{"id":8204,"date":"2022-10-19T08:15:18","date_gmt":"2022-10-19T08:15:18","guid":{"rendered":"https:\/\/blogs.bath.ac.uk\/edswahs\/?p=8204"},"modified":"2022-10-19T08:15:18","modified_gmt":"2022-10-19T08:15:18","slug":"policy-design-question","status":"publish","type":"post","link":"https:\/\/blogs.bath.ac.uk\/edswahs\/2022\/10\/19\/policy-design-question\/","title":{"rendered":"Policy Design Question"},"content":{"rendered":"<p>When you are trying to encourage one thing and discourage another \u2013 say a technologically-driven shift from brown to green(er) widgets \u2013 is it better to subsidise the green type or tax the brown?<\/p>\n<p>This is a question that I'd not given much thought to until I read an article in the Economist's Free Exchange column this week:\u00a0<em><a href=\"https:\/\/www.economist.com\/finance-and-economics\/2022\/10\/13\/energy-shocks-can-have-perverse-consequences\">Solarpunked<\/a>. \u00a0<\/em>And yet it must be of great concern to anyone in government or business encouraging transitions to net-zero.<\/p>\n<p>The Economist feature delves into the\u00a0<em>rebound\u00a0<\/em><i>effect\u00a0<\/i>and the\u00a0<em>elasticity of substitution<\/em> \u2013 mostly beyond me \u2013 but some hard facts seem to arise from previous experience. \u00a0Here's one example: the need to save fuel can spark innovation in existing products rather than promote the replacement of that product. \u00a0The 1970's oil price shock did not kill off the car but resulted in engines that were a bit more efficient. \u00a0This eventually resulted in bigger cars and more of them and the car was further embedded in the culture.<\/p>\n<p>Here's the last part of the article:<\/p>\n<p>\"Subsidising clean technologies rather than taxing dirty ones\u2014the strategy adopted by President Joe Biden\u2019s recent Inflation Reduction Act\u2014does not do nearly as much to displace fossil fuels. A family may buy a subsidised battery-powered vehicle, for instance, but only to complement a fossil-fuel one, which they can continue to drive without penalty. Policy design matters if a zero-carbon world is to become more than just another future that never happened.\"<\/p>\n<p>.......................................................<\/p>\n<p>As I drive my large-ish 8-year old diesel car, leaving my low range (8-year old) electric car at home, I ponder that paragraph as that's exactly what I did: buying an electric car to complement a fossil-fuel one which I drive without penalty (unless you count the cost of fuel). \u00a0Mind you, there are increasing costs (ie penalties) associated with the electric car owing to the rise in the price of electricity.<\/p>\n<p>So, 8 years on, should we replace both cars with a (large-ish) electric one?<\/p>\n<p>Well, the purchase price is huge as there are no brown to green incentives in place \u2013 and there are no tax incentives either as the brown diesel still meets environmental standards and qualifies for a ludicrously small road tax. \u00a0What to do ...<\/p>\n<p>Wait and see seems the rational response; wait until the tax \/ incentives balance shifts again to either make us or persuade us to ditch the diesel.<\/p>\n<p>There is another issue here as well: high milage electric cars are huge \u2013 humungous even. \u00a0I saw one yesterday that looked like a tank. \u00a0It was set out in gun-metal grey which didn't help, but even so. \u00a0Huge. \u00a0I don't want a humungous car as my only car to make local trips where all the parking slots are smaller than the car. \u00a0Madness.<\/p>\n<p>.............................<\/p>\n<p>If you read the Economist article, I recommend looking at the\u00a0<a href=\"https:\/\/www.economist.com\/leaders\/2022\/10\/13\/europe-is-growing-complacent-about-its-energy-crisis\"><em>Less is More<\/em><\/a> one as well. \u00a0In particular, ponder the conundrum of <em>Groningren <\/em>with policy design in mind ..<em>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When you are trying to encourage one thing and discourage another \u2013 say a technologically-driven shift from brown to green(er) widgets \u2013 is it better to subsidise the green type or tax the brown? This is a question that I'd...<\/p>\n","protected":false},"author":237,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[2,4],"tags":[],"class_list":["post-8204","post","type-post","status-publish","format-standard","hentry","category-comment","category-news-and-updates"],"acf":[],"jetpack_featured_media_url":"","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/posts\/8204","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/users\/237"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/comments?post=8204"}],"version-history":[{"count":0,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/posts\/8204\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/media?parent=8204"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/categories?post=8204"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.bath.ac.uk\/edswahs\/wp-json\/wp\/v2\/tags?post=8204"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}