Happy Canada Day and Independence Day for my Canadian and U.S. readers!

Events this week challenge the need for superior technical analysis to encourage innovation while we protect those harmed by actions of others. Our legal and regulatory system is based on the prevention and correction of righting such wrongs.

Civil law, and torts are well-established principles of British common law that Canada and the U.S. inherited to great effect. The word “tort” simply means “wronged”. If someone does something in their self interest and it harms you in some way, you have the right to sue for compensation. The notion is not at all about punishment. Instead, it is designed to ensure that we take into account the costs we impose on others through our actions. 

For instance, it might save me garbage fees if I simply dumped my garbage on my neighbor’s property. That imposes on them the cost I avoided by transferring it to them. But, it is inefficient in many ways. It begs retaliation and animosity. I am probably in a better position to dispose of waste of my creation than a neighbor who does not know what is in the refuge. And, we all understand the principle of financial responsibility for our own actions. 

However, if the typical response to dumping of garbage is “so, sue me,” the courts would be backed up with claims or neighbors would be imposing their own form of vigilante justice, or both.

The legal system is a costly, inefficient and counterproductive way to resolve such disputes. Instead, we pass laws to keep sensible people within the guardrails of human decency and prevent squabbles, court intervention, or even disputes that can escalate to the Hatfields and the McCoys. 

Pollution laws are exactly the same as the scenario of dumping garbage on our neighbor, except the neighbors are peoples rather than homeowners. Civil law within nations are designed to prevent such pollution nuisances. With the Cominco ruling from Trail, British Columbia in the 1930s and 1940s, the principle that one cannot pollute the atmosphere of a neighbor was extended to become a principle enshrined in international law as well.

Certainly polluters suffer the effects of their pollution unless prevailing winds blow the pollution elsewhere. But, since polluters also incur greater benefits in not having to safely dispose of effluent than the costs they impose on themselves and others, polluters pollute and the rest of society suffers. 

If we define pollution as emitting a substance into the atmosphere that harms others, then this misalignment of incentives and disincentives begs regulation to prevent discharge of smoke, toxic chemicals, sulfur dioxide, ozone-depleting chlorofluorocarbons, methane, and carbon dioxide, and to avoid myriad civil lawsuits clogging the courts. International conventions have fostered treaties to prevent or discourage the discharge of pollutants across borders, while, within nations, sanctions are typically fines and injunctions to prevent or limit discharges. 

While most all discharges that impose a cost on society as a whole have been regulated, greenhouse gasses have defied international treaties. International concerns about emissions are beyond the jurisdiction of domestic courts and agencies, so the lack of international agreements means nations continue to permit the emission of greenhouse gasses, despite broad recognition among scientists of the harm they cause through global warming. 

While carbon dioxide is the second most abundant greenhouse gas, after water vapor, the most potent major effluent is methane. These methane emissions come from natural sources such as the decomposition of vegetation and the melting of permafrost, the release of methane from underground hydrocarbon deposits, the flaring of gasses at oil and natural gas fields, leakage through natural gas distribution, incomplete combustion of natural gas, and farting. 

The molecules of methane are a far more potent global warmer than carbon dioxide, but they eventually decompose in the atmosphere into carbon dioxide and water vapor. Meanwhile, methane emissions from human activities contribute about 32% of the global warming the Earth experiences. Scientists have determined that human-related methane emissions must be reduced by 40-45% by 2030 to limit global warming to 1.5 degrees Celsius. Today's graph shows that methane emissions continue to accelerate, despite the best recommendations of scientists.

In 1890 Alfred Marshall differentiated between aspects of economic decisions within one’s control, which he called internal economies, and factors imposed on us by others, labeled external economies. His student, Arthur Pigou, in 1932 proposed that a tax should be imposed on such external costs imposed by others to ensure they pay the full cost of any effects they have on others. Economists universally agree with the logic of the imposition of such Pigouvian taxes when the effects can be relatively easily measured and the tax not too difficult to impose. 

That is where methane emissions from livestock such as cows, pigs, and sheep, through their front or rear ends, comes into play. Scientists can measure and model the rate of methane emissions per pound of living livestock, and the damage caused can likewise be estimated. Danish farmers will soon be paying this unique tax, at a rate of about $43 per metric tonne of carbon dioxide-equivalent livestock emissions per year, rising to $108 by 2035. In doing so,  Danish regulators has expanded their greenhouse gas policies to the last major sector of their economy that had to now not been included so significantly in their carbon pricing policies. Their agency estimates it will reduce emissions by almost 2 million tons of carbon dioxide-equivalent methane by 2030. In doing so, Denmark has emerged as the nation with some of the most innovative sustainable energy policies. Meanwhile, China retains its lead as the highest volume producer of the most innovative sustainable energy technologies.

While Denmark's measure will reduce by just 1/20,000th the annual human emissions of greenhouse gasses, the Danish effort is consistent with other carbon taxes widely recommended by economists. Should such taxes on human-induced emissions be properly imposed by nations, funds will be available to ameliorate the damage of greenhouse gas emissions and emitters will exercise the appropriate level of effort to reduce emissions. 

Such policies will obviously experience the wrath and lobbying of entities who find it less expensive to use their political influence to thwart regulation than pay the cost of the penalties for their emissions. The political pressure, especially from the petroleum industry, is immense as they attempt to protect their profits and heavy subsidies. Nonetheless, some jurisdictions have imposed or pledged carbon-equivalent taxes, usually more directly on hydrocarbon-based fuels rather than livestock releases. About 13% of human induced releases are now subject to carbon taxes in 40 countries and 20 cities worldwide. In Canada, Quebec, Ontario, British Columbia, Alberta, Manitoba, and Nova Scotia have all imposed carbon taxes, as has the Federal Government. The latter tax is proposed to rise to $170 per metric tonne by 2030, which approaches the current cost determined by scientists of the damage that results from emissions. 

