Prudence
Dato (IREGE/ University Savoie Mont Blanc)
There
was a debate
at the third conference of the Green Growth Knowledge Platform (GGKP)
on "Policies and the Green Economy" in Venice two weeks ago
on whether environmental policies are enough to escape the climate
change trap. The discussion mainly focused on environmental fiscal
policies, but also other important issues such as uncertainty, trust
and beliefs, non-environmental instruments, etc. In fact, Greenhouse
gas emissions, which cause planetary climate change, represent both
an environmental externality and the overuse of a common property
resource (atmosphere)1.
Green fiscal instruments, such as environmental taxes, tax incentives
and subsidies for green technologies are crucial solutions to reduce
those gas emissions and can also help to provide additional revenue
for public expenditure.
However, there exist
other measures that could be taken to improve the performance of
those environmental policies. For instance, it is important to
account for non-environmental market-failures (information problem,
incomplete property rights, split incentives, etc.), which have
environmental implications, by using non-environmental instruments
such as signals (Ecolabels), incentives mechanisms and regulation of
the housing markets, etc. Generally, labels provide information on
the quantity of pollution that a product can generate (green car) or
its energy consumption (energy efficiency). They are signals and can
be misreported. Then, one needs to additionally use incentives
mechanisms to control for this information problem. On top of that,
decision-makers also need to trust the information that is revealed
through the label. Otherwise, the label will be a useless gadget…In
residential sector for instance, split incentives2
can hinder energy efficiency. One solution could be a regulation of
the housing markets (OCDE, 2007)3
by introducing minimum standards (Gillingham, 20124
and Charlier, 20145).
Another
issue is uncertainty or volatility that can limit pro-environmental
actions. Sometimes, an environmental instrument can be inefficient
due to underestimation of the associated environmental externalities
because of lack of awareness and understanding of risk and
uncertainty (Hasset and Metcalf, 1995)6,
There exist many other non-environmental policies (in agriculture,
transport, infrastructures, etc.) that could be mixed with
environmental instruments to achieve both environmental effectiveness
and economic efficiency. Does it mean that environmental economics
needs to broaden its scope or that any economist should tackle
environmental issues?
1
Harris,
J., Codur, A., Institute, G. (2012). Economics
of climate change. Retrieved from
http://www.eoearth.org/view/article/151943.}
2
For
example, when a landlord would bear costs related to investments in
energy efficiency improvements, while the benefits of that
investment would accrue to the tenant (OECD, 2007).
3
OECD
(2007). Instrument Mixes for Environmental Policy, OECD Publishing,
Paris.
4
Gillingham,
K., M. Harding, and D. Rapson (2012). Split Incentives in Household.
Energy Consumption, Energy Journal, 33(2): 37-62.
5
Charlier,
D. (2014). Split Incentives and Energy Efficiency: Empirical
Analysis and Policy Options. Working papers, ART-Dev 2014-07.
6
Gilbert
E. Metcalf. "Energy Tax Credits and Residential Conservation
Investment: Evidence from Panel Data (with Kevin Hassett)"
Journal
of Public Economics
57 (1995): 201-217. Available at:
http://works.bepress.com/gilbert_metcalf/19
