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March 04, 2007
IN THE WASHINGTON POST, my law school classmate Dan Esty writes about Eco-Capitalism:
Environmental progress no longer depends on hundreds of bureaucrats at the Environmental Protection Agency mandating what piece of pollution-control equipment will be on each smokestack. Government must continue to set standards. But the burden of innovation and technology development will shift to the private sector.
Moving from "command and control" regulations to a market approach to environmental protection means that there will be real costs for pollution -- including a price to be paid for greenhouse-gas emissions -- for every business. But these costs sharpen the economic incentives for pollution control research and development, and create big opportunities for companies that come up with solutions for society's environmental problems.
That seems right to me. It's important, though, that we watch this stuff closely, as the opportunities for fraud and gimmicks are large. (As the WSJ warns, we need to beware of "old-fashioned rent-seeking with a climate-change patina"). However, as Esty also notes -- and as he also points out in his new book -- this isn't just a case of carbon taxes and the like. Consumers affirmatively want to buy more efficient products, so long as they're not sold in a hair-shirt fashion.