Friday, October 06, 2006

Green taxes - not necessarily 'in the bag' 

Thinking about it, the pay-to-dump plan for general household rubbish as in a previous post raises other issues. Again, I think it would be helpful to think these through as a test case in designing effective Green taxes before we set out on the Grand Vision outlined in our new Green Policy initiative.

Firstly, there is the psychological effect – does the new charge encourage a change in behaviour or provide a legitimisation for current behaviour? The modern classic example in economic theory is the childcare centre that introduced fines for parents who were late collecting their children – and found a big increase in the number of late collections. Many people treated the fine as an additional fee legitimising their late arrival, rather than as a deterrent. This actually happened in real-life case studies.

Would a low per-bag collection charge deter the accumulation of non-recyclabe rubbish or would it provide a legitimisation of that rubbish on the lines of “I have paid for it to be taken away, so take it away”.

And on reflection, there are alternatives to fly-dumping bags to avoid the charge – some people might slip rubbish into a neighbours bin thus forcing them to pay. The possibilities for neighbour-from-hell bin-rage seem rather high – do we really want to provide more plotlines for desperate soap opera scriptwriters?

I am coming to the conclusion that a per-bag rubbish collection charge might not be a good idea from a Green Shift perspective. Or at least we need a much harder look at how it could work out and what the alternatives might be.

An effective Green Tax policy needs to present clear costs that give clear information to people at points where avoidance is expensive and inconvenient, and where savings on costs are most easily achieved by green-friendly action. It needs to have as many automatic cause-and-effect links as possible and as few ‘regulatory discretion’ links as possible.

Again the classic ‘control system’ argument comes in. One way to prevent a factory polluting a river is to have a battery of regulations and inspectors and fines fore breaches of statutory requirements. Another way is to make the factory draw its own water supply from a point on the river downstream of the point it discharges its waste.

The ideal for green taxes is to develop consequences links in a market structure that are rather like the second case, so positive responses to the Green Initiatives follow on from rational self-interest.

There will be enough need for regulation and inspection and prosecution and (shudder) even targets without taking on unnecessary tasks.

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