| We examine the suggestion that if consumers in sufficient numbers are willing to pay the premium to have power generated using low-emission technologies, tax or permit policies become less necessary or stringent. While there are implementation difficulties with this proposal, our purpose is more fundamental: can economics make sense of using preferences as a regulatory instrument? If"green" preferences are exogenously given, to what extent can or should they be regarded as a substitute for other policies? Even with green preferences, production and consumption of polluting goods continues to impose social costs not borne in the market. Moreover, if green preferences are regarded as a policy instrument, the "no policy" baseline would require a problematic... |
