of the value of the earths air and water, biota and minerals. As these resources can be thought of as public property, as belonging to all, we can rightly share the proceeds of the pollution fees and resource fees among all people equally. Such a sharing of the wealth of the commons would secure each and every one of us against the threat of abject poverty. A system that combines equal ownership of the commons with free markets and private ownership of man-made capital would include essential elements of both capitalism and communism.

The magnitude of the challenge we face, the stakes involved, and our democratic principles all point to the need to secure the participation of the largest portion of our society in deciding what human impacts on earth we will allow. We cannot and should not expect that levels of resource extraction or pollution will be much in excess of what most people would consider as acceptable. Neither should we expect to hold emissions or taking of resources to levels below what the people will accept. A democratic society would set limits on environmental impacts such that about half considered the levels about right or somewhat too strict while the other half considered the limits about right or somewhat too lenient. If some of us believe that we know better than most what human impacts should be judged sustainable and acceptable, we will have the instruments of change in a free society to bring our fellow citizens around to our view: Reason and sustained pressure, education and the free flow of information.

This new paradigm built on the principle of democratic ownership and management of natural resources will have as its most basic political act the citizen expressing a preference about what kind of world we should make, what human impacts on the environment we ought to allow. But this act, this expression, must be in a form that users of natural resources can read so that it can inform their actions. We will need to develop easy to create, easy to read documents that we can use as our palate for painting a picture of the kind of world we want to live in. This is a question that any democratic society asks its citizens, implicitly or explicitly: What kind of society do we want to create?

How can we translate the expressed will of the people into industry action and permit prices without a central authority interpreting what the people said and decreeing what the permit price will be? Can we create a decentralized system that reflects the character of the new tools that make this direct democracy possible?

One possibility: Let each polluter survey a random sample of the people to determine what is acceptable behavior overall. They can then declare how many permits they expect to buy and what price they expect to pay, and survey others’ projected demands and prices. Businesses would be guessing what the permit price should be given the observed mix of supply and demand. This is an inexact science. When all business on average estimates a too-low fee for use of natural resources or putting pollution, the low estimate will result in levels of projected use or pollution that exceed what the people say is permissible. More iterations of public statements of projected prices, estimated demand, and surveys of other buyers estimates, informed by the results of the previous iteration, would bring the community of resource-users closer to the ideal market-clearing price.

In the past, the supply of natural resources exceeded any demands that humans placed on them. There was no need for markets to manage the demands placed on the commons. Natural resources were treated as a free good, with good reason. The abundant supply meant that there were no shortages. People could take what they wanted when they wanted because the supply always exceeded the demand. (Well, this is true more or less: Since the advent of civilization, various populations at various times have increased their numbers and degraded their resource base to the point that their civilization collapsed.) But conditions have changed. Now, population pressures and resource depletion are felt simultaneously across a global civilization.

Whatever level of human impacts on the environment we decide to allow, we will gain the greatest benefit from limited resources if we allow the free market to manage their allocation. Free markets are the most efficient means of allocating resources because, at a given cost of production, they accurately balance supply and demand. In the case where the supply of natural resources is set by vote of the people, we should say the free market offers the most efficient and fair means of reconciling an elastic demand to a limited supply, through a public auction. The resources will go to those for whom they have the greatest value or utility.

One potential problem with a popular vote on acceptable levels of pollution and use of resources is that some people may want to vote very far beyond what they would honestly consider as acceptable, as a ploy to skew the average in their direction, knowing full well that their vote is but one among many, and voting an extreme position would move the average farther in their preferred direction than a vote that reflected their true, more moderate position. How could we address this problem?

One possibility: We could agree that most of our votes for next year’s environmental impacts will be within, say, ten percent of this year’s levels, with perhaps only 10% of the total natural resource wealth of the planet being subject to a yearly change of as much as 25%. Each citizen would then be forced to consider carefully which human impacts were most harmful and deserving of extraordinary efforts at control. But would the fraction of total resource wealth subject to more abrupt adjustment be measured in dollar terms? How can we compare CO2 impacts with asphalt or coral reef destruction, other than in economic terms, e.g.: as a fraction of the overall economy? Another strategy for discouraging the practice of voting an extreme position in order to skew the average would be to decrease the weight of votes that fall far from the mean. We might apply a formula to votes, W = 1/(1+sd), so that a vote that fell four standard deviations from the mean would have only one-fifth the weight of a vote at the mean. All votes would be counted, but some would be given less weight, according to how much most people, by their votes, indicated the more extreme votes were simply not responsible. Voters away from the mean could include comments with their votes, in an attempt to educate others as to the reasons behind their less conventional views. These comments, if well presented and backed with credible evidence, could be the basis of a change of opinion of a larger segment of the population.

This system will mean that capital investments will only turn a profit to the extent that they successfully meet human needs at the lowest cost to the environment–in terms of resources used and pollution put out. Everyone who has any money to invest will see that the place to put it is into clean industries and enterprises. The economic situation changes to one that has money flowing toward people engaged in cleaner industry rather than primarily toward those who control capital engaged in the most advantageous exploitation of a free ride on the commons.

Polluters are now subsidized by everyone: we all, most especially the poor, must pay the price of dirtier air and water and soil: more disease, lower quality of life. Appropriate fees on use of natural resources and on adverse impacts on the community, with proceeds shared among all equally, would end this injustice.

