Environmental Atonement—A Commentary by Ian Ayres '86 and Barry Nalebuff
The following article originally appeared in the December 25, 2006, issue of Forbes.
By Ian Ayres and Barry Nalebuff
Ian was hiking at Sleeping Giant Park outside New Haven. As he exited the car, a tissue fell out of his pocket. Ian stooped to pick up the litter, but a gust of wind blew it a few feet out of reach. He walked over to pick it up and again the tissue skittered beyond his grasp.
As Ian started to make his third attempt at propriety, he noticed that he was walking by a lot of other people's trash. On the spur of the moment, he picked up a McDonald's (nyse: MCD - news - people ) cup and a Coke can and left his wayward tissue to dance in the wind. Ian's kids had been watching with great amusement their dad's ineffectual attempts to corral his litter. But they went ballistic when they saw him try to substitute his duty to pick up his own refuse. It made no difference to them that dad was picking up a greater quantity of more environmentally unfriendly trash. If it's your trash, you pick it up. That's what they had been taught.
There is something in the kids' logic, especially with regard to intentional pollution. We'd be squeamish about throwing an ice-cream-sodden napkin out the car window for convenience's sake, even if we had volunteered for a park cleanup the day before. And our squeamishness isn't just because littering is a crime. Two rights don't justify an intentional wrong. A paramedic who saves three lives doesn't get a license to commit one murder.
Thus it may seem odd that many environmentalists are embracing the pollute-and-repair paradigm in the fight against global warming. Instead of eliminating your own carbon pollution, you plant trees in the Amazon that suck up other people's carbon. The idea seems to be catching on. If you buy a Hummer H3, give TerraPass $80 to offset the 7 tons of carbon dioxide emitted during a year. Book a flight and Expedia (nasdaq: EXPE - news - people ) offers you a chance to help offset the CO2 for $6 to $30, depending on distance.
Is it really okay to substitute other people's pollution control for your own? We think the answer is yes, but only with three important qualifications.
First, you really have to make a full offset. If you are going to engage in intentional CO2 littering, make sure that your offset is what philosopher John Locke called "enough and as good." That means that even after you sell the Hummer, you are still responsible for the extra CO2 it continues to produce compared with other used cars.
Second, make sure you're not changing the incidence of pollution. If everyone litters on Colbert's property but atones for it by picking up trash on Stewart's land, Colbert is not going to be very happy about it. That's why the paramedic doesn't get a license to kill--the victim wouldn't approve the trade. In the case of CO2 abatement, one molecule is the same as the next, and so the Earth is happy for you to add one as long as you take away two.
The third test is to ensure that your substitute cleanup really is going beyond what you and others would have done anyway. You must be confident that your substitute is an incremental benefit and not crowding out someone else's effort. Thus, before Ian feels satisfied about trading other people's trash for his tissue, he should consider whether anyone else might have come along and picked up the can and the cup. As related in the previous issue of FORBES (Dec. 11), a badly designed pollution-trading program may cause people to produce chemicals for which there is no demand, just so they can sell the credits generated by partly reducing the noxious by-products.
When you buy CO2 offsets via TerraPass, it invests in renewable energy resources such as wind farms. But it isn't clear that the money you spend there really leads to lower pollution. While they are investing in clean-energy projects, those projects might have proceeded even without your investment.
If you truly want to be serious about reducing CO2, you can buy permits on the European exchange. Buying a permit to emit a ton of CO2 and then parking it unused is a more powerful way to make sure that your substitute is having an incremental impact. But for your purchase, a corporation would have emitted an extra ton of greenhouse gases. It turns out that this higher effectiveness comes at a price. The cost of the 7 tons emitted from the Hummer H3 would be $120, 50% more than the price from TerraPass.
The danger of false substitutes is that they can lure people into thinking that it's okay to pollute more. This danger is great enough that we think a two-for-one norm is a good rule of thumb. If everyone tried to pick up twice as much as they polluted, very soon we'd have a world where there wasn't much trash to pick up at all.
Ian Ayres and Barry Nalebuff are professors at Yale Law School and Yale School of Management, respectively, and co-authors of "Why Not."