Again: tax, do not subsidize

I reported previously that if the goal is to improve the environment, one should tax polluters rather than subsidize non-polluters. The reason is that subsidizing increases the use of resources and necessitates taxing something else to generate the income.

David Kelly provides another argument. While a subsidy may improve the environment in the short run, it hurts it in the long run. This has to do with higher interest rates, which lead to over-accumulation of capital and an increase the opportunity cost of the environment. Subtle, and this shows that partial equilibrium analysis can lead you astray.