Could America’s New Energy Abundance Spark a Trans-Atlantic Environmental Race to the Bottom?

Environmentalists often pillory China, with its opaque city air, dirty water, and contaminated food as the leader of a race to the bottom. By spending as little as possible on pollution control, they say, it keeps production costs to a minimum and boosts exports. If Chinese producers had to bear the full external costs their pollution imposes on others, the critics go on, a good part of the its competitive advantage would disappear. The environment would be cleaner and good jobs would return to the United States. So China’s behavior is an outrage, is it not?

Now, however, there is a looming danger of a new race to the bottom, this one with America as the leader and the Atlantic rather than the Pacific as the arena. Is this prospect any less outrageous?

Appropriate vs. affordable energy pricing

As I detailed in a three-part series earlier this year [1] [2] [3], economists across the political spectrum see appropriately high energy prices as a key to an efficient, environmentally sustainable economy. “Appropriate,” in this case, means prices that include charges for environmental harms—local pollution like smog and mercury emissions, groundwater pollution from fracking, climate change caused by greenhouse gas emissions, everything. Higher prices, in turn, would provide incentives for conservation and clean energy innovation. >>>Read more