Page 200 - Environment: The Science Behind the Stories

Command-and-control policy explore several main types of economic policy tools: taxes,
has improved our lives subsidies, and permit trading.

Most environmental laws and regulations of recent decades use Green taxes discourage undesirable
a command-and-control approach, in which a regulating agency
prohibits certain actions—or sets rules, standards, or limits— activities
and threatens punishment for those who violate these terms. The most straightforward economic policy tool—taxa-
This simple and direct approach to policymaking has brought tion—can be used to discourage undesirable activities. In
citizens of the United States and many other nations cleaner air, taxation, money passes from private parties to the govern-
cleaner water, safer workplaces, healthier neighborhoods, and ment, which uses it to pay for services to benefit the public.
many other advances. The relatively safe, healthy, comfortable Taxing undesirable activities helps to internalize external
lives most of us enjoy today owe much to the command-and- costs by making them part of the cost of doing business.
control environmental policy of the past few decades. Taxes on environmentally harmful activities and products
Even in plain financial terms, putting health and quality are called green taxes. When a business pays a green tax,
of life aside, command-and-control policy has been effective. it is essentially reimbursing the public for environmental
For over a decade, the White House Office of Management damage it causes.
and Budget has undertaken yearly analyses of U.S. regulatory Under green taxation, a firm owning a factory that pol-
policy to determine whether regulations result in more eco- lutes a waterway would pay taxes on the amount of pollution
nomic costs or more economic benefits. These analyses have it discharges—the more pollution, the higher the tax payment.
consistently revealed that benefits outweigh costs, and that This gives firms a financial incentive to reduce pollution while
environmental regulations have been most beneficial of all. allowing them the freedom to decide how best to do so. One
You can explore some of these data in Calculating Ecological polluter might choose to invest in technologies to reduce pol-
Footprints (p. 204). lution if doing so is more affordable than paying the taxes.
Despite these successes, many people have grown disen- Another polluter might find abating its pollution more costly
chanted with the top-down nature of the command-and- control and could choose to pay the taxes instead—funds the govern-
approach and have come to view government mandates as ment might then apply toward mitigating pollution in some
restrictions on their freedom. Sometimes government actions other way.
are well intentioned but not well enough informed, so they Green taxes have yet to gain wide support in the United
can lead to unforeseen consequences. Regulatory policy can States, although similar “sin taxes” on cigarettes and alcohol
also fail if a government does not live up to its responsibilities are long-accepted tools of U.S. social policy. Taxes on pol-
to protect its citizens or treat them equitably. This may occur lution have been widely instituted in Europe, where many
when leaders allow themselves to be unduly influenced by nations have adopted the polluter-pays principle (p. 186).
interest groups, small groups of people seeking private gain Today there is debate worldwide about whether we should
that work against the larger public interest. implement carbon taxes—taxes on gasoline, coal-based elec-
tricity, and fossil-fuel-intensive products according to the car-
bon emissions they produce—in order to fight global climate
Economic tools can help achieve policy goals change (p. 531).

The most common critique of command-and-control policy Green taxation provides incentive for industry to lower
is that it achieves its goals in a more costly and less efficient emissions not merely to a level specified in a regulation,
manner than the marketplace can. Whereas command-and- but to still-lower levels. However, green taxes do have CHAPTER 7 • Envi R onm E n TA l Poli C y : mA king D EC i si ons A n D s olving P R obl E m s
control policy mandates particular solutions to problems, drawbacks: Businesses will most likely pass on their tax
private entities competing in a free market can innovate expenses to consumers, and these increased costs may affect
and may produce new or better solutions at lower cost. As low-income consumers disproportionately more than high-
a result, political scientists, economists, and policymakers income ones.
today are exploring alternative policy approaches that aim
to channel the innovation and economic efficiency of the Subsidies promote certain activities
market in directions that benefit the public. Such economic
policy tools use financial incentives to encourage desired Another type of economic policy tool is the subsidy, a gov-
outcomes, discourage undesired outcomes, and set market ernment giveaway of money or resources that is intended
dynamics in motion to achieve goals in an economically to support and promote an industry or activity. Subsidies
efficient manner. take many forms. A tax break is a common form of subsidy.
Like regulation and like the tort law approach, economic Relieving the tax burden on an industry, firm, or individ-
policy tools aim to “internalize” external costs suffered by the ual assists it by reducing its expenses. Because a tax break
public by building these costs into market prices. Each of these deprives the government’s treasury of funds it would oth-
three approaches has strengths and weaknesses, and each is erwise collect, it has the same financial effect as a direct
best suited to different conditions. The approaches may also giveaway of money.
be used together. For instance, government regulation is often Subsidies can be used to promote environmentally sus-
needed to frame market-based efforts, and citizens can use tainable activities, but all too often they are used to prop up
the courts to ensure that regulations are enforced. Let’s now unsustainable ones. From 2002 to 2008, the U.S. government 199

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