(This is an archived extract from the book Patterns of Power: Edition 2)
As discussed later, politics should be seen as providing the negotiating forum to enable agreement to be reached on the provision of funds and incentives (6.7.5). The choice of technologies, though, should not be left to politicians – there are disadvantages in using tactical subsidies (3.3.7.1).
If environmental controls were implemented by the application of mandated technologies, there would be a risk of getting sub-optimum results – as pointed out by the Economist:
“Governments that try to pick winners often choose losers. Subsidies distort investment: since the German government fixed the price for solar power at munificent levels, the country has been sucking in huge numbers of solar panels that could be put to better use in sunnier climes. A global carbon tax would be a more efficient way to close the price gap between fossil and alternative fuels.”[1]
It is more effective for governments to agree the tax-levels and then let private enterprise choose the best implementation approach,[2] both on renewable sources of energy and on flood-defences. Addressing the problems of climate change would then be less costly.
© PatternsofPower.org, 2014
[1] The Economist report on alternative energy technologies, entitled Green dreams, was published on 18 November 2006 and was available in April 2014 at http://www.economist.com/node/8173054.
[2] Robert W. Crandall pointed out the economic inefficiencies caused by failure to allow the market to choose the best solution, in his article Pollution Controls, which was published in the Library of Economics and Liberty and was available in April 2014 at http://www.econlib.org/library/Enc/PollutionControls.html.
The Economist article cited earlier, entitled The charges of the light brigade, also pointed out the inefficiency of a government directing how money should be spent; http://www.economist.com/node/21555913.