Why We Need to Reset Capitalism to Put the Environment at the Center
While talking about internalizing externalities, ensuring greater transparency and more complete information for consumers isn't quite as flashy a green topic as some of the other things that TreeHugger reports on, in many ways ensuring that our post-financial meltdown economic system gets reset to place sustainability at the center (to take Daniel Esty's terminology from the Huffington Post) leads the list of things the green movement ought to be discussing.
Most simply, the environmental impact of the goods produced by companies absolutely can no longer be passed off onto society as a whole:Environmental Costs Must Be Shifted to Producers, Not Society
We need regulations which ensure that companies cannot structure their operations so that any upside gains accrue to their owners (or worse yet their managers), while risks or costs get shifted onto society as a whole. In the banking sector, rules against over-leveraging are urgently required. The recently released Turner Report in the UK outlines the first steps in this direction that should be taken. More generally, financial reporting rules must be designed to expose hidden risks and externalized costs.Greater Transparency, Green Reporting Required
We should likewise insist that companies which send emissions up a smokestack or out an effluent pipe cease their pollution or pay for the harm inflicted on the community. In our "reset" world, economic success cannot come at the price of harms imposed on the public in the form of contaminated air and water or risk of climate change. Thus while we lay the foundation for a more sustainable economy, let's similarly adopt rules that provide for a sustainable environmental future. This will require overhauling the traditional approach to environmental regulation which countenances way too much in the way of externalities by offering "permits" up to a certain level of harm.
In parallel with a commitment to internalizing externalities, we must adopt transparency as a watchword. Market capitalism does not work without adequate information about economic actors. This reality has been understood in theory, but now needs to be advanced in practice. Government has a critical role to play in establishing the terms of disclosure about companies, markets, products, investment vehicles, and more. Public officials must also be empowered to ensure that disclosures are complete and accurate.
Well-designed reporting rules make it easier to spot externalized costs or risks and harder to hide malfeasance. Widely available metrics also facilitate benchmarking across companies, which offers a mechanism for assessing performance, highlighting leaders and laggards, and spurring competitive pressures that drive all toward better results. Studying the leaders offers an important way to identify best practices in everything from corporate strategy to pollution control. Likewise, outliers (such as those who make 10% returns year after year without fail) can be isolated for special review and scrutiny.
More: Huffington Post - Reset: Making Sustainability the Centerpiece of Our RecoveryGreen EconomicsMore on the Ecological Stimulus Package: Lessons From the AncientsFocus on Green Economic Development in Developing Countries, Not Just Emission Reductions: IPCC ChairWe Need a "New Operating System" for the Modern World! Yale Univ's Dean of Environmental Studies Says