Wednesday, December 31, 2008

More About Marginal Abatement Cost (MAC)

To elaborate on the Marginal Cost Curve and the Marginal Damage curve, there is an underlying theory that says that there is a direct relationship between growth, or rather productivity, and pollution. So that being said it is doctrine, productivity = pollution, therefore you have to pollute to grow. This is true, we have entire economic text books that go on at lengths about it. The reason for that is that our entire existence is based on pollution. Electricity is derived from coal, cars run on petroleum, we over package everything. There is really no getting around it.

Is it possible to say that the relationship described above can be inverted? That is to say, growth = green? Sure! All you have to do is rewire the infrastructure to do that. If all electricity was hydroelectric or derived from biomass, it would be a near zero emissions situation. Introduce a coal-fired plant and therefore pollution and we have air quality problems, deforestation and all the goodness of non renewable energy sources. Some of the added costs are health bills, land reclamation and more. Similarly with cars, if they all ran on batteries and you had most fuel stations with chargers and only a few petrol cars, your economic incentive would be to conform to the status quo. That is why pollution = productivity, because everyone else is doing it too.

Currently, it costs more to be green and therefore it is unproductive, but there will come a point where the infrastructure will be suited to make green technology the productive one.

This will rewrite economic textbooks for sure!

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