Another economic theory I've come across is one proposed by British economist Arthur Cecil Pigou and discussed by Paul Hawken in The Ecology of Commerce (Amazon.com, Review) (pp 82-83). (The Ecology of Commerce is a great book which I couldn't hope to summarize here.)

Pigou proposed taxation (Pigovian taxes) as a way to mitigate the effects of negative externalities on society, thereby causing producers to internalize costs they had previously externalized. Pigou posited that companies fail to account for the total social costs of their externalities (e.g.: pollution, CO2 emissions, acid rain) and the costs associated with these effects (e.g.: health care costs, property damage) are typically paid for or borne by others (i.e.: citizens or government). Pigovian taxes effectively shift these costs to producers, thereby a) raising money to correct problems and b) providing incentives for producers to change their behavior and reduce these negative effects.

Green taxes are (I think) essentially the same as Pigovian taxes, and while some arguments point out that the poor may be disproportionally hurt by green taxes (Policy Studies Institute), perhaps efforts to improve home energy efficiency (better insulation, compact fluorescent lights) can be part of a comprehensive approach. That is, not only taxing energy use, but providing homeowners with solutions to reduce energy use.

Dave Chiu

CATEGORY: ENERGY PROJECT