Will Saving the Environment Make Us Fat?

Diesel engines can run on biodiesel, a fuel produced from renewable resources like vegetable oils, animal fats, or the grease found in restaurant fry vats. A small but growing number of people are adjusting their cars to run on both bio and regular diesel. Biodiesel is environmentally friendly. It runs much cleaner than ordinary diesel and is made from renewable resources. The only clue that a car is running on biodiesel is a vague French-fry smell that wafts from your tailpipe.

The French-fry smell is no accident, since you’re basically burning the leftover grease from fast food kitchens. Restaurants that used to pay removal services to get rid of their grease increasingly give it away to those interested in converting it to biodiesel. Who knows, if biodiesel catches on, the fry vat residue from fast food restaurants may be auctioned off to the highest bidder. In fact, new businesses are springing up around opportunities to make use of these “second use” materials.

Cleaner burning fuel, a renewable source of energy, and the re-use of grease that would otherwise have to be disposed of, sounds like a win-win for all concerned, right?

Well, maybe. In a bit of economic irony, one aspect of this win-win situation may have unintended negative consequences, or negative externalities. The restaurants that used to pay to get rid of used fry grease can now give it away to would-be biodiesel makers for free. In short, the rising popularity of biodiesel lowers the costs of fast food production. The restaurants, no longer incurring grease disposal costs, may lower prices in order to increase the quantity of greasy goodness demanded by fast food consumers. If fast food fry vats offer the most grease for biodiesel, the fast food restaurants pass on the grease disposal savings to consumers.

Cheaper fast food would encourage more consumption of what is widely understood to be the most fattening and least nutritious type of food available. That is, biodiesel may reduce the costs from one type of negative externality--the damage associated with burning fossil fuels--while increasing the costs from another--the public health costs associated with obesity. .

As an energy source, biodiesel offers several advantages over fossil fuels, but it’s interesting to note that almost any situation can present unforeseen negative externalities.

1. One reason we eat (and eat, and eat) fattening fast food is that it's cheap. Biodiesel could make cheap fast food even cheaper. Can you think of an incentive-based policy that would neutralize biodiesel's effect on fast food prices and consumption?

2. During the 1990s, the U.S. government's public health campaign against tobacco significantly altered consumer information and preferences about tobacco products. How might a similar public health campaign affect the fast food industry?

3. Fast food doesn't deserve all the blame for America's obesity problem. Less physical jobs and a lack of exercise help explain our collective waste line expansion as well. Can you think of incentive-based policies that would both discourage fossil fuel usage and encourage more physical activity? (Think about policies that influence the way we commute to school and work.)