'Green' Preferences as Regulatory Policy
AbstractWe examine the suggestion that if consumers in sufficient numbers are willing to pay the premium to have power generated using low-emission technologies, tax or permit policies become less necessary or stringent. While there are implementation difficulties with this proposal, our purpose is more fundamental: can economics make sense of using preferences as a regulatory instrument? If “green” preferences are exogenously given, to what extent can or should they be regarded as a substitute for other policies? Even with green preferences, production and consumption of polluting goods continues to impose social costs not borne in the market. Moreover, if green preferences are regarded as a policy instrument, the “no policy” baseline would require a problematic specification of counterfactual “non-green” preferences. Viewing green preferences as a regulatory policy instrument is conceptually sensible if the benchmark for optimal emissions is based on value judgments apart from preferences consumers happen to have. If so, optimal environmental protection would be defined by reference to ethical theory or, even less favorably, by prescriptions from policy advocates who give their own preferences great weight while giving those of the public at large (and the costs they bear) very little consideration.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-01-01.
Date of creation: 01 May 2001
Date of revision:
Environmental regulation; preference change;
Find related papers by JEL classification:
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- B4 - Schools of Economic Thought and Methodology - - Economic Methodology
- D6 - Microeconomics - - Welfare Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-ENE-2006-01-24 (Energy Economics)
- NEP-ENV-2006-01-24 (Environmental Economics)
- NEP-REG-2006-01-24 (Regulation)
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