Financial Stress May End Up Stimulating a Greener Economy

bloomberg 8 Financial Stress May End Up Stimulating a Greener EconomyWith the city’s tax revenues melting down along with our local economy, Mayor Michael Bloomberg and people in and around government are floating a number of large and small tax proposals. The idea of tolls on the East River bridges and even the recently defeated proposal to institute congestion pricing are once again getting serious attention as the MTA faces the need to make up revenue shortfalls. About half a million vehicles cross to and from Manhattan on those bridges each work day, and depending on the amount charged, a toll could generate up to $1 billion a year. It would also have the impact of reducing pollution, traffic and congestion in Lower Manhattan. It could also reduce the size and pain of the next subway fare hike.

In addition to reviving fees on drivers, Mayor Bloomberg has proposed charging shoppers 6 cents for each plastic bag they are given when they shop. The fee would be then divided, with 5 cents going to raise city revenue and the remaining 1 cent to be kept by the storeowner as an incentive to comply, Bloomberg spokesman Marc La Vorgna recently told the New York Times.

The proposed charge has been labeled a "fee," which requires approval only from the City Council, rather than a "tax," which requires approval from the State Legislature. Los Angeles and Dallas are also looking at similar measures, as is San Francisco, which last year banned non-biodegradable plastic bags used by grocery stories and large retailers. If the City enacts a fee, however, New York would become the first US city to implement a plastic bag surcharge.

In 2002, Ireland imposed a plastic bag consumption tax that required customers to pay 33 cents per bag at the register. Within weeks plastic bag use dropped 94 percent, and after five months $4.5 million in revenue had been raised for environmental projects. Similar initiatives have spread to countries such as Bangladesh, which banned polythene bags, and South Africa, where the government requires manufacturers to make plastic bags more durable and more expensive to discourage their disposal.

It is difficult to predict how much revenue the bag fee would bring in, since we don’t know how many people would switch to cloth or paper bags. Estimates range from $10 million to $16 million dollars annually; not a lot of money in a $60 billion budget, but perhaps enough to restore some hours to the library budgets that will be cut next year. Of course, if people reduce their use of plastic bags, fewer will end up in our garbage cans, lowering the cost of transporting and disposing waste. So either way, the city saves money. New York City spends about $1.3 billion dollars a year on its Sanitation Department. This breaks down to about $600 million for cleaning streets and collecting garbage, $400 million for disposing of the waste ($300 million in "waste export" contracts), $100 million for administration and $100 million for managing the Sanitation Department’s vehicles and buildings. It also includes $35 million for snow removal and $16 million for enforcement. Only $28 million is spent on recycling.

An effort to reduce packaging and waste and increase recycling might not only help protect the environment, if properly managed, it could reduce the cost of waste transport, storage and disposal. Reducing the amount of garbage we generate would (eventually) reduce the $1.3 billion spent on waste removal and is just one small way to deal with the budget crisis we face.

In fact, that crisis gives us an opportunity to look at waste throughout our city and economy. We can live just as well tomorrow as we do today if we become more efficient and less wasteful in our use of resources. Better insulation in our homes, more efficient lighting and water use, reduced packaging – all can lower our costs without reducing our standard of living.

There is talk from the Obama transition team that the proposed $150-billion investment in renewable energy may become part of the plan to revive the nation’s economy. In addition, public investment in modern infrastructure could have the effect of creating jobs while making our nation more energy efficient. A new school or bus garage with modern water, heating, lighting and cooling technologies will be less resource intensive than the structure it replaces.

The dramatic slowdown in the economy is frightening, and it is clear that many people will suffer as a result of the business failures we are starting to see. However, an unanticipated impact of this decline is that it is making many people and institutions look at their own consumption, and this reexamination can have a beneficial impact. This is not an argument for the virtues of poverty, since I find few virtues in a lack of resources. Rather it is an argument for thinking, for being smarter and less wasteful. If a new air conditioner can deliver the same cooling as an old one but uses half the electricity, then it makes sense to help people buy a new one. If carrying our groceries in a cloth bag is cheaper than carrying them in a disposable plastic bag, we should encourage people to abandon the plastic bag and carry the cloth one.

We see that the era of freewheeling excess on Wall Street has ended. This looks like the start of a period characterized by more prudent and careful investors learning to work within a more regulated financial system. Perhaps this trend will be matched by a more careful and frugal use of natural resources in our every day lives.

I am grateful for the research assistance of Sara Schonhardt, Master’s Student, Columbia University’s School of International and Public Affairs