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The Role of Economic Incentives in Going Green

Thu, Nov 5, 2009

Green

The Role of Economic Incentives in Going Green

By: David

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The tragedy of the commons is an academic theory first proposed by Garrett Hardin in the Journal of Science in 1968. The story illustrates a dilemma faced by all people when a good or resource is free to the public and therefore no individual has any incentive to maintain or properly manage its use. The story is based on an article by William Forster Lloyd which describes public land use for sheepherding in which the farmers allow their sheep to graze on the commons. While each farmer individually understands that overuse of the public commons will result in tragedy for all, no one in particular is willing to stop because they fear the economic disadvantage if they alone cease action. The tragedy of the commons is widely considered a prime example of the dilemma that we as citizens of the planet face today when dealing with the impact that the human species has on the earth.

In the 19th century the solution to the tragedy of the commons was to create increased personal property rights, and therefore making the individual responsible for their own land. The debate has raged on in the United States and many other countries as to how to resolve CO2 emission, and no credible plan has been developed, but we must begin with the attitude of personal ownership of the planet.
If citizens of the United States were to have value assigned to their carbon emissions much in the same way the government has been trying to do the same for industries perhaps we as individuals would begin to take ownership of our collective problem.
According to the U.N. the U.S. emits the most carbon per capita of any country. One of the largest carbon emitting segments outside of electricity generation (60%) is the use of motor gasoline . Motor gasoline comprises 1.2 million metric tons per year in the United States, which is roughly 21% of all carbon emissions in the United States. The average fuel economy of the American fleet still stands at roughly 25mpg while Europe’s by contrast is 45mpg. We can lament the tragedies of the American auto industry and discuss the American right to freedom of choice, but if we are to make an impact as citizens we need to be more drastic in creating change. The trouble is while the trendiness of “going green” has been pushed in myriad television advertising campaigns and billboards from petroleum companies, like BP to insert major corporations here, people still do not act without economic incentive.

I propose the government of the United States needs to do what the governments of Europe have been doing for decades, and tax gasoline at a level commensurate with the value of that resource. Motor gasoline for the American consumer is too cheap. In the U.S., which varies by state, 15-20 % of the cost of gasoline is comprised of taxes whereas in Europe in countries like France that figure is closer to 70%. Why are we as Americans incapable of making the same effective use of natural resources? The U.S. Surface Transportation Policy and Revenue commission proposed increasing the tax by 218% to ~$0.40 a gallon and then indexing it to inflation, which is still not enough. Now I do not believe that this is something that can happen overnight, but the U.S. government should seriously consider implementing a stepped increase in the tax on gasoline, which will have a three-fold impact. It will prevent people from overconsumption of natural resources, force car companies to produce vehicles that are more fuel efficient and in line with the impending shift in consumer demands, and it will alleviate the pressure that price fluctuation in crude oil have on the economy.
The government’s inability to effect change through CAFÉ standards which have remained unchanged since 1990 shows the ineffectiveness of that policy. In fact, previous governmental policy encouraged the consumption of gas guzzling SUV’s and light trucks. The best way to create a responsible use of gasoline is to make it economically beneficial for consumers to switch, and the government can use the increased tax revenue to build public transportation to give many consumers viable alternatives for commuting.
1 DOE
2 EIA

One Response to “The Role of Economic Incentives in Going Green”

  1. Alex Says:

    Great article. I think its okay as long as we don’t get carried away. These things can get out of control in EU


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