Market Failure and Political Failure | E-Axes

Not a member yet? Click here.
Forgot your Password?
Archives - Categories
On Inequality
On the Eurozone Debt Crisis
On Monetary Policy and Central Banking
On Global Economic Growth
On the Greek Debt Crisis
On the Banking and Financial Sectors
On Brexit
On China
On India
On Global Inflation
On Currencies
On the US Debt
On the "Economics" of the Arab Spring
Working Papers
Books suggested by members

Market Failure and Political Failure

From Project Syndicate by Jeffrey Frankel :

Markets can fail. But, as has been demonstrated in areas like air pollution, traffic congestion, spectrum allocation, and tobacco consumption, market mechanisms are often the best way for governments to address such failures. So why are such mechanisms now in retreat?

Consider markets for emissions allowances, in which firms that can cheaply cut air pollution trade with those that cannot. A decade ago, the idea that such markets could achieve desired environmental goals at relatively low cost was widely recognized and implemented. Today, however, politics is killing “cap and trade.”

In the United States, the highly successful cap-and-trade system for sulfur-dioxide emissions has effectively vanished. In Europe, the Emissions Trading System (ETS), the world’s largest market for carbon allowances, has become increasingly irrelevant as well. On both sides of the Atlantic, market-oriented environmental regulation has in effect been superseded over the last five years by older “command-and-control” approaches, by which the government dictates who should use which technologies, in what amounts, to reduce which emissions.

Cap and trade was originally supposed to be a Republican idea in the US: its backers were those who considered themselves pro-market, not those who considered themselves pro-regulation. Most environmental organizations initially opposed it, with many believing it immoral for corporations to be able to pay for the right to pollute.

Indeed, it was Ronald Reagan’s administration that pioneered the use of cap and trade to phase out leaded gasoline in the 1980’s. George H. W. Bush’s administration used it to reduce SO2 emissions from power plants in the 1990’s, and his son’s administration sought to use it to reduce SO2 and other emissions further in the 2000’s.


© 2011–2017 e-axes. All rights reserved. | Credits | Contact Us | Privacy Statement | Tue 23 Jan, 2018 04:28:28 AM
e-axes is proudly powered by Norder - Creative Solutions