Thursday, April 17, 2008

US environmental policy: going nowhere

So President Bush gave an "important" speech where he essentially concedes that something needs to be done about the environment. So what does he propose? Nothing that would bind anybody!

If you want to reduce emissions, you need to coax people and industry into that. Voluntary regulations do not work. The first best is to used market tools, like taxing emissions or having a market for emissions. The tax rate can be modulated to reach a particular emission level. Absent this, the second best is to regulate emissions for each entity individually, which can achieve the same emissions goal, although less efficiently.

President Bush does not even want to commit to an emissions target before 2025, and he still pushes his voluntary approach. But this is the whole problem: if everybody would be fine with reducing emissions, everybody would do it already. It is because we have a market failure here that the government needs to intervene, for everyone's good. Well, almost everyone, as there is no doubt about it, some will lose out. This is exactly why you want to regulate or tax.

1 comment:

Vilfredo said...

Bush does not care about the environment and never will. This is just for show. He has consistently proceeded that way: say he cares about something, and then put a policy in place that does exactly the contrary. The Colombia free trade agreement he recently proposed falls into the same category.