Energy and Environmental Cost-Shifting
By Arnold Kling
Even if we [in Europe] succeed in making big cuts in carbon emissions, these would not include the pollution created by imports. This is the accounting flaw at the heart of the Kyoto treaty. Globalization means energy-intensive manufacturing is moving out of Europe and into China. An imported MP3 player almost certainly requires more CO2 emissions for its Asian production run than it would have in Europe. Yet Europeans will be able to make the phony claim that they reduced emissions, when all they have done is export — and increase — them.
I also worry about “energy-saving” products, like hybrid cars. What is the up-front energy cost in building such a product? Is it higher than that of producing a normal car? If so, how does this difference compare with the present value of the car’s lifetime energy savings?
The more that the government subsidizes and distorts markets for energy or pollution, the more opportunities there are for energy-shifting and pollution-shifting to take place. Policies intended to reduce pollution and energy consumption can have the opposite effect, unless they are very carefully crafted and tuned.