Breath of Clarity

Letting Firms Buy the Right to Pollute

Opponents of emission tax policies sometimes assert that they are simply a way of letting firms buy the right to pollute. Is this a reasonable criticism (Field and Field 2017, 244)?

Emission tax policies are a method of letting firms buy the right to pollute.

Is it necessarily harmful to the environmental as long as there is a trading system? Andrew, great point in saying the creation of a trading system reduces greenhouse gas emissions compared to there being only emission tax policies letting firms buy the right to pollute. That being said, the trading system needs to be strongly functioning to result in a net zero impact. All emissions and reductions need to be accurately accounted for. It is interesting to conceptualize the Kyoto Protocol in the given context, particularly as I consider the difference between then and now. Is accurate accounting feasible in the current era?

Further, awesome approach in terms of showing how Russia and Ukraine were able to sell their emission reductions. Seeing nations reduce emissions in the face of economic challenge is remarkable. I appreciate how obstacles can fuel creativity. Can anybody bring insight into the conversation regarding ways developing countries use challenges to fuel creativity in terms of reducing emissions? I am impressed with the mechanisms people brainstorm and build. Noticing initiatives being locally implemented is a good start to understanding a collective attitude towards building environmentally beneficial practices, which also save money, is a socially efficient outlook.

Nonetheless, I agree environmental economists cannot simply rely on developing nations to compensate for emissions radiating from corporations because there are loopholes in the framework (Brunnengräber 2009). Moreover, how have conditions changed since Brunnengräber discussed trading systems back in 2009?

Ed, introducing external costs in terms social efficiency is intriguing. Great evidence showing damages from air pollution bring a severe cost in terms of the entire country’s GDP (Robinson 2019). Thank you for bringing a renewable energy technology subsidy into the discussion. Why would a firm choose to buy the right to pollute as long as there is a subsidy to encourage a decision that has no fee and is environmentally supportive? While some companies have installed renewable technology, are there scholarly articles answering specific objections a firm may have to implementing it?

The article Adam provided implies incentive-based environmental policy, particularly regulation including any type of subsidy, is beneficial. Further, the authors compare two types of models: action-oriented remuneration (AOR) and result-oriented remuneration (ROR). I appreciate the authors illustrate the importance of measurable, numerical goals (Dörschner and Musshof 2015, 90). Adam made a stellar statement, specifically as it relates to farmers, as he said ROR “prioritizes output and performance rather than action which may or may not lead to a positive change for local species richness”. It is fascinating to see massive creativity result from independence combined with the increasingly difficult challenge of farmers only being rewarded for results rather than just action. ROR simply measures efficiency in terms of emissions reduction rather than general intention. ROR defines true efficiency as emissions reduction.