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The Luxury of Offset, in Excess

11/22/09

By: Jake Bonifield, Indianapolis, IN

In economics, the name of the game is assumptions.  At least with almost every basic concept in Econ 100 and many of the classes beyond it, graphs and conclusions are all drawn and reached with asterisks attached.  A prime example is the presumption of perfect competition.

When one sees a typical supply-and-demand graph, unless it is an example of market failure, the interpreter is right to assume that there is “perfect competition” and that each competitor in the marketplace has equal access to information, that there are lots of buyers and sellers, and that the resulting price is pure, so to speak.  It is a comforting notion, for sure, but it is almost never found in reality.  And such is the folly of depiction, the luring solipsism we accept with simple models of complex realities.

Similar caveats may afflict a system of cap-and-trade if it were to be implemented in the US.  The disparity between the economist’s power point and how the finicky consumers of energy will react could prove catastrophic.  Last week, the New York Times reported the capitulation of a company which specialized in helping airlines to offer consumers an “offset” ticket price, whereby their individual contributions to carbon emitted as a result of the flight would be offset by carbon sink purchases by the airline.

This idea is similar to the premise of a cap-and-trade system which legislation such as Waxman-Markey would likely make law for US companies.  The problem, and the reason for Responsible Travel’s downfall, has to do with what may be called the false comfort of convenience.  Because so many consumers felt that they could merely purchase their environmental indulgences for only a few extra dollars per flight, they tended to travel even more often, sans guilt.

The bottom line, as Responsible Travel found out, was that when you assign a price to environmental degradation, there is a good chance it won’t cover the costs.

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