The Dollar Value of a Green Imagination

Suppose you’re hunting for a new house. What is going to attract you more: the marble countertops or the weatherstripping? Exactly. It takes a different kind of mind to pay attention to a house’s heating system or solar panels or duct insulation instead of its appearance and purchasing price. If you have that peculiar cast of mind, you have a “green imagination” — an attentiveness to sources of value that may not be visible. And it’s a way of thinking that will pay off, both for your own pocketbook and for the planet.

A green imagination is, in large part, the ability to use common sense — which, it turns out, is pretty uncommon. I mean, it’s only common sense that a technology which saves energy is economically beneficial, no? But the Bush administration (notably the vice president) has long insisted that Americans cannot afford to refit their transportation and manufacturing systems to make them more efficient. But of course, SUVs are affordable because they create jobs.

This kind of wacky reasoning has a superficial plausibility because of the way certain economic indicators such as the GDP are calculated. When someone pulls the last fish out of the ocean, that’s going to be recorded in Washington as a contribution to the economy, just as presumably the government economists of Easter Island must have counted it as a contribution to their GDP when someone cut down their last tree. Washington will consider it a good thing that someone had been employed that day and got a good price for his fish. Only a freakish person with a green imagination will object to this reasoning.

And, lo and behold! A green person named Hal Harvey at the Hewlett Foundation (www.hewlett.org) has been studying the actual costs and benefits of technological innovations that reduce energy expenditures, reaching the remarkable conclusion that they make good economic sense. His op ed article appeared in the San Francisco Chronicle on February 21. By his reckoning, Californians seem greener than the average American, apparently, for this state now “uses half as much energy per capita as the nation as a whole, saving the average household $1,000 each year, with total savings now more than $56 billion.” This does not happen because individuals have the imagination to seek these savings on their own. Instead, it has resulted mostly from changes in building codes and higher standards of energy efficiency imposed by state regulations for refrigerators, electric motors, lighting, and even cars. If we waited for individuals to demand these changes,, they would never happen in time.

Detroit auto companies are laying off workers because their cars are too inefficient for consumers to afford, in these days of high oil prices. But oil prices will go higher yet. For the sake of keeping their market share, the carmakers had better give up the fight against higher fuel economy standards. According to one study that Harvey cites, “higher mileage standards could create 15,000 new jobs by 2020, while cutting what we pay at the pump by 10 percent, which would save consumers an estimated $35 billion annually.”

Our problem arises from the goofy way that economic goods and bads are calculated. That’s reflected in the famous “tragedy of the commons” whereby it is economically rational for each farmer to let his cows eat as much grass as possible from the village common for his private individual gain. Never mind that the depletion of the commons grass will bring him, and the whole community, to ruin. The value of the global commons, our shared resource, does not enter into our calculations. So long as the depletion of the world's resources – oil, fish, grass, and all the rest – does not count as a loss, it will be perfectly rational for people to act stupidly.

The real costs of a particular economic activity often extend beyond the parties to the transaction. This is a matter of "externalities" imposed on the whole community or some individuals who cannot defend their rights. Pollution is one of those “externalities.” If you get sick because of inhaling toxic fumes emitted from industrial machinery, your health costs do not figure into the profit and losses of the industries – or at least the managers of those firms will try to fob those costs off onto someone else.

All this makes it difficult to estimate the true costs of a technology. Certainly the price of nuclear power is vastly under-estimated, for it does not include the costs of radiation leakage into the environment nor the long-term expense of de-commissioning nuclear power plants and storing the contaminated substances for a million years underground. How much would a kilowatt hour of electricity cost if you included those future and currently overlooked externalities?

Oddly, it is China that may change the conventional economic calculations by introducing a green imagination into their official decisionmaking. Its national assembly will debate openly on the adoption of a “Green GDP.” According to Bart Mongoven’s Stratfor report of February 23, the effect of such a change would be that the

“nation’s buying habits and manufacturing priorities likely would shift in ways that reward efficiency, the reduction of pollution and improved land-use practices. It is not clear exactly what this might mean for the world economy as a whole, but certainly the manufacturers of efficient and lower-polluting of ‘clean’ technologies would reap rewards…. Traditional GDP measures one side of the equation — production — but fails to consider the benefits gained versus the resources used up or destroyed in the process of production.”

I called China’s pioneering move “odd” because it has not been, so far, a stellar country when it comes to management of the environment. (See photo.) Other nations might have been expected to take the lead here. Back in 1990, Senator Al Gore promoted the notion of a “green GDP” in a book, Earth in the Balance, and Norway has been offering green economic measures for several years.

One outcome of these new green calculations may be that China will face some painful choices about its use of fossil fuels. A great part of Chinese manufacturing depends on coal-burning technologies that cause smog, lung disease, and water pollution. If these costs are brought into the equations that guide public policy, there will be newly apparent reasons for the country to develop renewable, non-polluting sources of energy.