The Economics of Pollution

Environmental subsidies are baked into our economic system

Business and industry in America and the rest of the world rely on environmental subsidies — they always have and still do. This common practice keeps prices low, so consumers don’t complain. But the system may be changing. There is growing awareness that the environmental consequences of this status quo are increasingly severe. However, change is always a double-edged sword, producing winners and losers, and powerful lobbies coalesce to fight any movement away from this system of subsidy.

It is unsurprising the U.S. Democratic Party dropped a provision in its party platform to end subsidies for the fossil fuel industry, given the strong lobby against it. But, let’s be clear; the fossil fuel industry is not alone in its historical reliance on environmental subsidies. Perhaps the focus should be on all environmental subsidies. The practice is widespread. Superfund cleanup sites provide a prime example of how the subsidy system works.

Superfund sites showcase a process providing ways to maximize profits at the expense of the environment — a process where future taxpayers cover the costs for damages done.

During the last two decades, cleaning up superfund sites cost the American taxpayer over $21 billion. The economics of how we got to this point are quite simple. If you manufacture a widget that sells for $100, and it costs you $50 to produce it, you have a handsome profit of $50 per item. However, if producing that object creates toxic…

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