In the discussion on how best to address climate change, carbon pricing is regarded as a principal tool to “internalize” the full costs associated with fossil fuel use. Higher prices will lead individuals to rethink their purchasing decisions. Thus, they may choose a more fuel-efficient car, drive less, mind their thermostat settings in winter and think whether and when to switch on the air conditioning in the summer. And so on.
To the extent that this helps to make consumers more discriminating and smart about their choices, it is all for the better. But a strategy that is driven solely or primarily by market signals can quickly translate into hardship, as skyrocketing home heating bills in the United States in 2008 demonstrated. In the United States, and maybe elsewhere as well, full-cost pricing and current socio-economic trends seem to be on a collision course.
Over the past quarter century or so, the gap between rich and poor has widened dramatically. More than a quarter of all U.S. workers earned poverty level [Excel] hourly wages in 2007. Inflation-adjusted average hourly earnings [Excel] were slightly above $17 in 1978, a level not seen again until 2002. From a perspective of simple economic justice, wages should be on a par with productivity gains—something that has not been the case [Excel] in the United States for at least 20 years now.
Some will say that higher disposable incomes associated with rising wages will only further drive consumption. While that may be true, stagnating wages as such certainly did not lead to wiser consumption decisions. Many families balanced their books by taking on growing debt—in part to support questionable purchasing decisions. (One can debate whether these are the consequence of innate foibles or insistent advertising that insinuates that happiness is a function of possessing the latest gadgets).
At a time of both tremendous global economic tumult and gathering climate catastrophe, will people be forced into false tradeoffs—choosing economy over ecology, or vice versa? Will sustainability happen at the cost of growing disparities and hardship?
Market signals can and should play a role in the move toward a sustainable economy. But environmental sustainability requires social sustainability. People who don’t have to constantly worry about making ends meet will be more likely to accept that prices should tell the ecological truth.
Environmentalists need to be as aware of the social dimensions of sustainability—well-versed in issues like living wages or occupational health and safety—as labor representatives are mindful of the environmental dimensions. Luckily, there are indications of growing recognition of mutual concerns, as well as cooperative efforts, from the Apollo Alliance and the Blue-Green Alliance to the very well-attended “Good Jobs Green Jobs” conferences in Pittsburgh (2008) and Washington, DC (2009).