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David F. Hales
President, College of the Atlantic

David F. Hales

David F. Hales is the president of the College of the Atlantic in Maine, which in 2007 became the first U.S. higher education institution to achieve carbon neutrality.

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Socializing risk and privatizing profit?

The BP spill is a highly predictable result of a system that socializes risk and liability and privatizes the profit. Focusing on one spill, no matter how devastating, is too narrow.

The current spill in the Gulf, and the debate over offshore drilling, are mere symptoms of a far more complex challenge. We need a safe, sustainable and affordable energy system. And drilling for oil, even offshore, and even in environmentally sensitive areas, will be a likely part of that system for at least the next half-century. Much of what we value about modern civilization is dependent on a continuing supply of oil. Our very civilization is addicted, and there is no easy way out.

The answer lies in moving to a new legal and economic structure for our energy system, the most important feature of which will be a truly free market. Solutions to complex problems with their genesis in human political and economic arrangements will come from simplifying fundamental elements of the human systems, not making them more complex.

The regulatory and subsidy aspects of the current system contribute heavily to corporate engagement in risky enterprises. Somewhere in the records of British Petroleum's deliberations on deep bed off-shore drilling, there is an analysis which concludes not that the benefits exceed the risks, but that the benefits exceed the risk to BP. I am sure that it includes consideration of liability for a major catastrophe, and concludes that the financial risk for BP is limited, and that most of the costs of a major disaster will ultimately be paid by the taxpayers, not the investors. I'm equally sure that it concludes that the profits will go to the investors.

For corporations, it's a pretty good deal -- they keep the profits and society takes the risks and assumes the liability.

There is a better way.

First, internalize all costs of energy production and distribution. No subsidies, none, as in zero. No oil depletion allowance, no limits on liability, not even a tax exemption for advertising of products or embellishing of corporate image. No subsidies. No exceptions.

Second, clearly fix responsibility. Not one project, no wind farm, no solar array, no coal mine, no oil well, and certainly no nuclear plant, can be started until a clear and certain party responsible for all damages and liabilities, including environmental and health impacts, has been identified in a way that legal responsibility is certain and swift.

If these two provisions were in place, BP would never have made the decision to drill at 5,000 feet in the Gulf. Let's put the market and the legal system on the side of precaution, conservatism, and common sense.

By David F. Hales  |  May 6, 2010; 12:42 PM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Winds of change? | Next: Secure our energy future

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At Nuremberg and other trials it became more difficult to nominate the real criminals. All loses and no profits. All profits and no loses avoids lots of confusion and confusion is only an excuse. This could cause more damage than terrorism and loses are for terrorists. Make more money Mom.

Posted by: tossnokia | May 9, 2010 10:23 AM
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Just search for the "cut the crap, kill the cap" group on Facebook.

BTW, Republicans should not mind dumping liability caps because the cost of risk would then be reflected at the pump and therefore spread across all consumers (including those who currently don't pay much in taxes).

Posted by: dkbain1 | May 9, 2010 12:03 AM
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This makes too much sense for the Republicans to accept!

Posted by: aeaustin | May 8, 2010 9:50 PM
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We pretty much know who is controlling today’s market, even the mention of it is about as interesting as talking about water being wet. Will this ever change? It has to; our resources are finite and not too long from now costs are going to soar beyond many individuals ability to afford this life style. Change is inevitable, and sadly, many will be forced into change, rather than choose and accept change. The dangerous part about all this is the fear and hostility that’s created when it does not have to be this way. Time magazine did a great story in their March issue about the future. 10 Ideas for the Next 10 years–A Vision of Transitions
http://www.transitionus.org/blog/vision-transition-time-magazine

Posted by: nrk55 | May 8, 2010 8:13 PM
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The Party of "No - HeII, No!" will oppose this on the grounds it's "socialism!". Anything that may possibly benefit the average citizen is by their definition "socialism".

Posted by: shadowmagician | May 8, 2010 10:04 AM
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