Stick and Carrot

1
Stick and Carrot

• Means of policy

2
Efficiency

• Economical theory In a free-market economy the
  production will eventually reach the efficient
  optimum..
• Efficiency carries no ethical content. It has no
  social or ecological meaning. It only takes into
  account the costs and benefits.

3
Public Goods

• Clean air is public good no price, use of
  good does not restrict others from using it.
• No price tag for polluting the environment or
  extracting a natural resource will lead to market
  failure.

4
Market Failure

• In the absence of policy interventions,
  financial incentives work in an undesirable
  direction environmentally responsible behaviour
  is costly, individuals have incentives to pass
  costs onto others, and it is often in the
  interests of individual resource harvesters to
  maximize current rates of harvest rather than to
  manage the resource on a sustainable basis

5
Past (and continuing) problems

• Pollution of waterways, seas
• Pollution of air (particles, SO2, NOx, Ozone,
  CO2, etc)
• Pollution of soil
• Over-exploitation of natural resources

6
Answer Politics, Policies

• Means
• Changing public opinion (brainwashing,
  propaganda)
• Price-tag schemes such as emissions trade system
• Direct and indirect subsidies, production rights
  and permits
• Taxes on production, use, import, export,
  emissions etc.
• Laws, restrictions, direct controls, standards
• Constitutional rights (e.g property rights,
  public goods)

7
Goals and timetables

• Goals, timetables important!
• Costs of planned, graduated adjustments are
  lower than those of enforced, rapid change
• Polluters pay -principle
• Energy Incentives to use more renewables, emit
  less CO2

8
Problems of politics

• Nature of decision-making process
• Long time span of decision-making process
• Time-span of consequences
• Unwanted consequences

9
More problems

• Rigid and unadapting tools
• Command-and control tools may be expensive,
  market-based incentive approaches tend to be more
  effective and less costly
• Results of market-based incentives are often
  unclear
• Taxes often become necessary for the state
  finances as, say, the production of waste goes
  down, the taxes on waste will increase even more.

10
Transferable emissions permits

• A decision of the total quantity of pollution
• A rule which ensures that any firm is allowed to
  produce pollution only to the quantity of
  emissions permits it possesses. Anything beyond
  that level is subject to very expensive fine or
  penalty.

11
Transferable emissions permits (cont.)

• A choice by the control authority over how the
  total quantity of emission permits is to be
  initially allocated between producers.
• A guarantee that emission permits can be freely
  traded between firms at whatever price is agreed
  for that trade.

12
Policymaking needs

• Higher quality environmental data
• Scientific research and technological development
• Integrated sectoral and spatial planning
• Integrating true economical costs and risks into
  all economical activity
• Informing and involving in the processes of the
  environmental protection, the general public
• Informing, and involving in corporate decision
  making, the workforces in the private and public
  sectors.