Depletion Quotas

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Herman Daly interviewed by Bruce Kunkel:

* Limiting biophysical throughput implies one of your basic parameters for the steady-state economy: depletion quotas. Can you explain how these would work?

The idea is to limit the rate of depletion—of fossil fuels, for example. We have something a bit like this with cap-and-trade. Governments can step in and say, fossil fuels are still privately owned—we haven’t nationalized them—but we are nationalizing one thing out of your property bundle: your right to decide upon the rate of depletion. We’re putting an aggregate limit on the right to deplete what you own. You have to purchase that right by auction from the government, because the total volume of depletion imposes social costs that are not reflected in your private decisions. The money that the government raises from the quota auction then becomes public revenue. You could use that revenue to reduce or eliminate some of the most regressive taxes for the poorest part of the population. So on the one hand the auction will drive up the price of petroleum, or whatever resource it is, but the scarcity rents reflected in that increased price are being redistributed back to the public. Or it could be used to finance a minimum income.” What sort of depletion quotas would we establish besides those for fossil fuels? The pollution of groundwater or topsoil would be harder to measure. You speak in terms of biophysical throughput, with output as a type of waste. But of course there are no undifferentiated types of energy or waste. So how do you go about doing this?

A very good and difficult question—I’ve struggled with that. You can go a long way with energy alone, because energy is needed to mine all the materials that go into the throughput. If you start with energy, and perhaps water and fundamental minerals like phosphorus, that would impose limits. I emphasize depletion quotas rather than pollution quotas because depletion is more concentrated, spatially and entropically, at the beginning of the throughput. Furthermore, if you limit the input, then ultimately you always limit the output, in a quantitative sense, although not qualitatively—you still have the problem of extremely toxic pollutants that are generated from remaining inputs.”