…environmental economics and the implications of environmental policy

Archive for the ‘Instrument Choice’ tag

Some are “Not Impressed by Quebec’s Emisison Rules”, But I am.

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On instrument choice, there has been a long-standing view of alternatives as substitutes. You either tax, trade or regulate a standard, or stage instruments in time say by taxing first to get movement in advance of a technology standard. This view is not surprising given much of the early environmental economics literature focused on the benefits of say trading over regulations and technology standards. But this has changed as the theorists have prodded and probed their analytical models and concluded that indeed there is a blurring of the lines, and that often, design elements can be merged to produce some sort of uber instrument. While theory says one thing, we can expect a lag in policy adoption as the policy wonks catch up. But in Quebec, somebody is paying attention:

Quebec Environment Minister Line Beauchamp announced Wednesday that her government has approved regulations to make the province the first in Canada to enforce the tougher emissions standards in cars, starting in 2010. The regulations require manufacturers to improve by 30 per cent the average emissions from their entire fleet of new cars by 2017…..Under Quebec’s plan, automakers would be forced to pay fines into the government’s green fund if they don’t meet their targets, while those that exceed the standard would be able to sell carbon credits to other companies.

What is astonishing about this is that we have elements of trading and taxes concurrently supporting a stringent regulatory standard in Canada. The monetary fines are a safety value that acts like a tax to recycle revenue and improve environmental performance, the trading provides cost-effective compliance through equalizing the marginal costs of producers and an on-going incentive through continuous improvement and the standard, well it is a North American first. And recall, Quebec has a carbon tax that is visible at the pump. Quebec through this “mixing and matching” of instruments seems to have technology change and consumer behaviour in transportation sector cornered. It’s all enough to make an environmental economist swoon.

Written by Dave Sawyer

December 14th, 2007 at 3:17 pm