Industry, investors, will only make money to the extent that they can conduct themselves in ways that are not offensive to workers, since people who receive their equal share of the earths natural resource wealth would be more free to seek better working conditions, more rewarding work, if they find themselves in an unappealing situation. They would not be paralyzed by the prospect of abject poverty if they find themselves temporarily without work. And is this not exactly what we want? Psychological rewards of work–meaning and purpose–would become more prominent as an issue of concern. Ecological sustainability would become an integral component of the corporate bottom line. Employers and employees both would be more free to follow their bliss.

Human beings come in many personality and character types. Some people are more inclined by their nature to say, “We will do it this way because it is best for the community… and we make more money”. Others will be more inclined to say, “We will do it this way because we make more money this way… and it is better for the community”. Our current system tends to exclude from business participation and success those who would be more inclined to the first type. And it forces those who are of the second type to say, “We will do it this way because we make more money, even though it is not really the best thing for the community or environment”. When we shift our paradigm to internalize externalities into the price of products, every economic decision accurately reflects the whole mix of costs and benefits of an action. By pursuing profit or low prices, we will be following the path that is best for ourselves and the larger community.

Many people believe that the only reason for government to exist is to protect the individual and community against those (individuals and groups) who would violate the rights and interests of others. A government dedicated to take action against those who initiate the use of force, and committed to never initiate the use of force itself, is the best guarantee of individual and minority rights. If putting out pollution and taking more than your share of natural resources is recognized as forcing others to live with your pollution and live without, with less of, what you are taking, then this principle of no first use of force by government provides the legal/moral basis for a paradigm of democratic ownership and control of the commons, with users of commons resources compensating the people in proportion to the magnitude of use or degradation. This paradigm is an integration of libertarian and green politics. We may need further shifts in our perception of the boundaries between what we consider public and private acts before many people who call themselves libertarian will embrace this paradigm wholeheartedly. Consider: is it a public act or a private act to do things on your own land that tend to destroy wildlife habitat and diminish biodiversity? Is preservation of biodiversity an issue of public concern?

With significant green fees, conventional taxes may be difficult to support financially. They may also be seen as lacking any philosophical foundation. We may see a system requiring payment to the people in return for the privilege of taking publicly owned resources for profit as fair and just, while the requirement that we make payment to the government in proportion to how much income we earn or goods and services we sell may not seem on the face to be eminently fair. Fees on things that we do that are detrimental to the community can be thought of as an alternative to conventional taxes, rather than as an addition to them.

We could determine that a portion of the proceeds of the fees on use of the commons will be public funds, dedicated to the support of public and community programs. With each person receiving a substantial stipend as their share of earths natural resource wealth, many of the functions of government that are intended to aid the poor and otherwise distribute income would be unnecessary. For those government programs that continue to be seen as necessary or desirable, citizens could each decide what programs are most deserving of support. We could vote on priorities for spending our share of public funds in the same way that we vote on priorities for moderating ecological impacts.

The people would set the agenda. Money would flow toward those who work toward some aspect of the agenda that is set by the community. Money would flow away from those who are working counter to some aspect of the agenda set by the community. If the people say they want less CO2; less asphalt; less light pollution interfering with our view of the stars, then the people whose decisions run counter to these community-agreed goals will be made to pay a fee. When the levels of the fees are such that the economic ‘bads’ are sufficiently reduced, the people will stop saying they want to see less of these things and they will turn their attention to other things. What we call externalities today would become internalized into the economic calculus. Actions which produce negative impacts will be performed only in so far as their benefits outweigh those costs.

Many people will not feel qualified to make taxing and spending decisions, at least on some issues. They may choose to delegate their vote to other, more qualified persons. We could have a direct / representative democracy with the option of calling back our proxy if ever we feel it is being used in an irresponsible way. This need not be a formal arrangement. If our votes on how to manage community resources and how to spend public funds are public statements, then we could examine others’ votes to find people with whom we agree. We could copy their votes if we are convinced that they are well-informed and responsible. Some people may gain a reputation of being more informed than others. Those entrusted with the responsibility to decide, on behalf of thousands or millions, appropriate levels of emissions and resource extraction would likely enter into that position by virtue of a reputation among many that they do quality work and are people of integrity. Because there may be some social prestige and status, (perhaps even a small stipend from the public funds), for holding such a position, there would likely be some incentive for a person to maintain this reputation, so as to preserve this favored status position. The persons or organizations entrusted with this responsibility for assessment would have every incentive to make their work widely available, both the data-gathering and the analysis, to possibly further increase their constituency. This could only help to improve the quality and relevance of information and materials available to schools, libraries and the public at large.

This paradigm gives each of us an equal voice in sculpting our society. When we ask questions about the quality of environment that we want to create, and translate the answers into reality, we change our understanding of the role of the citizen in society. We change our consciousness about our responsibility and our power. We are invited to consider carefully what we mean by progress and a good life.

A system of fees for use of resources, with control of overall levels of use vested in the people at large, would provide the feedback mechanisms that would cause economic activities to adjust to the ecological conditions that sustain them. Control of the proceeds of these fees vested in all people equally would go a long way toward redressing problems of disparity of wealth, and it ensures that the proceeds would be invested in ways consistent with the interests of the people at large. “