False Profits - What About Full Cost Pricing?

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Money made from environmental exploitation is a short term gain for a long term loss. Full cost pricing (FCP), IMHO, is the only solution.

Goods which are environmentally unfriendly are consistently more expensive that those which are green, because environmental damage is not being factored into the price. In some circumstances, the market should be able to adjust itself to full cost pricing with minimal government intervention. In other cases, taxes and surcharges may be necessary.

This is not an issue that can be addressed by only the government, or only the markets. It will take cooperation, and a hybrid of multiple approaches in order to really implement a working FCP system.

No one person can set the value of these items. What we can do is to redefine some of our paradigms to place more importance on natural resources and a healthy environment. We can do this without changing the whole game, just a some of the rules, though the end effect will be revolutionary.

During the industrial revolution, free market thinking was abundant, but concern for environmental consequences was non-existent. As we learn more about the damage we are capable of doing to the Earth, this mindset has changed a bit, but many people still seem to be living with a turn of the century valuation for natural resources.

One big step, is the idea that manufacturers should be responsible for the full life cycle of their goods, including expenses for disposal of packaging, as well as for disposal of the item itself.

As free marketers are so fond of pointing out, these sort of things always end up being paid by the customer, which really is the point of FCP anyways. If the cost of an environmentally destructive product is greater than that of a greener alternative, those who pay will be the ones who choose the destructive alternative.

Cereal boxes that are only half full, single serving cereal portions, toothpaste tubes with cardboard boxes, fruits and veggies that come individually wrapped or on Styrofoam trays, deodorant sticks (a refillable deodorant container is certainly a feasible idea), aerosol cans, computer software is often over-packaged when a jewel case would suffice, toilet paper/paper towel packages where each roll is also individually wrapped, individually wrapped processed cheese slices, stamp books (as opposed to single stamps)... These are all examples of over-packaging. It seems to me that this is the place for a green tax. For packaging levies, a tax/surcharge (which is paid into an environmental fund) would probably be best, In many cases, this would also have the benefit of making over-packaged materials less appealing to the customer.

I would prefer to assess this directly to the manufacturer, rather than at the purchase point, but unfortunately, I think this would defeat the purpose, as it would allow the company to defray the costs among other products. In order for this to work, there needs to be an incremental cost to the consumer, which will cause them to prefer items with greener packaging. Perhaps a system with levels of environmental friendliness, and something which meets the highest standard is entirely untaxed. This would give the greatest incentive, and hopefully prevent the tax from becoming too regressive.


If we force manufacturers to be responsible for disposal, the cost for goods which are harder to dispose of, or over-packaged, will rise compared to greener alternatives.

For example, car makers should be responsible for disposal costs. I would suggest a voucher for disposal, redeemable by the purchaser (and transferable to any new owner). Alternately, we could collect a tax or surcharge at the purchase point.

Where in the life cycle the disposal costs would be collected is going to vary, depending on the nature of the product.
For large tickets items, like cars and computers, a voucher system would probably be best, and the disposal facility would collect payment directly from the manufacturer.
For small hazardous or hard to dispose of materials which are distributed broadly, the items could be packaged with a postage paid return envelope, and the manufacturer could dispose of them en masse.
Batteries are a perfect example of something which is not priced at full cost. The environmental effects, and the health risks of the chemicals in discarded batteries are simply not being considered. If every battery that was sold came with a postage paid envelope that could return that battery to it's manufacturer, we could reduce those risks without any government taxes or levies. Those manufacturers would be able to use recycled materials from many of these batteries This could offset some of the collection costs, and the incremental cost to the customer would be minimal.

OK, next stop... Oil!

Here's something that is truly not priced at cost to the customer.

For example, without a doubt, there is a percentage of the military budget which goes solely to the business of protecting the flow of cheap oil. I don't know the percentage, and I doubt anybody here could make an accurate estimation, but I know we can all agree that the cost is there.

Oil is simply not traded on the free market. There is far too much state intervention and other forms of price fixing that goes on. Now, the big problem with oil is really that it has been under-priced for too long. If we were to jump from our current system, directly to the real cost of oil, it could easily be disastrous.

What we need people to realize is that oil is simply too precious to use as fuel. Stop and think about, even forgetting about the transportation and power issues, how many things around you involved petroleum and petroleum byproducts in their manufacture. Think about the computer you are using right now. Think about the construction of your house. Think about your household appliances. Think about all of the plastics all around you.

Now, to me, these uses are far more important than using oil to make gas. It's just not logical to waste our supplies on burning it, no matter whether the production peak is now, 10 years, 20 years, or 50 years.

We have other alternatives already, and with real funding for R&D, we really could get out of the fossil fuel powered economy.

So, where do we start?