Creating the Right Incentives for Environmental Stewardship


Here’s an article that’s illustrates what happens when regulators get clever in creating incentives for environmental stewardship and responsibility: smart people work around them, unintended consequences result, and windfall profits occur in random places that have nothing to do with environmental benefit.

If I were doing this, I’d make the whole situation incredibly simple. How about this?

Remove all subsidies, and tax behavior that has currently uncaptured externalities. Want to burn coal? No problem. But here’s a new price per kilowatt-hour that includes cleaning up the damage it’s doing to our lungs and environment. I don’t think you’ll find it too appealing, but it’s your choice.

Gasoline’s cheap now too, but it sure won’t be when all its costs to society are included.

You’d have renewable energy in one hell of a hurry, and no unintended consequences from people gaming the system.



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