In Canada, the vast majority of the revenue generated from these taxes are rebated back to households. While such rebates appear counterintuitive since they are not used to remedy the costs of emissions, they nonetheless send the correct cost signal to producers of emissions and induce change toward more benign energy consumption methods. 

Obviously, such policies require both the political resolve to overcome the objections of deep-pocketed industrial emitters and superior analyses by scientists who advise agencies responsible for setting policies. The ability of agencies to regulate these markets just faced a major setback by the U.S. Supreme Court. A very divided and divisive court ruled on Friday that agencies do not have autonomy to fill in the details of legislative or executive intent on such national policies. The court would instead prefer to interject its scientific wisdom in these highly technical analyses. 

The Court’s rebuke of its own legal precedent in the 1984 Chevron verdict (ironically enough) shall foment years of litigation and amplify uncertainty. No longer will there be faith and deference in agencies such as the Environmental Protection Agency, the Food and Drug Administration, the Department of Commerce, and many other agencies entrusted with the role of scientific analysis and administration of congressional and executive branch policies. The far-reaching conclusion in Friday's Loper Bright Enterprises v. Raimondo verdict shifts the balance between the powers of elected officials and the Supreme Court that were established as far back as Marbury vs. Madison in 1803.

In that 1803 ruling, the Supreme Court first asserted its authority to arbitrate challenges to federal law. By siding with James Madison, President Jefferson's Secretary of State, in his unwillingness to seat previous President Adams' nomination of William Marbury to the bench, the Supreme Court agreed with the executive branch. In turn, the executive branch implicitly affirmed the Supreme Court's assertion it had the power of such judicial review. Ever since then, a resilient balance between the judiciary, legislative, and executive branches has been maintained. It was fortified in the unanimous ruling in Chevron in 1984 in which the court acknowledged the autonomy of agency experts to define the scope of regulations stemming from legislation.

But, after the Loper Bright Enterprises v. Raimondo case decided 6-3 in a divided court last week, the Supreme Court asserts it is now the referee in the scientific arena that had in the past been the sole domain of government agency experts. Nine divisive judges have determined that federal judges may now rule on the soundness of environmental regulations, on drug approvals, on land use policies or the resolution of water rights, on oversight of financial markets, and many other highly technical issues that require significant expertise that the court does not have. The Supreme Court has just instituted an immense power grab. And, since they have positioned themselves as the final arbiters, only they can check their consolidation of power.

That is not the biggest problem, though. The winners of challenges to innovative policies will be those who currently benefit from policies and practices now set in stone from years and decades ago. Casualties will be innovators, those who must pay the ultimate price for emerging and accelerating risks through global warming, and our children. In the U.S., the fate of our children will be increasingly decided by nine judges appointed for life and with an average age of 66 who majored in history, political science, and english, in that order. They are well-schooled in political power dynamics as espoused by a handful of the nation's most elite private colleges. But, while none have any scientific background, all are now the final deciders of science-based government policy that will dictate our technological progress and pace of innovation in the new millenium.

I personally have much more faith in the sober analysis of scientists in increasingly sophisticated and technical societies than I do in judges, some of whom seem to have ideological axes to grind. Nations able to best harness new technologies for the betterment of humankind and the planet will lead innovation. Nations mired in divisiveness, in bureaucratic and political logjams that span decades, and in a disproportionate power of special interests to preserve status quos will be put at a distinct disadvantage as we try to remedy inadequate policies on global warming or take advantage of the best technologies and anticipate and ameliorate any harms that they may induce.

Meanwhile, those who wish to maintain the status quo have a green light to forum-shop for friendly federal judges who will force the hand of agencies trying to battle pandemics, protect financial markets, encourage healthy competition, approve new drugs, or reduce the pace of global warming.

For instance, following this ruling, a drug company could now find a friendly judge swayed by a pocketful of for-hire expert witnesses to prevent a competitor's agency-approved drug from reaching the market. Or, a corporation can have their friendly judge reverse an FDA determination that a drug is dangerous. Scientists must yield to the judgement of nine second guessing history, political science, and english majors who now have the fate of our highly technical and scientific economic innovation and policies in their hands.

In these dimensions, governments best able to respond to evolving science and technology, develop leading edge industrial policies, and recognize and remedy problems as they emerge will best succeed in an increasingly fast-paced and uncertain world. Representative democracies frustrated by bureaucratic and political logjams will find it difficult to navigate this incredibly dynamic world.

When there is a growing need to adapt to a changing world and adopt emerging technologies, nations able to act quickly and efficiently will have a competitive advantage. Recent decisions by the U.S. Supreme Court will dramatically slow policy and technology innovations in the U.S., but more authoritarian nations such as China will capitalize on their ability to streamline bureaucratic approval processes and permitting to clear the path of innovation. The rest of the world’s nations encouraged to align with one world view or another will be compelled to hitch their cart to the horse most able to keep pace with and advance a rapidly changing world.

With every step backward toward increasing gridlock, American competitiveness will pay the ultimate price. Meanwhile, American cows are breathing a sigh of relief that they can do as they please for the foreseeable future.

Maybe for their next trick, the six newly emboldened Supreme Court non-scientists in the majority can repeal the law of gravity.